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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________________________________________________________________________________________________________ 
FORM 10-Q
 _________________________________________________________________________________________________________________________________ 
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020.
OR
☐ 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 or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
800 Main Street, 4th Floor  
Lynchburg, Virginia   24504
(Address of principal executive offices)   (Zip Code)
Registrant's telephone number, including area code: (980) 365-4300
_________________________________________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value BWXT New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
The number of shares of the registrant's common stock outstanding at July 30, 2020 was 95,289,392.

Table of Contents
BWX TECHNOLOGIES, INC.
INDEX – FORM 10-Q
  PAGE
2
June 30, 2020 and December 31, 2019 (Unaudited)
2
Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)
4
Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)
5
Three Months Ended March 31 and June 30, 2020 and 2019 (Unaudited)
6
Six Months Ended June 30, 2020 and 2019 (Unaudited)
7
8
21
31
32
33
33
33
35
36

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PART I
FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30,
2020 		December 31,
2019
(Unaudited)
(In thousands)
Current Assets:
Cash and cash equivalents $ 61,584    $ 86,540   
Restricted cash and cash equivalents 3,069    3,056   
Investments 3,710    5,843   
Accounts receivable – trade, net 64,846    56,721   
Accounts receivable – other 9,480    13,426   
Retainages 46,767    46,670   
Contracts in progress 395,847    376,037   
Other current assets 38,670    41,462   
Total Current Assets 623,973    629,755   
Property, Plant and Equipment, Net 656,205    580,241   
Investments 7,236    7,620   
Goodwill 274,345    275,502   
Deferred Income Taxes 55,747    58,689   
Investments in Unconsolidated Affiliates 70,564    70,116   
Intangible Assets 186,442    191,392   
Other Assets 96,851    95,598   
TOTAL $ 1,971,363    $ 1,908,913   
See accompanying notes to condensed consolidated financial statements.
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BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
2020 		December 31,
2019
(Unaudited)
(In thousands, except share
and per share amounts)
Current Liabilities:
Current maturities of long-term debt $ —    $ 14,711   
Accounts payable 141,459    170,678   
Accrued employee benefits 66,489    82,640   
Accrued liabilities – other 60,467    52,213   
Advance billings on contracts 64,815    75,425   
Accrued warranty expense 5,131    9,042   
Income taxes payable 36,974    —   
Total Current Liabilities 375,335    404,709   
Long-Term Debt 826,831    809,442   
Accumulated Postretirement Benefit Obligation 22,021    23,259   
Environmental Liabilities 83,845    80,368   
Pension Liability 157,229    172,508   
Other Liabilities 24,570    14,515   
Commitments and Contingencies (Note 6)
Stockholders' Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 126,949,882 and 126,579,285 shares at June 30, 2020 and December 31, 2019, respectively
1,269    1,266   
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued
—    —   
Capital in excess of par value 143,412    134,069   
Retained earnings 1,447,642    1,344,383   
Treasury stock at cost, 31,660,490 and 31,266,670 shares at June 30, 2020 and December 31, 2019, respectively
(1,093,287)   (1,068,164)  
Accumulated other comprehensive income (loss) (17,519)   (7,448)  
Stockholders' Equity – BWX Technologies, Inc. 481,517    404,106   
Noncontrolling interest 15    6   
Total Stockholders' Equity 481,532    404,112   
TOTAL $ 1,971,363    $ 1,908,913   
See accompanying notes to condensed consolidated financial statements.

