BWX Technologies(BWXT) - 2024 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The company reported increased revenues and net income for both the three and six months ended June 30, 2024, compared to the same periods in 2023, with total assets growing to $2.84 billion primarily driven by an increase in contracts in progress, and cash flow from operations significantly increasing to $98.9 million for the first six months of 2024 Condensed Consolidated Statements of Income For the second quarter of 2024, revenues increased by 11.3% year-over-year to $681.5 million, and net income attributable to the company rose by 24.5% to $73.0 million, while for the first six months, revenues grew by 8.9% to $1.29 billion, with net income increasing by 18.2% to $141.4 million Key Financial Performance (Three and Six Months Ended June 30) | Metric | Q2 2024 | Q2 2023 | YoY Change | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $681.5M | $612.4M | +11.3% | $1,285.4M | $1,180.8M | +8.9% | | Operating Income | $98.8M | $86.7M | +14.0% | $191.8M | $174.5M | +9.9% | | Net Income Attributable to BWXT | $73.0M | $58.6M | +24.5% | $141.4M | $119.7M | +18.2% | | Diluted EPS | $0.79 | $0.64 | +23.4% | $1.54 | $1.30 | +18.5% | Condensed Consolidated Balance Sheets As of June 30, 2024, total assets stood at $2.84 billion, an increase from $2.75 billion at year-end 2023, primarily driven by an increase in 'Contracts in progress', while total liabilities rose to $1.84 billion from $1.81 billion, and total stockholders' equity increased to $998.3 million from $933.3 million over the same period Balance Sheet Summary (as of June 30, 2024 vs. Dec 31, 2023) | Account | June 30, 2024 (in thousands) | Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $48,341 | $75,766 | | Contracts in progress | $622,062 | $533,155 | | Total Current Assets | $909,843 | $817,801 | | Total Assets | $2,840,633 | $2,747,065 | | Long-Term Debt | $1,203,196 | $1,203,422 | | Total Liabilities | $1,842,382 | $1,813,764 | | Total Stockholders' Equity | $998,251 | $933,301 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash provided by operating activities increased to $98.9 million from $67.6 million in the prior-year period, while net cash used in investing activities decreased slightly to $60.6 million, and net cash used in financing activities increased significantly to $65.0 million, driven by lower debt borrowings and $20.0 million in common stock repurchases Cash Flow Summary (Six Months Ended June 30) | Activity | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $98,920 | $67,589 | | Net Cash Used in Investing Activities | ($60,624) | ($65,914) | | Net Cash Used in Financing Activities | ($65,004) | ($3,282) | | Total Decrease in Cash | ($27,016) | ($1,411) | - The increase in cash used for financing activities was primarily due to a $20.0 million repurchase of common stock in H1 2024, which did not occur in H1 2023, and a reduction in net borrowings of long-term debt[17][115] Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies, segment operations, and financial instruments, highlighting that the company operates in two segments, with revenue primarily recognized over time using a cost-to-cost method, an effective tax rate of 21.3% for the first six months of 2024, and remaining performance obligations (backlog) of $3.53 billion - The company operates in two reportable segments: Government Operations (manufacturing naval nuclear reactors and providing services to the U.S Government) and Commercial Operations (fabricating commercial nuclear components and providing medical radioisotopes)[21] - The effective tax rate for the six months ended June 30, 2024, was 21.3%, compared to 24.1% for the same period in 2023, primarily due to the revaluation of Canadian net deferred tax liabilities following a temporary reduction in the Canadian federal tax rate for qualifying nuclear manufacturers[27] - At June 30, 2024, the company's remaining performance obligations (backlog) were $3.53 billion, with approximately 68% expected to be recognized as revenue by the end of 2025[53] Segment Revenues and Operating Income (Six Months Ended June 30) | Segment | Revenue 2024 | Revenue 2023 | Operating Income 2024 | Operating Income 2023 | | :--- | :--- | :--- | :--- | :--- | | Government Operations | $1,028.0M | $951.9M | $178.2M | $172.8M | | Commercial Operations | $258.5M | $229.8M | $25.2M | $12.5M | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 11.3% consolidated revenue growth in Q2 2024 to higher volumes in both the Government and Commercial Operations segments, leading to increased operating income, with the company's backlog at $3.5 billion and strong liquidity of $568.3 million available under its revolving credit facility Results of Operations Consolidated revenues for Q2 2024 increased by $69.0 million (11.3%) year-over-year, driven by a $48.9 million increase in Government Operations and a $20.6 