BWX Technologies Announces Second Quarter 2017 Results

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BWX Technologies Announces Second Quarter 2017 Results

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August 7, 2017

- GAAP EPS of $0.61 and Adjusted EPS of $0.56
- BWXT JV Awarded $1.5B Environmental Cleanup Contract by DOE
- Consolidated Backlog of $3.8B
- Declares Quarterly Cash Dividend of $0.11 per Share
- Raising 2017 EPS Guidance to $1.97 - $2.07

LYNCHBURG, Va.--(BUSINESS WIRE)-- BWX Technologies, Inc. (NYSE: BWXT) ("BWXT" or the "Company") today reported second quarter 2017 revenues of $410 million, 1.9% growth compared to $402 million in the second quarter of 2016. GAAP Diluted Earnings per share (EPS) for the second quarter were $0.61 compared to GAAP EPS of $0.56 in 2016. GAAP EPS include a $0.05 per share benefit from a settlement of a contract dispute, which is further detailed in the non-GAAP reconciliation tables in Exhibit 1. Adjusted (non-GAAP) EPS increased 24% to $0.56 from $0.45 in the second quarter of 2016.

"BWXT completed a strong second quarter and first half of the year with positive contributions in each business segment," said Mr. John A. Fees, Executive Chairman. "Our Nuclear Operations business continues to produce excellent results, generating second quarter operating income of $75 million on impressive margins. The Nuclear Power business achieved a 12% operating margin as performance in our Canadian operations continued at a high level. Our Nuclear Services segment also saw increases in income and was awarded a new environmental cleanup contract valued at approximately $1.5 billion over the next 10 years. Our focused business approach and cost management is reflected across our P&L statements. We are excited about our markets and the potential for growth."

Second Quarter 2017 Results of Operations
The Company's consolidated GAAP operating income for the second quarter of 2017 increased to $92.3 million compared to GAAP operating income of $88.5 million in the second quarter of 2016. Adjusted (non-GAAP) operating income for the second quarter of 2017 was $84.4 million, an increase of more than 16% compared to adjusted (non-GAAP) operating income of $72.4 million in the second quarter of 2016.

Nuclear Operations Group (NOG) segment revenues remained strong at $312.9 million for the second quarter of 2017. NOG's revenue for the first half of 2017 was up nearly 3% compared to the first six months of 2016. NOG operating income was $74.8 million in the second quarter of 2017, 16.1% higher than the $64.4 million in the prior year period.

Revenues from the Nuclear Power Group (NPG) segment increased 13.8% to $54.6 million in the second quarter of 2017 compared to $47.9 million in the prior year period due to our acquisition of BWXT Nuclear Energy Canada Inc. (BWXT NEC). NPG's operating income was $6.5 million in the second quarter of 2017, producing a 12% operating margin in the quarter and a year-to-date margin of 15%.

The Nuclear Services Group (NSG) segment revenues were $44.8 million in the second quarter of 2017 compared to $32.2 million in the same quarter of 2016 due to the settlement of a contract dispute and increased activity levels both for U.S. commercial nuclear plant maintenance outages and our Naval Reactors decommissioning and decontamination project. NSG's operating income increased to $15.7 million in the second quarter of 2017 from $4.4 million in the prior year period due to the revenue increases noted above as well as lower business development expenses associated with the timing of proposal activities.

"BWXT's consolidated backlog increased compared to the second quarter of 2016 as we continue to lay the groundwork for future growth," said Mr. Rex D. Geveden, President and Chief Executive Officer. "We remain a vital supplier to the U.S. Navy as it considers expanding its submarine and aircraft carrier fleet. Our Nuclear Power segment is positioned for long-term growth in components, fuel, waste containers, outage work and refurbishment activities in Canada. We continue to believe we will be able to gain market share in the Nuclear Services segment over the next few years as evidenced by our latest U.S. Department of Energy contract award. In addition to investing to support these strong organic growth opportunities, we remain committed to our balanced capital allocation approach and continue to evaluate opportunities for acquired growth and strategic investments."

Liquidity and Debt
The Company generated cash from operating activities of $118.8 million in the second quarter of 2017 compared with net cash generated from operating activities of $85.8 million in the second quarter of 2016. At the end of the second quarter, the Company's cash and short-term investments position, net of restricted cash, was $152.4 million.

As of June 30, 2017, outstanding balances under our credit facility included $522.0 million in term loans, $0 in borrowings under the revolving line of credit, and letters of credit issued under the facility totaling $131.3 million. As a result, the Company has $268.7 million of remaining availability under our credit facility, excluding an additional $250 million accordion provision. We have $193 million of share repurchase authorization remaining as of June 30, 2017.

