HUNTINGTON INGALLS INDUSTRIES REPORTS SECOND QUARTER 2019 RESULTS

• Revenues were $2.2 billion in the quarter
• Operating margin was 8.0%
• Diluted earnings per share was $3.07

NEWPORT NEWS, Va., Aug. 01, 2019 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE: HII) reported second quarter 2019 revenues of $2.2 billion, up 8.3% from the second quarter of 2018. The increase was driven primarily by growth at HII’s Technical Solutions division from recent acquisitions and higher volume at HII’s Newport News Shipbuilding division.

Operating income in the quarter was $175 million and operating margin was 8.0%, compared to $257
million and 12.7%, respectively, in the second quarter of 2018. The decreases in operating income and operating margin were mainly the result of lower segment operating income, as well as an unfavorable change in the operating FAS/CAS adjustment compared to the prior year.

Diluted earnings per share in the quarter was $3.07, compared to $5.40 in the same period of 2018. The decrease was predominantly due to lower operating income, an unfavorable change in the non-operating retirement benefit and a higher effective income tax rate compared to the prior year.

Second quarter cash from operations was negative $44 million and free cash flow1 was negative $135 million, compared to positive $239 million and positive $154 million, respectively, in the second quarter of 2018.

New contract awards in the quarter were approximately $900 million, bringing total backlog to approximately $39.4 billion as of June 30.

“We are very pleased with the revenue growth achieved in the first half of the year,” said Mike Petters, HII’s president and CEO. “We remain confident we will achieve program milestones in the second half of the year that set the foundation for achieving our targeted shipbuilding margins in 2020.”

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

Results of Operations

Three Months Ended Six Months Ended June 30 June 30 (in millions, except per share amounts)20192018$ Change% Change 20192018$ Change% ChangeSales and service revenues$2,188 $2,020 $168 8.3% $4,268 $3,894 $374 9.6%Operating income175 257 (82)(31.9)% 336 448 (112)(25.0)% Operating margin %8.0%12.7% (472) bps 7.9%11.5% (363) bpsSegment operating income1138 181 (43)(23.8)% 267 298 (31)(10.4)% Segment operating margin %16.3%9.0% (265) bps 6.3%7.7% (140) bpsNet earnings128 239 (111)(46.4)% 246 395 (149)(37.7)%Diluted earnings per share$3.07 $5.40 $(2.33)(43.1)% $5.91 $8.86 $(2.95)(33.3)% Weighted-average diluted shares outstanding41.7 44.3 41.6 44.6 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 Six Months Ended June 30 June 30 ($ in millions)20192018$ Change% Change 20192018$ Change% ChangeRevenues$622 $629 $(7)(1.1)% $1,206 $1,214 $(8)(0.7)%Segment operating income169 83 (14)(16.9)% 115 147 (32)(21.8)%Segment operating margin %111.1%13.2% (210) bps 9.5%12.1% (257) bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Ingalls Shipbuilding revenues for the second quarter were $622 million, a decrease of $7 million from the same period in 2018, primarily driven by lower revenues in the Legend-class National Security Cutter (NSC) program and amphibious assault ships. Revenues on the NSC program decreased due to lower volumes on Stone (NSC 9), Kimball (NSC 7) and Midgett (NSC 8), partially offset by higher volumes on NSC 11 (unnamed) and NSC 10 (unnamed). Amphibious assault ship revenues decreased as a result of lower volumes on Tripoli (LHA 7) and Fort Lauderdale (LPD 28), partially offset by higher volumes on Bougainville (LHA 8), LPD 30 (unnamed) and Richard M. McCool Jr. (LPD 29). Surface combatant revenues remained constant due to higher volumes on USS Fitzgerald (DDG 62) repair and restoration, Jack H. Lucas (DDG 125) and Jeremiah Denton (DDG 129), offset by lower volumes on Delbert D. Black (DDG 119), Paul Ignatius (DDG 117) and Frank E. Petersen Jr. (DDG 121).

Ingalls Shipbuilding segment operating income for the second quarter was $69 million, a decrease of $14 million from the same period last year. Segment operating margin in the quarter was 11.1%, compared to 13.2% in the same period last year. The decreases were primarily due to lower risk retirement on the LPD program, as well as recoveries related to a settlement agreement in 2018, partially offset by higher risk retirement on the NSC program.

Key Ingalls Shipbuilding milestones for the quarter:

• Completed acceptance trials and delivery of National Security Cutter Midgett (NSC 8)
• Authenticated the keel of amphibious transport dock Richard M. McCool Jr. (LPD 29)
• Awarded contract with potential value of $932 million for planning yard services in support of in-service littoral combat ships (LCS)

Newport News Shipbuilding

Three Months Ended Six Months Ended June 30 June 30 ($ in millions)20192018$ Change% Change 20192018$ Change% ChangeRevenues$1,267 $1,183 $84 7.1% $2,532 $2,265 $267 11.8%Segment operating income170 91 (21)(23.1)% 148 142 6 4.2%Segment operating margin %15.5%7.7% (217) bps 5.8%6.3% (42) bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Newport News Shipbuilding revenues for the second quarter were $1.3 billion, an increase of $84 million, or 7.1%, from the same period in 2018, primarily driven by higher revenues in aircraft carriers and naval nuclear support services, partially offset by lower revenues in submarines. Aircraft carrier revenues increased primarily as a result of higher volumes on the advance planning contract for Enterprise (CVN 80) and the advance planning contract for the refueling and complex overhaul (RCOH) of USS John C. Stennis (CVN 74), partially offset by lower volumes on John F. Kennedy (CVN 79) and the RCOH of USS George Washington (CVN 73). Naval nuclear support services revenues increased primarily as a result of higher volumes in submarine support, facility maintenance and carrier fleet support services. Submarine revenues related to the Virginia-class submarine (VCS) program decreased due to lower volumes on Block III and Block IV boats, partially offset by higher volumes on Block V boats.

Newport News Shipbuilding segment operating income for the second quarter was $70 million, a decrease of $21
million from the same period last year. Segment operating margin was 5.5% for the quarter, compared to 7.7% in the same period last year. These decreases were primarily due to lower performance on the VCS program.

Key Newport News Shipbuilding milestones for the quarter:

• Achieved approximately 94% structural completion on the aircraft carrier John F. Kennedy (CVN 79)
• Achieved approximately 55% completion on the RCOH of USS George Washington (CVN 73)
• Awarded advanced procurement contract modification for Virginia-class Block V submarines
• Began advanced construction and completed the first cut of steel for the Columbia-class submarine program

Technical Solutions

Three Months Ended Six Months Ended June 30 June 30 ($ in millions)20192018$ Change% Change 20192018$ Change% ChangeRevenues$336 $243 $93 38.3% $593 $476 117 24.6%Segment operating income (loss)1(1)7 $(8)(114.3)% 4 9 (5)(55.6)%Segment operating margin %1(0.3)%2.9% (318) bps 0.7%1.9% (122) bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Technical Solutions revenues for the second quarter were $336 million, an increase of $93 million, or 38.3%, 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, fleet support and nuclear and environmental revenues.

Technical Solutions segment operating loss for the second quarter was $1 million, compared to operating income of $7 million in the second quarter of 2018. The decrease was primarily due to lower performance in fleet support services due to a $12 million forward loss on a contract, partially offset by higher equity income from our nuclear and environmental joint ventures.

Key Technical Solutions milestones for the quarter:

• Book-to-bill of 1.3 achieved in the quarter, driven by strong awards in mission driven innovative solutions and oil and gas