HUNTINGTON INGALLS INDUSTRIES REPORTS FIRST QUARTER 2019 RESULTS

• Revenues were $2.1 billion in the quarter
• Operating margin was 7.7%
• Diluted earnings per share was $2.85
• Record backlog of $40.6 billion

NEWPORT NEWS, Va., May 02, 2019 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE: HII) reported first quarter 2019 revenues of $2.1 billion, up 11.0 percent from the first quarter of 2018. The increase was driven primarily by higher volume at HII’s Newport News Shipbuilding division and growth at HII’s Technical Solutions division from recent acquisitions.

Operating income in the quarter was $161 million and operating margin was 7.7 percent, compared to $191
million and 10.2 percent, respectively, in the first quarter of 2018. The decreases in operating income and operating margin were mainly the result of an unfavorable change in the operating FAS/CAS adjustment and lower risk retirement at HII’s Ingalls Shipbuilding division compared to the prior year.

Diluted earnings per share in the quarter was $2.85, compared to $3.48 in the same period of 2018. The decrease was predominantly due to lower operating income and an unfavorable change in the non-operating portion of retirement benefit expense.

First quarter cash from operations was $11 million and free cash flow¹ was negative $63 million, compared to $120 million and positive $47 million, respectively, in the first quarter of 2018.

New contract awards in the quarter were approximately $19.6 billion, primarily driven by an award for the detail
design and construction of two Gerald R. Ford-class aircraft carriers, Enterprise (CVN 80) and the unnamed CVN 81, bringing total backlog to approximately $41 billion as of March 31.

“The first quarter was highlighted by the historic $15.2 billion contract for the detail design and construction of two aircraft carriers,” said Mike Petters, HII’s president and CEO. “With the Navy’s commitment to the two-carrier buy and more than $40 billion in contracted backlog overall, HII is well-positioned to continue creating long-term, sustainable value for our shareholders, customers and employees.”

¹ Non-GAAP measure. See Exhibit B for definition and reconciliation.

Results of Operations Three Months Ended March 31 (in millions, except per share amounts)20192018$ Change% ChangeSales and service revenues$2,080 $1,874 $206 11.0%Operating income161 191 (30)(15.7)%Operating margin %7.7%10.2% (245) bps Segment operating income¹129 117 12 10.3%Segment operating margin %¹6.2%6.2% (4) bps Net earnings118 156 (38)(24.4)%Diluted earnings per share$2.85 $3.48 $(0.63)(18.1)% Weighted-average diluted shares outstanding41.4 44.8 ¹ Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for definitions and reconciliations.Segment Operating Results Ingalls Shipbuilding Three Months Ended March 31 ($ in millions)20192018$ Change% ChangeRevenues$584 $585 $(1)(0.2)%Segment operating income¹46 64 (18)(28.1)%Segment operating margin %¹7.9%10.9% (306) bps ¹ Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Ingalls Shipbuilding revenues for the first quarter were $584 million, a decrease of $1 million from the same period in 2018, primarily driven by lower revenues in surface combatants, largely offset by higher revenues in amphibious assault ships and the Legend-class National Security Cutter (NSC) program. Surface combatant revenues decreased due to lower volumes on Delbert D. Black (DDG 119), Paul Ignatius (DDG 117), and Frank E. Petersen Jr. (DDG 121), partially offset by higher volumes on USS Fitzgerald (DDG 62) repair and restoration and Ted Stevens (DDG 128). Amphibious assault ship revenues increased as a result of higher volumes on Bougainville (LHA 8) and Richard M. McCool Jr. (LPD 29), partially offset by lower volumes on Tripoli (LHA 7) and the delivered USS Portland (LPD 27), as well as lower risk retirement on the LPD program. Revenues on the NSC program increased due to higher volumes on NSC 10 (unnamed) and NSC 11 (unnamed), partially offset by lower volume on the delivered Kimball (NSC 7).

Ingalls Shipbuilding segment operating income for the first quarter was $46 million, a decrease of $18 million from the same period last year. Segment operating margin in the quarter was 7.9 percent, compared to 10.9 percent in the same period last year. These decreases were primarily due to lower risk retirement on the LPD program, partially offset by one-time employee bonus payments in 2018 related to the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

Key Ingalls Shipbuilding milestones for the quarter:
• Delivered guided missile destroyer Paul Ignatius (DDG 117)
• Authenticated the keel of amphibious assault ship Bougainville (LHA 8)
• Awarded $1.5 billion contract for the detail design and construction of amphibious transport dock LPD 30, the first Flight II LPD
• Completed acceptance trials of National Security Cutter Midgett (NSC 8)

Newport News Shipbuilding Three Months Ended March 31 ($ in millions)20192018$ Change% ChangeRevenues$1,265 $1,082 $183 16.9%Segment operating income¹78 51 27 52.9%Segment operating margin %¹6.2%4.7% 145 bps ¹ Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Newport News Shipbuilding revenues for the first quarter were $1.3 billion, an increase of $183 million, or 16.9 percent, from the same period in 2018, primarily driven by higher revenues in aircraft carriers, naval nuclear support services, and submarines. Aircraft carrier revenues increased primarily as a result of higher volumes on the advance planning contract for Enterprise (CVN 80), the execution contract for the refueling and complex overhaul (RCOH) of USS George Washington (CVN 73), and the advance planning contract for the RCOH of USS John C. Stennis (CVN 74). Naval nuclear support service revenues increased primarily as a result of higher volumes in submarine support and facility maintenance services. Submarine revenues related to the Virginia-class submarine (VCS) program increased due to higher volumes on Block IV construction and Block V advanced procurement, partially offset by lower volumes on Block III boats.

Newport News Shipbuilding segment operating income for the first quarter was $78 million, an increase of $27 million from the same period last year. Segment operating margin was 6.2 percent for the quarter, compared to 4.7 percent in the same period last year. The increases are primarily due to the higher volume described above, and one-time employee bonus payments in 2018 related to the Tax Act, partially offset by lower performance on the VCS program.

Key Newport News Shipbuilding milestones for the quarter:
• Awarded $15.2 billion block buy contract for aircraft carrier Enterprise (CVN 80) and CVN 81
• Achieved approximately 91% structural completion on the aircraft carrier John F. Kennedy (CVN 79)
• Authenticated the keel of Virginia-class submarine New Jersey (SSN 796)
• Achieved approximately 50% completion on the RCOH of USS George Washington (CVN 73)

Technical Solutions Three Months Ended March 31 ($ in millions)20192018$ Change% ChangeRevenues$257 $233 24 10.3%Segment operating income¹5 2 3 150.0%Segment operating margin %¹1.9%0.9% 109 bps ¹ Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Technical Solutions revenues for the first quarter were $257 million, an increase of $24 million, or 10.3 percent, from the same period in 2018, primarily due to higher mission driven innovative solutions revenues following the acquisitions of G2 and Fulcrum IT Services (“Fulcrum”), as well as higher oil and gas revenues, partially offset by lower fleet support revenues.

Technical Solutions segment operating income for the first quarter was $5 million, compared to $2 million in the first quarter of 2018. The increase was primarily due to higher equity income from our nuclear and environmental joint ventures and one-time employee bonus payments in 2018 related to the Tax Act.

Key Technical Solutions milestones for the quarter:
• Completed the acquisition of Fulcrum