BWX Technologies, Inc. - FORM 10-Q

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EX-32.2 - EXHIBIT 32.2 - BWX Technologies, Inc.	exhibit322_93016x10q.htm
EX-32.1 - EXHIBIT 32.1 - BWX Technologies, Inc.	exhibit321_93016x10q.htm
EX-31.2 - EXHIBIT 31.2 - BWX Technologies, Inc.	exhibit312_93016x10q.htm
EX-31.1 - EXHIBIT 31.1 - BWX Technologies, Inc.	exhibit311_93016x10q.htm
EX-10.2 - EXHIBIT 10.2 - BWX Technologies, Inc.	exhibit102_93016x10q.htm
EX-10.1 - EXHIBIT 10.1 - BWX Technologies, Inc.	exhibit101_93016x10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

__________________________________________________

FORM 10-Q

__________________________________________________

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-34658

BWX TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

__________________________________________________



DELAWARE		80-0558025
(State of Incorporation or Organization)		(I.R.S. Employer Identification No.)

800 MAIN STREET, 4TH FLOOR
LYNCHBURG, VIRGINIA		24504
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (980) 365-4300

__________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The number of shares of the registrant’s common stock outstanding at October 27, 2016 was 99,233,414.

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BWX TECHNOLOGIES, INC.

INDEX - FORM 10-Q




	PAGE
PART I - FINANCIAL INFORMATION

Item 1 – Condensed Consolidated Financial Statements	2

Condensed Consolidated Balance Sheets
September 30, 2016 and December 31, 2015 (Unaudited)	2

Condensed Consolidated Statements of Income
Three and Nine Months Ended September 30, 2016 and 2015 (Unaudited)	4

Condensed Consolidated Statements of Comprehensive Income
Three and Nine Months Ended September 30, 2016 and 2015 (Unaudited)	5

Condensed Consolidated Statements of Stockholders’ Equity
Nine Months Ended September 30, 2016 and 2015 (Unaudited)	6

Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2016 and 2015 (Unaudited)	7

Notes to Condensed Consolidated Financial Statements	8

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3 – Quantitative and Qualitative Disclosures About Market Risk	34

Item 4 – Controls and Procedures	34

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings	35

Item 1A – Risk Factors	35

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 6 – Exhibits	36

SIGNATURES	37

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PART I

BWX TECHNOLOGIES, INC.

FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS



	September 30, 2016		December 31, 2015
	(Unaudited) (In thousands)
Current Assets:
Cash and cash equivalents	$	45,226	$	154,729
Restricted cash and cash equivalents	5,811		15,364
Investments	14,700		3,476
Accounts receivable – trade, net	157,188		153,326
Accounts receivable – other	23,868		22,444
Contracts in progress	345,966		265,770
Other current assets	24,591		32,185
Total Current Assets	617,350		647,294
Property, Plant and Equipment	879,015		846,936
Less accumulated depreciation	615,023		578,092
Net Property, Plant and Equipment	263,992		268,844
Investments	7,334		6,070
Goodwill	168,700		168,434
Deferred Income Taxes	175,872		181,359
Investments in Unconsolidated Affiliates	47,870		32,088
Intangible Assets	56,903		58,328
Other Assets	27,123		12,981
TOTAL	$	1,365,144	$	1,375,398

See accompanying notes to condensed consolidated financial statements.

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BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY



	September 30, 2016			December 31, 2015
	(Unaudited) (In thousands, except share and per share amounts)
Current Liabilities:
Current maturities of long-term debt	$	20,625		$	15,000
Accounts payable	76,500			74,130
Accrued employee benefits	56,743			67,603
Accrued liabilities – other	70,383			44,947
Advance billings on contracts	144,233			138,558
Accrued warranty expense	12,865			13,542
Total Current Liabilities	381,349			353,780
Long-Term Debt	423,211			278,259
Accumulated Postretirement Benefit Obligation	19,871			20,418
Environmental Liabilities	62,548			60,239
Pension Liability	339,986			358,512
Other Liabilities	19,540			24,555
Commitments and Contingencies (Note 6)
Stockholders’ Equity:
Common stock, par value $0.01 per share, authorized 325,000,000 shares; issued 124,083,156 and 122,813,135 shares at September 30, 2016 and December 31, 2015, respectively	1,241			1,228
Preferred stock, par value $0.01 per share, authorized 75,000,000 shares; No shares issued	—			—
Capital in excess of par value	16,171			22,732
Retained earnings	857,841			739,350
Treasury stock at cost, 24,853,379 and 17,515,757 shares at September 30, 2016 and December 31, 2015, respectively	(761,956		)	(498,346		)
Accumulated other comprehensive income	5,003			752
Stockholders’ Equity – BWX Technologies, Inc.	118,300			265,716
Noncontrolling interest	339			13,919
Total Stockholders’ Equity	118,639			279,635
TOTAL	$	1,365,144		$	1,375,398

See accompanying notes to condensed consolidated financial statements.

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BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(Unaudited) (In thousands, except share and per share amounts)
Revenues	$	379,505		$	358,970		$	1,146,713		$	1,051,592
Costs and Expenses:
Cost of operations	271,174			250,558			785,060			727,685
Research and development costs	1,746			1,518			5,043			8,999
Gains on asset disposals and impairments, net	(5		)	—			(55		)	(3		)
Selling, general and administrative expenses	49,225			47,550			146,474			152,736
mPower framework agreement	—			—			30,000			—
Income related to litigation proceeds	—			(65,728		)	—			(65,728		)
Special charges for restructuring activities	—			—			—			16,608
Costs to spin-off the Power Generation business	—			—			—			25,987
Total Costs and Expenses	322,140			233,898			966,522			866,284
Equity in Income of Investees	5,008			5,894			13,249			11,028
Operating Income	62,373			130,966			193,440			196,336
Other Income (Expense):
Interest income	128			30,028			533			30,262
Interest expense	(2,049		)	(1,231		)	(5,326		)	(6,792		)
Other – net	228			(1,666		)	25,119			(2,950		)
Total Other Income (Expense)	(1,693		)	27,131			20,326			20,520
Income from continuing operations before provision for income taxes and noncontrolling interest	60,680			158,097			213,766			216,856
Provision for Income Taxes	20,032			51,589			66,622			76,789
Income from continuing operations before noncontrolling interest	40,648			106,508			147,144			140,067
Income (loss) from discontinued operations, net of tax	—			(2,474		)	—			(8,311		)
Net Income	$	40,648		$	104,034		$	147,144		$	131,756
Net (Income) Loss Attributable to Noncontrolling Interest	(145		)	(164		)	(373		)	224
Net Income Attributable to BWX Technologies, Inc.	$	40,503		$	103,870		$	146,771		$	131,980
Amounts Attributable to BWX Technologies, Inc.’s Common Shareholders:
Income from continuing operations, net of tax	$	40,503		$	106,344		$	146,771		$	140,397
Income (loss) from discontinued operations, net of tax	—			(2,474		)	—			(8,417		)
Net Income Attributable to BWX Technologies, Inc.	$	40,503		$	103,870		$	146,771		$	131,980
Earnings per Common Share:
Basic:
Income from continuing operations	$	0.39		$	0.99		$	1.42		$	1.31
Income (loss) from discontinued operations	—			(0.02		)	—			(0.08		)
Net Income Attributable to BWX Technologies, Inc.	$	0.39		$	0.97		$	1.42		$	1.23
Diluted:
Income from continuing operations	$	0.39		$	0.98		$	1.40		$	1.30
Income (loss) from discontinued operations	—			(0.02		)	—			(0.08		)
Net Income Attributable to BWX Technologies, Inc.	$	0.39		$	0.96		$	1.40		$	1.23
Shares used in the computation of earnings per share (Note 12):
Basic	102,735,989			106,962,168			103,542,578			106,952,744
Diluted	103,815,585			108,184,304			104,799,178			107,634,732

See accompanying notes to condensed consolidated financial statements.

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BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(Unaudited) (In thousands)
Net Income	$	40,648		$	104,034		$	147,144		$	131,756
Other Comprehensive Income (Loss):
Currency translation adjustments, net of tax benefit (provision) of $54, $0, $(680) and $0, respectively	(272		)	(3,633		)	1,841			(12,412		)
Derivative financial instruments:
Unrealized (losses) gains arising during the period, net of tax benefit (provision) of $20, $803, $(332) and $1,581, respectively	(58		)	(2,313		)	954			(4,531		)
Reclassification adjustment for losses (gains) included in net income, net of tax (benefit) provision of $(45), $(684), $240 and $(1,254), respectively	129			1,976			(694		)	3,553
Amortization of benefit plan costs, net of tax benefit of $(142), $(139), $(425) and $(497), respectively	267			269			797			929
Investments:
Unrealized gains (losses) arising during the period, net of tax (provision) benefit of $(219), $344, $(744) and $358, respectively	407			(638		)	1,384			(664		)
Reclassification adjustment for gains included in net income, net of tax provision of $4, $5, $16 and $69, respectively	(8		)	(6		)	(31		)	(121		)
Other Comprehensive Income (Loss)	465			(4,345		)	4,251			(13,246		)
Total Comprehensive Income	41,113			99,689			151,395			118,510
Comprehensive (Income) Loss Attributable to Noncontrolling Interest	(145		)	(164		)	(373		)	199
Comprehensive Income Attributable to BWX Technologies, Inc.	$	40,968		$	99,525		$	151,022		$	118,709

See accompanying notes to condensed consolidated financial statements.

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BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY




	Common Stock			Capital In Excess of Par Value						Accumulated Other Comprehensive Income (Loss)												Total Stockholders' Equity
	Shares	Par Value		Capital In Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Stockholders' Equity			Noncontrolling Interest			Total Stockholders' Equity
		(In thousands, except share and per share amounts)
Balance December 31, 2015	122,813,135	$	1,228	$	22,732		$	739,350		$	752		$	(498,346	)	$	265,716		$	13,919		$	279,635
Net income	—	—		—			146,771			—			—			146,771			373			147,144
Dividends declared ($0.27 per share)	—	—		—			(28,280		)	—			—			(28,280		)	—			(28,280		)
Currency translation adjustments	—	—		—			—			1,841			—			1,841			—			1,841
Derivative financial instruments	—	—		—			—			260			—			260			—			260
Defined benefit obligations	—	—		—			—			797			—			797			—			797
Available-for-sale investments	—	—		—			—			1,353			—			1,353			—			1,353
Exercise of stock options	864,036	9		21,129			—			—			—			21,138			—			21,138
Shares placed in treasury	—	—		(40,000		)	—			—			(263,610		)	(303,610		)	—			(303,610		)
Stock-based compensation charges	405,985	4		8,924			—			—			—			8,928			—			8,928
Distributions to noncontrolling interests	—	—		—			—			—			—			—			(382		)	(382		)
Deconsolidation of Generation mPower LLC	—	—		—			—			—			—			—			(13,571		)	(13,571		)
Other	—	—		3,386			—			—			—			3,386			—			3,386
Balance September 30, 2016 (unaudited)	124,083,156	$	1,241	$	16,171		$	857,841		$	5,003		$	(761,956	)	$	118,300		$	339		$	118,639
Balance December 31, 2014	121,604,332	$	1,216	$	775,393		$	642,489		$	3,596		$	(423,990	)	$	998,704		$	15,497		$	1,014,201
Net income	—	—		—			131,980			—			—			131,980			(224		)	131,756
Dividends declared ($0.26 per share)	—	—		—			(28,191		)	—			—			(28,191		)	—			(28,191		)
Currency translation adjustments	—	—		—			—			(12,437		)	—			(12,437		)	25			(12,412		)
Derivative financial instruments	—	—		—			—			(978		)	—			(978		)	—			(978		)
Defined benefit obligations	—	—		—			—			929			—			929			—			929
Available-for-sale investments	—	—		—			—			(785		)	—			(785		)	—			(785		)
Exercise of stock options	156,467	2		4,108			—			—			—			4,110			—			4,110
Contributions to thrift plan	149,753	1		4,530			—			—			—			4,531			—			4,531
Shares placed in treasury	—	—		—			—			—			(22,572		)	(22,572		)	—			(22,572		)
Stock-based compensation charges	701,020	7		24,275			—			—			—			24,282			—			24,282
Distributions to noncontrolling interests	—	—		—			—			—			—			—			(332		)	(332		)
Spin-off of Power Generation Business	—	—		(792,342		)	—			10,407			—			(781,935		)	(1,120		)	(783,055		)
Balance September 30, 2015 (unaudited)	122,611,572	$	1,226	$	15,964		$	746,278		$	732		$	(446,562	)	$	317,638		$	13,846		$	331,484

See accompanying notes to condensed consolidated financial statements.

