What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-22 compared with 2020-02-24 · 153 added, 100 removed, 237 unchanged (52% of the section changed)

18 unchanged sentences

We believe many of our programs are well-aligned with national defense and other strategic priorities as we supply high-end equipment for submarines and aircraft carriers for the U.S.

However, it is possible that reductions in federal government spending and sequestration could have an adverse impact on the operating results and cash flows of our Nuclear Operations Group and Nuclear Services Group segments in the future.

However, it is possible that reductions in federal government spending and sequestration could have an adverse impact on the operating results and cash flows of this segment in the future.

We expect that orders for nuclear components will continue to be a significant part of backlog for the foreseeable future.

In addition, the U.S.

Navy issued its fiscal year 2020 long-range shipbuilding plan in March 2019, which continues to include recommendations to increase the size of its fleet of ships to include additional submarines and aircraft carriers beyond the number disclosed in long-range shipbuilding plans issued prior to February 2018.

We expect the U.S.

Navy's new shipbuilding plan will require us to make additional capital expenditures and investment in personnel to meet this growth in demand.

Navy issued its fiscal year 2022 long-range shipbuilding plan in December 2020, which maintains recommendations made in its fiscal year 2020 long-range shipbuilding plan (released in September 2019) to increase the size of its fleet of ships to include additional submarines and aircraft carriers beyond the number disclosed prior to September 2019.

While the new Administration may make further changes with its fiscal year 2022 budget submission, we have made additional capital expenditures and investments in personnel to meet this anticipated growth in demand and we expect to continue making such expenditures and investments.

Nuclear Power Group

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The revenues in this segment primarily depend on the demand and competitiveness of nuclear energy.

The activity of this segment depends on the timing of maintenance and refueling outages, the cyclical nature of capital

expenditures and major refurbishment and plant 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.

The activity of this segment depends on the timing of maintenance and refueling outages, the cyclical nature of capital expenditures and major refurbishment and plant 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.

Our acquisition of the MI business in July 2018 expanded our Nuclear Power Group segment's offerings to include medical radioisotope products.

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Given our specialized capabilities of full life-cycle management of special materials, facilities and technologies, we believe our Nuclear Services Group segment is well-positioned 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.

Additionally, the Nuclear Services Group segment supports the commercial nuclear industry in the U.S., which depends on the timing of maintenance outages for nuclear utility customers, which could cause variability in our financial results.

However, it is possible that reductions in federal government spending and sequestration could have an adverse impact on the operating results and cash flows of this segment in the future.

This segment also specializes in the development of advanced technologies.

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We utilize actuarial and other assumptions in calculating the cost and benefit obligations of our pension and postretirement benefits.

The assumptions utilized in the determination of our benefit cost

and obligations include assumptions regarding discount rates, expected returns on plan assets, mortality and health care cost trends.

The assumptions utilized in the determination of our benefit cost and obligations include assumptions regarding discount rates, expected returns on plan assets, mortality and health care cost trends.

The assumptions utilized represent our best estimates based on historical experience and other factors.

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Government contracts totaled $43.6 million, $46.7 million and $44.0 million, respectively.

The amount of recoverable CAS pension costs recognized as revenue on an annual basis may differ from the amounts noted above.

amount of recoverable CAS pension costs recognized as revenue on an annual basis may differ from the amounts noted above.

See further discussion of our accounting for contracts and revenue recognition above and in Note 1 to our consolidated financial statements included in this Report.

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The following sensitivity analysis shows the impact of a 25 basis point change in the assumed discount rate, return on assets and health care cost trend rate on our FAS pension and postretirement benefit plan obligations and expense for the year ended December 31, 2020:

.25% Increase

.25% Decrease

.25% Increase .25% Decrease

(In millions)

2 unchanged sentences

Effect on ongoing net periodic benefit cost (1)

$ 1.3 $ (1.3)

Effect on projected benefit obligation $ (42.1) $ 44.3

4 unchanged sentences

Effect on ongoing net periodic benefit cost (1)

$ 0.1 $ (0.1)

Effect on projected benefit obligation $ (1.7) $ 1.9

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Deterioration in macroeconomic, industry and market conditions, cost factors, overall financial performance, share price decline or entity and reporting unit specific events could cause us to believe a qualitative test is no longer appropriate.

