Ladies and gentlemen, thank you for standing by and welcome to BWX Technology Inc's Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the Company's prepared remarks, we will conduct the question-and-answer session, and instructions will be given at that time. Please note this event is been recorded. I would now like to turn the call over to our host, Mr. Alan Nethery, BWXT's Vice President, Investor Relations and Corporate Procurement. Please go ahead.

Thank you, Kate, and good morning everyone. We appreciate you’re joining us to discuss our 2016 third quarter results, which we reported yesterday afternoon. A copy of our press release is available on the investor relations section of our Web site at BWXT.com. Joining me this morning are John Fees, BWXT's Executive Chairman; Sandy Baker, President and Chief Executive Officer; David Black, Senior Vice President and Chief Financial Officer; and Rex Geveden, Chief Operating Officer. As always, please understand that certain matters discussed on today's call constitute forward-looking statements under federal securities laws. Forward-looking statements involve risks and uncertainties, including those described in the Safe Harbor provision at the end of yesterday's press release and the risk factors section of our most recent 10-K and 10-Q filings. These risks and uncertainties may cause actual Company results to differ materially, and we undertake no obligation to update these forward-looking statements, except where required by law. On today's call, we may also provide non-GAAP financial measures that are reconciled in yesterday's earnings release and our Company overview presentation, both of which are available on the investor relations section of BWXT.com. BWXT believes that the non-GAAP measures provide meaningful insight into the Company's operational performance and provides these measures to investors to help facilitate comparisons of operating results with prior periods, and to assist them in understanding BWXT's ongoing operations. And with that, I will now turn the call over to John.

Thank you, Alan, and good morning, everyone. We had a busy third quarter with several exciting achievements, and we have raised the lower end of our EPS guidance range, which I'll discuss later on the call. We continue to deliver strong operational performance in each of our segments with another quarter of consolidated top line growth and solid earnings per share. Our nuclear operation segment continues to execute well and achieve operating profit margins of near 20%. Furthermore, our nuclear energy and technical services segments performed well during the quarter, and we are on track to achieve their guidance for the year. In addition to our operational results, we demonstrated our commitment to a balanced capital allocation approach by taking a number of actions during the third quarter; first, we continue to deploy capital to support organic growth, particularly for the Ohio replacement class missile tubes; second, we delivered on our promise to return capital for our shareholders; both through our announced dividend and our share repurchase activity, which we ramped up by entering into $200 million accelerated share repurchase agreement in September. Lastly, as we discussed before, we are committed to a focused acquisition approach, targeting on the high quality companies with strong market positions in higher competency areas. GE-Hitachi Nuclear Energy Canada, Inc. is a company that fits that profile. The regulatory approvals and closing process are progressing well, and we still expect to close this transaction in the fourth quarter of this year. Meanwhile, we continue to assess other acquisition opportunities that would fit our criteria. During the quarter, the Company achieved 6% consolidated revenue growth and earnings per share of $0.39. Consolidated revenues for the quarter were $380 million compared to $359 million in the third quarter of 2015. Consolidated operating income in the quarter was $62 million compared to the prior year period of $131 million, which included nearly $66 million of operating income related to litigation proceeds. Our nuclear operations business performed well during the quarter, contributing through the consolidated revenue growth, as well as delivering stable operating income. Additionally, our nuclear energy segment’s revenue continued to grow, supported by our strong backlog. Lastly, our Technical Services business met expectations for the quarter and performed well in existing contracts. Before we get to the details of the operations and segment opportunities, which Sandy will present, let me turn it over to David who will discuss the second and third quarter results and other financial matters.

