BWXT - BWX Technologies Reports Third Quarter 2018 Results

November, 06 2018 04:30 PM BWX Technologies Inc.

Reiterates Long-Term Guidance

3Q18 revenue growth of 1.5%; 3Q18 orders up significantly; backlog at $3.8 billion
3Q18 GAAP EPS of $0.78 and non-GAAP EPS of $0.40, each inclusive of a $0.21 negative impact for missile tube reserves
Returned $79 million to shareholders in 3Q18; approved a new $250 million share repurchase authorization
Updated 2018 guidance: non-GAAP EPS in a range of $2.23 to $2.27, revenue of approximately $1.8 billion
Reiterated long-term guidance of low double-digit EPS growth

BWX Technologies, Inc. (NYSE: BWXT) (“BWXT,” “we,” “us” or the “Company”) reported third quarter 2018 revenue of $426 million, a 1.5% increase compared to $419 million in the third quarter of 2017. GAAP net income for the third quarter 2018 was $77.9 million, or $0.78 per diluted share, compared to net income of $46.6 million, or $0.46 per diluted share, in the prior-year quarter. Non-GAAP net income for the third quarter 2018 was $40.1 million, or $0.40 per diluted share. A reconciliation of non-GAAP results is detailed in Exhibit 1.

“We continue to exhibit top-line strength while building backlog,” said Rex D. Geveden, president and chief executive officer. “Third quarter results were negatively impacted by a reserve on missile tubes and increased interest expense; however, our long-term outlook remains unchanged. We have updated our 2018 guidance and continue to reiterate our low double-digit EPS CAGR based on our superior competitive positioning, robust organic growth opportunities, and balance sheet capacity.”

“We made substantial progress during the quarter on the missile tube welding issue. The problem is fully characterized, and the required remediations are understood. Accordingly, we have taken a charge in the third quarter to account for those items. Excluding this charge, third quarter NOG margins would have been 21.7%, or about 120 basis points higher than the third quarter of 2017.”

Third Quarter 2018 Segment Results
Nuclear Operations Group (NOG) segment revenue was $319 million for the third quarter of 2018, a 1.6% decrease from the prior-year period driven primarily by lower missile tube revenue partially offset by an increase in naval nuclear fuel and downblending services. NOG operating income was $45.6 million in the third quarter of 2018, down 31% compared with the prior-year period primarily driven by a $26.7 million charge for re-work related to missile tubes. Third quarter 2018 segment operating margin was 14.3%.

Nuclear Power Group (NPG) segment revenue was $79.2 million for the third quarter of 2018, a 15.4% increase from the prior-year period driven by an increase in field services, fuel manufacturing and the medical radioisotope acquisition. NPG operating income was $9.1 million in the third quarter of 2018, a 7.6% increase from the prior-year period. Third quarter 2018 segment operating margin was 11.4%.

Nuclear Services Group (NSG) segment operating income was $6.5 million for the third quarter of 2018 compared with $0.8 million for third quarter of 2017, primarily driven by an increase in operational performance, lower costs and new contract starts.

Liquidity and Debt
The Company utilized cash in operating activities of $25.8 million in the third quarter of 2018, inclusive of $118.1 million of voluntary pension contributions, compared with cash generated from operating activities of $80.7 million in the prior-year period. At the end of the third quarter 2018, the Company’s cash and short-term investments position, net of restricted cash, was $68.9 million.

As of September 30, 2018, the Company had gross debt of $781.2 million and $67.7 million in letters of credit issued under the Company’s revolving credit facility. Gross debt included $400.0 million in senior notes, $291.2 million in term loans and $90.0 million in borrowings under the Company’s revolving credit facility. As a result, the Company had $342.3 million in remaining availability under its revolving credit facility.

