BWXT 10-K & 10-Q changes, risk factors and insider trading

We rely on U.S. Government contracts (either directly or as a sub-tier contractor to a government contractor) for a substantial percentage of our revenue, and some of those contracts are subject to continued appropriations by Congress and may be terminated or delayed if future funding is not made available. In addition, the U.S. Government may not renew or may seek to modify or terminate our existing contracts.

For the year ended December 31, 2024,2025, whether directly or as a sub-tier contractor to a government contractor, U.S. Government contracts comprised approximately 76%68% of our total consolidated revenues. Government contracts are subject to various uncertainties, restrictions and regulations, including oversight audits, which could result in withholding or delaying payments to us, and termination or modification at the U.S. Government's convenience. In addition, some of our large, multi-year contracts with the U.S. Government are subject to annual funding determinations and the continuing availability of Congressional appropriations. Although multi-year operations may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal-year basis even though a program may continue for several years. Consequently, programs often are only partially funded initially, and additional funds are committed only as Congress makes further appropriations.

From time to time, the U.S. Government operates under a continuing resolution to continue funding the U.S. Government. Under such a continuing resolution, funding at amounts consistent with appropriated levels for the prior fiscal year are typically available, subject to certain restrictions, but new contract and program starts are not authorized. During periods covered by a continuing resolution, we expect our key programs will continue to be supported and funded under the continuing resolution. However, during periods covered by a continuing resolution, we may experience delays in new awards of our products and services, and those delays could have a material adverse effect on our financial condition, results of operations and cash flows. If Congress is not able to enact appropriations bills or extend a continuing resolution, the U.S. Government would enter a whole or partial shutdown. Additionally, there is a risk that no continuing resolution would be entered into in certain circumstances, which would also cause a whole or partial government shutdown. TheIn impactthe event of anya government shutdownshutdown, there is uncertain.uncertainty However,regarding ifwhich government functions would shut down or continue operations during a lapse in appropriations, and corresponding uncertainty regarding the extent or magnitude of potential impacts to our operations. If a government shutdown were to occur and were to continue for an extended period, our employees could be at risk of furlough and we could be at risk of program cancellations, schedule delays, production halts and other disruptions and nonpayment, which could have a material adverse effect on our financial condition, results of operations and cash flows.

Uncertainty remains with respect to trade policies and treaties between the U.S. and other countries, including Canada, where we manufacture heavy nuclear components and products for our medical radioisotopes business that may be sold to US customers. The U.S. federal government has recently implemented tariffs on certain foreign goods and may implement additional tariffs on foreign goods. For example, in January 2025, the U.S. presidential administration stated its intention to impose a 25% tariff on imports from Canada into the United States, and the Canadian government stated it would take certain retaliatory measures. On February 3, 2025, the U.S. presidential administration and the Canadian prime minister announced a 30-day pause to the implementation of these tariffs. As we currently manufacture substantially all of our products for our medical radioisotope business in Canada, a 25% tariff on all imports from Canada would increase the costs of those products manufactured in Canada and could adversely impact our gross profit for this business if we are unable to pass this cost to our customers. Our Canadian business does not currently have any material contracts for the sale of heavy nuclear components to US customers so the direct risk related to those tariffs is currently negligible. Such tariffs and, if enacted, any further legislationLegislation or actions taken by the U.S. federal government, Canadian government or Canadianother governmentforeign governments that restrict trade, such as additional tariffs, trade barriers, and other protectionist or retaliatory measures taken by such governments,measures, could adversely impact our profitability and ability to sell products and services. For example, new or increased tariffs would increase the cost of our products and the components and raw materials that go into making them. These increased costs could adversely impact the gross margin that we earn on our products, which could make our products less competitive and reduce demand from customers. The ultimate impact of any tariffs will depend on various factors, including if any tariffs are ultimately implemented, the timing of implementation, contractual terms, and the amount, scope, and nature of the tariffs.

We have been, and will likely continue to be, subject to cyber-based attacks and other attempts to threaten our information technology systems, including attempts to gain unauthorized access to our proprietary and sensitive information and attacks from computer hackers, viruses, malicious code, internal threats and other security problems. As a U.S. Government contractor, we may be prone to a greater number of these threats than companies in other industries. These threats range from attacks common to most industries to more advanced and persistent threats from highly-organized adversaries targeting us because we are a U.S. Government contractor. We are required to maintain minimum security standards for handling information under our government contracts and failure to do so could result in termination of those contracts. For example, as a contractor to the DoW, we are required to comply with applicable cybersecurity standards, including the DoW's Cybersecurity Maturity Model Certification, ("CMMC") program. CMMC requirements may change over time and could impose additional compliance obligations on us and our suppliers, and failure to meet applicable CMMC requirements could affect our ability to receive or perform certain defense-related contracts. We continue to monitor evolving data-privacy requirements and the use of emerging technologies, such as artificial intelligence, and maintain policies intended to promote their secure and responsible use. From time to time, we experience system interruptions and delays; however, prior cyber-based attacks directed at us have not had a material adverse impact on our results of operations. Due to the evolving nature of these security threats, the impact of any future incident cannot be predicted. If we are unable to protect our proprietary and sensitive information, our customers could question the adequacy of our threat mitigation and detection processes and procedures, which could negatively impact our reputation and present and future business. Moreover, the rapid evolution and increased sophistication, availability, and use of artificial intelligence technologies may exacerbate our cybersecurity risks by use of these technologies by us, our customers, suppliers, business partners, third-party providers, and bad actors. These trends may increase the likelihood of cybersecurity events occurring.