Thanks, John. The Nuclear Operations segment’s third quarter 2016 revenues were $317 million compared to $303 million in the third quarter of 2015. Revenues for the segment came in higher than third quarter 2015 results due to increased component manufacturing activity. Third quarter operating income was $63 million, stable with the good results in the prior year period. Nuclear Operations delivered a strong operating income margin of nearly 20% during the quarter. Additionally, the segment’s backlog was near $3 billion over a $0.5 billion higher than the segment’s backlog at the end of the third quarter of 2015. Our Technical Services business contributed solid operating income of $5 million, which is consistent with the previous two quarters of 2016 and brings the segment’s year-to-date operating income to the lower end of our guidance range of $15 million with the quarter still remaining. Operating income for this segment was lower in the third quarter compared to the prior year period since the segment transitioned-off in Idaho joint venture project in May of 2016, and we increased business development costs related to the timing of our proposal activities. For the third quarter of 2016, the Nuclear Energy segment increased revenue by 9% over the prior year period, reaching $38 million compared to $35 million in the third quarter of 2015. Revenue growth in this segment was primarily due to higher volume in the equipment business related to the Bruce Power Unit 16 generator work we announced in July of 2016. Operating income in the segment was stable compared to the prior year period at around $1 million. The Nuclear Energy segment has contributed $35 million of GAAP operating income and just $19 million in non-GAAP operating income year-to-date. Nuclear Energy year-to-date GAAP operating income includes the $16 million benefit related to a…

Thanks, David. Good morning everyone. Our Nuclear Operations segment continued its solid performance, achieving strong third quarter revenue growth with an operating income margin near 20%. Delivery of these results was again provided by smart execution in our shops, and the increased manufacturing activity. As we’ve discussed previously, the Navy’s current submarine bill schedule is set to transition to one Virginia class and one Ohio replacement class annually by the middle of the next decade. However, the Navy continues to resist the viability of producing additional Virginia class submarines. BWXT has established numerous bill schedule scenarios around this potential, beginning as early as 2019 and will be capable and ready for this increased scope. While timing of availability of congressional funding is not known, we would need to begin initial capital improvements related to this work in late 2017 in order to meet stated demand. We included this potential investment requirement as part of our balanced capital allocation approach, and remain prepared to capture the superior organic growth opportunity. Missile tube manufacturing provides another avenue for organic in the Nuclear Operations business. 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. We continue to perform well on the initial missile tube work, including three additional Ohio class tubes awarded in March from the Barberton procurement, and the development contract for the VPM missile tube program awarded in August. Additional VPM fabrication awards are expected in n2017. Earlier this quarter, we were informed that our competitor was awarded 22 missile tubes from the block two procurement that consist the 36 tubes. The remaining 14 tubes are expected to be awarded within the next several months, and we remain…

Thank you, Sandy. As this is my first time on the earnings call, I wanted to say that in joining BWXT last year I was quite excited about the Company and its prospects for future growth. And that view has been strongly reinforced over these past 12 months. We undertook a rigorous strategic planning process that lasted several months. In doing so, we identified growth opportunities available to BWXT, quantify those opportunities and develop detailed plans to capture the business. In the middle of 2015, BWXT guided the public to a high single-digit or a low double-digit earnings per share compounded annual growth rate over three to five year period. Our resulting consolidated strategic plan provides details and credible support to this guidance. Without disclosing too much, I can say that we plan to invest in certain technologies and opportunities, still augment our existing capabilities to produce new growth in areas such as nuclear materials processing and critical national defense components supply. These are generally high leverage opportunities, and that we understand the markets, add channels to them. And generally have the people and corporate knowledge to capitalize on them. In connection with these organic growth initiatives, we plan to reinvigorate our internal research and development program to promote margin sustainability and expansion, and to deliver on longer term growth opportunities. Going through the strategic planning process revealed and reinforced, my view of the breadth of depth of capabilities of our Company, and left me very confident about our ability to grow. I look forward to keeping you up-to-date on our progress as we execute the plan. With that, I will hand the call back over to John for a discussion of the Company's outlook for 2016.