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BWX TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Nine Months Ended September 30,
	2016			2015
	(Unaudited) (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	147,144		$	131,756
Non-cash items included in net income from continuing operations:
Depreciation and amortization	37,090			65,010
Income of investees, net of dividends	(6,083		)	(221		)
(Gains) losses on asset disposals and impairments, net	(55		)	26,441
Gain on deconsolidation of Generation mPower LLC	(13,571		)	—
Recognition of losses for pension and postretirement plans	1,222			3,587
Stock-based compensation expense	8,373			25,105
Excess tax benefits from stock-based compensation	(2,294		)	(381		)
Changes in assets and liabilities:
Accounts receivable	(4,379		)	(273		)
Accounts payable	2,635			(33,825		)
Contracts in progress and advance billings on contracts	(72,918		)	59,020
Income taxes	18,511			(17,257		)
Accrued and other current liabilities	6,834			5,417
Pension liability, accrued postretirement benefit obligation and employee benefits	(37,532		)	(41,340		)
Other, net	(3,839		)	15,819
NET CASH PROVIDED BY OPERATING ACTIVITIES	81,138			238,858
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash and cash equivalents	9,553			1,578
Purchases of property, plant and equipment	(30,865		)	(52,193		)
Purchases of securities	(17,599		)	(9,711		)
Sales and maturities of securities	7,895			5,441
Proceeds from asset disposals	55			60
Investments, net of return of capital, in equity method investees	(9,165		)	—
NET CASH USED IN INVESTING ACTIVITIES	(40,126		)	(54,825		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under the Credit Agreement	241,300			177,350
Repayments under Credit Agreement	(91,150		)	(177,350		)
Payment of debt issuance costs	(663		)	(4,929		)
Repurchase of common shares	(292,997		)	(18,088		)
Dividends paid to common shareholders	(28,421		)	(28,105		)
Exercise of stock options	18,775			3,646
Excess tax benefits from stock-based compensation	2,294			381
Cash divested in connection with spin-off of Power Generation business	—			(307,562		)
Other	(382		)	(332		)
NET CASH USED IN FINANCING ACTIVITIES	(151,244		)	(354,989		)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH	729			(6,092		)
TOTAL DECREASE IN CASH AND CASH EQUIVALENTS	(109,503		)	(177,048		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	154,729			312,969
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	45,226		$	135,921
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	4,367		$	5,294
Income taxes (net of refunds)	$	48,779		$	82,054
SCHEDULE OF NON-CASH INVESTING ACTIVITY:
Accrued capital expenditures included in accounts payable	$	5,628		$	2,161

See accompanying notes to condensed consolidated financial statements.

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BWX TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

We have presented the condensed consolidated financial statements of BWX Technologies, Inc. ("BWXT") in U.S. dollars in accordance with the interim reporting requirements of Form 10-Q, Rule 10-01 of Regulation S-X and accounting principles generally accepted in the United States ("GAAP"). Certain financial information and disclosures normally included in our financial statements prepared annually in accordance with GAAP have been condensed or omitted. Readers of these financial statements should, therefore, refer to the consolidated financial statements and notes in our annual report on Form 10-K for the year ended December 31, 2015 (our "2015 10-K"). We have included all adjustments, in the opinion of management, consisting only of normal recurring adjustments, necessary for a fair presentation.

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 amounts previously reported to conform to the presentation as of and for the three and nine month periods ended September 30, 2016. We present the notes to our condensed 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.

Spin-off

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"). The separation was effected through a pro rata distribution of 100% of BWE’s common stock to BWXT’s stockholders. The distribution of BWE common stock consisted of one share of BWE common stock for every two shares of BWXT common stock to holders of BWXT common stock on the record date of June 18, 2015. Cash was paid in lieu of any fractional shares of BWE common stock. Following the spin-off, BWXT did not retain any ownership interest in BWE. Prior to June 30, 2015, we completed an internal restructuring that separated the subsidiaries involved in our former Power Generation business and established BWE as the direct or indirect parent company of those subsidiaries. Concurrent with the spin-off, The Babcock & Wilcox Company was renamed BWX Technologies, Inc. The results of operations of our former Power Generation business are presented as discontinued operations on the condensed consolidated statements of income. See Note 2 for further information regarding the spin-off of BWE.

Reportable Segments

We operate in three reportable segments: Nuclear Operations, Technical Services and Nuclear Energy. Our reportable segments are further described as follows:

•

Our Nuclear Operations segment manufactures naval nuclear reactors for the U.S. Department of Energy ("DOE")/National Nuclear Security Administration’s ("NNSA") Naval Nuclear Propulsion Program, which in turn supplies them to the U.S. Navy for use in submarines and aircraft carriers. Through this segment, we own and operate manufacturing facilities located in Lynchburg, Virginia; Mount Vernon, Indiana; Euclid, Ohio; Barberton, Ohio; and Erwin, Tennessee. The Barberton and Mount Vernon locations specialize in the design and manufacture of heavy components. The Euclid facility, which is N-Stamp certified by the American Society of Mechanical Engineers, fabricates electro-mechanical equipment for the U.S. Government, and performs design, manufacturing, inspection, assembly and testing activities. 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. Fuel for the naval nuclear reactors is provided by Nuclear Fuel Services, Inc. ("NFS"), one of our wholly owned subsidiaries. Located in Erwin, Tennessee, NFS also converts Cold War-era government stockpiles of highly enriched uranium into material suitable for further processing into commercial nuclear reactor fuel.


•	Our Technical Services segment provides various services to the U.S. Government, including uranium processing, environmental site restoration services and management and operating services for various U.S. Government-owned facilities. These services are provided to the DOE, including the NNSA, the Office of Nuclear Energy, the Office of

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Science and the Office of Environmental Management; the Department of Defense and NASA. Through this segment we deliver products and management solutions to nuclear operations and high-consequence manufacturing facilities. A significant portion of this segment’s operations are conducted through joint ventures.

•

Our Nuclear Energy segment supplies commercial nuclear steam generators and components to nuclear utility customers. BWXT has supplied the nuclear industry with more than 1,300 large, heavy components worldwide. This segment is the only heavy nuclear component, N-Stamp certified manufacturer in North America. Our Nuclear Energy segment fabricates pressure vessels, reactors, steam generators, heat exchangers and other auxiliary equipment. This segment also provides specialized engineering services that include structural component design, 3-D thermal-hydraulic engineering analysis, weld and robotic process development and metallurgy and materials engineering. In addition, this segment offers services for nuclear steam generators and balance of plant equipment, as well as nondestructive examination and tooling/repair solutions for other plant systems and components. This segment also offers engineering and licensing services for new nuclear plant designs.

See Note 11 for further information regarding our segments.

Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. For further information, refer to the consolidated financial statements and the related footnotes included in our 2015 10-K.

GE Hitachi Nuclear Energy Canada Inc. Acquisition

On August 18, 2016, we signed a definitive agreement to acquire all of the shares of GE Hitachi Nuclear Energy Canada Inc. (“GEH-C”). GEH-C is a leading supplier of nuclear fuel, fuel handling systems, delivery systems and replacement components for CANDU reactors. The transaction is expected to be completed, subject to required Canadian regulatory reviews and other closing conditions, during the fourth quarter of 2016. Following successful completion of the transaction, GEH-C would be reported as part of our Nuclear Energy segment. GEH-C will expand our current commercial nuclear product and service portfolio and allow us to leverage our technology-based competencies in offering new products and services related to plant life extensions as well as the ongoing maintenance of nuclear power generation equipment.

Deconsolidation of Generation mPower LLC

On March 2, 2016, we entered into a framework agreement with Bechtel Power Corporation ("Bechtel"), BWXT Modular Reactors, LLC and BDC NexGen Power, LLC for the potential restructuring and restart of our mPower small modular reactor program (the "Framework Agreement"). As a result of entering into the Framework Agreement, we have deconsolidated Generation mPower LLC ("GmP") from our financial statements as of the date of the Framework Agreement. We recorded a gain of approximately $13.6 million during the nine months ended September 30, 2016 related to the deconsolidation of GmP as a component of other - net in our condensed consolidated statement of income.

For additional information on the Framework Agreement, see Note 6 to our condensed consolidated financial statements.

Contracts and Revenue Recognition

We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours or a cost-to-cost method, as applicable to the product or activity involved. We recognize estimated contract revenue and resulting income based on the measurement of the extent of progress towards 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 materials and major third-party subcontractors, if it appears that such exclusion would result in a more meaningful measurement of actual contract progress and resulting periodic allocation of income. We include revenues and related costs so recorded, 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 under the percentage-of-completion method. 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. 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. 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.

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For contracts as to which we are unable to estimate the final profitability except to assure that no loss will ultimately be incurred, we recognize equal amounts of revenue and cost until the final results can be estimated more precisely. For these deferred profit recognition contracts, we recognize revenue and cost equally and only recognize gross margin when probable and reasonably estimable, which we generally determine to be when the contract is approximately 70% complete. We treat long-term contracts that contain such a level of risk and uncertainty that estimation of the final outcome is impractical, except to assure that no loss will be incurred, as deferred profit recognition contracts.

Our policy is to account for fixed-price contracts under the completed-contract method if we believe that we are unable to reasonably forecast cost to complete at start-up. Under the completed-contract method, income is recognized only when a contract is completed or substantially complete.