Capital Deployment
The Company returned $79 million to shareholders during the third quarter 2018, including $63 million in share repurchases and $16 million in dividends. On November 6, 2018, our Board of Directors declared a quarterly cash dividend of $0.16 per common share. The dividend will be payable on December 13, 2018, to shareholders of record on November 20, 2018. The Board of Directors also approved a $250 million share repurchase authorization, resulting in a total available share repurchase authorization of $337 million.

2018 Guidance
BWXT revised its guidance for 2018:

Total Company revenue is now expected to be approximately $1.8 billion
Non-GAAP EPS is now expected to be in a range of $2.23 to $2.27 (excluding mark-to-market of pension and post-retirement benefits)
NOG revenue is now expected to be approximately $1.3 billion with operating margin in the high teens inclusive of CAS pension reimbursements and missile tube reserves
NPG revenue is now expected to be approximately $370 million with operating margin of approximately 14%
Non-GAAP effective tax rate is now expected in a range of 22% to 23%

BWXT reiterated the following guidance for 2018:

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 benefits of $30 to $35 million
Capital expenditures of approximately $150 million, primarily to support growth in Navy business
Depreciation and amortization of approximately $60 million

Long-term Guidance
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 Third Quarter 2018 Results

Date:

Wednesday, November 7, 2018, at 8:30 a.m. EST

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 radioisotope business; the timing and impact of the missile tube welding issue; our plans and expectations for the NOG, NPG and NSG segments; and our 2018 guidance and long-term guidance. 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 September 30, 2018

























GAAP


Pension & OPEB MTM (Gain) / Loss


Acquisition Related Costs


Loss on Forward Contracts


One-time Tax Benefit


Missile tube reserve


Non- GAAP






















Operating Income


$
50.4



$
–



$
0.9



$
–



$
–






$
51.3

Other Income (Expense)



34.2




(35.1
)



–




1.3




–







0.3

Provision for Income Taxes



(6.5
)



8.1




(0.2
)



(0.3
)



(12.5
)






(11.3
)
Net Income



78.1




(27.0
)



0.7




1.0




(12.5
)






40.3

Net Income Attributable to Noncontrolling Interest



(0.2
)



–




–




–




–







(0.2
)
Net Income Attributable to BWXT


$
77.9



$
(27.0
)


$
0.7



$
1.0



$
(12.5
)





$
40.1























Diluted Shares Outstanding



100.4



















100.4

Diluted Earnings per Common Share


$
0.78



$
(0.27
)


$
0.01



$
0.01



$
(0.12
)





$
0.40























Effective Tax Rate



7.7
%


















22.0
%






















NOG segment margins⁽⁴⁾



14.3
%














7.4
%



21.7
%











Three Months Ended September 30, 2017

























GAAP

















Non- GAAP






















Operating Income


$
66.8


















$
66.8

Other Income (Expense)



3.8



















3.8

Provision for Income Taxes



(23.9
)


















(23.9
)
Net Income



46.7



















46.7

Net Income Attributable to Noncontrolling Interest



(0.1
)


















(0.1
)
Net Income Attributable to BWXT


$
46.6


















$
46.6























Diluted Shares Outstanding



100.3



















100.3

Diluted Earnings per Common Share


$
0.46


















$
0.46























Effective Tax Rate



33.9
%


















33.9
%









(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.
(4)


Additional information about the missile tube reserve impact to Revenue, Operating Income and Operating Margin for 3Q and YTD can be found in our most recent Investor Briefing on the BWXT website at www.bwxt.com/investors.

