HUNTINGTON INGALLS INDUSTRIES REPORTS THIRD QUARTER 2017 RESULTS

• Revenues were $1.86 billion
• Operating margin was 12.7%
• Segment operating margin was 10.3%
• Diluted earnings per share was $3.27
• Cash from operations was $96 million; free cash flow was $5 million

NEWPORT NEWS, Va., Nov. 08, 2017 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported third quarter 2017 revenues of $1.86 billion, up 10.7 percent from the same period last year. The increase was driven primarily by higher volume at Newport News Shipbuilding and the acquisition of Camber Corp., which occurred in the fourth quarter of 2016.

Diluted earnings per share in the quarter was $3.27, compared to $2.27 in the same period of 2016.

Operating income in the third quarter was $237 million, compared to $175 million in the same period last year. Operating margin in the quarter was 12.7 percent, up from 10.4 percent from the same period last year. The increases in operating income and operating margin were driven primarily by higher income at Newport News Shipbuilding due to the resolution of outstanding contract changes, higher income at Technical Solutions resulting from the reversal of a portion of an accounts receivable allowance related to Westinghouse Electric Company’s bankruptcy filing, a higher FAS/CAS adjustment, and continued solid performance at Ingalls Shipbuilding.

Cash from operations was $96 million in the quarter, compared to $254 million in the third quarter of 2016, and free cash flow1 was $5 million.

New business awards for the quarter were approximately $3 billion, bringing total backlog to approximately $23 billion as of Sept. 30. Major awards in the third quarter included the refueling and complex overhaul (RCOH) of the aircraft carrier USS George Washington (CVN 73).

“Our results reflect solid overall operating performance by the business," said HII President and CEO Mike Petters. “I’m pleased with our third quarter and year-to-date performance and the team’s continued focus on safety, quality, cost and schedule.”

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

Results of Operations

Three Months Ended
September 30 Nine Months Ended
September 30 (in millions, except per share amounts)20172016$ Change% Change 20172016$ Change% ChangeSales and service revenues$1,863 $1,683 $180 10.7% $5,445 $5,146 $299 5.8%Operating income (loss)237 175 62 35.4% 638 590 48 8.1% Operating margin %12.7%10.4% 232 bps 11.7%11.5% 25 bpsSegment operating income (loss)1192 140 52 37.1% 499 490 9 1.8% Segment operating margin %110.3%8.3% 199 bps 9.2%9.5% (36) bpsNet earnings (loss)149 107 42 39.3% 415 376 39 10.4%Diluted earnings (loss) per share$3.27 $2.27 $1.00 44.1% $9.04 $7.93 $1.11 14.0% Weighted-average diluted shares outstanding45.5 47.2 45.9 47.4 Adjusted Net Earnings (Loss) Net earnings (loss)$149 $107 $42 39.3% $415 $376 $39 10.4%After-tax FAS/CAS Adjustment2(30)(24)(6)25.0% $(94)$(70)$(24)34.3%Adjusted Net Earnings (Loss)3$119 $83 $36 43.4% $321 $306 $15 4.9% Adjusted Diluted EPS Diluted earnings (loss) per share$3.27 $2.27 $1.00 44.1% $9.04 $7.93 $1.11 14.0%After-tax FAS/CAS Adjustment per share2(0.66)(0.51)(0.15)29.4% (2.05)$(1.48)(0.57)38.5%Adjusted Diluted EPS3$2.61 $1.76 $0.85 48.3% $6.99 $6.45 $0.54 8.4% 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
September 30 Nine Months Ended
September 30 ($ in millions)20172016$ Change% Change 20172016$ Change% ChangeRevenues$593 $577 $16 2.8% $1,782 $1,748 $34 1.9%Segment operating income (loss)174 66 8 12.1% 238 236 2 0.8%Segment operating margin %112.5%11.4% 104 bps 13.4%13.5% (15) bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Ingalls revenues for the third quarter increased $16 million, or 2.8 percent, from the same period in 2016, primarily due to higher revenues in amphibious assault ships, partially offset by lower revenues in the Legend-class National Security Cutter (NSC) program. Higher amphibious assault ships revenues were primarily due to increased volumes on Fort Lauderdale (LPD 28) and Bougainville (LHA 8), partially offset by decreased volumes on the delivered USS John P. Murtha (LPD 26), the delivered Portland (LPD 27) and Tripoli (LHA 7). Lower NSC program revenues were due to decreased volumes on the delivered USCGC Munro (NSC 6) and Kimball (NSC 7), partially offset by higher volume on Stone (NSC 9). Surface combatant revenues remained relatively constant due to decreased volumes on Frank E. Petersen Jr. (DDG 121), USS John Finn (DDG 113) following its delivery and Ralph Johnson (DDG 114), partially offset by higher volumes on Jack H. Lucas (DDG 125) and Lenah H. Sutcliffe Higbee (DDG 123).