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BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
(Unaudited)
(In thousands, except share and per share amounts)
Revenues $ 504,520    $ 471,231    $ 1,046,728    $ 887,685   
Costs and Expenses:
Cost of operations 367,534    338,023    759,977    641,658   
Research and development costs 4,029    5,332    8,632    10,506   
Losses on asset disposals and impairments, net 299    151    299    151   
Selling, general and administrative expenses 55,137    54,052    108,095    105,735   
Total Costs and Expenses 426,999    397,558    877,003    758,050   
Equity in Income of Investees 4,913    6,862    10,976    14,544   
Operating Income 82,434    80,535    180,701    144,179   
Other Income (Expense):
Interest income 61    137    292    552   
Interest expense (7,865)   (9,542)   (15,832)   (18,245)  
Other – net 9,450    6,604    17,367    14,125   
Total Other Income (Expense) 1,646    (2,801)   1,827    (3,568)  
Income before Provision for Income Taxes
84,080    77,734    182,528    140,611   
Provision for Income Taxes 19,684    18,734    42,512    32,501   
Net Income $ 64,396    $ 59,000    $ 140,016    $ 108,110   
Net Income Attributable to Noncontrolling Interest
(138)   (122)   (259)   (254)  
Net Income Attributable to BWX Technologies, Inc. $ 64,258    $ 58,878    $ 139,757    $ 107,856   
Earnings per Common Share:
Basic:
Net Income Attributable to BWX Technologies, Inc.
$ 0.67    $ 0.62    $ 1.46    $ 1.13   
Diluted:
Net Income Attributable to BWX Technologies, Inc.
$ 0.67    $ 0.62    $ 1.46    $ 1.13   
Shares used in the computation of earnings per share (Note 10):
Basic 95,457,629    95,357,311    95,434,990    95,306,210   
Diluted 95,633,571    95,677,204    95,694,972    95,749,280   
See accompanying notes to condensed consolidated financial statements.
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BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
(Unaudited)
(In thousands)
Net Income $ 64,396    $ 59,000    $ 140,016    $ 108,110   
Other Comprehensive Income (Loss):
Currency translation adjustments 856    4,295    (11,084)   5,238   
Derivative financial instruments:
Unrealized losses arising during the period, net of tax benefit of $141, $226, $32 and $390, respectively
(404)   (634)   (91)   (1,075)  
Reclassification adjustment for (gains) losses included in net income, net of tax provision (benefit) of $32, $(70), $(106) and $(21), respectively
(89)   203    331    62   
Amortization of benefit plan costs, net of tax benefit of $(167), $(155), $(334) and $(291), respectively
609    493    1,219    1,004   
Unrealized gains (losses) on investments arising during the period, net of tax provision of $0, $(3), $(2) and $(10), respectively
154    27    (446)   51   
Other Comprehensive Income (Loss) 1,126    4,384    (10,071)   5,280   
Total Comprehensive Income 65,522    63,384    129,945    113,390   
Comprehensive Income Attributable to Noncontrolling Interest
(138)   (122)   (259)   (254)  
Comprehensive Income Attributable to BWX Technologies, Inc.
$ 65,384    $ 63,262    $ 129,686    $ 113,136   
See accompanying notes to condensed consolidated financial statements.
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BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Capital In
Excess of
Par Value 		Accumulated
Other
Comprehensive
Income (Loss) 		Total
Stockholders'
Equity
  Shares Par
Value 		Retained
Earnings 		Treasury
Stock 		Stockholders'
Equity 		Noncontrolling
Interest
    (In thousands, except share and per share amounts)
Balance December 31, 2019 126,579,285    $ 1,266    $ 134,069    $ 1,344,383    $ (7,448)   $ (1,068,164)   $ 404,106    $ 6    $ 404,112   
Net income —    —    —    75,499    —    —    75,499    121    75,620   
Dividends declared ($0.19 per share)
—    —    —    (18,254)   —    —    (18,254)   —    (18,254)  
Currency translation adjustments —    —    —    —    (11,940)   —    (11,940)   —    (11,940)  
Derivative financial instruments —    —    —    —    733    —    733    —    733   
Defined benefit obligations —    —    —    —    610    —    610    —    610   
Available-for-sale investments —    —    —    —    (600)   —    (600)   —    (600)  
Exercises of stock options 56,431    1    1,331    —    —    —    1,332    —    1,332   
Shares placed in treasury —    —    —    —    —    (25,076)   (25,076)   —    (25,076)  
Stock-based compensation charges 252,943    2    3,100    —    —    —    3,102    —    3,102   
Distributions to noncontrolling interests —    —    —    —    —    —    —    (127)   (127)  
Balance March 31, 2020 (unaudited) 126,888,659    $ 1,269    $ 138,500    $ 1,401,628    $ (18,645)   $ (1,093,240)   $ 429,512    $ —    $ 429,512   
Net income —    —    —    64,258    —    —    64,258    138    64,396   
Dividends declared ($0.19 per share)
—    —    —    (18,244)   —    —    (18,244)   —    (18,244)  
Currency translation adjustments —    —    —    —    856    —    856    —    856   
Derivative financial instruments —    —    —    —    (493)   —    (493)   —    (493)  
Defined benefit obligations —    —    —    —    609    —    609    —    609   
Available-for-sale investments —    —    —    —    154    —    154    —    154   
Exercises of stock options 22,556    —    537    —    —    —    537    —    537   
Shares placed in treasury —    —    —    —    —    (47)   (47)   —    (47)  
Stock-based compensation charges 38,667    —    4,375    —    —    —    4,375    —    4,375   
Distributions to noncontrolling interests —    —    —    —    —    —    —    (123)   (123)  
Balance June 30, 2020 (unaudited) 126,949,882    $ 1,269    $ 143,412    $ 1,447,642    $ (17,519)   $ (1,093,287)   $ 481,517    $ 15    $ 481,532   
Balance December 31, 2018 125,871,866    $ 1,259    $ 115,725    $ 1,166,762    $ (10,289)   $ (1,037,795)   $ 235,662    $ 39    $ 235,701   
Recently adopted accounting standards —    —    —    (1,219)   77    —    (1,142)   —    (1,142)  
Net income —    —    —    48,978    —    —    48,978    132    49,110   
Dividends declared ($0.17 per share)
—    —    —    (16,323)   —    —    (16,323)   —    (16,323)  
Currency translation adjustments —    —    —    —    943    —    943    —    943   
Derivative financial instruments —    —    —    —    (582)   —    (582)   —    (582)  
Defined benefit obligations —    —    —    —    511    —    511    —    511   
Available-for-sale investments —    —    —    —    24    —    24    —    24   
Exercises of stock options 58,655    1    1,275    —    —    —    1,276    —    1,276   
Shares placed in treasury —    —    —    —    —    (29,027)   (29,027)   —    (29,027)  
Stock-based compensation charges 449,275    4    2,525    —    —    —    2,529    —    2,529   
Distributions to noncontrolling interests —    —    —    —    —    —    —    (146)   (146)  
Balance March 31, 2019 (unaudited) 126,379,796    $ 1,264    $ 119,525    $ 1,198,198    $ (9,316)   $ (1,066,822)   $ 242,849    $ 25    $ 242,874   
Net income —    —    —    58,878    —    —    58,878    122    59,000   
Dividends declared ($0.17 per share)
—    —    —    (16,301)   —    —    (16,301)   —    (16,301)  
Currency translation adjustments —    —    —    —    4,295    —    4,295    —    4,295   
Derivative financial instruments —    —    —    —    (431)   —    (431)   —    (431)  
Defined benefit obligations —    —    —    —    493    —    493    —    493   
Available-for-sale investments —    —    —    —    27    —    27    —    27   
Exercises of stock options 32,023    —    757    —    —    —    757    —    757   
Shares placed in treasury —    —    —    —    —    (260)   (260)   —    (260)  
Stock-based compensation charges 4,927    —    3,823    —    —    —    3,823    —    3,823   
Distributions to noncontrolling interests —    —    —    —    —    —    —    (128)   (128)  
Balance June 30, 2019 (unaudited) 126,416,746    $ 1,264    $ 124,105    $ 1,240,775    $ (4,932)   $ (1,067,082)   $ 294,130    $ 19    $ 294,149   
See accompanying notes to condensed consolidated financial statements.
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BWX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
  2020 2019
  (Unaudited) (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 140,016    $ 108,110   
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 30,565    30,833   
Income of investees, net of dividends (927)   (6,314)  
Recognition of losses for pension and postretirement plans 1,553    1,295   
Stock-based compensation expense 7,477    6,352   
Other, net 2,025    (977)  
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable (2,433)   6,836   
Accounts payable (6,641)   11,191   
Retainages (76)   (2,602)  
Contracts in progress and advance billings on contracts (27,560)   (69,549)  
Income taxes 39,098    (6,184)  
Accrued and other current liabilities 2,612    (15,192)  
Pension liabilities, accrued postretirement benefit obligations and employee benefits (32,996)   (22,983)  
Other, net 2,917    6,250   
NET CASH PROVIDED BY OPERATING ACTIVITIES 155,630    47,066   
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (115,477)   (75,701)  
Acquisition of business (16,174)   —   
Purchases of securities (2,159)   (2,038)  
Sales and maturities of securities 4,305    2,054   
Investments, net of return of capital, in equity method investees 88    —   
Other, net —    17   
NET CASH USED IN INVESTING ACTIVITIES (129,417)   (75,668)  
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 643,000    483,400   
Repayments of long-term debt (628,176)   (390,714)  
Payment of debt issuance costs (6,310)   —   
Repurchases of common shares (20,000)   (20,000)  
Dividends paid to common shareholders (36,764)   (32,976)  
Exercises of stock options 1,790    1,400   
Cash paid for shares withheld to satisfy employee taxes (5,044)   (8,654)  
Other, net 1,137    815   
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (50,367)   33,271   
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (690)   447   
TOTAL (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS (24,844)   5,116   
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
92,400    36,408   
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS AT END OF PERIOD
$ 67,556    $ 41,524   
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 17,923    $ 19,827   
Income taxes (net of refunds) $ 3,274    $ 38,103   
SCHEDULE OF NON-CASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable $ 17,235    $ 11,204   
See accompanying notes to condensed consolidated financial statements.
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BWX TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
We have presented the condensed consolidated financial statements of BWX Technologies, Inc. ("BWXT" or the "Company") in U.S. dollars in accordance with the interim reporting requirements of Form 10-Q, Rule 10-01 of Regulation S-X and accounting principles generally accepted in the United States ("GAAP"). Certain financial information and disclosures normally included in our financial statements prepared annually in accordance with GAAP have been condensed or omitted. Readers of these financial statements should, therefore, refer to the consolidated financial statements and notes in our annual report on Form 10-K for the year ended December 31, 2019 (our "2019 10-K"). We have included all adjustments, in the opinion of management, consisting only of normal recurring adjustments, necessary for a fair presentation.
We use the equity method to account for investments in entities that we do not control, but over which we have the ability to exercise significant influence. We generally refer to these entities as "joint ventures." We have eliminated all intercompany transactions and accounts. We have reclassified certain amounts previously reported to conform to the presentation at June 30, 2020 and for the three and six months ended June 30, 2020. We present the notes to our condensed consolidated financial statements on the basis of continuing operations, unless otherwise stated.
Unless the context otherwise indicates, "we," "us" and "our" mean BWXT and its consolidated subsidiaries.
Reportable Segments
We operate in three reportable segments: Nuclear Operations Group, Nuclear Power Group and Nuclear Services Group. Our reportable segments are further described as follows:
•Our Nuclear Operations Group segment manufactures naval nuclear reactors for the U.S. Naval Nuclear Propulsion Program for use in submarines and aircraft carriers. Through this segment, we own and operate manufacturing facilities located in Lynchburg, Virginia; Barberton, Ohio; Mount Vernon, Indiana; Euclid, Ohio; and Erwin, Tennessee. The Lynchburg operations fabricate fuel-bearing precision components that range in weight from a few grams to hundreds of tons. In-house capabilities also include wet chemistry uranium processing, advanced heat treatment to optimize component material properties and a controlled, clean-room environment with the capacity to assemble railcar-size components. The Barberton and Mount Vernon locations specialize in the design and manufacture of heavy components inclusive of development and fabrication activities for submarine missile launch tubes. The Euclid facility fabricates electro-mechanical equipment and performs design, manufacturing, inspection, assembly and testing activities. Fuel for the naval nuclear reactors is provided by Nuclear Fuel Services, Inc. ("NFS"), one of our wholly owned subsidiaries. Located in Erwin, NFS also downblends Cold War-era government stockpiles of high-enriched uranium into material suitable for further processing into commercial nuclear reactor fuel.
•Our Nuclear Power Group segment fabricates commercial nuclear steam generators, nuclear fuel, fuel handling systems, pressure vessels, reactor components, heat exchangers, tooling delivery systems and other auxiliary equipment, including containers for the storage of spent nuclear fuel and other high-level waste and supplies nuclear-grade materials and precisely machined components for nuclear utility customers. BWXT has supplied the nuclear industry with more than 1,300 large, heavy components worldwide and is the only commercial heavy nuclear component manufacturer in North America. This segment also provides specialized engineering services that include structural component design, 3-D thermal-hydraulic engineering analysis, weld and robotic process development, electrical and controls engineering and metallurgy and materials engineering. In addition, this segment offers in-plant inspection, maintenance and modification services for nuclear steam generators, heat exchangers, reactors, fuel handling systems and balance of plant equipment, as well as specialized non-destructive examination and tooling/repair solutions. This segment is also a leading global manufacturer and supplier of critical medical radioisotopes and radiopharmaceuticals for research, diagnostic and therapeutic uses.
•Our Nuclear Services Group segment provides various services to the U.S. Government and the commercial nuclear industry. Services provided to the U.S. Government include nuclear materials management and operation, environmental management and administrative and operating services for various U.S. Government-owned facilities. These services are provided to the U.S. Department of Energy ("DOE"), including the National Nuclear Security Administration ("NNSA"), the Office of Nuclear Energy, the Office of Science and the Office of Environmental Management, and NASA. Through this segment we deliver services and management solutions to nuclear and high-
8
consequence operations. A significant portion of this segment's operations are conducted through joint ventures. This segment also develops technology for a variety of applications, including advanced nuclear power sources, and offers complete advanced nuclear fuel and reactor design and engineering, licensing and manufacturing services for new advanced nuclear reactors.
See Note 9 for financial information about our segments. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. For further information, refer to the consolidated financial statements and notes included in our 2019 10-K.
Divestiture of U.S.-Based Commercial Nuclear Services Business
On May 29, 2020, our subsidiary BWXT Nuclear Energy, Inc. divested its U.S.-based commercial nuclear services business, a component of our Nuclear Services Group segment. In a cashless transaction, we exchanged net assets totaling $18.0 million, consisting primarily of property, plant and equipment and certain warranty obligations, for a manufacturing facility and the associated land of approximately the same value. The acquired assets are reported as part of the Nuclear Services Group segment.
Recently Adopted Accounting Standards
On January 1, 2020, we adopted the update to the Financial Accounting Standards Board ("FASB") Topic Financial Instruments – Credit Losses. This update requires entities to recognize expected credit losses immediately in the financial statements. We considered our customer base, credit loss history and expected loss rate in our evaluation of expected credit losses. The adoption of the provisions in this update did not have an impact on our financial position, results of operations or cash flows.
On January 1, 2020, we adopted the update to the FASB Topic Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This update simplifies the accounting for goodwill impairment by eliminating the second step from the goodwill impairment test. Goodwill impairment will now be determined by comparing the fair value of a reporting unit with its carrying amount. The adoption of the provisions in this update did not have an impact on our financial position, results of operations or cash flows.
In December 2019, the FASB issued an update to the FASB Topic Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This update simplifies various aspects related to the accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740, simplifies when companies recognize deferred taxes in an interim period and clarifies certain aspects of the current guidance to promote consistent application. We elected to early adopt this update effective January 1, 2020, which did not have a material impact on our financial position, results of operations or cash flows.
Contracts and Revenue Recognition
We generally recognize contract revenues and related costs over time for individual performance obligations based on a cost-to-cost method in accordance with FASB Topic Revenue from Contracts with Customers. We recognize estimated contract revenue and resulting income based on the measurement of the extent of progress toward completion as a percentage of the total project. Certain costs may be excluded from the cost-to-cost method of measuring progress, such as significant costs for uninstalled materials, if such costs do not depict our performance in transferring control of goods or services to the customer. We review contract price and cost estimates periodically as the work progresses and reflect adjustments proportionate to the percentage-of-completion in income in the period when those estimates are revised. Certain of our contracts recognize revenue at a point in time, and revenue on these contracts is recognized when control transfers to the customer. The majority of our revenue that is recognized at a point in time is related to parts and certain medical radioisotopes and radiopharmaceuticals in our Nuclear Power Group segment. For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined.
Provision for Income Taxes
We are subject to federal income tax in the U.S. and Canada as well as income tax within multiple U.S. state jurisdictions. We provide for income taxes based on the enacted tax laws and rates in the jurisdictions in which we conduct our operations. These jurisdictions may have regimes of taxation that vary with respect to nominal rates and with respect to the basis on which these rates are applied. This variation, along with the changes in our mix of income within these jurisdictions, can contribute to shifts in our effective tax rate from period to period.
9
Our effective tax rate for the three months ended June 30, 2020 was 23.4% as compared to 24.1% for the three months ended June 30, 2019. Our effective tax rate for the six months ended June 30, 2020 was 23.3% as compared to 23.1% for the six months ended June 30, 2019. The effective tax rates for the three and six months ended June 30, 2020 and 2019 were higher than the U.S. corporate income tax rate of 21% primarily due to state income taxes within the U.S. and the unfavorable rate differential associated with our Canadian earnings. Our effective tax rates for the six months ended June 30, 2020 and 2019 were favorably impacted by benefits recognized for excess tax benefits related to employee share-based payments of $0.9 million and $1.8 million, respectively.
