BWX Technologies, Inc. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of BWX Technologies, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of BWX Technologies, Inc. and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2021 expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition – Estimating Costs at Completion – Refer to Note 1 and Note 3 to the Financial Statements. Critical Audit Matter Description The Company generally recognizes contract revenues and related costs over time for individual performance obligations based on a cost-to-cost method in accordance with Financial Accounting Standards Board Topic Revenue from Contracts with Customers . The Company recognizes estimated contract revenue and resulting income based on the measurement of the extent of progress toward completion as a percentage of the total project. The Company reviews contract price and cost estimates periodically as the work progresses and reflects adjustments proportionate to the percentage-of-completion in income in the period when those estimates are revised. The accounting for these contracts involves judgment, particularly as it relates to the process of estimating total costs to complete the performance obligation. Given the significance of revenue and the level of judgment involved in estimating total costs to complete the performance obligations used to recognize revenue for long-term contracts, auditing such estimates involved especially subjective judgment. 41 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to revenues recognized over time, including management’s estimates of total contract costs to complete its performance obligations included the following, among others: • We tested the effectiveness of controls over revenue recognized over time, including those over cost estimates at completion for performance obligations. • For select cumulative adjustments recorded, we performed a retrospective review to determine that the adjustments were the result of changes in facts and circumstances and not estimates that were previously inaccurate. • We tested the recorded revenue using a combination of analytical procedures and detailed contract testing. • For select contracts with customers recognized over time, our detail testing performed included the following: ◦ Read the contract to understand the contract terms and evaluated the appropriateness of the accounting treatment in accordance with generally accepted accounting principles. ◦ Compared the transaction price to the consideration expected to be received based on current rights and obligations under the contract, including modifications that were agreed upon with the customer. ◦ Tested management’s identification of distinct performance obligations. ◦ Tested the mathematical accuracy of management’s calculation of the percent complete, the profit margin and the revenue recognized over time. ◦ Evaluated a selection of cost estimates within the selected contract as follows: ▪ Compared costs incurred to date or costs of similar performance obligations to evaluate the reasonableness of management’s estimates. ▪ Evaluated management’s ability to achieve the cost estimates by performing corroborating inquiries with the Company’s project managers and engineers, as appropriate; comparing the estimates to management’s work plans, engineering specifications, purchase orders, and/or supplier contracts as appropriate; and when considered necessary, observation of the work site to evaluate project status. /S/ DELOITTE & TOUCHE LLP Charlotte, North Carolina February 22, 2021 We have served as the Company's auditor since 2009. 42 Table of Contents BWX TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS ASSETS December 31, 2020 2019 (In thousands) Current Assets: Cash and cash equivalents $ 42,610 $ 86,540 Restricted cash and cash equivalents 3,070 3,056 Investments 3,707 5,843 Accounts receivable – trade, net 153,368 56,721 Accounts receivable – other 22,239 13,426 Retainages 55,172 46,670 Contracts in progress 449,176 376,037 Other current assets 44,256 41,462 Total Current Assets 773,598 629,755 Property, Plant and Equipment, Net 816,471 580,241 Investments 9,356 7,620 Goodwill 283,708 275,502 Deferred Income Taxes 49,415 58,689 Investments in Unconsolidated Affiliates 71,806 70,116 Intangible Assets 192,751 191,392 Other Assets 96,398 95,598 TOTAL $ 2,293,503 $ 1,908,913 See accompanying notes to consolidated financial statements. 43 Table of Contents BWX TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY December 31, 2020 2019 (In thousands, except share and per share amounts) Current Liabilities: Current maturities of long-term debt $ — $ 14,711 Bank overdraft 88,694 — Accounts payable 184,392 170,678 Accrued employee benefits 89,740 82,640 Accrued liabilities – other 78,028 52,213 Advance billings on contracts 83,581 75,425 Accrued warranty expense 5,292 9,042 Total Current Liabilities 529,727 404,709 Long-Term Debt 862,731 809,442 Accumulated Postretirement Benefit Obligation 25,689 23,259 Environmental Liabilities 84,153 80,368 Pension Liability 144,859 172,508 Other Liabilities 28,576 14,515 Commitments and Contingencies (Note 10) Stockholders' Equity: Common stock, par value $ 0.01 per share, authorized 325,000,000 shares; issued 127,009,536 and 126,579,285 shares at December 31, 2020 and 2019, respectively 1,270 1,266 Preferred stock, par value $ 0.01 per share, authorized 75,000,000 shares; no shares issued — — Capital in excess of par value 153,800 134,069 Retained earnings 1,549,950 1,344,383 Treasury stock at cost, 31,698,747 and 31,266,670 shares at December 31, 2020 and 2019, respectively ( 1,095,452 ) ( 1,068,164 ) Accumulated other comprehensive income (loss) 8,198 ( 7,448 ) Stockholders' Equity – BWX Technologies, Inc. 617,766 404,106 Noncontrolling interest 2 6 Total Stockholders' Equity 617,768 404,112 TOTAL $ 2,293,503 $ 1,908,913 See accompanying notes to consolidated financial statements. 44 Table of Contents BWX TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, 2020 2019 2018 (In thousands, except share and per share amounts) Revenues $ 2,123,516 $ 1,894,920 $ 1,799,889 Costs and Expenses: Cost of operations 1,548,119 1,361,056 1,295,876 Research and development costs 14,189 17,672 15,223 Losses (gains) on asset disposals and impairments, net ( 1,361 ) 2,824 64 Selling, general and administrative expenses 231,169 216,771 214,092 Total Costs and Expenses 1,792,116 1,598,323 1,525,255 Equity in Income of Investees 27,152 28,924 30,343 Operating Income 358,552 325,521 304,977 Other Income (Expense): Interest income 518 942 2,479 Interest expense ( 31,014 ) ( 35,320 ) ( 27,823 ) Other – net 34,116 22,599 512 Total Other Income (Expense) 3,620 ( 11,779 ) ( 24,832 ) Income before Provision for Income Taxes 362,172 313,742 280,145 Provision for Income Taxes 82,976 69,065 52,840 Net Income $ 279,196 $ 244,677 $ 227,305 Net Income Attributable to Noncontrolling Interest ( 526 ) ( 562 ) ( 347 ) Net Income Attributable to BWX Technologies, Inc. $ 278,670 $ 244,115 $ 226,958 Earnings per Common Share: Basic: Net Income Attributable to BWX Technologies, Inc. $ 2.92 $ 2.56 $ 2.29 Diluted: Net Income Attributable to BWX Technologies, Inc. $ 2.91 $ 2.55 $ 2.27 Shares used in the computation of earnings per share (Note 17): Basic 95,457,193 95,377,414 99,062,087 Diluted 95,726,497 95,810,538 100,019,053 See accompanying notes to consolidated financial statements. 45 Table of Contents BWX TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, 2020 2019 2018 (In thousands) Net Income $ 279,196 $ 244,677 $ 227,305 Other Comprehensive Income (Loss): Currency translation adjustments 15,685 5,263 ( 9,642 ) Derivative financial instruments: Unrealized (losses) gains arising during the period, net of tax benefit (provision) of $ 24 , $ 442 and $( 167 ), respectively ( 73 ) ( 1,586 ) 450 Reclassification adjustment for (gains) losses included in net income, net of tax provision (benefit) of $ 173 , $( 310 ) and $ 47 , respectively ( 487 ) 888 ( 118 ) Benefit obligations: Unrecognized losses arising during the period, net of tax benefit of $ 513 , $ 1,274 and $ 2,290 , respectively ( 1,820 ) ( 4,249 ) ( 8,444 ) Recognition of benefit plan costs, net of tax benefit of $( 645 ), $( 562 ) and $( 410 ), respectively 2,532 2,030 1,500 Investments: Unrealized (losses) gains arising during the period, net of tax provision of $( 56 ), $( 3 ) and $( 6 ), respectively ( 191 ) 418 ( 102 ) Reclassification adjustment for gains included in net income, net of tax provision of $ 0 , $ 0 and $ 1 , respectively — — ( 2 ) Other Comprehensive Income (Loss) 15,646 2,764 ( 16,358 ) Total Comprehensive Income 294,842 247,441 210,947 Comprehensive Income Attributable to Noncontrolling Interest ( 526 ) ( 562 ) ( 347 ) Comprehensive Income Attributable to BWX Technologies, Inc. $ 294,316 $ 246,879 $ 210,600 See accompanying notes to consolidated financial statements. 46 Table of Contents BWX TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock Capital In Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Stockholders' Equity Noncontrolling Interest Total Stockholders' Equity Shares Par Value (In thousands, except share and per share amounts) Balance December 31, 2017 125,381,591 $ 1,254 $ 98,843 $ 990,652 $ 9,454 $ ( 814,809 ) $ 285,394 $ 363 $ 285,757 Recently adopted accounting standards — — — 13,311 ( 3,385 ) — 9,926 — 9,926 Net income — — — 226,958 — — 226,958 347 227,305 Dividends declared ($ 0.64 per share) — — — ( 64,159 ) — — ( 64,159 ) — ( 64,159 ) Currency translation adjustments — — — — ( 9,642 ) — ( 9,642 ) — ( 9,642 ) Derivative financial instruments — — — — 332 — 332 — 332 Defined benefit obligations — — — — ( 6,944 ) — ( 6,944 ) — ( 6,944 ) Available-for-sale investments — — — — ( 104 ) — ( 104 ) — ( 104 ) Exercises of stock options 210,311 2 5,002 — — — 5,004 — 5,004 Shares placed in treasury — — — — — ( 222,986 ) ( 222,986 ) — ( 222,986 ) Stock-based compensation charges 279,964 3 11,880 — — — 11,883 — 11,883 Distributions to noncontrolling interests — — — — — — — ( 671 ) ( 671 ) Balance December 31, 2018 125,871,866 $ 1,259 $ 115,725 $ 1,166,762 $ ( 10,289 ) $ ( 1,037,795 ) $ 235,662 $ 39 $ 235,701 Recently adopted accounting standards — — — ( 1,219 ) 77 — ( 1,142 ) — ( 1,142 ) Net income — — — 244,115 — — 244,115 562 244,677 Dividends declared ($ 0.68 per share) — — — ( 65,275 ) — — ( 65,275 ) — ( 65,275 ) Currency translation adjustments — — — — 5,263 — 5,263 — 5,263 Derivative financial instruments — — — — ( 698 ) — ( 698 ) — ( 698 ) Defined benefit obligations — — — — ( 2,219 ) — ( 2,219 ) — ( 2,219 ) Available-for-sale investments — — — — 418 — 418 — 418 Exercises of stock options 246,967 2 5,623 — — — 5,625 — 5,625 Shares placed in treasury — — — — — ( 30,369 ) ( 30,369 ) — ( 30,369 ) Stock-based compensation charges 460,452 5 12,721 — — — 12,726 — 12,726 Distributions to noncontrolling interests — — — — — — — ( 595 ) ( 595 ) Balance December 31, 2019 126,579,285 $ 1,266 $ 134,069 $ 1,344,383 $ ( 7,448 ) $ ( 1,068,164 ) $ 404,106 $ 6 $ 404,112 Recently adopted accounting standards — — — — — — — — — Net income — — — 278,670 — — 278,670 526 279,196 Dividends declared ($ 0.76 per share) — — — ( 73,103 ) — — ( 73,103 ) — ( 73,103 ) Currency translation adjustments — — — — 15,685 — 15,685 — 15,685 Derivative financial instruments — — — — ( 560 ) — ( 560 ) — ( 560 ) Defined benefit obligations — — — — 712 — 712 — 712 Available-for-sale investments — — — — ( 191 ) — ( 191 ) — ( 191 ) Exercises of stock options 95,750 1 2,890 — — — 2,891 — 2,891 Shares placed in treasury — — — — — ( 27,288 ) ( 27,288 ) — ( 27,288 ) Stock-based compensation charges 334,501 3 16,841 — — — 16,844 — 16,844 Distributions to noncontrolling interests — — — — — — — ( 530 ) ( 530 ) Balance December 31, 2020 127,009,536 $ 1,270 $ 153,800 $ 1,549,950 $ 8,198 $ ( 1,095,452 ) $ 617,766 $ 2 $ 617,768 See accompanying notes to consolidated financial statements. 47 Table of Contents BWX TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2020 2019 2018 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 279,196 $ 244,677 $ 227,305 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 60,674 61,722 60,097 Income of investees, net of dividends ( 2,147 ) ( 7,969 ) ( 8,106 ) Provision for deferred taxes 7,890 3,794 17,446 Recognition of losses for pension and postretirement plans 9,548 6,222 34,554 Stock-based compensation expense 16,844 12,726 11,883 Other, net ( 792 ) 963 ( 2,238 ) Changes in assets and liabilities, net of effects from acquisitions: Accounts receivable ( 98,302 ) 15,605 37,282 Accounts payable ( 1,241 ) 44,592 1,888 Retainages ( 8,578 ) 11,477 24,911 Contracts in progress and advance billings on contracts ( 53,242 ) ( 78,645 ) ( 34,012 ) Income taxes 1,157 ( 3,833 ) ( 23,257 ) Accrued and other current liabilities 6,843 ( 14,135 ) 11,596 Pension liabilities, accrued postretirement benefit obligations and employee benefits ( 29,311 ) ( 8,822 ) ( 187,425 ) Other, net 7,903 ( 9,006 ) ( 2,634 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 196,442 279,368 169,290 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment ( 255,027 ) ( 182,124 ) ( 109,338 ) Acquisition of businesses ( 15,905 ) — ( 212,993 ) Purchases of securities ( 4,232 ) ( 4,208 ) ( 4,520 ) Sales and maturities of securities 6,360 5,874 3,933 Investments, net of return of capital, in equity method investees 88 255 ( 9,059 ) Other, net 3,397 208 5,253 NET CASH USED IN INVESTING ACTIVITIES ( 265,319 ) ( 179,995 ) ( 326,724 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of long-term debt 844,500 699,600 1,158,800 Repayments of long-term debt ( 794,676 ) ( 654,095 ) ( 876,206 ) Payment of debt issuance costs ( 6,803 ) — ( 9,443 ) Bank overdraft 88,694 — — Repurchases of common shares ( 21,960 ) ( 20,000 ) ( 214,759 ) Dividends paid to common shareholders ( 72,940 ) ( 65,374 ) ( 63,821 ) Exercises of stock options 2,812 4,446 3,573 Cash paid for shares withheld to satisfy employee taxes ( 5,249 ) ( 9,190 ) ( 6,796 ) Other, net ( 9,332 ) 900 ( 671 ) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 25,046 ( 43,713 ) ( 9,323 ) EFFECTS OF EXCHANGE RATE CHANGES ON CASH ( 271 ) 332 ( 9,979 ) TOTAL (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS ( 44,102 ) 55,992 ( 176,736 ) CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 92,400 36,408 213,144 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 48,298 $ 92,400 $ 36,408 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 38,267 $ 39,670 $ 16,993 Income taxes (net of refunds) $ 73,589 $ 70,056 $ 58,715 SCHEDULE OF NON-CASH INVESTING ACTIVITY: Accrued capital expenditures included in accounts payable $ 51,492 $ 39,528 $ 29,470 See accompanying notes to consolidated financial statements. 