Huntington Ingalls Industries (NYSE:HII) reported fourth quarter
2020 revenues of $2.8 billion, up 14.3% from the fourth quarter of
2019. Operating income in the quarter was $305 million and
operating margin was 11.1%, compared to $186 million and 7.7%,
respectively, in the fourth quarter of 2019. Diluted earnings per
share in the quarter was $6.15, compared to $3.61 in the same
period of 2019.
For the full year, revenues of $9.4 billion increased 5.2% over
2019. Operating income in 2020 was $799 million and operating
margin was 8.5%, compared to $736 million and 8.3%, respectively,
in 2019. Diluted earnings per share for the full year was $17.14,
compared to $13.26 in 2019.
Cash from operations in 2020 was $1.1 billion and free cash
flow1 was $757 million, compared to $896 million and $460 million,
respectively, in 2019.
New contract awards in the quarter were approximately $3.5
billion, bringing total backlog to approximately $46.0 billion as
of Dec. 31, 2020.
“2020 will be remembered as one of the most challenging business
environments that we have ever had to navigate. Throughout the
COVID-19 pandemic, we have made decisions that are focused on the
safety and well being of our employees, and I could not be prouder
of the way our team responded to the challenges. We enter 2021 as a
stronger and more agile company with positive momentum and an
enormous opportunity in front of us to leverage our $46 billion
backlog to drive long-term, sustainable value creation,” said Mike
Petters, HII’s president and CEO.
2021 Financial Outlook
- Expect FY21 shipbuilding revenue1 between $8.2 and $8.4
billion; and shipbuilding operating margin1 between 7.0% and
8.0%
- Expect FY21 Technical Solutions revenue of approximately $1.0
billion and segment operating margin1 between 3.0% and 5.0%
- Expect FY21 free cash flow1 between $150 and $250 million
- Expect cumulative FY20-FY24 free cash flow1 of approximately $3
billion
Results of Operations
| |
Three Months Ended |
|
|
|
Year Ended |
|
|
| |
December 31 |
|
|
|
December 31 |
|
|
| ($ in
millions, except per share amounts) |
2020 |
2019 |
$ Change |
% Change |
|
2020 |
2019 |
$ Change |
% Change |
|
Sales and service revenues |
$ |
2,757 |
|
$ |
2,412 |
|
$ |
345 |
|
14.3 |
% |
|
$ |
9,361 |
|
$ |
8,899 |
|
$ |
462 |
|
|
5.2 |
|
% |
| Operating income |
305 |
|
186 |
|
119 |
|
64.0 |
% |
|
799 |
|
736 |
|
63 |
|
|
8.6 |
|
% |
|
Operating margin % |
11.1 |
% |
7.7 |
% |
|
335 bps |
|
8.5 |
% |
8.3 |
% |
|
26 bps |
| Segment operating income1 |
242 |
|
173 |
|
69 |
|
39.9 |
% |
|
555 |
|
631 |
|
(76 |
) |
|
(12.0 |
) |
% |
|
Segment operating margin %1 |
8.8 |
% |
7.2 |
% |
|
161 bps |
|
5.9 |
% |
7.1 |
% |
|
(116) bps |
| Net earnings |
249 |
|
149 |
|
100 |
|
67.1 |
% |
|
696 |
|
549 |
|
147 |
|
|
26.8 |
|
% |
| Diluted earnings per
share |
$ |
6.15 |
|
$ |
3.61 |
|
$ |
2.54 |
|
70.4 |
% |
|
$ |
17.14 |
|
$ |
13.26 |
|
$ |
3.88 |
|
|
29.3 |
|
% |
| |
|
|
|
|
|
|
|
|
|
| Pension Adjusted
Figures |
|
|
|
|
|
|
|
|
|
| Net earnings2 |
176 |
|
122 |
|
54 |
|
44.3 |
% |
|
406 |
|
442 |
|
(36 |
) |
|
(8.1 |
) |
% |
| Diluted
earnings per share2 |
$ |
4.35 |
|
$ |
2.96 |
|
$ |
1.39 |
|
47.0 |
% |
|
$ |
10.00 |
|
$ |
10.66 |
|
$ |
(0.66 |
) |
|
(6.2 |
) |
% |
| 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 reconciliation. |
Segment Operating Results
Ingalls Shipbuilding
| |
Three Months Ended |
|
|
|
Year Ended |
|
|
| |
December 31 |
|
|
|
December 31 |
|
|
| ($ in
millions) |
2020 |
2019 |
$ Change |
% Change |
|
2020 |
2019 |
$ Change |
% Change |
|
Revenues |
$ |
752 |
|
$ |
702 |
|
$ |
50 |
|
7.1 |
% |
|
$ |
2,678 |
|
$ |
2,555 |
|
$ |
123 |
|
4.8 |
% |
| Segment operating income1 |
96 |
|
59 |
|
37 |
|
62.7 |
% |
|
281 |
|
235 |
|
46 |
|
19.6 |
% |
| Segment operating margin
%1 |
12.8 |
% |
8.4 |
% |
|
436 bps |
|
10.5 |
% |
9.2 |
% |
|
130 bps |
| 1 Non-GAAP measures.
