BWX Technologies, Inc. (Form: 10-Q, Received: 11/04/2015 18:15:04)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

¨	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)


DELAWARE		80-0558025
(State 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) 365-4300

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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 x

The number of shares of the registrant’s common stock outstanding at October 31, 2015 was 106,480,714.

BWX TECHNOLOGIES, INC.

I N D E X - F O R M 1 0 - Q


	PAGE
PART I - FINANCIAL INFORMATION

Item 1 – Condensed Consolidated Financial Statements		2

Condensed Consolidated Balance Sheets September 30, 2015 and December 31, 2014 (Unaudited)		3

Condensed Consolidated Statements of Income Three and Nine Months Ended September 30, 2015 and 2014 (Unaudited)		5

Condensed Consolidated Statements of Comprehensive Income Three and Nine Months Ended September 30, 2015 and 2014 (Unaudited)		6

Condensed Consolidated Statements of Stockholders’ Equity Nine Months Ended September 30, 2015 and 2014 (Unaudited)		7

Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 2015 and 2014 (Unaudited)		8

Notes to Condensed Consolidated Financial Statements		9

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		26

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		37

Item 4 – Controls and Procedures		37

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings		38

Item 1A – Risk Factors		38

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		38

Item 6 – Exhibits		39

SIGNATURES		40

PART I

BWX TECHNOLOGIES, INC.

FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS


	September 30,		December 31,
	2015		2014
	(Unaudited)
	(In thousands)
Current Assets:
Cash and cash equivalents	$	135,921	$	123,624
Restricted cash and cash equivalents		17,381		50,835
Investments		2,251		4,837
Accounts receivable – trade, net		180,108		165,144
Accounts receivable – other		27,206		6,094
Contracts in progress		266,826		290,622
Inventories		10,970		9,926
Deferred income taxes		42,832		38,320
Other current assets		21,735		32,127
Assets of discontinued operations – current		—		752,273

Total Current Assets		705,230		1,473,802

Property, Plant and Equipment		831,043		880,848
Less accumulated depreciation		568,773		573,048

Net Property, Plant and Equipment		262,270		307,800

Investments		6,300		7,606

Goodwill		168,585		169,914

Deferred Income Taxes		132,067		132,778

Investments in Unconsolidated Affiliates		33,812		31,256

Intangible Assets		58,863		60,227

Other Assets		43,595		50,133

Assets of Discontinued Operations – Non-Current		—		623,420

TOTAL	$	1,410,722	$	2,856,936

See accompanying notes to condensed consolidated financial statements.

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY


	September 30,			December 31,
	2015			2014
	(Unaudited)
	(In thousands, except share and per share amounts)
Current Liabilities:
Notes payable and current maturities of long-term debt	$	11,250		$	15,000
Accounts payable		60,184			88,985
Accrued employee benefits		60,863			85,433
Accrued liabilities – other		54,135			44,232
Advance billings on contracts		140,925			107,437
Accrued warranty expense		15,985			15,889
Income taxes payable		34,627			15,778
Liabilities of discontinued operations – current		—			446,881

Total Current Liabilities		377,969			819,635

Long-Term Debt		288,750			285,000

Accumulated Postretirement Benefit Obligation		26,890			29,956

Environmental Liabilities		59,117			56,259

Pension Liability		303,540			308,927

Other Liabilities		22,972			43,126

Liabilities of Discontinued Operations – Non-Current		—			299,832

Commitments and Contingencies (Note 5)
Stockholders’ Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 122,611,572 and 121,604,332 shares at September 30, 2015 and December 31, 2014, respectively		1,226			1,216
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued		—			—
Capital in excess of par value		15,964			775,393
Retained earnings		746,278			642,489
Treasury stock at cost 15,781,393 and 14,915,776 shares at September 30, 2015 and December 31, 2014, respectively		(446,562	)		(423,990	)
Accumulated other comprehensive income		732			3,596

Stockholders’ Equity – BWX Technologies, Inc.		317,638			998,704
Noncontrolling interest		13,846			15,497

Total Stockholders’ Equity		331,484			1,014,201

TOTAL	$	1,410,722		$	2,856,936

See accompanying notes to condensed consolidated financial statements.

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
	(Unaudited)
	(In thousands, except share and per share amounts)
Revenues	$	358,970		$	337,352		$	1,051,592		$	1,055,256
Costs and Expenses:
Cost of operations		250,558			242,607			727,685			752,980
Research and development costs		1,518			3,877			8,999			50,498
Gains on asset disposals and impairments, net		—			(625	)		(3	)		(625	)
Selling, general and administrative expenses		47,550			55,289			152,736			158,628
Special charges for restructuring activities		—			5,922			16,608			17,059
Income related to litigation proceeds		(65,728	)		—			(65,728	)		—
Costs to spin-off the Power Generation business		—			—			25,987			—

Total Costs and Expenses		233,898			307,070			866,284			978,540

Equity in Income of Investees		5,894			4,449			11,028			30,101

Operating Income		130,966			34,731			196,336			106,817

Other Income (Expense):
Interest income		30,028			145			30,262			376
Interest expense		(1,231	)		(2,832	)		(6,792	)		(4,637	)
Other – net		(1,666	)		18,563			(2,950	)		18,926

Total Other Income		27,131			15,876			20,520			14,665

Income from continuing operations before provision for income taxes and noncontrolling interest		158,097			50,607			216,856			121,482
Provision for Income Taxes		51,589			10,853			76,789			27,395

Income from continuing operations before noncontrolling interest		106,508			39,754			140,067			94,087

Income (loss) from discontinued operations, net of tax		(2,474	)		20,649			(8,311	)		30,962

Net Income	$	104,034		$	60,403		$	131,756		$	125,049

Net (Income) Loss Attributable to Noncontrolling Interest		(164	)		811			224			7,646

Net Income Attributable to BWX Technologies, Inc.	$	103,870		$	61,214		$	131,980		$	132,695

Amounts Attributable to BWX Technologies, Inc.’s Common Shareholders:
Income from continuing operations, net of tax	$	106,344		$	40,626		$	140,397		$	101,987
Income (loss) from discontinued operations, net of tax		(2,474	)		20,588			(8,417	)		30,708

Net Income Attributable to BWX Technologies, Inc.	$	103,870		$	61,214		$	131,980		$	132,695

Earnings per Common Share:
Basic:
Income from continuing operations	$	0.99		$	0.38		$	1.31		$	0.93
Income (loss) from discontinued operations		(0.02	)		0.19			(0.08	)		0.28

Net Income Attributable to BWX Technologies, Inc.	$	0.97		$	0.57		$	1.23		$	1.22

Diluted:
Income from continuing operations	$	0.98		$	0.38		$	1.30		$	0.93
Income (loss) from discontinued operations		(0.02	)		0.19			(0.08	)		0.28

Net Income Attributable to BWX Technologies, Inc.	$	0.96		$	0.57		$	1.23		$	1.21

Shares used in the computation of earnings per share (Note 10):
Basic		106,962,168			107,105,986			106,952,744			109,103,879

Diluted		108,184,304			107,444,284			107,634,732			109,482,318

See accompanying notes to condensed consolidated financial statements.

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
	(Unaudited)
	(In thousands)
Net Income	$	104,034		$	60,403		$	131,756		$	125,049
Other Comprehensive Income (Loss):
Currency translation adjustments		(3,633	)		(6,837	)		(12,412	)		(13,979	)
Derivative financial instruments:
Unrealized losses arising during the period, net of tax benefit of $803, $386, $1,581 and $436, respectively		(2,313	)		(1,115	)		(4,531	)		(1,257	)
Reclassification adjustment for losses included in net income, net of tax benefit of $(684), $(279), $(1,254) and $(266), respectively		1,976			807			3,553			760
Amortization of benefit plan costs, net of tax benefit of $(139), $(898), $(497) and $(1,293), respectively		269			2,505			929			3,299
Investments:
Unrealized gains (losses) arising during the period, net of tax (provision) benefit of $344, $(3), $358 and $(60), respectively		(638	)		5			(664	)		108
Reclassification adjustment for gains included in net income, net of tax provision of $5, $7, $69 and $22, respectively		(6	)		(14	)		(121	)		(40	)

Other Comprehensive Income (Loss)		(4,345	)		(4,649	)		(13,246	)		(11,109	)

Total Comprehensive Income		99,689			55,754			118,510			113,940

Comprehensive (Income) Loss Attributable to Noncontrolling Interest		(164	)		810			199			7,649

Comprehensive Income Attributable to BWX Technologies, Inc.	$	99,525		$	56,564		$	118,709		$	121,589

See accompanying notes to condensed consolidated financial statements.

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


											Accumulated
					Capital In						Other												Total
	Common Stock				Excess of			Retained			Comprehensive			Treasury			Stockholders’			Noncontrolling			Stockholders’
	Shares		Par Value		Par Value			Earnings			Income (Loss)			Stock			Equity			Interest			Equity
			(In thousands, except share and per share amounts)
Balance December 31, 2014		121,604,332	$	1,216	$	775,393		$	642,489		$	3,596		$	(423,990	)	$	998,704		$	15,497		$	1,014,201
Net income		—		—		—			131,980			—			—			131,980			(224	)		131,756
Dividends declared ($0.26 per share)		—		—		—			(28,191	)		—			—			(28,191	)		—			(28,191	)
Defined benefit obligations		—		—		—			—			929			—			929			—			929
Available-for-sale investments		—		—		—			—			(785	)		—			(785	)		—			(785	)
Currency translation adjustments		—		—		—			—			(12,437	)		—			(12,437	)		25			(12,412	)
Derivative financial instruments		—		—		—			—			(978	)		—			(978	)		—			(978	)
Exercise of stock options		156,467		2		4,108			—			—			—			4,110			—			4,110
Contributions to thrift plan		149,753		1		4,530			—			—			—			4,531			—			4,531
Shares placed in treasury		—		—		—			—			—			(22,572	)		(22,572	)		—			(22,572	)
Stock-based compensation charges		701,020		7		24,275			—			—			—			24,282			—			24,282
Distributions to noncontrolling interests		—		—		—			—			—			—			—			(332	)		(332	)
Spin-off of Power Generation Business		—		—		(792,342	)		—			10,407			—			(781,935	)		(1,120	)		(783,055	)

Balance September 30, 2015 (unaudited)		122,611,572	$	1,226	$	15,964		$	746,278		$	732		$	(446,562	)	$	317,638		$	13,846		$	331,484

Balance December 31, 2013		120,536,910	$	1,205	$	747,189		$	656,916		$	28,348		$	(268,971	)	$	1,164,687		$	18,254		$	1,182,941
Net income		—		—		—			132,695			—			—			132,695			(7,646	)		125,049
Dividends declared ($.20 per share)		—		—		—			(33,039	)		—			—			(33,039	)		—			(33,039	)
Defined benefit obligations		—		—		—			—			3,299			—			3,299			—			3,299
Available-for-sale investments		—		—		—			—			68			—			68			—			68
Currency translation adjustments		—		—		—			—			(13,976	)		—			(13,976	)		(3	)		(13,979	)
Derivative financial instruments		—		—		—			—			(497	)		—			(497	)		—			(497	)
Exercise of stock options		152,965		1		3,926			—			—			—			3,927			—			3,927
Contributions to thrift plan		307,748		3		9,946			—			—			—			9,949			—			9,949
Shares placed in treasury		—		—		—			—			—			(154,850	)		(154,850	)		—			(154,850	)
Stock-based compensation charges		420,276		5		11,781			—			—			—			11,786			—			11,786
Contribution of in-kind services		—		—		—			—			—			—			—			5,830			5,830
Distributions to noncontrolling interests		—		—		—			—			—			—			—			(517	)		(517	)

Balance September 30, 2014 (unaudited)		121,417,899	$	1,214	$	772,842		$	756,572		$	17,242		$	(423,821	)	$	1,124,049		$	15,918		$	1,139,967

See accompanying notes to condensed consolidated financial statements.

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended
	September 30,
	2015			2014
	(Unaudited) (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	131,756		$	125,049
Non-cash items included in net income from continuing operations:
Depreciation and amortization		65,010			57,400
Income of investees, net of dividends		(221	)		16,920
Losses on asset disposals and impairments, net		26,441			3,870
Gain on exchange of USEC investment		—			(18,647	)
In-kind research and development costs		—			5,830
Recognition of losses for pension and postretirement plans		3,587			12,952
Stock-based compensation and thrift plan expense		25,105			11,786
Excess tax benefits from stock-based compensation		(381	)		(568	)
Changes in assets and liabilities:
Accounts receivable		(273	)		(62,220	)
Accounts payable		(33,825	)		(115,271	)
Contracts in progress and advance billings on contracts		59,020			(74,214	)
Inventories		(561	)		138
Income taxes		(17,257	)		(11,804	)
Accrued and other current liabilities		5,417			13,206
Pension liability, accrued postretirement benefit obligation and employee benefits		(41,340	)		(66,679	)
Other, net		16,380			17,057

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		238,858			(85,195	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash equivalents		1,578			2,745
Purchases of property, plant and equipment		(52,193	)		(55,877	)
Acquisition of business, net of cash acquired		—			(127,705	)
Purchase of intangible assets		—			(722	)
Purchases of securities		(9,711	)		(21,225	)
Sales and maturities of securities		5,441			31,663
Proceeds from asset disposals		60			846
Investment in equity method investees		—			(4,900	)

NET CASH USED IN INVESTING ACTIVITIES		(54,825	)		(175,175	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of short-term borrowing and long-term debt		—			(4,424	)
Increase in short-term borrowing		—			2,855
Borrowings under the Credit Agreement		177,350			809,300
Repayments under Credit Agreement		(177,350	)		(504,900	)
Payment of debt issuance costs		(4,929	)		(5,390	)
Repurchase of common shares		(18,088	)		(149,774	)
Dividends paid to common shareholders		(28,105	)		(32,799	)
Exercise of stock options		3,646			3,854
Excess tax benefits from stock-based compensation		381			568
Cash divested in connection with spin-off of Power Generation business		(307,562	)		—
Other		(332	)		(202	)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(354,989	)		119,088

EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(6,092	)		(7,913	)

TOTAL DECREASE IN CASH AND CASH EQUIVALENTS		(177,048	)		(149,195	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		312,969			346,116

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	135,921		$	196,921

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	5,294		$	3,573
Income taxes (net of refunds)	$	82,054		$	52,845
SCHEDULE OF NON-CASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable	$	2,161		$	3,201

See accompanying notes to condensed consolidated financial statements.

BWX TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

We have presented the condensed consolidated financial statements of BWX Technologies, Inc. (“BWXT”) (formerly known as The Babcock & Wilcox 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, 2014 (our “2014 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 reclassified amounts previously reported to conform to the presentation as of and for the three and nine month periods ended September 30, 2015. We have eliminated all intercompany transactions and accounts. 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.

Spin-off

On June 30, 2015, we completed the spin-off of our former Power Generation business (the “spin-off”) into an independent, publicly traded company named Babcock & Wilcox Enterprises, Inc. (“BWE”). The separation was effected through a pro rata distribution of 100% of BWE’s common stock to BWXT’s stockholders. The distribution of BWE common stock consisted of one share of BWE common stock for every two shares of BWXT common stock to holders of BWXT common stock on the record date of June 18, 2015. Cash was paid in lieu of any fractional shares of BWE common stock. Following the spin-off, BWXT did not retain any ownership interest in BWE. Prior to June 30, 2015, we completed an internal restructuring that separated the subsidiaries involved in our former Power Generation business and established BWE as the direct or indirect parent company of those subsidiaries. Concurrent with the spin-off, The Babcock & Wilcox Company was renamed BWX Technologies, Inc.

The results of operations of our former Power Generation business are presented as discontinued operations on the condensed consolidated statements of income. We have presented the notes to our condensed consolidated financial statements on the basis of continuing operations, unless otherwise stated. See Note 2 for further information regarding the spin-off of BWE.

Reportable Segments

As a result of the spin-off of our former Power Generation business, we now operate in three reportable segments: Nuclear Operations, Technical Services and Nuclear Energy. Our former Power Generation business is now reported as discontinued operations. Prior to 2015, our mPower business was a separate reportable segment. In accordance with FASB Topic Segment Reporting , mPower no longer meets the quantitative threshold criteria and will be included in our “Other” category as it is no longer considered a reportable segment. This change in our reportable segments had no impact on our previously reported results of operations, financial condition or cash flows. We have applied these changes in reportable segments to previously reported historical financial information and related disclosures included in this report. Our reportable segments are further described as follows:

•

Our Nuclear Operations segment’s primary activity is the manufacture of naval nuclear reactors for the U.S. Department of Energy (“DOE”)/National Nuclear Security Administration’s (“NNSA”) Naval Nuclear Propulsion Program, which in turn supplies them to the U.S. Navy for use in submarines and aircraft carriers. Through this segment, we own and operate manufacturing facilities located in Lynchburg, Virginia; Mount Vernon, Indiana; Euclid, Ohio; Barberton, Ohio; and Erwin, Tennessee. The Barberton and Mount Vernon

locations specialize in the design and manufacture of heavy components. The Euclid facility, which is N-Stamp certified by the American Society of Mechanical Engineers, fabricates electro-mechanical equipment for the U.S. Government, and performs design, manufacturing, inspection, assembly and testing activities. 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. Fuel for the naval nuclear reactors is provided by Nuclear Fuel Services, Inc. (“NFS”), one of our wholly owned subsidiaries. Located in Erwin, Tennessee, NFS also converts Cold War-era government stockpiles of highly enriched uranium into material suitable for further processing into commercial nuclear reactor fuel.