As of June 30, 2020, we had gross unrecognized tax benefits of $4.0 million (exclusive of interest and federal and state benefits), all of which would reduce our effective tax rate if recognized.
Cash and Cash Equivalents and Restricted Cash and Cash Equivalents
At June 30, 2020, we had restricted cash and cash equivalents totaling $6.0 million, $2.9 million of which was held for future decommissioning of facilities (which is included in Other Assets on our condensed consolidated balance sheets) and $3.1 million of which was held to meet reinsurance reserve requirements of our captive insurer.
The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents on our condensed consolidated balance sheets to the totals presented on our condensed consolidated statement of cash flows:
June 30,
2020 		December 31,
2019
  (In thousands)
Cash and cash equivalents $ 61,584    $ 86,540   
Restricted cash and cash equivalents 3,069    3,056   
Restricted cash and cash equivalents included in Other Assets 2,903    2,804   
Total cash and cash equivalents and restricted cash and cash equivalents as presented on our condensed consolidated statement of cash flows
$ 67,556    $ 92,400   
Inventories
At June 30, 2020 and December 31, 2019, Other current assets included inventories totaling $12.0 million and $17.1 million, respectively, consisting entirely of raw materials and supplies.
Property, Plant and Equipment, Net
Property, plant and equipment, net is stated at cost and is set forth below:
  June 30,
2020 		December 31,
2019
  (In thousands)
Land $ 9,349    $ 8,919   
Buildings 254,951    221,462   
Machinery and equipment 780,088    775,997   
Property under construction 299,954    265,715   
1,344,342    1,272,093   
Less: Accumulated depreciation 688,137    691,852   
Property, Plant and Equipment, Net $ 656,205    $ 580,241   
10
Deferred Debt Issuance Costs
We have included deferred debt issuance costs in the condensed consolidated balance sheets as a direct deduction from the carrying amount of our Long-Term Debt. We amortize deferred debt issuance costs as interest expense over the life of the related debt. The following summarizes the changes in the carrying amount of our deferred debt issuance costs:
Six Months Ended
June 30,
2020 2019
(In thousands)
Balance at beginning of period $ 8,006    $ 9,583   
Additions 6,627    —   
Interest expense (1)
(1,464)   (788)  
Balance at end of period $ 13,169    $ 8,795   
(1)Includes the recognition of prior deferred debt issuance costs associated with the Credit Facility, as defined below, of $0.7 million for the six months ended June 30, 2020.
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated other comprehensive income (loss) included in Stockholders' Equity are as follows:
June 30,
2020 		December 31,
2019
  (In thousands)
Currency translation adjustments $ (2,315)   $ 8,769   
Net unrealized gain on derivative financial instruments 304    64   
Unrecognized prior service cost on benefit obligations (15,395)   (16,614)  
Net unrealized gain (loss) on available-for-sale investments (113)   333   
Accumulated other comprehensive income (loss) $ (17,519)   $ (7,448)  
The amounts reclassified out of Accumulated other comprehensive income (loss) by component and the affected condensed consolidated statements of income line items are as follows:
  Three Months Ended
June 30, 		Six Months Ended
June 30, 		 
  2020 2019 2020 2019  
Accumulated Other Comprehensive Income (Loss) Component Recognized
(In thousands) Line Item Presented
Realized gain (loss) on derivative financial instruments
$ 551    $ 64    $ 550    $ 52    Revenues
(430)   (337)   (987)   (135)   Cost of operations
121    (273)   (437)   (83)   Total before tax
(32)   70    106    21    Provision for Income Taxes
$ 89    $ (203)   $ (331)   $ (62)   Net Income
Amortization of prior service cost on benefit obligations
$ (776)   $ (648)   $ (1,553)   $ (1,295)   Other – net
167    155    334    291    Provision for Income Taxes
$ (609)   $ (493)   $ (1,219)   $ (1,004)   Net Income
Total reclassification for the period
$ (520)   $ (696)   $ (1,550)   $ (1,066)  
Derivative Financial Instruments
Our operations give rise to exposure to market risks from changes in foreign currency exchange ("FX") rates. We use derivative financial instruments, primarily FX forward contracts, to reduce the impact of changes in FX rates on our operating results. We use these instruments to hedge our exposure associated with revenues or costs on our long-term contracts and other transactions that are denominated in currencies other than our operating entities' functional currencies. We do not hold or issue derivative financial instruments for trading or other speculative purposes.
11
We enter into derivative financial instruments primarily as hedges of certain firm purchase and sale commitments and loans between domestic and foreign subsidiaries denominated in foreign currencies. We record these contracts at fair value on our condensed consolidated balance sheets. Based on the hedge designation at the inception of the contract, the related gains and losses on these contracts are deferred in stockholders' equity as a component of Accumulated other comprehensive income until the hedged item is recognized in earnings. The gain or loss on a derivative instrument not designated as a hedging instrument is immediately recognized in earnings. Gains and losses on derivative financial instruments that require immediate recognition are included as a component of Other – net on our condensed consolidated statements of income.
We have designated the majority of our FX forward contracts that qualify for hedge accounting as cash flow hedges. The hedged risk is the risk of changes in functional-currency-equivalent cash flows attributable to changes in FX spot rates of forecasted transactions primarily related to long-term contracts. We exclude from our assessment of effectiveness the portion of the fair value of the FX forward contracts attributable to the difference between FX spot rates and FX forward rates. At June 30, 2020, we had deferred approximately $0.3 million of net gains on these derivative financial instruments. Assuming market conditions continue, we expect to recognize the majority of this amount in the next 12 months. For the three months ended June 30, 2020 and 2019, we recognized (gains) losses of $3.6 million and $0.1 million, respectively, and for the six months ended June 30, 2020 and 2019, we recognized (gains) losses of $(1.6) million and $(1.5) million, respectively, in Other – net on our condensed consolidated statements of income associated with FX forward contracts not designated as hedges.
At June 30, 2020, our derivative financial instruments consisted of FX forward contracts with a total notional value of $159.7 million with maturities extending to July 2022. These instruments consist primarily of FX forward contracts to purchase or sell Canadian dollars and Euros. We are exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments. We attempt to mitigate this risk by using major financial institutions with high credit ratings. Our counterparties to derivative financial instruments have the benefit of the same collateral arrangements and covenants as described under our credit facility.
NOTE 2 – ACQUISITIONS
Laker Energy Products Ltd.
On January 2, 2020, our subsidiary BWXT Canada Ltd. acquired Laker Energy Products Ltd. ("Laker Energy Products") for CAD 21.1 million ($16.2 million U.S. dollar equivalent), subject to contingent consideration of up to an additional CAD 12.0 million. Our preliminary purchase price allocation resulted in the recognition of $8.3 million of Property, Plant and Equipment, Net, $6.4 million of Intangible Assets and $3.5 million of Goodwill. In addition, we recognized right-of-use assets and lease liabilities of $2.7 million. Laker Energy Products is a global supplier of nuclear-grade materials and precisely machined components for CANDU nuclear power utilities and employs approximately 140 personnel. Laker Energy Products is reported as part of our Nuclear Power Group segment.
NOTE 3 – REVENUE RECOGNITION
Disaggregated Revenues
Revenues by geographical area and customer type were as follows:
  Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total
  (In thousands)
United States:
Government $ 370,060    $ —    $ 28,486    $ 398,546    $ 343,048    $ —    $ 28,823    $ 371,871   
Non-Government
38,084    6,989    3,731    48,804    14,612    8,973    788    24,373   
$ 408,144    $ 6,989    $ 32,217    $ 447,350    $ 357,660    $ 8,973    $ 29,611    $ 396,244   
Canada:
Non-Government
$ —    $ 57,380    $ 1,111    $ 58,491    $ —    $ 66,160    $ 218    $ 66,378   
Other:
Non-Government
$ 2,108    $ 3,614    $ —    $ 5,722    $ 692    $ 11,506    $ —    $ 12,198   
Segment Revenues $ 410,252    $ 67,983    $ 33,328    511,563    $ 358,352    $ 86,639    $ 29,829    474,820   
Eliminations (7,043)   (3,589)  
Revenues $ 504,520    $ 471,231   
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  Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total
  (In thousands)
United States:
Government $ 771,126    $ —    $ 53,082    $ 824,208    $ 640,351    $ —    $ 53,274    $ 693,625   
Non-Government
58,925    16,597    14,940    90,462    19,950    18,135    5,141    43,226   
$ 830,051    $ 16,597    $ 68,022    $ 914,670    $ 660,301    $ 18,135    $ 58,415    $ 736,851   
Canada:
Non-Government
$ —    $ 131,907    $ 2,071    $ 133,978    $ —    $ 134,771    $ 508    $ 135,279   
Other:
Non-Government
$ 3,976    $ 7,396    $ —    $ 11,372    $ 2,852    $ 18,132    $ —    $ 20,984   
Segment Revenues $ 834,027    $ 155,900    $ 70,093    1,060,020    $ 663,153    $ 171,038    $ 58,923    893,114   
Eliminations (13,292)   (5,429)  
Revenues $ 1,046,728    $ 887,685   
Revenues by timing of transfer of goods or services were as follows:
  Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total
  (In thousands)
Over time $ 410,204    $ 61,590    $ 33,328    $ 505,122    $ 358,294    $ 72,793    $ 29,829    $ 460,916   
Point-in-time 48    6,393    —    6,441    58    13,846    —    13,904   
Segment Revenues
$ 410,252    $ 67,983    $ 33,328    511,563    $ 358,352    $ 86,639    $ 29,829    474,820   
Eliminations
(7,043)   (3,589)  
Revenues
$ 504,520    $ 471,231   
  Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total
  (In thousands)
Over time $ 833,943    $ 138,775    $ 70,093    $ 1,042,811    $ 663,027    $ 143,454    $ 58,923    $ 865,404   
Point-in-time 84    17,125    —    17,209    126    27,584    —    27,710   
Segment Revenues
$ 834,027    $ 155,900    $ 70,093    1,060,020    $ 663,153    $ 171,038    $ 58,923    893,114   
Eliminations
(13,292)   (5,429)  
Revenues
$ 1,046,728    $ 887,685   
Revenues by contract type were as follows:
  Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total
  (In thousands)
Fixed-Price Incentive Fee $ 317,180    $ 394    $ —    $ 317,574    $ 299,155    $ 1,308    $ —    $ 300,463   
Firm-Fixed-Price 64,193    61,866    6,911    132,970    36,697    77,205    3,904    117,806   
Cost-Plus Fee
28,827    —    24,018    52,845    22,286    8    25,780    48,074   
Time-and-Materials 52    5,723    2,399    8,174    214    8,118    145    8,477   
Segment Revenues
$ 410,252    $ 67,983    $ 33,328    511,563    $ 358,352    $ 86,639    $ 29,829    474,820   
Eliminations
(7,043)   (3,589)  
Revenues
$ 504,520    $ 471,231   
13
  Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total Nuclear
Operations
Group 		Nuclear
Power
Group 		Nuclear
Services
Group 		Total
  (In thousands)
Fixed-Price Incentive Fee $ 601,554    $ 886    $ —    $ 602,440    $ 544,642    $ 1,581    $ —    $ 546,223   
Firm-Fixed-Price 177,530    132,702    18,548    328,780    76,040    139,203    10,072    225,315   
Cost-Plus Fee
54,823    —    46,511    101,334    42,139    8    48,315    90,462   
Time-and-Materials 120    22,312    5,034    27,466    332    30,246    536    31,114   
Segment Revenues
$ 834,027    $ 155,900    $ 70,093    1,060,020    $ 663,153    $ 171,038    $ 58,923    893,114   
Eliminations
(13,292)   (5,429)  
Revenues
$ 1,046,728    $ 887,685   
Performance Obligations
As we progress on our contracts and the underlying performance obligations for which we recognize revenue over time, we refine our estimates of variable consideration and total estimated costs at completion, which impact the overall profitability on our contracts and performance obligations. Changes in these estimates result in the recognition of cumulative catch-up adjustments that impact our revenues and/or costs of contracts. During the three months ended June 30, 2020 and 2019, we recognized net favorable changes in estimates that resulted in increases in revenues of $11.4 million and $16.6 million, respectively. During the six months ended June 30, 2020 and 2019, we recognized net favorable changes in estimates that resulted in increases in revenues of $21.0 million and $21.4 million, respectively.
Contract Assets and Liabilities
We include revenues and related costs incurred, plus accumulated contract costs that exceed amounts invoiced to customers under the terms of the contracts, in Contracts in progress. We include in Advance billings on contracts billings that exceed accumulated contract costs and revenues recognized over time. Amounts that are withheld on our fixed-price incentive fee contracts are classified within Retainages. Certain of these amounts require conditions other than the passage of time to be achieved, with the remaining amounts only requiring the passage of time. Most long-term contracts contain provisions for progress payments. Our unbilled receivables do not contain an allowance for credit losses as we expect to invoice customers and collect all amounts for unbilled revenues. Changes in Contracts in progress and Advance billings on contracts are primarily driven by differences in the timing of revenue recognition and billings to our customers. During the six months ended June 30, 2020, our unbilled receivables increased $16.3 million primarily as a result of the timing of milestone billings on certain firm-fixed-price contracts within our Nuclear Power Group segment, partially offset by decreases in unbilled receivables within our Nuclear Operations Group segment. During the six months ended June 30, 2020, our Advance billings on contracts decreased $10.6 million primarily as a result of revenue recognized in excess of billings. Our fixed-price incentive fee contracts for our Nuclear Operations Group segment include provisions that result in an increase in retainages on contracts during the first and third quarters of the year, with larger payments made during the second and fourth quarters. Retainages also vary as a result of timing differences between incurring costs and achieving milestones that allow us to recover these amounts.
  June 30, December 31,
  2020 2019
  (In thousands)
Included in Contracts in progress:
Unbilled receivables $ 382,191    $ 365,861   
Retainages $ 46,767    $ 46,670   
Included in Other Assets:
Retainages $ 1,391    $ 1,412   
Advance billings on contracts $ 64,815    $ 75,425   
During the three months ended June 30, 2020 and 2019, we recognized $12.2 million and $16.7 million of revenues that were in Advance billings on contracts at December 31, 2019 and 2018, respectively. During the six months ended June 30, 2020 and 2019, we recognized $42.4 million and $50.5 million of revenues that were in Advance billings on contracts at December 31, 2019 and 2018, respectively.
14
Remaining Performance Obligations
Remaining performance obligations represent the dollar amount of revenue we expect to recognize in the future from performance obligations on contracts previously awarded and in progress. Of the remaining performance obligations on our contracts with customers at June 30, 2020, we expect to recognize revenues as follows:
2020 2021 Thereafter Total
(In approximate millions)
Nuclear Operations Group $ 722    $ 1,098    $ 2,094    $ 3,914   
Nuclear Power Group 178    209    384    771   
Nuclear Services Group 33    5    5    43   
Total Remaining Performance Obligations $ 933    $ 1,312    $ 2,483    $ 4,728   
NOTE 4 – LONG-TERM DEBT
Our Long-Term Debt consists of the following:
  June 30,
2020 		December 31,
2019
  (In thousands)
Senior Notes $ 800,000    $ 400,000   
Credit Facility 40,000    432,159   
Less: Amounts due within one year —    14,711   
Long-Term Debt, gross 840,000    817,448   
Less: Deferred debt issuance costs 13,169    8,006   
Long-Term Debt $ 826,831    $ 809,442   
Maturities of long-term debt subsequent to June 30, 2020 were as follows: 2020 through 2024 – $0.0 million; 2025 – $40.0 million; and thereafter – $800.0 million.
On June 12, 2020, we issued $400 million aggregate principal amount of our 4.125% senior notes due 2028 (the "Senior Notes due 2028") pursuant to an indenture dated June 12, 2020 (the "2020 Indenture") among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee. The proceeds from the issuance of the Senior Notes due 2028 were used to (1) repay in full the Term Loans, as defined below, under our Credit Agreement dated May 24, 2018 (as amended, the "Credit Facility"), (2) repay a portion of the borrowings under the Revolving Credit Facility, as defined below, under the Credit Facility, and (3) pay all fees and expenses related to the issuance of the Senior Notes due 2028.
Credit Facility
On March 24, 2020, we entered into an Amendment No. 1 to Credit Agreement (the "Amendment"), which amended the Credit Facility with Wells Fargo Bank, N.A., as administrative agent, and the other lenders party thereto. The Credit Facility originally provided for a $500 million senior secured revolving credit facility (the "Revolving Credit Facility"), a $50 million U.S. dollar senior secured term loan A made available to the Company (the "USD Term Loan") and a $250 million (U.S. dollar equivalent) Canadian dollar senior secured term loan A made available to BWXT Canada Ltd. (the "CAD Term Loan" and together with the USD Term Loan, the "Term Loans"). On June 12, 2020, we repaid in full the Term Loans, at par, with a portion of the proceeds from the issuance of the Senior Notes due 2028.
The Amendment, among other things, (1) provided additional commitments to increase the Revolving Credit Facility by $250 million, such that the Revolving Credit Facility is now $750 million; (2) extended the maturity date of the Revolving Credit Facility to March 24, 2025; (3) removed BWXT Canada Ltd. as a borrower under the Revolving Credit Facility; (4) modified the applicable margin for borrowings under the Revolving Credit Facility to be, at the Company's option, either (i) the Eurocurrency rate plus a margin ranging from 1.0% to 1.75% per year or (ii) the base rate plus a margin ranging from 0.0% to 0.75% per year, in each case depending on the Company's leverage ratio; (5) modified the commitment fee on the unused portion of the Revolving Credit Facility to range from 0.15% to 0.225% per year, depending on the Company's leverage ratio; and (6) modified the letter of credit fee with respect to each financial letter of credit and performance letter of credit issued under the Revolving Credit Facility to range from 1.0% to 1.75% and 0.75% to 1.05% per year, respectively, in each case, depending on the Company's leverage ratio.
15
All obligations under the Revolving Credit Facility are scheduled to mature on March 24, 2025. The proceeds of loans under the Revolving Credit Facility are available for working capital needs, permitted acquisitions and other general corporate purposes.
The Credit Facility allows for additional parties to become lenders and, subject to certain conditions, for the increase of the commitments under the Credit Facility, subject to an aggregate maximum for all additional commitments of (1) the greater of (a) $250 million and (b) 65% of EBITDA, as defined in the Credit Facility, for the last four full fiscal quarters, plus (2) all voluntary prepayments of the Term Loans, plus (3) additional amounts provided the Company is in compliance with a pro forma first lien leverage ratio test of less than or equal to 2.50 to 1.00.
The Company's obligations under the Credit Facility are guaranteed, subject to certain exceptions, by substantially all of the Company's present and future wholly owned domestic restricted subsidiaries. The Credit Facility is secured by first-priority liens on certain assets owned by the Company and its subsidiary guarantors (other than its subsidiaries comprising its Nuclear Operations Group segment and a portion of its Nuclear Services Group segment).
The Revolving Credit Facility requires interest payments on revolving loans on a periodic basis until maturity. We may prepay all loans under the Credit Facility at any time without premium or penalty (other than customary Eurocurrency breakage costs), subject to notice requirements.
