What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-22 · 241 added, 267 removed, 1436 unchanged (26% of the section changed)

32 unchanged sentences

• We tested recorded revenue using analytical procedures.

• We analyzed cumulative adjustments recorded during the year and tested those with characteristics of audit interest to determine that the adjustments were the result of changes in facts and circumstances.

• We analyzed cumulative adjustments recorded during the year and separately tested those with characteristics of audit interest due to their size to determine that the adjustments were the result of changes in facts and circumstances.

• We analyzed contracts with customers recognized over time to identify whether there are contracts with characteristics of audit interest.

For each contract determined to exhibit characteristics of audit interest, we performed detail testing, including the following:

For a contract determined to exhibit characteristics of audit interest, we performed the following testing:

◦ Read the contract to understand the contract terms and the accounting treatment in accordance with generally accepted accounting principles.

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◦ Evaluated a selection of cost estimates within the selected contract as follows:

▪ Evaluated costs incurred to date and costs of similar performance obligations, as appropriate, to evaluate the reasonableness of management’s estimates.

▪ Evaluated costs incurred to date based on historical experience or costs of similar performance obligations, as appropriate, 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 manager and comparing the estimates to management’s work plans and/or supplier contracts, as appropriate.

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Current Liabilities:

Bank overdraft $ — $ 88,694

Current maturities of long-term debt $ 6,250 $ —

Accounts payable 127,112 189,842

2 unchanged sentences

Advance billings on contracts 88,726 111,619

Accrued warranty expense 5,321 5,292

Total Current Liabilities 367,860 459,615

81 unchanged sentences

Derivative financial instruments:

Unrealized losses arising during the period, net of tax benefit of $ 170 , $ 24 and $ 442 , respectively

Unrealized gains (losses) arising during the period, net of tax (provision) benefit of $( 89 ), $ 170 and $ 24 , respectively

267 ( 500 ) ( 73 )

6 unchanged sentences

2,626 2,295 2,532

Unrealized gains (losses) arising during the period, net of tax provision of $( 24 ), $( 56 ) and $( 3 ), respectively

Unrealized (losses) gains arising during the period, net of tax benefit (provision) of $ 28 , $( 24 ) and $( 56 ), respectively

( 105 ) 90 ( 191 )

65 unchanged sentences

2022 2021 2020

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

(In thousands)

Net Income $ 238,620 $ 306,288 $ 279,196

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Sales and maturities of securities 3,813 5,553 6,360

Investments, net of return of capital, in equity method investees ( 11,450 ) — 88

Other, net 844 5,585 3,397

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Dividends paid to common shareholders ( 81,074 ) ( 79,668 ) ( 72,940 )

Exercises of stock options 2,033 2,812 4,446

Cash paid for shares withheld to satisfy employee taxes ( 6,588 ) ( 5,042 ) ( 5,249 )

Settlements of forward contracts, net 24,013 ( 2,030 ) ( 8,802 )

Other, net 6 1,674 2,282

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES ( 90,136 ) 25,046 ( 43,713 )

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 13,952 ( 90,136 ) 25,046

EFFECTS OF EXCHANGE RATE CHANGES ON CASH ( 1,205 ) 240 ( 271 )

TOTAL (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS ( 8,523 ) ( 44,102 ) 55,992

TOTAL INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS 1,215 ( 8,523 ) ( 44,102 )

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 39,775 48,298 92,400

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We generally refer to these entities as "joint ventures." We have eliminated all intercompany transactions and accounts.

We classify assets and liabilities related to long-term contracts as current using the duration of the related contract or program as our operating cycle, which is generally longer than one year.

We have reclassified certain amounts previously reported to conform to the presentation at December 31, 2022 and for the year ended December 31, 2022.

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.

We present the notes to our consolidated financial statements on the basis of continuing operations, unless otherwise stated.

1 unchanged sentence

Reportable Segments

We operate in three reportable segments:

We operate in two reportable segments:

Government Operations and Commercial Operations.

Our reportable segments reflect changes we made during the first quarter of 2022 to better align our businesses by their government and commercial nature, which reflects the manner in which our operating segment information is reported for purposes of assessing operating performance and allocating resources.

Prior to 2022, we reported three segments:

Nuclear Operations Group, Nuclear Power Group and Nuclear Services Group.

Our Government Operations segment consists of our legacy Nuclear Operations Group and Nuclear Services Group segments with certain research and development activities in the areas of advanced reactors and advanced manufacturing.

Our Commercial Operations segment consists of our legacy Nuclear Power Group segment with certain research and development and commercialization activities in the areas of medical and industrial radioisotopes and radiopharmaceuticals.

Both segments now include research and development and certain commercialization activities associated with new technologies previously reported outside of our reportable segments.

The change in our reportable segments had no impact on our previously reported consolidated results of operations, financial condition or cash flows.

We have applied the change in reportable segments to previously reported historical financial information and related disclosures included in this annual report on Form 10-K.

Our reportable segments are further described as follows:

• Our Nuclear Operations Group segment manufactures naval nuclear reactors for the U.S.

• Our Government Operations segment manufactures naval nuclear reactors, including the related nuclear fuel, 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.

Through this segment, we also fabricate fuel-bearing precision components that range in weight from a few grams to hundreds of tons, manufacture electro-mechanical equipment, perform design, manufacturing, inspection, assembly and testing activities and downblend Cold War-era government stockpiles of high-enriched uranium.

In addition, we supply proprietary and sole-source valves, manifolds and fittings to global naval and commercial shipping customers.

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.

This segment also provides various other services, primarily through joint ventures, to the U.S.

Government including nuclear materials management and operation, environmental management and administrative and operating services for various U.S.

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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.

Department of Energy ("DOE"), including the National Nuclear Security Administration, the Office of Nuclear Energy, the Office of Science and the Office of Environmental Management, the Department of Defense and NASA.