•

Our Technical Services segment provides various services to the U.S. Government, including uranium processing, environmental site restoration services and management and operating services for various U.S. Government-owned facilities. These services are provided primarily to the DOE, including the NNSA, the Office of Nuclear Energy, the Office of Science and the Office of Environmental Management and the Department of Defense. Through this segment we deliver products and management solutions to nuclear operations and high-consequence manufacturing facilities. A significant portion of this segment’s operations are conducted through joint ventures.

•

Our Nuclear Energy segment supplies commercial nuclear steam generators, components and services to nuclear utility customers, and has supplied the nuclear industry with more than 1,300 large, heavy components worldwide. This segment is the only commercial heavy nuclear component, N-Stamp certified manufacturer in North America. Our Nuclear Energy segment fabricates pressure vessels, reactors, steam generators, heat exchangers and other auxiliary equipment. This segment also provides specialized engineering services that include structural component design, 3-D thermal-hydraulic engineering analysis, weld and robotic process development and metallurgy and materials engineering. In addition, this segment offers services for nuclear steam generators and balance of plant equipment, as well as nondestructive examination and tooling/repair solutions for other plant systems and components. This segment also offers engineering and licensing services for new nuclear plant designs.

See Note 9 for further information regarding our segments.

Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. For further information, refer to the consolidated financial statements and the related footnotes included in our 2014 10-K.

Contracts and Revenue Recognition

We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours or a cost-to-cost method, as applicable to the product or activity involved. We recognize estimated contract revenue and resulting income based on the measurement of the extent of progress towards 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 materials and major third-party subcontractors, if it appears that such exclusion would result in a more meaningful measurement of actual contract progress and resulting periodic allocation of income. We include revenues and related costs so recorded, 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 and costs recognized under the percentage-of-completion method. 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. 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. 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.

For contracts as to which we are unable to estimate the final profitability except to assure that no loss will ultimately be incurred, we recognize equal amounts of revenue and cost until the final results can be estimated more precisely. For these deferred profit recognition contracts, we recognize revenue and cost equally and only recognize gross margin when probable and reasonably estimable, which we generally determine to be when the contract is approximately 70% complete. We treat long-term contracts that contain such a level of risk and uncertainty that estimation of the final outcome is impractical, except to assure that no loss will be incurred, as deferred profit recognition contracts.

Our policy is to account for fixed-price contracts under the completed-contract method if we believe that we are unable to reasonably forecast cost to complete at start-up. Under the completed-contract method, income is recognized only when a contract is completed or substantially complete.

Comprehensive Income

The components of accumulated other comprehensive income included in stockholders’ equity are as follows:


	September 30,			December 31,
	2015			2014
	(In thousands)
Currency translation adjustments	$	7,891		$	11,547
Net unrealized gain (loss) on available-for-sale investments		(620	)		155
Net unrealized gain (loss) on derivative financial instruments		(774	)		(123	)
Unrecognized prior service cost on benefit obligations		(5,765	)		(7,983	)

Accumulated other comprehensive income	$	732		$	3,596

The amounts reclassified out of accumulated other comprehensive income by component and the affected condensed consolidated statements of income line items are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Accumulated Other Comprehensive Income (Loss) Component Recognized	(In thousands)												Line Item Presented
Realized gain (loss) on derivative financial instruments	$	(23	)	$	391		$	461		$	301		Revenues
		(2,637	)		(1,459	)		(5,355	)		(1,332	)	Cost of operations

		(2,660	)		(1,068	)		(4,894	)		(1,031	)	Total before tax
		684			275			1,259			266		Provision for Income Taxes

	$	(1,976	)	$	(793	)	$	(3,635	)	$	(765	)	Net Income
Amortization of prior service cost on benefit obligations	$	(399	)	$	(1,582	)	$	(1,200	)	$	(2,350	)	Cost of operations
		(9	)		(1,609	)		(27	)		(1,780	)	Selling, general and administrative expenses

		(408	)		(3,191	)		(1,227	)		(4,130	)	Total before tax
		139			849			417			1,144		Provision for Income Taxes

	$	(269	)	$	(2,342	)	$	(810	)	$	(2,986	)	Net Income
Realized gain (loss) on investments	$	11		$	5		$	188		$	46		Other-net
		(5	)		(2	)		(68	)		(17	)	Provision for Income Taxes

	$	6		$	3		$	120		$	29		Net Income

Total reclassification for the period	$	(2,239	)	$	(3,132	)	$	(4,325	)	$	(3,722	)

Inventories

At September 30, 2015 and December 31, 2014, we had inventories totaling $11.0 million and $9.9 million, respectively, consisting entirely of raw materials and supplies.

Restricted Cash and Cash Equivalents

At September 30, 2015, we had restricted cash and cash equivalents totaling $20.1 million, $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 $17.4 million of which was held to meet reinsurance reserve requirements of our captive insurer.

Warranty Expense

We accrue estimated expense included in cost of operations on our condensed consolidated statements of income to satisfy contractual warranty requirements when we recognize the associated revenue on the related contracts. In addition, we record specific provisions or reductions where we expect the actual warranty costs to significantly differ from the accrued estimates. Such changes could have a material effect on our consolidated financial condition, results of operations and cash flows.

The following summarizes the changes in the carrying amount of our accrued warranty expense:


	Nine Months Ended September 30,
	2015			2014
	(In thousands)
Balance at beginning of period	$	15,889		$	17,469
Additions		890			997
Expirations and other changes		(3	)		(984	)
Payments		(56	)		(20	)
Translation and other		(735	)		(247	)

Balance at end of period	$	15,985		$	17,215

Research and Development

Our research and development activities are related to the development and improvement of new and existing products and equipment, as well as conceptual and engineering evaluation for translation into practical applications. We charge the costs of research and development unrelated to specific contracts as incurred. Substantially all of these costs are related to our mPower program for the development of our mPower ^TM reactor and the associated mPower Plant.

In the three and nine months ended September 30, 2014, we recognized $0.0 million and $5.8 million, respectively, of non-cash, in-kind research and development costs related to services contributed by our minority partner to Generation mPower LLC, our majority-owned subsidiary formed in 2011 to oversee the mPower program to develop the small modular nuclear power plant based on mPower™ technology. In the nine months ended September 30, 2014, we received funding of $25.4 million under our Cooperative Agreement with the DOE under its Small Modular Reactor Licensing Technical Support Program (the “Cooperative Agreement”). On April 14, 2014, we announced our plans to restructure the mPower program to reduce spending and focus on technology development. We slowed the pace of development and intend to invest no more than $15 million on an annual basis. We intend to continue working with the DOE to further the program. At this time, the latest extension to the Cooperative Agreement has expired and the DOE funding has been suspended.

Provision for Income Taxes

We are subject to federal income tax in the United States 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 changes in our mix of income within these jurisdictions, can contribute to shifts in our effective tax rate from period to period. We classify interest and penalties related to taxes (net of any applicable tax benefit) as a component of provision for income taxes on our condensed consolidated statements of income.

Our effective tax rate for the three months ended September 30, 2015 was approximately 32.6% as compared to 21.4% for the three months ended September 30, 2014. The effective tax rate for the three month period ended September 30, 2015 was lower than our statutory rate primarily due to the remeasurement of uncertain tax positions as a result of the close of a previously ongoing IRS audit as well as adjustments related to the filing of our 2014 U.S. tax return. The effective tax rate for the three months ended September 30, 2014 was lower due to the $18.6 million gain from the exchange of our USEC investment for which the related tax provision was offset by the reversal of a previously established valuation allowance related to the prior impairments of the USEC investment.

Our effective tax rate for the nine months ended September 30, 2015 was approximately 35.4% as compared to 22.6% for the nine months ended September 30, 2014. Our effective tax rate for the nine months ended September 30, 2015 was impacted by the spin-off of our former Power Generation business. Specifically, we recognized $3.8 million of tax provision for the nine months ended September 30, 2015 due to the change in our tax footprint associated with the spin-off, resulting in revaluations of deferred tax assets and liabilities as well as the need to recognize tax provision on our global earnings at our U.S. federal rate due to the likely repatriation of future foreign earnings. These amounts were offset by the remeasurement of uncertain tax positions and adjustments related to the filing of our 2014 tax return discussed above. The effective tax rates for the nine months ended September 30, 2014 was lower due to the impact of an increase in benefits from amended federal manufacturing deductions and the receipt of a favorable ruling from the Internal Revenue Service that retroactively reduced the U.S. tax owed on income from certain of our foreign joint ventures. In addition, the effective tax rates for the nine months ended September 30, 2014 was lower due to the $18.6 million gain from the exchange of our USEC investment for which the related tax provision was offset by the reversal of a previously established valuation allowance related to the prior impairments of the USEC investment.

As of September 30, 2015, we have gross unrecognized tax benefits of $3.0 million. Of the $3.0 million gross unrecognized tax benefits, $2.2 million would reduce our effective tax rate if recognized.

NOTE 2 – DISCONTINUED OPERATIONS

Spin-off of BWE

On June 30, 2015, we completed the spin-off of BWE to our stockholders through a stock distribution. BWE’s assets and business primarily consist of those that we previously reported as our Power Generation segment. In connection with the spin-off, our stockholders received 100% of the outstanding common stock of BWE. The distribution of BWE common stock occurred by way of a pro rata stock distribution to our stockholders. Our stockholders received one share of BWE common stock for every two shares of our common stock held by such stockholder on June 18, 2015, and cash in lieu of any fractional shares. Prior to the completion of the spin-off, BWXT made a cash payment to BWE totaling $132 million, in order for BWE to maintain appropriate working capital and liquidity levels.

In order to effect the distribution and govern BWXT’s relationship with BWE after the distribution, BWXT entered into a master separation agreement with BWE. In addition to the master separation agreement, BWXT and BWE entered into other agreements in connection with the distribution, including a tax sharing agreement and transition services agreements.

Master Separation Agreement

The master separation agreement between us and BWE contains the key provisions relating to the separation of our former Power Generation business from BWXT and the distribution of shares of BWE common stock. The master separation agreement identifies the assets that were transferred, liabilities that were assumed and contracts that were assigned to BWE by BWXT or by BWE to BWXT in the spin-off and describes how these transfers, assumptions and assignments occurred. Under the master separation agreement we also agreed to indemnify BWE against various claims and liabilities related to the past operation of BWXT’s business (other than BWE’s business).

At the spin-off, BWXT had outstanding performance guarantees for various projects executed by the Power Generation business in the normal course of business. These guarantees totaled $1,542 million and range in expiration dates from 2015 to 2035. The master separation agreement requires that the Power Generation business use commercially reasonable efforts to terminate (or have it or one of its subsidiaries substituted for us) all existing guarantees by us relating to our former Power Generation business, including financial, performance and other guarantee obligations. The Power Generation business is required to (i) use commercially reasonable efforts to perform all underlying obligations covered by the guarantees, (ii) take all actions to put us in the same position as if the Power Generation business, not us, had performed or were performing the guarantee obligations, and (iii) indemnify and hold us harmless for any losses arising from the guarantees. Moreover, to the extent that the Power Generation business fails to terminate or substitute any of the existing guarantees by the 24-month anniversary of the spin-off, the Power Generation business will be obligated to pay a quarterly carrying fee until the expiration of the guarantee or the termination or substitution of the guarantee, whichever occurs first. We estimated the fair value of these performance guarantees at June 30, 2015 to total $10.2 million and have recorded these amounts in other liabilities on our consolidated balance sheet.

During the quarter ended September 30, 2015, we have been released from certain of these performance guarantees and have reduced the associated liability to $9.4 million accordingly. The remaining guarantees total approximately $1,145 million and range in expiration dates from 2016 to 2035.

Tax Sharing Agreement

We and BWE have entered into an agreement providing for the sharing of taxes incurred before and after the distribution, various indemnification rights with respect to tax matters and restrictions to preserve the tax-free status of the distribution to BWXT. Under the terms of the tax sharing agreement we have entered into in connection with the spin-off, we will generally be responsible for 60% of any taxes imposed on us or BWE and its subsidiaries in the event that the spin-off and/or certain related preparatory transactions were to fail to qualify for tax-free treatment. However, if the spin-off and/or certain related preparatory transactions were to fail to qualify for tax-free treatment because of actions or failures to act by BWE, we would not be responsible for the related taxes associated with these actions. Conversely, if the spin-off and/or certain related preparatory transactions were to fail to qualify for tax-free treatment because of actions or failures to act by us, we would be responsible for all related taxes associated with these actions.

Transition Services Agreements

Under the transition services agreements, BWXT and BWE are providing each other certain transition services for a limited time. Such services include, among others, accounting, human resources, information technology, legal, risk management, tax and treasury services. In consideration for such services, BWXT and BWE each pay fees to the other for the services provided, and those fees are generally in amounts intended to allow the party providing the services to recover its direct and indirect costs incurred in providing those services. The transition services agreements contain customary mutual indemnification provisions.

Financial Information

The following table presents selected financial information regarding the results of operations of our former Power Generation business:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
	(Unaudited) (In thousands)
Revenues	$	—		$	401,706		$	830,234		$	1,036,345

Costs and Expenses:
Cost of operations		—			313,166			665,558			821,925
Research and development costs		—			4,502			8,480			12,795
Losses on asset disposals and impairments, net		—			20			8,963			1,477
Selling, general and administrative expenses ⁽¹⁾		—			53,698			108,911			146,962
Special charges for restructuring activities		—			2,753			7,666			11,744
Costs to spin-off		—			—			34,358			—

Total Costs and Expenses		—			374,139			833,936			994,903
Equity in Income (Loss) of Investees		—			2,860			(1,104	)		5,659

Operating Income (Loss)		—			30,427			(4,806	)		47,101
Other Income (Loss)		(2,003	)		38			(1,698	)		1,940

Income (Loss) before Provision for Income Taxes		(2,003	)		30,465			(6,504	)		49,041
Provision for Income Taxes		471			9,816			1,807			18,079

Net Income (Loss)		(2,474	)		20,649			(8,311	)		30,962
Net Income Attributable to Noncontrolling Interest		—			(61	)		(106	)		(254	)

Income (Loss) from Discontinued Operations	$	(2,474	)	$	20,588		$	(8,417	)	$	30,708

(1)	Included in selling, general and administrative expenses are allocations of corporate administrative expenses of $0.0 million and $28.0 million for the three and nine months ended September 30, 2015 and $14.1 million and $41.2 million for the three and nine months ended September 30, 2014.

We have incurred approximately $66.5 million in total spin-off related costs, which includes approximately $29.8 million for professional services and $23.1 million of retention and severance-related charges. The majority of the remaining costs relate to the separation of our facilities and related infrastructure inclusive of information technology systems. Income from discontinued operations for the nine months ended September 30, 2015 includes $34.4 million, respectively, of these charges and included in continuing operations are spin-off costs of $26.0 million for the nine months ended September 30, 2015. A total of $6.1 million was recognized in the year ended December 31, 2014.

Included in income from discontinued operations for the three months ended September 30, 2015 were certain adjustments made pursuant to FASB Topic Income Taxes which requires that adjustments made to remeasure uncertain tax positions directly associated with operations discontinued in a prior period be recognized in the current period as a component of discontinued operations. The remeasurement in the three months ended September 30, 2015 was the result of the close of a previously ongoing IRS audit as well as adjustments related to the filing of our 2014 U.S. tax return. Additionally, we revised our estimated annual effective tax rate during the period which had an impact on the provision for income taxes associated with our former Power Generation business and was recorded as a component of discontinued operations.

The following table presents the carrying values of the major accounts of discontinued operations that are included in our December 31, 2014 condensed consolidated balance sheet (Unaudited) (In thousands):


	December 31,
	2014
Cash and cash equivalents	$	189,345
Restricted cash and cash equivalents		3,661
Accounts receivable – trade, net		265,456
Accounts receivable – other		38,205
Contracts in progress		107,751
Inventories		98,711
Deferred income taxes		35,158
Other current assets		13,986

Total Current Assets	$	752,273

Net Property, plant and equipment	$	128,835
Goodwill		209,277
Deferred income taxes		112,988
Investments in unconsolidated affiliates		109,248
Intangible assets		50,646
Other assets		12,426

Total Assets of Discontinued Operations	$	1,375,693

Notes payable and current maturities of long-term debt	$	3,215
Accounts payable		158,643
Accrued employee benefits		39,464
Accrued liabilities – other		59,726
Advance billings on contracts		148,098
Accrued warranty expense		37,735

Total Current Liabilities	$	446,881

Long-term debt	$	—
Accumulated postretirement benefit obligation		28,257
Pension liability		255,062
Other long-term liabilities		16,513

Total Liabilities of Discontinued Operations	$	746,713

Following the completion of the spin-off on June 30, 2015, there were no assets or liabilities remaining from our Power Generation business.