The Credit Facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted leverage ratio is 4.00 to 1.00, which may be increased to 4.50 to 1.00 for up to four consecutive fiscal quarters after a material acquisition. The minimum consolidated interest coverage ratio is 3.00 to 1.00. In addition, the Credit Facility contains various restrictive covenants, including with respect to debt, liens, investments, mergers, acquisitions, dividends, equity repurchases and asset sales. As of June 30, 2020, we were in compliance with all covenants set forth in the Credit Facility.
Outstanding loans under the Revolving Credit Facility bear interest at our option at either (1) the Eurocurrency rate plus a margin ranging from 1.0% to 1.75% per year or (2) the base rate plus a margin ranging from 0.0% to 0.75% per year. We are charged a commitment fee on the unused portion of the Revolving Credit Facility, and that fee ranges from 0.15% to 0.225% per year. Additionally, we are charged a letter of credit fee of between 1.0% and 1.75% per year with respect to the amount of each financial letter of credit issued under the Credit Facility, and a letter of credit fee of between 0.75% and 1.05% per year with respect to the amount of each performance letter of credit issued under the Credit Facility. The applicable margin for loans, the commitment fee and the letter of credit fees set forth above will vary quarterly based on our leverage ratio. Based on the leverage ratio applicable at June 30, 2020, the margin for Eurocurrency rate and base rate revolving loans was 1.25% and 0.25%, respectively, the letter of credit fee for financial letters of credit and performance letters of credit was 1.25% and 0.825%, respectively, and the commitment fee for the unused portion of the Revolving Credit Facility was 0.175%.
As of June 30, 2020, borrowings and letters of credit issued under the Revolving Credit Facility totaled $40.0 million and $64.7 million, respectively. As a result, as of June 30, 2020 we had $645.3 million available under the Revolving Credit Facility for borrowings and to meet letter of credit requirements. As of June 30, 2020, the interest rate on outstanding borrowings under our Credit Facility was 1.43%.
The Credit Facility generally includes customary events of default for a secured credit facility. Under the Credit Facility, (1) if an event of default relating to bankruptcy or other insolvency events occurs with respect to the Company, all related obligations will immediately become due and payable; (2) if any other event of default exists, the lenders will be permitted to accelerate the maturity of the related obligations outstanding; and (3) if any event of default exists, the lenders will be permitted to terminate their commitments thereunder and exercise other rights and remedies, including the commencement of foreclosure or other actions against the collateral.
If any default occurs under the Credit Facility, or if we are unable to make any of the representations and warranties in the Credit Facility, we will be unable to borrow funds or have letters of credit issued under the Credit Facility.
Senior Notes due 2028
We issued $400 million aggregate principal amount of our Senior Notes due 2028 pursuant to the 2020 Indenture. The Senior Notes due 2028 are guaranteed by each of the Company's present and future direct and indirect wholly owned domestic subsidiaries that is a guarantor under the Credit Facility.
16
Interest on the Senior Notes due 2028 is payable semi-annually in cash in arrears on June 30 and December 30 of each year, commencing on December 30, 2020, at a rate of 4.125% per annum. The Senior Notes due 2028 will mature on June 30, 2028.
The Company may redeem the Senior Notes due 2028, in whole or in part, at any time on or after June 30, 2023 at a redemption price equal to (i) 102.063% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on June 30, 2023, (ii) 101.031% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on June 30, 2024 and (iii) 100.0% of the principal amount to be redeemed if the redemption occurs on or after June 30, 2025, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time prior to June 30, 2023, the Company may also redeem up to 40.0% of the Senior Notes due 2028 with net cash proceeds of certain equity offerings at a redemption price equal to 104.125% of the principal amount of the Senior Notes due 2028 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to June 30, 2023, the Company may redeem the Senior Notes due 2028, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the Senior Notes due 2028 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable "make-whole" premium.
The 2020 Indenture contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the 2020 Indenture or the Senior Notes due 2028 and certain provisions related to bankruptcy events. The 2020 Indenture also contains customary negative covenants. As of June 30, 2020, we were in compliance with all covenants set forth in the 2020 Indenture and the Senior Notes due 2028.
NOTE 5 – PENSION PLANS AND POSTRETIREMENT BENEFITS
We record the service cost component of net periodic benefit cost within Operating income on our condensed consolidated statements of income. For the three months ended June 30, 2020 and 2019, these amounts were $2.9 million and $2.6 million, respectively. For the six months ended June 30, 2020 and 2019, these amounts were $5.9 million and $5.2 million, respectively. All other components of net periodic benefit cost are included in Other – net within the condensed consolidated statements of income. For the three months ended June 30, 2020 and 2019, these amounts were $(9.5) million and $(5.3) million, respectively. For the six months ended June 30, 2020 and 2019, these amounts were $(19.0) million and $(10.5) million, respectively. Components of net periodic benefit cost included in net income were as follows:
  Pension Benefits Other Benefits
Three Months Ended
June 30, 		Six Months Ended
June 30, 		Three Months Ended
June 30, 		Six Months Ended
June 30,
  2020 2019 2020 2019 2020 2019 2020 2019
  (In thousands)
Service cost $ 2,779    $ 2,469    $ 5,598    $ 4,925    $ 161    $ 144    $ 327    $ 289   
Interest cost 9,221    11,563    18,523    23,155    404    585    814    1,170   
Expected return on plan assets
(19,211)   (17,418)   (38,575)   (34,854)   (672)   (628)   (1,344)   (1,255)  
Amortization of prior service cost (credit)
825    725    1,650    1,450    (49)   (77)   (97)   (155)  
Net periodic benefit (income) cost
$ (6,386)   $ (2,661)   $ (12,804)   $ (5,324)   $ (156)   $ 24    $ (300)   $ 49   
NOTE 6 – COMMITMENTS AND CONTINGENCIES
There were no material contingencies during the period covered by this Form 10-Q.
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NOTE 7 – FAIR VALUE MEASUREMENTS
Investments
The following is a summary of our investments measured at fair value at June 30, 2020:
Total Level 1 Level 2 Level 3
  (In thousands)
Equity securities
Mutual funds $ 5,752    $ —    $ 5,752    $ —   
Available-for-sale securities
U.S. Government and agency securities 2,307    2,307    —    —   
Corporate bonds 2,824    1,421    1,403    —   
Asset-backed securities and collateralized mortgage obligations
63    —    63    —   
Total $ 10,946    $ 3,728    $ 7,218    $ —   
The following is a summary of our investments measured at fair value at December 31, 2019:
Total Level 1 Level 2 Level 3
  (In thousands)
Equity securities
Equities $ 2,172    $ —    $ 2,172    $ —   
Mutual funds 5,685    —    5,685    —   
Available-for-sale securities
U.S. Government and agency securities 2,044    2,044    —    —   
Corporate bonds 3,483    1,855    1,628    —   
Asset-backed securities and collateralized mortgage obligations
79    —    79    —   
Total $ 13,463    $ 3,899    $ 9,564    $ —   
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 June 30, 2020 and December 31, 2019, we had FX forward contracts outstanding to purchase or sell foreign currencies, primarily Canadian dollars and Euros, with a total fair value of $(0.2) million and $(0.8) million, respectively.
Other Financial Instruments
We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments, as follows:
Cash and cash equivalents and restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying condensed consolidated balance sheets for Cash and cash equivalents and Restricted cash and cash equivalents approximate their fair values due to their highly liquid nature.
Long-term and short-term debt. We base the fair values of debt instruments, including our 5.375% senior notes due 2026 (the "Senior Notes due 2026") and our Senior Notes due 2028, on quoted market prices. Where quoted prices are not available, we base the fair values on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms. At June 30, 2020 and December 31, 2019, the fair value of our Senior Notes due 2026 was $413.0 million and $423.5 million, respectively. The fair value of our remaining debt instruments approximated their carrying values at June 30, 2020 and December 31, 2019.
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NOTE 8 – STOCK-BASED COMPENSATION
Stock-based compensation recognized for all of our plans for the three months ended June 30, 2020 and 2019 totaled $4.7 million and $4.2 million, respectively, with associated tax benefit totaling $0.8 million and $0.8 million, respectively. Stock-based compensation recognized for all of our plans for the six months ended June 30, 2020 and 2019 totaled $7.3 million and $7.8 million, respectively, with associated tax benefit totaling $1.2 million and $1.4 million, respectively.
BWX Technologies, Inc. 2020 Omnibus Incentive Plan
In May 2020, our stockholders approved the 2020 Omnibus Incentive Plan (the "2020 Plan") which succeeds the 2010 Long-Term Incentive Plan (the "Prior Plan"). Members of the Board of Directors, executive officers, key employees and consultants are eligible to participate in the 2020 Plan. The Compensation Committee of the Board of Directors selects the participants for the 2020 Plan. The 2020 Plan provides for cash awards and equity-based compensation in the form of stock options, restricted stock, restricted stock units, performance shares and performance units, subject to satisfaction of specific performance goals. Shares subject to awards under either the 2020 Plan or the Prior Plan that are cancelled, forfeited, terminated or expire unexercised, shall immediately become available for the granting of awards under the 2020 Plan. As of the effective date of the 2020 Plan, shares available for grant under the Prior Plan are available for grant under the 2020 Plan. In addition, our stockholders approved an additional 1,450,000 shares of common stock for issuance through the 2020 Plan. Options to purchase shares are granted at not less than 100% of the fair market value closing price on the date of grant, become exercisable at such time or times as determined when granted and expire not more than ten years after the date of grant.
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
June 30, 		Six Months Ended
June 30,
  2020 2019 2020 2019
  (In thousands)
REVENUES:
Nuclear Operations Group $ 410,252    $ 358,352    $ 834,027    $ 663,153   
Nuclear Power Group 67,983    86,639    155,900    171,038   
Nuclear Services Group 33,328    29,829    70,093    58,923   
Eliminations (1)
(7,043)   (3,589)   (13,292)   (5,429)  
$ 504,520    $ 471,231    $ 1,046,728    $ 887,685   
(1)Segment revenues are net of the following intersegment transfers:
Nuclear Operations Group Transfers $ (863)   $ (1,047)   $ (1,536)   $ (1,904)  
Nuclear Power Group Transfers (145)   (33)   (274)   (73)  
Nuclear Services Group Transfers (6,035)   (2,509)   (11,482)   (3,452)  
$ (7,043)   $ (3,589)   $ (13,292)   $ (5,429)  
OPERATING INCOME:
Nuclear Operations Group $ 85,972    $ 75,226    $ 176,331    $ 132,851   
Nuclear Power Group 1,102    14,883    9,572    27,466   
Nuclear Services Group 4,122    1,490    10,522    3,061   
Other (5,600)   (6,744)   (10,959)   (12,840)  
$ 85,596    $ 84,855    $ 185,466    $ 150,538   
Unallocated Corporate (2)
(3,162)   (4,320)   (4,765)   (6,359)  
Total Operating Income $ 82,434    $ 80,535    $ 180,701    $ 144,179   
Other Income (Expense) 1,646    (2,801)   1,827    (3,568)  
Income before Provision for Income Taxes $ 84,080    $ 77,734    $ 182,528    $ 140,611   
(2)Unallocated corporate includes general corporate overhead not allocated to segments.
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NOTE 10 – EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended
June 30, 		Six Months Ended
June 30,
  2020 2019 2020 2019
  (In thousands, except share and per share amounts)
Basic:
Net Income Attributable to BWX Technologies, Inc. $ 64,258    $ 58,878    $ 139,757    $ 107,856   
Weighted-average common shares 95,457,629    95,357,311    95,434,990    95,306,210   
Basic earnings per common share $ 0.67    $ 0.62    $ 1.46    $ 1.13   
Diluted:
Net Income Attributable to BWX Technologies, Inc. $ 64,258    $ 58,878    $ 139,757    $ 107,856   
Weighted-average common shares (basic) 95,457,629    95,357,311    95,434,990    95,306,210   
Effect of dilutive securities:
Stock options, restricted stock units and performance shares (1)
175,942    319,893    259,982    443,070   
Adjusted weighted-average common shares 95,633,571    95,677,204    95,694,972    95,749,280   
Diluted earnings per common share $ 0.67    $ 0.62    $ 1.46    $ 1.13   
(1)At June 30, 2020 and 2019, we excluded 8,321 and 52,386 shares, respectively, from our diluted share calculation as their effect would have been antidilutive.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included under Item 1 of this quarterly report on Form 10-Q ("Report") and the audited consolidated financial statements and the related notes and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our annual report on Form 10-K for the year ended December 31, 2019 (our "2019 10-K").
In this Report, unless the context otherwise indicates, "we," "us" and "our" mean BWX Technologies, Inc. ("BWXT" or the "Company") and its consolidated subsidiaries.
From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential security holders about our Company. Forward-looking statements include those statements that express a belief, expectation or intention, as well as those that are not statements of historical fact, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Statements and assumptions regarding expectations and projections of specific projects, our future backlog, revenues, income and capital spending, strategic investments, acquisitions or divestitures, return of capital activities, margin improvement initiatives or impacts of the novel strain of coronavirus ("COVID-19") pandemic are examples of forward-looking statements. Forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "plan," "seek," "goal," "could," "intend," "may," "should" or other words that convey the uncertainty of future events or outcomes. In addition, sometimes we will specifically describe a statement as being a forward-looking statement and refer to this cautionary statement.
We have based our forward-looking statements on information currently available to us and our current expectations, estimates and projections about our industries and our Company. We caution that these statements are not guarantees of future performance and you should not rely unduly on them as they involve risks, uncertainties and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. For example, the extent to which the COVID-19 outbreak impacts our business will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the length and severity of the COVID-19 health crisis, and the actions to contain its impact, in addition to the potential recurrence or subsequent waves of COVID-19 or similar diseases. While our management considers these statements and assumptions to be reasonable, they are inherently subject to numerous factors, including potentially the risk factors described in the sections labeled Item 1A, "Risk Factors" of our 2019 10-K, of our quarterly report on Form 10-Q for the quarter ended March, 31, 2020 (our "First Quarter 2020 10-Q") and of this Report, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in our forward-looking statements.
We have discussed many of these factors in more detail elsewhere in this Report, including under the heading "COVID-19 Assessment" of this Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 1A, "Risk Factors", and in Item 1A "Risk Factors" in our 2019 10-K and our First Quarter 2020 10-Q. These factors are not necessarily all the factors that could affect us. Unpredictable or unanticipated factors we have not discussed in this Report or in our 2019 10-K and our First Quarter 2020 10-Q could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. We do not intend to update or review any forward-looking statement or our description of important factors, whether as a result of new information, future events or otherwise, except as required by applicable laws.
GENERAL
We operate in three reportable segments: Nuclear Operations Group, Nuclear Power Group and Nuclear Services Group. In general, we operate in capital-intensive industries and rely on large contracts for a substantial amount of our revenues. We are currently exploring growth strategies across our segments to expand and complement our existing businesses. We would expect to fund these opportunities with cash generated from operations or by raising additional capital through debt, equity or some combination thereof.
Nuclear Operations Group
The revenues of our Nuclear Operations Group segment are largely a function of defense spending by the U.S. Government. Through this segment, we engineer, design and manufacture precision naval nuclear components, reactors and
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nuclear fuel for the DOE/NNSA's Naval Nuclear Propulsion Program. In addition, we perform development and fabrication activities for missile launch tubes for U.S. Navy submarines. As a supplier of major nuclear components for certain U.S. Government programs, this segment is a significant participant in the defense industry.
Nuclear Power Group
Through this segment, we design and manufacture commercial nuclear steam generators, heat exchangers, pressure vessels, reactor components, as well as other auxiliary equipment, including containers for the storage of spent nuclear fuel and other high-level nuclear waste. This segment is a leading supplier of nuclear fuel, fuel handling systems, tooling delivery systems, nuclear-grade materials and precisely machined components, and related services for CANDU nuclear power plants. This segment also provides a variety of engineering and in-plant services and is a significant supplier to nuclear power utilities undergoing major refurbishment and plant life extension projects. Additionally, this segment is a leading global manufacturer and supplier of critical medical radioisotopes and radiopharmaceuticals.
Our Nuclear Power Group segment's overall activity primarily depends on the demand and competitiveness of nuclear energy. A significant portion of our Nuclear Power Group segment's operations depend on the timing of maintenance and refueling outages, the cyclical nature of capital expenditures and major refurbishment and life extension projects, as well as the demand for nuclear fuel and fuel handling equipment primarily in the Canadian market, which could cause variability in our financial results.
Nuclear Services Group
Our Nuclear Services Group segment provides various services to the U.S. Government. The revenues and equity in income of investees under our U.S. Government contracts are largely a function of spending of the U.S. Government and the performance scores we and our consortium partners earn in managing and operating high-consequence operations at U.S. nuclear weapons sites, national laboratories and manufacturing complexes. With its specialized capabilities of full life-cycle management of special materials, facilities and technologies, we believe our Nuclear Services Group segment is well-positioned to continue to participate in the continuing cleanup, operation and management of critical government-owned nuclear sites, laboratories and manufacturing complexes maintained by the DOE, NASA and other federal agencies. This segment also develops technology for a variety of applications, including advanced nuclear power sources, and offers complete advanced nuclear fuel and reactor design and engineering, licensing and manufacturing services for new advanced nuclear reactors.
Divestiture of U.S.-Based Commercial Nuclear Services Business
On May 29, 2020, our subsidiary BWXT Nuclear Energy, Inc. divested its U.S.-based commercial nuclear services business, a component of our Nuclear Services Group segment. In a cashless transaction, we exchanged net assets totaling $18.0 million, consisting primarily of property, plant and equipment and certain warranty obligations, for a manufacturing facility and the associated land of approximately the same value. The acquired assets are reported as part of the Nuclear Services Group segment.