Our business depends upon the recruitment and continued service of our highly skilled, educated and trained employees. Our ability to attract, motivate, compensate, and retain highly qualified and diverse employees is necessary to support our customers and achieve business objectives. Competition for skilled and diverse employees in our industry can be intense, and any uncertainty surrounding future employment opportunities, facility locations, organizational and reporting structures, acquisitions and divestitures, and related concerns may impair our ability to attract and retain qualified employees. In addition, certain parts of our business, including in the Government Operations segment, involve designs, processing and final products that are classified by the U.S. Government and require applicable personnel to obtain and maintain U.S. Government security clearances. These additional employee qualifications often limit the pool of available candidates and extend the time necessary to recruit and qualify new employees. The loss of the services of qualified employees and any inability to recruit effective replacements or to otherwise attract, motivate, train or retain highly qualified and diverse employees could have a material adverse effect on our business, financial condition and results of operations. Separately, the recent presidential executive order regarding executive salaries and incentive compensation metrics applicable to defense contractors could adversely impact our ability to attract or retain executive talent.

We must comply with laws and regulations relating to the formation, administration, and performance of U.S. Government contracts. These laws and regulations include the FAR, the Defense FederalFAR AcquisitionSupplement Regulations,("DFARS"), the TruthTruthful inCost Negotiationsor Pricing Data Act, CAS,the andCAS national security laws, regulations, and orders restricting the use and dissemination of classified informationinformation, under theand U.S. export control laws andgoverning the export of certain products and technical information. Certain government contracts provide audit rights by government agencies, including with respect to performance, costs, internal controls and compliance with applicable laws and regulations. In complying with these laws and regulations, we may incur significant costs, and non-compliance may result in the imposition of fines and penalties, including contractual damages. If we fail to comply with existing or future laws and regulations or if a government audit, review, or investigation uncovers improper or illegal activities, we may be subject to civil penalties, criminal penalties, or administrative sanctions, including suspension or debarment from contracting with the U.S. Government. Changes in environmental and climate change laws or regulations, including laws relating to greenhouse gas emissions, could lead to new or additional investment in facilities and could increase environmental compliance expenditures, including increased energy, raw material and other costs. If we are unable to comply with any such regulatory changes, it could have a material adverse effect on our business, financial condition and results of operations. Further, our reputation could suffer harm if allegations of impropriety were made or found against us, which could adversely affect our operating performance and may result in additional expenses and possible loss of revenue.

Our nuclear operations are subject to various safety-relatedsafety requirementsand quality-related requirements, and occupational radiation protection requirements, imposed by the U.S. Government, the DOE, the NRC and the CNSC. In the event of non-compliance, these agencies might increase regulatory oversight, impose fines or shut down our operations, depending upon the assessment of the severity of the situation. Non-compliance may also impact our competitive position when seeking future contracts. Revised security and safety requirements promulgated by these agencies could necessitate substantial capital and other expenditures. In addition, we must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. Government contracts. U.S. Government contract laws and regulations affect how we do business with our customers and, in some instances, impose added costs on our business. A violation of specific laws and regulations could result in the imposition of fines and penalties or the termination of our contracts or debarment from bidding on contracts.

The Price-Anderson Act partially indemnifies the nuclear industry against liability arising from nuclear incidents in the U.S., while ensuring compensation for the general public. The Price-Anderson Act comprehensively regulates the manufacture, use and storage of radioactive materials, while promoting the nuclear industry by offering broad indemnification to commercial nuclear power plant operators and DOE contractors. Because we provide nuclear fabrication and other services to the DOE relating to its nuclear devices, facilities and other programs and the nuclear power industry in the ongoing maintenance and modifications of its nuclear power plants, including the manufacture of equipment and other components for use in such nuclear power plants, we expect, in the event of a nuclear incident or precautionary evacuation (as such terms are defined in the Atomic Energy Act), to be entitled to the indemnification protections under the Price-Anderson Act against liability arising from nuclear incidents occurring in the U.S.U.S., (with an available indemnification amountamount, for our DOE contracts, of approximately $16.5 billion (for nuclear incidents or precautionary evacuations occurring within the US) and of $2 billion (for nuclear incidents or precautionary evacuations occurring in foreign countries (with an available indemnification amount of $2 billion). The statutory authority for indemnification under the Price-Anderson Act has been extended by Congress five times, most recently through December 2065 by Section 107 to the Further Consolidated Appropriations Action, 2024 (Public Law 118-47, March 23, 2024).