Quarterly Dividend
On August 4, 2017, our Board of Directors declared a quarterly cash dividend of $0.11 per common share. The dividend will be payable on September 8, 2017, to shareholders of record on August 21, 2017.

Outlook
The Company increased its guidance for the full year 2017 and now expects adjusted earnings to be between $1.97 and $2.07 per share (previously $1.85 to $1.95). Adjusted earnings per share exclude any mark-to-market adjustments for pension and post-retirement benefits recognized during 2017 and other items listed in the non-GAAP reconciliation tables in Exhibit 1. Other changes to guidance for the full year 2017 include:

NPG segment revenue will increase to between $265 million and $275 million
NPG operating margins will approach 12%, inclusive of the amortization of intangibles
R&D expenses, captured mostly in our "Other" segment, will rise to approximately $10 million to support increased R&D efforts
Effective tax rate will decrease to between 31% and 33%

All other guidance remains unchanged. Beyond 2017, we continue to anticipate an adjusted earnings per share CAGR in the low double digits over the next three to five years based upon our robust organic growth strategy and remaining balance sheet capacity.

Forward-Looking Statements
BWXT cautions that this release contains forward-looking statements, including, without limitation, statements relating to backlog, to the extent they may be viewed as an indicator of future revenues, our ability to increase profitability in the Nuclear Services segment, management's plans and expectations for our business segments, including potential growth opportunities, as well as our outlook and guidance for (i) adjusted earnings per share, NPG segment revenue and operating margin, R&D expenses for 2017 and (ii) adjusted earnings per share beyond 2017. These forward-looking statements are based on management's current expectations and involve a number of risks and uncertainties, including, among other things, our ability to execute contracts in backlog; the lack of, or adverse changes in, Federal appropriations to government programs in which we participate; the demand for and competitiveness of nuclear power; capital priorities of power generating utilities; adverse changes in the industries in which we operate and delays, changes or termination of contracts in backlog. If one or more of these risks or other risks materialize, actual results may vary materially from those expressed. For a more complete discussion of these and other risk factors, see BWXT's filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2016 and subsequent quarterly reports on Form 10-Q. BWXT cautions not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.

About BWXT

Headquartered in Lynchburg, Va., BWX Technologies, Inc. (NYSE:BWXT) is a leading supplier of nuclear components and fuel to the U.S. government; provides technical and management services to support the U.S. government in the operation of complex facilities and environmental remediation activities; and supplies precision manufactured components, services and fuel for the commercial nuclear power industry. With over 6,000 employees, BWXT has nine major operating sites in the U.S. and Canada. In addition, BWXT joint ventures provide management and operations at more than a dozen U.S. Department of Energy and two NASA facilities. Follow us on Twitter @BWXTech and learn more at www.bwxt.com.


EXHIBIT 1
BWX TECHNOLOGIES, INC. RECONCILIATION OF NON-GAAP OPERATING INCOME AND EARNINGS PER SHARE^(1)(2)(3) (In millions, except per share amounts)

	Three Months Ended June 30, 2017

	GAAP			Performance Guarantees Release		mPower Deconsolidation		Litigation			Impairment (Gains)/ Charges		Non-GAAP

Operating Income	$	92.3		$	—	$	—	$	(7.9	)	$	—	$	84.4
Other Income (Expense)		(3.9	)		—		—		—			—		(3.9	)
Provision for Income Taxes		(27.1	)		—		—		2.8			—		(24.2	)
Net Income		61.4			—		—		(5.1	)		—		56.3
Net Income Attributable to Noncontrolling Interest		(0.2	)		—		—		—			—		(0.2	)
Net Income Attributable to BWXT	$	61.3		$	—	$	—	$	(5.1	)	$	—	$	56.2

Diluted Shares Outstanding		100.2												100.2
Diluted Earnings per Common Share	$	0.61		$	—	$	—	$	(0.05	)	$	—	$	0.56

Effective Tax Rate		30.6	%											30.1	%


	Three Months Ended June 30, 2016

	GAAP			Performance Guarantees Release		mPower Deconsolidation		Litigation			Impairment (Gains)/ Charges			Non-GAAP

Operating Income	$	88.5		$	—	$	—	$	(16.1	)	$	—		$	72.4
Other Income (Expense)		(0.5	)		—		—		—			(0.8	)		(1.2	)
Provision for Income Taxes		(29.5	)		—		—		5.5			0.3			(23.7	)
Net Income		58.5			—		—		(10.6	)		(0.4	)		47.5
Net Income Attributable to Noncontrolling Interest		(0.1	)		—		—		—			—			(0.1	)
Net Income Attributable to BWXT	$	58.4		$	—	$	—	$	(10.6	)	$	(0.4	)	$	47.4