Acquisition of Laker Energy Products Ltd.
On January 2, 2020, our subsidiary BWXT Canada Ltd. acquired Laker Energy Products Ltd. ("Laker Energy Products"). Laker Energy Products is a global supplier of nuclear-grade materials and precisely machined components for CANDU nuclear power utilities and employs approximately 140 personnel. Laker Energy Products is reported as part of our Nuclear Power Group segment.
Critical Accounting Policies and Estimates
For a summary of the critical accounting policies and estimates that we use in the preparation of our unaudited condensed consolidated financial statements, see Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 10-K. There have been no material changes to our critical accounting policies during the six months ended June 30, 2020 with the exception of the adoption of Financial Accounting Standards Board ("FASB") Topic Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment as described in the notes to the condensed consolidated financial statements in Part I of this Report.
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Accounting for Contracts
On certain of our performance obligations, we recognize revenue over time. In accordance with FASB Topic Revenue from Contracts with Customers, we are required to estimate the total amount of costs on these performance obligations. As of June 30, 2020, we have provided for the estimated costs to complete all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract revenues and costs. A principal risk on fixed-price contracts is that revenue from the customer is insufficient to cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor productivity or steel and other raw material prices. In some instances, we guarantee completion dates related to our projects or provide performance guarantees. Increases in costs on our fixed-price contracts could have a material adverse impact on our consolidated results of operations, financial condition and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated results of operations, financial condition and cash flows. During the three months ended June 30, 2020 and 2019, we recognized net changes in estimates related to contracts that recognize revenue over time, which increased operating income by approximately $11.4 million and $18.9 million, respectively. During the six months ended June 30, 2020 and 2019, we recognized net changes in estimates related to contracts that recognize revenue over time, which increased operating income by approximately $21.0 million and $23.7 million, respectively.
COVID-19 Assessment
A global outbreak of COVID-19 has occurred impacting over 200 countries, including the U.S. and Canada where we maintain our principal operations. Developments have been occurring rapidly with respect to the spread of COVID-19 and its impact on human health and businesses, with new and changing government actions occurring on a daily basis. As a result, we have been closely monitoring the COVID-19 pandemic and its impacts and potential impacts on our business.
We have received notifications from the U.S. and Canadian governments designating BWXT as an essential business given our roles in national security, energy production and medical manufacturing. We continue to operate our facilities and have taken numerous precautions to mitigate exposure and protect the health and well-being of our workforce. The COVID-19 pandemic has not caused a significant disruption to our operations or our supply chain to date.
Because developments related to the spread of COVID-19 and its impacts have been occurring rapidly, it is difficult to predict any future impact at this time. We may experience material disruptions to demand for our products and services and our operations in the future as a result of, among other things, national, state, provincial or local government enforced quarantines, worker illness or absenteeism, and travel and other restrictions. For example, we have experienced a year over year decline in revenues in our medical radioisotopes and radiopharmaceuticals business due to a decrease in demand for elective diagnostic procedures. For similar reasons, the COVID-19 pandemic may also adversely impact our supply chain and other manufacturers which could delay our receipt of essential goods and services. For example, certain services scheduled during nuclear power plant outages during which our Nuclear Power Group segment would operate have been rescheduled. We have also experienced delays in the bidding and contracting process for our U.S. Government businesses due to COVID-19 concerns. Any number of these potential risks could have a material adverse effect on our financial condition, results of operations and cash flows. The extent to which the COVID-19 outbreak impacts our business will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
See Item 1A "Risk Factors" in this Report for an additional discussion of risks of the COVID-19 pandemic on our business.
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RESULTS OF OPERATIONS – THREE AND SIX MONTHS ENDED JUNE 30, 2020 VS. THREE AND SIX MONTHS ENDED JUNE 30, 2019
Selected financial highlights are presented in the table below:
  Three Months Ended
June 30, 		  Six Months Ended
June 30, 		 
  2020 2019 $ Change 2020 2019 $ Change
  (In thousands)
REVENUES:
Nuclear Operations Group $ 410,252    $ 358,352    $ 51,900    $ 834,027    $ 663,153    $ 170,874   
Nuclear Power Group 67,983    86,639    (18,656)   155,900    171,038    (15,138)  
Nuclear Services Group 33,328    29,829    3,499    70,093    58,923    11,170   
Eliminations (7,043)   (3,589)   (3,454)   (13,292)   (5,429)   (7,863)  
$ 504,520    $ 471,231    $ 33,289    $ 1,046,728    $ 887,685    $ 159,043   
OPERATING INCOME:
Nuclear Operations Group $ 85,972    $ 75,226    $ 10,746    $ 176,331    $ 132,851    $ 43,480   
Nuclear Power Group 1,102    14,883    (13,781)   9,572    27,466    (17,894)  
Nuclear Services Group 4,122    1,490    2,632    10,522    3,061    7,461   
Other (5,600)   (6,744)   1,144    (10,959)   (12,840)   1,881   
$ 85,596    $ 84,855    $ 741    $ 185,466    $ 150,538    $ 34,928   
Unallocated Corporate (3,162)   (4,320)   1,158    (4,765)   (6,359)   1,594   
Total Operating Income $ 82,434    $ 80,535    $ 1,899    $ 180,701    $ 144,179    $ 36,522   
Consolidated Results of Operations
Three months ended June 30, 2020 vs. 2019
Consolidated revenues increased 7.1%, or $33.3 million, to $504.5 million in the three months ended June 30, 2020 compared to $471.2 million for the corresponding period in 2019, due to increases in revenues from our Nuclear Operations Group and Nuclear Services Group segments totaling $51.9 million and $3.5 million, respectively. These increases were partially offset by a decrease in revenues in our Nuclear Power Group segment of $18.7 million.
Consolidated operating income increased $1.9 million to $82.4 million in the three months ended June 30, 2020 compared to $80.5 million for the corresponding period of 2019. Operating income in our Nuclear Operations Group, Nuclear Services Group and Other segments increased by $10.7 million, $2.6 million, and $1.1 million, respectively. In addition, we experienced lower Unallocated Corporate expenses of $1.2 million when compared to the corresponding period of 2019. These increases were partially offset by a decrease in operating income in our Nuclear Power Group segment of $13.8 million.
Six months ended June 30, 2020 vs. 2019
Consolidated revenues increased 17.9%, or $159.0 million, to $1,046.7 million in the six months ended June 30, 2020 compared to $887.7 million for the corresponding period in 2019, due to increases in revenues from our Nuclear Operations Group and Nuclear Services Group segments totaling $170.9 million and $11.2 million, respectively. These increases were partially offset by a decrease in revenues in our Nuclear Power Group segment of $15.1 million.
Consolidated operating income increased $36.5 million to $180.7 million in the six months ended June 30, 2020 compared to $144.2 million for the corresponding period of 2019. Operating income in our Nuclear Operations Group, Nuclear Services Group and Other segments increased by $43.5 million, $7.5 million, and $1.9 million, respectively. In addition, we experienced lower Unallocated Corporate expenses of $1.6 million when compared to the corresponding period of 2019. These increases were partially offset by a decrease in operating income in our Nuclear Power Group segment of $17.9 million.
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Nuclear Operations Group
  Three Months Ended
June 30, 		  Six Months Ended
June 30, 		 
  2020 2019 $ Change 2020 2019 $ Change
  (In thousands)
Revenues $ 410,252    $ 358,352    $ 51,900    $ 834,027    $ 663,153    $ 170,874   
Operating Income $ 85,972    $ 75,226    $ 10,746    $ 176,331    $ 132,851    $ 43,480   
% of Revenues 21.0% 21.0% 21.1% 20.0%
Three months ended June 30, 2020 vs. 2019
Revenues increased 14.5%, or $51.9 million, to $410.3 million in the three months ended June 30, 2020 compared to $358.4 million for the corresponding period of 2019. The increase related to the timing of the procurement of certain long-lead materials when compared to the corresponding period of 2019 as well as additional volume in our naval nuclear fuel and downblending operations.
Operating income increased $10.7 million to $86.0 million in the three months ended June 30, 2020 compared to $75.2 million for the corresponding period of 2019. The increase was due to the operating income impact of the changes in revenues noted above.
Six months ended June 30, 2020 vs. 2019
Revenues increased 25.8%, or $170.9 million, to $834.0 million in the six months ended June 30, 2020 compared to $663.2 million for the corresponding period of 2019 as we continue to expand production related to the Columbia-Class nuclear propulsion system. The increase comprised additional volume in the manufacture of nuclear components for U.S. Government programs and the timing of the procurement of certain long-lead materials when compared to the corresponding period of 2019.
Operating income increased $43.5 million to $176.3 million in the six months ended June 30, 2020 compared to $132.9 million for the corresponding period of 2019. The increase was due to the operating income impact of the changes in revenues noted above as well as favorable contract adjustments related to our naval nuclear fuel operations.
Nuclear Power Group
  Three Months Ended
June 30, 		  Six Months Ended
June 30, 		 
  2020 2019 $ Change 2020 2019 $ Change
  (In thousands)
Revenues $ 67,983    $ 86,639    $ (18,656)   $ 155,900    $ 171,038    $ (15,138)  
Operating Income $ 1,102    $ 14,883    $ (13,781)   $ 9,572    $ 27,466    $ (17,894)  
% of Revenues 1.6% 17.2% 6.1% 16.1%
Three months ended June 30, 2020 vs. 2019
Revenues decreased 21.5%, or $18.7 million, to $68.0 million in the three months ended June 30, 2020 compared to $86.6 million for the corresponding period of 2019. The decrease was primarily related to lower revenues in our nuclear components business of $20.9 million largely attributable to decreased activity associated with major steam generator design and supply contracts as well as a decrease in volume associated with our medical radioisotopes business. These decreases were partially offset by revenues associated with the Laker Energy Products acquisition of $5.7 million.
Operating income decreased $13.8 million to $1.1 million in the three months ended June 30, 2020 compared to $14.9 million for the corresponding period of 2019, primarily attributable to the decrease in revenues noted above as well as a decline in operating margins as a result of net favorable changes in estimates related to certain long-term contracts recorded in the prior year.
Six months ended June 30, 2020 vs. 2019
Revenues decreased 8.9%, or $15.1 million, to $155.9 million in the six months ended June 30, 2020 compared to $171.0 million for the corresponding period of 2019. The decrease was primarily related to lower revenues in our nuclear components
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business of $11.3 million largely attributable to decreased activity associated with major steam generator design and supply contracts. We also experienced a decrease in revenue of $9.5 million due to lower levels of in-plant inspection, maintenance and modification services when compared to the same period in the prior year. These decreases were partially offset by revenues associated with the Laker Energy Products acquisition.
Operating income decreased $17.9 million to $9.6 million in the six months ended June 30, 2020 compared to $27.5 million for the corresponding period of 2019, primarily attributable to the decrease in revenues noted above as well as a decline in operating margins as a result of net favorable changes in estimates related to certain long-term contracts recorded in the prior year, as well a shift in our product line mix when compared to the same period in the prior year.
Nuclear Services Group
  Three Months Ended
June 30, 		  Six Months Ended
June 30, 		 
  2020 2019 $ Change 2020 2019 $ Change
  (In thousands)
Revenues $ 33,328    $ 29,829    $ 3,499    $ 70,093    $ 58,923    $ 11,170   
Operating Income $ 4,122    $ 1,490    $ 2,632    $ 10,522    $ 3,061    $ 7,461   
% of Revenues 12.4% 5.0% 15.0% 5.2%
Three months ended June 30, 2020 vs. 2019
Revenues increased 11.7%, or $3.5 million, to $33.3 million in the three months ended June 30, 2020 compared to $29.8 million for the corresponding period of 2019, primarily attributable to an increase in design and engineering work executed by our advanced technologies business.
Operating income increased $2.6 million to $4.1 million in the three months ended June 30, 2020 compared to $1.5 million for the corresponding period of 2019. The increase was due to the operating income impact of the changes in revenues noted above in addition to a decrease in selling, general and administrative expenses related to business development activities caused by the timing of proposal activities.
Six months ended June 30, 2020 vs. 2019
Revenues increased 19.0%, or $11.2 million, to $70.1 million in the six months ended June 30, 2020 compared to $58.9 million for the corresponding period of 2019. The increase was primarily attributable to design and engineering work executed by our advanced technologies business and an increase in the volume of commercial nuclear inspection and maintenance outage work in the U.S. when compared to the same period in the prior year.
Operating income increased $7.5 million to $10.5 million in the six months ended June 30, 2020 compared to $3.1 million for the corresponding period of 2019 due to the operating income impact of the changes in revenues noted above.
Other
  Three Months Ended
June 30, 		  Six Months Ended
June 30, 		 
  2020 2019 $ Change 2020 2019 $ Change
  (In thousands)
Operating Income $ (5,600)   $ (6,744)   $ 1,144    $ (10,959)   $ (12,840)   $ 1,881   
Operating income increased $1.1 million and $1.9 million in the three and six months ended June 30, 2020, respectively, primarily due to a decrease in research and development activities related to our medical and industrial radioisotope capabilities and other advanced technologies when compared to the corresponding periods of the prior year.
Unallocated Corporate
Unallocated corporate expenses decreased $1.2 million and $1.6 million in the three and six months ended June 30, 2020, respectively, primarily due to a decrease in healthcare claims, which was partially offset by an increase in legal and consulting costs associated with the divestiture of our U.S.-based commercial nuclear services business during the second quarter of 2020.
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Provision for Income Taxes
  Three Months Ended
June 30, 		  Six Months Ended
June 30, 		 
  2020 2019 $ Change 2020 2019 $ Change
  (In thousands)
Income before Provision for Income Taxes
$ 84,080    $ 77,734    $ 6,346    $ 182,528    $ 140,611    $ 41,917   
Provision for Income Taxes $ 19,684    $ 18,734    $ 950    $ 42,512    $ 32,501    $ 10,011   
Effective Tax Rate 23.4% 24.1% 23.3% 23.1%
We primarily operate in the U.S. and Canada, and we recognize our U.S. income tax provision based on the U.S. federal statutory rate of 21% and our Canadian tax provision based on the Canadian local statutory rate of approximately 25%.
Our effective tax rate for the three months ended June 30, 2020 was 23.4% as compared to 24.1% for the three months ended June 30, 2019. Our effective tax rate for the six months ended June 30, 2020 was 23.3% as compared to 23.1% for the six months ended June 30, 2019. The effective tax rates for the three and six months ended June 30, 2020 and 2019 were higher than the U.S. corporate income tax rate of 21% primarily due to state income taxes within the U.S. and the unfavorable rate differential associated with our Canadian earnings. Our effective tax rates for the six months ended June 30, 2020 and 2019 were favorably impacted by benefits recognized for excess tax benefits related to employee share-based payments of $0.9 million and $1.8 million, respectively.
Backlog
Backlog represents the dollar amount of revenue we expect to recognize in the future from contracts awarded and in progress. Not all of our expected revenue from a contract award is recorded in backlog for a variety of reasons, including that some projects are awarded and completed within the same reporting period.
Our backlog is equal to our remaining performance obligations under contracts that meet the criteria in FASB Topic Revenue from Contracts with Customers, as discussed in Note 3 to our condensed consolidated financial statements included in this Report. It is possible that our methodology for determining backlog may not be comparable to methods used by other companies.
We are subject to the budgetary and appropriations cycle of the U.S. Government as it relates to our Nuclear Operations Group and Nuclear Services Group segments. Backlog may not be indicative of future operating results, and projects in our backlog may be cancelled, modified or otherwise altered by customers.
June 30,
2020 		December 31,
2019
(In approximate millions)
Nuclear Operations Group $ 3,914    $ 4,515   
Nuclear Power Group 771    730   
Nuclear Services Group 43    43   
Total Backlog $ 4,728    $ 5,288   
We do not include the value of our unconsolidated joint venture contracts in backlog. These unconsolidated joint ventures are included in our Nuclear Services Group segment.
27
Of the backlog at June 30, 2020, we expect to recognize revenues as follows:
2020 2021 Thereafter Total
(In approximate millions)
Nuclear Operations Group $ 722    $ 1,098    $ 2,094    $ 3,914   
Nuclear Power Group 178    209    384    771   
Nuclear Services Group 33    5    5    43   
Total Backlog $ 933    $ 1,312    $ 2,483    $ 4,728   
At June 30, 2020, our Nuclear Operations Group segment's backlog with the U.S. Government was $3,516.4 million, $401.8 million of which had not yet been funded.
At June 30, 2020, our Nuclear Power Group segment had no backlog with the U.S. Government.
At June 30, 2020, our Nuclear Services Group segment's backlog with the U.S. Government was $37.7 million, all of which was funded.
Major new awards from the U.S. Government are typically received following Congressional approval of the budget for the U.S. Government's next fiscal year, which starts October 1, and may not be awarded to us before the end of the calendar year. Due to the fact that most contracts awarded by the U.S. Government are subject to these annual funding approvals, the total values of the underlying programs are significantly larger. In 2019, we received awards from the U.S. Government with a combined value in excess of $3.9 billion, inclusive of unexercised options, approximately $2.9 billion of which had been added to backlog as of June 30, 2020. The value of unexercised options excluded from backlog as of June 30, 2020 was approximately $1.0 billion, which is expected to be exercised through 2025, subject to annual Congressional appropriations.
Liquidity and Capital Resources
On June 12, 2020, we issued $400 million aggregate principal amount of our 4.125% senior notes due 2028 (the "Senior Notes due 2028") pursuant to an indenture dated June 12, 2020 (the "2020 Indenture") among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee. The proceeds from the issuance of the Senior Notes due 2028 were used to (1) repay in full the Term Loans, as defined below, under our Credit Agreement dated May 24, 2018 (as amended, the "Credit Facility"), (2) repay a portion of the borrowings under the Revolving Credit Facility, as defined below, under the Credit Facility, and (3) pay all fees and expenses related to the issuance of the Senior Notes due 2028.