Comprehensive Income

The components of accumulated other comprehensive income included in stockholders’ equity are as follows:



	September 30, 2016			December 31, 2015
	(In thousands)
Currency translation adjustments	$	9,661		$	7,820
Net unrealized loss on derivative financial instruments	(428		)	(688		)
Unrecognized prior service cost on benefit obligations	(5,534		)	(6,331		)
Net unrealized gain (loss) on available-for-sale investments	1,304			(49		)
Accumulated other comprehensive income	$	5,003		$	752

The amounts reclassified out of accumulated other comprehensive income by component and the affected condensed consolidated statements of income line items are as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Accumulated Other Comprehensive Income (Loss) Component Recognized	(In thousands)												Line Item Presented
Realized gain (loss) on derivative financial instruments	$	(2	)	$	(23	)	$	(42	)	$	461		Revenues
	(172		)	(2,637		)	976			(5,355		)	Cost of operations
	(174		)	(2,660		)	934			(4,894		)	Total before tax
	45			684			(240		)	1,259			Provision for Income Taxes
	$	(129	)	$	(1,976	)	$	694		$	(3,635	)	Net Income
Amortization of prior service cost on benefit obligations	$	(401	)	$	(399	)	$	(1,200	)	$	(1,200	)	Cost of operations
	(8		)	(9		)	(22		)	(27		)	Selling, general and administrative expenses
	(409		)	(408		)	(1,222		)	(1,227		)	Total before tax
	142			139			425			417			Provision for Income Taxes
	$	(267	)	$	(269	)	$	(797	)	$	(810	)	Net Income
Realized gain on investments	$	12		$	11		$	47		$	188		Other – net
	(4		)	(5		)	(16		)	(68		)	Provision for Income Taxes
	$	8		$	6		$	31		$	120		Net Income
Total reclassification for the period	$	(388	)	$	(2,239	)	$	(72	)	$	(4,325	)

Inventories

At September 30, 2016 and December 31, 2015, included in other current assets we had inventories totaling $8.0 million and $7.3 million, respectively, consisting entirely of raw materials and supplies.

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Restricted Cash and Cash Equivalents

At September 30, 2016, we had restricted cash and cash equivalents totaling $8.6 million, $2.8 million of which was held for future decommissioning of facilities (which is included in other assets on our condensed consolidated balance sheets) and $5.8 million of which was held to meet reinsurance reserve requirements of our captive insurer.

Warranty Expense

We accrue estimated expense included in cost of operations on our condensed 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 our accrued warranty expense:



	Nine Months Ended September 30,
	2016			2015
	(In thousands)
Balance at beginning of period	$	13,542		$	15,889
Additions	847			890
Expirations and other changes	(1,759		)	(3		)
Payments	(20		)	(56		)
Translation and other	255			(735		)
Balance at end of period	$	12,865		$	15,985

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. Substantially all of these costs are related to our mPower program for the development of our BWXT mPower™ reactor and the associated power plant.

Provision for Income Taxes

We are subject to federal income tax in the United States 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 changes in our mix of income within these jurisdictions, can contribute to shifts in our effective tax rate from period to period. Beginning in the second quarter of 2015, we began recognizing our consolidated income tax provision based on the U.S. federal statutory rate of 35% due to the presumed repatriation of our Canadian earnings. We classify interest and penalties related to taxes (net of any applicable tax benefit) as a component of provision for income taxes on our condensed consolidated statements of income.

Our effective tax rate for the three months ended September 30, 2016 was approximately 33.0% as compared to 32.6% for the three months ended September 30, 2015. The effective tax rate for the three months ended September 30, 2015 was lower than our statutory rate primarily due to the remeasurement of uncertain tax positions as a result of the close of a previously ongoing IRS audit as well as adjustments related to the filing of our 2014 U.S. tax return.

Our effective tax rate for the nine months ended September 30, 2016 was approximately 31.2% as compared to 35.4% for the nine months ended September 30, 2015. The effective tax rate for the nine months ended September 30, 2016 was lower than our statutory rate primarily due to the $13.6 million gain recognized related to the deconsolidation of GmP. The effective tax rate for the nine months ended September 30, 2015 was impacted by the spin-off of our former Power Generation business. Specifically, we recognized $3.8 million of tax provision due to the change in our tax footprint associated with the spin-off, resulting in the revaluations of deferred tax assets and liabilities as well as the need to recognize tax provision on our global earnings at our U.S. federal rate due to the likely repatriation of future foreign earnings. These amounts were offset by the remeasurement of uncertain tax positions and adjustments related to the filing of our 2014 U.S. tax return discussed above.

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As of September 30, 2016, we have gross unrecognized tax benefits of $1.9 million. Of the $1.9 million gross unrecognized tax benefits, $1.8 million would reduce our effective tax rate if recognized.

New Accounting Standards

In May 2014, the FASB issued the Topic Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in the Topic Revenue Recognition and most industry specific guidance. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB deferred the effective date of this amendment until 2018. The update may be adopted either retrospectively to each prior period or as a cumulative-effect adjustment on the date of adoption. We are currently evaluating the methods of adoption allowed by the updated standard and the effect it may have on our consolidated financial statements and related disclosures. Since the updated standard will supersede substantially all existing guidance related to revenue recognition, it could impact revenue and cost recognition for each of our segments, in addition to business processes and information technology systems. As a result, our evaluation of the effects of this Topic will extend over future periods.

In February 2016, the FASB issued an update to the Topic Leases, which supersedes previous lease reporting requirements. This update requires that a lessee recognize on its balance sheet the assets and liabilities for all leases with lease terms of more than 12 months, along with additional qualitative and quantitative disclosures. The effect of leases in a consolidated statement of income and a consolidated statement of cash flows is expected to be largely unchanged. Accounting by lessors was not significantly impacted by this update. This update will be effective for us in 2019, with early adoption permitted. We are currently evaluating the impact of the adoption of this standard on our financial statements.

In March 2016, the FASB issued an update to the Topic Compensation - Stock Compensation, which identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax reporting implications, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This update will be effective for us in 2017, with early adoption permitted. We are currently evaluating the impact of the adoption of this standard on our financial statements.

In March 2016, the FASB issued an update to the Topic Financial Instruments. This update, among other changes, requires companies to measure equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income. This update is effective in 2018 and early adoption is not permitted. We are currently evaluating the impact of the adoption of this standard on our financial statements.

NOTE 2 – DISCONTINUED OPERATIONS

Spin-off of BWE

On June 30, 2015, we completed the spin-off of BWE to our stockholders through a distribution of BWE stock. BWE’s assets and business primarily consist of those that we previously reported as our Power Generation segment.

At the spin-off, BWXT had outstanding performance guarantees for various projects executed by the Power Generation business in the normal course of business. These guarantees totaled $1,542 million and ranged in expiration dates from 2015 to 2035. In February 2016, BWE notified us that we have been released from substantially all remaining performance guarantees. Accordingly, we reduced the outstanding liability and recorded a gain of approximately $9.3 million during the nine months ended September 30, 2016 as a component of other – net in our condensed consolidated statement of income.

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Financial Information

The following table presents selected financial information regarding the results of operations of our former Power Generation business:



	Three Months Ended September 30,				Nine Months Ended September 30,
		2015				2015
	(Unaudited) (In thousands)
Revenues		$	—			$	830,234
Costs and Expenses:
Cost of operations		—				665,558
Research and development costs		—				8,480
Losses on asset disposals and impairments, net		—				8,963
Selling, general and administrative expenses ⁽¹⁾		—				108,911
Special charges for restructuring activities		—				7,666
Costs to spin-off		—				34,358
Total Costs and Expenses		—				833,936
Equity in Income (Loss) of Investees		—				(1,104		)
Operating Income (Loss)		—				(4,806		)
Other Income		(2,003		)		(1,698		)
Income (Loss) before Provision for Income Taxes		(2,003		)		(6,504		)
Provision for (Benefit from) Income Taxes		471				1,807
Net Income (Loss)		(2,474		)		(8,311		)
Net Income Attributable to Noncontrolling Interest		—				(106		)
Income (Loss) from Discontinued Operations		$	(2,474	)		$	(8,417	)


(1)	Included in selling, general and administrative expenses are allocations of corporate administrative expenses of $0.0 million and $28.0 million for the three and nine months ended September 30, 2015, respectively.

We incurred approximately $66.5 million in total spin-off related costs, which includes approximately $29.8 million for professional services and $23.1 million of retention and severance-related charges. Income (loss) from discontinued operations for the nine months ended September 30, 2015 includes $34.4 million of these charges, and included in continuing operations are spin-off costs of $26.0 million for the nine months ended September 30, 2015. A total of $6.1 million was recognized in the year ended December 31, 2014.

Included in income from discontinued operations for the three months ended September 30, 2015 were certain adjustments made pursuant to FASB Topic Income Taxes which requires that adjustments made to remeasure uncertain tax positions directly associated with operations discontinued in a prior period be recognized in the current period as a component of discontinued operations. The remeasurement in the three months ended September 30, 2015 was the result of the close of a previously ongoing IRS audit as well as adjustments related to the filing of our 2014 U.S. tax return. Additionally, we revised our estimated annual effective tax rate during the three months ended September 30, 2015, which had an impact on the provision for income taxes associated with our former Power Generation business and was recorded as a component of discontinued operations.

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The following table presents selected financial information regarding cash flows of our former Power Generation business that are included in the condensed consolidated statements of cash flows:



	Nine Months Ended September 30,
	2015
	(Unaudited) (In thousands)
Non-cash items included in net income (loss):
Depreciation and amortization	$	21,458
Income (loss) of investees, net of dividends	$	(2,293	)
Losses on asset disposals and impairments, net	$	10,544
Purchases of property, plant and equipment	$	11,494

NOTE 3 – SPECIAL CHARGES FOR RESTRUCTURING ACTIVITIES

As of June 30, 2015, margin improvement initiatives designed to strengthen the operating performance of our Nuclear Energy segment were substantially complete. In the nine months ended September 30, 2015, we incurred $0.7 million of expenses related to facility consolidation and employee termination benefits in connection with these initiatives. In addition, we incurred $15.9 million for the nine months ended September 30, 2015 related to the restructuring of our mPower program, consisting primarily of asset impairments as a result of the significant adverse changes in the business prospects of the mPower program.

The following summarizes the changes in our restructuring liability for the nine months ended September 30, 2016 and 2015:



	Nine Months Ended
	September 30, 2016			September 30, 2015
	(In thousands)
Balance at the beginning of the period	$	901		$	4,967
Special charges for restructuring activities ⁽¹⁾	—			610
Payments	(488		)	(4,076		)
Translation and other	(123		)	(240		)
Balance at the end of the period	$	290		$	1,261


(1)	Excludes non-cash charges of $16.0 million for the nine months ended September 30, 2015, which did not impact the restructuring liability.

At September 30, 2016, unpaid restructuring charges totaled $0.3 million for employee termination benefits.