Moreover, because we manufacture nuclear components for the U.S. Government's defense program, we may be entitled to some of the indemnification protections afforded by Public Law 85-804 for certain of our nuclear and hazardous operations risks. Public Law 85-804 authorizes certain agencies of the U.S. Government, such as the DOE and the DoD,DoW, to indemnify their contractors against unusually hazardous or nuclear risks when such action would facilitate the national defense. However, because the indemnification protections afforded by Public Law 85-804 are granted on a discretionary basis, situations could arise where the U.S. Government elects not to offer such protections. In such situations, our business could be adversely affected by either our inability to obtain commercially adequate insurance or indemnification or our refusal to pursue such operations in the absence of such protections.

In addition, if new legislationlegislation, regulations or regulationspresidential executive orders are enacted or implemented, or if existing lawslaws, regulations or regulationspresidential executive orders are amended or are interpreted or enforced differently, we may be required to obtain additional operating permits or approvals. Our inability to obtain, and to comply with, the permits and approvals required for our business could have a material adverse effect on us.

(1)During the year ended December 31, 2024, no adjustments to any one contract had a material impact on our consolidated financial statements.

Consolidated operating income decreasedincreased $2.5$23.9 million to $380.6$404.5 million in the year ended December 31, 20242025 compared to $383.1$380.6 million in 2023.2024. Operating income in our Government Operations and Commercial Operations segments increased $5.5$16.8 million and $9.3$10.9 million, respectively. These increases were more thanpartially offset by an increase in Unallocated Corporate expenses of $15.8$4.0 million when compared to the prior year.

Revenues increased 7.5%,7.7%, or $151.7$167.1 million, to $2,183.0$2,350.1 million in the year ended December 31, 20242025 compared to $2,031.3$2,183.0 million in 2023.2024. The increase was primarily driven by higherthe volumetiming of long-lead material procurements of $83.4 million, increases in theuranium manufactureprocessing and downblending operations of nuclear components for U.S. Government programs of $138.7$68.1 million whenand comparedan to the prior year. Continued growthincrease in design and engineering work executed by our advanced technologies business, particularly in the defense market, resulted in additional revenues of $62.2$52.2 million.million associated with the acquisition of A.O.T., which was completed on January 3, 2025. These increases were partially offset by a decrease in revenues associated with our downblendingadvanced operationstechnologies as well as a decrease in revenues caused by the timing of long-lead material procurements of $36.5 million and $24.7 million, respectively.business.

Operating income increased $9.3$17.0 million to $46.8$394.9 million in the year ended December 31, 20242025 compared to $37.5$377.9 million in 2023. The increase was2024, primarily duedriven toby the increaseoperating income impact of the changes in revenues noted above as well as a favorable shift in our product mix which was partially offset by a $4.4$13.1 million increase in expenses associated with due diligence and post-acquisition integration activities as well as restructuring-related activities when compared to the prior year.

Unallocated Corporate expenses increased $14.9$4.0 million to $44.1$48.1 million in the year ended December 31, 20242025 compared to $29.2$44.1 million in 2023.2024. DuringThe theincrease thirdwas quarter of 2023, we undertook several initiativesdue to transform our current information technology infrastructure and to improve the effectiveness of our digital framework. These initiatives are expected to continue into 2026 and accounted for increases in expense of $9.5 million for the year ended December 31, 2024. We also experienced an increase in legal and consulting costs associated with duemerger diligenceand acquisition related activities of $4.5$3.9 million forwhen compared to the yearcorresponding endedperiod Decemberin 31,the 2024.prior year. We also experienced a $7.1 million increase in restructuring-related expenditures. These increases were partially offset by a decrease in unallocatedexpenditures healthcare costs when comparedrelated to the priortransformation year.of our information technology infrastructure of $3.2 million.

During the year ended December 31, 2024,2025, other income (expense) increased $29.8$25.5 million to a loss of $6.3 million compared to a loss of $31.9 million compared to a loss of $61.7 million in 2023.2024. Included in other income (expense) are components of net periodic benefit cost, which include mark to market adjustments due to our immediate recognition of net actuarial gains (losses) for our pension and postretirement benefit plans which changed to a gain of $0.8$15.2 million during the year ended December 31, 20242025 compared to a lossgain of $20.9$0.8 million for the year ended December 31, 2023.2024. This was caused by afavorable decreasechanges in lossesincome (expense) related to mark to market adjustments totaling $20.2$17.2 million. In addition, we experienced aan decreaseincrease in interest expense of $7.6$4.7 million in 20242025 when compared to the prior year due primarily to aan decreaseincrease in borrowings coupled with aan declineincrease in the weighted-average interest rate on outstanding borrowings under our Former Credit Facility, as defined below. Other income (expense) also includes the effect of foreign currency transaction gains and losses as well as gains and losses on FX forward contracts which resulted in a net increase in other income (expense) of $17.7 million when compared to the prior year.

