BWX Technologies, Inc. 10-K

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to market risk from changes in interest rates relates primarily to our debt instruments. Our borrowings include both fixed and variable interest rate debt. At December 31, 2020, we had (i) $75.0 million in outstanding borrowings and $606.7 million available under the Credit Facility, (ii) an aggregate principal amount of $400.0 million of Senior Notes due 2026 and (iii) an aggregate principal amount of $400.0 million of Senior Notes due 2028. See Item 7 – "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources" for additional information on our debt instruments. We also have exposure from changes in interest rates related to our cash equivalents and our investment portfolio, which consists primarily of U.S. Government and agency securities, corporate bonds and equities and mutual funds. We are averse to principal loss and seek to ensure the safety and preservation of our invested funds by limiting default risk, market risk and reinvestment risk. We have operations in foreign locations, and, as a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange ("FX") rates or weak economic conditions in those foreign markets. In order to manage the operational risks associated with FX rate fluctuations, we attempt to hedge those risks with FX derivative instruments. Historically, we have hedged those risks with FX forward contracts. At December 31, 2020, the fair values of our outstanding derivative instruments were not significant. We do not enter into speculative derivative positions. 39 Table of Contents Interest Rate Sensitivity The following tables provide information about our financial instruments that are sensitive to changes in interest rates. The tables present principal cash flows and related weighted-average interest rates by expected maturity dates. Principal Amount by Expected Maturity (In thousands) At December 31, 2020: Fair Value at Years Ending December 31, December 31, 2021 2022 2023 2024 2025 Thereafter Total 2020 Investments $ 3,716 — — — — $ 7,090 $ 10,806 $ 13,063 Average Interest Rate 1.92% — — — — 2.18% Fixed Interest Rate Debt — — — — — $ 800,000 $ 800,000 $ 832,167 Average Interest Rate — — — — — 4.75% Variable Interest Rate Debt — — — — $ 75,000 — $ 75,000 $ 74,137 Average Interest Rate — — — — 2.19% — At December 31, 2019: Fair Value at Years Ending December 31, December 31, 2020 2021 2022 2023 2024 Thereafter Total 2019 Investments $ 3,663 — — — — $ 7,016 $ 10,679 $ 13,463 Average Interest Rate 1.94% — — — — 1.41% Fixed Interest Rate Debt — — — — — $ 400,000 $ 400,000 $ 423,462 Average Interest Rate — — — — — 5.38% Variable Interest Rate Debt $ 14,711 $ 14,711 $ 14,711 $ 388,026 — — $ 432,159 $ 431,644 Average Interest Rate 3.26% 3.20% 3.25% 3.11% — — Exchange Rate Sensitivity The following table provides information about our FX forward contracts outstanding at December 31, 2020 and presents such information in U.S. dollar equivalents. The table presents notional amounts and related weighted-average FX rates by expected (contractual) maturity dates and constitutes a forward-looking statement. These notional amounts generally are used to calculate the contractual payments to be exchanged under the contract. The average contractual FX rates are expressed using market convention, which is dependent on the currencies being bought and sold under the forward contract. Forward Contracts to Purchase Foreign Currencies in U.S. Dollars (in thousands) Year Ending Fair Value at Average Contractual Foreign Currency December 31, 2021 December 31, 2020 Exchange Rate Canadian dollar $ 19,277 $ 588 1.3078 U.S. dollar (selling Canadian dollar) $ 209,540 $ (2,299) 1.2866 Euro (selling Canadian dollar) $ 9,935 $ (35) 1.5656 Year Ending Fair Value at Average Contractual Foreign Currency December 31, 2022 December 31, 2020 Exchange Rate U.S. dollar (selling Canadian dollar) $ 4,457 $ (362) 1.3758 Euro (selling Canadian dollar) $ 576 $ (8) 1.5923 Year Ending Fair Value at Average Contractual Foreign Currency December 31, 2023 December 31, 2020 Exchange Rate U.S. dollar (selling Canadian dollar) $ 1,496 $ (42) 1.3098 40 Table of Contents