In addition, this segment also develops technology for advanced nuclear reactors for a variety of power and propulsion applications in the space and terrestrial domains and offers complete advanced nuclear fuel and reactor design and engineering, licensing and manufacturing services for these programs.

• Our Commercial Operations 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.

We have supplied the nuclear industry with more than 1,300 large, heavy components worldwide, and we are 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.

This segment also manufactures medical radioisotopes, radiopharmaceuticals and medical devices, and partners with life science and pharmaceutical companies developing new drugs.

See Note 15 and Note 3 for financial information about our segments.

During the first quarter of 2022, we made changes to our reportable segments to better align our businesses by their government and commercial nature, which reflects the manner in which resources will be allocated and operating performance will be assessed going forward.

Beginning with first quarter of 2022 reporting, our reportable segments will be Government Operations and Commercial Operations, and both segments will now include research and development and certain commercialization activities associated with new technologies previously reported centrally, outside of our reportable segments.

Our Government Operations segment will consist of our legacy Nuclear Operations Group and Nuclear Services Group segments with certain research and development activities in the areas of advanced reactors and autonomous manufacturing.

Our Commercial Operations segment will consist of our legacy Nuclear Power Group with certain research and development and commercialization activities in the areas of medical and industrial radioisotopes.

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

There were no accounting standards adopted during the year ended December 31, 2021 that had an impact on our financial position, results of operations, cash flows or disclosures.

There were no accounting standards adopted during the year ended December 31, 2022 that had a significant impact on our financial position, results of operations, cash flows or disclosures.

Use of Estimates

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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.

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 Commercial Operations 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.

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,

2021 2020 2019

(In thousands)

Balance at beginning of period $ 5,292 $ 9,042 $ 10,344

Additions 924 1,341 2,232

Expirations and other changes (1)

( 424 ) ( 1,624 ) ( 2,728 )

Payments ( 605 ) ( 1,026 ) ( 1,065 )

Translation and other (2)

134 ( 2,441 ) 259

Balance at end of period $ 5,321 $ 5,292 $ 9,042

(1) Includes discounts provided to customers in satisfaction of warranty obligations totaling $( 1.2 ) million in the year ended December 31, 2019.

(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.

See Note 3 for a further discussion of revenue recognition.

Stock-Based Compensation

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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 years ended December 31, 2021 and 2020, we recognized subsidies under the CEWS as offsets to operating expenses of $ 5.4 million and $ 20.4 million, respectively.

During the years ended December 31, 2022, 2021 and 2020, we recognized subsidies under the CEWS as offsets to operating expenses of $ 0.6 million, $ 5.4 million and $ 20.4 million, respectively.

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.

Research and development costs are expensed as incurred, unless these costs relate to customer-sponsored activities where we are reimbursed in accordance with the terms of the underlying contracts.

Amounts expensed as incurred for company-funded research and development projects are included in Research and development costs.

Costs related to contracts with customers for customer-sponsored research and development projects are included as a contract cost in Cost of operations whereby we recognize revenue, consistent with our revenue recognition policies.

Additionally, we may enter into cost-sharing arrangements with our customers to enhance our internal development capabilities and offset a portion of the costs incurred related to these development efforts.

Research and development activities totaled $ 45.4 million, $ 31.4 million and $ 40.8 million in the years ended December 31, 2022, 2021 and 2020, respectively.

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Our investment portfolio consists primarily of U.S.

Government 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.

Government securities, corporate bonds and mutual funds.

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 classify investments available for current operations in the consolidated balance sheets as current assets, while we classify investments held for long-term purposes as noncurrent 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.

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The following summarizes the changes in the carrying amount of Goodwill:

Operations Group Nuclear

Group Nuclear

Government Operations Commercial Operations Total

(In thousands)

Balance at December 31, 2020 $ 155,939 $ 127,769 $ 283,708

Acquisition of Precision Manufacturing (Note 2) — 5,753 — 5,753

Translation — 1,794 1,794

Balance at December 31, 2021 $ 155,939 $ 129,563 $ 285,502

Acquisitions (Note 2) 16,609 — 16,609

Translation ( 461 ) ( 8,485 ) ( 8,946 )

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Amortization expense ( 10,901 ) ( 9,329 ) ( 8,824 )

Reclassification of right-of-use assets — — ( 33,866 )

Translation and other (1)

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Year Ended December 31, Amount

2023 $ 11,328

2024 $ 11,328

2025 $ 11,328

2026 $ 10,147

We lease certain manufacturing facilities, office space and equipment under operating leases with terms of one to 20 years.

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At December 31, 2022, our right-of-use assets totaled $ 49.6 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 acquisitions.

The difference between our right-of-use assets and lease liabilities primarily resulted from favorable lease agreements related to acquisitions.

Warranty Expense

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.

Included in Accrued liabilities – other on our consolidated balance sheets were accrued warranty expenses totaling $ 6.6 million and $ 5.3 million at December 31, 2022 and 2021, respectively.

Deferred Debt Issuance Costs

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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 comprising 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

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.

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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.

Substantially all of our asset retirement obligations relate to the remediation of our nuclear analytical laboratory at our facility in Lynchburg, Virginia and the Nuclear Fuel Services, Inc.

("NFS") facility in our Government Operations segment as well as certain facilities in our Commercial Operations segment.

The following summarizes the changes in the carrying amount of these liabilities:

5 unchanged sentences

Additions/adjustments ( 4,289 ) — ( 3,284 )

Acquisitions — — —

Accretion 5,158 5,996 5,343

Translation and other (1)

241 371 ( 3,503 )

Translation ( 1,266 ) 241 371

Balance at end of period (1)

$ 82,512 $ 84,132 $ 78,110

(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.

(1) Includes current asset retirement obligations of $ 4.7 million, $ 4.7 million and $ 2.8 million at December 31, 2022, 2021 and 2020, respectively.

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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 $ 4.5 million and $ 5.0 million at December 31, 2021 and 2020, respectively.

Included in Other Liabilities on our consolidated balance sheets were reserves for self-insurance totaling $ 4.2 million and $ 4.5 million at December 31, 2022 and 2021, respectively.