Credit Facility
On March 24, 2020, we entered into an Amendment No. 1 to Credit Agreement (the "Amendment"), which amended the Credit Facility with Wells Fargo Bank, N.A., as administrative agent, and the other lenders party thereto. The Credit Facility originally provided for a $500 million senior secured revolving credit facility (the "Revolving Credit Facility"), a $50 million U.S. dollar senior secured term loan A made available to the Company (the "USD Term Loan") and a $250 million (U.S. dollar equivalent) Canadian dollar senior secured term loan A made available to BWXT Canada Ltd. (the "CAD Term Loan" and together with the USD Term Loan, the "Term Loans"). On June 12, 2020, we repaid in full the Term Loans, at par, with a portion of the proceeds from the issuance of the Senior Notes due 2028.
The Amendment, among other things, (1) provided additional commitments to increase the Revolving Credit Facility by $250 million, such that the Revolving Credit Facility is now $750 million; (2) extended the maturity date of the Revolving Credit Facility to March 24, 2025; (3) removed BWXT Canada Ltd. as a borrower under the Revolving Credit Facility; (4) modified the applicable margin for borrowings under the Revolving Credit Facility to be, at the Company's option, either (i) the Eurocurrency rate plus a margin ranging from 1.0% to 1.75% per year or (ii) the base rate plus a margin ranging from 0.0% to 0.75% per year, in each case depending on the Company's leverage ratio; (5) modified the commitment fee on the unused portion of the Revolving Credit Facility to range from 0.15% to 0.225% per year, depending on the Company's leverage ratio; and (6) modified the letter of credit fee with respect to each financial letter of credit and performance letter of credit issued under the Revolving Credit Facility to range from 1.0% to 1.75% and 0.75% to 1.05% per year, respectively, in each case, depending on the Company's leverage ratio.
All obligations under the Revolving Credit Facility are scheduled to mature on March 24, 2025. The proceeds of loans under the Revolving Credit Facility are available for working capital needs, permitted acquisitions and other general corporate purposes.
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The Credit Facility allows for additional parties to become lenders and, subject to certain conditions, for the increase of the commitments under the Credit Facility, subject to an aggregate maximum for all additional commitments of (1) the greater of (a) $250 million and (b) 65% of EBITDA, as defined in the Credit Facility, for the last four full fiscal quarters, plus (2) all voluntary prepayments of the Term Loans, plus (3) additional amounts provided the Company is in compliance with a pro forma first lien leverage ratio test of less than or equal to 2.50 to 1.00.
The Company's obligations under the Credit Facility are guaranteed, subject to certain exceptions, by substantially all of the Company's present and future wholly owned domestic restricted subsidiaries. The Credit Facility is secured by first-priority liens on certain assets owned by the Company and its subsidiary guarantors (other than its subsidiaries comprising its Nuclear Operations Group segment and a portion of its Nuclear Services Group segment).
The Revolving Credit Facility requires interest payments on revolving loans on a periodic basis until maturity. We may prepay all loans under the Credit Facility at any time without premium or penalty (other than customary Eurocurrency breakage costs), subject to notice requirements.
The Credit Facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted leverage ratio is 4.00 to 1.00, which may be increased to 4.50 to 1.00 for up to four consecutive fiscal quarters after a material acquisition. The minimum consolidated interest coverage ratio is 3.00 to 1.00. In addition, the Credit Facility contains various restrictive covenants, including with respect to debt, liens, investments, mergers, acquisitions, dividends, equity repurchases and asset sales. As of June 30, 2020, we were in compliance with all covenants set forth in the Credit Facility.
Outstanding loans under the Revolving Credit Facility bear interest at our option at either (1) the Eurocurrency rate plus a margin ranging from 1.0% to 1.75% per year or (2) the base rate plus a margin ranging from 0.0% to 0.75% per year. We are charged a commitment fee on the unused portion of the Revolving Credit Facility, and that fee ranges from 0.15% to 0.225% per year. Additionally, we are charged a letter of credit fee of between 1.0% and 1.75% per year with respect to the amount of each financial letter of credit issued under the Credit Facility, and a letter of credit fee of between 0.75% and 1.05% per year with respect to the amount of each performance letter of credit issued under the Credit Facility. The applicable margin for loans, the commitment fee and the letter of credit fees set forth above will vary quarterly based on our leverage ratio. Based on the leverage ratio applicable at June 30, 2020, the margin for Eurocurrency rate and base rate revolving loans was 1.25% and 0.25%, respectively, the letter of credit fee for financial letters of credit and performance letters of credit was 1.25% and 0.825%, respectively, and the commitment fee for the unused portion of the Revolving Credit Facility was 0.175%.
As of June 30, 2020, borrowings and letters of credit issued under the Revolving Credit Facility totaled $40.0 million and $64.7 million, respectively. As a result, as of June 30, 2020 we had $645.3 million available under the Revolving Credit Facility for borrowings and to meet letter of credit requirements. As of June 30, 2020, the interest rate on outstanding borrowings under our Credit Facility was 1.43%.
The Credit Facility generally includes customary events of default for a secured credit facility. Under the Credit Facility, (1) if an event of default relating to bankruptcy or other insolvency events occurs with respect to the Company, all related obligations will immediately become due and payable; (2) if any other event of default exists, the lenders will be permitted to accelerate the maturity of the related obligations outstanding; and (3) if any event of default exists, the lenders will be permitted to terminate their commitments thereunder and exercise other rights and remedies, including the commencement of foreclosure or other actions against the collateral.
If any default occurs under the Credit Facility, or if we are unable to make any of the representations and warranties in the Credit Facility, we will be unable to borrow funds or have letters of credit issued under the Credit Facility.
Senior Notes due 2026
We issued $400 million aggregate principal amount of 5.375% senior notes due 2026 (the "Senior Notes due 2026") pursuant to an indenture dated May 24, 2018 (the "2018 Indenture"), among the Company, certain of our subsidiaries, as guarantors, and U.S. Bank National Association, as trustee. The Senior Notes due 2026 are guaranteed by each of the Company's present and future direct and indirect wholly owned domestic subsidiaries that is a guarantor under the Credit Facility.
Interest on the Senior Notes due 2026 is payable semi-annually in cash in arrears on January 15 and July 15 of each year, which commenced on July 15, 2018, at a rate of 5.375% per annum. The Senior Notes due 2026 will mature on July 15, 2026.
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On and after July 15, 2021, the Company may redeem the Senior Notes due 2026, in whole or in part, at a redemption price equal to (i) 102.688% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on July 15, 2021, (ii) 101.344% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on July 15, 2022 and (iii) 100.0% of the principal amount to be redeemed if the redemption occurs on or after July 15, 2023, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time prior to July 15, 2021, the Company may also redeem up to 40.0% of the Senior Notes due 2026 with net cash proceeds of certain equity offerings at a redemption price equal to 105.375% of the principal amount of the Senior Notes due 2026 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to July 15, 2021, the Company may redeem the Senior Notes due 2026, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the Senior Notes due 2026 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable "make-whole" premium.
The 2018 Indenture contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the 2018 Indenture or the Senior Notes due 2026 and certain provisions related to bankruptcy events. The 2018 Indenture also contains customary negative covenants. As of June 30, 2020, we were in compliance with all covenants set forth in the 2018 Indenture and the Senior Notes due 2026.
Senior Notes due 2028
We issued $400 million aggregate principal amount of our Senior Notes due 2028 pursuant to the 2020 Indenture. The Senior Notes due 2028 are guaranteed by each of the Company's present and future direct and indirect wholly owned domestic subsidiaries that is a guarantor under the Credit Facility.
Interest on the Senior Notes due 2028 is payable semi-annually in cash in arrears on June 30 and December 30 of each year, commencing on December 30, 2020, at a rate of 4.125% per annum. The Senior Notes due 2028 will mature on June 30, 2028.
The Company may redeem the Senior Notes due 2028, in whole or in part, at any time on or after June 30, 2023 at a redemption price equal to (i) 102.063% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on June 30, 2023, (ii) 101.031% of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on June 30, 2024 and (iii) 100.0% of the principal amount to be redeemed if the redemption occurs on or after June 30, 2025, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time prior to June 30, 2023, the Company may also redeem up to 40.0% of the Senior Notes due 2028 with net cash proceeds of certain equity offerings at a redemption price equal to 104.125% of the principal amount of the Senior Notes due 2028 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to June 30, 2023, the Company may redeem the Senior Notes due 2028, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the Senior Notes due 2028 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable "make-whole" premium.
The 2020 Indenture contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the 2020 Indenture or the Senior Notes due 2028 and certain provisions related to bankruptcy events. The 2020 Indenture also contains customary negative covenants. As of June 30, 2020, we were in compliance with all covenants set forth in the 2020 Indenture and the Senior Notes due 2028.
Other Arrangements
We have posted surety bonds to support regulatory and contractual obligations for certain decommissioning responsibilities, projects and legal matters. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion, and the bonding facilities generally permit the surety, in its sole discretion, to terminate the facility or demand collateral. Although there can be no assurance that we will maintain our surety bonding capacity, we believe our current capacity is adequate to support our existing requirements for the next twelve months. In addition, these bonds generally indemnify the beneficiaries should we fail to perform our obligations under the applicable agreements. We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue. As of June 30, 2020, bonds issued and outstanding under these arrangements totaled approximately $73.3 million.
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Long-term Benefit Obligations
As of June 30, 2020, we had underfunded defined benefit pension and postretirement benefit plans with obligations totaling approximately $183.2 million. These long-term liabilities are expected to require use of our resources to satisfy future funding obligations. Based largely on statutory funding requirements, we expect to make contributions of approximately $5.6 million for the remainder of 2020 related to our pension and postretirement plans. We may also make additional contributions based on a variety of factors including, but not limited to, tax planning, evaluation of funded status and risk mitigation strategies.
Other
Our domestic and foreign cash and cash equivalents, restricted cash and cash equivalents and investments as of June 30, 2020 and December 31, 2019 were as follows:
June 30,
2020 		December 31,
2019
  (In thousands)
Domestic $ 60,709    $ 76,337   
Foreign 17,793    29,526   
Total $ 78,502    $ 105,863   
Our working capital increased by $23.6 million to $248.6 million at June 30, 2020 from $225.0 million at December 31, 2019, primarily attributable to changes in contracts in progress and advance billings due to the timing of project cash flows and a decrease in accounts payable associated with the timing of vendor payments, partially offset by an increase in income taxes payable.
Our net cash provided by operating activities increased by $108.6 million to $155.6 million in the six months ended June 30, 2020, compared to $47.1 million in the six months ended June 30, 2019. The increase in cash provided by operating activities was primarily attributable to an increase in net income and a decrease in working capital needs for the period ended June 30, 2020.
Our net cash used in investing activities increased by $53.7 million to $129.4 million in the six months ended June 30, 2020, compared to $75.7 million in the six months ended June 30, 2019. The increase in cash used in investing activities was primarily attributable to an increase in purchases of property, plant and equipment of $39.8 million as well as our acquisition of Laker Energy Products for $16.2 million in the three months ended March 31, 2020.
Our net cash used in financing activities increased by $83.6 million to $50.4 million in the six months ended June 30, 2020, compared to cash provided by financing activities of $33.3 million in the six months ended June 30, 2019. The increase in cash used in financing activities was primarily attributable to a decrease in net borrowings of $77.9 million and the payment of debt issuance costs of $6.3 million in the six months ended June 30, 2020.
At June 30, 2020, we had restricted cash and cash equivalents totaling $6.0 million, $2.9 million of which was held for future decommissioning of facilities (which is included in other assets on our condensed consolidated balance sheets) and $3.1 million of which was held to meet reinsurance reserve requirements of our captive insurer.
At June 30, 2020, we had short-term and long-term investments with a fair value of $10.9 million. Our investment portfolio consists primarily of U.S. Government and agency securities, corporate bonds and mutual funds. Our debt securities are carried at fair value and are either classified as trading, with unrealized gains and losses reported in earnings, or as available-for-sale, with unrealized gains and losses, net of tax, being reported as a component of other comprehensive income. Our equity securities are carried at fair value with the unrealized gains and losses reported in earnings.
Based on our liquidity position, we believe we have sufficient cash and letter of credit and borrowing capacity to fund our operating requirements for at least the next 12 months.
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 2019 10-K.
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Item 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this Report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) adopted by the Securities and Exchange Commission ("SEC") under the Exchange Act). This evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Our disclosure controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. You should note that the design of any system of disclosure controls and procedures is based in part upon various assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based on the evaluation referred to above, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective as of June 30, 2020 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure. There has been no change in our internal control over financial reporting during the three months ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
For information regarding ongoing investigations and litigation, see Note 6 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 2019 10-K and our First Quarter Form 10-Q are some of the factors that could materially affect our business, financial condition or future results. There have been no material changes to our risk factors from those disclosed in our 2019 10-K or our First Quarter Form 10-Q, except as noted below:
Actual or threatened public health epidemics or outbreaks, such as the recent outbreak of the COVID-19 illness, could have a material adverse effect on our business and results of operations.
Actual or threatened public health epidemics or outbreaks, such as the recent global outbreak of the novel coronavirus disease ("COVID-19"), could have a material adverse effect on our business and results of operations. COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread to over 200 countries, including every state in the United States. COVID-19 is impacting worldwide economic activity and has resulted in travel disruption, trade disruption and has affected companies’ operations around the world, including us. A public health epidemic, including COVID-19, poses the risk that we or our employees, contractors, suppliers, customers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures or other restrictions in connection with the COVID-19 pandemic, our operations will likely be impacted. Although our U.S. and Canadian facilities have to date been deemed "essential" by federal, state and local authorities and currently continue to operate, there can be no assurance that such authorities will not impose restrictions on the operations of our facilities as a result of the COVID-19 pandemic or that our facilities will continue to operate during the pandemic. If our operations or the operations of our customers or our suppliers are restricted, we may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. These cost increases may result in unfavorable changes in estimates which may not be fully recoverable or adequately covered by insurance.
While it is not possible at this time to estimate the impact that COVID-19 could have on our business, the continued spread of COVID-19 and the measures taken by the governments of countries affected, as well as measures taken by state and local authorities in the United States, could disrupt the supply chain and the manufacture or shipment of our products and adversely impact our business, financial condition or results of operations. We have already experienced delays in the bidding and contracting process for our U.S. Government businesses, as well as the rescheduling of certain services that our Canadian nuclear service business provides during nuclear power plant outages. Additionally, we have noted a year over year decline in revenues in our medical radioisotopes and radiopharmaceuticals business due to a decrease in demand for elective diagnostic procedures. More widespread or further delays could have a material adverse impact on our results of operations.
The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions, which could have an adverse effect on our business. The extent to which the COVID-19 outbreak impacts our business will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Since November 2012, we have periodically announced that our Board of Directors has authorized share repurchase programs. The following table provides information on our purchases of equity securities during the three months ended June 30, 2020. Any shares purchased that were not part of a publicly announced plan or program are related to repurchases of common stock pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.
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Table of Contents
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)
April 1, 2020 - April 30, 2020 —    —    —    $ 145.3   
May 1, 2020 - May 31, 2020 889    $ 53.14    —    $ 145.3   
June 1, 2020 - June 30, 2020 —    —    —    $ 145.3   
Total 889    $ 53.14    —   
(1)Includes 889 shares repurchased during May pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.
(2)On November 6, 2018, we announced that our Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $250 million during a three-year period that expires on November 6, 2021.
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Item 6. EXHIBITS
Exhibit
Number 		Description
3.1
3.2
3.3
4.1
4.2
10.1*
10.2*
10.3
10.4
31.1
31.2
32.1
32.2
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management contract or compensatory plan or arrangement.
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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)
August 3, 2020
36