When we determine that it is appropriate to test goodwill for impairment utilizing a quantitative test, the first step of the test compares the fair value of a reporting unit to its carrying amount, including goodwill.

We utilize both the income and

market valuation approaches to provide inputs into the estimate of the fair value of our reporting units, which would be considered by market participants.

When we determine that it is appropriate to test goodwill for impairment utilizing a quantitative test, we compare the fair value of a reporting unit to its carrying amount, including goodwill.

We utilize both the income and market valuation approaches to provide inputs into the estimate of the fair value of our reporting units, which would be considered by market participants.

Under the income valuation approach, we employ a discounted cash flow model to estimate the fair value of each reporting unit.

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Some assumptions, such as future revenues, costs and changes in working capital are company driven and could be affected by a loss of one or more significant contracts or customers, failure to control costs on certain contracts, a decline in U.S.

Government funding or a decline in demand based on changing economic or regulatory conditions.

funding or a decline in demand based on changing economic or regulatory conditions.

Changes in external market conditions may affect certain other assumptions, such as the cost of capital.

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Assumptions include the selection of our peer companies and use of market multiples, which could deteriorate or increase based on the profitability of our competitors and performance of their stock, which is often dependent on the performance of the stock market and general economy as a whole.

Adverse changes in these assumptions utilized within the first step of our impairment test could cause a reduction or elimination of excess fair value over carrying value, resulting in potential recognition of impairment.

If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairment loss, if any.

The second step compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill.

Adverse changes in the assumptions utilized in our impairment test could cause a reduction or elimination of excess fair value over carrying value, resulting in potential recognition of impairment.

If the fair value of the reporting unit exceeds its carrying value, no impairment charge is recorded.

If the carrying value of a reporting unit exceeds its fair value, an impairment charge is recorded to goodwill in the amount by which the carrying value exceeds fair value.

We completed our annual review of goodwill for each of our reporting units for the year ended December 31, 2020, which indicated that we had no impairment of goodwill.

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When we initially record such a liability, we capitalize a cost by increasing the carrying amount of the related long-lived asset.

When we acquire a business that has an asset retirement obligation, the asset retirement obligation is recognized at fair value without a

corresponding increase to the related long-lived asset.

When we acquire a business that has an asset retirement obligation, the asset retirement obligation is recognized at fair value without a corresponding increase to the related long-lived asset.

Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset.

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We adjust the estimated costs as further information develops or circumstances change.

Given the long-lived nature of these facilities, we are required to estimate retirement costs that will be incurred in the future, which may extend up to 40 years at the time the asset retirement obligation is established.

Due to the significance of the remaining useful life of these facilities, the timing of retirement and future costs for material components of the asset retirement

obligations, such as labor and waste disposal fees, could differ from our estimates.

An exception to this accounting treatment relates to the work we perform for two facilities for which the U.S.

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See Note 1 to our consolidated financial statements included in this Report for further discussion of recently adopted accounting standards.

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.

To date, we have experienced localized operational challenges as a result of employee illness, quarantines and social distancing protocols.

Within our Canadian operations, revenues in our medical radioisotopes and radiopharmaceuticals business have declined year over year due to a decrease in demand for elective diagnostic procedures, and certain services scheduled during nuclear power plant outages have been rescheduled, delaying the performance of services by our Nuclear Power Group segment.

We have also experienced delays in the bidding and contracting process for our U.S.

Government businesses due to COVID-19 concerns.

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 further 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 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.

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.

Government Assistance

On March 27, 2020, the U.S.

Government enacted the CARES Act, which among other things, provides employers an option to defer payroll tax payments for a limited period.

Based on our evaluation of the CARES Act, we qualify for the deferral of payroll tax payments in the future and as of December 31, 2020, and we have deferred $21.4 million of payroll taxes that will be paid beginning in December 2021.

Additionally, on April 11, 2020, the Canadian Government enacted CEWS under the COVID-19 Economic Response Plan to prevent large layoffs and help employers offset a portion of their employee salaries and wages for a limited period.

During the year ended December 31, 2020, we recognized $20.4 million of subsidies under CEWS as an offset to operating expenses.

The Canadian Government has extended CEWS to June 2021 with a number of modifications.

These modifications are expected to significantly decrease the amount of future claims for which we may qualify.

