November 4, 2021
NEWPORT NEWS, Va., (Nov. 04, 2021) -- Huntington Ingalls Industries (NYSE:HII) reported third quarter 2021 revenues of $2.3 billion, up 1.0% from the third quarter of 2020.
Operating income in the third quarter of 2021 was $118 million and operating margin was 5.0%, compared to $222 million and 9.6%, respectively, in the third quarter of 2020. The decreases in operating income and operating margin were primarily the result of a less favorable operating FAS/CAS adjustment.
Segment operating income1 in the third quarter of 2021 was $163 million and segment operating margin1 was 7.0%, compared to segment operating income1 of $162 million and segment operating margin1 of 7.0% in the third quarter of 2020.
Net earnings in the third quarter of 2021 were $147 million, compared to $222 million in the third quarter of 2020. Diluted earnings per share in the third quarter of 2021 was $3.65, compared to $5.45 in the same period of 2020. Third quarter 2021 results included approximately $15 million of non-recurring, pre-tax transaction expenses related to the acquisition of Alion. Excluding the impacts of pension, adjusted earnings per share1 in the quarter was $3.58, compared to $3.73 in the same period of 2020.
Third quarter cash from operations was $350 million and free cash flow1 was $277 million, compared to $222 million and $160 million, respectively, in the third quarter of 2020.
New contract awards in the third quarter of 2021 were approximately $600 million, bringing total backlog to approximately $50.1 billion as of Sept. 30, 2021.
“We are pleased with the third quarter results that represent another quarter of consistent shipbuilding program execution while we continue to navigate the challenges posed by the COVID-19 pandemic,” said Mike Petters, HII’s president and CEO. "During the quarter we closed the acquisition of Alion Science and Technology, and as we work to integrate it into our Technical Solutions division, we remain very excited about the significant growth avenues across the combined business that we believe will drive significant long-term value creation."
1 Non-GAAP measure. See Exhibit B for definitions and reconciliations.
Results of Operations Three Months Ended Nine Months Ended September 30 September 30 ($ in millions, except per share amounts)20212020$ Change% Change 20212020$ Change% ChangeSales and service revenues$2,338 $2,314 $24 1.0 % $6,847 $6,604 $243 3.7 %Operating income118 222 (104) (46.8)% 393 494 (101) (20.4)%Operating margin %5.0%9.6% (455) bps 5.7%7.5% (174) bpsSegment operating income1163 162 1 0.6 % 523 313 210 67.1 %Segment operating margin %17.0%7.0% (3) bps 7.6%4.7% 290 bpsNet earnings147 222 (75) (33.8)% 424 447 (23) (5.1)%Diluted earnings per share$3.65 $5.45 $(1.80) (33.0)% $10.52 $10.98 $(0.46) (4.2)% Pension Adjusted Earnings Adjusted Net earnings2144 152 (8) (5.3)% 411 230 181 78.7 %Adjusted Diluted earnings per share2$3.58 $3.73 $(0.15) (4.0)% $10.20 $5.65 $4.55 80.5 %1 Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for definitions and reconciliations.2 Non-GAAP measures that exclude the impacts of the FAS/CAS Adjustment. See Exhibit B for definition and reconciliation.
Segment Operating Results Ingalls Shipbuilding Three Months Ended Nine Months Ended September 30 September 30 ($ in millions)20212020$ Change% Change 20212020$ Change% ChangeRevenues$628 $675 $(47) (7.0)% $1,947 $1,926 $21 1.1%Segment operating income162 62 — — % 233 185 48 25.9%Segment operating margin %19.9%9.2% 69 bps 12.0%9.6% 236 bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Ingalls Shipbuilding revenues for the third quarter of 2021 were $628 million, a decrease of $47 million, or 7.0%, from the same period in 2020, primarily driven by lower revenues in the Legend-class National Security Cutter (NSC) program, the Arleigh Burke-class guided missile (DDG) program and amphibious assault ships. Revenues on the NSC program decreased due to lower volumes on Stone (NSC 9) following its delivery. DDG program revenues decreased due to lower volumes on Ted Stevens (DDG 128) and USS Delbert D. Black (DDG 119) following its delivery, partially offset by higher volumes on Jack H. Lucas (DDG 125). Revenues on amphibious assault ships decreased due to lower volumes on Bougainville (LHA 8), partially offset by higher volumes on LHA 9 (unnamed).
