Market Overview

BWX Technologies Reports Solid Second Quarter 2018 Results with Strong Revenue Growth

Share:
  • 2Q18 strong revenue growth of 7%; 2Q18 orders up significantly
  • 2Q18 GAAP EPS of $0.60; 2Q18 non-GAAP EPS of $0.58
  • Reiterated 2018 non-GAAP EPS guidance of $2.45 to $2.55 despite higher
    interest expense and integration costs
  • Completed acquisition of Nordion medical isotope business on July 30,
    2018

BWX Technologies, Inc. (NYSE:BWXT) ("BWXT" or the "Company") reported
second quarter 2018 revenue of $439 million, a 7.1% increase compared to
$410 million in the second quarter of 2017. GAAP net income for the
second quarter 2018 was $60.7 million, or $0.60 per diluted share,
compared to GAAP net income of $61.3 million, or $0.61 per diluted
share, in the prior-year quarter. Non-GAAP net income for the second
quarter 2018 was $58.0 million, or $0.58 per diluted share, compared to
non-GAAP net income of $56.2 million, or $0.56 per diluted share, in the
second quarter of 2017. A reconciliation of non-GAAP results is detailed
in Exhibit 1.

"We are extremely pleased with our second quarter results, especially
the robust top-line growth and the overall strong first half
performance," said Rex D. Geveden, president and chief executive
officer. "We continue to exhibit our capacity for growth while
maintaining best-in-class margins and superior competitive positioning.
We are maintaining earnings guidance as improving operating performance
is being offset by increasing interest expense resulting from capital
restructuring and integration costs related to the early close of
Nordion."

"We completed the acquisition of the Nordion medical radioisotope
business on July 30, 2018. Closing this acquisition earlier than
anticipated de-risks the industrialization phase for our technetium-99m
product line and gives us immediate access to a growing and dynamic
market."

Second Quarter 2018 Segment Results

Nuclear Operations Group (NOG) segment revenue was $332 million for the
second quarter of 2018, a 6.2% increase from the prior-year period
driven by higher missile tube volume and more fuel activity. NOG
operating income was $67.0 million in the second quarter of 2018, down
3.2% compared with the prior-year period. Second quarter 2018 segment
operating margin was 20.2%.

Nuclear Power Group (NPG) segment revenue was $75.7 million for the
second quarter of 2018, a 39% increase from the prior-year period driven
by increased field service and refurbishment activity. NPG operating
income was $7.8 million in the second quarter of 2018, a 37% increase
from the prior-year period. Second quarter 2018 segment operating margin
was 10.3%.

Nuclear Services Group (NSG) segment operating income was $3.5 million
for the second quarter of 2018 compared with $15.4 million for second
quarter of 2017, primarily driven by a $7.9 million gain from a
favorable legal settlement in the prior-year period.

Liquidity and Debt

The Company generated cash from operating activities of $35.9 million in
the second quarter of 2018 compared with net cash generated from
operating activities of $118.8 million in the prior-year period. At the
end of the second quarter 2018, the Company's cash and short-term
investments position, net of restricted cash, was $319.4 million.

As of June 30, 2018, the company had gross debt of $691.1 million, which
included $400 million in senior notes and $291.1 million in term loans.
There was no revolving line of credit borrowings and $71.5 million in
letters of credit issued under the Company's revolving credit facility.
As a result, the Company had $428.5 million in remaining availability
under its revolving credit facility.

Quarterly Dividend

On August 3, 2018, our Board of Directors declared a quarterly cash
dividend of $0.16 per common share. The dividend will be payable on
September 7, 2018, to shareholders of record on August 20, 2018.

2018 Outlook

BWXT reiterated guidance for 2018:

  • EPS in a range of $2.45 to $2.55 (excluding mark-to-market of pension
    and post-retirement benefits)
  • Revenue in a range of $1.75 to $1.85 billion
  • NOG revenue in a range of $1.3 to $1.4 billion and operating margin in
    the high teens with upside potential
  • NPG revenue in a range of $300 to $350 million and operating margin of
    approximately 12%
  • NSG operating income of approximately $20 million
  • Research and development costs of approximately $15 million
  • Corporate unallocated costs of approximately $20 million
  • Other income primarily related to pension and other post-employment
    benefit plans of $30 to $35 million
  • Effective non-GAAP tax rate in a range of 22% to 25%
  • Capital expenditures of approximately $150 million, primarily to
    support growth in Navy business
  • Depreciation and amortization of approximately $60 million

Long-term Outlook

BWXT reiterated long-term guidance that beyond 2017, and excluding the
benefit of tax reform, the Company anticipates an EPS Compound Annual
Growth Rate (CAGR) in the low-double digits over a three to five year
period based on a robust organic growth strategy and balance sheet
capacity.