Diluted Shares Outstanding		105.0													105.0
Diluted Earnings per Common Share	$	0.56		$	—	$	—	$	(0.10	)	$	0.00		$	0.45

Effective Tax Rate		33.5	%												33.3	%


⁽¹⁾		^{Tables may not foot due to rounding.}
⁽²⁾		^{BWXT is providing non-GAAP information regarding certain of its historical results and guidance on future earnings per share to supplement the results provided in accordance with GAAP and it should not be considered superior to, or as a substitute for, the comparable GAAP measures. BWXT believes the non-GAAP measures provide meaningful insight and transparency into the Company’s operational performance and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding BWXT's ongoing operations.}
⁽³⁾		^{BWXT has not included a reconciliation of provided non-GAAP guidance to the comparable GAAP measures due to the difficulty and unreliability of estimating any mark-to-market adjustments for pension and post-retirement benefits, which are determined at the end of the year.}


EXHIBIT 1 (continued)
BWX TECHNOLOGIES, INC. RECONCILIATION OF NON-GAAP OPERATING INCOME AND EARNINGS PER SHARE^(1)(2)(3) (In millions, except per share amounts)

	Six Months Ended June 30, 2017

	GAAP			Performance Guarantees Release			mPower Deconsolidation			Framework Agreement & Litigation			Impairment (Gains)/ Charges			Non-GAAP

Operating Income	$	175.6		$	—		$	—		$	(7.9	)	$	—		$	167.6
Other Income (Expense)		(6.7	)		—			—			—			(0.4	)		(7.1	)
Provision for Income Taxes		(51.7	)		—			—			2.8			0.0			(48.8	)
Net Income		117.2			—			—			(5.1	)		(0.4	)		111.7
Net Income Attributable to Noncontrolling Interest		(0.2	)		—			—			—			—			(0.2	)
Net Income Attributable to BWXT	$	117.0		$	—		$	—		$	(5.1	)	$	(0.4	)	$	111.5

Diluted Shares Outstanding		100.4															100.4
Diluted Earnings per Common Share	$	1.16		$	—		$	—		$	(0.05	)	$	0.00		$	1.11

Effective Tax Rate		30.6	%														30.4	%



	Six Months Ended June 30, 2016

	GAAP			Performance Guarantees Release			mPower Deconsolidation			Framework Agreement & Litigation			Impairment (Gains)/ Charges			Non-GAAP

Operating Income	$	131.1		$	—		$	—		$	13.9		$	—		$	145.0
Other Income (Expense)		22.0			(9.3	)		(13.6	)		—			(1.2	)		(2.1	)
Provision for Income Taxes		(44.9	)		3.4			—			(5.6	)		(0.5	)		(47.5	)
Net Income		108.2			(5.9	)		(13.6	)		8.3			(1.7	)		95.4
Net Income Attributable to Noncontrolling Interest		(0.2	)		—			—			—			—			(0.2	)
Net Income Attributable to BWXT	$	108.0		$	(5.9	)	$	(13.6	)	$	8.3		$	(1.7	)	$	95.2

Diluted Shares Outstanding		105.4															105.4
Diluted Earnings per Common Share	$	1.02		$	(0.06	)	$	(0.13	)	$	0.08		$	(0.02	)	$	0.90

Effective Tax Rate		29.3	%														33.3	%


⁽¹⁾		^{Tables may not foot due to rounding.}
⁽²⁾		^{BWXT is providing non-GAAP information regarding certain of its historical results and guidance on future earnings per share to supplement the results provided in accordance with GAAP and it should not be considered superior to, or as a substitute for, the comparable GAAP measures. BWXT believes the non-GAAP measures provide meaningful insight and transparency into the Company’s operational performance and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding BWXT's ongoing operations.}
⁽³⁾		^{BWXT has not included a reconciliation of provided non-GAAP guidance to the comparable GAAP measures due to the difficulty of estimating any mark-to-market adjustments for pension and post-retirement benefits, which are determined at the end of the year.}


BWX TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS

	June 30, 2017		December 31, 2016
	(Unaudited) (In thousands)
Current Assets:
Cash and cash equivalents	$	147,930	$	125,641
Restricted cash and cash equivalents		7,089		6,130
Investments		4,446		14,517
Accounts receivable – trade, net		145,980		135,950
Accounts receivable – other		10,510		25,221
Contracts in progress		400,455		356,793
Other current assets		29,134		29,319
Total Current Assets		745,544		693,571
Property, Plant and Equipment		945,963		922,641
Less accumulated depreciation		647,749		622,955
Net Property, Plant and Equipment		298,214		299,686
Investments		9,133		9,013
Goodwill		214,933		210,788
Deferred Income Taxes		182,836		194,464
Investments in Unconsolidated Affiliates		41,225		42,854
Intangible Assets		113,001		114,748
Other Assets		19,852		14,691
TOTAL	$	1,624,738	$	1,579,815


BWX TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY

	June 30, 2017			December 31, 2016
	(Unaudited) (In thousands, except share and per share amounts)
Current Liabilities:
Current maturities of long-term debt	$	27,609		$	27,370
Accounts payable		68,537			99,983
Accrued employee benefits		60,372			81,793
Accrued liabilities – other		38,274			72,105
Advance billings on contracts		185,765			147,148
Accrued warranty expense		12,217			11,477
Total Current Liabilities		392,774			439,876
Long-Term Debt		489,322			497,724
Accumulated Postretirement Benefit Obligation		18,994			19,059
Environmental Liabilities		84,775			81,711
Pension Liability		340,772			357,049
Other Liabilities		33,800			33,986
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 125,220,307 and 124,149,609 shares at June 30, 2017 and December 31, 2016, respectively		1,252			1,241
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued		—			—
Capital in excess of par value		87,657			22,018
Retained earnings		982,024			885,117
Treasury stock at cost, 25,937,314 and 24,858,809 shares at June 30, 2017 and December 31, 2016, respectively		(813,250	)		(762,169	)
Accumulated other comprehensive income		6,268			3,811
Stockholders' Equity – BWX Technologies, Inc.		263,951			150,018
Noncontrolling interest		350			392
Total Stockholders' Equity		264,301			150,410
TOTAL	$	1,624,738		$	1,579,815


BWX TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(Unaudited) (In thousands, except share and per share amounts)
Revenues	$	410,011		$	402,382		$	838,240		$	767,208
Costs and Expenses:
Cost of operations		271,382			265,076			567,612			513,886
Research and development costs		1,152			1,566			2,671			3,297
Gains on asset disposals and impairments, net		(31	)		(50	)		(31	)		(50	)
Selling, general and administrative expenses		48,488			52,040			99,638			97,249
mPower framework agreement		—			—			—			30,000
Total Costs and Expenses		320,991			318,632			669,890			644,382
Equity in Income of Investees		3,327			4,708			7,202			8,241
Operating Income		92,347			88,458			175,552			131,067
Other Income (Expense):
Interest income		211			267			348			405
Interest expense		(3,906	)		(1,583	)		(7,423	)		(3,277	)
Other – net		(170	)		820			383			24,891
Total Other Income (Expense)		(3,865	)		(496	)		(6,692	)		22,019
Income before Provision for Income Taxes		88,482			87,962			168,860			153,086
Provision for Income Taxes		27,062			29,465			51,654			44,855
Net Income	$	61,420		$	58,497		$	117,206		$	108,231
Net Income Attributable to Noncontrolling Interest		(157	)		(125	)		(224	)		(228	)
Net Income Attributable to BWX Technologies, Inc.	$	61,263		$	58,372		$	116,982		$	108,003
Earnings per Common Share:
Basic:
Net Income Attributable to BWX Technologies, Inc.	$	0.62		$	0.56		$	1.18		$	1.04
Diluted:
Net Income Attributable to BWX Technologies, Inc.	$	0.61		$	0.56		$	1.16		$	1.02
Shares used in the computation of earnings per share:
Basic		99,166,205			103,527,603			99,305,558			103,945,872
Diluted		100,150,926			104,971,216			100,420,948			105,419,583