Ingalls Shipbuilding segment operating income1 for the third quarter of 2021 was $62 million, in line with segment operating income1 of $62 million from the same period in 2020. Segment operating margin1 in the third quarter of 2021 was 9.9%, compared to 9.2% in the same period last year. The increase in segment operating margin1 was primarily driven by the recognition of an incentive on the DDG program, as well as higher risk retirement on the San Antonio-class amphibious transport dock (LPD) program, partially offset by lower risk retirement on the NSC program.
1Non-GAAP measure. See Exhibit B for definitions and reconciliations.
Key Ingalls Shipbuilding milestones for the quarter:
Newport News Shipbuilding revenues for the third quarter of 2021 were $1.4 billion, a decrease of $4 million, or 0.3%, from the same period in 2020, primarily driven by lower revenues in naval nuclear support services, partially offset by higher revenues in submarines and aircraft carriers. Naval nuclear support service revenues decreased primarily as a result of lower volumes in submarine fleet support services and facility maintenance services, partially offset by higher volumes in carrier fleet support services. Submarine revenues increased due to higher volumes in Block V boats of the Virginia-class submarine (VCS) program, submarine support services and the Columbia-class submarine program, partially offset by lower volumes in Block IV boats of the VCS program. Aircraft carrier revenues increased primarily as a result of higher volumes on the refueling and complex overhaul (RCOH) of USS John C. Stennis (CVN 74) and the construction of Doris Miller (CVN 81) and Enterprise (CVN 80), partially offset by lower volumes on the RCOH of USS George Washington (CVN 73) and the construction of John F. Kennedy (CVN 79).
Newport News Shipbuilding segment operating income1 for the third quarter of 2021 was $88 million, an increase of $9 million from the same period in 2020. Segment operating margin1 in the third quarter of 2021 was 6.5%, compared to 5.8% in the same period last year. The increases were primarily due to higher risk retirement on the RCOH of USS George Washington (CVN 73), and Block IV boats of the VCS program, partially offset by lower risk retirement on naval nuclear support services.
Key Newport News Shipbuilding milestones for the quarter:
1Non-GAAP measure. See Exhibit B for definitions and reconciliations.
Technical Solutions Three Months Ended Nine Months Ended September 30 September 30 ($ in millions)20212020$ Change% Change 20212020$ Change% ChangeRevenues$394 $320 $74 23.1 % $890 $957 (67) (7.0)%Segment operating income113 21 $(8) (38.1)% 33 23 10 43.5 %Segment operating margin %13.3%6.6% (326) bps 3.7%2.4% 130 bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.Technical Solutions revenues for the third quarter of 2021 were $394 million, an increase of $74 million from the same period in 2020. The increase was due primarily to the acquisition of Alion, partially offset by the divestiture of our oil and gas business and contribution of the San Diego Shipyard to a joint venture in the first quarter of this year. The acquisition of Alion closed on Aug. 19, 2021, and third quarter 2021 results include approximately $163 million of revenue attributable to Alion.
Technical Solutions segment operating income1 for the third quarter of 2021 was $13 million, compared to $21 million in the third quarter of 2020. Segment operating margin1 in the third quarter of 2021 was 3.3%, compared to
6.6% in the same period last year. The decrease was primarily driven by the inclusion of approximately $8 million of Alion related purchase intangible amortization, as well as lower performance in Defense and Federal Solutions, the divestiture of our oil and gas business, and the contribution of our San Diego Shipyard to a joint venture in the first quarter of this year. Third quarter 2021 results include approximately $4 million of segment operating income1 attributable to Alion, net of the aforementioned purchase intangible amortization.
Key Technical Solutions milestones for the quarter:
1Non-GAAP measure. See Exhibit B for definitions and reconciliations.
2021 Outlook1
HII is America’s largest shipbuilder, delivering the world’s most powerful ships and all-domain mission technologies, including unmanned systems, to U.S. and allied defense customers. HII is the largest producer of unmanned underwater vehicles for the U.S. Navy and the world.
With a more than 140-year history of advancing U.S. national security, HII builds and integrates defense capabilities extending from the core fleet to C6ISR, AI/ML, EW and synthetic training. Headquartered in Virginia, HII’s workforce is 44,000 strong.
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