48 Table of Contents BWX TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020 NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES We have presented the consolidated financial statements of BWX Technologies, Inc. ("BWXT") in U.S. dollars in accordance with accounting principles generally accepted in the United States ("GAAP"). We use the equity method to account for investments in entities that we do not control, but over which we have the ability to exercise significant influence. We generally refer to these entities as "joint ventures." We have eliminated all intercompany transactions and accounts. We have reclassified certain amounts previously reported to conform to the presentation at December 31, 2020 and for the year ended December 31, 2020. On June 30, 2015, we completed the spin-off of our former Power Generation business (the "spin-off") into an independent, publicly traded company named Babcock & Wilcox Enterprises, Inc. ("BWE"). We present the notes to our consolidated financial statements on the basis of continuing operations, unless otherwise stated. Unless the context otherwise indicates, "we," "us" and "our" mean BWXT and its consolidated subsidiaries. Reportable Segments We operate in three reportable segments: Nuclear Operations Group, Nuclear Power Group and Nuclear Services Group. Our reportable segments are further described as follows: • Our Nuclear Operations Group segment manufactures naval nuclear reactors for the U.S. Naval Nuclear Propulsion Program for use in submarines and aircraft carriers. Through this segment, we own and operate manufacturing facilities located in Lynchburg, Virginia; Barberton, Ohio; Mount Vernon, Indiana; Euclid, Ohio; and Erwin, Tennessee. The Lynchburg operations fabricate fuel-bearing precision components that range in weight from a few grams to hundreds of tons. In-house capabilities also include wet chemistry uranium processing, advanced heat treatment to optimize component material properties and a controlled, clean-room environment with the capacity to assemble railcar-size components. The Barberton and Mount Vernon locations specialize in the design and manufacture of heavy components inclusive of fabrication activities for submarine missile launch tubes. The Euclid facility fabricates electro-mechanical equipment and performs design, manufacturing, inspection, assembly and testing activities. Fuel for the naval nuclear reactors is provided by Nuclear Fuel Services, Inc. ("NFS"), one of our wholly owned subsidiaries. Located in Erwin, NFS also downblends Cold War-era government stockpiles of high-enriched uranium. • Our Nuclear Power Group segment fabricates commercial nuclear steam generators, nuclear fuel, fuel handling systems, pressure vessels, reactor components, heat exchangers, tooling delivery systems and other auxiliary equipment, including containers for the storage of spent nuclear fuel and other high-level waste and supplies nuclear-grade materials and precisely machined components for nuclear utility customers. BWXT has supplied the nuclear industry with more than 1,300 large, heavy components worldwide and is the only commercial heavy nuclear component manufacturer in North America. This segment also provides specialized engineering services that include structural component design, 3-D thermal-hydraulic engineering analysis, weld and robotic process development, electrical and controls engineering and metallurgy and materials engineering. In addition, this segment offers in-plant inspection, maintenance and modification services for nuclear steam generators, heat exchangers, reactors, fuel handling systems and balance of plant equipment, as well as specialized non-destructive examination and tooling/repair solutions. This segment is also a leading global manufacturer and supplier of critical medical radioisotopes and radiopharmaceuticals for research, diagnostic and therapeutic uses. • Our Nuclear Services Group segment provides various services to the U.S. Government including nuclear materials management and operation, environmental management and administrative and operating services for various U.S. Government-owned facilities. These services are provided to the U.S. Department of Energy ("DOE"), including the National Nuclear Security Administration ("NNSA"), the Office of Nuclear Energy, the Office of Science and the Office of Environmental Management, and NASA. Through this segment we deliver services and management solutions to nuclear and high-consequence operations. A significant portion of this segment's operations is conducted through joint ventures. This segment also develops technology for a variety of applications, including advanced nuclear power sources, and offers complete advanced nuclear fuel and reactor design and engineering, licensing and manufacturing services for new advanced nuclear reactors. 49 Table of Contents See Note 15 for financial information about our segments. Divestiture of U.S.-Based Commercial Nuclear Services Business On May 29, 2020, our subsidiary BWXT Nuclear Energy, Inc. divested its U.S.-based commercial nuclear services business, a component of our Nuclear Services Group segment. In a cashless transaction, we exchanged net assets totaling $ 18.0 million, consisting primarily of property, plant and equipment and certain warranty obligations, for a manufacturing facility and the associated land of approximately the same value. The acquired assets are reported as part of the Nuclear Services Group segment. Recently Adopted Accounting Standards On January 1, 2020, we adopted the update to the Financial Accounting Standards Board ("FASB") Topic Financial Instruments – Credit Losses . This update requires entities to recognize expected credit losses immediately in the financial statements. We considered our customer base, credit loss history and expected loss rate in our evaluation of expected credit losses. The adoption of the provisions in this update did not have an impact on our financial position, results of operations or cash flows. On January 1, 2020, we adopted the update to the FASB Topic Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This update simplifies the accounting for goodwill impairment by eliminating the second step from the goodwill impairment test. Goodwill impairment is now determined by comparing the fair value of a reporting unit with its carrying amount. The adoption of the provisions in this update did not have an impact on our financial position, results of operations or cash flows. In December 2019, the FASB issued an update to the FASB Topic Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . This update simplifies various aspects related to the accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740, simplifies when companies recognize deferred taxes in an interim period and clarifies certain aspects of the current guidance to promote consistent application. We elected to early adopt this update effective January 1, 2020, which did not have a material impact on our financial position, results of operations or cash flows. On January 1, 2020, we adopted the update to the FASB Topic Compensation – Retirement Benefits – Defined Benefit Plans – General . This update modifies the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. This update requires disclosure changes to be presented on a retrospective basis. The adoption of the provisions in this update did not have an impact on our financial position, results of operations or cash flows. Use of Estimates We use estimates and assumptions to prepare our financial statements in conformity with GAAP. Some of our more significant estimates include estimates of costs to complete long-term contracts and the associated revenues, estimates of the fair value of acquired intangible and other assets, estimates we make in selecting assumptions related to the valuations of our pension and postretirement benefit plans, including the selection of our discount rates, mortality and expected rates of return on our pension plan assets and estimates we make in evaluating our asset retirement obligations. These estimates and assumptions affect the amounts we report in our financial statements and accompanying notes. Our actual results could differ from these estimates. Variances could result in a material effect on our financial condition and results of operations in future periods. Contracts and Revenue Recognition We generally recognize contract revenues and related costs over time for individual performance obligations based on a cost-to-cost method in accordance with FASB Topic Revenue from Contracts with Customers . We recognize estimated contract revenue and resulting income based on the measurement of the extent of progress toward completion as a percentage of the total project. Certain costs may be excluded from the cost-to-cost method of measuring progress, such as significant costs for uninstalled materials, if such costs do not depict our performance in transferring control of goods or services to the customer. We review contract price and cost estimates periodically as the work progresses and reflect adjustments proportionate to the percentage-of-completion in income in the period when those estimates are revised. Certain of our contracts recognize revenue at a point in time, and revenue on these contracts is recognized when control transfers to the customer. The majority of our revenue that is recognized at a point in time is related to parts and certain medical radioisotopes and radiopharmaceuticals in our Nuclear Power Group segment. For all contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined. 50 Table of Contents Warranty Expense We accrue estimated warranty expense, included in Cost of operations on our consolidated statements of income, to satisfy contractual warranty requirements when we recognize the associated revenue on the related contracts. In addition, we record specific provisions or reductions where we expect the actual warranty costs to significantly differ from the accrued estimates. Such changes could have a material effect on our consolidated financial condition, results of operations and cash flows. The following summarizes the changes in the carrying amount of Accrued warranty expense: Year Ended December 31, 2020 2019 2018 (In thousands) Balance at beginning of period $ 9,042 $ 10,344 $ 13,428 Additions 1,341 2,232 1,494 Expirations and other changes (1) ( 1,624 ) ( 2,728 ) ( 3,367 ) Payments ( 1,026 ) ( 1,065 ) ( 663 ) Translation and other (2) ( 2,441 ) 259 ( 548 ) Balance at end of period $ 5,292 $ 9,042 $ 10,344 (1) Includes discounts provided to customers in satisfaction of warranty obligations totaling $( 1.2 ) million in each of the years ended December 31, 2019 and 2018. (2) Includes $( 2.5 ) million related to the divestiture of the U.S.-based commercial nuclear services business during the year ended December 31, 2020. Stock-Based Compensation We expense stock-based compensation in accordance with FASB Topic Compensation – Stock Compensation. Under this topic, the fair value of equity-classified awards, such as restricted stock, performance shares and stock options, is determined on the date of grant and is not remeasured. The fair value of liability-classified awards, such as cash-settled stock appreciation rights, restricted stock units and performance units, is determined on the date of grant and is remeasured at the end of each reporting period through the date of settlement. Grant date fair values for restricted stock, restricted stock units, performance shares and performance units are determined using the closing price of our common stock on the date of grant. Under the provisions of this FASB topic, we recognize expense for all share-based awards granted on a straight-line basis over the requisite service periods of the awards, which is generally equivalent to the vesting term. This topic requires compensation expense to be recognized such that compensation expense is recorded only for those awards expected to vest. As a result, we periodically review the amount of actual forfeitures and record any adjustments deemed necessary each reporting period. We also recognize excess tax benefits in our provision for income taxes. These excess tax benefits result from tax deductions in excess of the cumulative compensation expense recognized for options exercised and other equity-classified awards. Additionally, this FASB topic amended FASB Topic Statement of Cash Flows to require excess tax benefits to be classified along with other income tax cash flows as an operating activity. In addition, cash flows related to employee taxes paid for withheld shares are classified as a financing activity. See Note 9 for a further discussion of stock-based compensation. Grant Accounting We recognize amounts related to grants as a reduction of expense in the period in which the related costs for which the grants are intended to compensate are recognized and we are reasonably assured to receive payment. On April 11, 2020, the Canadian Government enacted the Canada Emergency Wage Subsidy ("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. 51 Table of Contents Research and Development Our research and development activities are related to the development and improvement of new and existing products and equipment, as well as conceptual and engineering evaluation for translation into practical applications. We charge the costs of research and development unrelated to specific contracts as incurred. Contractual arrangements for customer-sponsored research and development can vary on a case-by-case basis and include contracts, cooperative agreements and grants. Research and development activities totaled $ 40.8 million, $ 66.9 million and $ 63.4 million in the years ended December 31, 2020, 2019 and 2018, respectively. This includes amounts paid for by our customers of $ 26.6 million, $ 49.2 million and $ 48.2 million, in the years ended December 31, 2020, 2019 and 2018, respectively. Capitalization of Interest Cost We capitalize interest in accordance with FASB Topic Interest . We incurred total interest of $ 40.8 million, $ 41.4 million and $ 31.5 million in the years ended December 31, 2020, 2019 and 2018, respectively, of which we capitalized $ 9.8 million, $ 6.1 million and $ 3.7 million in the years ended December 31, 2020, 2019 and 2018, respectively. Income Taxes Income tax expense for federal, foreign, state and local income taxes is calculated on pre-tax income based on current tax law and includes the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We assess deferred taxes and the adequacy of the valuation allowance on a quarterly basis. In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. We record interest and penalties (net of any applicable tax benefit) related to income taxes as a component of Provision for Income Taxes on our consolidated statements of income. We would be subject to withholding taxes if we were to distribute earnings from certain foreign subsidiaries, and unrecognized deferred income tax liabilities, including withholding taxes, would be payable upon distribution of these earnings. We consider the earnings of our non-U.S. subsidiaries to be permanently reinvested. Earnings Per Share We have computed earnings per common share on the basis of the weighted-average number of common shares, and, where dilutive, common share equivalents, outstanding during the indicated periods. We issue a number of forms of stock-based compensation periodically, including incentive and non-qualified stock options, restricted stock, restricted stock units, performance shares and performance units, subject to satisfaction of specific performance goals. We include the shares applicable to these plans in our computation of diluted earnings per share when related performance criteria have been met. Cash and Cash Equivalents and Restricted Cash and Cash Equivalents Our cash equivalents are highly liquid investments with maturities of three months or less when we purchase them. We record cash and cash equivalents as restricted when we are unable to freely use such cash and cash equivalents for our general operating purposes. 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. 52 Table of Contents The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents on our consolidated balance sheets to the totals presented on our consolidated statements of cash flows: December 31, 2020 2019 (In thousands) Cash and cash equivalents $ 42,610 $ 86,540 Restricted cash and cash equivalents 3,070 3,056 Restricted cash and cash equivalents included in Other Assets 2,618 2,804 Total cash and cash equivalents and restricted cash and cash equivalents as presented on our consolidated statements of cash flows $ 48,298 $ 92,400 Investments Our investment portfolio consists primarily of U.S. Government and agency securities, corporate bonds and equities and mutual funds. Our debt securities are carried at fair value and are either classified as trading, with unrealized gains and losses reported in earnings, or as available-for-sale, with the unrealized gains and losses, net of tax, reported as a component of Accumulated other comprehensive income. Our equity securities are carried at fair value with the unrealized gains and losses reported in earnings. We classify investments available for current operations in the consolidated balance sheets as current assets, while we classify investments held for long-term purposes as non-current assets. We adjust the amortized cost of debt securities for amortization of premiums and accretion of discounts to maturity, and such adjustments are included in Interest income. We include realized gains and losses on our investments in Other – net. The cost of securities sold is based on the specific identification method. We include interest on securities in Interest income. Inventories We carry our inventory at the lower of cost or net realizable value using either the weighted average or first-in, first-out methods. At December 31, 2020 and 2019, Other current assets included inventories totaling $ 15.0 million and $ 17.1 million, respectively, consisting entirely of raw materials and supplies. Property, Plant and Equipment We carry our property, plant and equipment at depreciated cost, less any impairment provisions. We depreciate our property, plant and equipment using the straight-line method over estimated economic useful lives of eight to 40 years for buildings and three to 14 years for machinery and equipment. Our depreciation expense was $ 50.3 million, $ 51.0 million and $ 48.