The following table presents selected financial information regarding cash flows of our former Power Generation business that are included in the condensed consolidated statements of cash flows:


	Nine Months Ended
	September 30,
	2015			2014
	(Unaudited)
	(In thousands)
Non-cash items included in net income (loss):
Depreciation and amortization	$	21,458		$	18,693
Income (loss) of investees, net of dividends		(2,293	)		(8,557	)
Losses on asset disposals and impairments, net		10,544			1,476
Purchases of property, plant and equipment		11,494			10,629

NOTE 3 – SPECIAL CHARGES FOR RESTRUCTURING ACTIVITIES

In 2014, we began certain initiatives aimed at driving margin improvement in our Nuclear Energy segment. In the nine months ended September 30, 2015, we incurred $0.7 million of expenses related to facility consolidation and employee termination benefits in connection with these initiatives. During the nine months ended September 30, 2014, we incurred $3.1 million related to employee termination benefits and $5.4 million related to facility consolidation.

In addition, we incurred $15.9 million and $8.2 million for the nine months ended September 30, 2015 and 2014, respectively, related to the restructuring of our mPower program. The 2015 amount relates to asset impairments as a result of the significant adverse changes in the business prospects of the mPower program. We incurred additional expenses related to employee termination benefits totaling $0.4 million for the nine months ended September 30, 2014 related to the restructuring of our Technical Services segment.

The following summarizes the changes in our restructuring liability for the nine months ended September 30, 2015 and 2014:


	Nine Months Ended
	September 30,			September 30,
	2015			2014
	(In thousands)
Balance at the beginning of the period	$	4,967		$	5,148
Special charges for restructuring activities ⁽¹⁾		610			13,164
Payments		(4,076	)		(14,526	)
Translation and other		(240	)		(204	)

Balance at the end of the period	$	1,261		$	3,582

(1)	Excludes non-cash charges of $16.0 million and $3.9 million for the nine months ended September 30, 2015 and 2014, respectively, which did not impact the restructuring liability.

At September 30, 2015, unpaid restructuring charges totaled $1.2 million for employee termination benefits and $0.1 million for administrative costs.

NOTE 4 – PENSION PLANS AND POSTRETIREMENT BENEFITS

Components of net periodic benefit cost included in net income are as follows:


	Pension Benefits												Other Benefits
	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2015			2014			2015			2014			2015			2014			2015			2014
	(In thousands)
Service cost	$	6,110		$	6,455		$	18,598		$	18,779		$	219		$	212		$	661		$	635
Interest cost		16,186			17,792			48,900			52,385			685			713			2,058			2,108
Expected return on plan assets		(22,374	)		(22,044	)		(67,551	)		(64,596	)		(586	)		(575	)		(1,754	)		(1,725	)
Amortization of prior service cost (credit)		458			512			1,373			1,531			(50	)		(40	)		(146	)		(120	)
Recognized net actuarial loss		—			9,067			2,161			9,067			—			—			—			—

Net periodic benefit cost	$	380		$	11,782		$	3,481		$	17,166		$	268		$	310		$	819		$	898

During 2015, significant lump sum payments were made from certain salaried Canadian pension plans. As a result, we remeasured certain of our Canadian pension plans in the second quarter resulting in the recognition of a net actuarial loss of $2.2 million, which includes a $2.6 million settlement loss and a $0.4 million actuarial gain. We have excluded the recognized net actuarial loss from our reportable segments, and such amount has been reflected in Note 9 as the Mark to Market Adjustment in the reconciliation of reportable segment income to consolidated operating income. We recorded $1.0 million of the net actuarial loss within cost of operations and $1.2 million of the loss within selling, general and administrative expenses.

During the quarter ended September 30, 2014, benefit accruals under certain hourly Canadian pension plans were ceased with an effective date of January 1, 2015. In addition, significant lump sum payments were made from certain salaried Canadian pension plans during the nine months ended September 30, 2014. As a result of these actions, we remeasured certain of our Canadian pension plans resulting in the recognition of a net actuarial loss of

$9.1 million, which includes $4.5 million in actuarial losses, a $3.8 million settlement loss and a $0.8 million curtailment loss. We have excluded the recognized net actuarial loss from our reportable segments and such amount has been reflected in Note 9 as the Mark to Market Adjustment in the reconciliation of reportable segment income to consolidated operating income. We recorded $4.0 million of the net actuarial loss within cost of operations and $5.1 million of the loss within selling, general and administrative expenses.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

Other than as noted below, there have been no material changes during the period covered by this Form 10-Q in the status of the legal proceedings disclosed in Note 10 to the consolidated financial statements in Part II of our 2014 10-K.

Investigations and Litigation

Apollo and Parks Township

In January 2010, Michelle McMunn, Cara D. Steele and Yvonne Sue Robinson filed suit against Babcock & Wilcox Power Generation Group, Inc. (“B&W PGG”), Babcock & Wilcox Technical Services Group, Inc., formerly known as B&W Nuclear Environmental Services, Inc. and now known as BWXT Technical Services Group, Inc. (the “BWXT Parties”) and Atlantic Richfield Company (“ARCO”) in the United States District Court for the Western District of Pennsylvania. Since January 2010, additional suits have been filed by additional plaintiffs and there are currently seventeen lawsuits pending in the U.S. District Court for the Western District of Pennsylvania against the BWXT Parties and ARCO, including the most recent lawsuit filed in October 2015. In total, the suits presently involve approximately 108 primary claimants. The primary claimants allege, among other things, personal injuries and property damage as a result of alleged releases of radioactive material relating to the operation, remediation, and/or decommissioning of two former nuclear fuel processing facilities located in the Borough of Apollo and Parks Township, Pennsylvania (collectively, the “Apollo and Parks Litigation”). Those facilities previously were owned by Nuclear Materials and Equipment Company, a former subsidiary of ARCO (“NUMEC”), which was acquired by B&W PGG. The plaintiffs in the Apollo and Parks Litigation seek compensatory and punitive damages, and in November 2014 delivered a demand of $125.0 million for the settlement of all then-filed actions. All of the suits, except for the two most recent filings, have been consolidated for non-dispositive pre-trial matters. Fact discovery in the Apollo and Parks Litigation is now closed for all claims other than the two most recent lawsuits filed in June and October 2015, but no trial date has been set. In connection with the spin-off, we agreed to indemnify B&W PGG and its affiliates for any losses arising from the Apollo and Parks Litigation pursuant to the Master Separation Agreement.

In May 2015, the magistrate judge overseeing the consolidated suits (representing fifteen of the lawsuits filed to date and 93 primary claimants) issued a report recommending, among other things, that two motions for summary judgment filed by the BWXT Parties (Failure to Raise a Genuine Issue For Trial on Breach of Duty and Lack of Evidence Regarding Exposure and Dose) be granted in 11 of the 15 consolidated cases. This recommendation was accepted in all respects by the presiding judge and the motions for summary judgment were formally granted in September 2015. The magistrate judge subsequently issued an Order to Show Cause why summary judgment should not be granted in the BWXT Parties’ favor for the reasons stated in the Report and Recommendation filed in May 2015 with respect to the other 4 consolidated cases (but excluding the June and October 2015 filed lawsuits). The plaintiffs in the applicable individual suits filed their notice of appeal on the Motions for Summary Judgment decision on October 15, 2015. Although the appeal process could be lengthy, if ultimately upheld the decision would result in the dismissal of at least eleven of the seventeen currently filed suits.

At the time of ARCO’s sale of NUMEC stock to B&W PGG, B&W PGG received an indemnity and hold harmless agreement from ARCO, which has been assigned to BWXT and its affiliates, with respect to claims and liabilities arising prior to or as a result of conduct or events predating the acquisition.

Insurance coverage and/or the ARCO indemnity currently provides coverage for the claims alleged in the Apollo and Parks Litigation, although no assurance can be given that insurance and/or the indemnity will be available or sufficient in the event of liability, if any.

The BWXT Parties and ARCO were defendants in a prior litigation filed in 1994 relating to the operation of the Apollo Borough and Parks Township facilities in the matter of Donald F. Hall and Mary Ann Hall, et al., v. Babcock & Wilcox Company, et al. (the “Hall Litigation”). In 1998, the BWXT Parties settled all then-pending and future punitive damage claims in the Hall Litigation for $8.0 million and sought reimbursement from third parties, including its insurers, American Nuclear Insurers and Mutual Atomic Energy Liability Underwriters (“ANI”). In 2008, ARCO settled the Hall Litigation with the plaintiffs for $27.5 million. The BWXT Parties then settled the Hall Litigation in 2009 for $52.5 million, settling approximately 250 personal injury and wrongful death claims, as well

as approximately 125 property damage claims, alleging damages as a result of alleged releases involving the facilities. ARCO and the BWXT Parties retained their insurance rights against ANI in their respective settlements; however, under a related settlement regarding ARCO’s indemnification of B&W PGG relating to the two facilities, ARCO assigned to BWXT 58.33% of the total of all ARCO’s proceeds/amounts recovered against ANI on account of the Hall Litigation.

The BWXT Parties sought recovery from ANI for amounts paid by the BWXT Parties to settle the Hall Litigation, along with unreimbursed attorney fees, allocated amounts assigned by ARCO to the BWXT Parties, and applicable interest based upon ANI’s breach of contract and bad faith conduct in the matter of The Babcock & Wilcox Company et al. v. American Nuclear Insurers, et al. (the “ANI Litigation”). ARCO also sought recovery against ANI in the ANI Litigation, which has been pending before the Court of Common Pleas of Allegheny County, Pennsylvania.

In September 2011, a jury returned a verdict in the ANI Litigation, finding that the BWXT Parties’ settlement of the Hall Litigation for $52.5 million and ARCO’s settlement for $27.5 million were fair and reasonable. Following the verdict, in February 2012, the BWXT Parties, ARCO and ANI entered into an agreement (the “February 2012 Agreement”) in which the parties agreed to the dismissal with prejudice of all remaining claims pending in the ANI Litigation, excluding the BWXT Parties’ and ARCO’s claims seeking reimbursement from ANI for the $52.5 million and $27.5 million settlements (plus interest) (the “Settlement Claims”). By agreement, ANI also waived: (1) any and all rights to appeal the September 2011 jury verdict on the basis of the trial court’s evidentiary rulings; and (2) any defenses and arguments of any kind except ANI’s position that it was not required to reimburse the BWXT Parties’ and ARCO for their settlements under the provisions of the ANI policies. In February 2012, the Court granted the parties’ proposed order implementing their agreement and entered final judgment in favor of the BWXT Parties and ARCO on the Settlement Claims (the “February 2012 Judgment”). As part of the February 2012 Judgment, the Court ruled that the B&W Parties and ARCO are entitled to pre-judgment interest on their $52.5 million and $27.5 million settlements, in the amounts of approximately $8.8 million and $6.2 million, respectively. In addition, post-verdict interest from the date of the jury verdict was awarded at 6%. In March 2012, ANI filed a notice of appeal as to the final judgment and a supersedeas appeal bond in the amount of 120% of the total final judgment amount. The parties filed their respective briefs with the Superior Court and oral arguments were held October 31, 2012.

In July 2013, the Superior Court reversed the judgment of the trial court with instructions to reconsider the issue of the Settlement Claims under a different standard. In August 2013, B&W and ARCO filed a request for appeal of the Superior Court’s decision to the Pennsylvania Supreme Court. On January 24, 2014, the Supreme Court of Pennsylvania granted the request for appeal. The parties’ briefs on the appeal have been filed and oral arguments were held October 7, 2014.

On July 21, 2015, the Supreme Court of Pennsylvania issued its ruling by reversing the decision of the Superior Court and reinstating the trial court’s February 2012 Judgment in favor of the BWXT Parties and ARCO. Under the February 2012 Agreement, the parties agreed that there would be no recourse to the United States Supreme Court and, following the exhaustion of its other appeal remedies, ANI is required to pay the BWXT Parties and ARCO all amounts in satisfaction of the February 2012 Judgment, plus any pre- and post-judgment interest and $5 million in liquidated contingency. The Pennsylvania Supreme Court denied ANI’s application for reargument in September 2015, which exhausted ANI’s appeal remedies under the February 2012 Agreement. On September 22, 2015, we received a $94.8 million payment, inclusive of pre-and post-judgment interest totaling $29.1 million, in satisfaction of our portion of the February 2012 Judgment. During the three and nine months ended September 30, 2015, we recognized $65.7 million as a reduction of total cost and expenses and $29.1 million as interest income in our consolidated statements of income.

New Mexico Environment Department

One of our subsidiaries owns a 30% interest in a joint venture, Nuclear Waste Partnership, LLC (“NWP”), which is executing a prime contract with the DOE for the management and operation of the DOE’s Waste Isolation Pilot Plant in Carlsbad, New Mexico (the “WIPP”). Another of our subsidiaries owns a 13% interest in a separate joint venture, Los Alamos National Security, LLC (“LANS”), which is executing a prime contract with the DOE/NNSA for the management and operation of the DOE’s Los Alamos National Laboratory (“Los Alamos”). On December 6, 2014, the DOE and each of its contractors, NWP and LANS, received Administrative Compliance Orders from the New Mexico Environment Department (“NMED”) alleging violations of New Mexico environmental laws and regulations at both WIPP and Los Alamos associated with radiological incidents that occurred at the WIPP in February 2014 (the “WIPP Event”). The Administrative Compliance Orders assessed civil

penalties of approximately $17.75 million on the DOE and NWP and approximately $36.6 million on the DOE and LANS for the alleged violations at both the WIPP and Los Alamos. On April 30, 2015 the DOE, NWP, LANS and NMED reached a settlement framework in lieu of fines related to NMED’s alleged violations at WIPP and Los Alamos. The implementation of this settlement framework is ongoing. DOE/NNSA and LANS have executed an NNSA Fee Waiver Agreement, dated June 6, 2015, that resolves all financial liability issues concerning the WIPP Event. In return for a broad release of liability from NNSA for the WIPP Event, LANS agreed to repay NNSA certain provisional fee payments within five business days of the execution of a final settlement agreement between the DOE, NMED and LANS, which has not yet occurred. Once the final settlement agreement is executed, the return of provisional fees by LANS will require a related immaterial payment by a BWXT subsidiary to LANS in accordance with the LANS operating agreement. No fee repayments or fines were assessed against NWP as part of the settlement framework.

mPower

In April 2014, BWXT announced plans to restructure our mPower program for the development of our mPower reactor to focus on technology development. BWXT has worked with the DOE, Bechtel – our partner in Generation mPower LLC (“GmP”), and other stakeholders and potential investors in continuing efforts to restructure the mPower program in light of deteriorated market conditions. Although BWXT has continued to invest in the program at the rate of approximately $15 million annually, on July 13, 2015, Bechtel provided formal written notice asserting that BWXT and GmP are in material breach of the GmP Limited Liability Company Agreement dated February 28, 2011 (the “LLC Agreement”) for failing to make required investments.

Bechtel has asserted that due to the alleged breaches by BWXT, in accordance with the terms of the LLC Agreement, Bechtel is entitled to 150% of Bechtel’s approximately $80 million investment in the program. This investment was ‘in-kind’ only and did not involve any contribution of cash by Bechtel. BWXT strongly disagrees with Bechtel’s assertions. BWXT has firmly asserted that in response to “significant adverse changes” that have developed since the inception of GmP, BWXT has made substantial efforts to mitigate these adverse changes and is not in breach of any material provisions of the LLC Agreement. BWXT believes there have been significant adverse changes in the business prospects for nuclear power generally, as well as the business prospects of the program, and small modular reactors in particular, since the inception of the GmP Program. These significant adverse changes have resulted from developments and events such as the Fukushima disaster; extended projections of low natural gas prices; continuing ineffectiveness and uncertainty regarding emission controls on coal-fired power plants, compounded by other policies and regulatory changes that favor wind, solar and other renewables as alternative energy sources and legal battles that will likely continue to stifle any meaningful changes, such as the U.S. Supreme Court’s June 2015 ruling to overturn certain U.S. Environmental Protection Agency regulations regarding mercury and other emissions; and lower growth in electricity demand than projected due to multiple factors ranging from slower economic growth to increases in energy efficiency, among other events and developments. As a result of such significant adverse changes, BWXT has the right under the LLC Agreement to terminate the Program. Bechtel is therefore not entitled to any return of its investment. However, rather than terminate the program, BWXT would prefer to continue its investment for some period of time in an effort to further mitigate the adverse changes that have occurred and to continue advancing the research and development of the mPower small modular reactor technology.

BWXT and Bechtel have agreed to a 60-day period of negotiations, expiring on December 18, 2015 unless extended, for the purpose of negotiating a resolution of these matters.

As BWXT has previously disclosed, the latest extension to the Cooperative Agreement with the DOE has expired and the DOE funding has been suspended. We continue to work with the DOE regarding the status of and options relating to the Cooperative Agreement.

BWXT believes the claims asserted by Bechtel are without contractual or legal basis. BWXT intends to aggressively defend against all claims. However, if Bechtel were to prevail on their claims in this matter, the outcome could have a material adverse effect on our financial condition.

Other Litigation and Settlements

On December 17, 2014, an unfavorable jury verdict was delivered against The Babcock & Wilcox Company, Babcock & Wilcox Power Generation Group, Inc. Babcock & Wilcox Nuclear Energy, Inc. and Babcock & Wilcox Canada Ltd. in a case entitled AREVA NP, INC. f/k/a Framatome ANP, Inc. v. The Babcock & Wilcox Company, et. al. in the amount of approximately $16 million. We strongly disagree with the verdict and believe the plaintiff’s claims are without merit. On March 5, 2015 the trial court denied our post-trial motion requesting that the verdict be set aside or a new trial granted. The BWXT parties to the suit have filed a petition for appeal with the Virginia Supreme Court, which the Virginia Supreme Court must accept in order for the appeal to proceed.