Thank you, Rex. The segment’s guides we provided last quarter for 2016 remained unchanged. As David mentioned, we now expect depreciation and amortization to range $45 million and $50 million for the year. Additionally, we are raising the lower end of our non-EPS guidance for the full year 2016, and now expect this to be between $1.61 and $1.67 per share. For your reference the full list of our 2016 guidance is included in our Company overview presentation that we posted on our Web site yesterday evening. At this point, we are not releasing any specifics relative to our expectations for 2017, but we expect 2017 EPS to be in line with the high single-digit to low double-digits three to five year CAGR guidance that we provided coming out of the spin last year. We remained committed to our balance capital allocation approach, which was apparent during the third quarter. We are confident in our organic growth prospects, including missile tubes, and continued to invest capital in these opportunities. Meanwhile, the acquisition of GE-Hitachi is expected to improve our Nuclear Energy's business position in the growing Canadian Nuclear services and equipment market, and is expected to be accretive in the first year, which will provide great value to our shareholders. We also continue to be committed to returning capital to our shareholders. Even with the increased capital investments and the planned acquisition of GE-Hitachi, we continue to provide $0.09 quarterly dividend and including the ASR, we have committed approximately $293 million or share repurchases so far this year, representing over 7 million shares. As Dave had mentioned, we will continue to assess the best use of capital going forward under our balanced capital allocation approach. To wrap up, we had a solid third quarter that built upon a great first-half of the year to put us in a position to deliver our guidance for 2016. For beyond 2016, the strategic plan built by Rex and his team will guide us towards additional growth opportunities that fit our strategy, and increase our options to participate in even greater way in the markets we are currently serving. Our Nuclear Operations business segment remains a solid core business with strong margins and is positioned continued strong performance in organic growth. In addition, we believe our Nuclear Energy business' growth is situated to capture additional opportunities in the market, and our Technical Services business remains on a path for long-term operating income growth. That concludes our prepared remarks. I will now turn the call back to the operator who will assist us in taking your questions. Thank you.

We will now begin the question-and-answer session [Operator Instruction]. The first question comes from Bob Labick of CJS Securities. Please go ahead.

Just wanted to go back on the missile tubes. Obviously, you said the opportunity on that too is a little bit below your expectations. Can you talk about maybe what happened there? What you learned, or if you got any information what changes you will make going forward?

Bob, this is Sandy. We do have some information. It was a competitive and it was awarded based on price. And obviously our price wasn’t good enough. So, one lesson learned. Going forward, I think, we will be a bit more aggressive in our pricing stance for this segment. If you look at the combined Block 1, Block 2 by -- we have half of those and our competitor has about half. So we were about 50% more for missile tubes awarded. I expect that to improve and to get us -- and move to the point where we will have the majority of that market maybe overall by Block 3.

And then I am just shifting gears a little bit. Nice working acquisition and GE Hitachi. Can you talk about the M&A market? Are there more opportunities up in Canada for you to continue to grow in Nuclear Energy? Or what's the thought process there?

Well, we’re going to certainly eat the meal that we have in front of us. I mean that’s certainly priority one. We haven't finally closed and we haven't completed all the transition activities. But we’re excited about the size of the market, the things that are available. We’re keeping our eyes on potential other opportunities. And it allows us to not only assimilate what we’re doing but potentially broaden our approach towards the customers. We really like Canada as a nuclear market. We’ve been very successful there. Have great relationships with the utilities. And any opportunity we have to enhance that going forward, we’re going to certainly take advantage of. So, there may be some opportunities and we’ll keep you abreast on those as they occur, it’s within our framework of things.

The next question comes from Tate Sullivan of Sidoti. Please go ahead.

It’s great to hear in the call that you commented that you still expect the EPS growth in the high mid to high to high single digit to low double digit growth. Sounds great here. Separately, on your comment on potentially does U.S. adding an additional Virginia class sub. Does it mean that you have to plan differently that it’s Virginia class versus Ohio replacement. Are the specs different for new reactor? And based on previous cycles, or based on previous times and you have to spend more money, mean how much may you have to spend to prepare for an additional submarines build?

