February 15, 2018
NEWPORT NEWS, Va. (Feb. 15, 2018) -- Huntington Ingalls Industries (NYSE:HII) reported fourth quarter 2017 revenues of $2.0 billion, up 3.9 percent from the fourth quarter of 2016. Operating income in the quarter was $227 million and operating margin was 11.4 percent, compared to $268 million and 13.9 percent, respectively, in the fourth quarter of 2016. Diluted earnings per share in the quarter was $1.41, compared to $4.20 in the same period of 2016. Diluted earnings per share in fourth quarter 2017 included a one-time expense related to the early extinguishment of debt, the tax expense for the revaluation of net deferred tax assets resulting from the enactment of the Tax Act and the tax expense associated with a $214 million acceleration of discretionary pension contributions in 2018. Excluding these items, adjusted diluted earnings per share1 in the quarter was $3.11.
For the full year, revenues of $7.4 billion increased 5.3 percent over 2016. Operating income in 2017 was $865 million and operating margin was 11.6 percent, compared to $858 million and 12.1 percent, respectively, in 2016. Diluted earnings per share for the full year was $10.46, compared to $12.14 in 2016. Excluding the one time items described in the preceding paragraph, adjusted diluted earnings per share1 for 2017 was $12.14.
Cash from operations in 2017 was $814 million and free cash flow1 was $453 million, compared to $822 million and $537 million, respectively, in 2016.
New contract awards for 2017 were approximately $8.1 billion, bringing total backlog to $21.4 billion as of Dec. 31, 2017. Major contract awards in 2017 included Bougainville (LHA 8) construction, the refueling and complex overhaul (RCOH) of the aircraft carrier USS George Washington (CVN 73), a contract to begin integrated product and process development for the U.S. Navy’s new Columbia-class submarines, USS Boise (SSN 764) overhaul, LPD 29 (unnamed) advanced procurement, special selected restricted availability on USS Chosin (CG 65), and Jack H. Lucas (DDG 125) Flight III upgrades.
“Our 2017 results reflect Huntington Ingalls Industries’ continued focus on operational performance,” said Mike Petters, HII’s president and CEO. “Delivering six ships this year, while growing backlog and integrating our Technical Solutions business, demonstrates the commitment of our nearly 38,000 employees.”
Results of Operations Three MonthsSegment Operating Results
Ingalls Shipbuilding
Three Months Ended Year Ended December 31 December 31 ($ in millions)20172016$Ingalls Shipbuilding revenues for the fourth quarter were $638 million, a decrease of $3 million, or 0.5 percent, from the same period in 2016, due to lower revenues in the Legend-class National Security Cutter (NSC) program and surface combatants, partially offset by higher revenues in amphibious assault ships. Lower NSC program revenues were primarily due to decreased volumes on the delivered USCGC Munro (NSC 6) and Kimball (NSC 7), partially offset by increased volumes on Stone (NSC 9) and Midgett (NSC 8) in the quarter. Lower surface combatant revenues were primarily due to decreased volumes on the delivered Ralph Johnson (DDG 114), the delivered USS John Finn (DDG 113) and Lenah H. Sutcliffe Higbee (DDG 123), partially offset by increased volume on Jack H. Lucas (DDG 125). Higher amphibious assault ship revenues were due to increased volumes on Bougainville (LHA 8), Fort Lauderdale (LPD 28) and LPD 29 (unnamed), partially offset by decreased volume on the delivered USS Portland (LPD 27).
Ingalls Shipbuilding segment operating income for the fourth quarter was $75 million, a decrease of $10 million from the same period last year. Segment operating margin in the quarter was 11.8 percent, compared to 13.3 percent in the same period last year. These decreases were primarily due to lower risk retirement on the NSC and DDG programs, partially offset by higher risk retirement on the LPD program.
For the full year, Ingalls Shipbuilding revenues were $2.4 billion, an increase of $31 million, or 1.3 percent, from the same period in 2016, due to higher revenues in amphibious assault ships, partially offset by lower revenues in surface combatants and the Legend-class NSC program. Higher amphibious assault ship revenues were primarily due to increased volumes on Bougainville and Fort Lauderdale, partially offset by decreased volumes on the delivered USS John P. Murtha (LPD 26) and USS Portland. Lower surface combatant revenues were primarily due to decreased volumes on the delivered USS John Finn, Ralph Johnson, Frank E. Peterson Jr. (DDG 121), Paul Ignatius (DDG 117) and Delbert D. Black (DDG 119), partially offset by higher volumes on Jack H. Lucas and Lenah H. Sutcliffe Higbee and the extended selected restricted availability contract for USS Ramage (DDG 61). Revenues on the Legend-class NSC program decreased due to lower volume on the delivered USCGC Munro, partially offset by higher volumes on Stone and Midgett.