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)




Nine Months Ended September 30, 2018

























GAAP


Pension & OPEB MTM (Gain) / Loss


Acquisition Related Costs


Recognition of Debt Issuance Costs from Former Credit Facility


Gain on Forward Contracts


One-Time Tax Benefit


Non- GAAP






















Operating Income


$
201.8



$
–



$
2.5



$
–



$
–






$
204.3

Other Income (Expense)



47.0




(35.1
)



–




2.4




(4.7
)






9.5

Provision for Income Taxes



(43.6
)



8.1




(0.6
)



(0.6
)



1.2




(12.5
)



(47.9
)
Net Income



205.2




(27.0
)



1.9




1.8




(3.5
)



(12.5
)



166.0

Net Income Attributable to Noncontrolling Interest



(0.2
)



–




–




–




–







(0.2
)
Net Income Attributable to BWXT


$
205.0



$
(27.0
)


$
1.9



$
1.8



$
(3.5
)


$
(12.5
)


$
165.8























Diluted Shares Outstanding



100.5



















100.5

Diluted Earnings per Common Share


$
2.04



$
(0.27
)


$
0.02



$
0.02



$
(0.03
)


$
0.12



$
1.65























Effective Tax Rate



17.5
%


















22.4
%















































Nine Months Ended September 30, 2017

























GAAP


Framework Agreement & Litigation


Impairment (Gains) / Charges











Non- GAAP






















Operating Income


$
228.5



$
(7.9
)


$
–












$
220.6

Other Income (Expense)



11.0




–




(0.4
)












10.6

Provision for Income Taxes



(75.6
)



2.8




0.0













(72.7
)
Net Income



163.9




(5.1
)



(0.4
)












158.4

Net Income Attributable to Noncontrolling Interest



(0.4
)



–




–













(0.4
)
Net Income Attributable to BWXT


$
163.5



$
(5.1
)


$
(0.4
)











$
158.1























Diluted Shares Outstanding



100.4



















100.4

Diluted Earnings per Common Share


$
1.63



$
(0.05
)


$
(0.00
)











$
1.57























Effective Tax Rate



31.6
%


















31.5
%









(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




September 30, 2018


December 31, 2017



(Unaudited) (In thousands)
Current Assets:






Cash and cash equivalents


$
66,125


$
203,404
Restricted cash and cash equivalents



4,359



7,105
Investments



2,732



2,934
Accounts receivable — trade, net



194,575



189,217
Accounts receivable — other



46,183



19,365
Contracts in progress



326,355



420,628
Other current assets



44,528



30,437
Total Current Assets



684,857



873,090
Property, Plant and Equipment



1,073,893



1,013,141
Less accumulated depreciation



684,530



664,512
Net Property, Plant and Equipment



389,363



348,629
Investments



8,604



9,301
Goodwill



278,939



218,331
Deferred Income Taxes



45,105



86,740
Investments in Unconsolidated Affiliates



62,160



43,266
Intangible Assets



240,081



110,405
Other Assets



26,595



22,577
TOTAL


$
1,735,704


$
1,712,339


BWX TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY




September 30, 2018


December 31, 2017



(Unaudited) (In thousands, except share and per share amounts)
Current Liabilities:






Current maturities of long-term debt


$
14,745



$
27,870

Accounts payable



100,004




93,421

Accrued employee benefits



74,398




82,477

Accrued liabilities — other



53,508




64,738

Advance billings on contracts



104,646




246,192

Accrued warranty expense



12,426




13,428

Total Current Liabilities



359,727




528,126

Long-Term Debt



756,492




481,059

Accumulated Postretirement Benefit Obligation



20,111




21,368

Environmental Liabilities



89,429




79,786

Pension Liability



102,093




296,444

Other Liabilities



15,351




19,799

Commitments and Contingencies






Stockholders’ Equity:






Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 125,796,671 and 125,381,591 shares at September 30, 2018 and December 31, 2017, respectively



1,258




1,254

Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued



–




–

Capital in excess of par value



112,300




98,843

Retained earnings



1,159,552




990,652

Treasury stock at cost, 27,070,536 and 25,964,088 shares at September 30, 2018 and December 31, 2017, respectively



(884,200
)



(814,809
)
Accumulated other comprehensive income



3,542




9,454

Stockholders’ Equity — BWX Technologies, Inc.