We can really give you a whole lot about the difference of specs between different reactor plants, or anything about spec growth into reactor plants. But the comment that I would make is that we are continuing to assess scenarios with our customer. We’re looking at the possibility of this occurring. We’re rather positive about that potential outcome, but we’re not yet taken it to the bank. And so we continue to look at that. Capital spending, it just depends on timing of where we go. We’ll be -- based upon some projections we may need to start investing capital in calendar 2017 to prepare ourselves. And I would say that the range -- those up and down a bit. But nominally if we’re going to be building extra Virginias to replace, the Virginias that were not on the forecast with Ohio replacement coming in, we’re looking at the $100 million or may be less. And I think we gave that number in the last phone call. So we’re still somewhere in that framework. And we continue dialog with our customer about their needs and what we can best do to serve the program.

And I think you mention too that if you do go forward, let’s say in that planning prospect and start spending that money in second half ’17. Let’s say, I mean, what’s the time frame earliest to get any EPS benefit from building an additional submarine? And would it come over a period of one to two years? Or how do you think about that based on your historic experience?

We’re going to start putting in capital. We’re still stating in ’17 if the timing is right. But we’re still stating that the impact for EPS is probably going to be 2019 for the actual manufacturing start of the submarine.

The next question is from Paul Dircks of William Blair. Please go ahead.

First question from me, appreciating the fact that last year’s free cash flow included the MW power generation business and the legal settlement. Has free cash flow this year tracked in line with your expectations? And I guess related to that, with some of the working -- some of the organic growth initiatives you guys are looking to capture here. Should we expect the higher level of working capital investment going forward? Or what are some of the drivers that you can point to suggest improvement beyond the usual seasonal improvement that we usually see here in the fourth quarter?

When we look at cash flow, we really look at from a year because of the seasonality of how some of these payments come in. And even if we look at last year compared to this year, our last year third quarter was higher than our -- or almost as high as our fourth quarter. Whereas our anticipation this year is our fourth quarter is going to be the high. So there is movement from year-over-year that we have to look at. From a year standpoint, we don’t anticipate any issues with our cash flow. We are a cash generating business. We are tax payer at the rates we say and we suggest and the pension volume for the year is, as suggested, is about $20 million. Working capital fluctuates. Sometimes when we win a TSG, technical services bid, there's some initial working capital that's needed. So as we look at our balanced capital allocation approach, we're looking at new bids that we're winning with TSG compared to the acquisitions, compared to how the cash is flowing and then the capital we need for Virginia class and missile tubes. So, we're constantly looking at what the need is and how the cash is going to be flowing and we keep an eye on that. But we don't anticipate any issues or not surprised by what's happened. Well, and the other thing that I think that was is important to remember is that the markets that we serve and the things that we do are typically within the term that we have historically operated within. So as we would add organic growth going forward, we would fully anticipate to be somewhat within those terms. So, other than some of the seasonality, and that the quarter close bump-to-bump kind of thing, as David described, we would expect organic growth to maybe consume a little bit working capital, but we also expect them to cash generating businesses and not long-term working capital swings. So, that's just our view of how things would work.

On the GE-Hitachi Nuclear Energy Canada acquisition, can you give a little bit of color on how that transaction came together? And in the prepared remarks, you guys mentioned that you expect the acquisition to open up new growth opportunities in the refurbishment space. Is that simply a by-product of you adding the company or are there specific opportunities that because they are now going to be part of BWX that you'll be able to capture those? In other words, your market position is enhanced by the combination of your businesses.

This is Rex Geveden, and I'll take that one on. The GE-Hitachi acquisition was really a consequence of our strategy for growth in that market. It came about naturally. It was a company to company contact. And we do -- in analyzing that acquisition, we do see cost synergies with that acquisition as you would normally expect. But we do see revenue synergies as well. And those are related primarily to the plant life extension work that's happening there. Obviously, GE has recurring revenue streams around fuel business, around fuel handling, around the channel diagnostics. We like that. We like recurring revenue streams. But we also like the possibility of working with that company post closing, post transaction, to go after some business that’s related to the refurbishment of the reactors, both at OPG and at Bruce. So, we do see interesting revenue synergies there. And we think it'll be a great business to add to our portfolio.

The next question comes from Nickolas Chen of Alembic Global. Please go ahead.