For the full year, Ingalls Shipbuilding segment operating income was $313 million, compared to $321 million in 2016. Segment operating margin was 12.9 percent for 2017, compared to 13.4 percent in 2016. These decreases were primarily due to lower risk retirement on the delivered USS John P. Murtha and surface combatants, partially offset by higher risk retirement on Tripoli (LHA 7) and the delivered USS Portland.
Key Ingalls Shipbuilding milestones for the quarter:
Newport News Shipbuilding revenues for the fourth quarter were $1.1 billion, an increase of $20 million, or 1.8 percent, from the same period in 2016, due to higher revenues in naval nuclear support services and aircraft carriers, partially offset by lower revenues in submarines. Higher naval nuclear support services revenues were primarily due to increased volumes in submarine support services, partially offset by lower volume in aircraft carrier support services. Higher aircraft carrier revenues were primarily due to increased volumes on the advance planning and execution contract for the RCOH of USS George Washington (CVN 73), the advance planning contract for Enterprise (CVN 80) and the construction contract for John F. Kennedy (CVN 79), partially offset by decreased volumes on the execution contract for the RCOH of USS Abraham Lincoln (CVN 72), the construction contract for the delivered USS Gerald R. Ford (CVN 78) and the inactivation of the decommissioned Enterprise (CVN 65). Lower submarines revenues related to the Virginia-class (SSN 774) submarine (VCS) program were due to decreased volumes on Block III boats.
Newport News Shipbuilding segment operating income for the fourth quarter was $106 million, a decrease of $33 million from the same period last year. Segment operating margin was 9.3 percent for the quarter, compared to 12.4 percent in the same period last year. These decreases were primarily due to favorable changes in overhead costs in fourth quarter 2016 and the receipt of a $15 million local government incentive grant in fourth quarter 2016, partially offset by higher risk retirement on the aircraft carrier RCOH program in fourth quarter 2017.
For the full year, Newport News Shipbuilding revenues were $4.2 billion, an increase of $75 million, or 1.8 percent, from 2016, due to higher revenues in aircraft carriers and naval nuclear support services, partially offset by lower revenues in submarines. Higher aircraft carrier revenues were primarily due to increased volumes on the advance planning and execution contract for the RCOH of USS George Washington, the construction contract for John F. Kennedy 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, the construction contract for the delivered Gerald R. Ford and the inactivation of the decommissioned Enterprise (CVN 65). Higher naval nuclear support services revenues were primarily due to increased volume in submarine support services and facility maintenance services, partially offset by decreased volume in aircraft carrier support services. Lower submarines revenues related to the VCS program were due to decreased volumes on Block III boats, partially offset by increased volumes on Block IV boats.
For the full year, Newport News Shipbuilding segment operating income was $354 million, a decrease of $32 million from 2016. The decrease was primarily due to favorable changes in overhead costs in fourth quarter 2016, the receipt of a $15 million local government incentive grant in fourth quarter 2016, and lower volume and risk retirement in the VCS program. These decreases were partially offset by the resolution of outstanding contract changes on the inactivation of the decommissioned Enterprise and the RCOH of USS Abraham Lincoln. Segment operating margin for 2017 was 8.5 percent, compared to 9.4 percent in 2016.
Key Newport News Shipbuilding milestones for the quarter:
Technical Solutions revenues for the fourth quarter were $242 million, an increase of $56 million, or 30.1 percent, from the same period in 2016, primarily due to higher revenues in integrated missions solutions services and fleet support. Higher revenues in integrated missions solutions services were due to the acquisition of Camber in December 2016.
Technical Solutions segment operating income for the fourth quarter was $8 million, compared to $1 million in fourth quarter 2016, driven primarily by improved performance in nuclear and environmental services and increased volume in integrated missions solutions services, due to the acquisition of Camber in December 2016.
For the full year, Technical Solutions revenues were $952 million, an increase of $261 million, or 37.8 percent, from 2016, primarily due to higher volumes in integrated missions solutions services following the December 2016 acquisition of Camber, and higher volumes in fleet support and oil and gas services, partially offset by lower volumes in nuclear and environmental services due to the resolution in 2016 of outstanding contract changes on a nuclear and environmental commercial contract.
For the full year, Technical Solutions segment operating income was $21 million, compared to $8 million in 2016. This increase was primarily due to improved performance in oil and gas services and higher volume in integrated missions solutions services following the December 2016 acquisition of Camber, partially offset by the establishment of an allowance for accounts receivable on a nuclear and environmental commercial contract in 2017 and the resolution in 2016 of outstanding contract changes on a nuclear and environmental commercial contract.
Key Technical Solutions milestones for the quarter:
HII is a global, all-domain defense provider. HII's mission is to deliver the world's most powerful ships and all-domain solutions in service of the nation, creating the advantage for our customers to protect peace and freedom around the world.
As the nation's largest military shipbuilder, and with a more than 135-year history of advancing U.S. national security, HII delivers critical capabilities extending from ships to unmanned systems, cyber, ISR, AI/ML and synthetic training. Headquartered in Virginia, HII's workforce is 44,000 strong.
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