392,452




285,394

Noncontrolling interest



49




363

Total Stockholders’ Equity



392,501




285,757

TOTAL


$
1,735,704



$
1,712,339


BWX TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS




Three Months Ended September 30,


Nine Months Ended September 30,



2018


2017


2018


2017



(Unaudited) (In thousands, except share and per share amounts)
Revenues


$
425,507



$
419,360



$
1,321,891



$
1,257,600

Costs and Expenses:












Cost of operations



326,314




302,267




971,887




883,839

Research and development costs



3,959




2,597




11,673




5,268

Losses (gains) on asset disposals and impairments, net



243




(2
)



(2
)



(33
)
Selling, general and administrative expenses



53,919




51,351




159,199




150,881

Total Costs and Expenses



384,435




356,213




1,142,757




1,039,955

Equity in Income of Investees



9,323




3,630




22,698




10,832

Operating Income



50,395




66,777




201,832




228,477

Other Income (Expense):












Interest income



1,121




402




2,340




750

Interest expense



(7,925
)



(3,837
)



(19,354
)



(11,260
)
Other — net



40,968




7,252




63,984




21,487

Total Other Income (Expense)



34,164




3,817




46,970




10,977

Income before Provision for Income Taxes



84,559




70,594




248,802




239,454

Provision for Income Taxes



6,482




23,901




43,578




75,556

Net Income


$
78,077



$
46,693



$
205,224



$
163,898

Net Income Attributable to Noncontrolling Interest



(158
)



(140
)



(201
)



(364
)
Net Income Attributable to BWX Technologies, Inc.


$
77,919



$
46,553



$
205,023



$
163,534

Earnings per Common Share:












Basic:












Net Income Attributable to BWX Technologies, Inc.


$
0.78



$
0.47



$
2.06



$
1.65

Diluted:












Net Income Attributable to BWX Technologies, Inc.


$
0.78



$
0.46



$
2.04



$
1.63

Shares used in the computation of earnings per share:












Basic



99,421,031




99,328,677




99,542,933




99,313,264

Diluted



100,420,766




100,260,255




100,501,597




100,367,383


BWX TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS




Nine Months Ended September 30,



2018


2017



(Unaudited) (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:






Net Income


$
205,224



$
163,898

Non-cash items included in net income from continuing operations:






Depreciation and amortization



43,692




42,135

Income of investees, net of dividends



(8,471
)



731

Gains on asset disposals and impairments, net



(2
)



(33
)
Gain on forward contracts



(4,743
)



–

Recognition of debt issuance costs from Former Credit Facility



2,441




–

Provision for deferred taxes



38,685




17,501

Recognition of (gains) losses for pension and postretirement plans



(33,699
)



1,320

Stock-based compensation expense



8,519




9,879

Changes in assets and liabilities:






Accounts receivable



3,384




(17,748
)
Accounts payable



2,061




(10,978
)
Contracts in progress and advance billings on contracts



(35,049
)



(2,963
)
Income taxes



(46,511
)



21,587

Accrued and other current liabilities



3,344




(33,736
)
Pension liability, accrued postretirement benefit obligation and employee benefits



(184,898
)



(47,109
)
Other, net



(2,418
)



345

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES



(8,441
)



144,829

CASH FLOWS FROM INVESTING ACTIVITIES:






Purchases of property, plant and equipment



(60,488
)



(49,361
)
Acquisition of business



(212,993
)



–

Purchases of securities



(3,111
)



(3,237
)
Sales and maturities of securities



3,378




12,406

Investments, net of return of capital, in equity method investees



(9,037
)



2,142

Proceeds from asset disposals



499




142

Other, net



4,743




(24
)
NET CASH USED IN INVESTING ACTIVITIES



(277,009
)



(37,932
)
CASH FLOWS FROM FINANCING ACTIVITIES:






Borrowings of long-term debt



901,300




73,600

Repayments of long-term debt



(624,987
)



(94,320
)
Payment of debt issuance costs



(9,443
)