Loss Contingencies

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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 settlements for de minimis amounts prior to trial;

the likelihood of success at trial;

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Currency translation adjustments $ ( 4,207 ) $ 30,627

Net unrealized loss on derivative financial instruments ( 694 ) ( 496 )

Net unrealized gain (loss) on derivative financial instruments 105 ( 694 )

Unrecognized prior service cost on benefit obligations ( 17,955 ) ( 18,022 )

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(In thousands) Line Item Presented

Realized (loss) gain on derivative financial instruments

$ 307 $ ( 35 ) $ ( 132 ) Revenues

Realized (loss) gain on derivative financial instruments $ ( 370 ) $ 307 $ ( 35 ) Revenues

( 343 ) ( 712 ) 695 Cost of operations

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We report foreign currency transaction gains and losses in income.

We have included in Other – net transaction gains (losses) of $ 1.8 million, $( 0.6 ) million and $ 1.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

We have included in Other – net translation gains (losses) of $( 1.4 ) million, $ 1.8 million and $( 0.6 ) million for the years ended December 31, 2022, 2021 and 2020, respectively.

Derivative Financial Instruments

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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 enter into derivative financial instruments primarily as hedges of certain firm purchase and sale commitments and loans between subsidiaries denominated in foreign currencies.

We record these contracts at fair value on our consolidated balance sheets.

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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, 2021, we had deferred approximately $( 0.7 ) 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, 2021, 2020 and 2019, we recognized $( 0.1 ) million, $ 8.7 million and $( 1.0 ) million, respectively, of (gains) losses associated with FX forward contracts not designated as hedging instruments.

At December 31, 2021, our derivative financial instruments consisted of FX forward contracts with a total notional value of $ 352.2 million with maturities extending to November 2023.

These instruments consist primarily of FX forward contracts to purchase or sell Canadian dollars and Euros.

At December 31, 2022, we had deferred approximately $ 0.1 million of net gains on these derivative financial instruments.

Assuming market conditions continue, we expect to recognize the majority of this amount in the next 12 months.

For the years ended December 31, 2022, 2021 and 2020, we recognized (gains) losses of $( 27.1 ) million, $( 0.1 ) million and $ 8.7 million, respectively, in Other – net on our consolidated statements of income associated with FX forward contracts not designated as hedging instruments.

At December 31, 2022, our derivative financial instruments consisted of FX forward contracts with a total notional value of $ 438.8 million with maturities extending to December 2024.

These instruments consisted 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.

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.

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We are currently evaluating the impact, if any, of the adoption of this standard on our financial statements.

NOTE 2 – ACQUISITIONS

Laker Energy Products Ltd.

NOTE 2 – ACQUISITIONS AND DIVESTITURES

Acquisition of Dynamic Controls Limited and Citadel Capital Corporation

On April 11, 2022, our subsidiary BWXT Government Group, Inc.

acquired all of the outstanding stock of U.K.-based Dynamic Controls Limited ("Dynamic") and U.S.-based Citadel Capital Corporation, along with its wholly-owned subsidiary, Cunico Corporation ("Cunico"), for approximately $ 49.9 million.

Our preliminary purchase price allocation resulted in the recognition of $ 28.5 million of Intangible Assets, $ 6.4 million of inventory and $ 16.6 million of Goodwill.

Adjustments to our initial purchase price allocation include a reduction to intangible assets of $ 1.1 million with an offsetting increase to goodwill and a reduction of inventory of $ 2.0 million with an offsetting increase to Contracts in progress.

In addition, we recognized right-of-use assets and lease liabilities of $ 7.2 million.

The assets acquired and liabilities assumed have been recorded at preliminary estimates of fair value as determined by management, based on information currently available and on current assumptions of future operations, and are subject to change upon completion of acquisition accounting.

Dynamic and Cunico are suppliers of highly-engineered, proprietary valves, manifolds and fittings for global naval nuclear and diesel-electric submarines, surface warfare ships and commercial shipping vessels.

These companies are reported as part of our Government Operations segment.

The intangible assets included above consist of the following (dollar amounts in thousands):

Amount Amortization Period

Customer relationships $ 17,700 21 years

Backlog $ 6,600 5 years

Unpatented technology $ 4,200 8 years

Acquisition of Laker Energy Products Ltd.

On January 2, 2020, our subsidiary BWXT Canada Ltd.

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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.

In addition, we recognized right-of-use assets and lease liabilities of $ 2.7 million.

During the year ended December 31, 2021, we entered into an agreement with the seller resulting in no contingent consideration due and recognized a gain of $ 2.0 million (CAD 2.5 million) as a component of Cost of operations.

Precision Manufacturing is a global supplier of nuclear-grade materials and precisely machined components for CANDU nuclear power utilities and is reported as part of our Nuclear Power Group segment.

Precision Manufacturing is a global supplier of nuclear-grade materials and precisely machined components for CANDU nuclear power utilities and is reported as part of our Commercial Operations segment.

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 Government Operations segment.

The acquired assets are reported as part of the Government Operations segment.

NOTE 3 – REVENUE RECOGNITION

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.

Government Operations

Our Government Operations segment recognizes revenue over time for the manufacturing of naval nuclear reactor components and fuel, submarine missile launch tubes, the downblending of high-enriched uranium and for the development of advanced nuclear reactors for power and propulsion applications.

Certain of our contracts 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 determine the stand-alone selling price of our performance obligations based on the expected cost plus margin approach.

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.

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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 Government Operations 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.

Commercial Operations

Our Commercial Operations 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.

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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.

We are entitled to payment on the majority of our Commercial Operations segment contracts when we achieve certain milestones related to our progress.

