- Revenues were $2.2 billion in the quarter
- Operating margin was 9.6%
- Diluted earnings per share was $3.74
- Cash from operations was $363 million; free cash flow was $250 million1
NEWPORT NEWS, Va., Nov. 07, 2019 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE: HII) reported third quarter 2019 revenues of $2.2 billion, up 6.5% from the third 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 $214 million and operating margin was 9.6%, compared to $290 million and 13.9%, respectively, in the third quarter of 2018. The decreases in operating income and operating margin were mainly the result of a lower operating FAS/CAS adjustment, as well as lower segment operating income, compared to the prior year.
Diluted earnings per share in the quarter was $3.74, compared to $5.29 in the same period of 2018. The decrease was predominantly due to lower operating income and a lower non-operating retirement benefit compared to the prior year.
Third quarter cash from operations was $363 million and free cash flow1 was $250 million, compared to negative $93 million and negative $195 million, respectively, in the third quarter of 2018.
New contract awards in the quarter were approximately $2.1 billion, bringing total backlog to approximately $39.2 billion as of Sept. 30.
“We are very pleased with shipbuilding program execution in the quarter, most notably completing the undocking of USS
George Washington (CVN 73),” said Mike Petters, HII’s president and CEO. “We remain confident that execution of critical shipbuilding program milestones in the fourth quarter will create the momentum to achieve shipbuilding margins of 9 to 10 percent in 2020.”
1 Non-GAAP measure. See Exhibit B for definition and reconciliation.
Results of Operations
Three Months Ended
Nine Months Ended
September 30
September 30
(in millions, except per share amounts)
2019
2018
$ Change
% Change
2019
2018
$ Change
% Change
Sales and service revenues
$
2,219
$
2,083
$
136
6.5
%
$
6,487
$
5,977
$
510
8.5
%
Operating income
214
290
(76
)
(26.2
)%
550
738
(188
)
(25.5
)%
Operating margin %
9.6
%
13.9
%
(428) bps
8.5
%
12.3
%
(387) bps
Segment operating income1
191
217
(26
)
(12.0
)%
458
515
(57
)
(11.1
)%
Segment operating margin %1
8.6
%
10.4
%
(181) bps
7.1
%
8.6
%
(156) bps
Net earnings
154
229
(75
)
(32.8
)%
400
624
(224
)
(35.9
)%
Diluted earnings per share
$
3.74
$
5.29
$
(1.55
)
(29.3
)%
$
9.66
$
14.15
$
(4.49
)
(31.7
)%
Weighted-average diluted shares outstanding
41.2
43.3
41.4
44.1
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)
2019
2018
$ Change
% Change
2019
2018
$ Change
% Change
Revenues
$
647
$
694
$
(47
)
(6.8
)%
$
1,853
$
1,908
$
(55
)
(2.9
)%
Segment operating income1
61
82
(21
)
(25.6
)%
176
229
(53
)
(23.1
)%
Segment operating margin %1
9.4
%
11.8
%
(239) bps
9.5
%
12.0
%
(250) bps
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Ingalls Shipbuilding revenues for the third quarter were $647 million, a decrease of $47 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 USCGC
Kimball (NSC 7), USCGC
Midgett (NSC 8) and
Stone (NSC 9), partially offset by higher volumes on NSC 11 (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
Harrisburg (LPD 30) and
Bougainville (LHA 8). Surface combatant revenues were consistent with the prior year due to higher volumes on
Ted Stevens (DDG 128), USS
Fitzgerald (DDG 62) repair and restoration,
Jeremiah Denton (DDG 129) and
Jack H. Lucas (DDG 125), offset by lower volumes on
Delbert D. Black (DDG 119),
Paul Ignatius (DDG 117),
Frank E. Petersen Jr. (DDG 121) and
Lenah H. Sutcliffe Higbee (DDG 123).
Ingalls Shipbuilding segment operating income for the third quarter was $61 million, a decrease of $21 million from the same period last year. Segment operating margin in the quarter was 9.4%, compared to 11.8% in the same period last year. The decreases were primarily due to lower risk retirement on the NSC program.
Key Ingalls Shipbuilding milestones for the quarter:
- Completed builder’s trials for Tripoli (LHA 7)
- Completed external structural work on Stone (NSC 9)
Newport News Shipbuilding
Three Months Ended
Nine Months Ended
September 30
September 30
($ in millions)
2019
2018
$ Change
% Change
2019
2018
$ Change
% Change
Revenues
$
1,264
$
1,179
$
85
7.2
%
$
3,796
$
3,444
$
352
10.2
%
Segment operating income1
109
119
(10
)
(8.4
)%
257
261
(4
)
(1.5
)%
Segment operating margin %1
8.6
%
10.1
%
(147) bps
6.8
%
7.6
%
(81) bps
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Newport News Shipbuilding revenues for the third quarter were $1.3 billion, an increase of $85 million, or 7.2%, from the same period in 2018, primarily driven by higher revenues in aircraft carriers and 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 volume on the RCOH of USS
George Washington (CVN 73). Submarine revenues increased due to higher volumes on
Columbia-class and
Virginia-class (VCS) submarines. VCS program volumes increased due to higher volumes on Block V boats, partially offset by lower volumes on Block III boats.
Newport News Shipbuilding segment operating income for the third quarter was $109 million, a decrease of $10 million from the same period last year. Segment operating margin was 8.6% for the quarter, compared to 10.1% in the same period last year. These decreases were primarily due to a workers’ compensation benefit of $43 million in the same period last year, partially offset by contract changes in the current period for submarine support services related to work on
Los Angeles-class submarines.
Key Newport News Shipbuilding milestones for the quarter:
- Achieved approximately 96% structural completion on the aircraft carrier John F. Kennedy (CVN 79)
- Completed the undocking of USS George Washington (CVN 73) and achieved approximately 64% completion on the RCOH
Technical Solutions
Three Months Ended
Nine Months Ended
September 30
September 30
($ in millions)
2019
2018
$ Change
% Change
2019
2018
$ Change
% Change
Revenues
$
347
$
245
$
102
41.6
%
$
940
$
721
219
30.4
%
Segment operating income1
21
16
$
5
31.3
%
25
25
—
—
%
Segment operating margin %1
6.1
%
6.5
%
(48) bps
2.7
%
3.5
%
(81) bps
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Technical Solutions revenues for the third quarter were $347 million, an increase of $102 million, or 41.6%, from the same period in 2018, driven by the acquisitions of G2, Inc. and Fulcrum IT Services, as well as organic growth in fleet support and oil and gas services revenues.
Technical Solutions segment operating income for the third quarter was $21 million, an increase of $5 million from the same period last year. Segment operating margin was 6.1% for the quarter, compared to 6.5% in the same period last year. The increase in segment operating income was primarily due to improved performance on nuclear and environmental contracts.
Key Technical Solutions milestones for the quarter:
- Captured a multiple award contract to continue providing U.S. Navy installation and support services for command, control, communications, computer, intelligence, surveillance and reconnaissance (C4ISR) and supporting systems to the Naval Information Warfare Systems Command (NAVWAR)
- Captured a multiple award contract by the Defense Intelligence Agency to provide a wide range of analytic and operational support services