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. We expense the costs of maintenance, repairs and renewals that do not materially prolong the useful life of an asset as we incur them. Property, plant and equipment is stated at cost and is set forth below: December 31, 2020 2019 (In thousands) Land $ 9,585 $ 8,919 Buildings 267,808 221,462 Machinery and equipment 827,785 775,997 Property under construction 420,374 265,715 1,525,552 1,272,093 Less: Accumulated depreciation 709,081 691,852 Property, Plant and Equipment, Net $ 816,471 $ 580,241 Goodwill Goodwill represents the excess of the cost of our acquired businesses over the fair value of the net assets acquired. We perform testing of goodwill for impairment annually. We may elect to perform a qualitative test when we believe that there is sufficient excess fair value over carrying value based on our most recent quantitative assessment, adjusted for relevant events and circumstances that could affect fair value during the current year. If we conclude based on this assessment that it is more 53 Table of Contents likely than not that the reporting unit is not impaired, we do not perform a quantitative impairment test. In all other circumstances, we compare the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying value, no impairment charge is recorded. If the carrying amount of a reporting unit exceeds its fair value, an impairment charge is recorded to goodwill in the amount by which carrying value exceeds fair value. The following summarizes the changes in the carrying amount of Goodwill: Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total (In thousands) Balance at December 31, 2018 $ 110,939 $ 118,143 $ 45,000 $ 274,082 Translation and other (1) — 1,420 — 1,420 Balance at December 31, 2019 $ 110,939 $ 119,563 $ 45,000 $ 275,502 Acquisition of Laker Energy Products (Note 2) — 5,753 — 5,753 Translation — 2,453 — 2,453 Balance at December 31, 2020 $ 110,939 $ 127,769 $ 45,000 $ 283,708 (1) Includes an adjustment of $( 3.2 ) million, net of tax, to correct the business combination accounting for our 2016 acquisition. Investments in Unconsolidated Affiliates We use the equity method of accounting for affiliates in which we are able to exert significant influence. Currently, all of our material investments in affiliates that are not consolidated are recorded using the equity method. Affiliates in which we are unable to exert significant influence are carried at fair value. Intangible Assets Intangible assets are recognized at fair value when acquired. Intangible assets with definite lives are amortized to Costs and Expenses using the straight-line method over their estimated useful lives and tested for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. Intangible assets with indefinite lives are not amortized and are subject to annual impairment testing. We may elect to perform a qualitative assessment when testing indefinite-lived intangible assets for impairment to determine whether events or circumstances affecting significant inputs related to the most recent quantitative evaluation have occurred, indicating that it is more likely than not that the indefinite-lived intangible asset is impaired. Otherwise, we test indefinite-lived intangible assets for impairment by quantitatively determining the fair value of the indefinite-lived intangible asset and comparing the fair value of the intangible asset to its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, we recognize impairment for the amount of the difference. 54 Table of Contents Our Intangible Assets were as follows: December 31, 2020 2019 2018 (In thousands) Amortized intangible assets: Gross cost: Technical support agreement $ 68,785 $ 67,423 $ 64,749 Customer relationships 39,954 39,555 38,771 Unpatented technology 37,529 36,785 35,327 Favorable operating leases — — 35,161 CNSC class 1B nuclear facility license 26,528 26,002 24,971 Acquired backlog 7,487 — 8,079 Patented technology 780 765 734 All other 858 2,200 2,200 Total $ 181,921 $ 172,730 $ 209,992 Accumulated amortization: Technical support agreement $ ( 7,227 ) $ ( 4,153 ) $ ( 1,173 ) Customer relationships ( 15,996 ) ( 13,841 ) ( 11,767 ) Unpatented technology ( 4,584 ) ( 2,805 ) ( 1,194 ) Favorable operating leases — — ( 1,295 ) CNSC class 1B nuclear facility license ( 3,573 ) ( 2,635 ) ( 1,698 ) Acquired backlog ( 1,248 ) — ( 6,581 ) Patented technology ( 286 ) ( 212 ) ( 136 ) All other ( 86 ) ( 1,522 ) ( 1,302 ) Total $ ( 33,000 ) $ ( 25,168 ) $ ( 25,146 ) Net amortized intangible assets $ 148,921 $ 147,562 $ 184,846 Unamortized intangible assets: NRC category 1 license $ 43,830 $ 43,830 $ 43,830 The following summarizes the changes in the carrying amount of Intangible Assets: Year Ended December 31, 2020 2019 2018 (In thousands) Balance at beginning of period $ 191,392 $ 228,676 $ 110,405 Acquisitions (Note 2) 8,180 — 139,257 Amortization expense ( 8,824 ) ( 9,128 ) ( 11,490 ) Reclassification of right-of-use assets — ( 33,866 ) — Translation and other (1) 2,003 5,710 ( 9,496 ) Balance at end of period $ 192,751 $ 191,392 $ 228,676 (1) Includes $( 0.6 ) million related to the divestiture of the U.S.-based commercial nuclear services business during the year ended December 31, 2020. Estimated amortization expense for the next five fiscal years is as follows (amounts in thousands): Year Ended December 31, Amount 2021 $ 9,130 2022 $ 9,130 2023 $ 9,130 2024 $ 9,130 2025 $ 9,130 55 Table of Contents Leases We lease certain manufacturing facilities, office space and equipment under operating leases with terms of one to 20 years. Certain of the leases include options to renew for periods of one to 10 years. We include lease options in our determination of the right-of-use asset and lease liability if it is reasonably certain that we will exercise one or more of the options. Leases with initial terms of 12 months or less are excluded from our right-of-use assets and lease liabilities. Our right-of-use assets are included in Other Assets on our consolidated balance sheet. Our current lease liabilities are included in Accrued liabilities – other , and our noncurrent lease liabilities are included in Other Liabilities on our consolidated balance sheet. We use discount rates based on our incremental borrowing rate as most of our leases do not provide an implicit rate that can be readily determined. During the year ended December 31, 2020, we recognized lease expense of $ 7.7 million, which included $ 1.5 million related to the amortization of favorable lease agreements, and paid cash of $ 6.2 million for our operating leases. During the years ended December 31, 2019 and 2018, we recognized lease expense of $ 8.1 million and $ 6.2 million, respectively. At December 31, 2020, our weighted-average remaining lease term was 5.6 years, and for the purpose of measuring the present value of our lease liabilities, the weighted-average discount rate was 4.64 %. The maturities of our lease liabilities at December 31, 2020 were as follows (amounts in thousands): 2021 $ 3,348 2022 1,926 2023 1,182 2024 697 2025 507 Thereafter 2,828 Total lease payments $ 10,488 Less: Interest ( 1,722 ) Present value of lease liabilities (1) $ 8,766 (1) Includes current lease liabilities of $ 3.3 million. At December 31, 2020, our right-of-use assets totaled $ 41.3 million. The difference between the right-of-use assets and lease liabilities was primarily the result of our adoption of the update to the FASB Topic Leases on January 1, 2019, which resulted in reclassifications from Intangible Assets of favorable leases related to recent acquisitions. Deferred Debt Issuance Costs We have included deferred debt issuance costs in the consolidated balance sheets as a direct deduction from the carrying amount of our debt liability. We amortize deferred debt issuance costs as interest expense over the life of the related debt. The following summarizes the changes in the carrying amount of these assets: Year Ended December 31, 2020 2019 2018 (In thousands) Balance at beginning of period $ 8,006 $ 9,583 $ 4,202 Additions 6,803 — 9,443 Interest expense (1) ( 2,540 ) ( 1,577 ) ( 4,062 ) Balance at end of period $ 12,269 $ 8,006 $ 9,583 (1) Includes the recognition of prior deferred debt issuance costs associated with former credit facilities of $( 0.7 ) million and $( 2.4 ) million for the years ended December 31, 2020 and 2018, respectively. Pension Plans and Postretirement Benefits We sponsor various defined benefit pension and postretirement benefit plans covering certain employees of our U.S. and Canadian subsidiaries. We utilize actuarial valuations to calculate the cost and benefit obligations of our pension and postretirement benefits. The actuarial valuations utilize significant assumptions in the determination of our benefit cost and obligations, including assumptions regarding discount rates, expected returns on plan assets, mortality and health care cost trends. We determine our discount rate based on a yield curve comprised of rates of return on high-quality, fixed-income investments currently available and expected to be available during the period to maturity of our pension and postretirement 56 Table of Contents benefit plan obligations. The expected rate of return on plan assets assumption is based on capital market assumptions of the long-term expected returns for the investment mix of assets currently in the portfolio. The expected rate of return on plan assets is determined to be the weighted-average of the nominal returns based on the weightings of the classes within the total asset portfolio. Expected health care cost trends represent expected annual rates of change in the cost of health care benefits and are estimated based on analysis of health care cost inflation. The components of benefit cost related to service cost, interest cost, expected return on plan assets and prior service cost amortization are recorded on a quarterly basis based on actuarial assumptions. In the fourth quarter of each year, or as interim remeasurements are required, we immediately recognize net actuarial gains and losses in earnings as a component of net periodic benefit cost. Recognized net actuarial gains and losses consist primarily of our reported actuarial gains and losses and the difference between the actual return on plan assets and the expected return on plan assets. We recognize the funded status of each plan as either an asset or a liability in the consolidated balance sheets. The funded status is the difference between the fair value of plan assets and the present value of its benefit obligation, determined on a plan-by-plan basis. Our pension plan assets can include assets that are difficult to value. See Note 7 for detailed information regarding our plan assets. Asset Retirement Obligations and Environmental Cleanup Costs We accrue for future decommissioning of our nuclear facilities that will permit the release of these facilities to unrestricted use at the end of each facility's service life, which is a requirement of our licenses from the U.S. Nuclear Regulatory Commission ("NRC") and the Canadian Nuclear Safety Commission ("CNSC"). In accordance with the FASB Topic Asset Retirement and Environmental Obligations, we record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. 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. 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. Upon settlement of a liability, we will settle the obligation for its recorded amount or incur a gain or loss. This topic applies to environmental liabilities associated with assets that we currently operate and are obligated to remove from service. For environmental liabilities associated with assets that we no longer operate, we have accrued amounts based on the estimated costs of cleanup activities for which we are responsible, net of any cost-sharing arrangements. 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. Government is obligated to pay substantially all of the decommissioning costs. Substantially all of our asset retirement obligations relate to the remediation of our nuclear analytical laboratory and the NFS facility in our Nuclear Operations Group segment as well as certain facilities in our Nuclear Power Group segment. The following summarizes the changes in the carrying amount of these liabilities: Year Ended December 31, 2020 2019 2018 (In thousands) Balance at beginning of period $ 77,288 $ 90,822 $ 78,036 Costs incurred ( 1,608 ) ( 10,380 ) ( 1,011 ) Additions/adjustments ( 3,284 ) ( 5,030 ) 8,000 Acquisitions — — 2,062 Accretion 5,343 5,379 5,523 Translation and other (1) 371 ( 3,503 ) ( 1,788 ) Balance at end of period (2) $ 78,110 $ 77,288 $ 90,822 (1) Includes an adjustment of $( 4.3 ) million to correct the business combination accounting for our 2016 acquisition during the year ended December 31, 2019. (2) Includes current asset retirement obligations of $ 2.8 million, $ 5.7 million and $ 13.8 million at December 31, 2020, 2019 and 2018, respectively. 57 Table of Contents Self-Insurance We have a wholly owned insurance subsidiary that provides employer's liability, general and automotive liability and primary workers' compensation insurance and, from time to time, builder's risk insurance (within certain limits) to our companies. We may also, in the future, have this insurance subsidiary accept other risks that we cannot or do not wish to transfer to outside insurance companies. Included in Other Liabilities on our consolidated balance sheets are reserves for self-insurance totaling $ 5.0 million and $ 5.2 million at December 31, 2020 and 2019, respectively. Loss Contingencies We accrue liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such probable loss is not reasonably estimable. Due to the nature of our business, we are, from time to time, involved in investigations, litigation, disputes or claims related to our business activities, as discussed in Note 10. Our losses are typically resolved over long periods of time and are often difficult to assess and estimate due to, among other reasons, the possibility of multiple actions by third parties; the attribution of damages, if any, among multiple defendants; plaintiffs, in most cases involving personal injury claims, do not specify the amount of damages claimed; the discovery process may take multiple years to complete; during the litigation process, it is common to have multiple complex unresolved procedural and substantive issues; the potential availability of insurance and indemnity coverages; the wide-ranging outcomes reached in similar cases, including the variety of damages awarded; the likelihood of settlements for de minimus amounts prior to trial; the likelihood of success at trial; and the likelihood of success on appeal. Consequently, it is possible future earnings could be affected by changes in our assessments of the probability that a loss has been incurred in a material pending litigation against us and/or changes in our estimates related to such matters. Accumulated Other Comprehensive Income The components of Accumulated other comprehensive income included in Stockholders' Equity are as follows: December 31, 2020 2019 (In thousands) Currency translation adjustments $ 24,454 $ 8,769 Net unrealized (loss) gain on derivative financial instruments ( 496 ) 64 Unrecognized prior service cost on benefit obligations ( 15,902 ) ( 16,614 ) Net unrealized gain on available-for-sale investments 142 333 Accumulated other comprehensive income $ 8,198 $ ( 7,448 ) 58 Table of Contents The amounts reclassified out of Accumulated other comprehensive income by component and the affected consolidated statements of income line items are as follows: Year Ended December 31, 2020 2019 2018 Accumulated Other Comprehensive Income (Loss) Component Recognized (In thousands) Line Item Presented Realized (loss) gain on derivative financial instruments $ ( 35 ) $ ( 132 ) $ ( 242 ) Revenues 695 ( 1,066 ) 407 Cost of operations 660 ( 1,198 ) 165 Total before tax ( 173 ) 310 ( 47 ) Provision for Income Taxes $ 487 $ ( 888 ) $ 118 Net Income Amortization of prior service cost on benefit obligations $ ( 3,177 ) $ ( 2,592 ) $ ( 1,910 ) Other – net 645 562 410 Provision for Income Taxes $ ( 2,532 ) $ ( 2,030 ) $ ( 1,500 ) Net Income Realized gains on investments $ — $ — $ 3 Other – net — — ( 1 ) Provision for Income Taxes $ — $ — $ 2 Net Income Total reclassification for the period $ ( 2,045 ) $ ( 2,918 ) $ ( 1,380 ) Foreign Currency Translation We translate assets and liabilities of our foreign operations into U.S. dollars at current exchange rates, and we translate income statement items at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency financial statements as a component of Accumulated other comprehensive income. We report foreign currency transaction gains and losses in income. We have included in Other – net transaction gains (losses) of $( 0.6 ) million, $ 1.0 million and $ 2.