See Exhibit B for definitions and reconciliations. |
Ingalls Shipbuilding revenues for the fourth quarter of 2020
were $752 million, an increase of $50 million, or 7.1%, from the
same period in 2019, primarily driven by higher revenues in surface
combatants and amphibious assault ships, partially offset by lower
revenues in the Legend-class National Security Cutter (NSC)
program. Surface combatant revenues increased due to higher volumes
on Jeremiah Denton (DDG 129), Ted Stevens (DDG 128), Sam Nunn (DDG
133), and John F. Lehman (DDG 137), partially offset by lower
volumes on the re-delivered USS Fitzgerald (DDG 62) restoration and
modernization. Amphibious assault ship revenues increased as a
result of higher volumes on Pittsburgh (LPD 31) and Harrisburg (LPD
30), partially offset by lower volume on the delivered USS Tripoli
(LHA 7). Revenues on the Legend-class NSC program decreased due to
lower volumes on Friedman (NSC 11) and Calhoun (NSC 10), partially
offset by higher volume on the delivered Stone (NSC 9).
Ingalls Shipbuilding segment operating income for the fourth
quarter was $96 million, an increase of $37 million from the same
period last year. Segment operating margin in the quarter was
12.8%, compared to 8.4% in the same period last year. These
increases were primarily driven by higher risk retirement across
all programs.
For the full year, Ingalls Shipbuilding revenues were $2.7
billion, an increase of $123 million, or 4.8%, from 2019, primarily
driven by higher revenues in surface combatants and amphibious
assault ships, partially offset by lower revenues in the
Legend-class NSC program. Surface combatant revenues increased due
to higher volumes on Ted Stevens (DDG 128), Jeremiah Denton (DDG
129), Delbert D. Black (DDG 119), Sam Nunn (DDG 133), George M.
Neal (DDG 131), and Thad Cochran (DDG 135), partially offset by
lower volumes on USS Fitzgerald (DDG 62) restoration and
modernization, Paul Ignatius (DDG 117), Frank E. Petersen Jr. (DDG
121), and Jack H. Lucas (DDG 125). Amphibious assault ship revenues
increased as a result of higher volumes on Harrisburg (LPD 30),
Pittsburgh (LPD 31), LHA 9 (unnamed), Fort Lauderdale (LPD 28), and
Richard M. McCool Jr. (LPD 29), partially offset by lower volumes
on Tripoli (LHA 7), LPD life cycle services, and Bougainville (LHA
8). Revenues on the Legend-class NSC program decreased due to lower
volumes on Midgett (NSC 8) and Friedman (NSC 11), partially offset
by higher volume on Calhoun (NSC 10).
For the full year, Ingalls Shipbuilding segment operating income
was $281 million, compared to $235 million in 2019. The increase
was primarily driven by higher risk retirement on Delbert D. Black
(DDG 119) in connection with its delivery and a capital expenditure
contract incentive, as well as higher risk retirement and improved
performance on Tripoli (LHA 7) and Richard M. McCool Jr. (LPD 29),
partially offset by unfavorable adjustments across programs,
including delay and disruption related to COVID-19.
