- Revenues of $1.9 billion in the quarter; $7.1 billion in 2016
- Operating margin of 13.9% in the quarter; 12.1% in 2016
- Diluted earnings per share of $4.20 in the quarter; $12.14 in 2016
- Cash from operations of $822 million and free cash flow1 of $537 million in 2016
NEWPORT NEWS, Va., Feb. 16, 2017 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported fourth quarter 2016 revenues of $1.9 billion, up 0.9 percent from the fourth quarter of 2015. Operating income in the quarter was $268 million and operating margin was 13.9 percent, compared to $144 million and 7.6 percent, respectively, in the fourth quarter of 2015. Diluted earnings per share in the quarter was $4.20, compared to $1.06 in the same period of 2015.
For the full year, revenues of $7.1 billion increased 0.7 percent over 2015. Operating income in 2016 was $858 million and operating margin was 12.1 percent, compared to $769 million and 11.0 percent, respectively, in 2015. Diluted earnings per share for the full year was $12.14, compared to $8.36 in 2015. Cash from operations in 2016 was $822 million and free cash flow1 was $537 million, compared to $861 million and $673 million, respectively, in 2015.
New contract awards for 2016 were approximately $5.2 billion, bringing total backlog to $21.0 billion as of Dec. 31, 2016. Major contract awards in 2016 included the detail design and construction contract for the amphibious transport dock
Fort Lauderdale (LPD 28); a fixed-price incentive contract to build a ninth
Legend-class National Security Cutter (unnamed); the planning, advanced engineering and procurement of long-lead material contract for the amphibious assault ship
Bougainville (LHA 8); and the continued advance planning contract for the refueling and complex overhaul (“RCOH”) of the aircraft carrier USS
George Washington (CVN 73).
“Huntington Ingalls Industries’ operational performance in 2016 was solid,” said Mike Petters, HII’s president and CEO. “Exceptional execution on mature programs at Ingalls lessened the impact of the ongoing transition between programs at Newport News and drove the strong financial results for the year.”
Petters continued, “Our 2016 performance, the acquisition of Camber Corporation and the formation of our Technical Solutions division established a great foundation to achieve our Path to 2020 strategic commitments.”
1Free cash flow is a non-GAAP measure. See exhibit B for definition and reconciliation.
Results of Operations
Three Months Ended
Year Ended
December 31
December 31
(in millions, except per share amounts)
2016
2015
% Change
2016
2015
% Change
Sales and service revenues
$
1,922
$
1,905
0.9%
$
7,068
$
7,020
0.7%
Operating income
268
144
86.1%
858
769
11.6%
Operating margin %
13.9%
7.6%
638 bps
12.1%
11.0%
118 bps
Segment operating income1
225
124
81.5%
715
667
7.2%
Segment operating margin %1
11.7%
6.5%
520 bps
10.1%
9.5%
61 bps
Net earnings
197
50
294.0%
573
404
41.8%
Diluted earnings per share
$
4.20
$
1.06
296.2%
$
12.14
$
8.36
45.2%
Weighted-average diluted shares outstanding
46.9
47.3
47.2
48.3
Adjusted sales and service revenues2
$
1,922
$
1,905
0.9%
$
7,068
$
7,033
0.5%
Adjusted operating income2,3
268
187
43.3%
858
735
16.7%
Adjusted operating margin %2,3
13.9%
9.8%
413 bps
12.1%
10.5%
169 bps
Adjusted segment operating income1,2,3
225
167
34.7%
715
633
13.0%
Adjusted segment operating margin %1,2,3
11.7%
8.8%
294 bps
10.1%
9.0%
112 bps
Adjusted net earnings4
172
92
87.0%
479
354
35.3%
Adjusted diluted earnings per share4
$
3.67
$
1.95
88.2%
$
10.15
$
7.33
38.5%
1 Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for definitions and reconciliations.
2 Non-GAAP measures that exclude the impact of an insurance litigation settlement in the Ingalls segment in second quarter 2015. See Exhibit B for reconciliations.
3 Non-GAAP measures that exclude the impact of goodwill impairment charges in second and fourth quarters of 2015 and the impact of an intangible asset impairment charge in the Technical Solutions segment in fourth quarter 2015. See Exhibit B for reconciliations.
4 Non-GAAP measures that exclude the after-tax impacts of: FAS/CAS Adjustment in 2016 and 2015, an insurance litigation settlement in the Ingalls segment in second quarter 2015, goodwill impairment charges in second and fourth quarters of 2015 in the Technical Solutions segment, an intangible asset impairment charge in the Technical Solutions segment in fourth quarter 2015 and a loss on the early extinguishment of debt in the third quarter of 2015. See Exhibit B for reconciliations.
Fourth Quarter 2016 Significant Event
On December 1, 2016, the Company closed on its previously announced acquisition of Camber Corporation and simultaneously formed a new reporting segment, Technical Solutions. Technical Solutions is comprised of AMSEC, Camber Corporation, Continental Maritime of San Diego, Newport News Industrial, SN3, Undersea Solutions Corporation and UniversalPegasus International.
The segment provides agile software development and network engineering, training systems, logistics support, information technology, fleet maintenance and modernization, unmanned undersea systems, nuclear engineering and fabrication, and oil and gas engineering to a wide variety of government and commercial customers worldwide.
Segment Operating Results
Ingalls Shipbuilding
Three Months Ended
Year Ended
December 31
December 31
($ in millions)
2016
2015
% Change
2016
2015
% Change
Revenues
$
641
$
580
10.5%
$
2,389
$
2,188
9.2%
Segment operating income1
85
59
44.1%
321
379
(15.3)%
Segment operating margin %1
13.3%
10.2%
309 bps
13.4%
17.3%
(390) bps
Adjusted revenues2
641
580
10.5%
2,389
2,201
8.5%
Adjusted segment operating income1,2
85
59
44.1%
321
243
32.1%
Adjusted segment operating margin %1,2
13.3%
10.2%
309 bps
13.4%
11.0%
240 bps
1 Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for reconciliations.
2 Non-GAAP measures that exclude the impact of an insurance litigation settlement in second quarter 2015. See Exhibit B for reconciliations.
Ingalls Shipbuilding revenues for the fourth quarter were $641 million, an increase of $61 million, or 10.5 percent, from the same period in 2015, due to higher revenues in surface combatants and the
Legend-class National Security Cutter (“NSC”) program, partially offset by lower revenues in amphibious assault ships. Higher surface combatant revenues were primarily due to increased volumes on
Lenah H. Sutcliffe Higbee (DDG 123) and
Frank E. Petersen Jr. (DDG 121), partially offset by decreased volume on
Delbert D. Black (DDG 119) and the delivery of
John Finn (DDG 113) in the quarter
. Higher NSC program revenues were primarily due to increased volume on
Midgett (NSC 8), partially offset by the delivery of USCGC
Munro (NSC 6) in the quarter. Lower amphibious assault ships revenues were due to the delivery of USS
John P. Murtha (LPD 26) in the second quarter of 2016 and decreased volume on
Portland (LPD 27), partially offset by increased volumes on
Fort Lauderdale and
Bougainville.
Ingalls Shipbuilding segment operating income for the fourth quarter was $85 million, an increase of $26 million from the same period last year. Segment operating margin in the quarter was 13.3 percent, compared to 10.2 percent in the same period last year. These increases were primarily due to higher risk retirement and improved performance on the LPD, DDG and NSC programs.
For the full year, Ingalls Shipbuilding revenues were $2.4 billion, an increase of $201 million, or 9.2 percent, from 2015, due to higher revenues in surface combatants and amphibious assault ships, partially offset by lower revenues on the NSC program. Higher surface combatants revenues were primarily due to increased volumes on
Frank E. Petersen Jr.,
Lenah H. Sutcliffe Higbee, and planning yard services, partially offset by the delivery of
John Finn. Higher amphibious assault ships revenues were primarily due to increased volumes on
Fort Lauderdale,
Tripoli (LHA 7) and
Bougainville, partially offset by lower volume on
Portland and the delivery of USS
John P. Murtha. Lower NSC program revenues were due to the delivery of USCGC
James (NSC 5) in 2015 and the delivery of
Munro in 2016, partially offset by higher volume on
Midgett.
For the full year, Ingalls Shipbuilding segment operating income was $321 million, compared to $379 million in 2015. Segment operating margin was 13.4 percent for 2016, compared to 17.3 percent in 2015. Segment operating income and margin in 2015 included a $136 million favorable impact from an insurance litigation settlement. Adjusting for the insurance litigation settlement, segment operating income in 2016 increased $78 million over 2015, and segment operating margin increased 240 basis points. These increases were primarily due to higher risk retirement on the LPD and DDG programs, partially offset by lower risk retirement on the
America class (LHA 6) program.
Key Ingalls Shipbuilding milestones for the quarter:
- Awarded a $1.15 billion fixed-priced incentive contract for the detail design and construction of Fort Lauderdale
- Awarded a $486 million fixed-priced incentive contract for the construction of a ninth NSC
- Delivered Munro to the U.S. Coast Guard
- Delivered John Finn to the U.S. Navy
- Launched Kimball (NSC 7)
- Launched Paul Ignatius (DDG 117)
Newport News Shipbuilding
Three Months Ended
Year Ended
December 31
December 31
($ in millions)
2016
2015
% Change
2016
2015
% Change
Revenues
$
1,119
$
1,194
(6.3)%
$
4,089
$
4,298
(4.9)%
Segment operating income1
139
116
19.8%
386
401
(3.7)%
Segment operating margin %1
12.4%
9.7%
271 bps
9.4%
9.3%
11 bps
1 Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for reconciliations.
