- Revenues were $1.72 billion
- Operating margin was 9.5%
- Segment operating margin was 7.0%
- Diluted earnings per share was $2.56
- Cash and cash equivalents at the end of the quarter were $608 million
NEWPORT NEWS, Va., May 04, 2017 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported first quarter 2017 revenues of $1.72 billion, down 2.2 percent from the same period last year. Diluted earnings per share in the quarter was $2.56, compared to $2.87 in the same period of 2016.
Operating income in the quarter was $164 million, compared to $198 million in the same period last year. Operating margin in the quarter was 9.5 percent, compared to 11.2 percent in the same period last year. These decreases were driven by lower volumes and risk retirements in our shipbuilding segments and the establishment of a $29 million reserve against accounts receivable at Technical Solutions related to Westinghouse Electric Company’s bankruptcy filing, partially offset by the favorable FAS/CAS Adjustment.
New business awards for the quarter were approximately $600 million, bringing total backlog to approximately $20.0 billion as of Mar. 31, 2017.
“I am pleased with our performance at both Ingalls and Newport News and the progress we are making at our newly created services organization, Technical Solutions,” said Mike Petters, HII’s president and CEO. “We are executing well on our shipbuilding programs and are focused on the integration and operations of our services organization.”
Results of Operations
Three Months Ended
March 31
(in millions, except per share amounts)
2017
2016
$ Change
% Change
Sales and service revenues
$
1,724
$
1,763
$
(39
)
(2.2)%
Operating income (loss)
164
198
(34
)
(17.2)%
Operating margin %
9.5
%
11.2
%
(172) bps
Segment operating income (loss)1
120
166
(46
)
(27.7)%
Segment operating margin %1
7.0
%
9.4
%
(246) bps
Net earnings (loss)
119
136
(17
)
(12.5)%
Diluted earnings (loss) per share
$
2.56
$
2.87
$
(0.31
)
(10.8)%
Weighted-average diluted shares outstanding
46.4
47.4
Adjusted Net Earnings (Loss)
Net earnings (loss)
$
119
$
136
$
(17
)
(12.5)%
After-tax FAS/CAS Adjustment2
(32
)
(23
)
(9
)
39.1%
Adjusted Net Earnings (Loss)3
$
87
$
113
$
(26
)
(23.0)%
Adjusted Diluted EPS
Diluted earnings (loss) per share
$
2.56
$
2.87
$
(0.31
)
(10.8)%
After-tax FAS/CAS Adjustment per share2
(0.69
)
(0.49
)
(0.20
)
40.8%
Adjusted Diluted EPS3
$
1.87
$
2.38
$
(0.51
)
(21.4)%
1 Non-GAAP measures that exclude non-segment factors affecting operating income (loss). See Exhibit B for definitions and reconciliations.
2 Tax effected at 35% federal statutory rate.
3 Non-GAAP measures. See Exhibit B for definitions.
Segment Operating Results
Ingalls Shipbuilding
Three Months Ended
March 31
($ in millions)
2017
2016
$ Change
% Change
Revenues
$
550
$
586
$
(36
)
(6.1)%
Segment operating income (loss)1
66
82
(16
)
(19.5)%
Segment operating margin %1
12.0
%
14.0
%
(200) bps
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Ingalls revenues for the first quarter decreased $36 million, or 6.1 percent, from the same period in 2016, due to lower revenues in amphibious assault ships and surface combatants, partially offset by higher revenues in the
Legend-class National Security Cutter (NSC) program. Lower amphibious assault ships revenues were due to decreased volume on USS
John P. Murtha (LPD 26) delivered in the second quarter of 2016, partially offset by increased volumes on
Bougainville (LHA 8) and
Fort Lauderdale (LPD 28)
. Lower surface combatant revenues were primarily due to decreased volumes on
Frank E. Petersen Jr. (DDG 121),
Ralph Johnson (DDG 114) and
Delbert D. Black (DDG 119), partially offset by higher volume on
Lenah H. Sutcliffe Higbee (DDG 123). Higher NSC program revenues were due to increased volumes on
Stone (NSC 9),
Kimball (NSC 7) and
Midgett (NSC 8), partially offset by lower volume on USCGC
Munro (NSC 6) following delivery in 2016.
Ingalls segment operating income for the first quarter was $66 million, a decrease of $16 million from the same period last year. Segment operating margin in the quarter was 12.0 percent, compared to 14.0 percent in the same period last year. These decreases were primarily due to lower risk retirement on USS
John P. Murtha and
Portland (LPD 27), partially offset by higher risk retirement on the NSC program.
Key Ingalls milestones for the quarter:
- Christened Kimball
- Authenticated the keel for Frank E. Petersen Jr.
- Authenticated the keel for Midgett
- Started fabrication of Lenah H. Sutcliffe Higbee
Newport News Shipbuilding
Three Months Ended
March 31
($ in millions)
2017
2016
$ Change
% Change
Revenues
$
971
$
993
$
(22
)
(2.2)%
Segment operating income (loss)1
72
81
(9
)
(11.1)%
Segment operating margin %1
7.4
%
8.2
%
(74) bps
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Newport News revenues for the first quarter decreased $22 million, or 2.2 percent, from the same period in 2016, driven by lower revenues in submarines, partially offset by higher revenues in aircraft carriers. Lower submarines revenues related to the
Virginia class (SSN 774) submarine (“VCS”) program were due to decreased volumes on Block III boats, partially offset by increased volumes on Block IV boats. Higher aircraft carriers revenues were due to increased volumes on the advance planning contract for the refueling and complex overhaul (RCOH) of USS
George Washington (CVN 73), the construction contract for
John F. Kennedy (CVN 79) and the advance planning contract for
Enterprise (CVN 80), partially offset by decreased volumes on the execution contract for the RCOH of USS
Abraham Lincoln (CVN 72) and the construction contract for
Gerald R. Ford (CVN 78).
Newport News segment operating income for the first quarter was $72 million, a decrease of $9 million from the same period last year. Segment operating margin was 7.4 percent for the quarter, compared to 8.2 percent in the same period last year. These decreases were due to lower volume and risk retirement on the VCS program, partially offset by higher volume on the advance planning contract for the RCOH of USS
George Washington.
Key Newport News milestones for the quarter:
- Awarded a $25.5 million modification to an existing contract in support of advance fabrication of the aircraft carrier Enterprise
- Awarded a $29.7 million contract for the procurement of long-lead material for the first two Block V boats of the Virginia class submarines program
- Hosted a visit by President Donald J. Trump, at which he called aircraft carriers “the centerpiece of American military might overseas”
Technical Solutions
Three Months Ended
March 31
($ in millions)
2017
2016
$ Change
% Change
Revenues
$
225
$
208
$
17
8.2%
Segment operating income (loss)1
(18
)
3
$
(21
)
NM2
Segment operating margin %1
(8.0
)%
1.4
%
NM2
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
2 NM means the % change is “not meaningful”.
Revenues in the Technical Solutions segment for the first quarter increased $17 million, or 8.2 percent, from the same period last year, primarily due to the acquisition of Camber, partially offset by higher volumes in the first quarter of 2016 from the resolution of outstanding contract changes on a nuclear and environmental commercial contract.
Segment operating loss for the quarter was $18 million, a decrease of $21 million from the same period last year. The decrease was primarily due to the establishment of a $29 million reserve against accounts receivable on a nuclear and environmental commercial contract in the first quarter of 2017 and the resolution of outstanding contract changes on a nuclear and environmental commercial contract in the first quarter of 2016, partially offset by improved performance in oil and gas services and the acquisition of Camber.
