May 3, 2016
Executives
Alan Nethery – Vice President, Investor Relations and Corporate Procurement John Fees – Executive Chairman Peyton Baker – President, and Chief Executive Officer David Black – Senior Vice President and Chief Financial Officer
Analysts
Robert Labick – CJS Securities Michael Ciarmoli – KeyBanc Capital Tate Sullivan – Sidoti Paul Dircks – William Blair Nicholas Chen – Alembic Global Advisors Michael Ciarmoli – KeyBanc Capital
Operator
Ladies and gentlemen, thank you for standing by and welcome to the BWX Technologies, Inc.' s First 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 a question-and-answer session and instructions will be given at that time.
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.
Alan Nethery
Thank you, Catherine, and good morning everyone. We appreciate you're joining us to discuss our 2016 first quarter results, which we reported yesterday afternoon.
A copy of our press release is available on the Investor Relations section of our website at bwxt.com. Joining me this morning are John Fees, BWXT's Executive Chairman; Sandy Baker, President, and Chief Executive Officer; and David Black, Senior Vice President and Chief Financial 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 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 period and to assist them in understanding BWXT ongoing operation. And with that I will now turn the call over to John.
John Fees
Thank you, Alan. Good morning.
We've had a fantastic start to 2016 achieving revenue growth in all our segments and consolidated revenue growth of 9% and EPS growth of 44% over the first quarter of 2015. Our Nuclear Operations business achieved record first quarter revenue and a strong operating profit margin to begin the year.
We recently announced our Nuclear Operations business was awarded a new pricing agreement for the U.S. Navy on a record amount of component work for BWXT as well as nuclear fuel work.
In addition we recently reached an agreement on a three-year high-enriched uranium down blending contract. Together these agreements have a combined value of over $3 billion.
Our Nuclear Energy business also achieved excellent revenue growth in the first quarter as well as 15% operating profit margin due to the strength of our Canadian business and recovery in our U.S. service business.
This marks the fourth straight quarter of achieving positive operating income for the business and an operating profit margin of more than 7% over the last 12 months. The improvements in the operating profit resulted from the segments revenue growth and a realization of our cost improvement initiatives.
In the first quarter of 2016, our consolidated non-GAAP operating income was $73 million, 31% higher than the first quarter of 2015. We've accomplished year-over-year growth due to increased operating income in the Nuclear Energy and Technical Services segment as well as a reduction in its empire and corporate costs.
These operating income improvements were supported by the strong first quarter performance from our Nuclear Operations business. Our GAAP first quarter operating income was $43 million.
The consolidated backlog stands at $2.5 billion and Nuclear Operations segment has a backlog of $2.1 billion at the end of the first quarter. This backlog does not include the recently announced down blending contract or the new pricing agreement, valued in excess of $1 billion for the current year, which we expect to be reflected in the second quarter and result in a near record backlog for the Nuclear Operations segment.
The Nuclear Energy segment ended the quarter with a backlog of $345 million. The strong backlog is expected to support the segment's growth in the near term and allow us to achieve full year 2016 operating margin target of 10%.
Consolidated bookings for the first quarter were $177 million which is lighter than in the prior year period due to delay in reaching a new pricing range. Before we get to the details of the operations segment, opportunities which Sandy will present, let me turn it over to David who will discuss the segment's first quarter results and other financial matters.
David Black
Thanks John, the Nuclear Operations segment's first quarter 2016 revenues were $295 million compared to $284 million in the first quarter of 2015. Revenues for the segment came in higher than first quarter 2015 results due to increased manufacturing activity.
First quarter operating income was $65 million down from $68 million in the prior year period due to a $3 million property insurance claims settlement recognized in the first quarter of 2015. Operating income in our Technical Services segment was up $4 million in the first quarter of 2016 compared to the corresponding period of 2015, primarily due to the reduced first quarter business development cost and higher equity income at several of our sites.
Since the Technical Services segment primarily operates through unconsolidated joint ventures at its site revenue was not particularly meaningful in this segment. For the first quarter of 2016 the Nuclear Energy segment achieved revenue growth of 44% over the prior year period reaching $47 million compared to $33 million in the first quarter of 2015.
Revenue growth in this segment was primarily due to an increase in Nuclear Services work in Canada and the U.S. as well as growth in the equipment business related to the execution of the China Steam generator project.