__________, 20__


PERSONAL & CONFIDENTIAL

[NAME]
Board of Directors
BWX Technologies, Inc.

RE: Director Equity Grant

Dear _______:

In accordance with the Non-Employee Director Compensation Program approved by the Board of Directors of BWX Technologies, Inc. (“BWXT”), you received a grant (the “Grant”) of _____ Restricted Stock Units (“RSUs”) under the 2020 Omnibus Incentive Plan of BWXT (approved by shareholders effective May 1, 2020, the “Plan”) on _________ (the “Grant Date”). Capitalized terms used, but not otherwise defined, in this document will have the meanings given to such terms in the Plan.

Grant of RSUs. You have been granted the number of RSUs indicated above. Each RSU represents a right to receive a Share effective on the last day of the Vesting Period, which for this Grant is the same day as the Grant Date (the “Vesting Date”).

Settlement of RSUs. RSUs will be settled in Shares as soon as administratively practicable, but in no event later than 30 days following the Settlement Date. For purposes hereof, “Settlement Date” means either: (a) the Vesting Date or (b) in the event you made a permitted deferral election pursuant to the Plan with respect to this Grant, the date(s) of the applicable distribution event in accordance with such deferral election.

Dividend, Voting Rights and Other Rights. You shall have no rights of ownership in the Shares underlying the RSUs and shall have no right to vote such Shares until the date on which the Shares are transferred to you pursuant hereto. To the extent that cash dividends are otherwise paid with respect to Shares, dividend equivalents will be credited with respect to the Shares underlying the RSUs and shall be deferred (with no earnings accruing) until and paid to you at the same time the underlying Shares are transferred to you.