First question, I was hoping you guys could just discuss some of the drivers between the high and low end of the guidance range, which you narrowed?

Well, I mean, I think we're now going into the fourth quarter of the year. And just looking at the opportunities we have and where we feel we're going to fall into guidance that was a point in time that we could tighten that guidance up. I mean, the fourth quarter, we still have expectations of some cost savings to run through our Nuclear Operation group shop. So there's still lot of hard work in order to get us through where we need to be. But we're feeling comfortable at this point in time as we tighten that guidance that we're going to fall within the $1.61 to $1.67.

And the guidance -- and the drivers for our guidance they are not different than we’d drive our performance during the year at this particular point in time. The base business as we operate it, manage it, our margins, our ability to be able to optimize the volumes in our facility, keep our costs low, those are the kind of things that we operate on every day. And so, the drive, there is no unique driver in the fourth quarter that's going to influence it differently than it's been influencing in all the year. We have a better focus with three more months ago.

And then if you could give a little bit of color, I think, at some point there have been some discussion about maybe a second chance to been on the Y-12 and Pantex contracts. Is that actually a thing?

Well, when the time comes and that it's probably at least a couple of years away. But yes when that has put back in play we will certainly be looking at that as an opportunity for BWXT to again help to govern with running sites.

And next we have a follow-up from Tate Sullivan of Sidoti. Please go ahead.

Can we drill down on Nuclear Energy a little bit, and then I mean you gave some good indication on how you look at that business long-term. But, I mean, how should investors look at the margins quarter-to-quarter in that business? And how consistent can you get those margins? I mean, I have just sensitivity-wise I bring down that margin to 2% in 4Q to get to your guidance of the 10% for the full year. So, can you give more context on how you look at margins in that business?

Well, Tate, as we've stated in previous quarters that we like to look at that margin guidance by year because there is volatility inside quarters for the margins of any, and that's mainly because of the outrages and where we do service work and how things are flowing through the business. So we like to look at it for the -- at the year because we get our hands around that and be very close to that margin. Now, those margins, as we get into next year 2017, those margins will look different. Because remember when we said we were acquiring GEH that we said that the margins, any post acquisition, the GEH will be positive to those margins. Now we didn’t give any indication at that point in time of how positive they will be. But the margins are going to go up a little because of the GEH acquisition. So, right now, we look at it in the year timeframe when we get our hands around GEH and that gets in there. I think that will provide a little more stability into those margins, but those 10% little more is where we’re going to be.

And can you follow-up on -- I mean, why it makes sense to be in this business along with your core business and Nuclear Operations in the long-term. Is it the potential opportunity of all the Canadian refurbishment work that will come? Is it other work in other parts of the world? Can you follow-up on that, please?

Well, if you think of about the base capability of the Company, the things that we do in Canada very much capture to fund capabilities of Company. How you design and manufacture hardware related to offering a nuclear reactor, capturing steam generating power. With the GEH acquisition it has the fuel element to it, which has been a fundamental for the Company for a long period of time. So it very much and enhances -- the acquisition very much enhances the background and capability that we have. It's not new to us. It's not out of character for us to manage the nuclear fuel business. We certainly like the basis that this business brings with the upgrade programs that are going on in Canada, they’re bold and strong and we have very strong market positions there. And we think we can do a good job serving this customer, and be a very reliable supplier for them. And so, we’re focused in that area. Where it goes beyond that, certainly, can do, does have some international opportunities, they are not overly bit, and some are limited. But we’ll plan on continuing to serve those markets to the degree we can. As we all know nuclear right now in overall energy sense in the world, you’ve seen somewhat is an expensive option with low natural gas prices. But where we can support in initiatives and be a long-term nuclear player, certainly, within our fundamental interest of this Company.

There are no additional questions, at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Alan Nethery for closing remarks.

Thank you for joining us this morning. That concludes our conference call. A replay of this call will be posted on our Web site later today, and be available for a limited time. If you have further questions, please call me at 980-365-4300. Thanks.

The conference has now concluded. Thank you for attending today's presentation. Your may now disconnect.