Ingalls segment operating income for the third quarter was $74 million, an increase of $8 million from the same period last year. Segment operating margin in the quarter was 12.5 percent, compared to 11.4 percent in the same period last year. These increases were primarily due to higher risk retirement on Portland, partially offset by lower risk retirement on the NSC program.

Key Ingalls milestones for the quarter:

• Completed builder’s sea trials and acceptance sea trials for the guided missile destroyer Ralph Johnson
• Completed overhaul and modification of the guided missile destroyer USS Ramage (DDG 61)
• Selected to repair the guided missile destroyer USS Fitzgerald (DDG 62)
• Launched the guided missile destroyer Delbert D. Black (DDG 119)
• Christened Tripoli
• Completed acceptance sea trials and delivered the amphibious transport dock Portland

Newport News Shipbuilding

Three Months Ended
September 30 Nine Months Ended
September 30 ($ in millions)20172016$ Change% Change 20172016$ Change% ChangeRevenues$1,053 $978 $75 7.7% $3,025 $2,970 $55 1.9%Segment operating income (loss)196 68 28 41.2% 248 247 1 0.4%Segment operating margin %19.1%7.0% 216 bps 8.2%8.3% (12) bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Newport News revenues for the third quarter increased $75 million from the same period in 2016, driven by higher revenues in aircraft carriers, submarines and naval nuclear support services. Higher revenues in aircraft carriers were primarily due to increased volumes on the RCOH of USS George Washington (CVN 73), the construction contract for John F. Kennedy (CVN 79) and the advance planning contract for Enterprise (CVN 80), partially offset by decreased volumes on the RCOH for the redelivered USS Abraham Lincoln (CVN 72) and the construction contract on the delivered USS Gerald R. Ford (CVN 78). Higher revenues related to the Virginia-class submarine (“VCS”) program were primarily due to increased volumes on Block IV boats, partially offset by decreased volumes on Block III boats. Higher revenues in naval nuclear support services were driven by increased volume in submarine support, partially offset by decreased volume in aircraft carrier support.

Newport News segment operating income for the third quarter was $96 million, an increase of $28 million from the same period last year. Segment operating margin was 9.1 percent for the quarter, compared to 7.0 percent in the same period last year. The increase was primarily due to the resolution of outstanding contract changes on the inactivation of the decommissioned USS Enterprise (CVN 65) and the RCOH of USS Abraham Lincoln, partially offset by lower risk retirement on VCS Block III boats.

Key Newport News milestones for the quarter:

• Awarded a $2.8 billion contract to execute the RCOH of USS George Washington
• Awarded a $219 million contract to execute maintenance and modernization efforts on the submarine USS Columbus (SSN 762)
• Completed first cut of steel on Enterprise (CVN 80)
• Reached 52-month labor agreement with United Steelworkers of America

Technical Solutions

Three Months Ended
September 30 Nine Months Ended
September 30 ($ in millions)20172016$ Change% Change 20172016$ Change% ChangeRevenues$241 $154 $87 56.5% $710 $505 $205 40.6%Segment operating income (loss)122 6 16 266.7% 13 7 6 85.7%Segment operating margin %19.1%3.9% 523 bps 1.8%1.4% 44 bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Technical Solutions revenues for the third quarter increased $87 million, or 56.5 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.

Segment operating income for the third quarter was $22 million, an increase of $16 million from the same period last year. Segment operating margin was 9.1 percent for the quarter, compared to 3.9 percent in the same period last year. The increases were primarily due to the reversal of a portion of an accounts receivable allowance on a nuclear and environmental commercial contract.

Key Technical Solutions milestones for the quarter:

• Received a “notice to proceed” from the Department of Energy’s National Nuclear Security Administration allowing transition activities to begin for the management and operation of the Nevada National Security Site
• Successfully completed unmanned missions testing of dual-mode undersea vehicle Proteus
• Awarded a contract with a potential value of $78 million for technical and engineering support of U.S. Marine Corps’ Chemical, Biological, Radiological, Nuclear and High-Yield Explosive Consequence Management program
• Awarded a contract with a potential value of $43 million over three years to provide training services to the U.S. Navy for tactical afloat shipboard, ashore and submarine C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) systems