Disaggregated Revenues

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Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020

Group Nuclear

Group Total Nuclear

Group Nuclear

Group Total Nuclear

Group Nuclear

Government Operations Commercial Operations Total Government Operations Commercial Operations Total Government Operations Commercial Operations Total

(In thousands)

3 unchanged sentences

$ 1,794,658 $ 31,120 $ 1,825,778 $ 1,714,499 $ 44,102 $ 1,758,601 $ 1,751,755 $ 35,432 $ 1,787,187

Government $ 79 $ — $ 79 $ — $ — $ — $ — $ — $ —

Non-Government 3,134 373,705 376,839 3,417 345,412 348,829 4,357 309,433 313,790

$ 3,213 $ 373,705 $ 376,918 $ 3,417 $ 345,412 $ 348,829 $ 4,357 $ 309,433 $ 313,790

Government $ 1,356 $ — $ 1,356 $ — $ — $ — $ — $ — $ —

Non-Government 9,256 22,533 31,789 7,181 17,568 24,749 7,015 26,404 33,419

$ 10,612 $ 22,533 $ 33,145 $ 7,181 $ 17,568 $ 24,749 $ 7,015 $ 26,404 $ 33,419

Segment Revenues $ 1,808,483 $ 427,358 2,235,841 $ 1,725,097 $ 407,082 2,132,179 $ 1,763,127 $ 371,269 2,134,396

3 unchanged sentences

Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020

Group Nuclear

Group Total Nuclear

Group Nuclear

Group Total Nuclear

Group Nuclear

(In thousands) (In thousands) (In thousands)

Government Operations Commercial Operations Total Government Operations Commercial Operations Total Government Operations Commercial Operations Total

(In thousands)

Over time $ 1,798,388 $ 370,198 $ 2,168,586 $ 1,724,961 $ 355,477 $ 2,080,438 $ 1,763,043 $ 322,745 $ 2,085,788

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Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020

Group Nuclear

Group Total Nuclear

Group Nuclear

Group Total Nuclear

Group Nuclear

(In thousands) (In thousands) (In thousands)

Government Operations Commercial Operations Total Government Operations Commercial Operations Total Government Operations Commercial Operations Total

(In thousands)

Fixed-Price Incentive Fee $ 1,226,265 $ 9,728 $ 1,235,993 $ 1,244,916 $ 9,279 $ 1,254,195 $ 1,226,748 $ 1,578 $ 1,228,326

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During the years ended December 31, 2022, 2021 and 2020, we recognized net favorable changes in estimates that resulted in increases in revenues of $ 26.6 million, $ 30.7 million and $ 44.9 million, respectively, as well as increases (decreases) in cost of operations of $ 2.2 million, $ 4.2 million and $ 2.1 million, respectively.

Included in these amounts are contract adjustments for cost overruns related to the manufacture of non-nuclear components being produced within our Government Operations segment.

We recognized a decrease in operating income of $ 11.3 million for the year ended December 31, 2022 related to this matter.

These contract adjustments resulted in a decrease in earnings per share of $ 0.09 for the year ended December 31, 2022.

We are pursuing recovery of cost overruns related to this project.

Contract Assets and Liabilities

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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.

In accordance with contract terms, certain amounts that are withheld by our customers and 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.

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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, 2021, our unbilled receivables increased $ 92.4 million primarily as a result of fixed-price incentive fee contracts within our Nuclear Operations Group segment and the timing of milestone billings on certain firm-fixed-price contracts within our Nuclear Power Group segment.

During the year ended December 31, 2021, our Advance billings on contracts increased $ 28.0 million primarily as a result of billings in excess of revenue recognized on certain firm-fixed-price contracts within our Nuclear Operations Group segment.

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.

During the year ended December 31, 2022, our unbilled receivables decreased $ 7.4 million primarily as a result of decreases in cost in excess of billings on our fixed-price incentive fee contracts within our Government Operations segment, partially offset by increases due to the timing of milestone billings on certain firm-fixed-price contracts within our Government Operations and Commercial Operations segments.

During the year ended December 31, 2022, our Advance billings on contracts decreased $ 22.9 million primarily as a result of revenue recognized in excess of billings on certain firm-fixed-price contracts within our Government Operations segment.

Our fixed-price incentive fee contracts for our Government Operations 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.

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Retainages (1)

Included in Other Assets:

Retainages $ 1,271 $ 1,488

$ 48,566 $ 51,507

Advance billings on contracts $ 88,726 $ 111,619

Retainages expected to be collected after one year are included in Other Assets.

Of the long-term retainages at December 31, 2021, we anticipate collecting $ 0.3 million in 2023 and $ 1.0 million in 2024.

(1) At December 31, 2021, we also had noncurrent retainages of $ 1.3 million included in Other Assets.

During the years ended December 31, 2022 and 2021, we recognized $ 91.9 million and $ 67.5 million of revenue that was in Advance billings on contracts at the beginning of each year, respectively.

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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, 2021, we expect to recognize revenues as follows:

2022 2023 Thereafter Total

(In approximate millions)

Nuclear Operations Group $ 1,573 $ 1,102 $ 1,836 $ 4,511

Nuclear Power Group 260 142 242 644

Nuclear Services Group 21 — — 21

Total Remaining Performance Obligations $ 1,854 $ 1,244 $ 2,078 $ 5,176

Our backlog is equal to our remaining performance obligations under contracts that meet the criteria in FASB Topic Revenue from Contracts with Customers .

At December 31, 2022, our ending backlog was $ 4,144.3 million, which included $ 88.7 million of unfunded backlog related to U.S.

Government contracts.

We expect to recognize approximately 42 % of the revenue associated with our backlog by the end of 2023, with the remainder to be recognized thereafter.

NOTE 4 – EQUITY METHOD INVESTMENTS

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Net income $ 173,339 $ 156,994 $ 139,988

Reimbursable costs recorded in revenues by the unconsolidated joint ventures in our Nuclear Services Group segment totaled $ 4,102.9 million, $ 3,851.5 million and $ 3,516.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Reimbursable costs recorded in revenues by the unconsolidated joint ventures in our Government Operations segment totaled $ 4,453.7 million, $ 4,102.9 million and $ 3,851.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Income taxes for the investees are the responsibility of the respective owners.