The case was filed August 26, 2011 in the Circuit Court for the City of Lynchburg, Commonwealth of Virginia and alleged that the BWXT parties to the suit owed royalties on certain commercial nuclear contracts performed by the Company and certain of its subsidiaries since 2004. As a result of the jury’s decision and notwithstanding our evaluation of post-trial remedies, we made provisions in our financial statements in the fourth quarter of 2014 for the full amount of the jury award.

NOTE 6 – DERIVATIVE FINANCIAL INSTRUMENTS

Our international 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 primarily to hedge our exposure associated with revenues or costs on our long-term contracts 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 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. Any ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in other – net on our condensed consolidated statements of income. The gain or loss on a derivative instrument not designated as a hedging instrument is also immediately recognized in earnings. Gains and losses on derivative financial instruments that require immediate recognition are included as a component of other– net in our condensed consolidated statements of income.

We have designated all 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 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 September 30, 2015, we had deferred approximately $0.8 million of net losses on these derivative financial instruments in accumulated other comprehensive income. Assuming market conditions continue, we expect to recognize substantially all of this amount in the next twelve months.

At September 30, 2015, our derivative financial instruments consisted of FX forward contracts. The notional value of our FX forward contracts totaled $45.1 million at September 30, 2015, with maturities extending to January 2017. These instruments consist primarily of contracts to purchase or sell Canadian Dollars. We are exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. We attempt to mitigate this risk by using major financial institutions with high credit ratings. The counterparties to all of our FX forward contracts are financial institutions included in our credit facility. Our hedge counterparties have the benefit of the same collateral arrangements and covenants as described under our credit facility.

The following tables summarize our derivative financial instruments at September 30, 2015 and December 31, 2014:


	Asset and Liability Derivatives
	September 30,		December 31,
	2015		2014
	(In thousands)
Derivatives Designated as Hedges:
FX Forward Contracts:
Location
Accounts receivable – other	$	1,045	$	469
Accounts payable	$	3,729	$	2,655
Other liabilities	$	1,564	$	743

The effects of derivatives on our financial statements are outlined below:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
	(In thousands)
Derivatives Designated as Hedges:
Cash Flow Hedges:
FX Forward Contracts:
Amount of loss recognized in other comprehensive income (loss)	$	(3,116	)	$	(1,480	)	$	(5,754	)	$	(1,657	)
Gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings: effective portion
Location
Revenues	$	(23	)	$	391		$	461		$	301
Cost of operations	$	(2,637	)	$	(1,459	)	$	(5,355	)	$	(1,332	)

NOTE 7 – FAIR VALUE MEASUREMENTS

Investments

The following is a summary of our investments measured at fair value at September 30, 2015:


	9/30/15		Level 1		Level 2		Level 3
	(In thousands)
Trading securities
Corporate bonds – Centrus Energy Corp.	$	1,501	$	1,501	$	—	$	—
Available-for-sale securities
Equities – Centrus Energy Corp.	$	2,191	$	—	$	2,191	$	—
Mutual funds		3,832		—		3,832		—
Asset-backed securities and collateralized mortgage obligations		277		—		277		—
Commercial paper		750		—		750		—

Total	$	8,551	$	1,501	$	7,050	$	—

The following is a summary of our investments measured at fair value at December 31, 2014:


	12/31/14		Level 1		Level 2		Level 3
	(In thousands)
Trading securities
Corporate bonds – Centrus Energy Corp.	$	2,439	$	2,439	$	—	$	—
Available-for-sale securities
Equities – Centrus Energy Corp.	$	3,088	$	—	$	3,088	$	—
Mutual funds		4,199		—		4,199		—
Asset-backed securities and collateralized mortgage obligations		319		—		319		—
Commercial paper		2,398		—		2,398		—

Total	$	12,443	$	2,439	$	10,004	$	—

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 September 30, 2015 and December 31, 2014, we had forward contracts outstanding to purchase or sell Canadian dollars, with a total fair value of $(4.2) million and $(2.9) 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 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. The fair value of our debt instruments approximated their carrying value at September 30, 2015 and December 31, 2014.

NOTE 8 – STOCK-BASED COMPENSATION

Total stock-based compensation expense for all of our plans recognized for the three and nine months ended September 30, 2015 totaled $2.9 million and $24.4 million, respectively, with associated tax benefit recognized for the three and nine months ended September 30, 2015 totaling $1.0 million and $8.3 million, respectively. We recognized $13.2 million of stock-based compensation expense during the nine months ended September 30, 2015 as costs to spin-off the Power Generation business. This expense related primarily to equity retention awards and expense acceleration associated with employee terminations.

Total stock-based compensation expense for all of our plans recognized for the three and nine months ended September 30, 2014 totaled $3.4 million and $10.4 million, respectively, with associated tax benefit recognized for the three and nine months ended September 30, 2014 totaling $1.3 million and $4.0 million, respectively.

NOTE 9 – SEGMENT REPORTING

As described in Note 1, our operations are assessed based on three reportable segments. An analysis of our operations by reportable segment is as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
	(In thousands)						(In thousands)
REVENUES:
Nuclear Operations	$	303,304		$	297,489		$	879,493		$	877,141
Technical Services		21,261			20,236			61,434			70,706
Nuclear Energy		34,927			21,529			113,350			114,236
Other		—			—			—			278
Adjustments and Eliminations ⁽¹⁾		(522	)		(1,902	)		(2,685	)		(7,105	)

	$	358,970		$	337,352		$	1,051,592		$	1,055,256

⁽¹⁾	Segment revenues are net of the following intersegment transfers and other adjustments:


Nuclear Operations Transfers	$	(512	)	$	(1,799	)	$	(2,634	)	$	(6,730	)
Technical Services Transfers		—			(2	)		(12	)		(54	)
Nuclear Energy Transfers		(10	)		(101	)		(39	)		(321	)

	$	(522	)	$	(1,902	)	$	(2,685	)	$	(7,105	)

OPERATING INCOME:
Nuclear Operations	$	62,720		$	61,893		$	191,877		$	180,103
Technical Services		8,340			4,951			15,475			34,818
Nuclear Energy		1,382			(6,698	)		79			(4,627	)
Other		(2,357	)		(5,140	)		(12,015	)		(63,782	)

	$	70,085		$	55,006		$	195,416		$	146,512

Unallocated Corporate ⁽²⁾		(4,847	)		(5,286	)		(20,052	)		(13,569	)
Income Related to Litigation Proceeds		65,728			—			65,728			—
Special Charges for Restructuring Activities		—			(5,922	)		(16,608	)		(17,059	)
Cost to spin-off Power Generation business		—			—			(25,987	)		—
Mark to Market Adjustment		—			(9,067	)		(2,161	)		(9,067	)

Total Operating Income ⁽³⁾	$	130,966		$	34,731		$	196,336		$	106,817

Other Income (Expense) :
Interest income		30,028			145			30,262			376
Interest expense		(1,231	)		(2,832	)		(6,792	)		(4,637	)
Other – net		(1,666	)		18,563			(2,950	)		18,926

Total Other Income		27,131			15,876			20,520			14,665

Income before Provision for Income Taxes	$	158,097		$	50,607		$	216,856		$	121,482

⁽²⁾	Unallocated corporate includes general corporate overhead not allocated to segments.

⁽³⁾	Included in operating income is the following:


Equity in Income of Investees :
Nuclear Operations	$	—	$	—	$	—	$	—
Technical Services		5,894		4,419		11,028		30,069
Nuclear Energy		—		30		—		32

	$	5,894	$	4,449	$	11,028	$	30,101

NOTE 10 – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2015			2014		2015			2014
	(In thousands, except share and per share amounts)
*Basic:*
Income from continuing operations less noncontrolling interest	$	106,344		$	40,626	$	140,397		$	101,987
Income (loss) from discontinued operations, net of tax		(2,474	)		20,588		(8,417	)		30,708

Net income	$	103,870		$	61,214	$	131,980		$	132,695

Weighted average common shares		106,962,168			107,105,986		106,952,744			109,103,879

Income from continuing operations less noncontrolling interest	$	0.99		$	0.38	$	1.31		$	0.93
Income (loss) from discontinued operations, net of tax		(0.02	)		0.19		(0.08	)		0.28

Net income	$	0.97		$	0.57	$	1.23		$	1.22
*Diluted:*
Income from continuing operations less noncontrolling interest	$	106,344		$	40,626	$	140,397		$	101,987
Income (loss) from discontinued operations, net of tax		(2,474	)		20,588		(8,417	)		30,708

Net income	$	103,870		$	61,214	$	131,980		$	132,695

Weighted average common shares (basic)		106,962,168			107,105,986		106,952,744			109,103,879
Effect of dilutive securities:
Stock options, restricted stock and performance shares ⁽¹⁾		1,222,136			338,298		681,988			378,439

Adjusted weighted average common shares		108,184,304			107,444,284		107,634,732			109,482,318

Income from continuing operations less noncontrolling interest	$	0.98		$	0.38	$	1.30		$	0.93
Income (loss) from discontinued operations, net of tax		(0.02	)		0.19		(0.08	)		0.28

Net income	$	0.96		$	0.57	$	1.23		$	1.21

(1)	At September 30, 2015 and 2014, we have excluded from our diluted share calculation 1,478,086 and 1,342,544 shares, respectively, related to stock options, as their effect would have been antidilutive.

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 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, 2014 (our “2014 10-K”).

In this quarterly report on Form 10-Q, unless the context otherwise indicates, “we,” “us” and “our” mean BWX Technologies, Inc. (“BWXT”) (formerly known as The Babcock & Wilcox Company) and its consolidated subsidiaries.

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords.

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. These statements may include projections and estimates concerning the timing and success of specific projects and our future backlog, revenues, income and capital spending. 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.

These forward-looking statements include, but are not limited to, statements that relate to, or statements that are subject to risks, contingencies or uncertainties that relate to:

•

our business strategy;

•

future levels of revenues (including our backlog and projected claims to the extent either may be viewed as an indicator of future revenues), operating margins, income from operations, net income or earnings per share;

•

anticipated levels of demand for our products and services;

•

future levels of research and development, capital, environmental or maintenance expenditures;

•

our beliefs regarding the timing and effects on our businesses of certain tax legislation, rules or regulations;

•

the success or timing of completion of ongoing or anticipated capital or maintenance projects;

•

estimated costs to complete our on-going contracts;

•

expectations regarding the acquisition or divestiture of assets and businesses;

•

our share repurchase or other return of capital activities;

•

our ability to maintain appropriate insurance and indemnities;

•

the potential effects of judicial or other proceedings, including tax audits, on our business or businesses, financial condition, results of operations and cash flows;

•

the anticipated effects of actions of third parties such as competitors, or federal, foreign, state or local regulatory authorities, or plaintiffs in litigation;

•

the effective date and expected impact of accounting pronouncements;

•

our plans regarding our mPower ^TM reactor program and related Department of Energy (“DOE”) funding program; and

•

anticipated benefits, expected charges and changes associated with cost reduction and margin improvement activities.

In addition, various statements in this quarterly report on Form 10-Q, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements.

We have based our forward-looking statements on 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. While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, 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. Differences between actual results and any future performance suggested in our forward-looking statements could result from a variety of factors, including the following:

•

decisions on spending and trends by the U.S. Government, including continuing appropriations by Congress and the automatic budget cuts (or sequestration) established by the Budget Control Act of 2011 and other customers;

•

the highly competitive nature of our businesses;

•

general economic and business conditions, including changes in interest rates and currency exchange rates;

•

general developments in the industries in which we are involved;

•

cancellations of and adjustments to backlog and the resulting impact from using backlog as an indicator of future earnings;

•

changes in our effective tax rate and tax positions;

•

our ability to maintain operational support for our information systems against service outages and data corruption, as well as protection against cyber-based network security breaches and theft of data;

•

our ability to protect our intellectual property;

•

changes in incurred cost trends and estimates used in the percentage-of-completion method of accounting;

•

the operating risks normally incident to our lines of business, including the potential impact of project losses, liquidated damages and professional liability, product liability, warranty and other claims against us;

•

our ability to manage our capital structure, including our access to capital, debt and ability to raise additional financing;

•

our ability to comply with covenants in our credit agreement and other debt instruments and the availability, terms and deployment of capital;

•

volatility and uncertainty of the credit markets;

•

our ability to successfully manage research and development projects and costs, including our efforts to successfully develop and commercialize new technologies and products;

•

risks associated with our restructuring of the mPower program, including the risk of exposure to claims of contractual and other liability from our current partner, customer or others;

•

the risks associated with integrating businesses we acquire;

•

our ability to obtain and maintain liability, property and other insurance in amounts and on terms we consider adequate and at rates that we consider economical;

•

the aggregated risks retained in our captive insurance subsidiary;

•

the effects of asserted and unasserted claims;

•

results of tax audits and the realization of deferred tax assets;

•

changes in, and liabilities relating to, existing or future environmental matters and regulations, including with respect to our operations that involve the handling, transportation and disposal of radioactive or hazardous materials;

•

changes in, or our failure or inability to comply with, laws and governmental regulations;

•

difficulties we may encounter in obtaining regulatory or other necessary permits or approvals;

•

adverse outcomes from legal and regulatory proceedings;

•

our limited ability to influence and direct the operations of our joint ventures;

•

our ability to perform projects on time and on budget, in accordance with the schedules and terms established by the applicable contracts with customers;

•

our ability to obtain and maintain surety bonds, letters of credit and similar financing;

•

potential violations of the Foreign Corrupt Practices Act;

•

our ability to successfully compete with current and future competitors;

•

the loss of key personnel and the continued availability of qualified personnel;

•

our inability to realize expected benefits from cost reduction and margin improvement initiatives;

•

our ability to negotiate and maintain good relationships with labor unions;

•

changes in pension and medical expenses associated with our retirement benefit programs and other actuarial assumptions;

•

potentially insufficient systems of internal controls over financial reporting;

•

the ability of our suppliers to deliver raw materials in sufficient quantities and in a timely manner;

•

social, political and economic situations in foreign countries where we do business;

•

the possibilities of natural disasters, war, other armed conflicts or terrorist attacks; and

•

risks related to the spin-off of our former Power Generation business.

We believe the items we have outlined above are important factors that could cause estimates in our financial statements to differ materially from actual results and those expressed in a forward-looking statement made in this report or elsewhere by us or on our behalf. We have discussed many of these factors in more detail elsewhere in this report and in Item 1A “Risk Factors” in our 2014 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 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 our description of important factors each time a potential important factor arises, except as required by applicable securities laws and regulations. We advise our security holders that they should (1) be aware that factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.

GENERAL

As a result of the spin-off of our former Power Generation business, we now operate in three segments: Nuclear Operations, Technical Services and Nuclear Energy. Prior to 2015, our mPower business was considered a separate reportable segment; however, in accordance with FASB Topic Segment Reporting , this business no longer meets the quantitative threshold criteria and will be included in our “Other” category as it is no longer considered a reportable segment.

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 through acquisitions to expand and complement our existing businesses. We would expect to fund these opportunities with cash on hand or by raising additional capital through debt, equity or some combination thereof.

Nuclear Operations Segment

The revenues of our Nuclear Operations segment are largely a function of defense spending by the U.S. Government. As a supplier of major nuclear components for certain U.S. Government programs, this segment is a significant participant in the defense industry.

Technical Services Segment

The revenues and equity in income of investees of our Technical Services segment are largely a function of spending by 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 and national laboratories. With its specialized capabilities of full life-cycle management of special nuclear materials, facilities and technologies, our Technical Services segment participates in the cleanup, operation and management of the nuclear sites and weapons complexes maintained by the DOE.

Nuclear Energy Segment

Our Nuclear Energy segment’s overall activity primarily depends on the demand and competitiveness of nuclear energy. A significant portion of our Nuclear Energy segment’s operations depend on the timing of maintenance outages primarily in the Canadian market and the cyclical nature of capital expenditures and major refurbishments for nuclear utility customers, which could cause variability in our financial results.

Power Generation Spin-off

Prior to June 30, 2015, we completed an internal restructuring that separated the subsidiaries involved in our former Power Generation business and established BWE as the direct or indirect parent company of all those subsidiaries. Concurrent with the spin-off, The Babcock & Wilcox Company changed its name to BWX Technologies, Inc. Total costs associated with the spin-off, consisting primarily of professional services, retention and severance-related charges and facilities and infrastructure changes, approximated $66.5 million, of which $60.4 million was recognized in the nine month period ended September 30, 2015 and $6.1 million was recognized in the year ended December 31, 2014.

The results of operations for the three and nine month periods ended September 30, 2015 and 2014 reflect the historical operations of our former Power Generation business as discontinued operations. See Note 2 for further information regarding the spin-off of BWE. The discussions in this quarterly report are presented on the basis of continuing operations, unless otherwise stated.

Special Charges for Restructuring Activities

In 2014, we began certain initiatives aimed at driving margin improvement in our Nuclear Energy segment. The cost savings from these initiatives are expected to make our product and service offerings more cost-competitive through both direct and overhead cost reductions, allowing us to more aggressively pursue new business opportunities and other initiatives to increase stockholder value. We incurred $0.7 million and $8.5 million of costs associated with these initiatives for the nine months ended September 30, 2015 and 2014, respectively.