For the year ended December 31, 2024,2025, our provision for income taxes decreasedincreased $8.7$1.8 million to $66.4$68.3 million, while income before provision for income taxes increased $27.3$49.4 million to $348.7$398.1 million when compared to the prior year. Our effective tax rate was 17.1% for the year ended December 31, 2025 compared to 19.0% for the year ended December 31, 2024 compared to 23.4% for the year ended December 31, 2023.2024. Our effective tax rate for the yearyears ended December 31, 2025 and 2024 waswere lower than the U.S. corporate income tax rate of 21% primarily due to increased benefits from U.S. federal research and development tax credits. Our effective tax rate for the year ended December 31, 2023 was higher than the U.S. corporate income tax rate of 21% primarily due to state income taxes within the U.S. and the unfavorable rate differential associated with our non-U.S. earnings.

In order to minimize the negative impact of inflation on our operations, we attempt to cover the increased cost of anticipated changes in labor, material and service costs, either through an estimate of those changes, which we reflect in the original price, or through price escalation clauses in our contracts. However, there can be no assurance we will be able to covermitigate all changesincreases in cost using this strategy.

Our overall liquidity position, which we generally define as our unrestricted cash and cash equivalents plus amounts available for borrowings under our credit facility, increased by approximately $148.6$950.7 million to $1,748.4 million at December 31, 2025 compared to $797.7 million at December 31, 2024 compared to $649.1 million at December 31, 2023,2024, primarily attributable to improvementsthe issuance of $1.25 billion of 0% Convertible Senior Notes due 2030 (the "2030 Notes") and an increase of $250 million in operatingavailable cashborrowings flowsfrom whichour New Credit Facility. These were used,offset inpartially part,by torepayments repayon borrowingsthe underTerm ourLoan Revolvingand CreditCapped Facility,Call asTransaction defined below.premiums. We experiencedgenerated net cash generated from operations in each of the years ended December 31, 2024,2025, 20232024 and 2022.2023. Typically, the fourth quarter has been the period of highest cash flows from operating activities because of the timing of payments received from the U.S. Government on accounts receivable retainages and cash dividends received from our joint ventures.

New Credit Facility

On OctoberNovember 12,10, 2022,2025, we entered into ana second Amended and Restated Credit Agreement (the "New Credit Facility") with Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto, which amended and restated our then existingthen-existing secured credit facility (the "Former Credit Facility"), which consisted of a $750 million senior secured revolving credit facility. The Credit Facility consists of a $750 million senior secured revolving credit facility (the "Revolving Credit Facility") and a $250 million senior secured term A loan (the "Term Loan"). The Revolving Credit Facility and the Term Loan arewere scheduledrepaid, toin maturetheir onentirety, Octoberwith 12, 2027. Allthe proceeds from the Term2030 LoanNotes wereas useddiscussed tobelow. repayThe outstanding indebtedness under the FormerNew Credit Facility.Facility includes a $1.25 billion senior secured revolving credit facility. The proceeds of loans under the New Credit Facility are available for working capital needs, permitted acquisitions and other general corporate purposes.

The New Credit Facility allows for additional parties to become lenders and, subject to certain conditions, for the increase of the commitments under the New Credit Facility, subject to an aggregate maximum for all additional commitments of (1) the greater of (a) $400$600 million and (b) 100% of EBITDA, as defined in the New Credit Facility, for the last four full fiscal quarters, plus (2) all voluntary prepayments of the Term Loan, plus (3) additional amounts provided the Company is in compliance with a pro forma first lien leverage ratio test of3.00 lessto than1.00 or equal to 2.50 to 1.00.less.

Outstanding loans under the New Credit Facility bear interest at our option at either (1i) the Term SOFR plus a credit spread adjustment of 0.10%rate plus a margin ranging from 1.0%1.00% to 1.75% per year or (2ii) the base rate (the highest of (x) the administrative agent's prime rate, (y) the Federal Funds rate plus 0.50% and (z) the Term SOFR rate for a one-month tenor plus 1.00%) plus a margin ranging from 0.0% to 0.75% per year. WeIn areaddition, the Company will be charged (1) a commitment fee of between 0.15% and 0.225% per year on the unused portion of the RevolvingNew Credit Facility, and that fee ranges from 0.15% to 0.225% per year. Additionally, we are charged(2) a letter of credit fee of between 1.0%1.00% and 1.75% per year with respect to the amount of each financial letter of credit issued under the RevolvingNew Credit Facility, and (3) a letter of credit fee of between 0.75% and 1.05% per year with respect to the amount of each performance letter of credit or commercial letter of credit issued under the RevolvingNew Credit Facility. The applicable margin for loans, the commitment fee and the letter of credit fees set forth above will vary quarterly based on ourthe Company's consolidated total net leverage ratio. Based on the total net leverage ratio applicable at December 31, 2024, the margin for Term SOFR and base rate loans was 1.25% and 0.25%, respectively, the letter of credit fee for financial letters of credit and performance letters of credit was 1.25% and 0.825%, respectively, and the commitment fee for the unused portion of the Revolving Credit Facility was 0.175%.