NOTE 4 - CREDIT FACILITY

Our gross long-term debt consists of the following:



	September 30, 2016	December 31, 2015
	(In thousands)
Secured Debt:
Revolving Credit Facility	48,900	—
Term Loan	288,750	300,000
Incremental Term Loans	112,500	—
Less: Amounts due within one year	20,625	15,000
Long-term debt	429,525	285,000

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On September 2, 2016, we entered into an amendment (the “Amendment”) to our Credit Agreement dated May 11, 2015 with Bank of America, N.A., as administrative agent, and certain lenders and letter of credit issuers party thereto (collectively, the “Amended Credit Agreement”). Prior to the Amendment, our Credit Agreement provided for a five-year, senior secured revolving credit facility in an aggregate amount of up to $400 million, the full amount of which is available for the issuance of letters of credit, and a senior secured term loan facility of $300 million, which was drawn on June 30, 2015. The Amendment added a new U.S. dollar term loan facility in an aggregate principal amount of up to $112.5 million, which was drawn on September 16, 2016, and a new Canadian dollar term loan facility in an aggregate principal amount of up to the equivalent of $137.5 million U.S. dollars, which may be drawn in a single drawing at any time prior to December 31, 2016 (collectively, the “Incremental Term Loans”). All obligations under the Amended Credit Agreement are scheduled to mature on June 30, 2020. The proceeds of loans under the Amended Credit Agreement are available for working capital needs and other general corporate purposes.

The Amended Credit Agreement includes provisions for additional financial institutions to become lenders, or for any existing lender to increase its commitment thereunder, subject to an aggregate maximum of $250 million for all additional term loans, revolving credit borrowings and letter of credit commitments.

The Amended Credit Agreement is (i) guaranteed by substantially all of our wholly owned domestic subsidiaries, excluding our captive insurance subsidiary, and (ii) secured by first-priority liens on certain assets owned by us and the guarantors (other than our subsidiaries comprising our Nuclear Operations and Technical Services segments).

The Amended Credit Agreement requires interest payments on revolving loans on a periodic basis until maturity. We began making quarterly amortization payments on the $300 million term loan in an amount equal to 1.25% of the aggregate principal amount in the first quarter of 2016. We are required to make quarterly amortization payments on the Incremental Term Loans equal to 1.25% of the aggregate principal amount beginning in the fourth quarter of 2016. We may prepay all loans under the Amended Credit Agreement at any time without premium or penalty (other than customary Eurocurrency Rate breakage costs), subject to notice requirements.

The Amended Credit Agreement 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 3.00 to 1.00, which may be increased to 3.25 to 1.00 for up to four consecutive fiscal quarters after a material acquisition. The minimum consolidated interest coverage ratio is 4.00 to 1.00. In addition, the Amended Credit Agreement contains various restrictive covenants, including with respect to debt, liens, investments, mergers, acquisitions, dividends, equity repurchases and asset sales. At September 30, 2016, we were in compliance with all covenants set forth in the Amended Credit Agreement.

Outstanding loans denominated in U.S. dollars under the Amended Credit Agreement bear interest at our option at either the Eurocurrency Rate plus a margin ranging from 1.25% to 1.75% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the one-month Eurocurrency Rate plus 1.0%, or the administrative agent’s prime rate) plus a margin ranging from 0.25% to 0.75% per year. Canadian dollar loans, if outstanding, will bear interest at the Eurocurrency Rate plus a margin ranging from 1.25% to 1.75% per year. We are charged a commitment fee on the unused portions of the revolving credit facility and the term loan facilities, and that fee varies between 0.15% and 0.25% per year. Additionally, we are charged a letter of credit fee of between 1.25% and 1.75% per year with respect to the amount of each financial letter of credit issued under the Amended Credit Agreement and a letter of credit fee of between 0.75% and 1.05% per year is charged with respect to the amount of each performance letter of credit issued under the Amended Credit Agreement. 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. Upon the closing of the Credit Agreement and the subsequent Amendment, we paid certain upfront fees to the lenders thereunder, and paid arrangement and other fees to the arrangers and agents of the Amended Credit Agreement. At September 30, 2016, borrowings outstanding totaled $401.3 million and $48.9 million under our term loans and revolving line of credit, respectively, and letters of credit issued under the Amended Credit Agreement totaled $111.5 million. As a result, we had $377.1 million available for borrowings or to meet letter of credit requirements as of September 30, 2016, excluding the additional $250 million available to us for term loan, revolving credit borrowings and letter of credit commitments. As of September 30, 2016, the weighted-average interest rate on outstanding borrowings under our Amended Credit Agreement was 2.02%.

Based on the current credit ratings of the Amended Credit Agreement, the applicable margin for Eurocurrency Rate loans is 1.25% for the term loan facility drawn June 30, 2015 and 1.375% for the Incremental Term Loans. The commitment fee for unused portions of the Incremental Term Loans is 0.175%. The letter of credit fee for financial letters of credit is 1.25%, and the letter of credit fee for performance letters of credit is 0.75%. The commitment fee for unused portions of the revolving credit facility is 0.15%. The applicable interest rate at September 30, 2016 was 3.75% per year for the revolving credit facility. The Amended Credit Agreement does not have a floor for the base rate or the Eurocurrency Rate.

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The Amended Credit Agreement generally includes customary events of default for a secured credit facility, some of which allow for an opportunity to cure. If an event of default relating to bankruptcy or other insolvency events occurs under the Amended Credit Agreement, all obligations under the Amended Credit Agreement will immediately become due and payable. If any other event of default exists under the Amended Credit Agreement, the lenders will be permitted to accelerate the maturity of the obligations outstanding under the Amended Credit Agreement. If any event of default occurs under the Amended Credit Agreement, 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 Amended Credit Agreement, or if we are unable to make any of the representations and warranties in the Amended Credit Agreement, we will be unable to borrow funds or have letters of credit issued under the Amended Credit Agreement.

NOTE 5 – PENSION PLANS AND POSTRETIREMENT BENEFITS

Components of net periodic benefit cost included in net income are as follows:



	Pension Benefits												Other Benefits
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015			2016			2015			2016			2015
	(In thousands)
Service cost	$	1,793		$	6,110		$	5,493		$	18,598		$	105		$	219		$	423		$	661
Interest cost	13,724			16,186			41,178			48,900			551			685			1,645			2,058
Expected return on plan assets	(20,634		)	(22,374		)	(62,009		)	(67,551		)	(577		)	(586		)	(1,729		)	(1,754		)
Amortization of prior service cost (credit)	485			458			1,449			1,373			(76		)	(50		)	(227		)	(146		)
Recognized net actuarial loss	—			—			—			2,161			—			—			—			—
Net periodic benefit (income) cost	$	(4,632	)	$	380		$	(13,889	)	$	3,481		$	3		$	268		$	112		$	819

Beginning in the first quarter of 2016, we changed the method we use to estimate the interest and service cost components of our net periodic benefit cost for our pension and postretirement benefit plans. Previously, we estimated interest and service cost utilizing a single weighted-average discount rate derived from the yield curve data used to measure the benefit obligation. Our new method for estimating interest and service cost is a spot rate approach, which utilizes duration specific spot rates from the yield curve that was used to measure the benefit obligation.

Our combined net periodic benefit cost for our pension and postretirement plans decreased $18.1 million in the nine months ended September 30, 2016. The decrease is primarily due to the change in the method used to estimate the interest and service cost components of net periodic benefit cost discussed above. While this change in estimate provides a more precise estimate of interest and service cost by improving the relationship of the discount rates utilized to measure our benefit obligation and the rates utilized to estimate interest and service cost, this change will not affect the measurement of our total pension and postretirement benefit obligations or our total annual net periodic benefit cost as the change in our interest and service cost will be offset in our recognized net actuarial (gain) loss recognized in the fourth quarter each year. Net periodic benefit cost also decreased due to lower service cost resulting from the December 31, 2015 plan freeze of our major U.S. and Canadian defined benefit qualified pension plans, which was partially offset by a lower expected return on plan assets.

During the nine months ended September 30, 2015, significant lump sum payments were made from certain salaried Canadian pension plans. As a result, we remeasured certain of our Canadian pension plans resulting in the recognition of a net actuarial loss of $2.2 million, which includes a $2.6 million settlement loss and a $0.4 million actuarial gain. We have excluded the recognized net actuarial loss from our reportable segments, and such amount has been reflected in Note 11 as the Mark to Market Adjustment in the reconciliation of reportable segment income to consolidated operating income. We recorded $1.0 million of the net actuarial loss within cost of operations and $1.2 million of the loss within selling, general and administrative expenses.

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NOTE 6 – COMMITMENTS AND CONTINGENCIES

Other than as noted below, there have been no material changes during the period covered by this Form 10-Q in the status of the legal proceedings disclosed in Note 10 to the consolidated financial statements in Part II of our 2015 10-K.

Investigations and Litigation

Apollo and Parks Township

In January 2010, Michelle McMunn, Cara D. Steele and Yvonne Sue Robinson filed suit against Babcock & Wilcox Power Generation Group, Inc. ("B&W PGG"), Babcock & Wilcox Technical Services Group, Inc., formerly known as B&W Nuclear Environmental Services, Inc. and now known as BWXT Technical Services Group, Inc. (the "BWXT Parties") and Atlantic Richfield Company ("ARCO") in the United States District Court for the Western District of Pennsylvania. Since January 2010, additional suits have been filed by additional plaintiffs for a total of seventeen lawsuits filed in the U.S. District Court for the Western District of Pennsylvania against the BWXT Parties and ARCO. In total, the suits involve approximately 107 primary claimants. The primary claimants allege, among other things, personal injuries and property damage as a result of alleged releases of radioactive material relating to the operation, remediation and/or decommissioning of two former nuclear fuel processing facilities located in the Borough of Apollo and Parks Township, Pennsylvania (collectively, the "Apollo and Parks Litigation"). Those facilities previously were owned by Nuclear Materials and Equipment Company, a former subsidiary of ARCO ("NUMEC"), which was acquired by B&W PGG. The plaintiffs in the Apollo and Parks Litigation seek compensatory and punitive damages, and in November 2014 delivered a demand of $125.0 million for the settlement of all then-filed actions. All of the suits, except for the two most recent filings in June and October 2015 (the "2015 Lawsuits"), have been consolidated for non-dispositive pre-trial matters. Fact discovery in the Apollo and Parks Litigation is now closed for all claims other than the 2015 Lawsuits, but no trial date has been set. In connection with the spin-off, we agreed to indemnify B&W PGG and its affiliates for any losses arising from the Apollo and Parks Litigation pursuant to the Master Separation Agreement.

In May 2015, the magistrate judge overseeing the consolidated suits (representing fifteen of the lawsuits filed to date and 93 primary claimants) issued a report recommending, among other things, that two motions for summary judgment filed by the BWXT Parties (Failure to Raise a Genuine Issue For Trial on Breach of Duty and Lack of Evidence Regarding Exposure and Dose) be granted in 11 of the 15 consolidated cases. This recommendation was accepted in all respects by the presiding judge and the motions for summary judgment were formally granted in September 2015. In December 2015, the presiding judge in the consolidated cases accepted the magistrate judge's recommendation and granted the summary judgment motion in the other 4 consolidated cases, but not the 2015 Lawsuits. In March 2016, the presiding judge also granted motions to dismiss the two remaining 2015 Lawsuits on the grounds of preemption and failure to adequately plead the remaining cause of action with specificity. Accordingly, all claims in the existing 17 lawsuits have been dismissed by the trial court.

The plaintiffs in the initial 11 consolidated suits filed their notice of appeal on the Motions for Summary Judgment decision on October 15, 2015 in the 3^rd Circuit of the United States Court of Appeals, and the 4 additional consolidated cases have now joined this appeal. On April 16, 2016, the plaintiffs in the 2015 Lawsuits filed their notices of appeal in the 2015 Lawsuits and all cases on appeal have now been consolidated. Although the appeal process could be lengthy, if ultimately upheld the decision would result in the dismissal of all seventeen currently filed suits.