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$ 46,784 $ 31,870 $ 27,266

Timing of GAAP and other adjustments

1,628 ( 114 ) 652

GAAP and other adjustments ( 811 ) 1,628 ( 114 )

Equity in income of investees

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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.

We are subject to federal income tax in the U.S., Canada and the U.K., as well as income tax within multiple U.S.

state jurisdictions.

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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 authorities.

With few exceptions, we do not have any returns under examination for years prior to 2017.

We are not currently under audit by any of the various state authorities, and 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.

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Accrued warranty expense 1,694 1,363

Capitalized Section 174 expenditures 11,145 —

Accrued vacation pay 3,246 7,633

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Other 2,719 2,568

Total deferred tax assets 118,120 129,135

Gross deferred tax assets 120,001 118,120

Valuation allowance for deferred tax assets ( 13,022 ) ( 13,218 )

Deferred tax assets 104,902 116,243

Total deferred tax assets 106,979 104,902

Deferred tax liabilities:

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Total deferred tax liabilities 109,984 94,667

Net deferred tax assets $ 10,235 $ 49,415

Net deferred tax assets (liabilities) $ ( 3,005 ) $ 10,235

The components of Income before Provision for Income Taxes were as follows:

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Credit Facility 500,000 —

Former Credit Facility — 400,000

Amounts due within one year 6,250 —

Long-Term Debt, gross 1,293,750 1,200,000

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Maturities of Long-Term Debt subsequent to December 31, 2022 were as follows:

2022 through 2024 – $ 0.0 million ;

2023 – $ 6.3 million;

2024 – $ 6.3 million;

2025 – $ 12.5 million;

2026 – $ 12.5 million;

2027 – $ 462.5 million;

and thereafter – $ 800.0 million.

Credit Facility

On March 24, 2020, we entered into an Amendment No.

1 to Credit Agreement, which amended the Credit Agreement dated as of May 24, 2018 (as amended, the "Credit Facility") with Wells Fargo Bank, N.A., as administrative agent, and the other lenders party thereto.

The Credit Facility provides for a $ 750 million senior secured revolving credit facility (the "Revolving Credit Facility").

All obligations under the Revolving Credit Facility are scheduled to mature on March 24, 2025.

The proceeds of loans under the Revolving Credit Facility are available for working capital needs, permitted acquisitions and other general corporate purposes.

The Credit Facility allows for additional parties to become lenders and, subject to certain conditions, for the increase of the commitments under the Credit Facility, subject to an aggregate maximum for all additional commitments of (1) the greater of (a) $ 250 million and (b) 65 % of EBITDA, as defined in the Credit Facility, for the last four full fiscal quarters, plus (2) all voluntary prepayments of the term loans, plus (3) additional amounts provided the Company is in compliance with a pro forma first lien leverage ratio test of less than or equal to 2.50 to 1.00.

On October 12, 2022, we entered into an Amended and Restated Credit Agreement (the "Credit Facility") with Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto, which amended and restated our then existing secured credit facility (the "Former Credit Facility"), which consisted of a $ 750 million senior secured revolving credit facility.

The Credit Facility consists of a $ 750 million senior secured revolving credit facility (the "Revolving Credit Facility") and a $ 250 million senior secured term A loan (the "Term Loan").

The Revolving Credit Facility and the Term Loan are scheduled to mature on October 12, 2027.

All proceeds from the Term Loan were used to repay outstanding indebtedness under the Former Credit Facility.

The proceeds of loans under the Credit Facility are available for working capital needs, permitted acquisitions and other general corporate purposes.

The Credit Facility allows for additional parties to become lenders and, subject to certain conditions, for the increase of the commitments under the Credit Facility, subject to an aggregate maximum for all additional commitments of (1) the greater of (a) $ 400 million and (b) 100 % of EBITDA, as defined in the Credit Facility, for the last four full fiscal quarters, plus (2) all voluntary prepayments of the Term Loan, 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 Credit Facility is secured by first-priority liens on certain assets owned by the Company and its subsidiary guarantors (other than its subsidiaries comprising a portion of its Government Operations segment).

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

We are required to make quarterly amortization payments on the Term Loan in an amount equal to (i) 0.625 % of the initial aggregate principal amount of the Term Loan on the last business day of each quarter beginning the quarter ending March 31, 2023 and ending the quarter ending December 31, 2024 and (ii) 1.25 % of the initial aggregate principal amount of the Term Loan on the last business day of each quarter ending after December 31, 2024, with the balance of the Term Loan due at maturity.

We may prepay all loans under the Credit Facility at any time without premium or penalty (other than customary Term SOFR breakage costs), subject to notice requirements.

The Credit Facility includes financial covenants that are evaluated 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.

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, 2022, 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.

Outstanding loans under the Credit Facility bear interest at our option at either (1) the Term SOFR plus a credit spread adjustment of 0.10 % 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, 2021, the margin for Eurocurrency rate and base rate revolving loans was 1.50 % and 0.50 %, respectively, the letter of credit fee for financial letters of credit and performance letters of credit was 1.50 % and 0.90 %, respectively, and the commitment fee for the unused portion of the Revolving Credit Facility was 0.20 %.

As of December 31, 2021, borrowings and letters of credit issued under the Revolving Credit Facility totaled $ 400.0 million and $ 36.2 million, respectively.

As a result, as of December 31, 2021 we had $ 313.8 million available under the Revolving Credit Facility for borrowings and to meet letter of credit requirements.

As of December 31, 2021, the interest rate on outstanding borrowings under our Credit Facility was 1.61 %.

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 Revolving 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 Revolving 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 consolidated total net leverage ratio.

The margin for Term SOFR and base rate loans was 1.50 % and 0.50 %, respectively, the letter of credit fee for financial letters of credit and performance letters of credit was 1.50 % and 0.90 %, respectively, and the commitment fee for the unused portion of the Revolving Credit Facility was 0.20 % from the closing date through the date of our delivery of the compliance certificate for the fiscal quarter ended December 31, 2022.