Operating income increased from a loss of $4 million in the first quarter of 2015 to income of $7 million in the first quarter of 2016. The operating income growth was driven by the revenue growth in the services and equipment businesses as well as lower fixed costs related to our margin improvement initiatives completed in 2015.
Our GAAP results for the first quarter include a $0.02 EPS benefit related to certain net gains recognized in the quarter, which are further detailed in our GAAP to non-GAAP tables in our press release. As part of our new mPower framework agreement with our partner we recognized the $30 million potential charge decreasing our GAAP EPS results by $0.18 for the quarter.
As a result of entering into the framework agreement we have deconsolidated our mPower joint venture from a financial statement and recorded a $14 million gain which increased our GAAP EPS results by $0.13. Additionally we have released all of our performance guarantees associated with our former Power Generation business and recognized a $9 million gain which increased GAAP EPS by $0.06.
For the quarter the GAAP effective tax rate was 24.9% slightly below our 2016 guidance from 34% to 36% primarily due to the after tax gain related to deconsolidation of our mPower joint venture. Our base effective tax rate for the year excluding discrete items are still expected to be between 34% and 36% consistent with 2016 guidance.
The company's cash and investments position net of restricted cash as of March 31 was $80 million, a decrease of $84 million compared to $164 million at the end of 2015. First quarter cash flow represented a net use of cash from operating activities of approximately $80 million.
BWXT's first half of the year cash flow was typically lower compared to the second half of the year since employee incentive payments were paid in the first quarter and the receipt of contract retention payments does not occur until the second half of the year. The company's capital expenditures for the quarter totaled $10 million which is slightly lower than the capital expenditures in the first quarter of 2015.
Depreciation and amortization for the company was $12 million in the first quarter compared to $15 million in the same quarter last year. We expect capital expenditures in 2016 to be between $55 million and $60 million with depreciation and amortization in the range of $45 million consistent with our previously provided guidance.
As of March 31, 2016, we have $296 million borrowing under the term loan and letters of credit totaling $112 million under our credit facility. Our liquidity under the credit facility is $288 million, which excludes the additional $250 million accordion provision available to us for term loan, revolving credit borrowing and letter of credit commitments.
In October of 2015, our Board authorized us to purchase up to $300 million of BWXT stock over a two year period which began in February 26, 2016. Under the current authorization and the previous authorization that expired in February, we purchased 1.6 million shares of BWXT stock at a cost of $50 million with an average share price of $30.32 during the first quarter of 2016.
Now I'll hand the call over to Sandy for a discussion on the first quarter operations and segment opportunities. Sandy?
Peyton Baker
Thanks David and good morning. I'll typically begin this portion of the dialogue with the Nuclear Operations segment as it accounts for such a large part of our business.
But today, I'd like to highlight our Nuclear Energy segment, great performance, and some of the exciting prospects we have going on in this business. We continued to perform well on the China steam generator design and build contract which contributed to our revenue and operating income growth in this segment.
In addition, we had higher volume in our Canadian and U.S. service business.
Our U.S. services completed a successful steam generator outages at two sites and our Canadian services successfully completed field work for the Bruce Power unit 8 outage.
The service business is seasonal and results can vary from quarter-to-quarter based on the timing of our customers' outages. The segment's first quarter results benefited from the timing of outage work which we expected to be heavier in the spring than in the fall.
With the segment's strong first quarter performance, we're on our way to achieving the revenue and operating income margin guidance we've provided for 2016. Given the seasonality in our services business and the timing of projects in our equipment business, we believe that 10% operating income margin for the full year is a reasonable expectation.
The prospects in the Canadian nuclear market remains strong and we are optimistic in our ability to continue to win work in this market, particularly with the life extension work that is expected to take place over the next 15 years, at Bruce Power and Ontario Power Generation. We have history working with both Bruce Power and OPG and have developed strong relationships.
The life extension work presents a great longer term opportunity for continued revenue growth with good margins in our Nuclear Energy segment as we've demonstrated with our first quarter results. During the last quarter, we announced the Memorandum of Understanding with Bruce Power.
We're supplying replacements steam generators with a full Bruce B units. We are currently in negotiations to contract with the steam generator supply with Bruce Power unit six.
Bruce Power's total cost for the refurbishment is expected to be CAD$13 billion with that portion of the steam generator work going forward $400 million to $500 million of the total. We expect to perform additional equipment and service work for Bruce during the life extension process which would add to the steam generator work.