See Item 1A "Risk Factors" in this Report for an additional discussion of risks of the COVID-19 pandemic on our business.

RESULTS OF OPERATIONS – YEARS ENDED DECEMBER 31, 2020, 2019 and 2018

1 unchanged sentence

Year Ended December 31,

2020 2019 2018

(In thousands)

2 unchanged sentences

Nuclear Services Group 136,493 131,339 122,438

Adjustments and Eliminations

Eliminations (30,503) (17,646) (7,630)

$ 2,123,516 $ 1,894,920 $ 1,799,889

OPERATING INCOME:

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Nuclear Services Group 26,436 14,226 20,374

Other (22,309) (23,099) (18,074)

$ 382,165 $ 343,270 $ 325,975

Unallocated Corporate (23,613) (17,749) (20,998)

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Consolidated Results of Operations

Consolidated revenues increased 5.3% , or $95.0 million , to $1,894.9 million in the year ended December 31, 2019 compared to $1,799.9 million for the corresponding period of 2018 , due to increases in revenue from our Nuclear Operations Group and Nuclear Services Group segments totaling $109.4 million and $8.9 million, respectively.

These increases were partially offset by a decrease in our Nuclear Power Group segment of $13.3 million.

Consolidated revenues increased 12.1%, or $228.6 million, to $2,123.5 million in the year ended December 31, 2020 compared to $1,894.9 million for the corresponding period of 2019, due to increases in revenues from our Nuclear Operations Group, Nuclear Power Group and Nuclear Services Group segments totaling $217.7 million, $18.6 million and $5.2 million, respectively.

Consolidated operating income increased $33.0 million to $358.6 million in the year ended December 31, 2020 compared to $325.5 million for the corresponding period of 2019.

Operating income in our Nuclear Operations Group and Nuclear Power Group segments increased by $26.9 million and $1.5 million, respectively.

We also experienced lower Unallocated Corporate expenses of $3.2 million when compared to the corresponding period of 2018.

These increases were partially offset by decreases in operating income in our Nuclear Services Group and Other segments of $6.1 million and $5.0 million, respectively.

Operating income in our Nuclear Operations Group, Nuclear Services Group and Other segments increased by $27.7 million, $12.2 million and $0.8 million, respectively.

These increases were partially offset by lower operating income in our Nuclear Power Group segment of $1.8 million and higher Unallocated Corporate expenses of $5.9 million when compared to the prior year.

Nuclear Operations Group

Year Ended December 31,

2020 2019 $ Change

(In thousands)

Revenues $ 1,646,257 $ 1,428,587 $ 217,670

Operating Income $ 326,049 $ 298,328 $ 27,721

% of Revenues 19.8% 20.9%

Revenues increased by 8.3% , or $109.4 million , to $1,428.6 million in the year ended December 31, 2019 compared to $1,319.2 million for the corresponding period of 2018 .

This increase was primarily attributable to increased activity in the manufacture of nuclear components for U.S.

Government programs as well as the timing of the procurement of certain long-lead materials when compared to the corresponding period of 2018.

These increases were partially offset by lower activity in our downblending operations.

Revenues increased by 15.2%, or $217.7 million, to $1,646.3 million in the year ended December 31, 2020 compared to $1,428.6 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 prior year.

We also experienced a volume increase in our naval nuclear fuel and downblending operations.

Operating income increased $27.7 million to $326.0 million in the year ended December 31, 2020 compared to $298.3 million for the corresponding period of 2019.

The increase was due to the operating income impact of the net changes in revenue noted above as well as the unfavorable contract adjustments recorded in the prior year resulting from rework issues related to the manufacture of non-nuclear components of $29.2 million.

The increase was due to the operating income impact of the changes in revenues noted above.

Nuclear Power Group

Year Ended December 31,

2020 2019 $ Change

(In thousands)

Revenues $ 371,269 $ 352,640 $ 18,629

Operating Income $ 51,989 $ 53,815 $ (1,826)

% of Revenues 14.0% 15.3%

Revenues decreased by 3.6% , or $13.3 million , to $352.6 million in the year ended December 31, 2019 compared to $365.9 million for the corresponding period of 2018 .

The decrease was primarily attributable to a decline in revenues resulting from a lower volume of in-plant inspection, refurbishment and maintenance and modification services when compared to the same period in the prior year.