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Derivative Financial Instruments Our operations give rise to exposure to market risks from changes in foreign currency exchange ("FX") rates. We use derivative financial instruments, primarily FX forward contracts, to reduce the impact of changes in FX rates on our operating results. We use these instruments to hedge our exposure associated with revenues or costs on our long-term contracts and other transactions that are denominated in currencies other than our operating entities' functional currencies. We do not hold or issue derivative financial instruments for trading or other speculative purposes. We enter into derivative financial instruments primarily as hedges of certain firm purchase and sale commitments and loans between domestic and foreign subsidiaries denominated in foreign currencies. We record these contracts at fair value on our consolidated balance sheets. Based on the hedge designation at inception of the contract, the related gains and losses on these contracts are deferred in stockholders' equity as a component of Accumulated other comprehensive income until the hedged item is recognized in earnings. The gain or loss on a derivative instrument not designated as a hedging instrument is immediately recognized in earnings. Gains and losses on derivative financial instruments that require immediate recognition are included as a component of Other – net on our consolidated statements of income and are recorded in the statements of cash flows based on the nature and use of the instruments. We have designated the majority of our FX forward contracts that qualify for hedge accounting as cash flow hedges. The hedged risk is the risk of changes in functional-currency-equivalent cash flows attributable to changes in FX spot rates of forecasted transactions primarily related to long-term contracts. We exclude from our assessment of effectiveness the portion of the fair value of the FX forward contracts attributable to the difference between FX spot rates and FX forward rates. At December 31, 2020, we had deferred approximately $( 0.5 ) million of net losses on these derivative financial instruments. Assuming market conditions continue, we expect to recognize the majority of this amount in the next twelve months. For the years ended December 31, 2020, 2019 and 2018, we recognized $ 8.7 million, $( 1.0 ) million and $( 4.7 ) million, respectively, of (gains) losses associated with FX forward contracts not designated as hedges. 59 Table of Contents At December 31, 2020, our derivative financial instruments consisted of FX forward contracts with a total notional value of $ 245.3 million with maturities extending to March 2023. These instruments consist primarily of FX forward contracts to purchase or sell Canadian dollars and Euros. We are exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments. We attempt to mitigate this risk by using major financial institutions with high credit ratings. Our counterparties to derivative financial instruments have the benefit of the same collateral arrangements and covenants as described under our credit facility. NOTE 2 – ACQUISITIONS Laker Energy Products Ltd. On January 2, 2020, our subsidiary BWXT Canada Ltd. acquired Laker Energy Products Ltd. ("Laker Energy Products") for CAD 23.3 million ($ 17.8 million U.S. dollar equivalent). At December 31, 2020, we are subject to the payment of contingent consideration totaling CAD 5.0 million, of which we have recognized CAD 2.5 million as a component of the purchase price. Our purchase price allocation resulted in the recognition of $ 8.4 million of Property, Plant and Equipment, Net, $ 8.2 million of Intangible Assets and $ 5.8 million of Goodwill. In addition, we recognized right-of-use assets and lease liabilities of $ 2.7 million. Laker Energy Products is a global supplier of nuclear-grade materials and precisely machined components for CANDU nuclear power utilities and employs approximately 140 personnel. Laker Energy Products is reported as part of our Nuclear Power Group segment. Nordion Medical Isotope Business On July 30, 2018, our subsidiary BWXT ITG Canada, Inc. acquired the Nordion medical isotope business (the "MI business") for $ 213.0 million. The MI business is a leading global manufacturer and supplier of critical medical radioisotopes and radiopharmaceuticals for research, diagnostic and therapeutic uses. Its customers include radiopharmaceutical companies, hospitals and radiopharmacies. Its primary operations are located in Kanata, Ontario, Canada and Vancouver, British Columbia, Canada. This acquisition added approximately 150 highly trained and experienced personnel, two specialized production centers and a uniquely licensed infrastructure. In addition to the growing portfolio of radioisotope products we acquired, the MI business will be the platform from which we plan to launch our Molybdenum-99 product line and a number of future radioisotope-based imaging, diagnostic and therapeutic products. This business is reported as part of our Nuclear Power Group segment. The purchase price of the acquisition has been allocated among assets acquired and liabilities assumed at fair value, with the excess purchase price recorded as goodwill. Our purchase price allocation is as follows (amounts in thousands): Accounts receivable – trade $ 7,732 Contracts in progress 51 Inventories 2,113 Other current assets 97 Property, plant and equipment 12,948 Goodwill 62,495 Deferred Income Taxes 3,006 Intangible assets 139,257 Total assets acquired $ 227,699 Accounts payable $ 654 Accrued employee benefits 579 Accrued liabilities – other 1,665 Environmental liabilities 2,062 Pension liability 9,746 Total liabilities assumed $ 14,706 Net assets acquired $ 212,993 Amount of tax deductible goodwill $ 53,693 60 Table of Contents The intangible assets included above consist of the following (dollar amounts in thousands): Amount Amortization Period Technical support agreement $ 67,500 23 years Unpatented technology $ 33,000 23 years Favorable operating leases $ 28,157 13 - 30 years Customer relationship $ 10,600 23 years The following unaudited pro forma financial information presents our results of operations for the years ended December 31, 2018 and 2017 as if the acquisition of the MI business had occurred on January 1, 2017. The unaudited pro forma financial information below is not intended to represent or be indicative of our actual consolidated results had we completed the acquisition at January 1, 2017. This information is presented for comparative purposes only and should not be taken as representative of our future consolidated results of operations. Year Ended December 31, 2018 2017 (In thousands, except per share amounts) Revenues $ 1,825,029 $ 1,726,135 Net Income Attributable to BWX Technologies, Inc. $ 228,545 $ 143,475 Basic Earnings per Common Share $ 2.31 $ 1.44 Diluted Earnings per Common Share $ 2.29 $ 1.43 The unaudited pro forma results include the following pre-tax adjustments to the historical results presented above: • Increase in amortization expense related to timing of amortization of the fair value of identifiable intangible assets acquired of approximately $ 3.5 million and $ 6.0 million for the years ended December 31, 2018 and 2017, respectively. • Additional interest expense associated with the incremental borrowings that would have been incurred to acquire the MI business as of January 1, 2017 of approximately $ 2.4 million and $ 5.2 million for the years ended December 31, 2018 and 2017, respectively. • Elimination of $ 2.5 million in acquisition related costs recognized in the year ended December 31, 2018 that are not expected to be recurring. NOTE 3 – REVENUE RECOGNITION The adoption of FASB Topic Revenue from Contracts with Customers , which was recognized in a cumulative catch-up adjustment on January 1, 2018, resulted in an increase to Retained earnings of $ 9.9 million. Within our Nuclear Operations Group segment, we continue to recognize revenue over time and now measure progress on performance obligations using a cost-to-cost method. Prior to January 1, 2018, we utilized man-hours or a cost-to-cost method to measure progress on certain performance obligations within this segment. The performance obligations identified for recognizing revenue are similar to our historical units of account. As a result of the change to a cost-to-cost method, the timing of revenue recognition on affected contracts, in the aggregate, results in the recognition of revenue and cost of operations earlier in the process of satisfying performance obligations. This change impacted the life-to-date revenue and cost of operations recognized on performance obligations, and the adjustment to capture the impact of the new revenue recognition standard was recorded as a cumulative catch-up adjustment in Retained earnings. The impact of the adoption of the new revenue standard on our Nuclear Power Group and Nuclear Services Group segments was not material. Contracts and Revenue Recognition Nuclear Operations Group Our Nuclear Operations Group segment recognizes revenue over time for the manufacturing of naval nuclear reactor components and fuel, submarine missile launch tubes and the downblending of high-enriched uranium. Certain of our contracts 61 Table of Contents contain two or more different types of components, each of which we identify as a separate performance obligation. We recognize revenue using a cost-to-cost method to measure progress as control is continually transferred to the customer as we incur costs on the performance obligations. We allocate revenue to the individual performance obligations within contracts with multiple performance obligations based on the stand-alone selling price of the individual performance obligations. Our fixed-price incentive fee contracts include incentives that we concluded to be variable consideration. The amount of the variable consideration to which we are entitled is dependent on our actual costs incurred on the performance obligation compared to the target costs for that performance obligation and subject to incentive price revisions included within the contracts. We include these incentive fees in revenue when there is sufficient evidence to determine that the variable consideration is not constrained. The remaining contracts typically have immaterial amounts of variable consideration and have a single performance obligation. Our estimates of variable consideration and total estimated costs at completion are determined through a detailed process based on historical performance and our expertise using the most likely method. Variations from estimated contract performance could result in a material effect on our financial condition and results of operations in future periods. Our Nuclear Operations Group segment's contracts primarily allow for billings as costs are incurred, subject to certain retainages on our fixed-price incentive fee contracts, that require milestones to be reached for the remaining consideration to be paid. Our fuel and downblending contracts allow billing when we achieve certain milestones related to our progress. Nuclear Power Group Our Nuclear Power Group segment recognizes revenue over time using a cost-to-cost method for the manufacturing of large components, non-standard parts, fuel bundles and service contracts as control continually transfers to the customers. For standard parts, revenue is recognized at the point in time control transfers to the customer, which is consistent with the transfer of ownership. For medical radioisotopes, we recognize revenue either at the point in time control transfers to the customer or over time using a unit of output method. This segment generates revenue primarily from firm-fixed-price contracts that do not contain variable consideration as well as time-and-materials based contracts. Certain of these contracts contain assurance warranties and/or provisions for liquidated damages, which are expected to have an immaterial impact to the contracts based on our historical experience. We are entitled to payment on the majority of our Nuclear Power Group segment contracts when we achieve certain milestones related to our progress. Nuclear Services Group Our contracts within our Nuclear Services Group segment are primarily cost-plus service contracts on which we recognize revenue over time based on a cost-to-cost method, which is consistent with the structure of the billings associated with these contracts. Ownership continuously transfers to the customer as we perform the services. The contracts within this segment do not contain significant variable consideration and contain a single performance obligation. 