We anticipate booking work related to these projects this year. Regarding the Ontario Power Generation life extension project hopefully [indiscernible] in early January that the Darlington life extension projects was approved by the government with a lead unit which was scheduled to shutdown later this year, the engineering phase has been completed and procurement is well underway.
We are currently manufacturing components and providing services for this unit. Overall the Darlington life extension project includes the refurbishment of four reacting units, with the total cost of the project expected to be CAD$13 billion.
The work will have a similar scope for the Bruce Power life extension work except the steam generators will not be in play. We envisioned the enforcement of the work for OPG could be between CAD$300 million and CAD$400 million over the life of the project.
Additionally we continued to provide steam generator maintenance services in Romania and scheduled maintenance projects in Argentina and China to begin in April. Our Nuclear Operation segment continued it's very good performance leading to record first quarter revenue and impressive operating line.
Delivery of these results was provided by smart operational execution and ongoing contract cost reductions. As John mentioned, and as we announced last week, we completed our negotiations, and has since contracted on a new pricing agreement with that customer, the largest in our history.
We expect the new pricing agreement to continue the long term stable performance outlook of our Nuclear Operations business. It is important to note the $3.1 billion value referenced in our announcement of the new pricing agreement includes $167 million of naval nuclear component orders unrelated to the new pricing agreement that were booked in the last three quarters.
The new pricing agreement includes 2016 awards and [indiscernible] options related to providing naval nuclear components as well as fuel that we had in our Nuclear Fuel Services business. Approximately 1.2 billion of this award had been received in 2016 and it will be booked in the second quarter.
The bulk of the remaining contracts awards are expected to be received in 2017 and 2018 subject to annual congressional corporation. We also announced we've been awarded a 3-year contract valued at over $240 million with the down blending 10 metric tons of excess high enriched uranium.
We were pleased to continue providing services and support for the National Nuclear Security Administration non-proliferation initiative. Together the pricing agreement and down blending contracts were valued at over $3 billion.
The timing and size of these awards was as expected and aligns with the guidance we've previously provided for full year 2016. Regarding our missile tube work, we continued to perform well and believe we can expand our current scope moving forward.
Proposals for the next procurement had been submitted and the contract is expected to be awarded in the third quarter of this year. The Ohio-class replacement program continues to move forward and it is in the design and development phase.
Preparations to the work are underway and we expect to begin production of this new class in the 2018-2019 timeframe. Once the Ohio-class replacement program starts, the current bill schedule will transition from two Virginia-class submarines per year to one Virginia-class and one Ohio class annually by the middle of next decade.
However there have been discussions publicly on the possibility of adding one or more additional Virginia-class submarine to the multi-year bill schedule in order to support the Navy's needs. In fact the House Armed Services Committee fiscal year 2017 defense authorization bill directs the secretary of the Navy to submit a report detailing the viability of producing additional Virginia-class submarines beyond the baseline plan in the 2017 to 2030 timeframe.
Any additional submarine production is subject to Congressional funding and the industrial base demonstrating their ability to meet the demand. Nevertheless if this materializes it represent a good organic growth opportunity and will require significant infrastructure modification to meet this new demand.
The Technical Services Group continues to perform well on its current contracts and remains especially active in the DOE laboratory, national security, and environmental management areas. At the end of March, our joint venture with Paducah and Portsmouth Gaseous Diffusion plant received a 2.5 year extension with an estimated value of approximately $750 million.
The new contract is already included in our 2016 guidance for this segment and includes an option for an additional 30 month contract extension. We are optimistic regarding the segment's long-term growth prospects and have submitted several proposals on project extension and rebids that if awarded will contribute to the segment’s operating income growth starting in 2017.
In addition there several opportunities for awards in the next 24 months, including management and operations of the Nevada National Security Site, the Savannah River Site, and Sandia National Laboratory. That concludes the discussion of the segment operations.
I'll hand the call back over to John for a discussion of the company's outlook for 2016.
John Fees
Thanks, Sandy. The guidance we provided last quarter for 2016 remains unchanged.
Even with the fantastic first quarter results, we want to reiterate that our full adjusted EPS guidance is expected to be between $1.50 and a $1.60. As David and Sandy mentioned in their discussions, first quarter results were higher than our expected full year run rate due to seasonality in our Nuclear Energy segment, as well as the timing of the business development activities in Technical Services segments.
For your reference, the full list of our 2016 guidance is included at our company overview presentation that we issued yesterday evening. We continued to execute on our balance capital allocation approach and we are committed to returning capital to our shareholders.