This decrease was partially offset by a $23.9 million increase in revenues associated with our MI business and increased activity in our nuclear components business.

Operating income increased $1.5 million to $53.8 million in the year ended December 31, 2019 compared to $52.3 million for the corresponding period of 2018 .

This increase was primarily attributable to our nuclear fuel manufacturing business which contains a $5.2 million favorable change in estimate associated with an asset retirement obligation for one of our nuclear fuel fabrication facilities.

This increase was partially offset by the operating income impact of the decrease in revenues noted above.

Revenues increased by 5.3%, or $18.6 million, to $371.3 million in the year ended December 31, 2020 compared to $352.6 million for the corresponding period of 2019.

This was primarily related to an increase in revenues of $38.0 million associated with the acquisition of Laker Energy Products during the first quarter of 2020.

We also experienced additional volume related to the fabrication of nuclear fuel and a higher levels of in-plant inspection, maintenance and modification services.

These increases were partially offset by lower revenues in our nuclear components business largely attributable to decreased activity associated with major steam generator design and supply contracts of $34.2 million.

In addition, we experienced lower demand for our medical radioisotopes when compared to the prior year, due to a decrease in elective diagnostic procedures caused in part by the COVID-19 pandemic.

Operating income decreased $1.8 million to $52.0 million in the year ended December 31, 2020 compared to $53.8 million for the corresponding period of 2019, primarily attributable to a $5.2 million favorable change in estimate associated with an asset retirement obligation in addition to net favorable changes in estimates related to certain long-term contracts recorded in the prior year.

We also experienced a shift in our product line mix when compared to the prior year which resulted in a decline in operating margins.

This was offset by $20.4 million of wage subsidies received under the CEWS to offset the effects of COVID-19 on our Canadian operations.

Nuclear Services Group

Year Ended December 31,

2020 2019 $ Change

(In thousands)

Revenues $ 136,493 $ 131,339 $ 5,154

Operating Income $ 26,436 $ 14,226 $ 12,210

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Revenues increased by 3.9%, or $5.2 million, to $136.5 million in the year ended December 31, 2020 compared to $131.3 million for the corresponding period of 2019.

The increase was primarily attributable to 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 decreased $6.1 million to $14.2 million in the year ended December 31, 2019 compared to $20.4 million for the corresponding period of 2018 .

The decrease was primarily attributable to higher selling, general and administrative expenses related to business development activities caused by the timing of proposal activities and lower levels

of income at a site in New Mexico that we exited in the prior year.

These decreases were partially offset by improved operational performance at several of our sites and the operating income impact of the increase in revenue related to our U.S.

commercial nuclear services business noted above.

The increase was primarily attributable to design and engineering work executed by our advanced technologies business which was partially offset by a decline in revenues due to the divestiture of our U.S.-based commercial nuclear services business during the second quarter of 2020.

Operating income increased $12.2 million to $26.4 million in the year ended December 31, 2020 compared to $14.2 million for the corresponding period of 2019 due to the operating income impact of the changes in revenues noted above in addition to year over year improvements in our U.S.-based commercial nuclear services business prior to divestiture.

Year Ended December 31,

2020 2019 $ Change

(In thousands)

Operating Income $ (22,309) $ (23,099) $ 790

Operating income decreased $5.0 million to a loss of $23.1 million in the year ended December 31, 2019 compared to a loss of $18.1 million for the corresponding period of 2018 , primarily due to an increase in expenses related to research and development and commercialization activities related to our medical and industrial radioisotope capabilities and other advanced technologies when compared to the corresponding period of the prior year.

Operating income increased $0.8 million to a loss of $22.3 million in the year ended December 31, 2020 compared to a loss of $23.1 million for the corresponding period of 2019, 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 prior year.

Unallocated Corporate

Unallocated corporate expenses decreased $3.2 million to $17.7 million in the year ended December 31, 2019 compared to $21.0 million for the corresponding period of 2018 , primarily due to higher levels of legal and consulting costs associated with due diligence activities conducted in the prior year.

Unallocated corporate expenses increased $5.9 million to $23.6 million in the year ended December 31, 2020 compared to $17.7 million for the corresponding period of 2019, primarily due to a $2.6 million reserve related to a franchise tax audit of years prior to 2016, higher levels of incentive compensation and a $1.6 million 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.