In addition, in the nine months ended September 30, 2015 and 2014, we incurred $15.9 million and $8.2 million of costs associated with the restructuring of our mPower program. The 2015 amount relates to asset impairments as a result of the significant adverse changes in the business prospects of the mPower program. In the nine months ended September 30, 2014, we incurred $0.4 million of costs associated with the restructuring of our Technical Services 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 2014 10-K. There have been no material changes to our policies during the nine months ended September 30, 2015.

Accounting for Contracts

As of September 30, 2015, in accordance with the percentage-of-completion method of accounting, we have provided for our 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 costs. A principal risk on fixed-priced 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. In the nine months ended September 30, 2015 and 2014, we recognized net changes in estimates related to long-term contracts accounted for on the percentage-of-completion basis, which increased operating income by approximately $14.5 million and $17.6 million, respectively.

RESULTS OF OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 VS. THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014

Selected financial highlights are presented in the table below:


	Three months ended September 30,								Nine months ended September 30,
	2015			2014			$ Change		2015			2014			$ Change
	(in thousands)								(in thousands)
REVENUES:
Nuclear Operations	$	303,304		$	297,489		$	5,815	$	879,493		$	877,141		$	2,352
Technical Services		21,261			20,236			1,025		61,434			70,706			(9,272	)
Nuclear Energy		34,927			21,529			13,398		113,350			114,236			(886	)
Other		—			—			—		—			278			(278	)
Adjustments and Eliminations		(522	)		(1,902	)		1,380		(2,685	)		(7,105	)		4,420

	$	358,970		$	337,352		$	21,618	$	1,051,592		$	1,055,256		$	(3,664	)

OPERATING INCOME:
Nuclear Operations	$	62,720		$	61,893		$	827	$	191,877		$	180,103		$	11,774
Technical Services		8,340			4,951			3,389		15,475			34,818			(19,343	)
Nuclear Energy		1,382			(6,698	)		8,080		79			(4,627	)		4,706
Other		(2,357	)		(5,140	)		2,783		(12,015	)		(63,782	)		51,767

	$	70,085		$	55,006		$	15,079	$	195,416		$	146,512		$	48,904

Unallocated Corporate		(4,847	)		(5,286	)		439		(20,052	)		(13,569	)		(6,483	)
Income Related to Litigation Proceeds		65,728			—			65,728		65,728			—			65,728
Special Charges for Restructuring Activities		—			(5,922	)		5,922		(16,608	)		(17,059	)		451
Cost to spin-off Power Generation business		—			—			—		(25,987	)		—			(25,987	)
Mark to Market Adjustment		—			(9,067	)		9,067		(2,161	)		(9,067	)		6,906

Total Operating Income	$	130,966		$	34,731		$	96,235	$	196,336		$	106,817		$	89,519

Consolidated Results of Operations

Three months ended September 30, 2015 vs. 2014

Consolidated revenues increased 6.4%, or $21.6 million, to $359.0 million in the three months ended September 30, 2015 compared to $337.4 million for the corresponding period in 2014. The Nuclear Energy segment experienced a $13.4 million increase in revenues in addition to increased revenues in our Nuclear Operations and Technical Services segments totaling $5.8 million and $1.0 million, respectively.

Consolidated operating income increased $96.2 million to $131.0 million in the three months ended September 30, 2015 from $34.7 million for the corresponding period of 2014. The increase was primarily driven by $65.7 million of income related to litigation proceeds as well as improvements in our Nuclear Energy, Technical Services, Nuclear Operations and Other segments of $8.1 million, $3.4 million, $0.8 million and $2.8 million, respectively. We also incurred a decrease in special charges for restructuring activities, which are now largely complete, of $5.9 million and recognized a Mark to Market Adjustment of $9.1 million in the corresponding period of the prior year.

Nine months ended September 30, 2015 vs. 2014

Consolidated revenues totaled $1,051.6 million in the nine months ended September 30, 2015 and were relatively unchanged compared to $1,055.3 million in the corresponding period of 2014.

Consolidated operating income increased $89.5 million to $196.3 million in the nine months ended September 30, 2015 from $106.8 million for the corresponding period of 2014. The increase was primarily driven by $65.7 million of income related to litigation proceeds. Operating income in our Nuclear Operations, Nuclear Energy and Other segments increased $11.8 million, $4.7 million and $51.8 million, respectively, which were partially offset by

decreased operating income in our Technical Services segment of $19.3 million. We also incurred costs to spin-off our former Power Generation business totaling $26.0 million and recognized a Mark to Market Adjustment of $2.2 million in the nine month period ended September 30, 2015 compared to a $9.1 million Mark to Market Adjustment in the corresponding period of the prior year.

Nuclear Operations


	Three months ended September 30,								Nine months ended September 30,
	2015			2014			$ Change		2015			2014			$ Change
	(in thousands)								(in thousands)
Revenues	$	303,304		$	297,489		$	5,815	$	879,493		$	877,141		$	2,352
Operating Income		62,720		$	61,893			827		191,877			180,103			11,774
% of Revenues		20.7	%		20.8	%				21.8	%		20.5	%

Three months ended September 30, 2015 vs. 2014

Revenues increased 2.0%, or $5.8 million, to $303.3 million in the three months ended September 30, 2015 compared to $297.5 million for the corresponding period of 2014. The increase was primarily attributable to higher production levels at our naval nuclear fuel and downblending operations of $6.5 million when compared to the corresponding period of the prior year.

Operating income increased $0.8 million to $62.7 million in the three months ended September 30, 2015 compared to $61.9 million in the corresponding period of 2014, which is consistent with the increase in revenue noted above.

Nine months ended September 30, 2015 vs. 2014

Revenues totaled $879.5 million in the nine months ended September 30, 2015 and were relatively unchanged compared to $877.1 million in the corresponding period of 2014 reflecting consistent activity on a year over year basis.

Operating income increased $11.8 million to $191.9 million in the nine months ended September 30, 2015 compared to $180.1 million in the corresponding period of 2014, primarily due to contract improvements related to both our manufacturing of nuclear components for U.S. Government programs and our naval nuclear fuel and downblending operations. We also recognized a $3.0 million benefit from the settlement of a property-related insurance claim during the nine months ended September 30, 2015.

Technical Services


	Three months ended September 30,						Nine months ended September 30,
	2015		2014		$ Change		2015		2014		$ Change
	(in thousands)						(in thousands)
Revenues	$	21,261	$	20,236	$	1,025	$	61,434	$	70,706	$	(9,272	)
Operating Income		8,340		4,951		3,389		15,475		34,818		(19,343	)

Three months ended September 30, 2015 vs. 2014

Revenues totaled $21.3 million in the three months ended September 30, 2015 and were relatively unchanged when compared to $20.2 million for the corresponding period of 2014.

Operating income increased $3.4 million to $8.3 million in the three months ended September 30, 2015 compared to $5.0 million in the corresponding period of 2014 primarily attributable to improved fee performance at several of our sites as well as favorable billing rate adjustments compared to the prior year. This increase was partially offset by the loss of the Pantex and Y-12 contracts and the termination of our work scope for the American Centrifuge Program both of which occurred in 2014 and resulted in operating income decreases of $2.3 million when compared to the corresponding period of the prior year.

Nine months ended September 30, 2015 vs. 2014

Revenues decreased 13.1%, or $9.3 million, to $61.4 million in the nine months ended September 30, 2015 compared to $70.7 million for the corresponding period of 2014, primarily attributable to a $10.9 million decrease in specialty manufacturing associated with the termination of our work scope for the American Centrifuge Program that occurred during the second quarter of 2014.

Operating income decreased $19.3 million to $15.5 million in the nine months ended September 30, 2015 compared to $34.8 million in the corresponding period of 2014. This decrease was primarily attributable to the loss of the Pantex and Y-12 contracts in 2014, which resulted in a decrease in operating income of $21.6 when compared to the prior year period. In addition, the termination of our work scope for the American Centrifuge Program contributed $2.5 million to the decline in operating income. These declines were partially offset by improved fee performance at several of our other sites as well as favorable billing rate adjustments compared to the prior year.

Nuclear Energy


	Three months ended September 30,								Nine months ended September 30,
	2015			2014			$ Change		2015			2014			$ Change
	(in thousands)								(in thousands)
Revenues	$	34,927		$	21,529		$	13,398	$	113,350		$	114,236		$	(886	)
Operating Income		1,382			(6,698	)		8,080		79			(4,627	)		4,706
% of Revenues		4.0	%		(31.1	)%				0.1	%		(4.1	)%

Three months ended September 30, 2015 vs. 2014

Revenues increased 62.2%, or $13.4 million, to $34.9 million in the three months ended September 30, 2015 compared to $21.5 million in the corresponding period of 2014. This increase was primarily attributable to a $9.7 million increase in our nuclear services business attributable to outage work in both Canada and the United States as well as $5.3 million associated with higher manufacturing volume in our nuclear equipment business when compared to the corresponding 2014 period. These increases were partially offset by $1.9 million caused by the continued weakening of the Canadian Dollar when compared to the same period in 2014.

Operating income increased $8.1 million to $1.4 million in the three months ended September 30, 2015 compared to a loss of $6.7 million in the corresponding period of 2014, primarily attributable to improved performance in our nuclear services business totaling $5.9 million due to increased revenue and lower fixed cost resulting from the margin improvement initiatives that began in 2014. Selling, general and administrative expenses also decreased by $1.0 million compared to the same period in 2014 primarily due to the same initiatives.

Nine months ended September 30, 2015 vs. 2014

Revenues decreased 0.8%, or $0.9 million, to $113.4 million in the nine months ended September 30, 2015 compared to $114.2 million in the corresponding period of 2014. The translation of our Canadian Dollar denominated contracts into U.S. Dollars had a $10.1 million impact on revenue when compared to the same period of the prior year. The disposal of our Nuclear Projects business in the second quarter of 2014 also contributed to a decline in revenue of $8.3 million. These decreases were partially offset by an increase in volume of $18.0 million attributable to our nuclear services business in both the United States and Canada.

Operating income increased $4.7 million to $0.1 million in the nine months ended September 30, 2015 compared to a loss of $4.6 million in the corresponding period of 2014. The increase in nuclear services revenue noted above and lower fixed cost resulting from the margin improvement initiatives that began in the prior year resulted in an operating income improvement of $8.9 million. These increases were partially offset by lower volume and unfavorable contract performance in our nuclear equipment business.

Other


	Three months ended September 30,								Nine months ended September 30,
	2015			2014			$ Change		2015			2014			$ Change
	(in thousands)								(in thousands)
Revenues	$	—		$	—		$	—	$	—		$	278		$	(278	)
Operating Income		(2,357	)		(5,140	)		2,783		(12,015	)		(63,782	)		51,767

Three months ended September 30, 2015 vs. 2014

Operating income increased $2.8 million to a loss of $2.4 million in the three months ended September 30, 2015 compared to a loss of $5.1 million in the corresponding period of 2014, due to the slowing pace of development related to our previously announced plans to restructure the mPower program. Research and development activities decreased $7.4 million, which was partially offset by a $5.6 million decline in reimbursements from the DOE under its Small Modular Reactor Licensing Technical Support Program related to the development of the mPower™ reactor design. At this time, the latest extension to the Cooperative Agreement has expired and the DOE funding has been suspended. Selling, general and administrative expenses also decreased by $0.8 million compared to the same period in 2014 primarily due to the restructuring of our mPower program to focus on technology development.

Nine months ended September 30, 2015 vs. 2014

Operating income increased $51.8 million to a loss of $12.0 million in the nine months ended September 30, 2015 compared to a loss of $63.8 million in the corresponding period of 2014, due to our previously announced plans to restructure the mPower program to focus on technology development. Research and development activities decreased $65.9 million, which was partially offset by a $25.4 million decline in reimbursements from the DOE under its Small Modular Reactor Licensing Technical Support Program related to the development of the mPower™ reactor design. At this time, the latest extension to the Cooperative Agreement has expired and the DOE funding has been suspended. Selling, general and administrative expenses also decreased by $10.4 million compared to the same period in 2014 primarily due to the restructuring of our mPower program to focus on technology development.

Unallocated Corporate

Unallocated corporate expenses of $4.8 million were largely unchanged for the three months ended September 30, 2015, as compared to $5.3 million for the corresponding period in 2014. Unallocated corporate expenses increased $6.5 million to $20.1 million for the nine months ended September 30, 2015, as compared to $13.6 million for the corresponding period in 2014, mainly related to favorable healthcare costs experienced in the prior year period.

Unallocated corporate expenses through September 30, 2015 include certain expenses that were incurred to manage and provide corporate support of a larger consolidated group prior to the spin-off of the Power Generation business. General corporate overhead expenses that are not specifically identifiable with our former Power Generation business are reflected as part of continuing operations for the historical financial statements. We expect unallocated corporate expense to be approximately $15 to $20 million on an annual basis subsequent to the spin-off of the Power Generation business.

Special Charges for Restructuring Activities

Operating income for the nine months ended September 30, 2015 included special charges for restructuring activities totaling $16.6 million, primarily related to asset impairments recognized as a result of the significant adverse changes in the business prospects of the mPower program. Our restructuring activities are now largely complete and we do not anticipate significant future expenditures.

Operating income for the three and nine months ended September 30, 2014 included special charges for restructuring activities totaling $5.9 million and $17.1 million, respectively, primarily related to termination benefits, consulting costs and facility costs related to our mPower restructuring and Nuclear Energy margin improvement initiatives.

Provision for Income Taxes


	Three months ended September 30,								Nine months ended September 30,
	2015			2014			$ Change		2015			2014			$ Change
	(in thousands)								(in thousands)
Income from Continuing Operations before Provision for Income Taxes	$	158,097		$	50,607		$	107,490	$	216,856		$	121,482		$	95,374
Income Tax Provision	$	51,589		$	10,853		$	40,736	$	76,789		$	27,395		$	49,394
Effective Tax Rate		32.6	%		21.4	%				35.4	%		22.6	%

We primarily operate in the United States and Canada. Beginning in the second quarter of 2015, we began recognizing our consolidated income tax provision based on the U.S. federal statutory rate of 35% due to the presumed repatriation of our Canadian earnings.

Our effective tax rate for the three month period ended September 30, 2015 was approximately 32.6% as compared to 21.4% for the three month period ended September 30, 2014. The effective tax rate for the three month period ended September 30, 2015 was impacted primarily by the remeasurement of uncertain tax positions as a result of the close of a previously ongoing IRS audit as well as adjustments related to the filing of our 2014 U.S. tax return. The effective tax rate for the three months ended September 30, 2014 was lower due to the $18.6 million gain from the exchange of our USEC investment for which the related tax provision was offset by the reversal of a previously established valuation allowance related to the prior impairments of the USEC investment.

Our effective tax rate for the nine month period ended September 30, 2015 was approximately 35.4% as compared to 22.6% for the nine month period ended September 30, 2014. Our effective tax rate for the nine months ended September 30, 2015 was impacted by the spin-off of our former Power Generation business. Specifically, we recognized $3.8 million of tax provision for the nine months ended September 30, 2015 due to the change in our tax footprint associated with the spin-off, resulting in revaluations of deferred tax assets and liabilities as well as the need to recognize tax provision on our global earnings at our U.S. federal rate due to the likely repatriation of future foreign earnings. These amounts were offset by the remeasurement of uncertain tax positions and adjustments related to the filing of our 2014 tax return discussed above. The effective tax rates for the nine months ended September 30, 2014 was lower due to the impact of an increase in benefits from amended federal manufacturing deductions and the receipt of a favorable ruling from the Internal Revenue Service that retroactively reduced the U.S. tax owed on income from certain of our foreign joint ventures. In addition, the effective tax rates for the nine months ended September 30, 2014 was lower due to the $18.6 million gain from the exchange of our USEC investment for which the related tax provision was offset by the reversal of a previously established valuation allowance related to the prior impairments of the USEC investment.

Backlog

Backlog is not a measure recognized by generally accepted accounting principles. It is possible that our methodology for determining backlog may not be comparable to methods used by other companies. We generally include expected revenue in our backlog when we receive written confirmation from our customers authorizing the performance of work and committing the customer to payment for work performed. We are subject to the budgetary and appropriation cycle of the U.S. Government as it relates to our Nuclear Operations and Technical Services segments. Backlog may not be indicative of future operating results and projects in our backlog may be cancelled, modified or otherwise altered by customers. We do not include orders of our unconsolidated joint ventures in backlog. These unconsolidated joint ventures are primarily included in our Technical Services segment.


	September 30,		December 31,
	2015		2014
	(Unaudited)
	(In millions)
Nuclear Operations	$	2,452	$	2,778
Technical Services		6		3
Nuclear Energy		342		264

Total Backlog	$	2,800	$	3,045

Of the September 30, 2015 backlog, we expect to recognize revenues as follows:


	2015		2016		Thereafter		Total
	(Unaudited)
	(In approximate millions)
Nuclear Operations	$	284	$	859	$	1,309	$	2,452
Technical Services		6		—		—		6
Nuclear Energy		38		128		176		342

Total Backlog	$	328	$	987	$	1,485	$	2,800

At September 30, 2015, Nuclear Operations backlog with the U.S. Government was $2.4 billion, of which $175.9 million had not yet been funded.

At September 30, 2015, Technical Services backlog with the U.S. Government was $5.5 million, all of which was funded.

At September 30, 2015, Nuclear Energy had no backlog with the U.S. Government.