We increased the quarterly dividend to $0.09 per share last quarter and have repurchased approximately $102 million of shares in the last two quarters. Additionally M&A pipeline is strong and we remained active in evaluating potential targets in order to find the best fit for our business and drive value to our shareholders.
To wrap up we had a great first quarter and we're on our way to delivering fully on our expectation for 2016. Our Nuclear Operations business remained solid core business with strong margins with the execution of the new pricing agreement, the down blending contract is positioned well with continued strong performance going forward.
We believe our Nuclear Energy business is situated for growth, and margin improvements. Technical Services remains on the path for long-term operating income growth.
That concludes our prepared remarks. I will now turn it back over to the operator, who will assist us in taking questions.
Operator
Thank you. [Operator Instructions] And our first question comes from the line of Bob Labick of CJS Securities.
Your line is open.
Robert Labick
Good morning and congratulations on a nice start to the year.
Peyton Baker
Thank you.
John Fees
Thanks, Bob.
Robert Labick
I wanted to start with one last points you guys just discussed, the possibility of an additional Virginia class submarine. Could you talk about the timing of when that would be decided and then just expand a little bit more about the significant capital needed for you to build out the infrastructure to be able to do two Virginia class and the Ohio class replacements?
And where does that funding come from. Is it albeit [indiscernible]?
Does the government contribute or how would that work?
John Fees
Bob this is John. It's – we're at the early stages of that conversation, but the conversation is still going on.
Basically I think if you want to think about a nominal case and I'm sure the government will look at a variety of different cases, but a nominal case would probably to buy two Virginia's each year when [indiscernible] Ohio is procured. That would result in about 12 additional reactor plants, 12 additional submarines, 12 additional reactor plants starting later this decade and extending forward for the next 12 years or so.
In that regard, if that is the case that happens, we would actually have to start putting capital into the business sometime in 2017 to be able to prepare ourselves, to be able to have the capacity, to be able move forward on that. That represents a little bit in excess of probably $2 billion worth of work.
If that case happens, in order to execute on that, we'll probably take nominally about a $100 million worth of capital. But again, that's all – that all can go up and down based upon where these scenarios go with the government ultimately decides to do if anything, but it's an active conversation.
And we will have discussions with our customer about how to deal with that capital investment and those will go on as part of the contract discussions that we would have if the government decides to enter into that, but that is basically what that represents. It's a very nice organic growth opportunity that we would very much want to support.
But it's not totally dependent upon us, I mean this a whole infrastructure question, shipyards as well as ourselves and our resources.
Robert Labick
Got it. Very exciting.
I look forward to hearing more about it as it progress. And then on the new pricing agreement, did you talk about the kind of similarities and differences between this and previous pricing and how we should think about it in terms of future margins for NOG excluding the potential for the second [indiscernible] just under normal circumstances.
Peyton Baker
Yeah, Bob this is Sandy. This award as we call it the market basket is very similar to the previous pricing agreements we had, only it's larger, but comprised of six Virginia Class submarines, and the units for that as well as a Ford Class chipset and the refuel for the Nimitz class, so it was a fairly sizable in fact the largest pricing agreement we've had yet.
The terms of the contract are very much the same. Variations in some of the terms were very similar to the previous pricing agreements we've had with that customer, so we're pretty excited about that.
It was because of the size of it took us some time to get through the negotiations, but I think everyone including our customer feels good about where we are on this.
Robert Labick
Great. One last one if I may.
I'll get back in the queue. Thanks for the color on the seasonality to the Nuclear Energy business.
Could you just give us a sense obviously with the very strong margins in Q1 and the kind of annual goal of [indiscernible] is it? Should we be expecting somewhere between like a 5% and a 15% depending on the workflow in any given quarter or is it even more varied.
Could you lose money one quarter, make a lot the next, but how should we think about the range of margins due to the seasonality of that business?
David Black
Hey, Bob, this is David. I think that in that business we always look at it as the year, because we started in our mind tied to the year that we're going to have that 10% margin for the year.
Bob like you said there is variability from quarter-to-quarter and you could go into a probably more negative in a quarter if your outages for that tend to be certain times at the year and you're recognizing the revenue that way. And so there could be some variability such that it could be close to zero or could be up like you see now in 2015.
But we still anticipate with what revenues are going through therefore with the year and the work going through there that we will come out of the year with a 10% margin for that business.
Robert Labick
Great. Thank you very much.
David Black
Yeah.
Operator
Thank you. Our next question comes from Michael Ciarmoli with KeyBanc Capital.
Your line is open.
Michael Ciarmoli
Hey good morning, guys. Congratulations and thanks for taking my question.
Peyton Baker
Thanks, Michael.
Michael Ciarmoli
May be just a follow on with Bob, he has sort of the first part of that VA-Class question. What if the other side of that they scale back the VA production to one per year?
What are the implications if that plays out? Just knowing that you know from a budget perspective there are certainly lot of big programs not only with the Navy, but more broadly if they can find the funding to support those VA Classes?
John Fees
This is, John. We really don't see a scenario under which that would occur.
The concern is that there is just not enough submarines been built to able to meet the demands that we have as a country in terms of protecting our national interest around the world. And that's what's really driving this concern to evaluate these additional vessels.
And the Ohio-class has to be replaced, I mean, it's really not an option. The only option would be is not to have a strategic force under sea and we don't see a scenario in which that would occur either.
So we feel that the built rate that we have described before has been in our disclosures represents a very nominal case with not a lot of downside at this particular point. As we project it now between 2014 we just see that, that Ohio would be incremental over Virginia just because of the size of the plant and then in addition to that we see the potential for the organic growth we described with more Virginia Class submarines been built to meet those requirements that the government has laid out for the navy.
So, that's kind of how we view it. We really don't see a downsized scenario that seems feasible to us at this point.
Michael Ciarmoli
Okay, perfect. And then just back to the pricing agreement, I guess, two questions.
First on you're getting a large booking. How should we think about the cadence of revenue recognition, I think you called out several programs though in there for the VA classes, the Ford's, the refueling, so how do we think about for that backlog being recognized over the next 12 months?
And then separately in kind of thinking about these price negotiations, were there any additional cost reduction measures you guys had to agree upon and maybe if you could elaborate on what you guys are doing to reduce the cost there?
David Black
Hey Michael this is David. As far as the cost reduction, I'll let Sandy go into that as a line, because as we negotiate these through times there is always things we work with the customer to make sure that we look at the future.
I mean our future rates are rates that we're looking at out 10 years. So there are things we look and the customer looks at with us that we know that we're going to tighten up on cost and we do look at cost reductions, so that is to address that?
Peyton Baker
Yeah, this is Sandy, Michael. As with every pricing agreement we've had before, as we go through negotiations, we have accepted challenges on cost reduction, this one is no different and it's pretty much in line with what we've had in the past.
And so I'm pretty confident that we'll be able to achieve those cost reductions as we have on the previous pricing agreements. So it wasn't anything out of the ordinary or abnormal associated with it that I.
David Black
Now as far as the revenue bleed on that, I recall that as we were concerned about --we were not concerned about actually booking the sort of your timing just because we kept saying. It will be yearend before we start working on this.
So you'll find that very little will come in this year. But you'll see next quarter we'll provide that, next quarter on the revenue bleed of that.
We don't give that currently for this amount of bookings as we haven't yet got the bookings until the second quarter, but the second quarter Q will give you the revenue bleed for the future per year.
Michael Ciarmoli
Okay, perfect and then just the last one from me. You guys mentioned the missile tubes as an organic opportunity.
Should we be thinking about some of these other Navy platforms whether it's the LXR, dock landing, or the TAO(X) next gen oilers. Are there opportunities there for you guys to secure some content?
Peyton Baker
This is Sandy again. No I don't see that.
We constantly look for opportunities on the Navy side for things that we could do. There are highly engineered high consequence by product and missile tubes happens to be one of those, but the ones you mentioned I don't see them playing a role with us.
Michael Ciarmoli
Great, thanks guys. I'll jump back in queue.
Operator
Thank you. Our next question comes from Tate Sullivan with Sidoti.
Your line is open.
Tate Sullivan
Thank you. And I'm just looking at your business outlook slide in your deck on [indiscernible].
Can you just clarify the operating margins around 10% for full year in Nuclear Energy that has achieved by year end I mean what's the different there?
David Black
Hey, Tate, this is David. What we're saying there is that we knew that the first quarter could come out at 8% or it could be 15%.
What we're saying that is when you get to the year end and you look at the full year and look back that and you will have achieved a 10% margin on that full years of revenue.
Tate Sullivan
Okay.