As of December 31, 2024, borrowings under our Term Loan totaled $237.5 million, borrowings and2025, letters of credit issued under the RevolvingNew Credit Facility totaled $25.0$1.4 million and $1.4 million, respectively, and we had $723.6no outstanding borrowings and had $1,248.6 million available under the RevolvingNew Credit Facility for borrowings and to meet letter of credit requirements. As of December 31, 2024, the weighted-average interest rate on outstanding borrowings under our Credit Facility was 5.72%.

The New Credit Facility generally includes customary events of default for a secured credit facility. Under the New Credit Facility, (1) if an event of default relating to bankruptcy or other insolvency events occur with respect to the Company, all related obligations will immediately become due and payable; (2) if any other event of default exists, the lenders will be permitted to accelerate the maturity of the related obligations outstanding; and (3) if any event of default exists, the lenders will be permitted to terminate their commitments thereunder and exercise other rights and remedies, including the commencement of foreclosure or other actions against the collateral.

If any default occurs under the New Credit Facility, or if we are unable to make any of the representations and warranties in the New Credit Facility, we will be unable to borrow funds or have letters of credit issued under the New Credit Facility.

We issued $400 million aggregate principal amount of 4.125% senior notes due 2028 (the "Senior Notes due 2028") pursuant to an indenture dated June 12, 2020 (the "2020 Indenture"), among the Company, certain of our subsidiaries, as guarantors, and U.S. Bank Trust Company, National Association (formerly known as U.S. Bank National Association) ("U.S. Bank"), as trustee. The Senior Notes due 2028 are guaranteed by each of the Company's present and future direct and indirect wholly owned domestic subsidiaries that is a guarantor under the New Credit Facility.

We may redeem the Senior Notes due 2028, in whole or in part, at any time on or after June 30, 2024 at a redemption price equal to (i) 101.031% of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on June 30, 2024 and (ii) 100.0% of the principal amount to be redeemed if the redemption occurs on or after June 30, 2025, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

We may redeem the Senior Notes due 2029, in whole or in part, at any time on or after April 15, 20242025 at a redemption price equal to (i) 102.063% of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on April 15, 2024, (ii) 101.031% of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on April 15, 2025 and (iiiii) 100.0% of the principal amount to be redeemed if the redemption occurs on or after April 15, 2026, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Similarly, we have provided letters of credit and bank guarantees to governmental agencies and contractual counterparties to support regulatory and contractual obligations for certain decommissioning responsibilities, projects and legal matters. We utilize our RevolvingNew Credit Facility and a bilateral letter of credit facility to support such obligations, but the issuance of letters of credit and bank guarantees under our bilateral letter of credit facility is at the issuer’sissuer's discretion, and our bilateral letter of credit facility generally permits the issuer, in its sole discretion, to demand collateral if the issuer does not otherwise have the benefit of the collateral under our New Credit Facility. On May 14, 2025, we amended our bilateral letter of credit facility to increase the maximum aggregate amount to $75 million. Although there can be no assurance that we will maintain our bilateral letter of credit capacity, we believe our current capacity, together with capacity under our RevolvingNew Credit Facility, is adequate to support our existing requirements for the next 12 months. As of December 31, 2024,2025, letters of credit and bank guarantees issued and outstanding under our bilateral letter of credit facility totaled approximately $33.7$48.7 million, and such letters of credit and bank guarantees are secured by the collateral under our New Credit Facility.

Our working capital increased by $13.0$432.5 million to $888.3 million at December 31, 2025 from $455.8 million at December 31, 2024 from $442.8 million at December 31, 2023,2024, primarily attributable to the change in income taxes receivablecash and prepaidcash expensesequivalents whichresulting was partially offset byfrom the timingissuance of projectlong-term cash flows.debt.

Our net cash provided by operating activities increased by $44.7$71.4 million to $479.8 million in the year ended December 31, 2025, compared to $408.4 million in the year ended December 31, 2024, compared to $363.7 million in the year ended December 31, 2023.2024. The increase in cash provided by operating activities was primarily attributable to the timing of project cash flows.flows offset partially by decreases in deferred tax liabilities and pension liabilities.

Our net cash used in financinginvesting activities increased by $83.4$587.5 million to $252.8$742.1 million in the year ended December 31, 2024,2025, compared to cash used in financing activities of $169.4$154.6 million in the year ended December 31, 2023.2024. The increase in cash used in financinginvesting activities was primarily attributable to athe reduction in net borrowingsacquisitions of long-termA.O.T. debtand ofKinectrics $75.0for $101.1 million and an$434.5 increasemillion, inrespectively, repurchasesnet of commoncash stock of $20.0 million.acquired.

