HUNTINGTON INGALLS INDUSTRIES REPORTS THIRD QUARTER 2018 RESULTS

• Revenues were $2.1 billion
• Operating margin was 13.9%
• Diluted earnings per share was $5.29
• Cash and cash equivalents at the end of the quarter were $68 million

NEWPORT NEWS, Va., Nov. 08, 2018 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported third quarter 2018 revenues of $2.1 billion, up 11.8 percent from the same period last year. The increase was driven primarily by higher volumes at HII’s Newport News Shipbuilding and Ingalls Shipbuilding segments.

Operating income in the quarter was $290 million and operating margin was 13.9 percent, compared to $241 million and 12.9 percent, respectively, in the third quarter of 2017. The increases in operating income and operating margin were the result of higher segment operating income and a favorable change in the Operating FAS/CAS Adjustment compared to the prior year.

Diluted earnings per share in the quarter was $5.29, compared to $3.27 in the same period of 2017. The increase was predominantly due to higher operating income, a lower statutory federal income tax rate and a favorable change in the non-operating portion of retirement benefit expense.

New contract awards in the quarter were approximately $2.8 billion, bringing total backlog to approximately $22 billion as of Sept. 30.

“I am pleased with the execution by all of our business segments,” said HII President and CEO Mike Petters. “Key contract awards in the third quarter demonstrate the team’s commitment to providing high-quality, cost-effective solutions for our customers.”

Results of Operations

Three Months Ended Nine Months Ended September 30 September 30 (in millions, except per share amounts)2018 2017 $ Change % Change 2018 2017 $ Change % ChangeSales and service revenues$2,083 $1,863 $220 11.8% $5,977 $5,445 $532 9.8%Operating income (loss)290 241 49 20.3% 738 650 88 13.5% Operating margin %13.9% 12.9% 99 bps 12.3% 11.9% 41 bpsSegment operating income (loss)1217 192 25 13.0% 515 499 16 3.2% Segment operating margin %110.4% 10.3% 11 bps 8.6% 9.2% (55) bpsNet earnings (loss)229 149 80 53.7% 624 415 209 50.4%Diluted earnings (loss) per share$5.29 $3.27 $2.02 61.8% $14.15 $9.04 $5.11 56.5% Weighted-average diluted shares outstanding43.3 45.5 44.1 45.9 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 Nine Months Ended September 30 September 30 ($ in millions)2018 2017 $ Change % Change 2018 2017 $ Change % ChangeRevenues$694 $593 $101 17.0% $1,908 $1,782 $126 7.1%Segment operating income (loss)182 74 8 10.8% 229 238 (9) (3.8)%Segment operating margin %111.8% 12.5% (66) bps 12.0% 13.4% (135) bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Ingalls Shipbuilding revenues for the third quarter were $694 million, an increase of $101 million, or 17.0 percent, from the same period in 2017, primarily due to higher revenues in amphibious assault ships and the Legend-class National Security Cutter (NSC) program, partially offset by lower surface combatant revenues. Higher amphibious assault ship revenues were mainly the result of higher volumes on Richard M. McCool Jr. (LPD 29), Bougainville (LHA 8) and Fort Lauderdale (LPD 28), partially offset by lower volumes on the delivered USS Portland (LPD 27) and Tripoli (LHA 7). NSC program revenues increased due to higher volumes on Stone (NSC 9) and NSC 10 (unnamed), partially offset by lower volume on Midgett (NSC 8). Surface combatant revenues decreased primarily as a result of lower volumes on the delivered USS Ralph Johnson (DDG 114), Paul Ignatius (DDG 117) and Lenah H. Sutcliffe Higbee (DDG 123), partially offset by higher volume on USS Fitzgerald (DDG 62) repair and restoration.

Ingalls Shipbuilding segment operating income for the third quarter was $82 million, an increase of $8 million from the same period last year. Segment operating margin in the quarter was 11.8 percent, compared to 12.5 percent in the same period last year. The increase in segment operating income was primarily driven by the higher volumes described above, and the decrease in segment operating margin was mainly due to lower risk retirement on the San Antonio-class (LPD 17) program, partially offset by higher risk retirement on the NSC program.