Other Income (Expense)

During the year ended December 31, 2019 , other income (expense) increased $13.1 million to a loss of $11.8 million compared to a loss of $24.8 million for the corresponding period of 2018 .

During the year ended December 31, 2020, other income (expense) increased $15.4 million to a gain of $3.6 million compared to a loss of $11.8 million for the corresponding period of 2019.

A component of other income (expense) is net periodic benefit cost inclusive of mark to market adjustments due to our immediate recognition of net actuarial gains (losses) for our pension and postretirement benefit plans.

Net periodic benefit cost changed to income of $17.5 million in the year ended December 31, 2019 compared to expense of $0.7 million in the corresponding period of 2018.

This increase in income was partially offset by an increase in interest expense of $7.5 million associated with higher levels of long-term debt when compared to the prior year.

Net periodic benefit cost resulted in an increase to other income of $14.1 million when compared to the prior year.

Provision for Income Taxes

Year Ended December 31,

2020 2019 $ Change

(In thousands)

Income before Provision for Income Taxes

$ 362,172 $ 313,742 $ 48,430

Provision for Income Taxes

$ 82,976 $ 69,065 $ 13,911

Effective Tax Rate

On December 22, 2017, H.R.

1, the Tax Cuts and Jobs Act (the "Act") was enacted, making significant changes to existing U.S.

tax laws that impact BWXT, including, but not limited to, a reduction to the U.S.

corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017, the taxation of global intangible low-taxed income ("GILTI") and additional deduction limitations related to executive compensation.

Our Canadian operations continue to be subject to tax at a local statutory rate of approximately 25%.

For the year ended December 31, 2020, our provision for income taxes increased $13.9 million to $83.0 million, while income before provision for income taxes increased $48.4 million to $362.2 million.

Our effective tax rate was approximately 22.0% for 2019 , as compared to 18.9% for 2018 .

Our effective tax rate for 2019 was higher than the U.S.

Our effective tax rate was approximately 22.9% as compared to 22.0% for the years ended December 31, 2020 and 2019, respectively.

Our effective tax rates for the years ended December 31, 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.

These unfavorable rate impacts were partially offset by benefits recognized for excess tax benefits related to employee share-based payments of $2.4 million.

Our effective tax rate for 2018 was lower than the U.S.

corporate income tax rate of 21% primarily due to remeasurement adjustments to our deferred tax assets as a result of accelerating additional contributions made in August 2018 to certain of our domestic pension plans for inclusion in our 2017 U.S.

These unfavorable rate impacts were partially offset by benefits recognized for excess tax benefits related to employee share-based payments of $1.1 million and $2.4 million for the years ended December 31, 2020 and 2019, respectively.

See Note 5 to our consolidated financial statements included in this Report for further information on income taxes.

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LIQUIDITY AND CAPITAL RESOURCES

Our overall liquidity position, which we generally define as our unrestricted cash and cash equivalents and short-term investments plus amounts available for borrowings under our credit facility, decreased by approximately $5.2 million to $364.8 million at December 31, 2019 compared to $370.0 million at December 31, 2018 .

Our overall liquidity position, which we generally define as our unrestricted cash and cash equivalents plus amounts available for borrowings under our credit facility, increased by approximately $290.4 million to $649.3 million at December 31, 2020 compared to $358.9 million at December 31, 2019.

We experienced net cash generated from operations in each of the years ended December 31, 2020, 2019 and 2018.

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Government on accounts receivable retainages and cash dividends received from our joint ventures.

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 as of 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 May 24, 2018, we and certain of our subsidiaries entered into a credit agreement (the "Credit Facility") with Wells Fargo Bank, N.A., as administrative agent, and the other lenders party thereto.

The Credit Facility includes a $500.0 million senior secured revolving credit facility (the "Revolving Credit Facility"), a $50.0 million U.S.

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").

All obligations under the Credit Facility are scheduled to mature on May 24, 2023.

The proceeds of loans under the Credit Facility are available for working capital needs 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 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 "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.

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 obligations of BWXT Canada Ltd.

under the Credit Facility are guaranteed, subject to certain exceptions, by substantially all of the Company's present and future wholly owned Canadian and domestic restricted subsidiaries.