62 Table of Contents Disaggregated Revenues Revenues by geographical area and customer type were as follows: Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total (In thousands) United States: Government $ 1,540,256 $ — $ 113,075 $ 1,653,331 $ 1,368,555 $ — $ 111,236 $ 1,479,791 $ 1,311,886 $ — $ 107,711 $ 1,419,597 Non-Government 98,986 35,432 19,061 153,479 51,802 38,058 17,907 107,767 4,146 16,059 11,831 32,036 $ 1,639,242 $ 35,432 $ 132,136 $ 1,806,810 $ 1,420,357 $ 38,058 $ 129,143 $ 1,587,558 $ 1,316,032 $ 16,059 $ 119,542 $ 1,451,633 Canada: Non-Government $ — $ 309,433 $ 4,357 $ 313,790 $ — $ 287,948 $ 2,196 $ 290,144 $ 161 $ 294,781 $ 2,758 $ 297,700 Other: Non-Government $ 7,015 $ 26,404 $ — $ 33,419 $ 8,230 $ 26,634 $ — $ 34,864 $ 2,977 $ 55,071 $ 138 $ 58,186 Segment Revenues $ 1,646,257 $ 371,269 $ 136,493 2,154,019 $ 1,428,587 $ 352,640 $ 131,339 1,912,566 $ 1,319,170 $ 365,911 $ 122,438 1,807,519 Eliminations ( 30,503 ) ( 17,646 ) ( 7,630 ) Revenues $ 2,123,516 $ 1,894,920 $ 1,799,889 Revenues by timing of transfer of goods or services were as follows: Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total (In thousands) (In thousands) (In thousands) Over time $ 1,646,092 $ 322,745 $ 136,493 $ 2,105,330 $ 1,428,348 $ 305,075 $ 131,339 $ 1,864,762 $ 1,318,884 $ 335,430 $ 122,438 $ 1,776,752 Point-in-time 165 48,524 — 48,689 239 47,565 — 47,804 286 30,481 — 30,767 Segment Revenues $ 1,646,257 $ 371,269 $ 136,493 2,154,019 $ 1,428,587 $ 352,640 $ 131,339 1,912,566 $ 1,319,170 $ 365,911 $ 122,438 1,807,519 Eliminations ( 30,503 ) ( 17,646 ) ( 7,630 ) Revenues $ 2,123,516 $ 1,894,920 $ 1,799,889 Revenues by contract type were as follows: Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total Nuclear Operations Group Nuclear Power Group Nuclear Services Group Total (In thousands) (In thousands) (In thousands) Fixed-Price Incentive Fee $ 1,226,770 $ 1,578 $ — $ 1,228,348 $ 1,137,883 $ 2,511 $ — $ 1,140,394 $ 1,041,083 $ 16,165 $ — $ 1,057,248 Firm-Fixed-Price 306,296 296,394 32,334 635,024 210,631 282,014 26,163 518,808 195,030 252,893 23,294 471,217 Cost-Plus Fee 112,479 — 94,320 206,799 79,741 755 102,726 183,222 80,880 45 96,566 177,491 Time-and-Materials 712 73,297 9,839 83,848 332 67,360 2,450 70,142 2,177 96,808 2,578 101,563 Segment Revenues $ 1,646,257 $ 371,269 $ 136,493 2,154,019 $ 1,428,587 $ 352,640 $ 131,339 1,912,566 $ 1,319,170 $ 365,911 $ 122,438 1,807,519 Eliminations ( 30,503 ) ( 17,646 ) ( 7,630 ) Revenues $ 2,123,516 $ 1,894,920 $ 1,799,889 63 Table of Contents Performance Obligations As we progress on our contracts and the underlying performance obligations for which we recognize revenue over time, we refine our estimates of variable consideration and total estimated costs at completion, which impact the overall profitability on our contracts and performance obligations. Changes in these estimates result in the recognition of cumulative catch-up adjustments that impact our revenues and/or costs of contracts. During the years ended December 31, 2020, 2019 and 2018, we recognized net favorable changes in estimates that resulted in increases in revenues of $ 44.9 million, $ 70.9 million and $ 58.6 million, respectively, as well as increases (decreases) in cost of operations of $ 2.1 million, $( 0.7 ) million and $ 12.3 million, respectively. Included in these 2018 amounts are contract adjustments resulting from rework issues related to the manufacture of non-nuclear components being produced within our Nuclear Operations Group segment. We recognized a decrease in operating income of $ 29.2 million for the year ended December 31, 2018 related to this matter, which resulted in a decrease in earnings per share of $ 0.23 . Contract Assets and Liabilities We include revenues and related costs incurred, plus accumulated contract costs that exceed amounts invoiced to customers under the terms of the contracts, in Contracts in progress. We include in Advance billings on contracts billings that exceed accumulated contract costs and revenues and costs recognized over time. Amounts that are withheld on our fixed-price incentive fee contracts are classified within Retainages. Certain of these amounts require conditions other than the passage of time to be achieved, with the remaining amounts only requiring the passage of time. Most long-term contracts contain provisions for progress payments. Our unbilled receivables do not contain an allowance for credit losses as we expect to invoice customers and collect all amounts for unbilled revenues. Changes in Contracts in progress and Advance billings on contracts are primarily driven by differences in the timing of revenue recognition and billings to our customers. During the year ended December 31, 2020, our unbilled receivables increased $ 70.4 million primarily as a result of the timing of milestone billings in our Nuclear Power Group segment and the acquisition of Laker Energy Products. Our fixed-price incentive fee contracts for our Nuclear Operations Group segment include provisions that result in an increase in retainages on contracts during the first and third quarters of the year, with larger payments made during the second and fourth quarters. Retainages also vary as a result of timing differences between incurring costs and achieving milestones that allow us to recover these amounts. December 31, December 31, 2020 2019 (In thousands) Included in Contracts in progress: Unbilled receivables $ 436,279 $ 365,861 Retainages $ 55,172 $ 46,670 Included in Other Assets: Retainages $ 1,488 $ 1,412 Advance billings on contracts $ 83,581 $ 75,425 Retainages expected to be collected after one year are included in Other Assets. Of the long-term retainages at December 31, 2020, we anticipate collecting $ 0.3 million in 2022 and $ 1.2 million in 2023. During the years ended December 31, 2020 and 2019, we recognized $ 51.5 million and $ 62.3 million of revenue that was in Advance billings on contracts at December 31, 2019 and 2018, respectively. Remaining Performance Obligations Remaining performance obligations represent the dollar amount of revenue we expect to recognize in the future from performance obligations on contracts previously awarded and in progress. Of the remaining performance obligations on our contracts with customers at December 31, 2020, we expect to recognize revenues as follows: 2021 2022 Thereafter Total (In approximate millions) Nuclear Operations Group $ 1,221 $ 919 $ 1,519 $ 3,659 Nuclear Power Group 307 171 248 726 Nuclear Services Group 21 — — 21 Total Remaining Performance Obligations $ 1,549 $ 1,090 $ 1,767 $ 4,406 64 Table of Contents NOTE 4 – EQUITY METHOD INVESTMENTS We have investments in entities that we account for using the equity method. Our share of the undistributed earnings of our equity method investees were $ 26.6 million and $ 16.1 million at December 31, 2020 and 2019, respectively. The following tables summarize combined balance sheet and income statement information for investments accounted for under the equity method: December 31, 2020 2019 (In thousands) Current assets $ 492,025 $ 442,253 Noncurrent assets 970 1,285 Total Assets $ 492,995 $ 443,538 Current liabilities $ 270,536 $ 219,702 Owners' equity 222,459 223,836 Total Liabilities and Owners' Equity $ 492,995 $ 443,538 Year Ended December 31, 2020 2019 2018 (In thousands) Revenues $ 3,980,066 $ 3,716,548 $ 5,685,015 Gross profit $ 142,709 $ 133,170 $ 172,673 Net income $ 139,988 $ 130,949 $ 162,095 Reimbursable costs recorded in revenues by the unconsolidated joint ventures in our Nuclear Services Group segment totaled $ 3,851.5 million, $ 3,516.1 million and $ 5,339.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. Income taxes for the investees are the responsibility of the respective owners. Accordingly, no provision for income taxes has been recorded by the investees. Reconciliations of net income per combined income statement information of our investees to equity in income of investees per our consolidated statements of income are as follows: Year Ended December 31, 2020 2019 2018 (In thousands) Equity income based on stated ownership percentages $ 27,266 $ 28,272 $ 30,787 Timing of GAAP and other adjustments ( 114 ) 652 ( 444 ) Equity in income of investees $ 27,152 $ 28,924 $ 30,343 Our transactions with unconsolidated affiliates were as follows: Year Ended December 31, 2020 2019 2018 (In thousands) Sales to $ 12,186 $ 14,668 $ 18,454 Dividends received $ 25,005 $ 20,955 $ 22,237 Capital contributions, net of returns $ ( 88 ) $ ( 255 ) $ 9,059 At December 31, 2020 and 2019, Accounts receivable - other included amounts due from unconsolidated affiliates of $ 2.5 million and $ 2.6 million, respectively. 65 Table of Contents NOTE 5 – INCOME TAXES We are subject to federal income tax in the U.S. and Canada as well as income tax within multiple U.S. state jurisdictions. We provide for income taxes based on the enacted tax laws and rates in the jurisdictions in which we conduct our operations. These jurisdictions may have regimes of taxation that vary with respect to nominal rates and with respect to the basis on which these rates are applied. This variation, along with the changes in our mix of income within these jurisdictions, can contribute to shifts in our effective tax rate from period to period. We are currently under audit by various state and international authorities. With few exceptions, we do not have any returns under examination for years prior to 2017. We apply the provisions of FASB Topic Income Taxes regarding the treatment of uncertain tax positions. A reconciliation of unrecognized tax benefits (exclusive of interest and federal and state benefits) is as follows: Year Ended December 31, 2020 2019 2018 (In thousands) Balance at beginning of period $ 3,899 $ 274 $ 1,680 Increases based on tax positions taken in the current year 2,075 3,736 — Increases based on tax positions taken in the prior years — — — Decreases based on tax positions taken in the prior years — — — Decreases due to settlements with tax authorities — — — Decreases due to lapse of applicable statute of limitation ( 123 ) ( 127 ) ( 1,379 ) Other, net 1 16 ( 27 ) Balance at end of period $ 5,852 $ 3,899 $ 274 The unrecognized tax benefits balance of $ 5.9 million at December 31, 2020 would reduce our effective tax rate if recognized. We believe that, within the next 12 months, it is reasonably possible that our entire previously unrecognized tax benefits will be resolved with the appropriate taxing jurisdiction. 66 Table of Contents Deferred income taxes reflect the net tax effects of temporary differences between the financial and tax bases of assets and liabilities. Significant components of deferred tax assets and liabilities as of December 31, 2020 and 2019 were as follows: December 31, 2020 2019 (In thousands) Deferred tax assets: Pension liability $ 31,152 $ 36,791 Accrued warranty expense 1,338 2,365 Accrued vacation pay 7,442 7,077 Accrued liabilities for self-insurance (including postretirement health care benefits) 2,602 2,991 Accrued liabilities for executive and employee incentive compensation 13,312 12,121 Environmental and products liabilities 20,261 20,100 Lease liabilities 2,155 1,856 Investments in joint ventures and affiliated companies 1,148 4,702 Long-term contracts 15,974 10,790 Accrued payroll taxes 4,828 — U.S. federal tax credits and loss carryforward 7,224 4,177 U.S. state tax credits and loss carryforward 6,819 7,297 Foreign tax credit and loss carryforward 9,919 5,848 Other 4,961 4,621 Total deferred tax assets 129,135 120,736 Valuation allowance for deferred tax assets ( 12,892 ) ( 13,578 ) Deferred tax assets 116,243 107,158 Deferred tax liabilities: Property, plant and equipment 39,315 23,889 Right-of-use lease assets 10,509 10,446 Intangibles 17,004 14,134 Total deferred tax liabilities 66,828 48,469 Net deferred tax assets $ 49,415 $ 58,689 The components of Income before Provision for Income Taxes were as follows: Year Ended December 31, 2020 2019 2018 (In thousands) U.S. $ 314,150 $ 270,569 $ 231,721 Other than U.S. 48,022 43,173 48,424 Income before Provision for Income Taxes $ 362,172 $ 313,742 $ 280,145 67 Table of Contents The components of Provision for Income Taxes were as follows: Year Ended December 31, 2020 2019 2018 (In thousands) Current: U.S. – federal $ 53,340 $ 47,693 $ 14,680 U.S. – state and local 7,587 2,180 4,597 Other than U.S. 14,159 15,398 16,117 Total current 75,086 65,271 35,394 Deferred: U.S. – federal 10,852 7,975 20,327 U.S. – state and local ( 536 ) 872 1,564 Other than U.S. ( 2,426 ) ( 5,053 ) ( 4,445 ) Total deferred 7,890 3,794 17,446 Provision for Income Taxes $ 82,976 $ 69,065 $ 52,840 The following is a reconciliation of our income tax provision from the U.S. statutory federal tax rate to our consolidated effective tax rate: Year Ended December 31, 2020 2019 2018 U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % State and local income taxes 1.9 % 1.0 % 2.1 % Foreign rate differential 0.6 % 0.6 % 0.7 % Excess tax deductions on equity compensation ( 0.3 ) % ( 0.7 ) % ( 1.0 ) % Impact of U.S. Tax Cuts & Jobs Act — % — % ( 4.7 ) % Other ( 0.3 ) % 0.1 % 0.8 % Effective tax rate 22.9 % 22.0 % 18.9 % In the year ended December 31, 2018, we recognized $ 13.5 million of benefit in our provision for income taxes related to the remeasurement of our deferred tax assets as a result of accelerating additional contributions to certain of our domestic pension plans for inclusion in our 2017 U.S. tax return. At December 31, 2020, we had a valuation allowance of $ 12.9 million for deferred tax assets, which we expect cannot be realized through carrybacks, future reversals of existing taxable temporary differences and our estimate of future taxable income. We believe that our remaining deferred tax assets are more likely than not realizable through carrybacks, future reversals of existing taxable temporary differences and our estimate of future taxable income. Any changes to our estimated valuation allowance could be material to our consolidated financial statements. The following is an analysis of our valuation allowance for deferred tax assets: Beginning Balance Charges To Costs and Expenses Charged To Other Accounts Ending Balance (In thousands) Year Ended December 31, 2020 $ ( 13,578 ) 771 ( 85 ) $ ( 12,892 ) Year Ended December 31, 2019 $ ( 13,257 ) ( 414 ) 93 $ ( 13,578 ) Year Ended December 31, 2018 $ ( 15,252 ) 2,017 ( 22 ) $ ( 13,257 ) We have federal capital losses of $ 7.2 million available to offset future capital gains. These federal capital losses begin to expire in the year 2023. We are carrying a full valuation allowance of $ 7.2 million against the deferred tax asset related to these federal capital loss carryforwards. In addition, we have state credits and state net operating losses of $ 8.6 million ($ 6.8 million net of federal tax benefit) available to offset future taxable income in various states. These state net operating loss carryforwards begin to expire in the 68 Table of Contents year 2021. We are carrying a valuation allowance of $ 7.2 million ($ 5.7 million net of federal tax benefit) against the deferred tax asset related to the state credits and state loss carryforwards. We would be subject to withholding taxes if we were to distribute earnings from certain foreign subsidiaries. As of December 31, 2020, the undistributed earnings of these subsidiaries were approximately $ 209.8 million, and our unrecognized deferred income tax liabilities of approximately $ 10.5 million would be payable upon the distribution of these earnings. All of our foreign earnings are considered indefinitely reinvested. NOTE 6 – LONG-TERM DEBT Our Long-Term Debt consists of the following: December 31, 2020 2019 (In thousands) Secured Debt: Senior Notes $ 800,000 $ 400,000 Credit Facility 75,000 432,159 Less: Amounts due within one year — 14,711 Long-Term Debt, gross 875,000 817,448 Less: Deferred debt issuance costs 12,269 8,006 Long-Term Debt $ 862,731 $ 809,442 Maturities of Long-Term Debt subsequent to December 31, 2020 were as follows: 2021 through 2024 – $ 0.0 million; 2025 – $ 75.0 million; and thereafter – $ 800.0 million. 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 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" 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. 69 Table of Contents 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 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. The Credit Facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted leverage ratio is 4.00 to 1.00, which may be increased to 4.50 to 1.00 for up to four consecutive fiscal quarters after a material acquisition. The minimum consolidated interest coverage ratio is 3.00 to 1.00. In addition, the Credit Facility contains various restrictive covenants, including with respect to debt, liens, investments, mergers, acquisitions, dividends, equity repurchases and asset sales. As of December 31, 2020, we were in compliance with all covenants set forth in the Credit Facility. 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 1.0 % 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, 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; and (3) if any event of default exists, the lenders will be permitted to terminate their commitments thereunder and exercise other rights and remedies, including the commencement of foreclosure or other actions against the collateral. 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. 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 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. 70 Table of Contents 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, 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 We have posted surety bonds to support regulatory and contractual obligations for certain decommissioning responsibilities, projects and legal matters. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety's discretion, and the bonding facilities generally permit the surety, in its sole discretion, to terminate the facility or demand collateral. Although there can be no assurance that we will maintain our surety bonding capacity, we believe our current capacity is adequate to support our existing requirements for the next twelve months. In addition, these bonds generally indemnify the beneficiaries should we fail to perform our obligations under the applicable agreements. We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue. As of December 31, 2020, bonds issued and outstanding under these arrangements totaled approximately $ 73.7 million. NOTE 7 – PENSION PLANS AND POSTRETIREMENT BENEFITS We have historically provided defined benefit retirement benefits, primarily through noncontributory pension plans, for most of our regular employees. Certain of our subsidiaries have made other benefits available to certain groups of employees, 71 Table of Contents including postretirement health care and life insurance benefits. For salaried employees, all major U.S. and Canadian defined benefit retirement plans have been closed to new entrants, and benefit accruals have ceased. For hourly employees, certain defined benefit retirement plans have been closed to new entrants. Our funding policy is to fund the plans as recommended by the respective plan actuaries and in accordance with the Employee Retirement Income Security Act of 1974, as amended, or other applicable law. Assuming we continue as a government contractor, our contractual arrangements with the U.S. Government provide for the recovery of contributions to our pension and other postretirement benefit plans covering employees working primarily in our Nuclear Operations Group segment. 72 Table of Contents Obligations and Funded Status Pension Benefits Year Ended December 31, Other Benefits Year Ended December 31, 2020 2019 2020 2019 (In thousands) Change in benefit obligation: Benefit obligation at beginning of period $ 1,308,798 $ 1,186,186 $ 58,881 $ 60,405 Service cost 10,650 9,123 642 545 Interest cost 37,199 46,307 1,612 2,254 Plan participants' contributions 180 321 562 550 Amendments 2,333 5,523 — — Settlements ( 7,041 ) ( 25,694 ) — — Actuarial loss (gain) 120,126 139,909 2,219 ( 2,427 ) Foreign currency exchange rate changes 3,513 6,027 331 462 Benefits paid ( 61,703 ) ( 58,904 ) ( 3,161 ) ( 2,908 ) Benefit obligation at end of period $ 1,414,055 $ 1,308,798 $ 61,086 $ 58,881 Change in plan assets: Fair value of plan assets at beginning of period $ 1,150,495 $ 1,024,091 $ 48,321 $ 43,945 Actual return on plan assets 190,862 195,846 5,293 5,688 Plan participants' contributions 180 321 562 550 Company contributions 5,131 4,284 992 915 Settlements ( 7,041 ) ( 21,191 ) — — Foreign currency exchange rate changes 3,308 6,048 — — Benefits paid ( 61,703 ) ( 58,904 ) ( 3,091 ) ( 2,777 ) Fair value of plan assets at the end of period 1,281,232 1,150,495 52,077 48,321 Funded status $ ( 132,823 ) $ ( 158,303 ) $ ( 9,009 ) $ ( 10,560 ) Amounts recognized in the balance sheet consist of: Prepaid postretirement benefit obligation $ — $ — $ 18,069 $ 14,012 Prepaid pension 14,588 16,936 — — Accrued employee benefits ( 3,082 ) ( 3,218 ) ( 1,389 ) ( 1,313 ) Accumulated postretirement benefit obligation — — ( 25,689 ) ( 23,259 ) Pension liability ( 144,329 ) ( 172,021 ) — — Accrued benefit liability, net $ ( 132,823 ) $ ( 158,303 ) $ ( 9,009 ) $ ( 10,560 ) Amount recognized in accumulated comprehensive income (before taxes): Prior service cost (credit) $ 21,319 $ 22,356 $ ( 1,059 ) $ ( 1,252 ) Supplemental information: Plans with accumulated benefit obligation in excess of plan assets: Projected benefit obligation $ 1,264,764 $ 1,167,257 N/A N/A Accumulated benefit obligation $ 1,255,899 $ 1,153,811 $ 24,593 $ 22,316 Fair value of plan assets $ 1,117,353 $ 992,018 $ — $ — Plans with plan assets in excess of accumulated benefit obligation: Projected benefit obligation $ 149,291 $ 141,541 N/A N/A Accumulated benefit obligation $ 149,270 $ 141,497 $ 36,493 $ 36,565 Fair value of plan assets $ 163,879 $ 158,477 $ 52,077 $ 48,321 73 Table of Contents We record the service cost component of net periodic benefit cost within Operating income on our consolidated statements of income. For the years ended December 31, 2020, 2019 and 2018, these amounts were $ 11.3 million, $ 9.7 million and $ 10.2 million, respectively. All other components of net periodic benefit cost are included in Other – net on our consolidated statements of income. For the years ended December 31, 2020, 2019 and 2018, these amounts were $( 31.6 ) million, $( 17.5 ) million and $ 0.7 million, respectively. Components of net periodic benefit cost included in net income are as follows: Pension Benefits Year Ended December 31, Other Benefits Year Ended December 31, 2020 2019 2018 2020 2019 2018 (In thousands) Components of net periodic benefit cost: Service cost $ 10,650 $ 9,123 $ 9,593 $ 642 $ 545 $ 620 Interest cost 37,199 46,307 47,496 1,612 2,254 2,121 Expected return on plan assets ( 77,298 ) ( 69,809 ) ( 80,939 ) ( 2,691 ) ( 2,514 ) ( 2,540 ) Amortization of prior service cost 3,370 2,903 2,221 ( 193 ) ( 311 ) ( 311 ) Recognized net actuarial loss (gain) 6,829 9,353 36,738 ( 458 ) ( 5,723 ) ( 4,094 ) Net periodic benefit cost (income) $ ( 19,250 ) $ ( 2,123 ) $ 15,109 $ ( 1,088 ) $ ( 5,749 ) $ ( 4,204 ) Net periodic benefit cost related to our pension plans is calculated in accordance with GAAP. In addition, we calculate pension costs in accordance with U.S. cost accounting standards ("CAS") for purposes of cost recovery on our U.S. Government contracts to the extent applicable. See further discussion of CAS pension costs in our discussion of Critical Accounting Policies and Estimates included in Item 7 of this Annual Report on Form 10-K. Recognized net actuarial losses (gains) consist primarily of our reported actuarial losses (gains), settlements, and the differences between the actual returns on plan assets and the expected returns on plan assets. The benefit obligation of our pension plans as of December 31, 2020 and 2019 increased by $ 124.2 million and $ 156.8 million, respectively, due primarily to decreases in the discount rate. In July 2018, we completed the purchase of a group annuity contract that transferred certain domestic pension benefit obligations of approximately $ 240 million to an insurance company for approximately 1,300 retirees. As a result, we recognized pension settlement-related charges of $ 10.4 million during 2018. We made contributions to our pension and postretirement benefit plans totaling $ 159.0 million during the year ended December 31, 2018. In August 2018, we accelerated $ 118.1 million of pension contributions to certain domestic pension plans in order to capture a tax benefit in our 2017 U.S. tax return due to the change in corporate tax rates. Additional Information Pension Benefits Year Ended December 31, Other Benefits Year Ended December 31, 2020 2019 2020 2019 (In thousands) Decrease in accumulated other comprehensive income due to actuarial losses – before taxes $ ( 2,333 ) $ ( 5,523 ) $ — $ — In the current fiscal year, we have recognized expense (income) in other comprehensive income as a component of net periodic benefit cost of approximately $ 3.4 million and $( 0.2 ) million for our pension benefits and other benefits, respectively. 74 Table of Contents Assumptions Pension Benefits Other Benefits 2020 2019 2020 2019 Weighted-average assumptions used to determine net periodic benefit obligations at December 31: Discount rate 2.63 % 3.31 % 2.49 % 3.21 % Pension Benefits Other Benefits 2020 2019 2018 2020 2019 2018 Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31: Discount rate to determine service cost 3.00 % 3.74 % 3.32 % 3.01 % 3.93 % 3.91 % Discount rate to determine interest cost 2.78 % 3.98 % 3.56 % 2.62 % 3.92 % 3.50 % Expected return on plan assets 6.95 % 6.95 % 6.95 % 5.66 % 5.68 % 5.70 % The expected return on plan assets rate assumptions are based on the long-term expected returns for the investment mix of assets in the portfolio. In setting these rates, we use a building-block approach. Historical real return trends for the various asset classes in the plan's portfolio are combined with anticipated future market conditions to estimate the real rate of return for each asset class. These rates are then adjusted for anticipated future inflation to estimate nominal rates of return for each asset class. The expected rate of return on plan assets is then determined to be the weighted-average nominal return based on the weightings of the asset classes within the total asset portfolio. Our existing other benefit plans are unfunded, with the exception of the NFS postretirement benefit plans. These plans provide health benefits to certain salaried and hourly employees, as well as retired employees, of NFS. All of the assets for these postretirement benefit plans are contributed into a Voluntary Employees' Beneficiary Association trust. 2020 2019 Assumed health care cost trend rates at December 31: Health care cost trend rate assumed for next year 6.75 % 7.00 % Rates to which the cost trend rate is assumed to decline (ultimate trend rate) 4.50 % 4.50 % Year that the rate reaches ultimate trend rate 2030 2030 Investment Goals General The overall investment strategy of the pension trusts is to achieve long-term growth of principal, while avoiding excessive risk and to minimize the probability of loss of principal over the long term. The specific investment goals that have been set for the pension trusts, in the aggregate, are (1) to ensure that plan liabilities are met when due and (2) to achieve an investment return on trust assets consistent with a reasonable level of risk. Allocations to each asset class for both domestic and foreign plans are reviewed periodically and rebalanced, if appropriate, to assure the continued relevance of the goals, objectives and strategies. The pension trusts for both our domestic and foreign plans employ a professional investment advisor and a number of professional investment managers whose individual benchmarks are, in the aggregate, consistent with the plan's overall investment objectives. The goals of each investment manager are (1) to meet (in the case of passive accounts) or exceed (for actively managed accounts) the benchmark selected and agreed upon by the manager and the pension trust and (2) to display an overall level of risk in its portfolio that is consistent with the risk associated with the agreed upon benchmark. The investment performance of total portfolios, as well as asset class components, is periodically measured against commonly accepted benchmarks, including the individual investment manager benchmarks. In evaluating investment manager performance, consideration is also given to personnel, strategy, research capabilities, organizational and business matters, adherence to discipline and other qualitative factors that may impact the ability to achieve desired investment results. 75 Table of Contents Domestic Plans We sponsor the following domestic defined benefit pension plans: • BWXT Retirement Plan; • Nuclear Fuel Services, Inc. Retirement Plan for Salaried Employees; and • Nuclear Fuel Services, Inc. Retirement Plan for Hourly Employees. The assets of the domestic pension plans are commingled for investment purposes and held by the trustee in the BWXT Master Trust (the "Master Trust"). For the years ended December 31, 2020 and 2019, the investment returns on domestic plan assets of the Master Trust (net of deductions for management fees) were approximately 19 % and 21 %, respectively. The following is a summary of the asset allocations for the Master Trust at December 31, 2020 and 2019 by asset category: December 31, 2020 2019 Asset Category: Commingled and Mutual Funds 29 % 27 % U.S. Government Securities 28 % 22 % Fixed Income (excluding U.S. Government Securities) 18 % 33 % Diversified Credit 11 % 5 % Real Estate 7 % 7 % Partnerships with Security Holdings 4 % 5 % Other 3 % 1 % Total 100 % 100 % The target allocation for 2021 for the domestic plans, by asset class, is as follows: Asset Class: Fixed Income 49 % Equities 28 % Other 23 % Foreign Plans We sponsor various plans through certain of our Canadian subsidiaries. The combined weighted-average asset allocations of these plans at December 31, 2020 and 2019 by asset category were as follows: December 31, 2020 2019 Asset Category: Fixed Income 98 % 62 % Equity Securities and Commingled Mutual Funds — % 35 % Other 2 % 3 % Total 100 % 100 % The target allocation for 2021 for the Canadian plans, by asset class, is entirely fixed income securities. 76 Table of Contents Fair Value See Note 14 for a detailed description of fair value measurements and the hierarchy established for valuation inputs. The following is a summary of total assets for our plans measured at fair value at December 31, 2020: 12/31/2020 Level 1 Level 2 Level 3 Unclassified (In thousands) Pension and Other Benefits: Fixed Income $ 391,418 $ — $ 228,857 $ — $ 162,561 Commingled and Mutual Funds 338,473 72,764 — — 265,709 U.S. Government Securities 316,375 310,975 5,400 — — Diversified Credit 126,823 — — — 126,823 Real Estate 77,437 — — — 77,437 Partnerships with Security Holdings 49,007 — — — 49,007 Cash and Accrued Items (1) 33,776 — — — 33,776 Total Assets $ 1,333,309 $ 383,739 $ 234,257 $ — $ 715,313 (1) Includes items that are not required to be categorized in the fair value hierarchy in order to permit reconciliation of the fair value hierarchy to the fair value of plan assets presented in the Obligations and Funded Status table. The following is a summary of total assets for our plans measured at fair value at December 31, 2019: 12/31/2019 Level 1 Level 2 Level 3 Unclassified (In thousands) Pension and Other Benefits: Fixed Income $ 453,390 $ — $ 355,064 $ — $ 98,326 Commingled and Mutual Funds 334,786 58,161 — — 276,625 U.S. Government Securities 220,606 216,300 4,306 — — Partnerships with Security Holdings 52,840 — — — 52,840 Real Estate 65,821 — — — 65,821 Other 47,550 — — — 47,550 Cash and Accrued Items 23,823 17,180 6,643 — — Total Assets $ 1,198,816 $ 291,641 $ 366,013 $ — $ 541,162 Cash Flows Domestic Plans Foreign Plans Pension Benefits Other Benefits Pension Benefits Other Benefits (In thousands) Expected employer contributions to trusts of defined benefit plans: 2021 $ — $ 90 $ 1,827 N/A Expected benefit payments: 2021 $ 59,656 $ 2,736 $ 7,007 $ 507 2022 $ 61,903 $ 2,812 $ 7,237 $ 509 2023 $ 63,795 $ 2,819 $ 7,353 $ 539 2024 $ 65,255 $ 2,841 $ 7,469 $ 549 2025 $ 66,330 $ 2,827 $ 7,578 $ 578 2026-2030 $ 336,783 $ 12,950 $ 38,756 $ 3,322 Defined Contribution Plans We also provide benefits under the BWXT Thrift Plan (the "Thrift Plan"). The Thrift Plan generally provides for matching employer contributions of 50 % of the first 6 % of compensation, as defined in the Thrift Plan, contributed by 77 Table of Contents participants, and fully vest and are nonforfeitable after three years of service or upon retirement, death, lay-off or approved disability. These matching employer contributions are made in cash and invested at the employees' discretion. We also provide service-based cash contributions under the Thrift Plan to employees not accruing benefits under our defined benefit plans. Our Canadian Plans also include a defined contribution component whereby we make cash, service-based contributions. Amounts charged to expense for employer contributions under our defined contribution plans totaled approximately $ 35.8 million, $ 31.7 million and $ 31.3 million in the years ended December 31, 2020, 2019 and 2018, respectively. NOTE 8 – CAPITAL STOCK In October 2015, our Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock of up to an aggregate market value of $ 300 million; this authorization expired on February 26, 2018. On February 24, 2017, our Board of Directors authorized an additional share repurchase of up to an aggregate market value of $ 150 million; this authorization became fully utilized in November 2018. On November 6, 2018, our Board of Directors authorized an additional share repurchase of up to an aggregate market value of $ 250 million during a three-year period from November 6, 2018 to November 6, 2021. In the year ended December 31, 2020, we repurchased 338,521 shares of our common stock for $ 22.0 million. In the year ended December 31, 2019, we repurchased 443,877 shares of our common stock for $ 20.0 million. In the year ended December 31, 2018, we repurchased 4,523,934 shares of our common stock for approximately $ 214.7 million. As of December 31, 2020, we had approximately $ 143.4 million available to us for share repurchase under the $ 250 million authorization described above. NOTE 9 – STOCK-BASED COMPENSATION BWX Technologies, Inc. 2020 Omnibus Incentive Plan In May 2020, our stockholders approved the 2020 Omnibus Incentive Plan (the "2020 Plan") which succeeded the 2010 Long-Term Incentive Plan of BWX Technologies, Inc. (the "2010 Plan"). Members of the Board of Directors, executive officers, key employees and consultants are eligible to participate in the 2020 Plan. The Compensation Committee of the Board of Directors selects the participants for the 2020 Plan. The 2020 Plan provides for cash awards and equity-based compensation in the form of stock options, restricted stock, restricted stock units, performance shares and performance units, subject to satisfaction of specific performance goals. Shares subject to awards under either the 2020 Plan or the 2010 Plan that are cancelled, forfeited, terminated or expire unexercised, shall immediately become available for the granting of awards under the 2020 Plan. As of the effective date of the 2020 Plan, shares available for grant under the 2010 Plan are available for grant under the 2020 Plan. In addition, our stockholders approved an additional 1,450,000 shares of common stock for issuance through the 2020 Plan. Options to purchase shares are granted at not less than 100 % of the fair market value closing price on the date of grant, become exercisable at such time or times as determined when granted and expire not more than ten years after the date of grant. At December 31, 2020, we had a total of 4,333,710 shares of our common stock available for future awards. In the event of a change in control of the Company, the terms of the awards under the 2020 Plan contain provisions that may cause restrictions to lapse and accelerate the vesting of awards. 