Conference Call to Discuss Second Quarter 2018 Results

Date: Tuesday, August 7, 2018, at 9:00 a.m. EDT

Live Webcast: Investor Relations section of website at www.bwxt.com

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; the
anticipated benefits of our acquisition of Nordion's medical isotope
business; timing of future revenues from the acquisition of Nordion's
medical isotope business and new medical isotope business; our plans and
expectations for the NOG, NPG and NSG segments; and our outlook and
guidance for 2018 and beyond. 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, 2017 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
approximately 6,250 employees, BWXT has eleven 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, 2018
GAAP  

Acquisition
Related Costs

 

Recognition of
Debt Issuance
Costs from
Former

Credit Facility

 

Gain on
Forward
Contracts

  Non-GAAP
 
Operating Income $ 71.5 $ $ $ $ 71.5
Other Income (Expense) 7.7 2.4 (6.0 ) 4.1
Provision for Income Taxes   (18.5 )       (0.6 )   1.5     (17.6 )
Net Income   60.7         1.8     (4.5 )   58.1  
Net Income Attributable to Noncontrolling Interest   (0.1 )               (0.1 )
Net Income Attributable to BWXT $ 60.7   $   $ 1.8   $ (4.5 ) $ 58.0  
 
Diluted Shares Outstanding 100.6 100.6
Diluted Earnings per Common Share $ 0.60 $ $ 0.02 $ (0.04 ) $ 0.58
 
Effective Tax Rate 23.3 %   23.2 %
 
Three Months Ended June 30, 2017
GAAP Litigation

Impairment (Gains) /
Losses

Non-GAAP
 
Operating Income $ 85.4 $ (7.9 ) $ $ 77.5
Other Income (Expense) 3.1 3.1
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 %
     
 

(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, 2018
GAAP  

Acquisition
Related Costs

 

Recognition of
Debt Issuance
Costs from
Former

Credit Facility

Gain on
Forward
Contracts

  Non-GAAP
 
Operating Income $ 151.4 $ 1.6 $ $ $ 153.0
Other Income (Expense) 12.8 2.4 (6.0 ) 9.2
Provision for Income Taxes   (37.1 )   (0.4 )   (0.6 )   1.5     (36.6 )
Net Income   127.1     1.2     1.8     (4.5 )   125.7  
Net Income Attributable to Noncontrolling Interest   (0.0 )               (0.0 )
Net Income Attributable to BWXT $ 127.1   $ 1.2   $ 1.8   $ (4.5 ) $ 125.6  
 
Diluted Shares Outstanding 100.5 100.5
Diluted Earnings per Common Share $ 1.26 $ 0.01 $ 0.02 $ (0.04 ) $ 1.25
 
Effective Tax Rate 22.6 %   22.5 %
 
Six Months Ended June 30, 2017
GAAP Litigation

Impairment
(Gains) /
Charges

Non-GAAP
 
Operating Income $ 161.7 $ (7.9 ) $ $ 153.8
Other Income (Expense) 7.2 (0.4 ) 6.8
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 %
                       
 

(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,
2018

December 31,
2017
(Unaudited)

(In thousands)

Current Assets:
Cash and cash equivalents $ 317,624 $ 203,404
Restricted cash and cash equivalents 5,870 7,105
Investments 1,824 2,934
Accounts receivable – trade, net 200,889 189,217
Accounts receivable – other 14,742 19,365
Contracts in progress 317,405 420,628
Other current assets 32,343   30,437
Total Current Assets 890,697   873,090
Property, Plant and Equipment 1,034,015 1,013,141
Less accumulated depreciation 676,813   664,512
Net Property, Plant and Equipment 357,202   348,629
Investments 8,932   9,301
Goodwill 215,547   218,331
Deferred Income Taxes 84,868   86,740
Investments in Unconsolidated Affiliates 57,854   43,266
Intangible Assets 103,008   110,405
Other Assets 24,357   22,577
TOTAL $ 1,742,465   $ 1,712,339
 
   

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 
June 30,
2018
December 31,
2017

(Unaudited)

(In thousands, except share
and per share amounts)

Current Liabilities:
Current maturities of long-term debt $ 14,556 $ 27,870
Accounts payable 88,421 93,421
Accrued employee benefits 67,417 82,477
Accrued liabilities – other 48,377 64,738
Advance billings on contracts 77,775 246,192
Accrued warranty expense 12,822   13,428  
Total Current Liabilities 309,368   528,126  
Long-Term Debt 666,200   481,059  
Accumulated Postretirement Benefit Obligation 20,065   21,368  
Environmental Liabilities 80,708   79,786  
Pension Liability 259,231   296,444  
Other Liabilities 18,576   19,799  
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $0.01 per share, authorized 325,000,000
shares; issued 125,748,071 and 125,381,591 shares at June 30, 2018
and December 31, 2017, respectively
1,257 1,254
Preferred stock, par value $0.01 per share, authorized 75,000,000
shares; No shares issued
Capital in excess of par value 108,919 98,843
Retained earnings 1,097,665 990,652
Treasury stock at cost, 26,057,475 and 25,964,088 shares at June 30,
2018 and December 31, 2017, respectively
(820,826 ) (814,809 )
Accumulated other comprehensive income 1,248   9,454  
Stockholders' Equity – BWX Technologies, Inc. 388,263 285,394
Noncontrolling interest 54   363  
Total Stockholders' Equity 388,317   285,757  
TOTAL $ 1,742,465   $ 1,712,339  
 
   

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
(Unaudited)

(In thousands, except share

and per share amounts)

Revenues $ 438,921 $ 410,011 $ 896,384 $ 838,240
Costs and Expenses:
Cost of operations 318,209 278,356 645,573 581,572
Research and development costs 4,107 1,152 7,714 2,671
Gains on asset disposals and impairments, net (237 ) (31 ) (245 ) (31 )
Selling, general and administrative expenses 51,518   48,433   105,280   99,530  
Total Costs and Expenses 373,597   327,910   758,322   683,742  
Equity in Income of Investees 6,225   3,327   13,375   7,202  
Operating Income 71,549   85,428   151,437   161,700  
Other Income (Expense):
Interest income 441 211 1,219 348
Interest expense (7,869 ) (3,906 ) (11,429 ) (7,423 )
Other – net 15,106   6,749   23,016   14,235  
Total Other Income (Expense) 7,678   3,054   12,806   7,160  
Income before Provision for Income Taxes 79,227 88,482 164,243 168,860
Provision for Income Taxes 18,493   27,062   37,096   51,654  
Net Income $ 60,734   $ 61,420   $ 127,147   $ 117,206  
Net Income Attributable to Noncontrolling Interest (71 ) (157 ) (43 ) (224 )
Net Income Attributable to BWX Technologies, Inc. $ 60,663   $ 61,263   $ 127,104   $ 116,982  
Earnings per Common Share:
Basic:
Net Income Attributable to BWX Technologies, Inc. $ 0.61   $ 0.62   $ 1.28   $ 1.18  
Diluted:
Net Income Attributable to BWX Technologies, Inc. $ 0.60   $ 0.61   $ 1.26   $ 1.16  
Shares used in the computation of earnings per share:
Basic 99,681,580   99,166,205   99,603,884   99,305,558  
Diluted 100,571,737   100,150,926   100,542,014   100,420,948  
 
 

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Six Months Ended June 30,
2018   2017
(Unaudited)