The Credit Facility is secured by first-priority liens on certain assets owned by the Company (other than its subsidiaries comprising its Nuclear Operations Group segment and a portion of its Nuclear Services Group segment);

provided that (1) the Company's domestic obligations are only secured by assets and property of the domestic loan parties and (2) the obligations of BWXT Canada Ltd.

and the Canadian guarantors are secured by assets and property of the Canadian guarantors and the domestic loan parties.

The Credit Facility requires interest payments on revolving loans on a periodic basis until maturity.

We began making quarterly amortization payments on the USD Term Loan and the CAD Term Loan in amounts equal to 1.25% of the initial aggregate principal amount of each term loan in the third quarter of 2018.

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.

4 unchanged sentences

As of December 31, 2020, we were in compliance with all covenants set forth in the Credit Facility.

Outstanding loans under the Credit Facility will bear interest at our option at either (1) the Eurocurrency rate plus a margin ranging from 1.25% to 2.0% per year or (2) the base rate or Canadian index rate, as applicable (described in the Credit Facility as the highest of (a) with respect to the base rate only, the federal funds rate plus 0.5% , (b) the one-month Eurocurrency rate plus 1.0% and (c) the administrative agent's prime rate or the Canadian prime rate, as applicable), plus, in each case, a margin ranging from 0.25% to 1.0% per year.

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 1.25% and 2.0% 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 1.2% per year with respect to the amount of each performance letter of credit issued under the Credit Facility.

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 December 31, 2019 , the margin for Eurocurrency rate and base rate or Canadian index rate loans was 1.375% and 0.375% , respectively, the letter of credit fee for financial letters of credit and performance letters of credit was 1.375% and 0.825% , respectively, and the commitment fee for the unused portion of the Revolving Credit Facility was 0.175% .

As of December 31, 2019 , borrowings outstanding totaled $272.2 million and $160.0 million under our term loans and revolving line of credit, respectively, and letters of credit issued under the Credit Facility totaled $67.6 million .

As a result, we had $272.4 million available for borrowings or to meet letter of credit requirements as of December 31, 2019 .

As of December 31, 2019 , the weighted-average interest rate on outstanding borrowings under our Credit Facility was 3.29% .

The Credit Facility generally includes customary events of default for a secured credit facility, some of which allow for an opportunity to cure.

Under the Credit Facility, (1) if an event of default relating to bankruptcy or other insolvency events occurs, all related obligations will immediately become due and payable;

Based on the leverage ratio applicable at December 31, 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 December 31, 2020, borrowings and letters of credit issued under the Revolving Credit Facility totaled $75.0 million and $68.3 million, respectively.

As a result, as of December 31, 2020 we had $606.7 million available under the Revolving Credit Facility for borrowings and to meet letter of credit requirements.

As of December 31, 2020, the interest rate on outstanding borrowings under our Credit Facility was 1.41%.

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;

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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.

We issued $400.0 million aggregate principal amount of 5.375% senior notes due 2026 (the "Senior Notes") pursuant to an indenture dated May 24, 2018 (the "Indenture"), among the Company, certain of our subsidiaries, as guarantors, and U.S.

Senior Notes due 2026

On May 24, 2018, 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 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 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 will mature on July 15, 2026.

On and after July 15, 2021, the Company may redeem the Senior Notes, 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 with net cash proceeds of certain equity offerings at a redemption price equal to 105.375% of the principal amount of the Senior Notes 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, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable "make-whole" premium.

The Indenture contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the Indenture or the Senior Notes and certain provisions related to bankruptcy events.

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 at a rate of 5.375% per annum.

The Senior Notes due 2026 will mature on July 15, 2026.

On and after July 15, 2021, we 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, we 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, we 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 December 31, 2019 , we were in compliance with all covenants and agreements set forth in the Indenture and the Senior Notes.

As of December 31, 2020, we were in compliance with all covenants set forth in the 2018 Indenture and the Senior Notes due 2026.

Senior Notes due 2028

On June 12, 2020, 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 at a rate of 4.125% per annum.

The Senior Notes due 2028 will mature on June 30, 2028.

We 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, we 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, we 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 December 31, 2020, we were in compliance with all covenants set forth in the 2020 Indenture and the Senior Notes due 2028.