–

Repurchase of common shares



(62,558
)



–

Dividends paid to common shareholders



(48,014
)



(31,072
)
Exercise of stock options



3,511




16,019

Cash paid for shares withheld to satisfy employee taxes



(5,402
)



(7,389
)
Other



(515
)



(415
)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES



153,892




(43,577
)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH



(8,464
)



15,290

TOTAL (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS



(140,022
)



78,610

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


$
73,122



$
213,210

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:






Cash paid during the period for:






Interest


$
13,325



$
10,762

Income taxes (net of refunds)


$
51,779



$
36,425

SCHEDULE OF NON-CASH INVESTING ACTIVITY:






Accrued capital expenditures included in accounts payable


$
13,457



$
7,680


BWX TECHNOLOGIES, INC. BUSINESS SEGMENT INFORMATION




Three Months Ended September 30,


Nine Months Ended September 30,



2018


2017


2018


2017



(Unaudited) (In thousands)
REVENUES:












Nuclear Operations Group


$
319,325



$
324,545



$
968,096



$
962,492

Nuclear Services Group



28,366




27,507




90,995




100,146

Nuclear Power Group



79,162




68,621




267,675




200,864

Adjustments and Eliminations



(1,346
)



(1,313
)



(4,875
)



(5,902
)
TOTAL


$
425,507



$
419,360



$
1,321,891



$
1,257,600














SEGMENT INCOME:












Nuclear Operations Group


$
45,580



$
66,459



$
180,283



$
203,503

Nuclear Services Group



6,494




776




11,182




16,577

Nuclear Power Group



9,063




8,426




38,637




27,094

Other



(5,142
)



(2,255
)



(13,542
)



(4,937
)
SUBTOTAL



55,995




73,406




216,560




242,237

Unallocated Corporate



(5,600
)



(6,629
)



(14,728
)



(13,760
)
TOTAL


$
50,395



$
66,777



$
201,832



$
228,477














DEPRECIATION AND AMORTIZATION:












Nuclear Operations Group


$
8,102



$
7,706



$
24,004



$
23,261

Nuclear Services Group



792




914




2,600




2,788

Nuclear Power Group



4,615




3,436




11,694




10,243

Other



–




–




–




–

Corporate



1,763




1,880




5,394




5,843

TOTAL


$
15,272



$
13,936



$
43,692



$
42,135














CAPITAL EXPENDITURES:












Nuclear Operations Group


$
22,047



$
18,851



$
50,471



$
43,090

Nuclear Services Group



71




178




306




489

Nuclear Power Group



595




1,047




2,317




3,235

Other



286




–




1,340




–

Corporate



3,529




538




6,054




2,547

TOTAL


$
26,528



$
20,614



$
60,488



$
49,361


BWX TECHNOLOGIES, INC. BUSINESS SEGMENT INFORMATION




Three Months Ended September 30,


Nine Months Ended September 30,



2018


2017


2018


2017



(Unaudited) (In thousands)
BACKLOG:












Nuclear Operations Group


$
2,939,464


$
2,970,088


$
2,939,464


$
2,970,088
Nuclear Services Group



26,211



37,520



26,211



37,520
Nuclear Power Group



868,258



527,708



868,258



527,708
TOTAL


$
3,833,933


$
3,535,316


$
3,833,933


$
3,535,316













BOOKINGS:












Nuclear Operations Group


$
571,762


$
32,272


$
646,698


$
446,771
Nuclear Services Group



10,786



43,004



86,109



108,295
Nuclear Power Group



56,800



115,718



502,085



255,070
TOTAL


$
639,348


$
190,994


$
1,234,892


$
810,136

View source version on businesswire.com: https://www.businesswire.com/news/home/20181106005975/en/

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

Company Name:	BWX Technologies Inc.
Stock Symbol:	BWXT
Market:	NYSE
Website:	bwxt.com