HUNTINGTON INGALLS INDUSTRIES REPORTS SECOND QUARTER 2017 RESULTS

• Revenues were $1.86 billion

• Operating margin was 12.8%

• Segment operating margin was 10.1%

• Diluted earnings per share was $3.21

• Cash from operations was $186 million; free cash flow was $107 million

NEWPORT NEWS, Va., Aug. 03, 2017 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported second quarter 2017 revenues of $1.86 billion, up 9.3 percent from the same period last year. The increase was driven primarily by higher volume at Ingalls Shipbuilding and the acquisition of Camber Corporation, which occurred in the fourth quarter of 2016. Diluted earnings per share in the quarter was $3.21, compared to $2.80 in the same period of 2016.

Operating income in the second quarter was $237 million, compared to $217 million in the same period last year. The increase was primarily driven by the FAS/CAS adjustment and improved performance at Ingalls Shipbuilding. Operating margin in the quarter was 12.8 percent, similar to second quarter 2016.

Second quarter cash from operations was $186 million, compared to $169 million in the second quarter of 2016, and free cash flow1 was $107 million.

New business awards for the quarter were approximately $3.4 billion, bringing total backlog to approximately $21.1 billion as of June 30. Major awards in the second quarter included Bougainville (LHA 8) construction and LPD 29 (unnamed) advanced procurement.

“We achieved several significant operational milestones at both Ingalls and Newport News this quarter, most notably the delivery of CVN 78, USS Gerald R. Ford,” said Mike Petters, HII’s president and CEO. “Marking a great accomplishment for HII and the Navy, this first in a class of next-generation aircraft carriers provides our sailors with the most technologically advanced platform to carry out their missions.”

1Free cash flow is a non-GAAP measure. See exhibit B for definition and reconciliation

Results of Operations

Three Months Ended
June 30

Six Months Ended
June 30

(in millions, except per share amounts)

2017

2016

$
Change

%
Change

2017

2016

$
Change

%
Change

Sales and service revenues

$

1,858

$

1,700

$

158

9.3%

$

3,582

$

3,463

$

119

3.4%

Operating income (loss)

237

217

20

9.2%

401

415

(14

)

(3.4)%

Operating margin %

12.8

%

12.8

%

(1) bps

11.2

%

12.0

%

(79) bps

Segment operating income (loss)1

187

184

3

1.6%

307

350

(43

)

(12.3)%

Segment operating margin %1

10.1

%

10.8

%

(76) bps

8.6

%

10.1

%

(154) bps

Net earnings (loss)

147

133

14

10.5%

266

269

(3

)

(1.1)%

Diluted earnings (loss) per share

$

3.21

$

2.80

$

0.41

14.6%

$

5.77

$

5.68

$

0.09

1.6%

Weighted-average diluted shares outstanding

45.8

47.5

46.1

47.4

Adjusted Net Earnings (Loss)

Net earnings (loss)

$

147

$

133

$

14

10.5%

$

266

$

269

$

(3

)

(1.1)%

After-tax FAS/CAS Adjustment2

(32

)

(23

)

(9

)

39.1%

$

(64

)

$

(45

)

$

(19

)

42.2%

Adjusted Net Earnings (Loss)3

$

115

$

110

$

5

4.5%

$

202

$

224

$

(22

)

(9.8)%

Adjusted Diluted EPS

Diluted earnings (loss) per share

$

3.21

$

2.80

$

0.41

14.6%

$

5.77

$

5.68

$

0.09

1.6%

After-tax FAS/CAS Adjustment per share2

(0.70

)

(0.48

)

(0.22

)

45.8%

(1.39

)

$

(0.95

)

(0.44

)

46.3%

Adjusted Diluted EPS3

$

2.51

$

2.32

$0.19 8.2% $4.38 $4.73 $(0.35)(7.4)%

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
June 30

Six Months Ended
June 30

($ in millions)

2017

2016

$
Change

%
Change

2017

2016

$
Change

%
Change

Revenues

$

639

$

585

$

54

9.2%

$

1,189

$

1,171

$

18

1.5%

Segment operating income (loss)1

98

88

10

11.4%

164

170

(6

)

(3.5)%

Segment operating margin %1

15.3

%

15.0

%

29 bps

13.8

%

14.5

%

(72) bps

1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Ingalls revenues for the second quarter increased $54 million, or 9.2 percent, from the same period in 2016, due to higher revenues in amphibious assault ships and the Legend-class National Security Cutter (NSC) program. Higher amphibious assault ships revenues were due to increased volumes on Fort Lauderdale (LPD 28), Bougainville (LHA 8) and Tripoli (LHA 7), partially offset by decreased volume on the delivered USS John P. Murtha (LPD 26). Higher NSC program revenues were due to increased volumes on Stone (NSC 9) and Kimball (NSC 7), partially offset by lower volume on the delivered USCGC Munro (NSC 6). Surface combatant revenues remained relatively constant due to decreased volumes on USS John Finn (DDG 113) following its delivery and Frank E. Petersen Jr. (DDG 121), partially offset by higher volumes on Lenah H. Sutcliffe Higbee (DDG 123) and Jack H. Lucas (DDG 125).