Other Arrangements

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Cash, Cash Equivalents, Restricted Cash and Investments

In the aggregate, our cash and cash equivalents, restricted cash and cash equivalents and investments increased by approximately $58.5 million to $105.9 million at December 31, 2019 from $47.4 million at December 31, 2018 , primarily due to the items discussed below.

In the aggregate, our cash and cash equivalents, restricted cash and cash equivalents and investments decreased by approximately $44.5 million to $61.4 million at December 31, 2020 from $105.9 million at December 31, 2019, primarily due to the items discussed below.

Our domestic and foreign cash and cash equivalents, restricted cash and cash equivalents and investments as of December 31, 2020 and 2019 were as follows:

(In thousands)

Our working capital increased by $59.9 million to $225.0 million at December 31, 2019 from $165.1 million at December 31, 2018 , primarily attributable to increases in cash and cash equivalents and changes in net contracts in progress and advance billings due to the timing of project cash flows.

These increases were partially offset by an increase in accounts payable caused by the timing of vendor payments.

Our net cash provided by operating activities increased by $110.1 million to $279.4 million in the year ended December 31, 2019 , compared to cash provided by operating activities of $169.3 million in the year ended December 31, 2018 .

The increase in cash provided by operating activities was primarily attributable to a $153.3 million decrease in pension contributions when compared to the prior year, partially offset by the timing of project cash flows.

Our net cash used in investing activities decreased by $146.7 million to $180.0 million in the year ended December 31, 2019 , compared to $326.7 million in the year ended December 31, 2018 .

The decrease in cash used in investing activities was primarily attributable to our acquisition of the MI business for $213.0 million during the prior year, partially offset by an increase in purchases of property, plant and equipment of $72.8 million during the year ended December 31, 2019.

Our net cash used in financing activities increased by $34.4 million to $43.7 million in the year ended December 31, 2019 , compared to $9.3 million in the year ended December 31, 2018 .

The increase in net cash used in financing activities was primarily attributable to a decrease in net borrowings of $237.1 million as compared to the prior year, partially offset by a decrease in repurchases of common shares of $194.8 million.

Domestic $ 31,376 $ 76,337

Foreign 29,985 29,526

Total $ 61,361 $ 105,863

Our working capital increased by $18.8 million to $243.9 million at December 31, 2020 from $225.0 million at December 31, 2019, primarily attributable to changes in net contracts in progress and advance billings due to the timing of project cash flows.

This increase was partially offset by a decrease in cash and cash equivalents and an increase in other accrued liabilities primarily related to the deferral of payroll tax payments under the CARES Act.

Our net cash provided by operating activities decreased by $82.9 million to $196.4 million in the year ended December 31, 2020, compared to cash provided by operating activities of $279.4 million in the year ended December 31, 2019, primarily attributable to the timing of project cash flows.

This decrease was partially offset by an increase in net income and the deferral of payroll tax payments under the CARES Act of $21.4 million.

Our net cash used in investing activities increased by $85.3 million to $265.3 million in the year ended December 31, 2020, compared to $180.0 million in the year ended December 31, 2019.

The increase in cash used in investing activities was primarily attributable to an increase in purchases of property, plant and equipment of $72.9 million as well as our acquisition of Laker Energy Products for $15.9 million during the year ended December 31, 2020.

Our net cash provided by financing activities increased by $68.8 million to $25.0 million in the year ended December 31, 2020, compared to cash used in financing activities of $43.7 million in the year ended December 31, 2019.

The increase in net cash provided by financing activities was primarily attributable to bank overdrafts of $88.7 million, partially offset by the payment of debt issuance costs of $6.8 million and an increase in dividends paid to common shareholders of $7.6 million compared to the prior year.

At December 31, 2020, we had restricted cash and cash equivalents totaling $5.7 million, $2.6 million of which was held for future decommissioning of facilities (which is included in other assets on our consolidated balance sheets) and $3.1 million of which was held to meet reinsurance reserve requirements of our captive insurer.

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Our cash requirements as of December 31, 2020 under current contractual obligations were as follows:

Total Less than

(In thousands)

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Our contingent commitments under letters of credit and surety bonds currently outstanding expire as follows:

Total Less than

Years Thereafter

(In thousands)

$ 142,022 $ 129,952 $ 3,100 $ 8,970 $ —

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis