Ladies and gentlemen, welcome to BWX Technologies First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the company’s prepared remarks, we will conduct a question-and-answer session and instructions will be given at that time. I’d now like to turn the conference call over to our host, Mark Kratz, BWXT’s Vice President of Investor Relations. Please go ahead.

Thank you, Todd. Good morning and welcome to BWXT’s first quarter 2021 earnings call. Joining me today are Rex Geveden, President and CEO; and David Black, Senior Vice President and CFO. On today’s call, we will discuss certain matters that constitute forward-looking statements. These statements involve risks and uncertainties, including those described in the Safe Harbor provisions found in yesterday’s earnings release and the company’s SEC filings. We will also discuss non-GAAP financial measures, which are reconciled to GAAP measures in the quarterly materials that are available on the BWXT website. With that, Rex, I will turn the call over to you.

Thank you, Mark, and good morning everyone. Yesterday, we reported solid first quarter results with earnings of $0.73 per share on over $0.5 billion revenue and strong operating cash flow. Year-over-year revenue and earnings comparisons are down slightly at the consolidated level given a tough comparison to a robust first quarter last year. However, 2021 performance to date is what we expected and just as we outlined on the last earnings call. BWXT is off to a swift start in 2021 with success on several significant milestones. So let me give you an update on those matters before turning the call over to David to discuss detailed financial results and guidance. The Nuclear Operations Group was awarded a $2.2 billion contract for the 2021, 2022 pricing period from the naval nuclear propulsion program. The content for this award includes components and fuel for the continued cadence in the two Virginia class submarines per year, as well as incremental Columbia work. Although the President's budget request for 2022 has not been released, we anticipate bipartisan support for the Navy's nuclear platforms and shipbuilding accounts. We look forward to additional budget information from the new administration in the coming weeks. Apart from the pricing agreement, we are reasonably positioned to move to a three Virginia class submarine cadence in non-sequential years if required, similar to the schedule from the Navy's most recent 30-year shipbuilding plan assuming some delivery day flexibility. We await an updated 30-year plan and in a scenario where a more condensed third Virginia ordering cadence is planned, then a modest amount of incremental capital investment would be required. Outside of Naval Reactors, NOG was awarded $57.5 million from the Department of Energy to design and stand up a pilot process for purifying enriched uranium into a safe metal form. This is new scope for BWXT and it leverages the unique NRC category one credentials, infrastructure security, and workforce that could result in production orders in a few years once this capability is fully demonstrated. Lastly, the segment also announced two additional awards, totaling $35 million this quarter, the first awarded by Naval Reactors is for uranium recovery from scrap waste and unused product to be processed and reused. The second award from the Department of Energy is for completing the second phase of a new Research Reactor fuel line using high assay and low enriched uranium, another non-proliferation activity that BWXT will perform. In medical, we continue to make both strategic and tangible progress with commercialization of the technetium 99 generating product line. In March, we announced the formation of a joint venture with Global Medical Solutions, a leading centralized radiopharmacy operator and radiopharmaceutical manufacturer and distributor. The JV intends to manufacture and distribute BWXT radioisotopes and radiopharmaceuticals in the Asia Pacific region as we look to expand our go-to-market strategy. As noted in the press release, the new entity would replicate BWXT’s Tech 99 generator infrastructure and operations in Asia, beginning in 2023. We view this agreement as another endorsement of BWXT's unique technology and it lays the groundwork to capture global market share of Technetium 99, which is utilized in over $40 million diagnostic imaging procedures per year. On a related note, we will continue to make significant progress on Technetium 99 generator commercialization in North America. In April, we completed installation of radiochemistry equipment and for all practical purposes, we consider the radiochemistry line to be complete. We are also on track to complete the last major facility modifications this month, two important milestones that draw us closer to commercialization next year. The other two major components, the radiopharmaceutical and target delivery systems are both progressing as planned. We anticipate having a fully manufactured target delivery system this month and we will participate in a Canadian Nuclear Regulatory Commission public hearing in June to receive the anticipated approval for modifications to the MPG reactor for our equipment. In the first quarter, the team further reduced program risk by demonstrating a full pilot production run utilizing the BWXT generator. We took the process from start to finish producing natural moly targets, radiating them at the Missouri University Research Reactor, processing the moly 99, loading it into the BWXT design generator, and eluting technetium over the course of two weeks. The elution process demonstrated 95% generator efficiency, better than the requirements of other generators on the market today. In the services business, BWXT was awarded a $690 million contract extension for environmental management and cleanup work at the Portsmouth gaseous diffusion plant, further demonstrating the company's breadth and depth in nuclear waste management and commitment to environmental remediation efforts for the Department of Energy. The services business also wrapped up two more proposal submissions including the Y-12 context management and operations and Oak Ridge reservation cleanup. We now have four large deal proposals submitted and anticipate three of those contracts will be announced sometime later this year. And lastly, we achieved significant milestones with two microreactor design awards in BWXT’s advanced technologies business. Most recently, NASA awarded the company additional scope for nuclear thermal propulsion. This extends our efforts with NASA for another year as the agency's nuclear thermal propulsion initiative begins to transition from development to technology demonstration. In March, the Department of Defense’s strategic capabilities office down selected and awarded BWXT a final design phase contract for a transportable microreactor prototype. This leaves BWXT as one of the two possible contractors for a full-scale demonstration in the years to come. BWXT’s innovative designs and uniquely licensed facilities continue to deliver innovative nuclear solutions for the evolving mission requirements of the DOD, including the reduction of its carbon emissions. Following successful completion of the final design phase, the strategic capabilities office would be in a position to award a demonstration phase and beyond. After the prototype demonstration, the program could lead to a nuclear reactor production program to ensure that the DOE's domestic infrastructure is more resilient to electrical grid attacks. This makes energy logistics for unique defense applications more straightforward and robust in the future. The early successes in microreactors underscore the company's robust capabilities in design, engineering, and manufacturing that position us well to compete for subsequent work as these first-of-a-kind solutions are developed for meeting power generation mission requirements of the future. And with that, I will turn the call over to David.

Thanks, Rex and good morning, everyone. I will start on Slide 4 of the earnings presentation with total company results. First quarter revenue was $528 million, down 2.6% primarily from lower energy revenue compared to a robust first quarter last year, which was partially offset by higher MPG revenue. First quarter earnings per share were down 7.6% to $0.73 as a result of less operating segment earnings, higher other expenses, and a higher tax rate. Those headwinds were partially offset by higher pension income, foreign exchange gains, and lower interest expense. A quarter-over-quarter bridge can be found on Slide 5. Moving to the first quarter segment results on Slide 6. The Nuclear Operations Group generated $402 million of revenue, down about 5% compared with the prior year period, primarily from lower long lead material production. Energy operating income was $74.4 million, down 18% from the prior year period. Operating income was disproportionately lower than revenue due to a combination of lower volume and fewer favorable contract adjustments that were in part driven by negative impacts from COVID absences that we discussed on the February earnings call. This resulted in an 18.5% operating margin for the segment in the first quarter. We do not foresee any change to the typical high teens margin with upside from pension reimbursements for the full year for NOG. And the Nuclear Power Group’s first quarter revenue was $107 million, up 22% compared with the first quarter last year, driven primarily from higher field service parts manufacturing and fuel handling activity, partially offset by lower component volume. While another significant driver, we note that BWXT medical was up 6.5% as the market continues to show positive signs of recovery following COVID impacts from last year. MPG operating income was up 20%, driven by higher volume and resulted in 9.6% operating margins for the segment in the first quarter. Lastly, Nuclear Services Group operating income was $5.7 million in the first quarter, down less than $1 million versus the prior year period, as better contract performance was more than offset by the absence of U.S. Commercial Service income due to the sale of the U.S. Nuclear Services business in 2020. Overall, we are reiterating 2021 guidance on Slide 9 and 8. We continue to see the midpoint of our earnings guidance as the most likely outcome for the year as solid progress to date is balanced with higher expected development expenses associated with the preparation of the company's Technetium 99 generator product line. We have guided other operating expenses, including R&D to greater than 1% of revenue for this year and wanted to put more specificity around those costs. We anticipate those heightened expenses will be about $30 million for 2021. Now that investing triggering milestones have occurred and we have better line of sight on how those will unfold through the remainder of the year. We also anticipate slightly higher interest expense this year with the recent issuance of $400 million in senior notes. We intend to use those proceeds to redeem the notes due in 2026 on or after July 15 this year, ultimately resulting in lower interest expense, but we will not see the net effect of those benefits until 2022. Following the redemption of the 2026 notes, BWXT will continue to have a well-positioned balance sheet with a staggered debt structure well into the future. For 2021 guidance, we also reiterate our expectation that earnings will be back half weighted with an approximate 45, 55 split for the year driven primarily from NOG timing, the recovery in MPG from COVID, and the cadence of NSG awards. I would also note that CapEx is still anticipated to be about $250 million for the year, as evidenced in our first quarter results with over $100 million expense to date. Lastly, I would like to introduce our new multi-year guidance on Slide 9. Yesterday, we published our new multi-year guidance framework which we are designating as medium-term financial targets. We view this timeframe similar to our prior multi-year EPS guidance generally over the next three to five years. However, we are pivoting our focus to multiple aspects of financial performance and capital allocation, and we intend to revisit this guidance at regular intervals or if there are any major shifts in BWXT’s strategy. This structure will continue to give analysts, investors, and other stakeholders a rolling view of the targets and focus areas of the company moving forward knowing that any one year may have push or pull effects on the three major components depending on growth cadence, CapEx and working capital for free cash flow and other investment opportunities for capital allocation. We anticipate mid-to-high single-digit adjusted EBITDA growth rates over the medium term driven by revenue increases across all segments and margin expansion outside of the Naval Reactors business. Measuring adjusted EBITDA provides greater insight into the underlying growth over the next several years as depreciation headwinds pick up from the recent intense capital campaigns in both the Navy and medical businesses. This measure also removes any variability for non-cash pension income taxes and share repurchase, resulting in a cleaner look at operational performance. As we shift to maintenance capital expectations exit in 2022, we expect robust free cash flow to return and are aiming to convert more than 85% of adjusted net income to cash, with some annual fluctuations for working capital and pension funding requirements. And lastly, we are committing to return more than 50% of the company's free cash flow to shareholders through dividends and share repurchases. While we don't have a discreet dividend policy, the Board of Directors continues to support the regular payment of a healthy dividend as it is viewed as a cornerstone in the company's ability to generate and return future cash to shareholders. We anticipate continuing to pay the dividend in line with historical ratios to earnings, which has ranged between 20% to 30% of net income since the spin in 2015. The remaining balance of our return to shareholder commitment will be fulfilled with share repurchases pending market conditions. This commitment reflects a strong balance between our desire to be shareholder-friendly while continuing to maintain the flexibility to invest in possible future opportunities both organically or inorganically. To be clear, we do not anticipate building large cash balances and we will look to return any excess cash to shareholders. To that end, the Board of Directors recently approved a new $500 million share repurchase authorization with no expiration date. This action supports our strategic capital allocation commitment in order to maximize long-term shareholder value. And with that, I will turn the call back over to Rex for some additional color on our new medium-term financial targets.

Thank you, David. We believe that our new medium-term guidance accurately reflects BWXT’s ability to profitably grow, as it has since the spin in 2015. Our growth targets include the assumption of increases in the base business as well as progress in several key initiatives that have been advancing over the last few years. We anticipate continued growth in the Naval Reactors business and other opportunities to expand NOG’s product and service offerings. Growth also contemplates a successful Technetium 99 introduction to the market in 2022 and share gains in that product as well as others over the subsequent years, while also expanding margins in the BWXT medical business. The other significant portion of our growth is anticipated to come from new wins in the nuclear services business and continued traction in microreactor programs as they progress from design to demonstration phases. David mentioned we expect to convert more than 85% of net income into free cash flow as we transition to maintenance CapEx levels toward the end of 2022. Our current strategic planning does not anticipate significant capital investment beyond that. But we remain flexible to make those investments, which could further support and extend growth in the company. And lastly, we want to make the commitment to return the majority of free cash flow back to investors over the medium-term. We plan to continue to pay a strong dividend and supplement the rest of that commitment in the share repurchase system. We see the commitment of these medium-term financial targets as the first step toward an Investor Day later this year. In the coming quarters, we expect to make significant strides and major milestones across the company, including the new Tech 99 generator product line, and anticipate more visibility into how the growth in nuclear services will unfold. We look forward to sharing more depth and insights about the company with investors sometime this fall. And with that, I will ask the operator to open the line for questions.

Operator?

Thank you. We will now begin the question and answer session. We will pause momentarily to assemble our roster. The first question comes from Robert Spingarn with Credit Suisse. Please go ahead.

Hi, good morning, everybody.

Good morning, Rob.

Good morning, Rob.

Rex, can we just start on the microreactor business? And you've talked a lot about the developments there and it's gaining some momentum. But can we frame this in some kind of time horizon as when this goes from sort of concept to your development to production? And when this could get to some kind of a critical mass for you? Is it a 2025 type of timeframe or is it 2030? How do we think about that?

Yes, so Rob, we have talked about that in the past that we're going through what I would call sort of technology development for the most part, in some cases designs for demonstration reactors in the cases of nuclear thermal propulsion and then reactors for DOD. And those would transition into demonstration programs fairly shortly. In the case of the reactor, it would be next year, so that decision, if that decision is taken and funded for NASA may be a little longer term for a demonstration program. So we will start to see demonstration money as early as next year and on into the next few years. And as I have said in the past, these programs for us right now run them in tens of millions a year. When you get into a demonstration phase, it'll be a few hundred million, let's call it whether that's a terrestrial demonstration or an on-orbit demonstration in the case of NASA. And then production programs would presumably follow that. And so the way I think about those programs, obviously the sales there depend on the production tempo, but those will follow the demonstration and I would think of those as being in the latter part of the decade, 2027, 2028, let's call it, so I think it becomes a very interesting part of the business maybe in that six or seven years from now, something like that. And as I have said in the past, in an ideal case, we're able to construct a new vertical for the business that maybe resembles our Naval Reactors vertical.

Okay. And those numbers you throw out there, those for BWXT or would those be total program you'd share some of those revenues?

So those are total program revenues that I threw out there. And it depends on whether you prime or not. For example, we would prime a reactor demonstration program in the case of the DOD on a spacecraft and launch vehicle. We might be in a subcontractor position on that one, but those are total program figures.

Okay. And then just one quick one for David on cost inflation in the supply chain. Are you seeing any pressures that we're seeing broadly in the economy? And is there any lag in terms of the recoverability of that in your contracts with customers such that it can have an impact on margins? Thank you.

So as everyone else is, we are seeing input prices increase, but we have negotiated in our contracts appropriate levels of inflation and using indexes. So at this point in time, we feel secure that we'll still be able to get the margins that we have mentioned.

And in addition to the pricing or price inflation, is the availability of inputs satisfactory?

Yes, right now for us, we're not having any problem with the supply chain providing the materials and things that we need in order to get our production process.

Okay. Thank you both.

Thank you.

The next question comes from Bob Labick with CJS Securities. Please go ahead.

Good morning, and congratulations on a lot of nice milestones across the board.

Thanks, Bob.

Thank you, Bob.

I want to start with Rex, I think you mentioned a full pilot production program using your Technetium generator with 95% efficiency. Could you expand on that a little bit? How is the product you've piloted different from what you plan to submit to the FDA later this year? What are the biggest obstacles to reaching that point? Do you just need some approvals before then, or how does that product differ from what you will ultimately submit?

Yes, Bob, so that product is basically identical to what we will be producing. The only difference is we were using a BWXT design generator and we were using material from the Missouri University Research Reactor. But it wasn't running through our plant in Canada. It wasn't running through an automated radiochemistry radiopharmacy line. So that would be the difference. It was more of a manual process. But it's a very important milestone because it tells us how the generator works. And we were able to demonstrate that the elution efficiency, which is sort of the rate at which you're able to draw that technetium out of the generator was best in class.

Okay, great. That sounds fantastic. And then just one other one quickly, where does M&A fit into your medium-term or multi-year guidance? And how is the market looking right now? I mean, you guys have so much on your plate anyway, are you looking for M&A opportunities right now or are you focused internally?

So we didn't preemptively bake any M&A into that medium-term guidance. Although you could think about maybe pushing our performance into the top end of that guidance range by augmenting it with some acquisitions. We do have an active M&A pipeline, and we find something that really fits and that can amplify our strategic intentions then we would do it. But I think you're correct to say that our focus right now is really on like building out this organic growth that we've been capitalizing and ensuring that we have success on that. But M&A is always an option for us.

Thanks so much.

Thank you, Bob.

The next question comes from Peter Arment with Baird. Please go ahead.

Yes. Good morning. Rex, David.

Good morning, Peter.

Hey, David, regarding the medium-term financial targets, you mentioned some modest improvements in working capital as a percentage of sales. Can you clarify if that’s around 100 basis points or 200 basis points?

I mean, we haven't defined what that modest is. There's going to be some improvement over time. But, we do have fluctuations when you look quarter-to-quarter with our working capital as we build up our contracts and progress and things. So we just think as we look over time, there'll be just some small modest improvements in that in order to provide the additional space force.

Okay. Rex, regarding the joint venture with GMS, could you explain some of the components of the deal and how you expect to report it in your financials? Thanks.

Yes. The deal is set up so that our partner will fund the investment. We will contribute our technology and intellectual property to a special purpose entity, and then we will share in the financial outcomes, which will be reflected as income in the future.

Great. Thanks, guys.

Thanks, Peter.

The next question comes from Pete Skibitski with Alembic Global. Please go ahead.

Hey, good morning, Rex and David and Mark.

Good morning.

Good morning.

Hey, guys, the COVID related absences at the beginning of the first quarter sounds like there was a negative margin impact there. Is it safe to assume that you're kind of out of the woods there for the balance of the year?

Pete, I think we certainly hope so. If you look at the way COVID ran through the business, it looks somewhat like the national curve, and that there were kind of three peaks at the beginning: one that early summer, and then it really was most impactful to us in the fall and winter timeframe. We started to see pretty significant impacts around October, worse in November, worse yet in December and it peaked out around the second week of January for us, and then started to roll off. But it bled on into February. And we sort of worked our way through the problem and we've been kind of hitting our numbers, but it's absolutely affected production in the plants. What happens there in that case is of course, you get less productivity, less product rolling through the shop, and therefore less favorable contract adjustments as a consequence of all that. To give you a sense of the magnitude, there were times when our largest plant in Lynchburg had over 10% absent either from quarantine or from having to be evacuated from their workstations to do a decontamination exercise following a potential contact. And some of our other large plants, we had 7% or 8% absences, day-to-day at the peak. So it really did roll through the plants in a way that was impactful. Yes, we're certainly seeing much improved rates and much, much lower quarantine numbers at this point. And we're hoping that we follow the trajectory of the U.S. and get out of the woods on this soon.

Okay, okay. Yes, appreciate the color. That's great. And now on the financial targets. It sounds to me like a mid-to-high single-digit adjusted EBITDA that roughly corresponds to the top line growth. But can you maybe clarify on the depreciation, amortization? It sounds like that will play a role. I know guidance is your $65 million, David, I mean, does that get to over $100 million by the end of the period? Or just trying to get a sense of how much D&A contributes to that?

Yes, no, I think as we look now, we're saying that 3.5% to 4% is what our continued maintenance capital is going to be. But your depreciation because of the high capital that we currently have been spending will get us closer to that $100 million towards the end of that period. So we feel that looking at adjusted EBITDA is just a much better picture for us to look at our operations and the underlying business.

Yes, that makes sense. Last question for me. Hey, Rex, some other companies secured the DARPA Draco contract. Did you guys plan for it? If so, was it unexpected or disappointing? I just want to hear your thoughts on that. I know it's a different mission area, but I'm curious about it.

Yes. Yes, that was an interesting one. We were certainly interested in that contract. We do have a continuing relationship with DARPA on that and with some of the spacecraft providers. So we're kind of in the game, but we were not awarded prime contracts.

Okay, okay. Okay, thanks very much, guys.

Thanks, Pete.

Thank you, Pete.

The next question comes from Michael Ciarmoli with Truist. Please go ahead.

Hey, good morning, guys. Thanks for taking the questions here. Nice results. How you guys doing?

Good morning.

Good morning.

Rex, just to stay on what Pete was just asking. I'm not that Draco to be clear, it would seem that General Atomics can prime everything and do everything themselves. But maybe Blue Origin or Lockheed could pull you in as a reactor subcontractor. Is that the right way to kind of look at some not only this opportunity, but maybe even future opportunities where you can get pulled in as a component supplier?

Yes, that's exactly right, Michael.

Okay. David just did say there was a $30 million of increased expenses this year kind of flowing through related a lot to the isotopes and some other development expense programs?

No in our other segment, what we're saying is that that segment is going to increase to $30 million. I think the forecast was $26 million or so. So it's gone up some, because of the additional expenses, did not increase $30 million. So it's just gone up 10% or so to cover the additional commercialization costs that we feel we need in the current year to get us to the DA submittal here and then to production next year.