Liquidity and Capital Resources

Credit Facility

On May 11, 2015, BWXT entered into a credit agreement (the “Credit Agreement”) with a syndicate of lenders and letter of credit issuers, and Bank of America, N.A., as administrative agent. The Credit Agreement provides for a five-year, senior secured revolving credit facility in an aggregate amount of up to $400 million, the full amount of which is available for the issuance of letters of credit, and a senior secured term loan facility in an aggregate amount of up to $500 million, $300 million of which was drawn upon closing on June 30, 2015. The remaining commitment for the term loan expires on December 31, 2015. Obligations under the Credit Agreement are scheduled to mature on the fifth anniversary of its closing date. The proceeds of loans under the Credit Agreement were used to repay all indebtedness under BWXT’s former secured credit facility, and remaining amounts are available for working capital needs and other general corporate purposes.

The Credit Agreement includes provisions for additional financial institutions to become lenders, or for any existing lender to increase its commitment thereunder, subject to an aggregate maximum of $250 million for all incremental term loan, revolving credit borrowings and letter of credit commitments.

The Credit Agreement is (i) guaranteed by substantially all of BWXT’s wholly owned domestic subsidiaries, excluding BWXT’s captive insurance subsidiary, and (ii) secured by first-priority liens on certain assets owned by BWXT and the guarantors (other than the BWXT’s subsidiaries comprising its Nuclear Operations and Technical Services segments).

The Credit Agreement requires interest payments on revolving loans on a periodic basis until maturity. BWXT is also required to make quarterly amortization payments on the term loan portion of the Credit Agreement in an amount equal to 1.25% of the aggregate principal amount of the term loan facility that is utilized beginning in the first quarter of 2016. BWXT may prepay all loans under the Credit Agreement at any time without premium or penalty (other than customary LIBOR breakage costs), subject to notice requirements.

Loans outstanding under the Credit Agreement bear interest at BWXT’s option at either the LIBOR rate plus a margin ranging from 1.25% to 1.75% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the one month LIBOR rate plus 1.0%, or the administrative agent’s prime rate) plus a margin ranging from 0.25% to 0.75% per year. Starting on the closing date of the Credit Agreement, we are charged a commitment fee on the unused portions of the revolving credit facility and term loan facility, and that fee varies between 0.150% and 0.250% per year. Additionally, we are charged a letter of credit fee of between 1.25% and 1.75% per year with respect to the amount of each financial letter of credit issued under the Credit Agreement and a letter of credit fee of between 0.75% and 1.05% per year is charged with respect to the amount of each performance letter of credit issued under the Credit Agreement. The applicable margin for loans, the commitment fee and the letter of credit fees set forth above will vary quarterly based on BWXT’s leverage ratio. Upon the closing of the Credit Agreement, BWXT paid certain upfront fees to the lenders thereunder, and paid arrangement and other fees to the arrangers and agents of the Credit Agreement. At September 30, 2015, borrowings outstanding totaled $300.0 million and $0.0 million under our term loan and revolving line of credit, respectively, and letters of credit issued under the Credit Agreement totaled $69.9 million. As a result, we had $530.1 million available for borrowings or to meet letter of credit requirements as of September 30, 2015, excluding the additional $250 million available to us for term loan, revolving credit borrowings and letter of credit commitments.

Based on the current credit ratings of the Credit Agreement, the applicable margin for Eurocurrency rate loans is 1.375%, the applicable margin for base rate loans is 0.375%, the letter of credit fee for financial letters of credit is 1.375%, the letter of credit fee for performance letters of credit is 0.825%, and the commitment fee for unused portions of the Credit Agreement is 0.175%. The Credit Agreement does not have a floor for the base rate or the Eurocurrency rate. As of September 30, 2015, the interest rate on borrowings under our Credit Agreement was 1.57%.

The Credit Agreement 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 3.00 to 1.00, which ratio may be increased to 3.25 to 1.00 for up to four consecutive fiscal quarters after a material acquisition. The minimum consolidated interest coverage ratio is 4.00 to 1.00. In addition, the Credit Agreement contains various restrictive covenants, including with respect to debt, liens, investments, mergers, acquisitions, dividends, equity repurchases and asset sales.

The Credit Agreement generally includes customary events of default for a secured credit facility, some of which allow for an opportunity to cure. If an event of default relating to bankruptcy or other insolvency events with respect to BWXT occurs under the Credit Agreement, all obligations under the Credit Agreement will immediately become due and payable. If any other event of default exists under the Credit Agreement, the lenders will be permitted to accelerate the maturity of the obligations outstanding under the Credit Agreement. If any event of default occurs under the Credit Agreement, 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 Agreement, or if BWXT is unable to make any of the representations and warranties in the Credit Agreement, BWXT will be unable to borrow funds or have letters of credit issued under the Credit Agreement.

Long-term Benefit Obligations

Our unfunded pension and postretirement benefit obligations totaled $332.8 million at September 30, 2015. These long-term liabilities are expected to require use of our resources to satisfy future funding obligations. We expect to make contributions of approximately $4 million for the remainder of 2015 primarily related to our foreign pension plans and postretirement plans.

Other

Our domestic and foreign cash and cash equivalents, restricted cash and cash equivalents and investments as of September 30, 2015 and December 31, 2014 were as follows:


	September 30,		December 31,
	2015		2014
	(In thousands)
Domestic	$	153,364	$	159,770
Foreign		11,141		29,853

Total	$	164,505	$	189,623

We expect cash on hand, cash flow from operations and borrowing capacity under the Credit Agreement to be sufficient to meet our liquidity needs for the next twelve months.

Our working capital decreased by approximately $21.5 million to $327.3 million at September 30, 2015 from $348.8 million at December 31, 2014, attributable to a decrease in net contracts in progress associated with cash receipts in our Nuclear Operations segment which was partially offset by the timing of accounts payable and accrued employee benefit payments.

Our net cash provided by operations was $238.9 million in the nine months ended September 30, 2015, compared to cash used in operations of $85.2 million for the nine months ended September 30, 2014. This increase in cash provided by operations was largely attributable to a $94.8 million payment received in connection with the ANI legal judgment as discussed further in Note 5 to our condensed consolidated financial statements, as well as improved project cash flows and working capital in relation to the prior year period.

Our net cash used in investing activities decreased by $120.4 million to $54.8 million in the nine months ended September 30, 2015 from cash used in investing activities of $175.2 million in the nine months ended September 30, 2014. The higher cash used in investing activities in 2014 was primarily attributable to the prior year acquisition of MEGTEC associated with our former Power Generation business.

Our net cash used in financing activities was $355.0 million in the nine months ended September 30, 2015, compared to cash provided by financing activities of $119.1 million for the nine months ended September 30, 2014. This increase in net cash used in financing activities was primarily attributable to cash divested in connection with the spin-off of our former Power Generation business. In addition, we borrowed less from our credit facility and repurchased fewer common shares during the 2015 period as compared to the prior year period.

At September 30, 2015, we had restricted cash and cash equivalents totaling $20.1 million, $2.7 million of which was held for future decommissioning of facilities (which we include in other assets on our condensed consolidated balance sheets) and $17.4 million of which was held to meet reinsurance reserve requirements of our captive insurer.

At September 30, 2015, we had investments with a fair value of $8.6 million. Our investment portfolio consists primarily of investments in corporate bonds, equities and highly liquid money market instruments. Our investments 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, reported as a component of other comprehensive income.

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 2014 10-K.

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, 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 SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). 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 September 30, 2015 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 Securities and Exchange Commission, 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 quarter ended September 30, 2015 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 5 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 annual report on Form 10-K for the year ended December 31, 2014 are some of the factors that could materially affect our business, financial condition or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In November 2012, we announced that our Board of Directors authorized a share repurchase program. The following table provides information on our purchases of equity securities during the quarter ended September 30, 2015. 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.


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⁾
July 1, 2015 – July 31, 2015		101,097	$	24.88		—	$	346.6
August 1, 2015 – August 31, 2015		266,792	$	25.93		258,000	$	340.0
September 1, 2015 – September 30, 2015		442,205	$	25.83		441,000	$	328.5

Total		810,094	$	25.74		699,000

⁽¹⁾	Includes 101,097 shares, 8,792 shares and 1,205 shares repurchased during July, August, and September, respectively, pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.

(2)

On May 7, 2013, 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. On February 26, 2014, 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. The February 2014 authorization was in addition to the $250 million share repurchase amount authorized in May 2013. We may repurchase shares in the open market using the additional repurchase amounts authorized in May 2013 and February 2014 during a two-year period that expires on December 10, 2015 for the May 2013 authorization and February 25, 2016 for the February 2014 authorization. On November 4, 2015, we also 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 $300 million during a two-year period from February 26, 2016 to February 26, 2018.

Item 6. Exhibits

Exhibit 2.1* - Master Separation Agreement dated as of July 2, 2010 between McDermott International, Inc. and BWXT (formerly The Babcock & Wilcox Company) (incorporated by reference to Exhibit 2.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

Exhibit 2.2* - Master Separation Agreement, dated as of June 8, 2015, between BWXT (formerly The Babcock & Wilcox Company) and Babcock & Wilcox Enterprises, Inc. (incorporated by reference to Exhibit 2.1 to BWXT’s Current Report on Form 8-K filed with the SEC on June 9, 2015 (File No. 1-34658)).

Exhibit 3.1* - Restated Certificate of Incorporation of BWXT (formerly The Babcock & Wilcox Company) (incorporated by reference to Exhibit 3.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

Exhibit 3.2 - Certificate of Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658)).

Exhibit 3.3* - Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to BWXT’s Current Report on Form 8-K filed with the SEC on June 9, 2015 (File No. 1-34658)).

Exhibit 10.1* ⁺ - 2010 Long-Term Incentive Plan of BWX Technologies, Inc. as amended and restated July 1, 2015 (incorporated by reference to Exhibit 10.9 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

Exhibit 10.2* ⁺ - BWX Technologies, Inc. Executive Incentive Compensation Plan as amended & Restated July 1, 2015 (incorporated by reference to Exhibit 10.10 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

Exhibit 10.3* ⁺ - BWX Technologies, Inc. Executive Severance Plan amended and restated July 1, 2015 (incorporated by reference to Exhibit 10.11 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

Exhibit 10.4* ⁺ - Supplemental Executive Retirement Plan of BWX Technologies, Inc. as amended and restated July 1, 2015 (incorporated by reference to Exhibit 10.12 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

Exhibit 10.5* ⁺ - BWX Technologies, Inc. Defined Contribution Restoration Plan as amended and restated effective July 1, 2015 (incorporated by reference to Exhibit 10.13 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

Exhibit 10.6* ⁺ - Form of Director and Officer Indemnification Agreement entered into between BWX Technologies, Inc. and each of its directors and selected officers (incorporated by reference to Exhibit 10.15 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

Exhibit 10.7 ⁺ - Form of Change In Control Agreement between BWX Technologies, Inc. and selected officers (other than Mr. Geveden).

Exhibit 10.8*+ - Form of Change In Control Agreement between Rex D. Geveden and BWX Technologies, Inc. (incorporated by reference to Exhibit 10.1 to BWXT’s Current Report on Form 8-K filed with the SEC on October 7, 2015 (File No. 1-34658)).

Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.

Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.

Exhibit 32.1 - Section 1350 certification of Chief Executive Officer.

Exhibit 32.2 - Section 1350 certification of Chief Financial Officer.

101.INS - XBRL Instance Document

101.SCH - XBRL Taxonomy Extension Schema Document

101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB - XBRL Taxonomy Extension Label Linkbase Document

101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF - XBRL Taxonomy Extension Definition Linkbase Document

^*	Incorporated by reference to the filing indicated.

⁺	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.


		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)

November 4, 2015

EXHIBIT INDEX


Exhibit Number		Description
2.1*		Master Separation Agreement dated as of July 2, 2010 between McDermott International, Inc. and BWXT (formerly The Babcock & Wilcox Company) (incorporated by reference to Exhibit 2.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

2.2*		Master Separation Agreement, dated as of June 8, 2015, between BWXT (formerly The Babcock & Wilcox Company) and Babcock & Wilcox Enterprises, Inc. (incorporated by reference to Exhibit 2.1 to BWXT’s Current Report on Form 8-K filed with the SEC on June 9, 2015 (File No. 1-34658)).

3.1*		Restated Certificate of Incorporation of BWXT (formerly The Babcock & Wilcox Company) (incorporated by reference to Exhibit 3.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

3.2		Certificate of Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658)).

3.3*		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to BWXT’s Current Report on Form 8-K filed with the SEC on June 9, 2015 (File No. 1-34658)).

10.1* ⁺		2010 Long-Term Incentive Plan of BWX Technologies, Inc. as amended and restated July 1, 2015 (incorporated by reference to Exhibit 10.9 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

10.2* ⁺		BWX Technologies, Inc. Executive Incentive Compensation Plan as amended & Restated July 1, 2015 (incorporated by reference to Exhibit 10.10 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

10.3* ⁺		BWX Technologies, Inc. Executive Severance Plan amended and restated July 1, 2015 (incorporated by reference to Exhibit 10.11 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

10.4* ⁺		Supplemental Executive Retirement Plan of BWX Technologies, Inc. as amended and restated July 1, 2015 (incorporated by reference to Exhibit 10.12 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

10.5* ⁺		BWX Technologies, Inc. Defined Contribution Restoration Plan as amended and restated effective July 1, 2015 (incorporated by reference to Exhibit 10.13 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

10.6* ⁺		Form of Director and Officer Indemnification Agreement entered into between BWX Technologies, Inc. and each of its directors and selected officers (incorporated by reference to Exhibit 10.15 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658).

10.7 ⁺		Form of Change In Control Agreement between BWX Technologies, Inc. and selected officers (other than Mr. Geveden).

10.8* ⁺		Form of Change In Control Agreement between Rex D. Geveden and BWX Technologies, Inc. (incorporated by reference to Exhibit 10.1 to BWXT’s Current Report on Form 8-K filed with the SEC on October 7, 2015 (File No. 1-34658)).

31.1		Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.

31.2		Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.

32.1		Section 1350 certification of Chief Executive Officer.

32.2		Section 1350 certification of Chief Financial Officer.



101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

^*	Incorporated by reference to the filing indicated.

⁺	Management contract or compensatory plan or arrangement.

Exhibit 10.7

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (“Agreement”) is by and between BWX Technologies, Inc. (the “Company”) and (“Executive”).

The Company considers it essential to the interests of the Company’s stockholders to secure the continued employment of key management personnel. The Board of Directors of the Company recognizes that the possibility of a Change in Control (as defined in Exhibit A to this Agreement) exists and that the uncertainty this raises may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. In order to encourage the continued attention and dedication of key management personnel, this Agreement is being entered into by the Company and Executive.

The Company and Executive agree as follows:

1.	D EFINITIONS : Capitalized terms are defined in Exhibit A to this Agreement.

S EVERANCE B ENEFITS : If Executive experiences a Covered Termination he will be entitled to the following payments and benefits set forth below; provided that the benefits described in Sections 2(b), (c), (d), (e) and (f) shall only be payable if the Executive executes a waiver and release in the form attached as Exhibit B to this Agreement, which releases the Company and its affiliates, directors, officers and other customary persons from any claim or liability arising out of or related to Executive’s employment with or termination of employment from the Company or any of its affiliates (except for amounts to which Executive is legally entitled pursuant to employee benefit plans, Executive’s right to enforce this Agreement and rights to insurance coverage or indemnification) (the “ Release ”), which Release is not revoked within the time period provided therein, and the executed Release is delivered to the Company no later than forty-five (45) days after the Covered Termination.

(a)

Accrued Benefits. The Accrued Benefits, payable within sixty (60) days after the effective date of the Covered Termination, or such earlier time as may be required by applicable law.

(b)

SERP. As of the effective date of the Covered Termination, a fully vested and non-forfeitable interest in Executive’s account balance in the SERP and Restoration Plan (as applicable), payable in accordance with the terms of SERP and/or Restoration Plan, as applicable.

(c)

Unvested Equity Awards. As of the effective date of the Covered Termination, unless otherwise settled in accordance with the provisions of Section 4 of this Agreement and the plans and agreements referred to therein, a fully vested and non-forfeitable interest in any outstanding unvested equity awards granted on Company Shares (“ Equity Awards ”), to be vested and, in the case of restricted stock units, settled, in any such case within the 60 ^th day after the effective date of the Covered Termination; provided that no such Equity Award that is subject to Code Section 409A will be paid on a date earlier than is provided in the

applicable Equity Award agreement to the extent necessary to avoid the imposition of tax penalties pursuant to Code Section 409A; provided further that any performance-based Equity Awards shall be settled with respect to the number of Company Shares earned based on the target rate of performance applicable to such award. , In addition, any Equity Awards that are vested (including as a result of the foregoing provision) options to purchase Company Shares that Executive holds as of the date of his Covered Termination will remain exercisable through the expiration of the original term of such option.

(d)

Severance Payment Based on Salary. An amount equal to [2.99] [2] [1] times the sum of Executive’s (x) Salary plus (y) the product of (1) Salary and (2) Target Bonus Percentage, paid in a lump sum in cash within sixty (60) days after the Covered Termination.

(e)

Severance Payment Based on Bonus .