Newport News Shipbuilding revenues for the fourth quarter were $1.1 billion, a decrease of $75 million, or 6.3 percent, from the same period in 2015, due to lower revenues in aircraft carriers and submarines. Lower aircraft carriers revenues were primarily due to decreased volumes on the construction contract for
Gerald R. Ford (CVN 78) and the execution contract for the RCOH of USS
Abraham Lincoln (CVN 72), partially offset by increased volumes on the advance planning contracts for the RCOH of USS
George Washington and the construction preparation contract for
Enterprise (CVN 80). 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.
Newport News Shipbuilding segment operating income for the fourth quarter was $139 million, an increase of $23 million from the same period last year. Segment operating margin was 12.4 percent for the quarter, compared to 9.7 percent in the same period last year. These increases were primarily due to favorable changes in overhead costs and the receipt of a $15 million local government incentive grant, partially offset by lower risk retirement on the VCS program.
For the full year, Newport News Shipbuilding revenues were $4.1 billion, a decrease of $209 million, or 4.9 percent, from 2015, due to lower revenues in aircraft carriers. Lower aircraft carrier revenues were primarily due to decreased volumes on the construction contract for
Gerald R. Ford and the execution contract for the RCOH of USS
Abraham Lincoln, partially offset by increased volumes on the construction contract for
John F. Kennedy (CVN 79) and the advance planning contract for the RCOH of USS
George Washington. Submarines revenues related to the VCS program were relatively flat in 2016 compared to 2015. Increased volumes on Block IV boats and USS
John Warner (SSN 785) post-shakedown availability services were offset by decreased volumes on Block III boats.
For the full year, Newport News Shipbuilding segment operating income was $386 million, a decrease of $15 million from 2015. The decrease was primarily due to lower risk retirement on the VCS program, lower volume and lower risk retirement on the execution contract for the RCOH of USS
Abraham Lincoln and lower volume on
Gerald R. Ford, partially offset by higher volumes on
John F. Kennedy (CVN 79) and the RCOH of USS
George Washington (CVN 73), favorable changes in overhead costs, and the receipt of a $15 million local government incentive grant. Segment operating margin for 2016 was 9.4 percent, compared to 9.3 percent in 2015.
Technical Solutions
Three Months Ended
Year Ended
December 31
December 31
($ in millions)
2016
2015
% Change
2016
2015
% Change
Revenues
$
186
$
154
20.8%
$
691
$
616
12.2%
Segment operating income (loss)1
1
(51)
102.0%
8
(113)
107.1%
Segment operating margin %1
0.5%
(33.1)%
NM3
1.2%
(18.3)%
NM3
Adjusted segment operating income (loss)1,2
1
(8)
112.5%
8
(11)
172.7%
Adjusted segment operating margin %1,2
0.5%
(5.2)%
573 bps
1.2%
(1.8)%
294 bps
1 Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for reconciliations.
2 Non-GAAP measures that exclude the impact of goodwill impairment charges in second and fourth quarters of 2015 and an intangible asset impairment charge in fourth quarter 2015. See Exhibit B for reconciliation.
3 NM means the % change is “not meaningful”.
Technical Solutions revenues for the fourth quarter were $186 million, an increase of $32 million, or 20.8 percent, from the same period in 2015, primarily due to the acquisition of Camber and higher revenues in oil and gas and nuclear and environmental services, partially offset by lower revenues in fleet support. Higher oil and gas revenues were primarily due to increased volume in field services, partially offset by decreased volume in engineering services. Higher nuclear and environmental revenues were primarily due to increased volumes in commercial fabrication services, partially offset by decreased volumes in environmental remediation programs.
Technical Solutions segment operating income for the fourth quarter was $1 million, compared to segment operating loss of $51 million in fourth quarter 2015. Segment operating loss in the fourth quarter of 2015 included a $27 million intangible asset impairment charge and a $16 million goodwill impairment charge. Adjusting for these items, segment operating income in the fourth quarter of 2016 increased $9 million from the same period in 2015. The increase was primarily due to improved performance in oil and gas and fleet support.
For the full year, Technical Solutions revenues were $691 million, an increase of $75 million, or 12.2 percent, from 2015, primarily due to increased volumes in nuclear and environmental and fleet support as well as the acquisition of Camber, partially offset by lower volume in oil and gas.
For the full year, Technical Solutions segment operating income was $8 million, compared to a segment operating loss of $113 million in 2015. Segment operating loss in 2015 included $75 million of goodwill impairment charges and a $27 million intangible asset impairment charge. Adjusting for these items, segment operating income in 2016 increased $19 million over 2015. The increase was primarily due to improved performance in oil and gas, fleet support and nuclear and environmental.