At the time of ARCO’s sale of NUMEC stock to B&W PGG, B&W PGG received an indemnity and hold harmless agreement from ARCO, which has been assigned to BWXT and its affiliates, with respect to claims and liabilities arising prior to or as a result of conduct or events predating the acquisition.

Insurance coverage and/or the ARCO indemnity currently provides coverage for the claims alleged in the Apollo and Parks Litigation, although no assurance can be given that insurance and/or the indemnity will be available or sufficient in the event of liability, if any.

mPower

In April 2014, BWXT announced plans to restructure our mPower program for the development of our mPower reactor to focus on technology development. Since then, BWXT has worked with the DOE, Bechtel - our partner in Generation mPower LLC (“GmP”) - and other stakeholders and potential investors in continuing efforts to restructure the mPower program in light of deteriorated market conditions. Although BWXT has continued to invest in the program during 2014 and 2015 at the rate of approximately $15.0 million annually, on July 13, 2015, Bechtel provided a written notice asserting that BWXT and GmP were in material breach of the GmP Limited Liability Company Agreement dated February 28, 2011 (the “GmP LLC Agreement”). BWXT asserted, among other things, that it had the right under the LLC Agreement to terminate the mPower program and

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Bechtel was therefore not entitled to any return of its investment. In October 2015, BWXT and Bechtel agreed to a 60-day period of negotiations for the purpose of negotiating a resolution of these matters, which was subsequently extended.

On March 2, 2016, BWXT entered into a Framework Agreement with Bechtel, BWXT Modular Reactors, LLC and BDC NexGen Power, LLC for the potential restructuring and restart of our mPower program (the "Framework Agreement"). The Framework Agreement provides that during a 12-month fundraising period beginning on the effective date of the Framework Agreement, Bechtel will attempt to secure funding from third parties (including the DOE) to complete development of the mPower Plant design sufficient to achieve design certification by the U.S. Nuclear Regulatory Commission. During this fundraising period, BWXT plans to continue advancing the mPower design through in-kind engineering services within our previously announced planned mPower project spending of no more than $10.0 million per year.

If Bechtel is successful in securing adequate commitments of funding from external sources (as determined by Bechtel in its sole discretion), then the Framework Agreement requires (a) BWXT and Bechtel to negotiate and execute a new GmP limited liability company agreement and ancillary-related agreements, with Bechtel taking over management of the mPower program from BWXT, and (b) BWXT to fund an aggregate of $60.0 million in in-kind development costs toward achieving design certification (not to exceed $12.0 million per year).

In the event that Bechtel determines in its sole discretion that the mPower program should not be restarted, whether due to (1) adequate third party funding not being secured, (2) the parties being unable to finalize the new GmP limited liability company agreement and other ancillary-related agreements, or (3) otherwise, the mPower program would be terminated, GmP would be wound up and Bechtel would be entitled to payment of a settlement amount of $30.0 million (the “Settlement Amount”). Our sole liability and Bechtel’s sole remedy arising out of the Framework Agreement will be our obligation to pay, and Bechtel’s right to receive, respectively, the Settlement Amount. Any and all other previously existing claims, demands or actions between Bechtel and us arising out of the GmP LLC Agreement and ancillary-related agreements, whether known or unknown (including Bechtel’s previously asserted breach claim for $120.0 million), were released upon our delivery of a letter of credit equal in value to the Settlement Amount on March 2, 2016.

In the nine months ended September 30, 2016, we recognized the $30.0 million potential Settlement Amount, payment of which is contingent upon determination in Bechtel’s sole discretion not to restart the mPower program. In addition, provisions of the Framework Agreement result in the deconsolidation of GmP and the associated recognition of an approximate $13.6 million gain upon deconsolidation.

As BWXT has previously disclosed, the latest extension to the Cooperative Agreement with the DOE has expired and the DOE funding has been suspended.

NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS

Our international 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 primarily to hedge our exposure associated with revenues or costs on our long-term contracts 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 denominated in foreign currencies. We record these contracts at fair value on our condensed consolidated balance sheets. Based on the hedge designation at the 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. Any ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in other – net on our condensed consolidated statements of income. The gain or loss on a derivative instrument not designated as a hedging instrument is also immediately recognized in earnings. Gains and losses on derivative financial instruments that require immediate recognition are included as a component of other – net in our condensed consolidated statements of income.

We have designated all 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 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 September 30, 2016, we had deferred approximately $0.4 million of net losses on these derivative financial instruments in accumulated other comprehensive income. Assuming market conditions continue, we expect to recognize substantially all of this amount in the next 12 months.

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At September 30, 2016, our derivative financial instruments consisted of FX forward contracts. The notional value of our FX forward contracts totaled $39.8 million at September 30, 2016, with maturities extending to June 2017. These instruments consist primarily of contracts to purchase or sell Canadian dollars. We are exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. We attempt to mitigate this risk by using major financial institutions with high credit ratings. The counterparties to all of our FX forward contracts are financial institutions included in our credit facility. Our hedge counterparties have the benefit of the same collateral arrangements and covenants as described under our credit facility.

The following tables summarize our derivative financial instruments at September 30, 2016 and December 31, 2015:



	Asset and Liability Derivatives
	September 30, 2016		December 31, 2015
	(In thousands)
Derivatives Designated as Hedges:
FX Forward Contracts:
Location
Accounts receivable – other	$	224	$	132
Other assets	$	—	$	174
Accounts payable	$	1,542	$	3,790
Other liabilities	$	—	$	432

The effects of derivatives on our financial statements are outlined below:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands)
Derivatives Designated as Hedges:
Cash Flow Hedges:
FX Forward Contracts:
Amount of gain (loss) recognized in other comprehensive income (loss)	$	(78	)	$	(3,116	)	$	1,286		$	(5,754	)
Gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings: effective portion
Location
Revenues	$	(2	)	$	(23	)	$	(42	)	$	461
Cost of operations	$	(172	)	$	(2,637	)	$	976		$	(5,355	)

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NOTE 8 – FAIR VALUE MEASUREMENTS

Investments

The following is a summary of our investments measured at fair value at September 30, 2016:



	9/30/2016		Level 1		Level 2		Level 3
	(In thousands)
Trading securities
Equities	$	68	$	68	$	—	$	—
Corporate bonds	2,178		2,178		—		—
Available-for-sale securities
U.S. Government and agency securities	8,156		8,156		—		—
Corporate bonds	3,017		—		3,017		—
Equities	2,858		—		2,858		—
Mutual funds	4,183		—		4,183		—
Asset-backed securities and collateralized mortgage obligations	225		—		225		—
Commercial paper	1,349		—		1,349		—
Total	$	22,034	$	10,402	$	11,632	$	—

The following is a summary of our investments measured at fair value at December 31, 2015:



	12/31/2015		Level 1		Level 2		Level 3
	(In thousands)
Trading securities
Equities	$	891	$	891	$	—	$	—
Corporate bonds	703		703		—		—
Available-for-sale securities
Equities	948		—		948		—
Mutual funds	3,969		—		3,969		—
Asset-backed securities and collateralized mortgage obligations	262		—		262		—
Commercial paper	2,773		—		2,773		—
Total	$	9,546	$	1,594	$	7,952	$	—

We estimate the fair value of investments based on quoted market prices. For investments for which there are no quoted market prices, we derive fair values from available yield curves for investments of similar quality and terms.

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 September 30, 2016 and December 31, 2015, we had forward contracts outstanding to purchase or sell Canadian dollars, with a total fair value of $(1.3) million and $(3.9) 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:

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Cash and cash equivalents and restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying condensed 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 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. The fair value of our debt instruments approximated their carrying value at September 30, 2016 and December 31, 2015.

NOTE 9 – STOCK-BASED COMPENSATION

Total stock-based compensation expense for all of our plans recognized for the three months ended September 30, 2016 and 2015 totaled $2.9 million and $2.9 million, respectively, with associated tax benefit totaling $1.1 million and $1.0 million, respectively. Total stock-based compensation for all of our plans recognized for the nine months ended September 30, 2016 and 2015 totaled $9.6 million and $24.4 million, respectively, with associated tax benefit totaling $3.4 million and $8.3 million, respectively.

We recognized $13.2 million of stock-based compensation expense during the nine months ended September 30, 2015 as costs to spin-off the Power Generation business. This expense related primarily to equity retention awards and expense acceleration associated with employee terminations.

NOTE 10 – ACCELERATED SHARE REPURCHASE AGREEMENT

On September 15, 2016, the Company entered into a $200 million accelerated share repurchase agreement (the “ASR Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”). Pursuant to the terms of the ASR Agreement, on September 16, 2016, the Company paid Wells Fargo $200 million in cash and received 4,135,435 shares of the Company’s common stock. The final number of shares to be repurchased will be based on the volume-weighted average stock price of the Company’s common stock during the term of the ASR Agreement, less a customary discount. At settlement, under certain circumstances, Wells Fargo may be required to deliver additional shares of common stock to the Company, or under certain circumstances, the Company may be required to deliver shares of common stock or to make a cash payment, at its election, to Wells Fargo. Final settlement of the ASR Agreement is expected to be completed no later than the first quarter of 2017.

The initial repurchase of shares under the ASR Agreement resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. The ASR Agreement was accounted for as a treasury stock transaction and forward stock purchase contract. The shares delivered were recorded in treasury stock and the unsettled portion of the ASR Agreement was recorded in capital in excess of par value in the Company’s condensed consolidated balance sheet. The forward stock purchase contract is considered indexed to the Company’s own stock and is classified as an equity instrument.

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NOTE 11 – SEGMENT REPORTING

As described in Note 1, our operations are assessed based on three reportable segments. An analysis of our operations by reportable segment is as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands)						(In thousands)
REVENUES:
Nuclear Operations	$	316,899		$	303,304		$	937,814		$	879,493
Technical Services	26,178			21,261			71,838			61,434
Nuclear Energy	38,190			34,927			139,698			113,350
Adjustments and Eliminations ⁽¹⁾	(1,762		)	(522		)	(2,637		)	(2,685		)
	$	379,505		$	358,970		$	1,146,713		$	1,051,592


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



Nuclear Operations Transfers	$	(23	)	$	(512	)	$	(149	)	$	(2,634	)
Technical Services Transfers	(1,736		)	—			(2,456		)	(12		)
Nuclear Energy Transfers	(3		)	(10		)	(32		)	(39		)
	$	(1,762	)	$	(522	)	$	(2,637	)	$	(2,685	)
OPERATING INCOME:
Nuclear Operations	$	62,537		$	62,720		$	191,886		$	191,877
Technical Services	4,683			8,340			14,675			15,475
Nuclear Energy	1,000			1,382			34,844			79
Other	(1,907		)	(2,357		)	(5,068		)	(12,015		)
	$	66,313		$	70,085		$	236,337		$	195,416
Unallocated Corporate ⁽²⁾	(3,940		)	(4,847		)	(12,897		)	(20,052		)
mPower Framework Agreement	—			—			(30,000		)	—
Income Related to Litigation Proceeds	—			65,728			—			65,728
Special Charges for Restructuring Activities	—			—			—			(16,608		)
Cost to Spin-off Power Generation Business	—			—			—			(25,987		)
Mark to Market Adjustment	—			—			—			(2,161		)
Total Operating Income	$	62,373		$	130,966		$	193,440		$	196,336
Other Income (Expense):
Interest income	128			30,028			533			30,262
Interest expense	(2,049		)	(1,231		)	(5,326		)	(6,792		)
Other – net	228			(1,666		)	25,119			(2,950		)
Total Other Income (Expense)	(1,693		)	27,131			20,326			20,520
Income before Provision for Income Taxes	$	60,680		$	158,097		$	213,766		$	216,856


(2)	Unallocated corporate includes general corporate overhead not allocated to segments.