As of December 31, 2022, borrowings under our Term Loan totaled $ 250.0 million, borrowings and letters of credit issued under the Revolving Credit Facility totaled $ 250.0 million and $ 2.5 million, respectively, and we had $ 497.5 million available under the Revolving Credit Facility for borrowings and to meet letter of credit requirements.

As of December 31, 2022, the weighted-average interest rate on outstanding borrowings under our Credit Facility was 5.93 %.

The Credit Facility generally includes customary events of default for a secured credit facility.

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Bank National Association, as trustee.

On July 15, 2021, using cash on hand and borrowings under the Credit Facility, we redeemed the Senior Notes due 2026 at a redemption price equal to 102.688 % of the principal amount, resulting in an early redemption premium of $ 10.8 million and the write-off of deferred debt issuance costs totaling $ 4.2 million.

On July 15, 2021, using cash on hand and borrowings under the Former Credit Facility, we redeemed the Senior Notes due 2026 at a redemption price equal to 102.688 % of the principal amount, resulting in an early redemption premium of $ 10.8 million and the write-off of deferred debt issuance costs totaling $ 4.2 million.

These charges were recorded in our consolidated statement of income during the year ended December 31, 2021 as components of Other – net and Interest expense, respectively.

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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.

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 12-month period beginning on June 30, 2023, (ii) 101.031 % of the principal amount to be redeemed if the redemption occurs during the 12-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.

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.

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The Senior Notes due 2029 will mature on April 15, 2029.

We may redeem the Senior Notes due 2029, in whole or in part, at any time on or after April 15, 2024 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 April 15, 2024, (ii) 101.031 % of the principal amount to be redeemed if the redemption occurs during the twelve-month period beginning on April 15, 2025 and (iii) 100.0 % of the principal amount to be redeemed if the redemption occurs on or after April 15, 2026, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

We may redeem the Senior Notes due 2029, in whole or in part, at any time on or after April 15, 2024 at a redemption price equal to (i) 102.063 % of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on April 15, 2024, (ii) 101.031 % of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on April 15, 2025 and (iii) 100.0 % of the principal amount to be redeemed if the redemption occurs on or after April 15, 2026, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

At any time prior to April 15, 2024, we may also redeem up to 40.0 % of the Senior Notes due 2029 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 2029 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

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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.

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 12 months.

In addition, these bonds generally indemnify the beneficiaries should we fail to perform our obligations under the applicable agreements.

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As of December 31, 2022, bonds issued and outstanding under these arrangements totaled approximately $ 113.5 million.

Similarly, we have provided letters of credit to governmental agencies and contractual counterparties to support regulatory and contractual obligations for certain decommissioning responsibilities, projects and legal matters.

We utilize our Revolving Credit Facility and a bilateral letter of credit facility to support such obligations, but the issuance of letters of credit under our bilateral letter of credit facility is at the issuer's discretion, and our bilateral facility generally permits the issuer, in its sole discretion, to demand collateral if the issuer does not otherwise have the benefit of the collateral under our Credit Facility.

Although there can be no assurance that we will maintain our bilateral letter of credit capacity, we believe our current capacity, together with capacity under our Revolving Credit Facility, is adequate to support our existing requirements for the next 12 months.

As of December 31, 2022, letters of credit issued and outstanding under our bilateral letter of credit facility totaled approximately $ 34.9 million, and such letters of credit are secured by the collateral under our Credit Facility.

NOTE 7 – PENSION PLANS AND POSTRETIREMENT BENEFITS

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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.

Government provide for the recovery of contributions to our pension and other postretirement benefit plans covering employees working primarily in our Government Operations segment.

Obligations and Funded Status

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The benefit obligation of our pension plans as of December 31, 2022 and 2021 increased (decreased) by $( 295.1 ) million and $( 43.0 ) million, respectively, due to changes in the discount rate.

In December 2021, we purchased a group annuity contract that transferred certain foreign hourly pension benefit obligations of approximately $ 38.3 million to an insurance company for approximately 400 retirees.

In November 2022, we completed the wind-up of our foreign salaried pension benefit plan and settled approximately $ 48.8 million in benefit obligations.

As a result, we recognized pension settlement-related charges of $ 12.6 million during the year ended December 31, 2022.

Additional Information

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Asset Category:

Commingled and Mutual Funds 29 % 29 %

Government Securities 36 % 32 %

Commingled and Mutual Funds 25 % 29 %

Real Estate 16 % 11 %

Diversified Credit 13 % 11 %

Fixed Income (excluding U.S.

Government Securities) 5 % 11 %

Diversified Credit 11 % 11 %

Real Estate 11 % 7 %

Partnerships with Security Holdings 3 % 4 %

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Equities 28 %

Foreign Plans

We sponsor various plans through certain of our Canadian subsidiaries.

The combined weighted-average asset allocations of these plans at December 31, 2021 and 2020 by asset category were as follows:

We sponsor the BWXT Canada Ltd.

Bargaining Unit Employees' Pension Plan.

We also sponsored the BWXT Canada Ltd.

Salaried Non-Union Employees' Retirement Plan until its wind-up in November 2022.

The following is a summary of the asset allocations of these plans at December 31, 2022 and 2021 by asset category:

Asset Category:

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Total 100 % 100 %

The target allocation for 2022 for the Canadian plans, by asset class, is as follows:

The target allocation for 2023 for the Canadian plan, by asset class, is as follows:

Fixed Income 65 %

Equities 35 %

Cash and Other 69 %

See Note 14 for a detailed description of fair value measurements and the hierarchy established for valuation inputs.

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Commingled and Mutual Funds 230,674 42,180 — — 188,494

Fixed Income 182,169 31,856 128,829 — 21,484

Diversified Credit 133,508 — — — 133,508

Real Estate 132,867 — — — 132,867

Investment Contract (1)

46,817 — — 46,817 —

Diversified Credit 108,363 — — — 108,363

Fixed Income 95,967 35,563 — — 60,404

Partnerships with Security Holdings 25,259 — — — 25,259

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Total Assets $ 921,307 $ 383,738 $ — $ — $ 537,569

(1) During 2021, we filed for regulatory approval for the windup of our foreign salaried pension benefit plan.

