In a third quarter during which it announced a major acquisition in its commercial nuclear power business, BWX Technologies of Lynchburg, Va., essentially held steady, registering small gains in revenue amid a slight dip in profit.
Overall, BWXT on Monday reported quarterly operating income of just over $62 million, down sharply from about $130 million in the same quarter of 2015. The year-ago quarter, however, included a one-time gain of roughly $65 million from litigation. Excluding that non-recurring event, quarterly income fell only about 5 percent. Income for the nine months just ended dropped roughly 1.5 percent to just over $190 million. Quarterly revenue rose 6 percent to just under $380 million.
Despite a revenue bump, operating income for BWXT’s Technical Services segment, which includes nuclear cleanup for DOE’s Office of Environmental Management (EM) and nuclear propulsion work in support of the U.S. Navy, plunged more than 40 percent to just over $4.5 million in the quarter, the company said Monday.
BWXT President and CEO Sandy Baker said during the company earnings call Tuesday that the business segment “remains especially active in the DOE Laboratory, National Security and Environmental Management areas with several near term opportunities.”
BWXT maintains a presence across the DOE complex, including at the Los Alamos and Lawrence Livermore national laboratories, the Nevada National Security Site, the Savannah River Site, the Portsmouth Gaseous Diffusion Plant, and the Waste Isolation Pilot Plant.
The Nevada site is currently under rebid following the National Nuclear Security Administration’s withdrawal of a contract award from a company that recently changed hands from contractors Lockheed Martin to Leidos. DOE’s Office of Environmental Management released in September its solicitation for cleanup work at Los Alamos, which is currently conducted by the site’s management and operations contractor Los Alamos National Security. Final bids for this work are due Nov. 21.
The decline for Technical Services reflected the end this spring of BWXT’s Idaho Treatment Group joint venture, which wrapped up a five-year contract worth about $500 million for managing transuranic waste processing at the Idaho National Laboratory, and waste processing at the site’s Advanced Mixed Waste Treatment Unit. The decline also reflects “increased business development costs” for the segment, according to the earnings report.
Technical Services revenue rose just over 20 percent year over year to about $26 million, “due to higher activity at our Naval Reactor decommissioning and decontamination project,” BWXT said.
Operating income in the Nuclear Operations segment, which specializes in nuclear component and vessel manufacturing for the U.S. government, was about flat at roughly $62 million. Segment revenue rose about 4.5 percent to just over $315 million.
Baker said during the earnings call that an avenue for organic growth in Nuclear Operations involves missile tube manufacturing for submarines. “We anticipate that around 322 tubes will be built, split between the Virginia and Ohio replacement classes for a total market value of $1.5 billion over the next 15 to 20 years,” Baker said.
The Ohio replacement’s missile tubes will carry the submarine-launched Trident II D5 ballistic missile. The Navy plans to procure 12 new submarines as part of the program to replace 14 vessels in the aging Ohio class. General Dynamics Electric Boat is the prime contractor, with Huntington Ingalls’ Newport News Shipbuilding in a secondary role. Construction for the first new submarine is scheduled for 2021. The Navy previously determined that submarine design and construction yard preparation would cost $17.4 billion, and that building the remaining ships would cost an average of $5.2 billion.
Baker noted that the Navy has awarded the BWXT competitor General Dynamics Electric Boat a contract to manufacture 22 missile tubes from a procurement block consisting of 36 tubes. “The remaining 14 tubes are expected to be awarded within the next several months, and we remain confident in our ability to capture this award,” he said.
At the Nuclear Energy segment, which is focused on the commercial nuclear power industry, operating income fell about 25 percent to roughly $1 million, while revenue rose 9 percent to $38 million. During the quarter, BWXT announced it would acquire GE-Hitachi Nuclear Energy Canada, which will be folded into the Nuclear Energy segment. The deal is expected to close in the fourth quarter, the company said.
The company reaffirmed its full-year 2016 guidance of revenues between $1.45 billion and $1.5 billion, and noted an expected depreciation and amortization between $45 million and $50 million for the year. The company is also raising the lower end of its non-GAAP earnings per share guidance for the year to a range of $1.61 to $1.67.