Insulated from the worst of the COVID-19 pandemic by its large government contracts and a bread-and-butter nuclear Navy business that didn’t shut down in the spring, BWX Technologies posted a modest uptick in both profit and revenue for the second quarter of 2020.
Quarterly net income rose $5 million to about $64 million, or $0.67 per share, from about $59 million, or $0.62 per share, a year ago.
“The core Navy franchise continued to beat our internal expectations through a combination of work volume increases and contract performance improvements driven by operational excellence,” President and CEO Rex Geveden said in a press release accompanying the latest quarterly earnings report.
Geveden also discussed the uncertainty surrounding the Department of Energy’s award of the $13-billion Hanford Site Tank Closure Contract to the BWXT-led Hanford Works Restoration group.
The federal agency in May said it had selected the team of BWXT, Fluor, Intera, and DBD for the decade-long contract, which within days drew protests from two other bidding teams: one comprised of Atkins, Amentum, and Westinghouse, and the other reportedly of Jacobs, Honeywell, and Perma-Fix Environmental Services. The Government Accountability Office as of last week had dismissed the protests at the request of DOE, which is reconsdering the award.
“I don’t expect we’ll get much, if anything, out of that in 2020, at this point though,” Geveden said of the impending transition of the Hanford tank accord during a Tuesday call with investors.
The Energy Departmnt plans “corrective action” over the contract award, according to a July 22 letter from an agency attorney to the GAO. Among other things, DOE will look into whether BWXT’s team had an unfair advantage due to involvement by Douglas Shoop, the former manager of DOE’s Richland Operations Office at Hanford. Shoop retired in 2019 and now works in industry.
The new Hanford tank covers continued management of 56 million gallons of radioactive tank waste generated by decades of plutonium production for the U.S. nuclear arsenal. That will encompass deliver liquid waste to the Waste Treatment Plant that Bechtel National is building to solidify the material for disposal.
“Beyond Hanford, the DOE opportunity pipeline remains attractive, as we have outlined in the Investor presentation materials. In fact, some opportunities have accelerated, namely the recompete for the National Nuclear Security Administration to uranium hub at Y-12, and the central assembly-and-disassembly site for nuclear weapons at Pantex,” Geveden said.
The semiautonomous DOE nuclear-weapon agency has decided against extending the contract for Bechtel National-led Consolidated Nuclear Security to run the Pantex weapons assembly an disassembly plant in Amarillo, Texas, and the Y-12 National Security Complex in Oak Ridge, which produces uranium-fueled secondary stages for nuclear weapons. The incumbent will be out by Sept. 30, 2021.
Late last week, the NNSA announced it would continue to manage two major nuclear-weapons production sites under a single contract.
BWXT used to manage both sites under separate contracts and has already indicated a willingness to compete for the new award. The NNSA said the follow-on will be worth up to $28 billion over 10 years, including five years of firm funding. The agency expects to release the draft solicitation in August.
The company remains in place elsewhere around the DOE nuclear complex, including partnering in cleanup at the Portsmouth Site in Ohio, transuranic waste disposal at the Waste Isolation Pilot Plant in New Mexico, and management of the NNSA’s Lawrence Livermore National Laboratory in California.
Geveden discussed potential opportunities created by growing funding for the NNSA – the agency requested $20 billion for the upcoming 2021 fiscal year. That would be more than $3 billion above its current funding, though the House last week approved approriations legsilation giving the agency just $18 billion for the budget year beginning Oct. 1. The Senate has yet to roll out any new spending bills for 2021, increasing the likelihood of stopgap legislation.
“I think, most of that opportunity for us lies in the area of management and operations of DOE” sites, Geveden said. “And so what you see there is largely increased funding in places like Los Alamos and Livermore and Sandia, Nevada, and then Pantex and Y-12. And so, it shows up at the labs for the most part, and the opportunity for us is a significant boost in equity income around the management of those sites for DOE. That’s the most tangible I think opportunity for us in that budget trajectory.”
Quarterly operating income in the Nuclear Services Group, which includes operations at DOE defense-nuclear sites, more than doubled to just over $4 million, as revenue ticked up more than $3 million to around $33 million. Backlog remained at $43 million, but the figure does not include BWXT’s share of the joint venture companies that run DOE defense-nuclear sites under federal contracts.
The ongoing COVID-19 pandemic during the quarter whacked the Nuclear Power Group, which includes the company’s commercial nuclear-power and medical-isotope businesses. The unit’s second-quarter operating income plummeted almost $14 million to about $1 million. Segment revenue there dropped about $20 million to some $68 million. Backlog increased to more than $770 million from $730 million in the first half.
In the release, Geveden said the group “is well positioned for recovery through the remainder of the year.”
The core defense business continued to operate amid the pandemic response.
“We remain committed to protecting employee health and safety first while also maintaining business viability,” Geveden said. “Company protocols continue to demonstrate effectiveness in minimizing employee exposure and business interruption, as evidenced by the limited number of cases within the company and the absence of workplace transmission.”