Based on those participants who elected to receive annuities upon retirement, we purchased a group annuity contract totaling $ 45.6 million.

(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.

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Pension and Other Benefits:

Fixed Income $ 391,418 $ — $ 228,857 $ — $ 162,561

Commingled and Mutual Funds 338,473 72,764 — — 265,709

Government Securities $ 369,980 $ 365,295 $ 4,685 $ — $ —

Commingled and Mutual Funds 358,423 77,680 — — 280,743

Fixed Income 182,169 31,856 128,829 — 21,484

Diversified Credit 133,508 — — — 133,508

Real Estate 126,886 — — — 126,886

Investment Contract (1)

46,817 — — 46,817 —

Partnerships with Security Holdings 46,515 — — — 46,515

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Total Assets $ 1,310,311 $ 474,831 $ 133,514 $ 46,817 $ 655,149

(1) During 2021, we filed for regulatory approval for the wind-up of our foreign salaried pension benefit plan.

Based on those participants who elected to receive annuities upon retirement, we purchased a group annuity contract totaling $ 45.6 million.

The wind-up of this plan was completed in 2022.

(2) 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 the changes in the Plans' Level 3 instruments for the year ended December 31, 2021:

The following is a summary of the changes in the Plans' Level 3 instruments for the years ended December 31, 2022 and 2021:

Year Ended December 31,

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Purchases — 45,645

Unrealized gain 652

Dispositions ( 35,822 ) —

Realized gain (loss) ( 6,988 ) —

Change in unrealized gain (loss) ( 652 ) 652

Translation ( 3,355 ) 520

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Nonvested at end of period 510 $ 53.01

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 actual number of shares in which each participant vests is contingent upon achievement of a mix of certain targets (depending on the grant year), including return on invested capital;

earnings before interest, taxes, depreciation and amortization;

total shareholder return and diluted earnings per share, 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.

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• 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.

Based upon our prior experience, we do not expect that any of these investigations, litigation proceedings, disputes and claims will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Environmental Matters

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We are also involved in manufacturing activities at licensed facilities in Canada that are 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, 2021 and 2020 with surety bonds for the ultimate decommissioning of these licensed facilities.

The NRC's decommissioning regulations require our Government Operations 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 $ 68.1 million and $ 61.8 million during the years ended December 31, 2022 and 2021, respectively, with surety bonds for 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.

In Canada, the CNSC's decommissioning regulations require our Commercial Operations 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 $ 43.3 million and $ 46.4 million during the years ended December 31, 2022 and 2021, respectively, with letters of credit and surety bonds for the ultimate decommissioning of these licensed facilities.

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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.

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.

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.

The primary customer of our Government Operations segment is the U.S.

Government, including some of its contractors.

Our Nuclear Power Group segment's major customers are large utilities.

Our Commercial Operations 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 similarly affected by changes in economic or other conditions.

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Government represented 68 % and 68 % of net receivables at December 31, 2022 and 2021, respectively.

See Note 15 and Note 3 for additional information about our operations in different geographic areas.

In the years ended December 31, 2022, 2021 and 2020, revenues from large utility customers accounted for approximately 14 %, 14 % and 13 % of our total consolidated revenues, respectively.

Accounts receivable due directly from large utility customers represented 15 % and 18 % of net receivables at December 31, 2022 and 2021, respectively.

See Note 15 for additional information about our major customers.

We believe that our provision for possible losses on uncollectable accounts receivable is adequate for our credit loss exposure.

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$ 6,001 $ 1,649 $ — $ 7,650

5,323 1,432 — 6,755

Available-for-sale securities

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These investments are measured on the fair value of the underlying investments but may not be redeemable at that fair value.

Certain of these investments are subject to customary redemption notice periods of up to 90 days.

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.

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 primarily include U.S.

Government securities, corporate bonds and equities and mutual funds.

Government securities, corporate bonds 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.

18 unchanged sentences

$ 7,650 $ — $ 7,650 $ — $ —

6,755 — 6,755 — —

Available-for-sale securities

15 unchanged sentences

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, the fair value of our Senior Notes due 2026 was $ 415.5 million.

At December 31, 2022 and 2021, the fair value of our Senior Notes due 2028 was $ 358.0 million and $ 406.3 million, respectively.

At December 31, 2021, the fair value of our Senior Notes due 2029 was $ 406.5 million.

At December 31, 2022 and 2021, the fair value of our Senior Notes due 2029 was $ 352.0 million and $ 406.5 million, respectively.

The fair value of our remaining debt instruments approximated their carrying values at December 31, 2022 and 2021.

NOTE 15 – SEGMENT REPORTING

As described in Note 1, our operations are assessed based on three reportable segments.

As described in Note 1, our operations are assessed based on two reportable segments.

The operations of our segments are managed separately, and each segment has unique technology, services and customer classes.

We account for intersegment

sales at prices that we generally establish by reference to similar transactions with unaffiliated customers.

We account for intersegment 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.