(1)

Covered Termination Performance Year. An amount equal to the product of (A) the Salary and (B) the Target Bonus Percentage, with the product of (A) and (B) prorated based on the number of days Executive was employed during the bonus year in which Executive’s Covered Termination occurs, paid in a lump sum in cash within sixty (60) days after the effective date of the Covered Termination.

(2)

Prior Performance Year. If a bonus for the prior calendar year has not been paid under the Bonus Plan as of the Executive’s effective date of the Covered Termination, then Executive will be entitled to the actual amount of the bonus determined under the Bonus Plan for such prior calendar year (such amount to be determined without the exercise of any downward discretion), paid in a lump sum in cash at the same time such bonus is paid to other Bonus Plan participants.

(f)

Health Care Benefits. An amount equal to three (3) times the full annual cost that is payable by Executive for continuation of coverage for medical, dental and vision benefits elected by Executive for him/herself and his/her eligible dependents under COBRA for the year in which Executive’s Covered Termination occurs, paid in a lump sum in cash within sixty (60) days after the Covered Termination.

In no event shall the benefits provided for in Sections 2(a), (d), (e) and (f) above or any payment provided for in (c) above that is not subject to Code Section 409A be paid later than March 15th of the calendar year immediately following the calendar year in which the Executive’s Covered Termination Date occurs. For the avoidance of doubt, in the event of a Covered Termination, in no event shall Executive be eligible for or entitled to any other severance payments or benefits under any other severance plan, program or policy maintained by the Company or any of its Affiliates.

- 2 -

L IMITATION ON P AYMENTS AND B ENEFITS : Notwithstanding any provision of this Agreement to the contrary, if any amount or benefit to be paid or provided under this Agreement would be an “Excess Parachute Payment,” within the meaning of Section 280G of the Code, or any successor provision thereto, but for the application of this sentence, then the payments and benefits identified in the last sentence of this Section 3 to be paid or provided under this Agreement will be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes an Excess Parachute Payment; provided, however, that no such reduction shall be made if it is not thereby possible to eliminate all Excess Parachute Payments under this Agreement; provided, however, that the foregoing reduction will be made only if and to the extent that such reduction would result in an increase in the aggregate payment and benefits to be provided, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income and employment taxes). Whether requested by Executive or the Company, the determination of whether any reduction in such payments or benefits to be provided under this Agreement or otherwise is required pursuant to the preceding sentence will be made at the expense of the Company by the Company’s independent accountants, which determination shall take into account a reasonable compensation analysis of the value of services provided or to be provided by Executive, including Executive’s agreeing to refrain from performing services pursuant to a covenant not to compete or similar covenant applicable to Executive (including, without limitation, those contemplated by Section 6, 7 and 8 of this Agreement).

The fact that Executive’s right to payments or benefits may be reduced by reason of the limitations contained in this Section 3 will not of itself limit or otherwise affect any other rights of the Executive other than pursuant to this Agreement. In the event that any payment or benefit intended to be provided under this Agreement or otherwise is required to be reduced pursuant to this Section 3, the Company will reduce the Executive’s payment and/or benefits, to the extent required, in the following order: (i) the lump sum payment provided under Section 2(d); (ii) the lump sum payment provided under Section 2(e)(1); (iii) the lump sum payment related to Health Care Benefits provided under Section 2(f); and (iv) the accelerated vesting of equity-based awards described in Section 2(c).

C HANGE IN C ONTROL E QUITY -B ASED B ENEFITS : If a Change in Control occurs, any benefits Executive may be entitled to with respect to any equity-based compensation (including any Equity Awards) shall be determined in accordance with the applicable plans and award agreements. In the event of any conflict between the terms of any such plans or award agreement and Section 2(c) of this Agreement, the terms of such plan or award agreement shall control to the extent such plan or award agreement provides for accelerated vesting or settlement in connection with a Change in Control (either upon the occurrence of such an event or thereafter). For the avoidance of doubt, if any given equity-based compensation award agreement is silent with respect to the effect of a Change in Control and the plan pursuant to which any such award agreement is granted does not contain provisions that would automatically apply to the given award, then Section 2(c) of this Agreement shall control.

- 3 -

5.	I NTERNAL R EVENUE C ODE 409A:

(a)

Compliance. It is the intent of the parties that the provisions of this Agreement either comply with Code Section 409A and the Treasury regulations and guidance issued thereunder or that one or more elements of compensation or benefits be exempt from Code Section 409A. Accordingly, the parties intend that this Agreement be interpreted and operated in a manner consistent with such requirements in order to avoid the application of penalty taxes under Code Section 409A to the extent reasonably practicable. The Company shall neither cause nor permit: (i) any payment, benefit or consideration to be substituted for a benefit that is payable under this Agreement if such action would result in the failure of any amount that is subject to Code Section 409A to comply with the applicable requirements of Code Section 409A; or (ii) any adjustments to any equity interest to be made in a manner that would result in the equity interest’s becoming subject to Code Section 409A unless, after such adjustment, the equity interest is in compliance with the requirements of Code Section 409A to the extent applicable. A Covered Termination shall constitute an “involuntary separation from service” for purposes of Code Section 409A.

(b)

Waiting Period for Specified Employees . Notwithstanding any provision of this Agreement to the contrary, if Executive is a “Specified Employee” (as that term is defined in Code Section 409A) as of Executive’s Covered Termination Date, then any amounts or benefits which are payable under this Agreement upon Executive’s “Separation from Service” (within the meaning of Code Section 409A), which are subject to the provisions of Code Section 409A and not otherwise exempt under Code Section 409A, and would otherwise be payable during the first six-month period following such Separation from Service, shall be paid on the first business day that (i) is at least six months after the date after Executive’s Covered Termination Date or (ii) follows Executive’s date of death, if earlier (the “Waiting Period”). The benefits in Sections 2(a), (d), (e) and (f) and certain of the benefits in Section 2(c) are intended to be exempt from Code Section 409A under the “short-term deferral exemption” and thus the Waiting Period is not intended to apply to such benefits.

C ONFIDENTIALITY AND N ON -D ISCLOSURE : Executive acknowledges that pursuant to this Agreement, the Company agrees to provide to him Confidential Information and has previously provided him other such Confidential Information. In return for this and other consideration, provided under this Agreement, Executive agrees that he will not, while employed by the Company or any Affiliate and thereafter, disclose or make available to any other person or entity, or use for his own personal gain, any Confidential Information, except for such disclosures as required in the performance of his duties hereunder as may otherwise be required by law or legal process (in which case Executive shall notify the Company of such legal or judicial proceeding as soon as practicable following his receipt of notice of such a proceeding, and permit the Company to seek to protect its interests and information).

- 4 -

R ETURN OF P ROPERTY : Executive agrees that at the time of leaving his or her employ with the Company or an Affiliate, he will deliver to the Company (and will not keep in his possession, recreate or deliver to anyone else) all Confidential Information as well as all other devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, customer or client lists or information, or any other documents or property (including all reproductions of the aforementioned items) belonging to the Company or any of its Affiliates, regardless of whether such items were prepared by Executive.

8.	N ON -S OLICITATION A ND N ON -C OMPETITION :

(a)

For consideration provided under this Agreement, including, but not limited to the Company’s agreement to provide Executive with Confidential Information regarding the Company and its respective businesses, Executive agrees that while employed by the Company or an Affiliate and for [thirty-six (36)] [twenty-four (24)] [twelve (12)] months following a Separation from Service during the term of this Agreement he shall not, without the prior written consent of the General Counsel, directly or indirectly, (i) hire or induce, entice or solicit (or attempt to induce, entice or solicit) any employee of the Company or any of its Affiliates or ventures to leave the employment of the Company or any of its Affiliates or ventures or (ii) solicit or attempt to solicit the business of any customer or acquisition prospect of the Company or any of its Affiliates or ventures with whom Executive had any actual contact or Confidential Information about, in any such case while employed by the Company or an Affiliate.

(b)

Additionally, for consideration provided under this Agreement, including, but not limited to the Company’s agreement to provide Executive with Confidential Information regarding the Company and its respective businesses, Executive agrees that while employed by the Company or an Affiliate and for [thirty-six (36)] [twenty-four (24)] [twelve (12)] months following a Covered Termination he will not, without the prior written consent of the Company, acting alone or in conjunction with others, either directly or indirectly, engage in any business that is in competition with the Company or an Affiliate or accept employment with or render services at a comparable level of responsibility to such a business as an officer, agent, employee, independent contractor or consultant, or otherwise engage in activities that are in competition with the Company or an Affiliate.

(c)

The restrictions contained in this Section 8 are limited to areas or territories within the United States and in any foreign country in which the Company or an Affiliate engages (or has definite plans to engage) in operations or the marketing of its products or services at the time of Executive’s Separation from Service.

(d)

Executive acknowledges that these restrictive covenants under this Agreement, for which Executive received valuable consideration from the Company as provided in this Agreement, including, but not limited to the Company’s agreement to provide Executive with Confidential Information regarding the Company and its respective businesses, are ancillary to otherwise enforceable

- 5 -

provisions of this Agreement, that the consideration provided by the Company gives rise to the interest of each of the Company in restraining Executive from competing and that the restrictive covenants are designed to enforce Executive’s consideration or return promises under this Agreement. Additionally, Executive acknowledges that these restrictive covenants contain limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other legitimate business interests of the Company, including, but not limited to, the Company’s need to protect its Confidential Information. Executive further acknowledges that a violation on Executive’s part of any of the restrictive covenants contained in Section 6 or this Section 8 of this Agreement would cause immeasurable and irreparable damage to the Company. Accordingly, Executive agrees that, in addition to any other remedy the Company may have for any such violation: (1) the Company shall be entitled to injunctive relief in any court of competent jurisdiction for any actual or threatened violation of any such covenant in addition to any other remedies it may have; and (2) in addition, if the General Counsel of the Company (or other similarly situated senior executive of the Company) reasonably and in good faith determines that Executive has materially breached any of these restrictive covenants contained in this Section 8 of the Agreement during the applicable period in which they are in effect, after written notice to Executive of such determination and a ten (10) day opportunity to cure such breach (if the General Counsel determines in good faith that such breach is curable), if such breach is not so cured to the reasonable satisfaction of the General Counsel, then Executive shall be required to promptly repay all net after-tax cash amounts previously paid under this Agreement to Executive, and Executive shall forfeit any Equity Awards he or she may then hold.

9.	N OTICES : For purposes of this Agreement, notices and all other communications must be in writing and will be deemed to have been given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Company:

If to Executive:

or to such other address as either party may furnish to the other in writing in accordance with this Section.

10.	A PPLICABLE L AW : The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Delaware, but without giving effect to the principles of conflict of laws of such State.

- 6 -

11.

S EVERABILITY : If any provision of this Agreement is determined to be invalid or unenforceable (including for the avoidance of doubt any provision (or portion thereof) of Section 6, 7 or 8 of this Agreement), then the invalidity or unenforceability of that provision will not affect the validity or enforceability of any other provision of this Agreement and all other provisions will remain in full force and effect.

12.

W ITHHOLDING OF T AXES : The Company may withhold from any payments under this Agreement all federal, state, local or other taxes as may be required pursuant to any law or governmental regulation or ruling. Executive acknowledges that other than the Company’s obligation to withhold and remit applicable income and/or employment taxes and pay its share of any applicable payroll taxes, Executive is solely responsible for any and all taxes, interest and penalties that may be imposed with respect to the payments and benefits provided under this Agreement.

13.

N O A SSIGNMENT ; S UCCESSORS : Executive’s right to receive payments or benefits under this Agreement will not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, whether voluntary, involuntary, by operation of law or otherwise, other than a transfer by will or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this Section 13 the Company will have no liability to pay any amount so attempted to be assigned or transferred. This Agreement inures to the benefit of and is enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

This Agreement is binding upon and inures to the benefit of the Company and its successors and assigns (including, without limitation, any company into or with which the Company may merge or consolidate and any Successor).

14.	N UMBER AND G ENDER : Wherever appropriate herein, words used in the singular will include the plural, the plural will include the singular, and the masculine gender will include the feminine gender.

15.

C ONFLICTS : This Agreement constitutes the entire understanding of the parties with respect to its subject matter and supersedes any other agreement or other understanding, whether oral or written, express or implied, between them concerning, related to or otherwise in connection with, the subject matter hereof; provided, that if Executive is a party to a Restructuring Transaction Retention Agreement, the terms of such agreement shall continue to apply if Executive experiences a Separation from Service prior to the occurrence of a Change in Control during the term of such Agreement, as provided thereunder.

16.

A MENDMENT AND W AIVER : No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by any party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by any other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

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17.	C OUNTERPARTS : This Agreement may be executed in several counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

18.

T ERM : The effective date of this Agreement shall commence on July 1, 2015 (“ Effective Date ”) and shall end on the earlier of (a) subject to extension in order to give effect to the notice and cure provisions contained in the definition of Good Reason, the second anniversary of the date a Change in Control occurs, or (b) the date on which Executive experiences a Separation from Service under circumstances that do not constitute a Covered Termination; provided that terms of this Agreement which must survive the termination this Agreement in order to be effectuated (including the provisions of Sections 2, 3, 6, 7 and 8) will survive.

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COMPANY

By:
Name:
Title:

EXECUTIVE

By:
Name:

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EXHIBIT A

D EFINITIONS

The following terms have the meanings set forth below.

“Accrued Benefits” shall mean:

Any portion of Executive’s Salary earned through the Covered Termination Date and not yet paid;

Reimbursement for any and all amounts advanced in connection with Executive’s employment for reasonable and necessary expenses incurred by Executive through the date of the Covered Termination Date in accordance with the Company’s policies and procedures on reimbursement of expenses;

iii

Any earned vacation pay not theretofore used or paid in accordance with the Company’s policy for payment of earned and unused vacation time;

If Executive participates in the Company’s financial planning program as of the date a Change in Control occurs, financial planning services through AYCO (or a successor) until the earlier of June 30 of the calendar year following the calendar year in which a Covered Termination occurs or the date such program terminates for all similarly situated employees; and

All other payments and benefits to which Executive may be entitled under the terms of any applicable compensation arrangement or benefit plan or program of the Company that do not specify the time of distribution; provided that Accrued Benefits shall not include any entitlement to severance under any severance plan or policy of the Company.

“Affiliate” means an Affiliate of the Company within the meaning of Rule 12b-2 promulgated under Section 12 of the Exchange Act.

“Board” means the Board of Directors of the Company.

“Bonus Plan” means the Company’s Executive Incentive Compensation Plan or the Company’s Management Incentive Compensation Plan, as applicable to Executive, or any successor plan thereto.

“Cause” means

(i)

the willful and continued failure of Executive to perform substantially Executive’s duties with the Company or an Affiliate (occasioned by reason other than physical or mental illness or disability of Executive) after a written demand for substantial performance is delivered to Executive by the Compensation Committee of the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Compensation Committee of the Board or the

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Chief Executive Officer believes that Executive has not substantially performed his duties, after which Executive shall have thirty days to defend or remedy such failure to substantially perform his duties;

(ii)

the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or

(iii)

the conviction of Executive with no further possibility of appeal for, or plea of guilty or nolo contendere by Executive to, any felony.

The cessation of employment of Executive under subparagraph (i) and (ii) above shall not be deemed to be for “Cause” unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Compensation Committee of the Board of Directors of the Company at a meeting of such Committee called and held for such purpose (after reasonable notice is provided to Executive and he is given an opportunity, together with his counsel, to be heard before such Committee), finding that, in the good faith opinion of such Committee, Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.

A “Change in Control” will be deemed to have occurred upon the occurrence of any of the following:

(a)

30% Ownership Change : Any Person, other than an ERISA-regulated pension plan established by the Company or an Affiliate, makes an acquisition of Outstanding Voting Stock and is, immediately thereafter, the beneficial owner of 30% or more of the then Outstanding Voting Stock, unless such acquisition is made directly from the Company in a transaction approved by a majority of the Incumbent Directors; or any group is formed that is the beneficial owner of 30% or more of the Outstanding Voting Stock (other than a group formation for the purpose of making an acquisition directly from the Company and approved (prior to such group formation) by a majority of the Incumbent Directors); or

(b)

Board Majority Change : Individuals who are Incumbent Directors cease for any reason to constitute a majority of the members of the Board; or

(c)

Major Mergers and Acquisitions : Consummation of a Business Combination unless, immediately following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Voting Stock immediately before such Business Combination beneficially own, directly or indirectly, more than 51% of the then outstanding shares of voting stock of the parent corporation resulting from such Business Combination in substantially the same relative proportions as their ownership, immediately before such Business Combination, of the Outstanding Voting Stock, (ii) if the Business Combination involves the issuance or payment by the Company of consideration to another entity or its shareholders, the total fair

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market value of such consideration plus the principal amount of the consolidated long-term debt of the entity or business being acquired (in each case, determined as of the date of consummation of such Business Combination by a majority of the Incumbent Directors) does not exceed 50% of the sum of the fair market value of the Outstanding Voting Stock plus the principal amount of the Company’s consolidated long-term debt (in each case, determined immediately before such consummation by a majority of the Incumbent Directors), (iii) no Person (other than any corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of the then outstanding shares of voting stock of the parent corporation resulting from such Business Combination and (iv) a majority of the members of the board of directors of the parent corporation resulting from such Business Combination were Incumbent Directors of the Company immediately before consummation of such Business Combination; or

(d)

Major Asset Dispositions : Consummation of a Major Asset Disposition unless, immediately following such Major Asset Disposition, (i) individuals and entities that were beneficial owners of the Outstanding Voting Stock immediately before such Major Asset Disposition beneficially own, directly or indirectly, more than 70% of the then outstanding shares of voting stock of the Company (if it continues to exist) and of the entity that acquires the largest portion of such assets (or the entity, if any, that owns a majority of the outstanding voting stock of such acquiring entity) and (ii) a majority of the members of the Board (if it continues to exist) and of the entity that acquires the largest portion of such assets (or the entity, if any, that owns a majority of the outstanding voting stock of such acquiring entity) were Incumbent Directors of the Company immediately before consummation of such Major Asset Disposition.