Tax Consequences. BWXT has been advised that for U.S. federal income tax purposes, as of the Settlement Date, you will be deemed to have received compensation taxable as ordinary income equal to the Fair Market Value of the Shares received hereunder on the Settlement Date. To the extent applicable, it is intended that this document and the Grant comply with the provisions of Section 409A of the Code. This document and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause this document or the Plan to fail to satisfy Section 409A of the Code shall have no force or effect until amended to comply with or be exempt from Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by BWXT without your consent). You are solely responsible for the taxes associated with the Grant and you should consult with and


rely on your own tax advisor, accountant or legal advisor as to the tax consequences to you of this Grant, including settlement.

Adjustments. The RSUs and the number of Shares issuable for each RSU, and the other terms and conditions of the Grant evidenced by this document, are subject to adjustment, including as provided in Section 4.3 of the Plan.

Securities and Exchange Commission Requirements. Because you are a Section 16 insider, this Grant must be reported on a Form 4 before the end of the second (2nd) business day following the Grant Date. You are also subject to Rule 144. This Rule is applicable only when the underlying Shares are sold, so you need not take any action under Rule 144 at this time.

No Right to Future Awards or Board Membership. The grant of the RSUs under this document to you is a voluntary, discretionary award being made on a one-time basis and it does not constitute a commitment to make any future awards. Nothing contained in this document shall confer upon you any right to continued service as a member of the Board.

Amendments. Any amendment to the Plan shall be deemed to be an amendment to this document to the extent that the amendment is applicable hereto; provided, however, that (a) no amendment shall adversely affect your rights under this document without your written consent, and (b) your consent shall not be required to an amendment that is deemed necessary by BWXT to ensure compliance with Section 409A of the Code.

Severability. In the event that one or more of the provisions of this document shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

Relation to Plan. This document is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this document and the Plan, the Plan shall govern. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein or in the Plan, have the right to determine any questions which arise in connection with this document.

Acknowledgement. You acknowledge that you (a) have received a copy of the Plan, (b) have had an opportunity to review the terms of this document and the Plan, (c) understand the terms and conditions of this document and the Plan and (d) agree to such terms and conditions.











Other Information. If you have any questions concerning the aforementioned, please do not hesitate to contact ___________ at ___________.

Please acknowledge receipt and acceptance of all of the Grant and its terms by signing both this letter and the enclosed copy thereof and returning such signed copy to BWXT at 11525 N. Community House Road, Charlotte, North Carolina 28277, attention of ___________, and marked “Personal and Confidential” as soon as possible following receipt hereof.

Very truly yours,

BWX TECHNOLOGIES, INC.






ACCEPTED:



_________________________________ Date: __________


JOINDER AGREEMENT

This JOINDER AGREEMENT (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”) dated as of February 13, 2020 between LAKER ENERGY PRODUCTS LTD., an Ontario corporation (the “New Subsidiary”), and WELLS FARGO BANK, N.A., in its capacity as Administrative Agent (the “Administrative Agent”) under that certain Credit Agreement, dated as of May 24, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among BWX TECHNOLOGIES, INC., a Delaware corporation as the Administrative Borrower thereunder, BWXT CANADA LTD., an Ontario corporation as the Canadian Borrower thereunder (the “Canadian Borrower”), the Lenders party thereto, the Administrative Agent, the Swing Line Lender and each L/C Issuer (each as defined therein). All capitalized terms used and not defined herein shall have the meanings given thereto in the Credit Agreement or the applicable Loan Document referred to herein.

The Canadian Borrower desires to or is required by Section 6.22 of the Credit Agreement to cause the New Subsidiary to become a “Guarantor”.

Accordingly, the New Subsidiary hereby agrees as follows with the Administrative Agent, for the benefit of the Guaranteed Parties:

1. The New Subsidiary hereby agrees that by execution of this Agreement it is a Guarantor (as defined in the Canadian Guaranty) under the Canadian Guaranty as if a signatory thereof on the Closing Date, and the New Subsidiary (a) shall comply with, and be subject to, and have the benefit of, all of the terms, conditions, covenants, agreements and obligations set forth in the Canadian Guaranty and (b) hereby makes each representation and warranty of a Guarantor, as set forth in the Canadian Guaranty. The New Subsidiary hereby agrees that (i) each reference to a “Guarantor” or the “Guarantors” in the Canadian Guaranty and the other Loan Documents shall include the New Subsidiary (in each case, other than references solely applicable to a “Domestic Guarantor” or “Domestic Guarantors” (as defined in the Credit Agreement)) and (ii) each reference to the “Canadian Guaranty” as used therein shall mean the Canadian Guaranty as supplemented hereby and as otherwise amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof. Without limiting the generality of the foregoing terms of this paragraph 1, the New Subsidiary hereby, jointly and severally together with the other Guarantors, guarantees to the Administrative Agent, for the benefit of the Guaranteed Parties, as provided in the Canadian Guaranty, the prompt payment and performance of the Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof.

2. The New Subsidiary hereby agrees that by execution of this Agreement it is a Grantor (as defined in the Canadian Collateral Agreement) under the Canadian Collateral Agreement as if a signatory thereof on the Closing Date, and the New Subsidiary (a) shall comply with, and be subject to, and have the benefit of, all of the terms, conditions, covenants, agreements and obligations set forth in the Canadian Collateral Agreement and (b) hereby makes each representation and warranty of a Grantor, as set forth in the Canadian Collateral Agreement. The New Subsidiary hereby agrees that (i) each reference to a “Grantor” or the “Grantors” in the


Canadian Collateral Agreement and the other Loan Documents shall include the New Subsidiary, (ii) each reference to the “Canadian Collateral Agreement” as used therein shall mean the Canadian Collateral Agreement as supplemented hereby and as otherwise amended, restated, modified or supplemented as of the date hereof and (iii) each reference to “Collateral” in the Canadian Collateral Agreement and the other Loan Documents shall include all Collateral (as defined in the Canadian Collateral Agreement) of the New Subsidiary (other than any of New Subsidiary’s Excluded Assets (as defined in the Canadian Collateral Agreement)). Without limiting the generality of the foregoing terms of this paragraph 2, the New Subsidiary hereby grants to the Administrative Agent, for the benefit of the Secured Parties, a continuing security interest in, and a right of setoff against, any and all right, title and interest, whether now or hereafter owned or acquired, of the New Subsidiary in and to the Collateral of the New Subsidiary.

3. Attached hereto as Annex A are supplements to Schedules 5.03 and 5.17(b) of the Credit Agreement and each of the Schedules to the Canadian Collateral Agreement to the extent such Schedules have changed or will change after, and as a result of, the execution and delivery hereof (which supplements include, as of the date hereof, all information required to be provided therein with respect to the New Subsidiary).

4. All notices and communications to the New Subsidiary shall be given to the address of the Canadian Borrower set forth in, and otherwise made in accordance with, Section 10.02 of the Credit Agreement.

5. The New Subsidiary hereby waives acceptance by the Administrative Agent and the Guaranteed Parties of the guarantee by the New Subsidiary under the Canadian Guaranty upon the execution of this Agreement by the New Subsidiary.

6. The New Subsidiary hereby acknowledges that (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is deemed a party and (b) it has received a copy of the Credit Agreement and the other Loan Documents and has reviewed and understands the same.

7. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.

8. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the Province of Ontario and the federal laws of Canada applicable therein.

[Signature Pages Follow]




IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the date first above written.

LAKER ENERGY PRODUCTS LTD.,
as Guarantor

By: /s/ John MacQuarrie
Name: John MacQuarrie
Title: President




Acknowledged and accepted:

WELLS FARGO BANK, N.A.,
as Administrative Agent

By: /s/ Jonathan D. Beck
Name: Jonathan D. Beck
Title: Vice President





ANNEX A
Supplemental Schedules


JOINDER AGREEMENT

This JOINDER AGREEMENT (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”) dated as of July 9, 2020 between BWXT MT. ATHOS, LLC, a Delaware limited liability company (the “New Subsidiary”), and WELLS FARGO BANK, N.A., in its capacity as Administrative Agent (the “Administrative Agent”) under that certain Credit Agreement, dated as of May 24, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among BWX TECHNOLOGIES, INC., a Delaware corporation, as a borrower thereunder (the “Administrative Borrower”), BWXT CANADA LTD., an Ontario corporation (the “Canadian Borrower”), the Lenders party thereto, the Administrative Agent, the Swing Line Lender and each L/C Issuer (each as defined therein). All capitalized terms used and not defined herein shall have the meanings given thereto in the Credit Agreement or the applicable Loan Document referred to herein.

The Administrative Borrower desires to or is required by Section 6.22 of the Credit Agreement to cause the New Subsidiary to become a “Domestic Guarantor”.

Accordingly, the New Subsidiary hereby agrees as follows with the Administrative Agent, for the benefit of the Guaranteed Parties (as defined in the Domestic Guaranty):

1.The New Subsidiary hereby agrees that by execution of this Agreement it is a Domestic Guarantor (as defined in the Domestic Guaranty) under the Domestic Guaranty as if a signatory thereof on the Closing Date, and the New Subsidiary (a) shall comply with, and be subject to, and have the benefit of, all of the terms, conditions, covenants, agreements and obligations set forth in the Domestic Guaranty and (b) hereby makes each representation and warranty of a Domestic Guarantor, as set forth in the Domestic Guaranty. The New Subsidiary hereby agrees that (i) each reference to a “Domestic Guarantor” or the “Domestic Guarantors” in the Domestic Guaranty and the other Loan Documents shall include the New Subsidiary and (ii) each reference to the “Domestic Guaranty” as used therein shall mean the Domestic Guaranty as supplemented hereby and as otherwise amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof. Without limiting the generality of the foregoing terms of this paragraph 1, the New Subsidiary hereby, jointly and severally together with the other Domestic Guarantors, guarantees to the Administrative Agent, for the benefit of the Guaranteed Parties, as provided in the Domestic Guaranty, the prompt payment and performance of the Guaranteed Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof.
2.The New Subsidiary hereby agrees that by execution of this Agreement it is a Domestic Grantor (as defined in the Domestic Collateral Agreement) under the Domestic Collateral Agreement as if a signatory thereof on the Closing Date, and the New Subsidiary (a) shall comply with, and be subject to, and have the benefit of, all of the terms, conditions, covenants, agreements and obligations set forth in the Domestic Collateral Agreement and (b) hereby makes each representation and warranty of a Domestic Grantor, as set forth in the Domestic Collateral Agreement. The New Subsidiary hereby agrees that (i)


each reference to a “Domestic Grantor” or the “Domestic Grantors” in the Domestic Collateral Agreement and the other Loan Documents shall include the New Subsidiary, (ii) each reference to the “Domestic Collateral Agreement” as used therein shall mean the Domestic Collateral Agreement as supplemented hereby and as otherwise amended, restated, amended and restated, supplemented or otherwise modified as of the date hereof and (iii) each reference to “Collateral” in the Domestic Collateral Agreement and the other Loan Documents shall include all Collateral (as defined in the Domestic Collateral Agreement) of the New Subsidiary (other than any of New Subsidiary’s Excluded Assets (as defined in the Domestic Collateral Agreement)). Without limiting the generality of the foregoing terms of this paragraph 2, the New Subsidiary hereby grants to the Administrative Agent, for the benefit of the Secured Parties, a continuing security interest in, and a right of setoff against, any and all right, title and interest, whether now or hereafter owned or acquired, of the New Subsidiary in and to the Collateral (as defined in the Domestic Collateral Agreement) of the New Subsidiary.
3.Attached hereto as Annex A are supplements to Schedules 5.03 and 5.17(b) of the Credit Agreement and each of the Schedules to the Domestic Collateral Agreement to the extent such Schedules have changed or will change after, and as a result of, the execution and delivery hereof (which supplements include, as of the date hereof, all information required to be provided therein with respect to the New Subsidiary).
4.All notices and communications to the New Subsidiary shall be given to the address of the Administrative Borrower set forth in, and otherwise made in accordance with, Section 10.02 of the Credit Agreement.
5.The New Subsidiary hereby waives acceptance by the Administrative Agent and the Guaranteed Parties of the guarantee by the New Subsidiary under the Domestic Guaranty upon the execution of this Agreement by the New Subsidiary.
6.The New Subsidiary hereby acknowledges that (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is deemed a party and (b) it has received a copy of the Credit Agreement and the other Loan Documents and has reviewed and understands the same.
7.This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.
8.This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.
[Signature Pages Follow]




IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the date first above written.

BWXT MT. ATHOS, LLC,
as Domestic Guarantor

By: /s/ Kirt J. Kubbs
Name: Kirt. J. Kubbs
Title: Treasurer




Acknowledged and accepted:

WELLS FARGO BANK, N.A.,
as Administrative Agent

By: /s/ Jonathan D. Beck
Name: Jonathan D. Beck
Title: Director





ANNEX A
Supplemental Schedules


EXHIBIT 31.1
CERTIFICATION
I, Rex D. Geveden, certify that:
1.I have reviewed this quarterly report on Form 10-Q of BWX Technologies, Inc. for the quarterly period ended June 30, 2020;
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;
4.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:
a.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;
b.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;
c.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
d.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):
a.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
b.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.
August 3, 2020
/s/ Rex D. Geveden
Rex D. Geveden
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 June 30, 2020;
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;
4.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:
a.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;
b.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;
c.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
d.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):
a.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
b.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.
 August 3, 2020
/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, Rex D. Geveden, 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 June 30, 2020 (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: August 3, 2020    /s/ Rex D. Geveden
   Rex D. Geveden
   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)the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (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: August 3, 2020    /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.