David Black
Like we've already discussed it will be volatile during the quarters, but at year end we'll be able to get to 10%.
Tate Sullivan
Okay. And looking back for the full year, that's a 10%.
And is there any incremental change from your previous language on that?
David Black
No, that's....
Tate Sullivan
That's considered.
David Black
What we've been consistently saying.
Tate Sullivan
Okay. And then on – I think also related to being in the high teens in the Nuclear Operations business and you mentioned a $3 million settlement this quarter.
Are any other items going forward in nuclear operations that would get you to the high teens from above 20%?
John Fees
What we've done there is we have historically, we have continued to give thoughts on guidance on Nuclear Operations segment produced in the high teens. As we have described in the past as well, we're not surprised when we do better.
I think there is an opportunity that exists within the way that we contract that provides that opportunity, but it requires us to do some significant work to be able to meet the incentives that are laid out by our customer there. And so what we dedicate ourselves to is to cost control, cost reduction, and meeting the challenges that they've given us, and that inherently will drive up our margins if we're successful in doing that, so we both win in that sort of circumstances.
We believe with the current contracts set and the breakdown that we've had since the spin, we have been giving structured guidance that says we expect high teens. I think we've been consistently over 20, because we've been able to achieve some of those benefits that I have described.
So I would not change the thought of that going forward in light of the backlog that we have to honor the pricing agreement that we've just done there.
Tate Sullivan
Okay, thank you very much.
Operator
[Operator Instructions] Our next question comes from Paul Dircks with William Blair. Your line is open.
Paul Dircks
Hi, thank you. Good morning.
John Fees
Hi Paul.
Paul Dircks
So question on cash flow for you guys. I just wanted to ask your thoughts on the trajectory of cash flow this year and how you may be thinking about share repurchase throughout the year.
I guess, tied to that as well and perhaps this question is for you John. How are you guys thinking about potential?
Are you thinking about share increases as it relates to potential increase in CapEx for the Virginia Class submarine infrastructure expansion and also your thoughts on acquisition. So really just an all-encompassing question on capital allocation here looking forward.
John Fees
We really did not see a scenario in which we will increase the share count. We actually see it going the other way.
We've been dedicated to a good balanced capital allocation approach. We bought a reasonably significant amount of shares back here in the last two quarters.
We continue to focus on that. We did have the increase in dividend, that's been reconfirmed and reapproved by the Board this quarter, but we do have some things in the balance.
We have some decent M&A that we have in front of us, we have some capital infusion that we want to put into the company to drive some of the organic growth if those opportunities present themselves. So we do have to have a little bit of balance in that, but we certainly are dedicated to return to our shareholders.
And it is certainly the benchmark by which we evaluate everything we do. We can better deploy the capital and get – create more shareholder value than what we created in our minds, then return the capital if we can do that through growth in the company that gives the shareholders better benefit, we're going to pursue it.
So we're managing that. We're looking at that going forward and that's the basis by which we've been managing and running enterprise and I don't see anything in that changing and I do not see this increasing the share count – I actually it would envisioned over the long-term that it would go in the other direction.
Paul Dircks
All right and thank you for that color. Do you guys envision any sort of scenario in which you would add to your debt total certainly perhaps in support of some of the future capital that you may want to infuse into the business?
John Fees
I think it depends on the scenario that we've got in front of ourselves and what all comes to play. Certainly we have capacity and we have capacity to leverage the company.
We're not going to get crazy about that and not over levered where we think we should be. But we certainly have capacity and that could be an avenue in which we could achieve these things that collectively they all come together at the same time and we have tremendous capacity to do that.
Paul Dircks
Thank you and our last question from me. Can you remind us of some of the timing for award decisions on the near term Technical Services opportunities out there?
John Fees
Yeah if I can remember all of those. We're submitting five proposals this year and eight proposals next year for various work.
Most of that is in 2017 as far as award then a lot of test site for is one that would be awarded this year here to the plan. Certainly by the end of the year we ought to know on that one, but the rest are largely in 2017.
Paul Dircks
Very well. Thank you.
Operator
Thank you, and our next question comes from Nicholas Chen with Alembic Global Advisors. Your line is open.
Nicholas Chen
Hi guys, thanks for taking my call this morning. Just in terms of the M&A pipeline and what you guys are looking at.
Can you just sort of discuss which areas look most appealing right now?