Got it. So then how do we think about as you get into production and maybe then tying into the medium-term targets, you'll presumably get a roll-off of these expenses. I don't think you put a fine pencil on it yet. But the margins presumably in the isotopes, I think we're always going to be accretive to NOG. But should we think about once everything comes online seeing a pretty big tailwind to some margins? Obviously, you'll have the core Naval Reactor, which is a pretty mature margin, but maybe how should we think about the margins as they trend in that segment into next year once you get into production?

So Michael, I'll take that one. So certainly in the that's the way to think about that business, that product line in the long-term, it's going to be margin accretive certainly. In the intermediate term, let's call it as we ramp up into production, we'll be bearing some pretty heavy expenses, and ramping to what will ultimately be our ultimate production level over the first year or two in that product line. So I wouldn't anticipate a lot of pop, a lot of tailwind until we've gotten into let me call it full stride on production. We intend to give you much more color around that when we get to the Investor Day later this fall, so that you can see more transparently how we expect that business to unfold and grow.

Got it. Got it. Perfect. And then just last one for me, the MPG, you had a really strong quarter on the top line, good growth, and it sounded like you're still waiting for that business to kind of start to normalize from COVID. But the revenue growth decelerates for the rest of the year. Is that just normal seasonality outage and timing or what's happening in there with MPG for the remainder of the year?

Yes, you have that right. It's just some natural cyclicality of the business.

Got it. Thanks, Rex. I'll jump back in the queue.

Thank you, Mike.

The next question comes from Ron Epstein with Bank of America. Please go ahead.

Yes, I got a couple of questions for you.

Hey, Ron.

Hey, Ron.

How has the American rescue plan changed your pension considerations in terms of cash recoveries and funding and so on and so forth?

Ron hasn't contributed much to our efforts. We've managed to get our pension plan fully funded, so from a funding perspective, we are at a sufficient level. In terms of cash, we expect to have additional funding available through 2024. Currently, our funding is below $20 million annually, which means delaying some payments won't significantly impact us. Our focus is on strengthening the pension and annuitizing as much as possible when the opportunity arises, allowing us to reduce our liabilities over time.

Got it. How does the change in R&D consideration under the tax law unless it's reversed impact you guys, you have to amortize it now over five years versus taking it all at once?

Yes, I mean, remember, our R&D right now is less than 1% actually 0.6%, I think this year. So the impact to us is going to be very small. We do take advantage of any tax benefit we can get. But the change in benefits is going to be very small.

Got it. On the midterm guidance, why is the cash conversion only 85%? I would have thought kind of a company in your position. It would be higher than that?

No, I mean, once again, as we expand our business, we need to have the flexibility to manage working capital. We also have some pension payments that will still be required in future years. So at this moment, we believe that 85% is a reasonable target. There may be times when we exceed that and times when we fall short, but we consider this a solid base for measurement moving forward.

Got it. And then maybe one last final one. On your EBITDA growth target, how much of that's predicated on just kind of the core business? And how much of that is predicated on new businesses? I mean, broadly speaking, is it sort of like two-thirds core business, one-third new businesses? I'm just trying to get a sense of how much in that you're banking on things like the medical business growing and so on and so forth?

So Ron, I'll take that one. I'd say that maybe I answer a slightly different question than you asked if I could. The way that we're thinking about it is if you wanted to get into the upper range of our guidance, then the strategic initiatives need to pan out appropriately and our base business needs to do what we anticipate it's going to do. So kind of in the high scenario, the Navy business does what you want it to do, the isotopes story unfolds. So the moly project is successful, and we gain the market share that we expect. We win a good share of this Department of Energy technical services opportunities, and we continue to have some traction with the microreactor demonstration programs. That would, as we think about it, sort of get you in the high end of the mid-term EBITDA guidance, medium-term EBITDA guidance. And so that's how we're thinking about it internally.

And I would add to that, Ron, that as we look at the NOG business, we show and continue to show the growth of Columbia in that business. We do have two items out there that we're always aware of and that one is this differential and the pension. The other thing that we don't talk a lot about is the reloads. The forward reloads won't start again until a specific time in the future. The government doesn't really lay out a schedule there. And as I've said in the past, we do not talk a lot about those because the government likes to use those to fill our shops in times of need. So but those are some impacts there as well as we go forward.

Got it. Thank you very much.

Thanks, Ron.

As we have no further questions, this concludes our question and answer session. I would now like to turn the conference back over to Mark Kratz for any closing remarks.

Thanks, Todd. And that concludes today's conference call. If you have further questions, please call me at 980-365-4300. Thank you for joining us this morning. Bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.