BWX TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2017			2016
	(Unaudited) (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	117,206		$	108,231
Non-cash items included in net income from continuing operations:
Depreciation and amortization		28,199			24,669
Income of investees, net of dividends		987			(3,413	)
Gains on asset disposals and impairments, net		(31	)		(50	)
Gain on deconsolidation of Generation mPower LLC		—			(13,571	)
Recognition of losses for pension and postretirement plans		892			813
Stock-based compensation expense		7,098			6,030
Changes in assets and liabilities:
Accounts receivable		(154	)		22,662
Accounts payable		(26,905	)		10,285
Contracts in progress and advance billings on contracts		(3,869	)		(76,044	)
Income taxes		18,477			13,182
Accrued and other current liabilities		(39,325	)		17,101
Pension liability, accrued postretirement benefit obligation and employee benefits		(43,790	)		(29,016	)
Other, net		5,238			(7,864	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		64,023			73,015
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash and cash equivalents		(959	)		10,202
Purchases of property, plant and equipment		(28,747	)		(18,479	)
Purchases of securities		(12,049	)		(15,467	)
Sales and maturities of securities		19,986			5,305
Investments, net of return of capital, in equity method investees		211			(10,493	)
Proceeds from asset disposals		140			50
Other, net		(24	)		—
NET CASH USED IN INVESTING ACTIVITIES		(21,442	)		(28,882	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under the Credit Agreement		73,600			—
Repayments under Credit Agreement		(87,344	)		(7,500	)
Repurchase of common shares		—			(81,466	)
Dividends paid to common shareholders		(20,139	)		(19,024	)
Exercise of stock options		14,608			14,957
Cash paid for shares withheld to satisfy employee taxes		(7,045	)		(8,638	)
Other		(266	)		(257	)
NET CASH USED IN FINANCING ACTIVITIES		(26,586	)		(101,928	)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		6,294			868
TOTAL INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		22,289			(56,927	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		125,641			154,729
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	147,930		$	97,802
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	7,049		$	2,786
Income taxes (net of refunds)	$	33,997		$	32,939
SCHEDULE OF NON-CASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable	$	3,886		$	4,980


BWX TECHNOLOGIES, INC. BUSINESS SEGMENT INFORMATION

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(Unaudited) (In thousands)
REVENUES:
Nuclear Operations Group	$	312,866		$	325,660		$	637,947		$	620,915
Nuclear Services Group		44,785			32,224			72,639			66,218
Nuclear Power Group		54,569			47,946			132,243			84,145
Adjustments and Eliminations		(2,209	)		(3,448	)		(4,589	)		(4,070	)
TOTAL	$	410,011		$	402,382		$	838,240		$	767,208

SEGMENT INCOME:
Nuclear Operations Group	$	74,794		$	64,407		$	148,042		$	129,349
Nuclear Services Group		15,659			4,405			16,321			10,208
Nuclear Power Group		6,541			26,674			20,339			33,628
Other		(1,070	)		(1,271	)		(2,682	)		(3,161	)
SUBTOTAL		95,924			94,215			182,020			170,024
Unallocated Corporate		(3,577	)		(5,757	)		(6,468	)		(8,957	)
mPower Framework Agreement		—			—			—			(30,000	)
TOTAL	$	92,347		$	88,458		$	175,552		$	131,067

DEPRECIATION AND AMORTIZATION:
Nuclear Operations Group	$	7,924		$	9,122		$	15,555		$	17,458
Nuclear Services Group		936			939			1,874			1,874
Nuclear Power Group		3,419			704			6,807			1,352
Other		—			—			—			—
Corporate		1,944			1,999			3,963			3,985
TOTAL	$	14,223		$	12,764		$	28,199		$	24,669

CAPITAL EXPENDITURES:
Nuclear Operations Group	$	12,488		$	5,720		$	24,239		$	13,361
Nuclear Services Group		104			19			311			25
Nuclear Power Group		1,148			1,617			2,188			3,065
Other		—			—			—			—
Corporate		1,294			1,041			2,009			2,028
TOTAL	$	15,034		$	8,397		$	28,747		$	18,479


BWX TECHNOLOGIES, INC. BUSINESS SEGMENT INFORMATION

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(Unaudited) (In thousands)
BACKLOG:
Nuclear Operations Group	$	3,262,169	$	3,247,817	$	3,262,169	$	3,247,817
Nuclear Services Group		20,980		39,724		20,980		39,724
Nuclear Power Group		480,534		385,186		480,534		385,186
TOTAL	$	3,763,683	$	3,672,727	$	3,763,683	$	3,672,727

BOOKINGS:
Nuclear Operations Group	$	169,734	$	1,475,546	$	414,499	$	1,556,494
Nuclear Services Group		28,241		22,568		65,291		72,185
Nuclear Power Group		56,654		114,137		139,352		160,968
TOTAL	$	254,629	$	1,612,251	$	619,142	$	1,789,647

View source version on businesswire.com: http://www.businesswire.com/news/home/20170807005911/en/

BWX Technologies, Inc.
Investor Contact:
Alan Nethery, 980-365-4300
Vice President, Investor Relations
Investors@bwxt.com
or
Media Contact:
Jud Simmons, 434-522-6462
Media and Public Relations Director
hjsimmons@bwxt.com

Source: BWX Technologies, Inc.

Conference Call to Discuss Second Quarter 2017 Results

Tuesday, August 8, 2017, at 9:00 a.m. EDT

Live Webcast:

Investor Relations section of website at www.bwxt.com