Since 2017, we have made considerable investments in property, plant and equipment to support the growth of our Government Operations and Commercial Operations segments. Significant projects included the expansion of Government Operations facilities to support increased demand from the U.S. Government and the commercialization of our medical radioisotope technology and the expansion of our Cambridge, Ontario, Canada manufacturing plant for heavy commercial nuclear power equipment in our Commercial Operations segment. We expect these heightened spending levels to decline as these capital expansion projects are largely complete.

Through this segment, we engineer, design and manufacture precision naval nuclear components, reactors and nuclear fuel for the U.S. Department of Energy ("DOE")/National Nuclear SafetySecurity Administration's ("NNSA")Administration Naval Nuclear Propulsion Program. In addition, this segment downblends Cold War-era government stockpiles of high-enriched uranium, develops and manufactures advanced materials and products for commercial, military and space applications and supplies proprietary and sole-source valves, manifolds and fittings to global naval and commercial shipping customers. As a supplier of major nuclear components for certain U.S. Government programs, this segment is a significant participant in the defense industry.

Acquisitions and Dispositions

Subsequent to March 31, 2026, we announced our intention to acquire Precision Components Group, LLC ("PCG"), including its subsidiaries Precision Custom Components and DC Fabricators. PCG iswas a privately held U.S. manufacturer of complex, heavy-walled and heat-transfer components. The acquisition will expand BWXT’s heavy-manufacturing footprint and establish additional U.S. commercial nuclear production capacity to serve growing domestic demand. The acquisition is expected to close during the second half of 2026, subject to required regulatory approvals and customary closing conditions. Once completed, PCG will be reported as part of our Commercial Operations segment.

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 of our 2025 10-K. There have been no material changes to our critical accounting policies and estimates during the threesix months ended MarchJune 31,30, 2026.

As we progress on our contracts and the underlying performance obligations, we refine our estimates of variable consideration and total estimated costs at completion, which impact the overall profitability on our contracts and performance obligations. Changes in these estimates result in the recognition of cumulative catch-up adjustments that impact our revenues and/or costs of contracts. The aggregate impact of changes in estimates decreasedincreased our revenues and operating income as follows:

Results of Operations – Three and Six Months Ended MarchJune 31,30, 2026 vs. Three and Six Months Ended MarchJune 31,30, 2025

Consolidated revenues increased 26.1%,18.0%, or $178.0$137.6 million, to $860.2$901.6 million in the three months ended MarchJune 31,30, 2026 compared to $682.3$764.0 million for the corresponding period of 2025, due to increases in our Government Operations and Commercial Operations segments of $22.6$12.3 million and $155.3$126.4 million, respectively.

Consolidated operating income increased $10.1$11.7 million to $106.7$114.1 million in the three months ended MarchJune 31,30, 2026 compared to $96.6$102.4 million for the corresponding period of 2025 due to increasesan increase in our Commercial Operations segment of $17.5 million, partially offset by a decrease in our Government Operations and Commercial Operations segmentssegment of $1.4$3.7 million and $17.6an million,increase respectively, offset partially by higherin Unallocated Corporate expenses of $8.9$2.0 million when compared to the corresponding period in the prior year.

Operating incomeRevenues increased $1.4$12.3 millionmillion, or 2.1%, to $99.1$601.3 million in the three months ended MarchJune 31,30, 2026 compared to $97.7$589.0 million for the corresponding period of 20252025. The increase was primarily due to thecontributions operatingfrom incomeenrichment impact of the changes in revenue noted above.operations.

Revenues increased 121.1%,71.7%, or $155.3$126.4 million, to $283.6$302.5 million in the three months ended MarchJune 31,30, 2026 compared to $128.3$176.1 million for the corresponding period of 2025. The increase was primarily related to the acquisition of Kinectrics, completed on May 20, 2025, which resulted in an increase in revenues of $105.3$68.3 million. The increase was also due to higher revenues relatedrelating to on-site inspection, maintenancemaintenance, modification and refurbishment work of $23.1$31.8 million and componentsfuel handling and engineering services and parts manufacturing of $19.2$19.6 million.

Operating income increased $17.6$17.5 million to $24.0$24.3 million in the three months ended MarchJune 31,30, 2026 compared to $6.5$6.9 million for the corresponding period of 2025. The increase was primarily related to the operating income impact of the changes in revenues noted above as well as a favorable shift in our product mix.mix Thesewhen increasescompared wereto partiallythe offsetcorresponding byperiod aof $1.7the millionprior increase in expenses associated with acquisition and restructuring-related activities.year.

Unallocated corporate expenses increased $8.9$2.0 million to $16.5$15.9 million in the three months ended MarchJune 31,30, 2026 compared to $7.6$13.9 million the corresponding period of 2025. The increase was primarily relateddue to higher expenditures for legal and consultinghealthcare costs associated with merger and acquisition related activities of $3.0 million and restructuring related activities $1.0 million when compared to the corresponding periodtiming of the prior year.claims.