For purposes of the definition of a “Change in Control”,

(1)

“Person” means an individual, entity or group;

(2)

“group” is used as it is defined for purposes of Section 13(d)(3) of the Exchange Act;

(3)

“beneficial owner” is used as it is defined for purposes of Rule 13d-3 under the Exchange Act;

(4)

“Outstanding Voting Stock” means outstanding voting securities of the Company entitled to vote generally in the election of directors; and any specified percentage or portion of the Outstanding Voting Stock (or of other voting stock) is determined based on the combined voting power of such securities;

(5)

“Incumbent Director” means a member of the board of directors of the Company (x) who was a director of the Company on the Effective Date of this Agreement or (y) who becomes a member of the board of directors after such date and whose election, or nomination for election by the

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Company’s shareholders, was approved by a vote of a majority of the Incumbent Directors at the time of such election or nomination, except that any such director will not be deemed an Incumbent Director if his or her initial assumption of office occurs as a result of an actual or threatened election contest or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board;

(6)

“Business Combination” means

(x)

a merger or consolidation involving the Company or its stock, or

(y)

an acquisition by the Company, directly or through one or more subsidiaries, of another entity or its stock or assets;

(7)

“parent corporation resulting from a Business Combination” means the Company if its stock is not acquired or converted in the Business Combination and otherwise means the entity which as a result of such Business Combination owns the Company or all or substantially all the Company’s assets either directly or through one or more subsidiaries ; and

(8)

“Major Asset Disposition” means the sale or other disposition in one transaction or a series of related transactions of 70% or more of the assets of the Company and its subsidiaries on a consolidated basis; and any specified percentage or portion of the assets of the Company will be based on fair market value, as determined by a majority of the Incumbent Directors.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1986 (and any successor legislation thereto).

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means BWX Technologies, Inc., and, except for purposes of determining whether a Change in Control has occurred, any successor entity thereto.

“Company Shares” means shares of common stock of the Company (or any successor entity thereto).

“Confidential Information” means any and all information, data and knowledge that has been created, discovered, developed or otherwise become known to the Company or any of its Affiliates or in which property rights have been assigned or otherwise conveyed to the Company or any of its Affiliates, which information, data or knowledge has commercial value in the business in which the Company or any of its Affiliates or ventures is engaged, except such information, data or knowledge as is or becomes known to the public without violation of the terms of this Agreement. By way of illustration, but not limitation, Confidential Information includes business trade secrets, secrets concerning the Company’s or any of its Affiliate’s plans and strategies, nonpublic information concerning material market opportunities, technical trade secrets, processes, formulas, know-how, improvements, discoveries, developments, designs,

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inventions, techniques, marketing plans, manuals, records of research, reports, memoranda, computer software, strategies, forecasts, new products, unpublished financial information, projections, licenses, prices, costs, and employee, customer and supplier lists.

“Covered Termination” means, during the term of this Agreement (the “ Protection Period ”), there occurs a termination of Executive’s employment (such that Executive ceases to be employed by the Company or an Affiliate) that is a “Separation from Service” (as defined in Code Section 409A and the Treasury regulations and guidance issued thereunder) (i) by the Company or an Affiliate for a reason other than Cause or other than Executive’s Disability or (ii) by Executive for Good Reason (in either case, not including Executive’s death).

“Disability” means circumstances which would qualify Executive for long term disability benefits under the Company’s Long Term Disability Plan, whether or not Executive is covered under such plan.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Good Reason” means any one or more of the following events which occurs during the Protection Period:

(a)

a material diminution in the duties or responsibilities of Executive from those applicable immediately before the date on which a Change in Control occurs;

(b)

a material reduction in Executive’s annual rate of base salary or target bonus as in effect on the Change in Control or as either of the same may be increased from time to time thereafter;

(c)

a material reduction in the amount of Executive’s annual target long-term incentive compensation opportunity (whether payable in cash, Company Shares or a combination thereof) as in effect on the Change in Control or as the same may be increased from time to time thereafter , unless such material reduction applies to all similarly situated executives of the Company and the parent corporation resulting from the Business Combination; and provided that for the avoidance of doubt, a material reduction of such annual target long-term incentive compensation opportunity shall not be deemed to occur if such opportunity becomes payable solely in cash;

(d)

a change in the location of Executive’s principal place of employment with the Company by more than 50 miles from the location where Executive was principally employed immediately before the Change in Control[, or the failure of the Company to continue in effect a place of employment for Executive in Charlotte, in each case] ¹ without the Executive’s consent.

¹	Applicable to the Change In Control Agreement for each of Messrs. Black and Canafax

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If any of the events described above occurs prior to the second anniversary of a Change in Control (an “ Event ”), Executive shall give the Company written notice (the “ Executive Notice ”) within sixty (60) days following Executive’s knowledge of an Event that Executive intends to terminate employment as a result. The Company shall have thirty (30) days following receipt of the Executive Notice in which to cure the Event. If the Company does not take such action within that time, the Event shall constitute Good Reason. If Executive does not provide the Executive Notice within sixty (60) days as required above then the Event shall not constitute Good Reason, and thereafter, for purposes of determining whether Executive has Good Reason, Executive’s terms and conditions of employment after the occurrence of the Event shall be substituted for those terms and conditions of Executive’s employment in effect immediately prior to the Change in Control.

“Restoration Plan” means the BWX Technologies, Inc. Defined Contribution Restoration Plan, as in effect on the Change in Control.

“Restructuring Transaction Retention Agreement ” means a Restructuring Transaction Retention Agreement by and between the Executive and The Babcock & Wilcox Company dated as of November 5, 2014, which agreement has been assumed by the Company in connection with the spinoff.

“Salary” means Executive’s annual rate of base salary as in effect immediately before the Change in Control or, if higher, in effect immediately before the first Event constituting Good Reason.

“SERP” means the BWX Technologies, Inc. Supplemental Executive Retirement Plan, as in effect on the Change in Control.

“Subsidiary” means every corporation, limited liability company, partnership or other entity of which 50% or more of the total combined voting power of all classes of voting securities or other equity interests is owned, directly or indirectly, by BWX Technologies, Inc.

“Target Bonus Percentage” means the percentage applicable to Executive to determine Executive’s target incentive award opportunity under the Bonus Plan applicable to Executive as in effect immediately before the Covered Termination or, if higher, immediately before the first Event constituting Good Reason.

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EXHIBIT B

Separation and General Release Agreement

This Separation and General Release Agreement (the “ Agreement ”) is entered into by and between, and shall inure to the benefit of and be binding upon, (“ Executive ”) and BWX Technologies, Inc., a Delaware corporation (the “ Company ”).

RECITALS:

1.	Reference is made to the Change in Control Agreement, dated , 2015 (the “ CIC Agreement ”), by and between the Company and Executive, which is incorporated herein by reference.

2.	Execution and delivery of this Agreement by Executive is a condition to Executive’s right to receive certain payments and benefits under the CIC Agreement.

3.	Capitalized terms used and not defined herein shall have the meanings given to them in the CIC Agreement.

In consideration of the mutual promises and obligations set forth herein and in the CIC Agreement, the adequacy of which is hereby expressly acknowledged, Executive and the Company hereby agree as follows:

(e) Executive hereby unconditionally and irrevocably releases and forever discharges, to the fullest extent applicable law permits, the Releasees, as defined below, from any and every action, cause of action, complaint, claim, demand, legal right, compensation, obligation, damages (including consequential, exemplary and punitive damages), liability, cost and/or expense (including attorney’s fees) that he has, may have or may be entitled to from or against the Releasees, whether legal, equitable or administrative, in any forum or jurisdiction, whether known or unknown, foreseen or unforeseen, matured or unmatured, which arises directly or indirectly out of, or is based on or related in any way to Executive’s employment with or termination of employment from the Company, its predecessors, successors and assigns and past, present and future Affiliates, subsidiaries, divisions and parent corporations, including, without limitation, any such matter arising from the negligence, gross negligence or willful misconduct of the Releasees (together, the “ Released Claims ”); provided, however, that this release does not apply to any claims solely and specifically (i) arising after the date this Agreement is executed, (ii) for indemnification (including, without limitation, under the Company’s organizational documents or insurance policies) arising in connection with an action instituted by a third party against the Company, its Affiliates or Executive in his capacity as an employee or a former officer or director of the Company or its Affiliates (it being agreed by the Company that Executive shall continue to be entitled to such indemnification in respect of the period prior to the date his employment with the Company is terminated), (iii) arising from any breach or failure to perform the CIC Agreement, or (iv) that cannot be waived by law. For the sake of clarity, this Paragraph (a) shall not operate to deny Executive of any rights to coverage under the Company’s directors and officers liability insurance policy, as in effect from time to time, to which he would otherwise be entitled. The term “ Releasees ” means the Company, its predecessors, successors and assigns and past, present and future Affiliates, subsidiaries, divisions and parent corporations and all their respective past, present and future officers, directors, shareholders, employee benefit plan administrators, employees and agents, individually and in their respective capacities.

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(f) The parties intend this release to cover any and all Released Claims, whether arising under any employment contract (express or implied), policies, procedures or practices of any of the Releasees, and/or by any acts or omissions of any of the Releasees’ agents or employees or former agents or employees and/or whether arising under any state or federal statute, including but not limited to state employment discrimination laws, all federal discrimination laws, the Age Discrimination in Employment Act of 1967, as amended (“ ADEA ”), the Employee Retirement Income Security Act of 1974, as amended, all local laws and ordinances and/or common law, without exception. As such, it is expressly acknowledged and agreed that this release is a general release, representing a full and complete disposition and satisfaction of all of the Releasees’ real or alleged waivable legal obligations to Executive as to the matters in Paragraph (a) above, with the specific exceptions noted above.

(g) The release set forth in Paragraph (a) includes a release of any claims Executive may have under the ADEA against the Releasees that may have existed on or prior to the date Executive signs this Agreement. The ADEA is a federal statute that prohibits discrimination on the basis of age. By signing this Agreement, Executive understands that he is waiving any and all claims arising under the ADEA that Executive may have against the Releasees up to the date Executive signs this Agreement. Executive understands that any claims under the ADEA that may arise after he signs this Agreement are not waived. Executive acknowledges that he is receiving consideration for the waiver of any and all claims under the ADEA in addition to anything of value to which he is already entitled.

(h) Executive expressly agrees that neither he nor any person acting on his behalf will file or permit to be filed any action for legal or equitable relief against the Releasees involving any matter related in any way to his employment with, or termination from employment with the Company, its predecessors, successors, assigns and past, present and future Affiliates, subsidiaries, divisions and parent corporations, including the matters covered by the Released Claims. In the event that such an action is filed, Executive agrees that the Releasees are entitled to legal and equitable remedies against him, including an award of attorney’s fees. However, it is expressly understood and agreed that the foregoing two sentences shall not apply to any charge filed by Executive with the Equal Employment Opportunity Commission, any action for a claim arising after the date this Agreement is executed, any action for indemnification arising in connection with an action instituted by a third party against the Company, its Affiliates or Executive in his capacity as an employee or former officer or director of the Company or its Affiliates or any action filed by Executive that is narrowly limited to seeking a determination as to the validity of the release provisions of this Agreement or to enforce the terms of the CIC Agreement. Should Executive file a charge with the Equal Employment Opportunity Commission or should any governmental entity, agency, or commission file a charge, action, complaint or lawsuit against any of the Releasees based on any Released Claim, Executive agrees not to seek or accept any resulting relief whatsoever.

(i) Executive acknowledges that the Company and/or its Affiliates or Ventures have previously provided him with Confidential Information and may provide him with Confidential Information and that the unauthorized disclosure of such Confidential Information

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will result in irreparable harm to the Company and/or its Affiliates or Ventures. Executive shall not disclose or make available to any other person or entity, or use for his own personal gain, any Confidential Information. For purposes of this Agreement, the term “ Venture ” means an entity in which the Company or an Affiliate has a management or voting interest.

(j) In consideration of the payments and promises provided under the CIC Agreement, the sufficiency of which is expressly acknowledged, Executive agrees that for the month period following the date of his termination of employment with the Company he will not perform any act, engage in any conduct or course of action or make or publish any adverse or untrue or misleading statement which has or may reasonably have the effect of demeaning the name or business reputation of the Company, the Releasees, an Affiliate or a Venture or which adversely affects or may reasonably be expected to adversely affect the best interests (economic or otherwise) of the Company, the Releasees, an Affiliate or a Venture.

(k) Nothing in this Agreement or the CIC Agreement shall be construed as a waiver of any forfeiture provisions in the Restoration Plan, the SERP or the Restoration of Retirement Income Plan for Certain Participants in the BWXT Retirement Plan (formerly, the Retirement Plan for Employees of Babcock & Wilcox Governmental Operations, referred to as the “Excess Plan”).

(l) Executive and the Company agree and acknowledge that this Agreement together with the CIC Agreement contains and comprises the entire agreement and understanding between the parties, that no other representation, promise, covenant or agreement of any kind whatsoever has been made to cause any party to execute this Agreement, and that all agreements and understandings between the parties are embodied and expressed in this Agreement and the CIC Agreement. The parties also agree that the terms of this Agreement shall not be amended or changed except in writing and signed by Executive and a duly authorized agent of the Company. The parties further agree that this Agreement together with the CIC Agreement shall be binding on and inure to the benefit of Executive, the Company, the Company’s successors, assigns, the Releasees, the Affiliates and the Ventures, each as defined in this Agreement. Any other agreements or understandings between the parties, whether written or oral, are hereby null and void.

(m) Applicable Law . The validity, interpretation, construction and performance of this Agreement together with the CIC Agreement will be governed by and construed in accordance with the substantive laws of the State of Delaware, but without giving effect to the principles of conflict of laws of such State.

(n) Executive acknowledges that he had at least ( ) calendar days from the date this Agreement was first presented to him to consider this Agreement. By signing this Agreement, Executive agrees that the Company advised him in writing to consult with an attorney. Executive can only accept this Agreement by executing it during the ( ) day period beginning on the date of Executive’s Separation from Service (the “ Acceptance Period ”) and delivering it to the attention of the Company General Counsel at prior to 5:00 pm, Eastern Time, on the last day of the Acceptance Period. Executive has seven (7) calendar days following the date upon which he executes this Agreement within which to revoke this

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Agreement (“ Revocation Period ”) by delivering a written notice of his revocation to the attention of the Company General Counsel at prior to the end of the Revocation Period. This Agreement does not become effective or enforceable until the Revocation Period has expired and Executive has not revoked this Agreement.

(o) Executive represents and warrants that as of the date of his execution of this Agreement he has no knowledge of any unlawful activity by himself, the Company, the Releasees, the Affiliates or the Ventures.

(p) Miscellaneous Provisions .

(i) Executive hereby resigns from all other director and officer positions held with the Company and any other appointed or elected positions he may hold with the Company and its Affiliates and Ventures, effective on the date of his termination of employment with the Company.

(ii) Failure on the part of the Company or Executive at any time to insist on strict compliance by the other party with any provisions of this Agreement shall not constitute a waiver of either party’s obligations in respect thereof, or of either party’s right hereunder to require strict compliance therewith in the future.

(iii) The obligations set forth in this Agreement are severable and divisible, and the unenforceability of any clause or portion thereof shall not affect the enforceability of the remainder of such clause or of any other obligation contained herein.

I HAVE READ THE FOREGOING RELEASE AGREEMENT, FULLY UNDERSTAND IT AND HAVE VOLUNTARILY EXECUTED IT ON THE DATE WRITTEN BELOW, SIGNIFYING THEREBY MY ASSENT TO, AND WILLINGNESS TO BE BOUND BY ITS TERMS:


Date:						By:

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EXHIBIT 31.1

CERTIFICATION

I, Peyton S. Baker, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of BWX Technologies, Inc. for the quarterly period ended September 30, 2015;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 4, 2015

/s/ Peyton S. Baker

Peyton S. Baker

President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, David S. Black, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of BWX Technologies, Inc. for the quarterly period ended September 30, 2015;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 4, 2015

/s/ David S. Black

David S. Black

Senior Vice President and Chief Financial Officer

EXHIBIT 32.1

BWX TECHNOLOGIES, INC.

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, Peyton S. Baker, President and Chief Executive Officer of BWX Technologies, Inc., a Delaware corporation (the “Company”), hereby certify, to my knowledge, that:

(1)

the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: November 4, 2015		/s/ Peyton S. Baker
		Peyton S. Baker
		President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

EXHIBIT 32.2

BWX TECHNOLOGIES, INC.

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, David S. Black, Senior Vice President and Chief Financial Officer of BWX Technologies, Inc., a Delaware corporation (the “Company”), hereby certify, to my knowledge, that:

(1)

(2)

information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: November 4, 2015		/s/ David S. Black
		David S. Black
		Senior Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.