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(In thousands)

Nuclear Operations Group $ 1,622,598 $ 1,646,257 $ 1,428,587

Nuclear Power Group 407,082 371,269 352,640

Nuclear Services Group 123,538 136,493 131,339

Government Operations $ 1,808,483 $ 1,725,097 $ 1,763,127

Commercial Operations 427,358 407,082 371,269

Eliminations (1)

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(1) Segment revenues are net of the following intersegment transfers:

Nuclear Operations Group Transfers $ ( 5,402 ) $ ( 3,791 ) $ ( 4,382 )

Nuclear Power Group Transfers ( 778 ) ( 553 ) ( 208 )

Nuclear Services Group Transfers ( 22,964 ) ( 26,159 ) ( 13,056 )

Government Operations Transfers $ ( 2,941 ) $ ( 7,327 ) $ ( 10,327 )

Commercial Operations Transfers ( 66 ) ( 778 ) ( 553 )

$ ( 3,007 ) $ ( 8,105 ) $ ( 10,880 )

OPERATING INCOME:

Nuclear Operations Group $ 308,645 $ 326,049 $ 298,328

Nuclear Power Group 52,548 51,989 53,815

Nuclear Services Group 27,932 26,436 14,226

Other ( 24,333 ) ( 22,309 ) ( 23,099 )

Government Operations $ 336,501 $ 329,549 $ 345,250

Commercial Operations 27,418 35,243 36,915

$ 363,919 $ 364,792 $ 382,165

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Losses (Gains) on Asset Disposals and Impairments, Net:

Nuclear Operations Group $ ( 8 ) $ ( 8 ) $ ( 6 )

Nuclear Power Group ( 2,548 ) ( 1,681 ) 103

Nuclear Services Group — 328 2,727

Government Operations $ ( 250 ) $ ( 8 ) $ 320

Commercial Operations 6,233 ( 2,548 ) ( 1,681 )

Unallocated Corporate ( 463 ) ( 976 ) —

1 unchanged sentence

Equity in Income of Investees :

Nuclear Operations Group $ — $ — $ —

Nuclear Power Group — — —

Nuclear Services Group 33,498 27,152 28,924

Government Operations $ 45,973 $ 33,498 $ 27,152

Commercial Operations — — —

$ 45,973 $ 33,498 $ 27,152

3 unchanged sentences

CAPITAL EXPENDITURES:

Nuclear Operations Group $ 143,945 $ 135,637 $ 133,279

Nuclear Power Group 153,571 106,596 38,053

Nuclear Services Group 2,940 1,326 1,169

Other 166 252 2,597

Government Operations $ 103,093 $ 147,051 $ 137,197

Commercial Operations 88,853 153,571 106,614

Segment Capital Expenditures 191,946 300,622 243,811

2 unchanged sentences

DEPRECIATION AND AMORTIZATION:

Nuclear Operations Group $ 40,514 $ 33,174 $ 33,231

Nuclear Power Group 19,774 18,325 17,054

Nuclear Services Group 1,005 1,685 3,246

Other 1,076 645 787

Government Operations $ 47,982 $ 42,485 $ 35,398

Commercial Operations 18,805 19,884 18,431

Segment Depreciation and Amortization 66,787 62,369 53,829

4 unchanged sentences

SEGMENT ASSETS:

Nuclear Operations Group $ 1,243,766 $ 1,184,741 $ 986,827

Nuclear Power Group 974,372 828,729 580,413

Nuclear Services Group 186,249 166,240 177,952

Other 2,858 3,638 3,751

Government Operations $ 1,498,472 $ 1,430,863 $ 1,353,122

Commercial Operations 1,005,545 976,382 830,226

Segment Assets 2,504,017 2,407,245 2,183,348

2 unchanged sentences

INVESTMENT IN UNCONSOLIDATED AFFILIATES:

Nuclear Operations Group $ — $ — $ —

Nuclear Power Group — — —

Nuclear Services Group 85,284 71,806 70,116

Government Operations $ 100,198 $ 85,284 $ 71,806

Commercial Operations — — —

Total Investment in Unconsolidated Affiliates $ 100,198 $ 85,284 $ 71,806

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(In thousands)

Nuclear Operations Group:

Government Programs $ 1,527,704 $ 1,540,256 $ 1,368,555

Commercial Operations 94,894 106,001 60,032

Government Operations:

Nuclear Components and Fuel $ 1,494,810 $ 1,481,416 $ 1,512,980

Downblending and Nuclear Services 233,197 198,420 207,221

Advanced Reactor Design and Engineering 80,476 45,261 42,926

1,808,483 1,725,097 1,763,127

Nuclear Power Group:

Commercial Operations:

Nuclear Manufacturing 221,458 246,444 250,585

1 unchanged sentence

427,358 407,082 371,269

Nuclear Services Group:

Nuclear Environmental Services 77,514 94,320 102,726

Nuclear Services and Advanced Reactor Design and Engineering 46,024 42,173 28,613

123,538 136,493 131,339

Eliminations ( 3,007 ) ( 8,105 ) ( 10,880 )

4 unchanged sentences

NET PROPERTY, PLANT AND EQUIPMENT:

$ 698,772 $ 603,518 $ 494,202

United States $ 743,767 $ 698,772 $ 603,518

Canada 389,490 346,868 212,953

United Kingdom 1,640 — —

$ 1,134,897 $ 1,045,640 $ 816,471

2 unchanged sentences

In the years ended December 31, 2022, 2021 and 2020, sales to the U.S.

Government accounted for approximately 76 %, 77 % and 77 % of our total consolidated revenues, respectively, all of which were included in our Nuclear Operations Group and Nuclear Services Group segments.

Government accounted for approximately 94 %, 95 % and 94 % of our Government Operations segment revenues, respectively.

In the years ended December 31, 2022, 2021 and 2020, sales to large utility customers accounted for approximately 74 %, 75 % and 73 % of our Commercial Operations segment revenues, respectively.

NOTE 16 – QUARTERLY FINANCIAL DATA (UNAUDITED)

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(1) Includes equity in income of investees.

In the quarter ended June 30, 2022, we recognized an unfavorable contract adjustment of $ 11.3 million related to the manufacture of non-nuclear components.

In the quarter ended September 30, 2021, we recognized an early redemption premium of $ 10.8 million and wrote-off deferred debt issuance costs totaling $ 4.2 million.

24 unchanged sentences

$ 2.60 $ 3.24 $ 2.91

(1) At December 31, 2021, 2020 and 2019, none of our shares were antidilutive.

(1) At December 31, 2022, 2021 and 2020, we excluded 10,419 , 0 and 0 shares, respectively, from our diluted share calculation as their effect would have been antidilutive.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data