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NOTE 12 – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016		2015
	(In thousands, except share and per share amounts)
Basic:
Income from continuing operations less noncontrolling interest	$	40,503	$	106,344		$	146,771	$	140,397
Income (loss) from discontinued operations, net of tax	—		(2,474		)	—		(8,417		)
Net income	$	40,503	$	103,870		$	146,771	$	131,980
Weighted average common shares	102,735,989		106,962,168			103,542,578		106,952,744
Income from continuing operations less noncontrolling interest	$	0.39	$	0.99		$	1.42	$	1.31
Income (loss) from discontinued operations, net of tax	—		(0.02		)	—		(0.08		)
Net income	$	0.39	$	0.97		$	1.42	$	1.23
Diluted:
Income from continuing operations less noncontrolling interest	$	40,503	$	106,344		$	146,771	$	140,397
Income (loss) from discontinued operations, net of tax	—		(2,474		)	—		(8,417		)
Net income	$	40,503	$	103,870		$	146,771	$	131,980
Weighted average common shares (basic)	102,735,989		106,962,168			103,542,578		106,952,744
Effect of dilutive securities:
Stock options, restricted stock and performance shares ⁽¹⁾	1,079,596		1,222,136			1,256,600		681,988
Adjusted weighted average common shares	103,815,585		108,184,304			104,799,178		107,634,732
Income from continuing operations less noncontrolling interest	$	0.39	$	0.98		$	1.40	$	1.30
Income (loss) from discontinued operations, net of tax	—		(0.02		)	—		(0.08		)
Net income	$	0.39	$	0.96		$	1.40	$	1.23


(1)	At September 30, 2016 and 2015, we have excluded from our diluted share calculation 33,428 and 1,478,086 shares, respectively, as their effect would have been antidilutive.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included under Item 1 of this report and the audited consolidated financial statements and the related notes and Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our annual report on Form 10-K for the year ended December 31, 2015 (our "2015 10-K").

In this quarterly report on Form 10-Q, unless the context otherwise indicates, "we," "us" and "our" mean BWX Technologies, Inc. ("BWXT") and its consolidated subsidiaries.

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the "safe harbor" protection for forward-looking statements that applicable federal securities law affords.

From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential security holders about our company. In addition, various statements in this quarterly report on Form 10-Q, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934. Statements and assumptions regarding expectations and projections of specific projects, our future backlog, revenues, income and capital spending, acquisitions or divestitures, return of capital activities or margin improvement initiatives are examples of forward-looking statements. Forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "plan," "seek," "goal," "could," "intend," "may," "should" or other words that convey the uncertainty of future events or outcomes. In addition, sometimes we will specifically describe a statement as being a forward-looking statement and refer to this cautionary statement.

We have based our forward-looking statements on our current expectations, estimates and projections about our industries and our company. We caution that these statements are not guarantees of future performance and you should not rely unduly on them, as they involve risks, uncertainties and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in our forward-looking statements.

We believe the items we have outlined above are important factors that could cause estimates in our financial statements to differ materially from actual results and those expressed in a forward-looking statement made in this report or elsewhere by us or on our behalf. Differences between actual results and any future performance suggested in our forward-looking statements could result from a variety of factors. We have discussed many of these factors in more detail elsewhere in this report and in Item 1A "Risk Factors" in our 2015 10-K. These factors are not necessarily all the factors that could affect us. Unpredictable or unanticipated factors we have not discussed in this report could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. We do not intend to update our description of important factors each time a potential important factor arises, except as required by applicable securities laws and regulations. We advise our security holders that they should (1) be aware that factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.

GENERAL

We operate in three reportable segments: Nuclear Operations, Technical Services and Nuclear Energy. In general, we operate in capital-intensive industries and rely on large contracts for a substantial amount of our revenues. We are currently exploring growth strategies across our segments through acquisitions to expand and complement our existing businesses. We would expect to fund these opportunities with cash on hand or by raising additional capital through debt, equity or some combination thereof.

Nuclear Operations Segment

The revenues of our Nuclear Operations segment are largely a function of defense spending by the U.S. Government. Through this segment, we engineer, design and manufacture precision naval nuclear components and reactors for the DOE/

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NNSA's Naval Nuclear Propulsion Program. As a supplier of major nuclear components for certain U.S. Government programs, this segment is a significant participant in the defense industry.

Technical Services Segment

The revenues and equity in income of investees of our Technical Services segment are largely a function of spending by the U.S. Government and the performance scores we and our consortium partners earn in managing and operating high-consequence operations at U.S. nuclear weapons sites and national laboratories. With its specialized capabilities of full life-cycle management of special materials, facilities and technologies, we believe our Technical Services segment is well-positioned to continue to participate in the continuing cleanup, operation and management of critical government-owned nuclear sites, laboratories and manufacturing complexes maintained by the DOE, NASA and other federal agencies.

Nuclear Energy Segment

Through this segment, we design, license, manufacture and deliver commercial nuclear steam generators, pressure vessels, reactor components, heat exchangers and other auxiliary equipment, including containers for the storage of spent nuclear fuel. This segment also is a significant supplier to nuclear power utilities undergoing major refurbishment projects.

Our Nuclear Energy segment’s overall activity primarily depends on the demand and competitiveness of nuclear energy. The activity of this segment depends on the timing of maintenance outages primarily in the Canadian market and the cyclical nature of capital expenditures and major refurbishments for nuclear utility customers, which could cause variability in our financial results.

GE Hitachi Nuclear Energy Canada Inc. Acquisition

Power Generation Spin-off

Prior to June 30, 2015, we completed an internal restructuring that separated the subsidiaries involved in our former Power Generation business and established BWE as the direct or indirect parent company of all those subsidiaries. Concurrent with the spin-off, The Babcock & Wilcox Company changed its name to BWX Technologies, Inc.

The results of operations for the nine month period ended September 30, 2015 reflect the historical operations of our former Power Generation business as discontinued operations. See Note 2 for further information regarding the spin-off of BWE. The discussions in this quarterly report are presented on the basis of continuing operations, unless otherwise stated.

mPower Framework Agreement

On March 2, 2016, we entered into a framework agreement with Bechtel Power Corporation ("Bechtel"), BWXT Modular Reactors, LLC and BDC NexGen Power, LLC for the potential restructuring and restart of our mPower small modular reactor program (the "Framework Agreement"). As a result of entering into the Framework Agreement, we have deconsolidated GmP from our financial statements as of the date of the Framework Agreement. We recorded a gain of approximately $13.6 million during the nine months ended September 30, 2016 related to the deconsolidation of GmP as a component of other - net in our condensed consolidated statement of income.

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For additional information on the Framework Agreement, see Note 6 to our condensed consolidated financial statements.

Critical Accounting Policies and Estimates

For a summary of the critical accounting policies and estimates that we use in the preparation of our unaudited condensed consolidated financial statements, see Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our 2015 10-K. There have been no material changes to our policies during the nine months ended September 30, 2016.

Accounting for Contracts

As of September 30, 2016, in accordance with the percentage-of-completion method of accounting, 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. A principal risk on fixed-priced contracts is that revenue from the customer is insufficient to 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. In some instances, we guarantee completion dates related to our projects or provide performance guarantees. Increases in costs on our fixed-price contracts could have a material adverse impact on our consolidated results of operations, financial condition and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated results of operations, financial condition and cash flows. In the nine months ended September 30, 2016 and 2015, we recognized net changes in estimates related to long-term contracts accounted for on the percentage-of-completion basis, which increased operating income by approximately $15.8 million and $14.5 million, respectively.

RESULTS OF OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 VS. THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015

Selected financial highlights are presented in the table below:



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			$ Change			2016			2015			$ Change
	(in thousands)									(in thousands)
REVENUES:
Nuclear Operations	$	316,899		$	303,304		$	13,595		$	937,814		$	879,493		$	58,321
Technical Services	26,178			21,261			4,917			71,838			61,434			10,404
Nuclear Energy	38,190			34,927			3,263			139,698			113,350			26,348
Adjustments and Eliminations	(1,762		)	(522		)	(1,240		)	(2,637		)	(2,685		)	48
	$	379,505		$	358,970		$	20,535		$	1,146,713		$	1,051,592		$	95,121
OPERATING INCOME:
Nuclear Operations	$	62,537		$	62,720		$	(183	)	$	191,886		$	191,877		$	9
Technical Services	4,683			8,340			(3,657		)	14,675			15,475			(800		)
Nuclear Energy	1,000			1,382			(382		)	34,844			79			34,765
Other	(1,907		)	(2,357		)	450			(5,068		)	(12,015		)	6,947
	$	66,313		$	70,085		$	(3,772	)	$	236,337		$	195,416		$	40,921
Unallocated Corporate	(3,940		)	(4,847		)	907			(12,897		)	(20,052		)	7,155
mPower Framework Agreement	—			—			—			(30,000		)	—			(30,000		)
Income Related to Litigation Proceeds	—			65,728			(65,728		)	—			65,728			(65,728		)
Special Charges for Restructuring Activities	—			—			—			—			(16,608		)	16,608
Cost to Spin-off Power Generation Business	—			—			—			—			(25,987		)	25,987
Mark to Market Adjustment	—			—			—			—			(2,161		)	2,161
Total Operating Income	$	62,373		$	130,966		$	(68,593	)	$	193,440		$	196,336		$	(2,896	)

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Consolidated Results of Operations

Three months ended September 30, 2016 vs. 2015

Consolidated revenues increased 5.7%, or $20.5 million, to $379.5 million in the three months ended September 30, 2016 compared to $359.0 million for the corresponding period in 2015. The Nuclear Operations segment experienced a $13.6 million increase in revenues in addition to increases in our Technical Services and Nuclear Energy segments totaling $4.9 million and $3.3 million, respectively.

Consolidated operating income decreased $68.6 million to $62.4 million in the three months ended September 30, 2016 compared to $131.0 million for the corresponding period of 2015 primarily due to the recording of $65.7 million of income related to litigation proceeds during the three months ended September 30, 2015. Operating income in our Nuclear Operations, Technical Services and Nuclear Energy segments decreased $0.2 million, $3.7 million and $0.4 million, respectively, which was partially offset by a $0.5 million improvement in our Other segment and a decrease in unallocated corporate expenses of $0.9 million.