Ingalls segment operating income for the second quarter was $98 million, an increase of $10 million from the same period last year. Segment operating margin in the quarter was 15.3 percent, compared to 15.0 percent in the same period last year. These increases were primarily due to higher risk retirement and improved performance on Tripoli and the NSC program, partially offset by lower risk retirement on the delivered USS John P. Murtha.

Key Ingalls milestones for the quarter:

• Christened Paul Ignatius (DDG 117)

• Launched Tripoli

• Awarded a $3.0 billion contract for the detailed design and construction of Bougainville

• Awarded a contract modification to incorporate Flight III upgrades on Jack H. Lucas

• Awarded a $218 million advance procurement contract for LPD 29 (unnamed)

• Completed Builder’s Sea Trials for Portland (LPD 27)

Newport News Shipbuilding

Three Months Ended
June 30

Six Months Ended
June 30

($ in millions)

2017

2016

$
Change

%
Change

2017

2016

$
Change

%
Change

Revenues

$

1,001

$

999

$

2

0.2%

$

1,972

$

1,992

$

(20

)

(1.0)%

Segment operating income (loss)1

80

98

(18

)

(18.4)%

152

179

(27

)

(15.1)%

Segment operating margin %1

8.0

%

9.8

%

(182) bps

7.7

%

9.0

%

(128) bps

1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Newport News revenues for the second quarter increased $2 million from the same period in 2016, driven by higher revenues in naval nuclear support services, partially offset by lower revenues in submarines and aircraft carriers. Higher revenues in naval nuclear support services were due to increased volumes in submarine support and facility maintenance services. Lower submarines revenues related to the Virginia-class submarine (“VCS”) program were due to decreased volumes on Block III boats, partially offset by increased volumes on Block IV boats. Lower aircraft carriers revenues were due to decreased volumes on the execution contract for the refueling and complex overhaul (RCOH) of USS Abraham Lincoln (CVN 72) and the construction contract for USS Gerald R. Ford (CVN 78), partially offset by increased volumes on the advance planning 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).

Newport News segment operating income for the second quarter was $80 million, a decrease of $18 million from the same period last year. Segment operating margin was 8.0 percent for the quarter, compared to 9.8 percent in the same period last year. These decreases were due to lower risk retirement on the VCS program and lower volume on the RCOH of USS Abraham Lincoln, partially offset by higher volume on the advance planning contract for the RCOH of USS George Washington.

Key Newport News milestones for the quarter:

• Delivered Washington (SSN 787) to the Navy

• Redelivered USS Abraham Lincoln to the Navy

• Delivered USS Gerald R. Ford to the Navy

• Christened and launched Indiana (SSN 789)

• Reached 50 percent structural completion on John F. Kennedy

Technical Solutions

Three Months Ended
June 30

Six Months Ended
June 30

($ in millions)

2017

2016

$
Change

%
Change

2017

2016

$
Change

%
Change

Revenues

$

244

$

143

$

101

70.6%

$

469

$

351

$

118

33.6%

Segment operating income (loss)1

9

(2

)

11

550.0%

(9

)

1

(10

)

NM2

Segment operating margin %1

3.7

%

(1.4

)%

509 bps

(1.9

)%

0.3

%

(220) bps

1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

2 NM means the % of change is “not meaningful”.

Technical Solutions revenues for the second quarter increased $101 million, or 70.6 percent, from the same period last year, primarily due to higher volume in integrated mission solutions services following the acquisition of Camber in the fourth quarter last year and higher volumes in fleet support and oil and gas services.

Segment operating income for the second quarter was $9 million, an increase of $11 million from the same period last year. Segment operating margin was 3.7 percent for the quarter, compared to (1.4) percent in the same period last year. The increase was primarily due to improved performance in oil and gas services and the acquisition of Camber.

Key Technical Solutions milestones for the quarter:

• Awarded a contract to provide engineering services and technical, logistics, maintenance and installation/alteration support to Naval Sea System Command’s Naval Surface Warfare Center Philadelphia Division (NSWCPD) for up to $39 million

• Awarded a task order to provide various engineering support services at Combat Direction Systems Activity, Dam Neck (CDSADN) for up to $40 million

• Awarded a $38 million task order by the U.S. Navy’s Southwest Regional Maintenance Center for a Special Selected Restricted Availability (SSRA) on the guided missile cruiser USS Chosin (CG 65)