Our effective tax rate for the three months ended MarchJune 31,30, 2026 was 15.0%21.6% as compared to 17.7%19.7% for the three months ended MarchJune 31,30, 2025. The effective tax ratesrate for the three months ended MarchJune 31,30, 2026 and March 31, 2025 were lower thanapproximated the U.S. corporate federal income tax rate of 21% due to benefits from U.S. federal research and development tax credits offset by excess tax expense associated with non-deductible executive compensation. The effective tax rate for the three months ended June 30, 2025 was lower than the U.S. corporate income tax rate of 21% primarily due to benefits from U.S. federal research and development tax credits and excess tax benefits associated with equity compensation.

As of MarchJune 31,30, 2026, our ending backlog was $8,650.8$8,398.1 million, which included $2,367.4$2,256.4 million of unfunded backlog related to U.S. Government contracts. We expect to recognize approximately 60%55% of the revenue associated with our backlog by the end of 2027, with the remainder to be recognized thereafter.

The value of unexercised options excluded from backlog as of MarchJune 31,30, 2026, including previous awards, was approximately $1,400 million. We expect $900 million to be awarded in 2030 and $500 million to be awarded in 2035, subject to annual Congressional appropriations.

The New Credit Facility is scheduled to mature on November 10, 2030, subject to an early maturity trigger if on any date the aggregate outstanding principal amount of unsecured indebtedness due within 91 days thereof is in excess of 100% of EBITDA, as defined in the New Credit Facility, for the last four full fiscal quarters. However, this early maturity trigger will not apply if (1) the total Net Leverage Ratio is less than or equal to 2.00 to 1.00 or (2) liquidity is at least 125% of such outstanding unsecured indebtedness. The Company’s obligations under the New Credit Facility are guaranteed by the same guarantors that guarantee the 2030 Notes. The New Credit Facility is secured by first-priority liens on certain assets owned by the Company and the guarantors (other than its subsidiaries comprising a portion of its Government Operations segment), provided such liens may be released if the Company obtains investment grade ratings of(with ata leaststable BBB-outlook or better) from S&Ptwo orof Baa3the fromthree Moody'sprimary rating agencies, and no default or event of default exists.

The New Credit Facility contains representations and warranties, affirmative and negative covenants and events of default that the Company considers customary for an agreement of this type, including covenants setting a maximum consolidated total net leverage ratio and a minimum consolidated interest coverage ratio. If any event of default relating to bankruptcy or other insolvency events occurs with respect to the Company, the lenders’ commitments under the New Credit Facility will automatically terminate and all outstanding obligations under the New Credit Facility will immediately become due and payable. If any other event of default occurs, the lenders will be permitted to terminate their commitments under the New Credit Facility, accelerate all outstanding obligations under the New Credit Facility and exercise other rights and remedies, including the commencement of foreclosure or other actions against the collateral. Based on the total net leverage ratio applicable at MarchJune 31,30, 2026, the margin for Term SOFR and base rate loans was 1.50% and 0.50%, respectively, the letter of credit fee for financial letters of credit and performance letters of credit was 1.50% and 0.90%, respectively, and the commitment fee for the unused portion of the New Credit Facility was 0.20%.

The New Credit Facility includes financial covenants that are evaluated on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted leverage ratio is 4.00 to 1.00, which may be increased to 4.50 to 1.00 for up to four consecutive fiscal quarters after a material acquisition. The minimum consolidated interest coverage ratio is 3.00 to 1.00. In addition, the New Credit Facility contains various restrictive covenants, including with respect to debt, liens, investments, mergers, acquisitions, dividends, equity repurchases and asset sales. As of MarchJune 31,30, 2026, we were in compliance with all covenants set forth in the New Credit Facility.

As of MarchJune 31,30, 2026, letters of credit issued under the New Credit Facility totaled $1.4 million. We had no outstanding borrowings and $1,248.6 million available under the New Credit Facility for borrowings and to meet letter of credit requirements.

The 2020 Indenture contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the 2020 Indenture or the Senior Notes due 2028 and certain provisions related to bankruptcy events. The 2020 Indenture also contains customary negative covenants. As of MarchJune 31,30, 2026, we were in compliance with all covenants set forth in the 2020 Indenture and the Senior Notes due 2028.

We may redeem the Senior Notes due 2029, in whole or in part, at any time at a redemption price equal to 100.0% of the principal amount to be redeemed if the redemption occurs on or after April 15, 2026, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The 2021 Indenture contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the 2021 Indenture or the Senior Notes due 2029 and certain provisions related to bankruptcy events. The 2021 Indenture also contains customary negative covenants. As of MarchJune 31,30, 2026, we were in compliance with all covenants set forth in the 2021 Indenture and the Senior Notes due 2029.

Before August 1, 2030, noteholders will have the right to convert their 2030 Notes only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on March 31, 2026,quarter, if the last reported sale price of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter; (2) during the five consecutive business days immediately after any ten consecutive trading day period if the trading price per $1,000 principal amount of 2030 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on each Trading Day; (3) upon the occurrence of specified corporate events or distributions on the common stock as set forth in the Indenture; or (4) if the Company calls the 2030 Notes for redemption.