2010 Long-Term Incentive Plan of BWX Technologies, Inc. Members of the Board of Directors, executive officers, key employees and consultants were eligible to participate in the 2010 Plan prior to it being succeeded by the 2020 Plan. The Compensation Committee of the Board of Directors selected the participants for the 2010 Plan. The 2010 Plan provided for a number of forms of stock-based compensation, including incentive and non-qualified stock options, restricted stock, restricted stock units, performance shares and performance units, subject to satisfaction of specific performance goals. Shares subject to award under the 2010 Plan that are cancelled, forfeited, terminated or expire unexercised, shall immediately become available for the granting of awards under the 2020 Plan. As part of the approval of the 2010 Plan, 10,000,000 shares of common stock were initially authorized for issuance, with an additional 2,300,000 authorized for issuance in 2014. Options to purchase shares are granted at not less than 100 % of the fair market value closing price on the date of grant, become exercisable at such time or times as determined when granted and expire not more than ten years after the date of grant. Long-Term Incentive Plan of BWXT Technical Services Group, Inc. In June 2012, we established the 2012 Long-Term Incentive Plan of BWXT Technical Services Group, Inc., a cash-settled plan for employees of certain subsidiaries and unconsolidated affiliates as selected by the plan committee. The cash- 78 Table of Contents settled plan provides for a number of forms of stock-based compensation, including stock appreciation rights, restricted stock units and performance units, subject to satisfaction of specific performance goals. Stock appreciation rights are granted at not less than 100 % of the fair market value closing price of a share of BWXT common stock on the date of grant, become exercisable at such time or times as determined when granted and expire not more than ten years after the date of grant. Stock appreciation rights are cash settled for the excess of the market price of BWXT common stock on the exercise date minus the exercise price. Restricted stock units and performance units are cash settled upon vesting as determined when granted. We will not issue any shares of BWXT common stock under this plan, as all awards are cash settled. In the event of a change in control of the Company, the terms of the awards under the cash-settled plan contain provisions that may cause restrictions to lapse and accelerate the vesting of awards. Stock-based compensation expense for all of our plans recognized for the years ended December 31, 2020, 2019 and 2018 totaled $ 16.8 million, $ 14.8 million and $ 10.8 million, respectively, with associated tax benefit totaling $ 2.7 million, $ 2.5 million and $ 1.7 million, respectively. As of December 31, 2020, unrecognized estimated compensation expense related to nonvested awards was $ 15.1 million, which is expected to be recognized over a weighted-average period of 1.6 years. Stock Options The following table summarizes activity for our stock options for the year ended December 31, 2020 (share data in thousands): Number of Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (In millions) Outstanding at beginning of period 324 $ 23.91 Granted — N/A Exercised ( 123 ) $ 23.64 Cancelled/expired/forfeited — N/A Outstanding at end of period 201 $ 24.07 2.9 years $ 7.3 Exercisable at end of period 201 $ 24.07 2.9 years $ 7.3 The aggregate intrinsic value included in the table above represents the total pre-tax intrinsic value that would have been received by the option holders had all option holders exercised their options on December 31, 2020. The intrinsic value is calculated as the total number of option shares multiplied by the difference between the closing price of our common stock on the last trading day of the period and the exercise price of the options. This amount changes based on the price of our common stock. During the years ended December 31, 2020, 2019 and 2018, the total intrinsic value of stock options exercised was $ 4.7 million, $ 8.1 million and $ 8.5 million, respectively. The actual tax benefits realized related to the stock options exercised during the year ended December 31, 2020 totaled $ 0.8 million. 79 Table of Contents Performance Shares Nonvested performance shares as of December 31, 2020 and changes during the year ended December 31, 2020 were as follows (share data in thousands): Number of Shares Weighted- Average Grant Date Fair Value Nonvested at beginning of period 409 $ 53.39 Adjustment to assumed vesting percentage 76 $ 52.86 Granted 146 $ 56.75 Vested ( 173 ) $ 48.76 Cancelled/forfeited ( 7 ) $ 54.64 Nonvested at end of period 451 $ 56.15 The actual number of shares in which each participant vests is dependent upon achievement of certain return on invested capital and diluted earnings per share targets over a three -year performance period. The number of shares in which participants can vest ranges from zero to 200 % of the initial performance shares granted, to be determined upon completion of the three -year performance period. The nonvested shares at the end of the period in the table above assumes weighted-average vesting of 121 %. The actual tax benefits realized related to the performance shares vested during the year ended December 31, 2020 totaled $ 1.4 million. Restricted Stock Units Nonvested restricted stock units as of December 31, 2020 and changes during the year ended December 31, 2020 were as follows (share data in thousands): Number of Shares Weighted- Average Grant Date Fair Value Nonvested at beginning of period 166 $ 54.51 Granted 120 $ 56.70 Vested ( 97 ) $ 54.45 Cancelled/forfeited ( 4 ) $ 54.54 Nonvested at end of period 185 $ 55.96 The actual tax benefits realized related to the restricted stock units vested during the year ended December 31, 2020 totaled $ 1.3 million. Cash-Settled Stock Appreciation Rights The following table summarizes activity for our stock appreciation rights for the year ended December 31, 2020 (unit data in thousands): Number of Units Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (In millions) Outstanding at beginning of period 55 $ 23.39 Granted — N/A Exercised ( 15 ) $ 21.69 Cancelled/expired/forfeited — N/A Outstanding at end of period 40 $ 24.04 2.9 years $ 1.4 Exercisable at end of period 40 $ 24.04 2.9 years $ 1.4 80 Table of Contents The aggregate intrinsic value included in the table above represents the total pre-tax intrinsic value that would have been received by the stock appreciation rights holders had all holders exercised their rights on December 31, 2020. The intrinsic value is calculated as the total number of stock appreciation rights multiplied by the difference between the closing price of our common stock on the last trading day of the period and the exercise price of the stock appreciation rights. This amount changes based on the price of our common stock. Cash-Settled Performance Units The actual number of units in which each participant vests is dependent upon achievement of certain return on invested capital and diluted earnings per share targets over a three -year performance period. The number of units in which participants can vest ranges from zero to 200 % of the initial performance units granted, to be determined upon completion of the three -year performance period. As of December 31, 2020, we had 3,453 nonvested units valued at $ 60.28 per share with an assumed weighted-average vesting of 104 %. The fair value is based on our closing stock price as of December 31, 2020 and is re-determined at the end of each reporting period for purposes of remeasuring compensation expense associated with these cash-settled awards. Cash-Settled Restricted Stock Units As of December 31, 2020, we had 1,422 nonvested units valued at $ 60.28 per share. The fair value is based on our closing stock price as of December 31, 2020 and is re-determined at the end of each reporting period for purposes of remeasuring compensation expense associated with these cash-settled awards. NOTE 10 – COMMITMENTS AND CONTINGENCIES Investigations and Litigation Due to the nature of our business, we are, from time to time, involved in investigations, litigation, disputes or claims related to our business activities, including, among other things: • performance- or warranty-related matters under our customer and supplier contracts and other business arrangements; and • workers' compensation, employment, premises liability and other claims. Based upon our prior experience, we do not expect that any of these litigation proceedings, disputes and claims will have a material adverse effect on our consolidated financial condition, results of operations or cash flows. Environmental Matters We have been identified as a potentially responsible party at various cleanup sites under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended ("CERCLA") and other environmental laws. These laws can impose liability for the entire cost of cleanup on any of the potentially responsible parties, regardless of fault or the lawfulness of the original conduct. Generally, however, where there are multiple responsible parties, a final allocation of costs is made based on the amount and type of wastes disposed of by each party and the number of financially viable parties, although this may not be the case with respect to any particular site. We have not been determined to be a major contributor of wastes to any of these sites. On the basis of the relative contribution of waste to each site by potentially responsible parties, as well as the financial solvency of other potentially responsible parties, we expect our share of the ultimate liability for the various sites will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows in any given year. We perform significant amounts of work for the U.S. Government under both prime contracts and subcontracts and operate certain facilities that are licensed to possess and process special nuclear materials. As a result of these activities, we are subject to continuing reviews by governmental agencies, including the U.S. Environmental Protection Agency and the NRC. We are also involved in manufacturing activities at licensed facilities in Canada that are also subject to continuing reviews by governmental agencies in Canada, including the CNSC. The NRC's decommissioning regulations require our Nuclear Operations Group segment to provide financial assurance that it will be able to pay the expected cost of decommissioning its two licensed facilities at the end of their service lives. We provided financial assurance totaling $ 61.8 million during the years ended December 31, 2020 and 2019 with surety bonds for 81 Table of Contents the ultimate decommissioning of these licensed facilities. These facilities have provisions in their government contracts pursuant to which substantially all of our decommissioning costs and financial assurance obligations are covered by the DOE, including the costs to complete the decommissioning projects underway at the facility in Erwin, Tennessee. The surety bonds noted above are to cover decommissioning required pursuant to work not subject to this DOE obligation. In Canada, the CNSC's decommissioning regulations require our Nuclear Power Group segment to provide financial assurance that it will be able to pay the expected cost of decommissioning its CNSC-licensed facilities at the end of their service lives. We provided financial assurance totaling $ 47.9 million and $ 47.0 million during the years ended December 31, 2020 and 2019, respectively, with letters of credit and surety bonds for the ultimate decommissioning of these licensed facilities. Our compliance with federal, foreign, state and local environmental control and protection regulations resulted in pre-tax charges of approximately $ 16.3 million, $ 15.9 million and $ 14.7 million in the years ended December 31, 2020, 2019 and 2018, respectively. In addition, compliance with existing environmental regulations necessitated capital expenditures of $ 1.2 million, $ 1.4 million and $ 1.7 million in the years ended December 31, 2020, 2019 and 2018, respectively. At December 31, 2020 and 2019, we had total environmental accruals (including asset retirement obligations) of $ 91.3 million and $ 90.8 million, respectively. Of our total environmental accruals at December 31, 2020 and 2019, $ 7.1 million and $ 10.4 million, respectively, were included in current liabilities. Inherent in the estimates of these accruals are our expectations regarding the levels of contamination, decommissioning costs and recoverability from other parties, which may vary significantly as decommissioning activities progress. Accordingly, changes in estimates could result in material adjustments to our operating results, and the ultimate loss may differ materially from the amounts that we have provided for in our consolidated financial statements. NOTE 11 – RISKS AND UNCERTAINTIES Revenue Recognized Over Time As of December 31, 2020, in accordance with the method of recognizing revenue over time, we have provided for our estimated costs to complete all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. The risk on fixed-price contracts is that revenue from the customer does not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor productivity or steel and other raw material prices. Increases in costs on our fixed-price contracts could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated financial condition, results of operations and cash flows. Insurance Upon the February 22, 2006 effectiveness of the settlement relating to the Chapter 11 proceedings involving several of our former subsidiaries, most of our subsidiaries contributed substantial insurance rights to the asbestos personal injury trust, including rights to (1) certain pre-1979 primary and excess insurance coverages and (2) certain of our 1979-1986 excess insurance coverage. These insurance rights provided coverage for, among other things, asbestos and other personal injury claims, subject to the terms and conditions of the policies. The contribution of these insurance rights was made in exchange for the agreement on the part of the representatives of the asbestos