Key Ingalls Shipbuilding milestones for the quarter:

• Awarded $5.1 billion multiyear contract for six Arleigh Burke-class (DDG 51) destroyers

- $1.8 billion for the first two destroyers currently exercised

• Awarded a $165.5 million advance procurement contract for LPD 30
• Launched the guided missile destroyer Frank E. Petersen Jr. (DDG 121)
• Authenticated the keel of the National Security Cutter Stone (NSC 9)
• Delivered the National Security Cutter Kimball (NSC 7)

Newport News Shipbuilding

Three Months Ended Nine Months Ended September 30 September 30 ($ in millions)2018 2017 $ Change % Change 2018 2017 $ Change % ChangeRevenues$1,179 $1,053 $126 12.0% $3,444 $3,025 $419 13.9%Segment operating income (loss)1119 96 23 24.0% 261 248 13 5.2%Segment operating margin %110.1% 9.1% 98 bps 7.6% 8.2% (62) bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Newport News Shipbuilding revenues for the third quarter were $1.2 billion, an increase of $126 million, or 12.0 percent, from the same period in 2017, mainly due to higher revenues in aircraft carriers and naval nuclear support services. Higher aircraft carrier revenues were primarily the result of increased volumes on the execution contract for the refueling and complex overhaul (RCOH) of USS George Washington (CVN 73) and the advance planning contract for Enterprise (CVN 80), partially offset by decreased volumes on the inactivation of the decommissioned aircraft carrier Enterprise (CVN 65), the execution contract for the RCOH of the redelivered USS Abraham Lincoln (CVN 72) and the construction contract for John F. Kennedy (CVN 79). The increase in naval nuclear support services revenues was mainly the result of higher volumes in submarine support and facility maintenance services.

Newport News Shipbuilding segment operating income for the third quarter was $119 million, an increase of $23 million from the same period last year. Segment operating margin was 10.1 percent for the quarter, compared to 9.1 percent in the same period last year. These increases were primarily the result of favorable changes in workers’ compensation expense, partially offset by the resolution in 2017 of outstanding contract changes on the inactivation of the decommissioned Enterprise (CVN 65) and the RCOH of USS Abraham Lincoln (CVN 72).

Key Newport News Shipbuilding milestones for the quarter:

• Reached 50 percent completion of John F. Kennedy (CVN 79)
• Awarded an advance planning contract for the RCOH of USS John C. Stennis (CVN 74)
• Began post-delivery work on USS Gerald R. Ford (CVN 78)

Technical Solutions

Three Months Ended Nine Months Ended September 30 September 30 ($ in millions)2018 2017 $ Change % Change 2018 2017 % Change % ChangeRevenues$245 $241 $4 1.7% $721 $710 11 1.5%Segment operating income (loss)116 22 $(6) (27.3)% 25 13 12 92.3%Segment operating margin %16.5% 9.1% (260) bps 3.5% 1.8% 164 bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Technical Solutions revenues for the third quarter were $245 million, an increase of $4 million from the same period in 2017, primarily due to higher oil and gas services and mission driven innovative solutions revenues, partially offset by lower fleet support and nuclear and environmental revenues.

Technical Solutions segment operating income for the third quarter was $16 million, a decrease of $6 million from the same period last year. Segment operating margin was 6.5 percent for the quarter, compared to 9.1 percent in the same period of 2017. These decreases were primarily driven by the release in 2017 of a portion of an accounts receivable allowance on a nuclear and environmental commercial contract, partially offset by improved performance in oil and gas services.

Key Technical Solutions milestones for the quarter:

• Triad National Security, a joint venture supported by HII’s Technical Solutions segment, received a notice to proceed with the management transition process at Los Alamos National Laboratory (LANL).
• Awarded a contract valued at $34 million, including options, to provide engineering, technical, repair and logistical support to the U.S. Navy’s Coastal Riverine Forces.