million increase in Commercial Operations, reflecting higher volume in nuclear component manufacturing, advanced technologies, in-plant services, and medical radioisotopes, which also contributed to a $12.1 million rise in consolidated operating income - Government Operations revenue increased by $48.9 million (9.9%) in Q2 2024, primarily from higher volume in manufacturing nuclear components for U.S Government programs and a $15.2 million increase from the advanced technologies business[85][86] - Commercial Operations revenue increased by $20.6 million (17.0%) in Q2 2024, driven by higher demand for in-plant inspection, maintenance, and modification services ($8.4 million), nuclear components ($4.4 million), and increased volume in fuel handling and medical radioisotopes[89] - Unallocated corporate expenses increased by $3.8 million in Q2 2024, mainly due to initiatives to transform IT infrastructure and improve the digital framework, which are expected to continue into 2026[91][92] Backlog As of June 30, 2024, the company's total backlog was $3.53 billion, a decrease from $4.00 billion at the end of 2023, with Government Operations accounting for $2.87 billion and Commercial Operations contributing $0.67 billion, and approximately 68% expected to be recognized as revenue by the end of 2025 Backlog by Segment (in millions) | Segment | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Government Operations | $2,865 | $3,217 | | Commercial Operations | $669 | $781 | | Total Backlog | $3,534 | $3,998 | - The backlog includes $379.4 million of unfunded U.S Government contracts, with approximately $100 million in unexercised options excluded from backlog expected to be awarded in 2024[97] Liquidity and Capital Resources The company maintains a strong liquidity position with $568.3 million available under its $750 million revolving credit facility as of June 30, 2024, with total debt including a $240.6 million Term Loan and $800 million in Senior Notes, and working capital increasing by $58.5 million to $501.3 million during the first half of 2024 - The company's Credit Facility consists of a $750 million revolving credit facility and a $250 million term loan, both maturing in October 2027[98] - As of June 30, 2024, borrowings under the Term Loan were $240.6 million, and borrowings under the Revolving Credit Facility were $180.0 million, leaving $568.3 million available[103] - The company has two sets of senior notes outstanding: $400 million at 4.125% due 2028 and $400 million at 4.125% due 2029[105][107] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that its exposures to market risks have not materially changed from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes to the company's market risk exposures since the 2023 10-K filing[118] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2024, with no material changes in internal control over financial reporting during the second quarter of 2024 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective as of June 30, 2024[119] - No changes occurred in the company's internal control over financial reporting during the three months ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, these controls[119] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company refers to Note 4 of its financial statements for information on legal proceedings, where it was stated that there were no material contingencies during the period - There were no material contingencies or legal proceedings during the period covered by the report[56][121] Item 1A. Risk Factors There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to risk factors have occurred since the filing of the 2023 10-K[122] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2024, the company repurchased 358 shares at an average price of $96.52 per share to satisfy tax withholding obligations for employee benefit plans, not as part of the publicly announced share repurchase program, with approximately $377.6 million remaining available for repurchases under the board's authorization as of June 30, 2024 Share Repurchases (Q2 2024) | Period | Total Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | April 2024 | 89 | $98.20 | | May 2024 | 269 | $95.97 | | June 2024 | 0 | N/A | | Total | 358 | $96.52 | - The shares purchased were to satisfy statutory tax withholding obligations and not part of the publicly announced repurchase plan[123][124] - As of June 30, 2024, approximately $377.6 million remained authorized for future share repurchases under the existing program[124] Item 5. Other Information During the second quarter of 2024, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2024[125] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, CEO and CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 1350), and Interactive Data Files (Inline XBRL) - Key exhibits filed include CEO and CFO certifications as required by the Sarbanes-Oxley Act[127]