John Fees
I mean, I think as we said before that our business is such that we're looking at all areas. NOG in itself, I mean, it's a great business with great margin, but that's they're very difficult to find, but there are things out there, and we are looking.
Nuclear Energy is a great business, it's got a long term outlook, it's got refurbishment programs, now they have been discussed by Bruce Power and OPG. Both of those long term, into the future, organic growth, so there's some opportunities inside of any.
We've always said also on a TSG basis, we're just getting into NASA if there is ways to get into NASA and DoD by a strategic acquisition, we would look at that also. So I think we're open pretty much across the board as we're looking, just looking at the acquisition and seeing what it will bring to us.
Peyton Baker
So when we say across the board, we also meet with what we consider to be our core capability and the types of businesses that we really enjoy and feel we can manage well. High technology, high value added, high consequence type things, limited competition to no competition, close relationship with our customers that's kind of the angle that we play well in and that's something we do extremely well.
And so, I don't think we're going to leave that fundamental core focus area to go off and do something totally different. So we talk about it.
We're looking to get everything. We're looking to get everything within that box and within that framework.
Nicholas Chen
Are there any areas where the multiples look better than others?
Peyton Baker
It all depends on the price. I'm certainly not a person and I don't think we are.
Certainly we love higher margins and we love great margins in our business, but where we're looking to get returns. And so, and what we can do with the company once we get our hands around it we manage it.
So we're really looking at it from a standpoint of what kind of return on invested capital we can make and what the potentials for potential future organic growth would be with the idea that we run it. We're not trying to buy a business that has 20% margin, we think that's the wrong focus.
We think the focus is the price that you pay, and a return that you can get to your shareholders, and that's really our evaluation criteria.
Nicholas Chen
That's very helpful. Thanks so much guys.
Operator
Thank you. And we have a follow up from Michael Ciarmoli with KeyBanc Capital.
Your line is open.
Michael Ciarmoli
Hey guys just on the margins. I appreciate the conservatism, and the guidance, but just wondering we've got the seasonality certainly and maybe the volatility in the Nuclear Energy business, but still assuming if you can exit the year at 10% there.
I guess you're getting the in enrichment contract in Technical Services and it seems like the margin level in that business should be I guess fairly stable. It doesn't seem like any of the new Navy were kicked in till later in the year.
So presumably you've got a similar work scope for the remainder of a couple of quarters and maybe the benefit of some learning curves and volumes on missile tubes if things go that way. I mean I guess the guidance assumes sort of flattish margins for the remainder of this year compared with the trailing three quarters of last year.
Is there anything else in there that would suggest you can't deliver these kind of continued margins outside of the seasonality in Nuclear Energy?
Peyton Baker
No I mean I think what we're saying is the margins, we feel we can deliver those margins. We're not at this point in time looking at the year and thinking in the first quarter we've done so well that we can lift guidance, because it is the first quarter.
We have a lot of work to do for the year in order to accomplish what we need to accomplish to get those margins. Inside of the NOG margins, it's the cost savings, it's the efficiencies and we also have the [indiscernible] reimbursement that's continuing, that helps to push us above the 20% margin.
So we feel that we're going to be able to obtain the margins that we're forecasting in order to get us to the $50, $60 range. I mean we're very comfortable there.
John Fees
I recognize too that there is puts and takes that we have out in front of ourselves. So the things that we're trying to do is maximize the puts and minimize the takes.
And when we get to the point we really feel we got our arm around that, we'll certainly update you. Certainly the first quarter puts a little upward pressure on the guidance, we understand that, but we're not at a point right now where we feel that we really got our full arms around the ups and downs that we forecast and as soon as we do we're certainly going to take that.
Michael Ciarmoli
That's perfect. I appreciate that.
Are the missile tubes, I think margins are dilutive right now to the Nuclear Ops group?
John Fees
We're in the early phases of that and it's sort of early to determine that, so I think the answer is we're going to work very hard to achieve the margins that we have in the rest of that business and we think that's doable and they'll see this being delivered.
Michael Ciarmoli
All right, perfect, thanks guys.
Operator
Thank you. And I'm showing no further questions at this time.
I'd like to turn the call back to Mr. Alan Nethery for any closing remarks.
Alan Nethery
Thank you for joining us this morning and this concludes our conference call. A replay of this call will be posted on our website later today.
It will be available for a limited time. If you have further questions, please call me at 980-365-4300.
Thank you.
Operator
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program.
You may all disconnect. Everyone have a great day.