Nine months ended September 30, 2016 vs. 2015

Consolidated revenues increased 9.0%, or $95.1 million, to $1,146.7 million in the nine months ended September 30, 2016 compared to $1,051.6 million for the corresponding period in 2015, due to increases in revenues from our Nuclear Operations, Technical Services and Nuclear Energy segments totaling $58.3 million, $10.4 million and $26.3 million, respectively.

Consolidated operating income decreased $2.9 million to $193.4 million in the nine months ended September 30, 2016 compared to $196.3 million for the corresponding period of 2015. Operating income in the Nuclear Energy segment increased $34.8 million due to increased revenue related to our Canadian nuclear service and equipment businesses and the reversal of a $16.1 million loss contingency that resulted from a favorable ruling in a lawsuit involving commercial nuclear contracts. We also experienced improvements in our Other segment of $6.9 million and a decrease in unallocated corporate expenses of $7.2 million. These increases were offset by the recording of a $30.0 million charge related to the mPower Framework Agreement during the nine months ended September 30, 2016. During the nine months ended September 30, 2015, we recorded income of $65.7 million related to litigation proceeds which was partially offset by special charges for restructuring activities totaling $16.6 million, costs to spin-off the Power Generation business totaling $26.0 million and a $2.2 million Mark to Market Adjustment.

Nuclear Operations



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			$ Change			2016			2015			$ Change
	(in thousands)									(in thousands)
Revenues	$	316,899		$	303,304		$	13,595		$	937,814		$	879,493		$	58,321
Operating Income	62,537			$	62,720		(183		)	191,886			191,877			9
% of Revenues	19.7		%	20.7		%				20.5		%	21.8		%

Three months ended September 30, 2016 vs. 2015

Revenues increased 4.5%, or $13.6 million, to $316.9 million in the three months ended September 30, 2016 compared to $303.3 million for the corresponding period of 2015. The increase was primarily attributable to increased activity in the manufacturing of nuclear components for U.S. Government programs.

Operating income decreased $0.2 million to $62.5 million in the three months ended September 30, 2016 compared to $62.7 million for the corresponding period of 2015. The operating income associated with the increase in revenue related to the manufacturing of nuclear components for U.S. Government programs noted above and an increase in operating income at our naval nuclear fuel and downblending operations was offset by an increase in overhead and selling, general and administrative expenses.

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Nine months ended September 30, 2016 vs. 2015

Revenues increased 6.6%, or $58.3 million, to $937.8 million in the nine months ended September 30, 2016 compared to $879.5 million for the corresponding period of 2015. The increase was primarily attributable to increased activity in the manufacturing of nuclear components for U.S. Government programs.

Operating income of $191.9 million in the nine months ended September 30, 2016 was unchanged compared to the corresponding period of 2015. The operating income associated with the increase in revenue related to the manufacturing of nuclear components for U.S. Government programs noted above was offset by an increase in overhead and selling, general and administrative expenses. In addition, a $3.0 million benefit from the settlement of a property-related insurance claim as well as contract improvements in our naval nuclear fuel and downblending business occurred during the nine months ended September 30, 2015.

Technical Services



	Three Months Ended September 30,							Nine Months Ended September 30,
	2016		2015		$ Change			2016		2015		$ Change
	(in thousands)							(in thousands)
Revenues	$	26,178	$	21,261	$	4,917		$	71,838	$	61,434	$	10,404
Operating Income	4,683		8,340		(3,657		)	14,675		15,475		(800		)

Three months ended September 30, 2016 vs. 2015

Revenues increased 23.1%, or $4.9 million, to $26.2 million in the three months ended September 30, 2016 compared to $21.3 million for the corresponding period of 2015. This increase is primarily attributable to higher activity at our Naval Reactor decommissioning and decontamination project.

Operating income decreased $3.7 million to $4.7 million in the three months ended September 30, 2016 compared to $8.3 million in the corresponding period of 2015, primarily attributable to improved fee performance at several of our sites as well as favorable billing rate adjustments that occurred during the three months ended September 30, 2015. In addition, we also experienced higher selling, general and administrative expenses of $1.7 million related to an increase in business development activities caused by the timing of proposal activities.

Nine months ended September 30, 2016 vs. 2015

Revenues increased 16.9%, or $10.4 million, to $71.8 million in the nine months ended September 30, 2016 compared to $61.4 million for the corresponding period of 2015, primarily attributable to higher activity at our Naval Reactor decommissioning and decontamination project.

Operating income decreased $0.8 million to $14.7 million in the nine months ended September 30, 2016 compared to $15.5 million in the corresponding period of 2015, primarily attributable to improved fee performance at several of our sites as well as favorable billing rate adjustments that occurred during the nine months ended September 30, 2015. In addition, we also experienced higher selling, general and administrative expenses of $0.7 million related to an increase in business development activities caused by the timing of proposal activities.

Nuclear Energy



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			$ Change			2016			2015			$ Change
	(in thousands)									(in thousands)
Revenues	$	38,190		$	34,927		$	3,263		$	139,698		$	113,350		$	26,348
Operating Income	1,000			1,382			(382		)	34,844			79			34,765
% of Revenues	2.6		%	4.0		%				24.9		%	0.1		%

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Three months ended September 30, 2016 vs. 2015

Revenues increased 9.3%, or $3.3 million, to $38.2 million in the three months ended September 30, 2016 compared to $34.9 million for the corresponding period of 2015. The increase in revenues was driven by an $8.6 million increase in our nuclear equipment business primarily due to steam generator design and manufacturing work associated with major life extension and refurbishment projects for the Canadian nuclear market, as well as our China steam generator project. These increases were partially offset by a decline in outage and inspection work in the United States and Canada of $2.9 million.

Operating income decreased $0.4 million to $1.0 million in the three months ended September 30, 2016 compared to $1.4 million for the corresponding period of 2015. The decrease in operating income was primarily due to the decline in revenue associated with our services business in the United States and Canada noted above. This decrease was partially offset by the operating income improvement associated with the higher revenues in our equipment business noted above. Lower selling, general and administrative expenses resulted in additional operating income improvements when compared to the same period of the prior year.

Nine months ended September 30, 2016 vs. 2015

Revenues increased 23.2%, or $26.3 million, to $139.7 million in the nine months ended September 30, 2016 compared to $113.4 million for the corresponding period of 2015. This increase is primarily attributable to our services business in Canada, which experienced a higher volume of outage projects when compared to the same period of the prior year, resulting in an increase in revenue of $22.0 million. In addition, revenue in our nuclear equipment business increased $12.6 million primarily due to steam generator design and manufacturing work associated with major life extension and refurbishment projects for the Canadian nuclear market, as well as the China steam generator project. These increases were partially offset by a decline in service projects in the United States as well as the $4.9 million unfavorable impact of the translation of our Canadian dollar denominated contracts into U.S. dollars when compared to the same period of the prior year.

Operating income increased $34.8 million to $34.8 million in the nine months ended September 30, 2016 compared to $0.1 million for the corresponding period of 2015, primarily attributable to the reversal of a $16.1 million loss contingency resulting from a favorable ruling in a lawsuit involving commercial nuclear contracts. In addition, the increase in revenue associated with our Canadian nuclear service and equipment businesses noted above combined to increase operating income by $13.1 million. Lower selling, general and administrative expenses resulted in additional operating income improvements of $2.3 million when compared to nine months ended September 30, 2015.

Other



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015		$ Change	2016		2015		$ Change
	(in thousands)					(in thousands)
Operating Income	(1,907	)	(2,357	)	450	(5,068	)	(12,015	)	6,947

Three months ended September 30, 2016 vs. 2015

Operating income increased $0.5 million to a loss of $1.9 million in the three months ended September 30, 2016 compared to a loss of $2.4 million for the corresponding period of 2015, due to the slowing pace of development related to our previously announced plans to restructure the mPower program. Research and development activities and selling, general and administrative expenses decreased $0.4 million compared to the same period in 2015.

Nine months ended September 30, 2016 vs. 2015

Operating income increased $6.9 million to a loss of $5.1 million in the nine months ended September 30, 2016 compared to a loss of $12.0 million for the corresponding period of 2015, due to the slowing pace of development related to our previously announced plans to restructure the mPower program. Research and development activities decreased $4.8 million and selling, general and administrative expenses decreased $2.1 million compared to the nine months ended September 30, 2015.

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Unallocated Corporate

Unallocated corporate expenses decreased $0.9 million to $3.9 million for the three months ended September 30, 2016, as compared to $4.8 million for the corresponding period of 2015 primarily due to favorable healthcare costs when compared to the corresponding period of the prior year.

Unallocated corporate expenses decreased $7.2 million to $12.9 million for the nine months ended September 30, 2016 compared to $20.1 million for the corresponding period of 2015 primarily due to lower general corporate overhead resulting from the spin-off, which allowed the Company to reduce expenses that were previously incurred to support a larger organization.

Unallocated corporate expenses for the nine months ended September 30, 2015 include certain expenses that were incurred to manage and provide corporate support of a larger consolidated group prior to the spin-off of the Power Generation business. General corporate overhead expenses that were not specifically identifiable with our former Power Generation business are reflected as part of continuing operations for the historical financial statements.

Special Charges for Restructuring Activities

Operating income for the nine months ended September 30, 2015 included special charges for restructuring activities totaling $16.6 million primarily related to asset impairments recognized as a result of the significant adverse changes in the business prospects of the mPower program.

Provision for Income Taxes



	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			$ Change			2016			2015			$ Change
	(in thousands)									(in thousands)
Income from Continuing Operations before Provision for Income Taxes	$	60,680		$	158,097		$	(97,417	)	$	213,766		$	216,856		$	(3,090	)
Income Tax Provision	$	20,032		$	51,589		$	(31,557	)	$	66,622		$	76,789		$	(10,167	)
Effective Tax Rate	33.0		%	32.6		%				31.2		%	35.4		%

We primarily operate in the United States and Canada, and we recognize our consolidated income tax provision based on the U.S. federal statutory rate of 35% due to the presumed repatriation of our Canadian earnings.

Our effective tax rate for the nine months ended September 30, 2016 was approximately 31.2% as compared to 35.4% for the nine months ended September 30, 2015. The effective tax rate for the nine months ended September 30, 2016 was lower than our statutory rate primarily due to the $13.6 million gain recognized related to the deconsolidation of GmP. The effective tax rates for the nine months ended September 30, 2015 was impacted by the spin-off of our former Power Generation business. Specifically, we recognized $3.8 million of tax provision due to the change in our tax footprint associated with the spin-off, resulting in the revaluations of deferred tax assets and liabilities as well as the need to recognize tax provision on our global earnings at our U.S. federal rate due to the likely repatriation of future foreign earnings. These amounts were offset by the remeasurement of uncertain tax positions and adjustments related to the filing of our 2014 U.S. tax return discussed above.

Backlog

Backlog is not a measure recognized by generally accepted accounting principles. It is possible that our methodology for determining backlog may not be comparable to methods used by other companies. We generally include expected revenue in our backlog when we receive written confirmation from our customers authorizing the performance of work and committing the customer to payment for work performed. We are subject to the budgetary and appropriation cycle of the U.S. Government as it relates to our Nuclear Operations and Technical Services segments. Backlog may not be indicative of future operating

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results and projects in our backlog may be canceled, modified or otherwise altered by customers. We do not include orders of our unconsolidated joint ventures in backlog. These unconsolidated joint ventures are primarily included in our Technical Services segment.