We have posted surety bonds to support regulatory and contractual obligations for certain decommissioning responsibilities, projects and legal matters. We utilize surety bond facilities to support such obligations, but the issuance of surety bonds under those facilities is typically at the surety's discretion, and the surety bond facilities generally permit the surety, in its sole discretion, to terminate the facility or demand collateral. Although there can be no assurance that we will maintain our surety bond capacity, we believe our current capacity is adequate to support our existing requirements for the next 12 months. In addition, these surety bonds generally indemnify the beneficiaries should we fail to perform our obligations under the applicable agreements. We, and certain of our subsidiaries, have jointly executed general agreements of indemnity in favor of surety underwriters relating to surety bonds those underwriters issue. As of MarchJune 31,30, 2026, surety bonds issued and outstanding under these arrangements totaled approximately $359.6$355.4 million.

Similarly, we have provided letters of credit and bank guarantees to governmental agencies and contractual counterparties to support regulatory and contractual obligations for certain decommissioning responsibilities, projects and legal matters. We utilize our New Credit Facility and a bilateral letter of credit facility to support such obligations, but the issuance of letters of credit and bank guarantees under our bilateral letter of credit facility is at the issuer's discretion, and our bilateral letter of credit facility generally permits the issuer, in its sole discretion, to demand collateral if the issuer does not otherwise have the benefit of the collateral under our New Credit Facility. Although there can be no assurance that we will maintain our bilateral letter of credit facility capacity, we believe our current capacity, together with capacity under our New Credit Facility, is adequate to support our existing requirements for the next 12 months. As of MarchJune 31,30, 2026, letters of credit and bank guarantees issued and outstanding under our bilateral letter of credit facility totaled approximately $50.7$36.2 million, and such letters of credit and bank guarantees are secured by the collateral under our New Credit Facility.

As of MarchJune 31,30, 2026, we had underfunded defined benefit pension and postretirement benefit plans with obligations totaling approximately $158.1$152.0 million. These long-term liabilities are expected to require use of our resources to satisfy future funding obligations. Based largely on statutory funding requirements, we expect to make contributions of approximately $16.3$15.8 million for the remainder of 2026 related to our pension and postretirement plans. We may also make additional contributions based on a variety of factors including, but not limited to, tax planning, evaluation of funded status and risk mitigation strategies.

Our domestic and foreign cash and cash equivalents, restricted cash and cash equivalents and investments as of MarchJune 31,30, 2026 and December 31, 2025 were as follows:

Our working capital increased by $53.8$108.5 million to $942.2$996.8 million at MarchJune 31,30, 2026 from $888.3 million at December 31, 2025, primarily due to favorable changes in contracts in progress and advance billings on contracts due to the timing of project cash flows and decreases in accrued employee benefits offset partially by increases in accounts payable and accrued liabilities.payable.

Our net cash provided by operating activities increased by $42.0$39.3 million to $92.6$249.0 million in the threesix months ended MarchJune 31,30, 2026, compared to cash provided by operating activities of $50.7$209.7 million in the threesix months ended MarchJune 31,30, 2025. The increase in cash provided by operating activities was primarily attributable to favorable changes on the timing of vendor paymentspayments, customer billings and project cash flows.flows and an increase in net income. This increase was offset partially by a decrease in income taxes payable.

Our net cash used in investing activities decreased by $109.4$545.0 million to $46.9$84.4 million in the threesix months ended MarchJune 31,30, 2026, compared to cash used in investing activities of $156.4$629.5 million in the threesix months ended MarchJune 31,30, 2025. The decrease in cash used in investing activities was primarily attributable to the acquisitionacquisitions of A.O.T. onand JanuaryKinectrics 3,in 2025.the prior year.

Our net cash used in financing activities increased by $119.0$442.8 million to $34.2$57.0 million in the threesix months ended MarchJune 31,30, 2026, compared to cash provided by financing activities of $84.8$385.8 million in the threesix months ended MarchJune 31,30, 2025. The increase in cash used in financing activities was primarily due to net borrowings of long-term debt of $141.9$473.8 million in the corresponding period in the prior year, offset partially by $30.0 million of repurchases of common stock in the corresponding period in the prior year.

At MarchJune 31,30, 2026, we had restricted cash and cash equivalents totaling $8.0$8.1 million, $4.8$5.0 million of which was held for future decommissioning of facilities (which is included in Other Assets on our condensed consolidated balance sheets) and $3.2$3.1 million of which was held to meet reinsurance reserve requirements of our captive insurer.

At MarchJune 31,30, 2026, we had long-term investments with a fair value of $7.9$8.8 million and our investment portfolio consisted entirely of mutual funds. These equity securities are carried at fair value with the unrealized gains and losses reported in earnings.

As discussed in Note 2 to our condensed consolidated financial statements, on July 1, 2026, we announcedcompleted our intentionacquisition to acquireof PCG. We expect to make a significant cash investment during 2026 to complete this acquisition.