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 127,147 $ 117,206
Non-cash items included in net income from continuing operations:
Depreciation and amortization 28,420 28,199
Income of investees, net of dividends (3,384 ) 987
Gains on asset disposals and impairments, net (245 ) (31 )
Gain on forward contracts (5,997 )
Recognition of debt issuance costs from Former Credit Facility 2,441
Recognition of losses for pension and postretirement plans 993 892
Stock-based compensation expense 5,755 7,098
Changes in assets and liabilities:
Accounts receivable (10,858 ) (154 )
Accounts payable (3,835 ) (26,905 )
Contracts in progress and advance billings on contracts (53,902 ) (3,869 )
Income taxes (12,302 ) 18,477
Accrued and other current liabilities 973 (39,325 )
Pension liability, accrued postretirement benefit obligation and
employee benefits
(57,439 ) (43,790 )
Other, net (457 ) 5,320  
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,310   64,105  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (33,960 ) (28,747 )
Purchases of securities (1,822 ) (12,049 )
Sales and maturities of securities 2,955 19,986
Investments, net of return of capital, in equity method investees (9,800 ) 211
Proceeds from asset disposals 249 140
Other, net 997   (24 )
NET CASH USED IN INVESTING ACTIVITIES (41,381 ) (20,483 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 700,000 73,600
Repayments of long-term debt (509,968 ) (87,344 )
Payment of debt issuance costs (8,197 )
Dividends paid to common shareholders (32,063 ) (20,139 )
Exercise of stock options 3,018 14,608
Cash paid for shares withheld to satisfy employee taxes (4,710 ) (7,045 )
Other (352 ) (266 )
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 147,728   (26,586 )
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (10,660 ) 6,294  
TOTAL INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND
CASH EQUIVALENTS
112,997   23,330  
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
213,144   134,600  
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS
AT END OF PERIOD
$ 326,141   $ 157,930  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 7,625 $ 7,049
Income taxes (net of refunds) $ 49,848 $ 33,997
SCHEDULE OF NON-CASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable $ 8,775 $ 3,886
 
   

BWX TECHNOLOGIES, INC.

BUSINESS SEGMENT INFORMATION

 
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
(Unaudited)

(In thousands)

REVENUES:

Nuclear Operations Group $ 332,140 $ 312,866 $ 648,771 $ 637,947
Nuclear Services Group 32,596 44,785 62,629 72,639
Nuclear Power Group 75,697 54,569 188,513 132,243
Adjustments and Eliminations (1,512 ) (2,209 ) (3,529 ) (4,589 )
TOTAL $ 438,921   $ 410,011   $ 896,384   $ 838,240  
 

SEGMENT INCOME:

Nuclear Operations Group $ 67,046 $ 69,295 $ 134,703 $ 137,044
Nuclear Services Group 3,511 15,399 4,688 15,801
Nuclear Power Group 7,810 5,712 29,574 18,668
Other (4,357 ) (1,070 ) (8,400 ) (2,682 )
SUBTOTAL 74,010   89,336   160,565   168,831  
Unallocated Corporate (2,461 ) (3,908 ) (9,128 ) (7,131 )
TOTAL $ 71,549   $ 85,428   $ 151,437   $ 161,700  
 

DEPRECIATION AND AMORTIZATION:

Nuclear Operations Group $ 8,124 $ 7,924 $ 15,902 $ 15,555
Nuclear Services Group 895 936 1,808 1,874
Nuclear Power Group 3,484 3,419 7,079 6,807
Other
Corporate 1,856   1,944   3,631   3,963  
TOTAL $ 14,359   $ 14,223   $ 28,420   $ 28,199  
 

CAPITAL EXPENDITURES:

Nuclear Operations Group $ 14,615 $ 12,488 $ 28,424 $ 24,239
Nuclear Services Group 104 235 311
Nuclear Power Group 763 1,148 1,722 2,188
Other 542 1,054
Corporate 406   1,294   2,525   2,009  
TOTAL $ 16,326   $ 15,034   $ 33,960   $ 28,747  
 
   

BWX TECHNOLOGIES, INC.

BUSINESS SEGMENT INFORMATION

 
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
(Unaudited)

(In thousands)

BACKLOG:

Nuclear Operations Group $ 2,686,050 $ 3,262,169 $ 2,686,050 $ 3,262,169
Nuclear Services Group 43,518 20,980 43,518 20,980
Nuclear Power Group 883,049   480,534   883,049   480,534
TOTAL $ 3,612,617   $ 3,763,683   $ 3,612,617   $ 3,763,683
 

BOOKINGS:

Nuclear Operations Group $ 14,860 $ 169,734 $ 74,936 $ 414,499
Nuclear Services Group 47,572 28,241 75,323 65,291
Nuclear Power Group 408,377   56,654   445,285   139,352
TOTAL $ 470,809   $ 254,629   $ 595,544   $ 619,142
 

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