	September 30, 2016		December 31, 2015
	(Unaudited) (In millions)
Nuclear Operations	$	2,983	$	2,311
Technical Services	10		4
Nuclear Energy	395		335
Total Backlog	$	3,388	$	2,650

Of the September 30, 2016 backlog, we expect to recognize revenues as follows:



	2016		2017		Thereafter		Total
	(Unaudited) (In approximate millions)
Nuclear Operations	$	286	$	1,017	$	1,680	$	2,983
Technical Services	10		—		—		10
Nuclear Energy	62		170		163		395
Total Backlog	$	358	$	1,187	$	1,843	$	3,388

At September 30, 2016, Nuclear Operations backlog with the U.S. Government was $2,970.2 million, of which $266.2 million had not yet been funded.

At September 30, 2016, Technical Services backlog with the U.S. Government was $10.1 million, all of which was funded.

At September 30, 2016, Nuclear Energy had no backlog with the U.S. Government.

Major new awards from the U.S. Government are typically received following congressional approval of the budget for the government’s next fiscal year, which starts October 1, and may not be awarded to us before the end of the calendar year. Due to the fact that most contracts awarded by the U.S. Government are subject to these annual funding approvals, the total values of the underlying programs are significantly larger. In April 2016, we were awarded a component and fuel contract, along with a three-year downblending contract by the U.S. Government with a combined value in excess of $3.0 billion. Approximately $1.4 billion of these awards were added to backlog during the nine months ended September 30, 2016.

The value of unexercised options as of September 30, 2016 was approximately $1.6 billion, which are expected to be exercised periodically through 2018, subject to annual congressional appropriations.

Liquidity and Capital Resources

Credit Facility

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Other Arrangements

We have posted surety bonds to support contractual obligations to customers relating to certain projects. We utilize bonding facilities to support such obligations, but the issuance of bonds under those facilities is typically at the surety’s discretion. 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 project requirements for the next 12 months. In addition, these bonds generally indemnify customers should we fail to perform our obligations under the applicable contracts. 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 in support of some of our contracting activity. As of September 30, 2016, bonds issued and outstanding under these arrangements in support of contracts totaled approximately $19.5 million.

Long-term Benefit Obligations

Our unfunded pension and postretirement benefit obligations totaled $350.9 million at September 30, 2016. These long-term liabilities are expected to require use of our resources to satisfy future funding obligations. We expect to make contributions of approximately $1.7 million for the remainder of 2016 related to our pension plans and postretirement plans.

Other

Our domestic and foreign cash and cash equivalents, restricted cash and cash equivalents and investments as of September 30, 2016 and December 31, 2015 were as follows:



	September 30, 2016		December 31, 2015
	(In thousands)
Domestic	$	38,945	$	158,679
Foreign	36,907		23,733
Total	$	75,852	$	182,412

We expect cash on hand, cash flow from operations and borrowing capacity under the Amended Credit Agreement to be sufficient to meet our liquidity needs for the next 12 months.

Our working capital decreased by approximately $57.5 million to $236.0 million at September 30, 2016 from $293.5 million at December 31, 2015, attributable to a decrease in cash and cash equivalents used in financing and investing activities during the nine months ended September 30, 2016. This decrease was partially offset by changes in net contracts in progress and advance billings due to the timing of project cash flows.

Our net cash provided by operations decreased by $157.8 million to $81.1 million in the nine months ended September 30, 2016, compared to cash provided by operations of $238.9 million in the nine months ended September 30, 2015. This decrease in cash provided by operations was largely attributable to the changes in net contracts in progress and advance billings discussed above.

Our net cash used in investing activities decreased by $14.7 million to $40.1 million in the nine months ended September 30, 2016 compared to cash used in investing activities of $54.8 million in the nine months ended September 30, 2015. The decrease in cash used in investing activities in 2016 was primarily attributable to a reduction in purchases of property, plant and equipment.

Our net cash used in financing activities decreased by $203.8 million to $151.2 million in the nine months ended September 30, 2016, compared to cash used in financing activities of $355.0 million in the nine months ended September 30, 2015. This decrease in net cash used in financing activities was primarily attributable to the cash divested in connection with the spin-off of our former Power Generation business in the prior year totaling $307.6 million. This was partially offset by the increase in repurchases of common shares of $274.9 million during the nine months ended September 30, 2016 and a net increase in borrowings under our credit facility of $150.2 million when compared to the same period in the prior year.

At September 30, 2016, we had restricted cash and cash equivalents totaling $8.6 million, $2.8 million of which was held for future decommissioning of facilities (which we include in other assets on our condensed consolidated balance sheets) and $5.8 million of which was held to meet reinsurance reserve requirements of our captive insurer.

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At September 30, 2016, we had investments with a fair value of $22.0 million. Our investment portfolio consists primarily of investments in corporate bonds, equities and highly liquid money market instruments. Our investments 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 unrealized gains and losses, net of tax, reported as a component of other comprehensive income.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposures to market risks have not changed materially from those disclosed in Item 7A included in Part II of our 2015 10-K.

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) adopted by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Our disclosure controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. You should note that the design of any system of disclosure controls and procedures is based in part upon various assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based on the evaluation referred to above, our Chief

Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective as of September 30, 2016 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure. There has been no change in our internal control over financial reporting during the quarter ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding ongoing investigations and litigation, see Note 6 to our unaudited condensed consolidated financial statements in Part I of this report, which we incorporate by reference into this Item.

Item 1A. Risk Factors

In addition to the other information in this report, the other factors presented in Item 1A. Risk Factors in our 2015 10-K are some of the factors that could materially affect our business, financial condition or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In November 2012, we announced that our Board of Directors authorized a share repurchase program. The following table provides information on our purchases of equity securities during the quarter ended September 30, 2016. Any shares purchased that were not part of a publicly announced plan or program are related to repurchases of common stock pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.



Period	Total number of shares purchased ⁽¹⁾	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) ⁽²⁾
July 1, 2016 - July 31, 2016	123,331	$	35.73	115,000	$	249.3
August 1, 2016 - August 31, 2016	122,821	$	38.47	115,000	$	244.9
September 1, 2016 - September 30, 2016 ⁽³⁾	4,187,065	$	38.69	4,185,435	$	43.0
Total	4,433,217	$	38.60	4,415,435


(1)	Includes 8,331 shares, 7,821 shares and 1,630 shares repurchased during July, August and September, respectively, pursuant to the provisions of employee benefit plans that permit the repurchase of shares to satisfy statutory tax withholding obligations.


(2)	On November 4, 2015, we announced that our Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $300 million during a two-year period that began on February 26, 2016 and expires on February 26, 2018.

(3)

Includes 4,135,435 shares purchased pursuant to the terms of our accelerated share repurchase agreement with Wells Fargo Bank, National Association on September 16, 2016, which has reduced the aggregate market value of shares that may yet be purchased as part of our authorized repurchase program by $200 million. See Note 10 to our unaudited condensed consolidated financial statements in Part I of this report for additional information regarding the accelerated share repurchase agreement.

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Item 6. Exhibits

Exhibit 2.1* - Master Separation Agreement dated as of July 2, 2010 between McDermott International, Inc. and BWXT (formerly The Babcock & Wilcox Company) (incorporated by reference to Exhibit 2.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

Exhibit 2.2* - Master Separation Agreement, dated as of June 8, 2015, between BWXT (formerly The Babcock & Wilcox Company) and Babcock & Wilcox Enterprises, Inc. (incorporated by reference to Exhibit 2.1 to BWXT’s Current Report on Form 8-K filed with the SEC on June 9, 2015 (File No. 1-34658)).

Exhibit 3.1* - Restated Certificate of Incorporation of BWXT (formerly The Babcock & Wilcox Company) (incorporated by reference to Exhibit 3.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

Exhibit 3.2* - Certificate of Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658)).

Exhibit 3.3* - Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to BWXT’s Current Report on Form 8-K filed with the SEC on June 9, 2015 (File No. 1-34658)).

Exhibit 4.1* - Amendment No. 1 to Credit Agreement, dated September 2, 2016, entered into by and among BWX Technologies, Inc., certain lenders and letter of credit issuers executing the signature pages thereto and Bank of America, N.A., as administrative agent, and acknowledged by certain subsidiaries of BWX Technologies, Inc., as guarantors (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 2, 2016 (File No. 1-34658)).

Exhibit 10.1⁺ - Form of Amendment to Change in Control Agreement, dated July 1, 2016, between the Company and certain officers.

Exhibit 10.2 - Accelerated share repurchase confirmation, dated September 15, 2016, between the Company and Wells Fargo, National Association.

Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.

Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.

Exhibit 32.1 - Section 1350 certification of Chief Executive Officer.

Exhibit 32.2 - Section 1350 certification of Chief Financial Officer.

101.INS - XBRL Instance Document

101.SCH - XBRL Taxonomy Extension Schema Document

101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB - XBRL Taxonomy Extension Label Linkbase Document

101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF - XBRL Taxonomy Extension Definition Linkbase Document



*	Incorporated by reference to the filing indicated.



+	Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		BWX TECHNOLOGIES, INC.

		/s/ David S. Black
	By:	David S. Black
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer and Duly Authorized
		Representative)

		/s/ Jason S. Kerr
	By:	Jason S. Kerr
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer and Duly Authorized
		Representative)

October 31, 2016

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EXHIBIT INDEX



Exhibit Number	Description
2.1*	Master Separation Agreement dated as of July 2, 2010 between McDermott International, Inc. and BWXT (formerly The Babcock & Wilcox Company) (incorporated by reference to Exhibit 2.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

2.2*	Master Separation Agreement, dated as of June 8, 2015, between BWXT (formerly The Babcock & Wilcox Company) and Babcock & Wilcox Enterprises, Inc. (incorporated by reference to Exhibit 2.1 to BWXT’s Current Report on Form 8-K filed with the SEC on June 9, 2015 (File No. 1-34658)).

3.1*	Restated Certificate of Incorporation of BWXT (formerly The Babcock & Wilcox Company) (incorporated by reference to Exhibit 3.1 to The Babcock & Wilcox Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 1-34658)).

3.2*	Certificate of Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to BWXT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 1-34658)).

3.3*	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to BWXT’s Current Report on Form 8-K filed with the SEC on June 9, 2015 (File No. 1-34658)).

4.1*	Amendment No. 1 to Credit Agreement, dated September 2, 2016, entered into by and among BWX Technologies, Inc., certain lenders and letter of credit issuers executing the signature pages thereto and Bank of America, N.A., as administrative agent, and acknowledged by certain subsidiaries of BWX Technologies, Inc., as guarantors (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 2, 2016 (File No. 1-34658)).

10.1⁺	Form of Amendment to Change in Control Agreement, dated July 1, 2016, between the Company and certain officers.

10.2	Accelerated share repurchase confirmation, dated September 15, 2016, between the Company and Wells Fargo, National Association.

31.1	Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.

31.2	Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.

32.1	Section 1350 certification of Chief Executive Officer.

32.2	Section 1350 certification of Chief Financial Officer.

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document



*	Incorporated by reference to the filing indicated.



+	Management contract or compensatory plan or arrangement.

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company