claimants, including the representative of future claimants, to the entry of a permanent injunction, pursuant to Section 524(g) of the U.S. Bankruptcy Code, to channel to the asbestos trust all asbestos-related general liability claims against our subsidiaries and former subsidiaries arising out of, resulting from or attributable to their operations, and the implementation of related releases and indemnification provisions protecting those subsidiaries and their affiliates from future liability for such claims. Although we are not aware of any significant, unresolved claims against our subsidiaries and former subsidiaries that are not subject to the channeling injunction and that relate to the periods during which such excess insurance coverage related, with the contribution of these insurance rights to the asbestos personal injury trust, it is possible that we could have underinsured or uninsured exposure for non-derivative asbestos claims or other personal injury or other claims that would have been insured under these coverages had the insurance rights not been contributed to the asbestos personal injury trust. In conjunction with the spin-off, claims and liabilities associated with the asbestos personal injury, property damage and indirect property damage claims mentioned above have been expressly assumed by BWE pursuant to the master separation agreement between us and BWE. NOTE 12 – FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK The primary customer of our Nuclear Operations Group and Nuclear Services Group segments is the U.S. Government, including some of its contractors. Our Nuclear Power Group segment's major customers are large utilities. These concentrations of customers may impact our overall exposure to credit risk, either positively or negatively, in that our customers may be 82 Table of Contents similarly affected by changes in economic or other conditions. In the years ended December 31, 2020, 2019 and 2018, U.S. Government contracts accounted for approximately 77 %, 77 % and 79 % of our total consolidated revenues, respectively. Accounts receivable due directly or indirectly from the U.S. Government represented 83 % and 67 % of net receivables at December 31, 2020 and 2019, respectively. See Note 15 for additional information about our operations in different geographic areas. We believe that our provision for possible losses on uncollectable accounts receivable is adequate for our credit loss exposure. At December 31, 2020 and 2019, the allowances for possible losses that we deducted from Accounts receivable – trade, net on our consolidated balance sheets were $ 0.2 million. NOTE 13 – INVESTMENTS The following is a summary of our investments at December 31, 2020: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (In thousands) Equity securities Equities $ 172 $ 628 $ — $ 800 Mutual funds 5,323 1,432 — 6,755 Available-for-sale securities U.S. Government and agency securities 2,317 1 ( 4 ) 2,314 Corporate bonds 2,879 259 ( 6 ) 3,132 Asset-backed securities and collateralized mortgage obligations 115 — ( 53 ) 62 Total $ 10,806 $ 2,320 $ ( 63 ) $ 13,063 The following is a summary of our investments at December 31, 2019: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (In thousands) Equity securities Equities $ 417 $ 1,755 $ — $ 2,172 Mutual funds 4,988 697 — 5,685 Available-for-sale securities U.S. Government and agency securities 2,039 5 — 2,044 Corporate bonds 3,103 380 — 3,483 Asset-backed securities and collateralized mortgage obligations 132 — ( 53 ) 79 Total $ 10,679 $ 2,837 $ ( 53 ) $ 13,463 NOTE 14 – FAIR VALUE MEASUREMENTS FASB Topic Fair Value Measurements and Disclosures defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. This topic also sets forth the disclosure requirements regarding fair value and establishes a hierarchy for valuation inputs that emphasizes the use of observable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy established by this topic is as follows: • Level 1 – inputs are based upon quoted prices for identical instruments traded in active markets. • Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for similar or identical instruments in inactive markets and model-based valuation techniques for which all significant assumptions 83 Table of Contents are observable in the market or can be corroborated by observable market data for substantially the full term of the assets and liabilities. • Level 3 – inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar valuation techniques. In accordance with FASB Topic Fair Value Measurements , certain investments that were measured at net asset value per share (or its equivalent) ("NAV") have not been classified in the fair value hierarchy. These investments are measured on the fair value of the underlying investments but may not be redeemable at that fair value. When appropriate, we adjust these net asset values for contributions and distributions, if any, made during the period beginning on the latest NAV valuation date and ending on our measurement date. We also consider available market data, relevant index returns, preliminary estimates from our investees and other data obtained through research and consultation with third-party advisors in determining the fair value of these investments. The following sections describe the valuation methodologies we use to measure the fair values of our investments, derivatives and nonrecurring fair value measurements. Investments Investments primarily include U.S. Government and agency securities, corporate bonds and equities and mutual funds. In general, and where applicable, we principally use a composite of observable prices and quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology applies to our Level 1 and Level 2 investments. Fair Value Measurements The following is a summary of our investments measured at fair value at December 31, 2020: 12/31/2020 Level 1 Level 2 Level 3 Unclassified (In thousands) Equity securities Equities $ 800 $ — $ — $ 800 $ — Mutual funds 6,755 — 6,755 — — Available-for-sale securities U.S. Government and agency securities 2,314 2,314 — — — Corporate bonds 3,132 1,738 1,394 — — Asset-backed securities and collateralized mortgage obligations 62 — 62 — — Total $ 13,063 $ 4,052 $ 8,211 $ 800 $ — The following is a summary of our investments measured at fair value at December 31, 2019: 12/31/2019 Level 1 Level 2 Level 3 Unclassified (In thousands) Equity securities Equities $ 2,172 $ — $ 2,172 $ — $ — Mutual funds 5,685 — 5,685 — — Available-for-sale securities U.S. Government and agency securities 2,044 2,044 — — — Corporate bonds 3,483 1,855 1,628 — — Asset-backed securities and collateralized mortgage obligations 79 — 79 — — Total $ 13,463 $ 3,899 $ 9,564 $ — $ — 84 Table of Contents Derivatives Level 2 derivative assets and liabilities currently consist of FX forward contracts. Where applicable, the value of these derivative assets and liabilities is computed by discounting the projected future cash flow amounts to present value using market-based observable inputs, including FX forward and spot rates, interest rates and counterparty performance risk adjustments. At December 31, 2020 and 2019, we had FX forward contracts outstanding to purchase or sell foreign currencies, primarily Canadian dollars and Euros, with a total fair value of $( 2.2 ) million and $( 0.8 ) million, respectively. Other Financial Instruments We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments, as follows: Cash and cash equivalents and restricted cash and cash equivalents . The carrying amounts that we have reported in the accompanying consolidated balance sheets for Cash and cash equivalents and Restricted cash and cash equivalents approximate their fair values due to their highly liquid nature. Long-term and short-term debt . We base the fair values of debt instruments, including our Senior Notes, on quoted market prices. Where quoted prices are not available, we base the fair values on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms. At December 31, 2020 and 2019, the fair values of our Senior Notes due 2026 were $ 415.5 million and $ 423.5 million, respectively. At December 31, 2020, the fair value of our Senior Notes due 2028 was $ 416.7 million. The fair value of our remaining debt instruments approximated their carrying values at December 31, 2020 and 2019. NOTE 15 – SEGMENT REPORTING As described in Note 1, our operations are assessed based on three reportable segments. The operations of our segments are managed separately, and each segment has unique technology, services and customer classes. We account for intersegment 85 Table of Contents sales at prices that we generally establish by reference to similar transactions with unaffiliated customers. Reportable segments are measured based on operating income exclusive of general corporate expenses and gains (losses) on sales of corporate assets. 1. Information about Operations in our Different Industry Segments: Year Ended December 31, 2020 2019 2018 (In thousands) REVENUES: Nuclear Operations Group $ 1,646,257 $ 1,428,587 $ 1,319,170 Nuclear Power Group 371,269 352,640 365,911 Nuclear Services Group 136,493 131,339 122,438 Eliminations (1) ( 30,503 ) ( 17,646 ) ( 7,630 ) $ 2,123,516 $ 1,894,920 $ 1,799,889 (1) Segment revenues are net of the following intersegment transfers: Nuclear Operations Group Transfers $ ( 3,791 ) $ ( 4,382 ) $ ( 4,004 ) Nuclear Power Group Transfers ( 553 ) ( 208 ) ( 308 ) Nuclear Services Group Transfers ( 26,159 ) ( 13,056 ) ( 3,318 ) $ ( 30,503 ) $ ( 17,646 ) $ ( 7,630 ) OPERATING INCOME: Nuclear Operations Group $ 326,049 $ 298,328 $ 271,405 Nuclear Power Group 51,989 53,815 52,270 Nuclear Services Group 26,436 14,226 20,374 Other ( 22,309 ) ( 23,099 ) ( 18,074 ) $ 382,165 $ 343,270 $ 325,975 Unallocated Corporate (1) ( 23,613 ) ( 17,749 ) ( 20,998 ) Total Operating Income (2) $ 358,552 $ 325,521 $ 304,977 Other Income (Expense) 3,620 ( 11,779 ) ( 24,832 ) Income before Provision for Income Taxes $ 362,172 $ 313,742 $ 280,145 (1) Unallocated Corporate includes general corporate overhead not allocated to segments. (2) The following amounts are included in Operating Income: Losses (Gains) on Asset Disposals and Impairments, Net: Nuclear Operations Group $ ( 8 ) $ ( 6 ) $ — Nuclear Power Group ( 1,681 ) 103 ( 179 ) Nuclear Services Group 328 2,727 — Other — — 467 Unallocated Corporate — — ( 224 ) $ ( 1,361 ) $ 2,824 $ 64 Equity in Income of Investees : Nuclear Operations Group $ — $ — $ — Nuclear Power Group — — — Nuclear Services Group 27,152 28,924 30,343 Other — — — $ 27,152 $ 28,924 $ 30,343 86 Table of Contents Year Ended December 31, 2020 2019 2018 (In thousands) CAPITAL EXPENDITURES: Nuclear Operations Group $ 135,637 $ 133,279 $ 93,360 Nuclear Power Group 106,596 38,053 4,710 Nuclear Services Group 1,326 1,169 974 Other 252 2,597 2,780 Segment Capital Expenditures 243,811 175,098 101,824 Corporate Capital Expenditures 11,216 7,026 7,514 Total Capital Expenditures $ 255,027 $ 182,124 $ 109,338 DEPRECIATION AND AMORTIZATION: Nuclear Operations Group $ 33,174 $ 33,231 $ 32,132 Nuclear Power Group 18,325 17,054 17,154 Nuclear Services Group 1,685 3,246 3,401 Other 645 787 — Segment Depreciation and Amortization 53,829 54,318 52,687 Corporate Depreciation and Amortization 6,845 7,404 7,410 Total Depreciation and Amortization $ 60,674 $ 61,722 $ 60,097 December 31, 2020 2019 2018 (In thousands) SEGMENT ASSETS: Nuclear Operations Group $ 1,184,741 $ 986,827 $ 878,758 Nuclear Power Group 828,729 580,413 482,763 Nuclear Services Group 166,240 177,952 180,441 Other 3,638 3,751 5,557 Segment Assets 2,183,348 1,748,943 1,547,519 Corporate Assets 110,155 159,970 107,577 Total Assets $ 2,293,503 $ 1,908,913 $ 1,655,096 INVESTMENT IN UNCONSOLIDATED AFFILIATES: Nuclear Operations Group $ — $ — $ — Nuclear Power Group — — — Nuclear Services Group 71,806 70,116 63,746 Other — — — Total Investment in Unconsolidated Affiliates $ 71,806 $ 70,116 $ 63,746 87 Table of Contents 2. Information about our Product and Service Lines: Year Ended December 31, 2020 2019 2018 (In thousands) REVENUES: Nuclear Operations Group: Government Programs $ 1,540,256 $ 1,368,555 $ 1,311,886 Commercial Operations 106,001 60,032 7,284 1,646,257 1,428,587 1,319,170 Nuclear Power Group: Nuclear Manufacturing 250,585 243,472 201,628 Nuclear Services and Engineering 120,684 109,168 164,283 371,269 352,640 365,911 Nuclear Services Group: Nuclear Environmental Services 94,320 102,726 96,566 Nuclear Services and Advanced Reactor Design and Engineering 42,173 28,613 25,872 136,493 131,339 122,438 Eliminations ( 30,503 ) ( 17,646 ) ( 7,630 ) $ 2,123,516 $ 1,894,920 $ 1,799,889 3. Information about our Consolidated Operations in Different Geographic Areas: Year Ended December 31, 2020 2019 2018 (In thousands) REVENUES (1) : U.S. $ 1,780,409 $ 1,572,085 $ 1,446,791 Canada 309,688 287,971 294,913 All Other Countries 33,419 34,864 58,185 $ 2,123,516 $ 1,894,920 $ 1,799,889 (1) We allocate geographic revenues based on the location of the customers' operations . December 31, 2020 2019 2018 (In thousands) NET PROPERTY, PLANT AND EQUIPMENT: U.S. $ 603,518 $ 494,202 $ 390,632 Canada 212,953 86,039 48,607 $ 816,471 $ 580,241 $ 439,239 4. Information about our Major Customers: In the years ended December 31, 2020, 2019 and 2018, sales to the U.S. Government accounted for approximately 77 %, 77 % and 79 % of our total consolidated revenues, respectively, all of which were included in our Nuclear Operations Group and Nuclear Services Group segments. 88 Table of Contents NOTE 16 – QUARTERLY FINANCIAL DATA (UNAUDITED) The following tables set forth selected unaudited quarterly financial information for the years ended December 31, 2020 and 2019: Year Ended December 31, 2020 Quarter Ended March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 (In thousands, except per share amounts) Revenues $ 542,208 $ 504,520 $ 519,878 $ 556,910 Operating income (1) $ 98,267 $ 82,434 $ 88,770 $ 89,081 Equity in income of investees $ 6,063 $ 4,913 $ 8,271 $ 7,905 Net Income Attributable to BWX Technologies, Inc. $ 75,499 $ 64,258 $ 73,171 $ 65,742 Earnings per common share: Basic: Net Income Attributable to BWX Technologies, Inc. $ 0.79 $ 0.67 $ 0.77 $ 0.69 Diluted: Net Income Attributable to BWX Technologies, Inc. $ 0.79 $ 0.67 $ 0.76 $ 0.69 (1) Includes equity in income of investees. Year Ended December 31, 2019 Quarter Ended March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019 (In thousands, except per share amounts) Revenues $ 416,454 $ 471,231 $ 506,000 $ 501,235 Operating income (1) $ 63,644 $ 80,535 $ 98,462 $ 82,880 Equity in income of investees $ 7,682 $ 6,862 $ 7,874 $ 6,506 Net Income Attributable to BWX Technologies, Inc. $ 48,978 $ 58,878 $ 74,810 $ 61,449 Earnings per common share: Basic: Net Income Attributable to BWX Technologies, Inc. $ 0.51 $ 0.62 $ 0.78 $ 0.64 Diluted: Net Income Attributable to BWX Technologies, Inc. $ 0.51 $ 0.62 $ 0.78 $ 0.64 (1) Includes equity in income of investees. We immediately recognize actuarial gains (losses) for our pension and postretirement benefit plans in earnings as a component of net periodic benefit cost. Recorded in the quarters ended December 31, 2020 and 2019, the effects of these adjustments on pre-tax income were $( 6.4 ) million and $( 3.6 ) million, respectively. 89 Table of Contents NOTE 17 – EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Year Ended December 31, 2020 2019 2018 (In thousands, except shares and per share amounts) Basic: Net Income Attributable to BWX Technologies, Inc. $ 278,670 $ 244,115 $ 226,958 Weighted-average common shares 95,457,193 95,377,414 99,062,087 Basic earnings per common share $ 2.92 $ 2.56 $ 2.29 Diluted: Net Income Attributable to BWX Technologies, Inc. $ 278,670 $ 244,115 $ 226,958 Weighted-average common shares (basic) 95,457,193 95,377,414 99,062,087 Effect of dilutive securities: Stock options, restricted stock units and performance shares (1) 269,304 433,124 956,966 Adjusted weighted-average common shares 95,726,497 95,810,538 100,019,053 Diluted earnings per common share $ 2.91 $ 2.55 $ 2.27 (1) At December 31, 2020, 2019 and 2018, none of our shares were antidilutive. 90 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.