Key Ingalls Shipbuilding milestones for the quarter:
- Delivered Legend-class National Security Cutter Stone (NSC
9)
Newport News Shipbuilding
| |
Three Months Ended |
|
|
|
Year Ended |
|
|
| |
December 31 |
|
|
|
December 31 |
|
|
| ($ in
millions) |
2020 |
2019 |
$ Change |
% Change |
|
2020 |
2019 |
$ Change |
% Change |
|
Revenues |
$ |
1,750 |
|
$ |
1,399 |
|
$ |
351 |
|
|
25.1 |
|
% |
|
$ |
5,571 |
|
$ |
5,231 |
|
$ |
340 |
|
|
6.5 |
|
% |
| Segment operating income1 |
128 |
|
137 |
|
(9 |
) |
|
(6.6 |
) |
% |
|
233 |
|
410 |
|
(177 |
) |
|
(43.2 |
) |
% |
| Segment
operating margin %1 |
7.3 |
% |
9.8 |
% |
|
(248) bps |
|
4.2 |
% |
7.8 |
% |
|
(366) bps |
| 1 Non-GAAP measures.
See Exhibit B for definitions and reconciliations. |
Newport News Shipbuilding revenues for the fourth quarter of
2020 were $1.8 billion, an increase of $351 million, or 25.1%, from
the same period in 2019, driven primarily by higher revenues in
aircraft carrier construction and refueling and complex overhaul
(RCOH), and submarine construction, as well as fleet support
services. Aircraft carrier revenues increased primarily as a result
of higher volumes on Enterprise (CVN 80) and Doris Miller (CVN 81),
and the advance planning contract for the RCOH of USS John C.
Stennis (CVN 74), partially offset by lower volumes on John F.
Kennedy (CVN 79), USS Gerald R. Ford (CVN 78), and the RCOH of USS
George Washington (CVN 73). Submarine revenues increased primarily
as a result of higher volumes on Block V boats of the
Virginia-class program (VCS) and the Columbia-class program,
partially offset by lower volumes on Block III and Block IV boats
of the Virginia-class program.
Newport News Shipbuilding segment operating income for the
fourth quarter was $128 million, compared to operating income of
$137 million for the same period last year. Segment operating
margin was 7.3% for the quarter, compared to 9.8% in the same
period last year, primarily due to lower risk retirement on the
Virginia-class submarine program. Additionally, results in the same
period last year benefited from the award of the VCS Block V
contract, as well as contract actions related to work on Los
Angeles-class submarines.
For the full year, Newport News Shipbuilding revenues were $5.6
billion, an increase of $340 million, or 6.5%, from 2019, primarily
driven by higher revenues in aircraft carriers, submarines, and
naval nuclear support services. Aircraft carrier revenues increased
primarily as a result of higher volumes on Enterprise (CVN 80), the
RCOH of USS John C. Stennis (CVN 74), and Doris Miller (CVN 81),
partially offset by lower volumes on the RCOH of USS George
Washington (CVN 73), John F. Kennedy (CVN 79), and USS Gerald R.
Ford (CVN 78). Submarine revenues increased primarily as a result
of higher volumes on the Virginia-class submarine program and the
Columbia-class submarine program. The higher volume on the
Virginia-class submarine program was due to higher volumes on Block
V boats, partially offset by lower volumes on Block III and Block
IV boats. Naval nuclear support service revenues increased
primarily as a result of higher volumes in carrier fleet support
services.
For the full year, Newport News Shipbuilding segment operating
income was $233 million, a decrease of $177 million from 2019,
primarily due to unfavorable cumulative catch-up adjustments in the
second quarter on Block IVboats of the Virginia-class submarine
program.
Key Newport News Shipbuilding milestones for the quarter:
- Awarded a $2.2 billion construction contract for six module
sections for each of the first two Columbia-class submarines
- Authenticated the keel of Virginia-class submarine
Massachusetts (SSN 798)
- John F. Kennedy (CVN 79) is approximately 78% complete
- RCOH of USS George Washington (CVN 73) is approximately 85%
complete
Technical Solutions
| |
Three Months Ended |
|
|
|
Year Ended |
|
|
| |
December 31 |
|
|
|
December 31 |
|
|
| ($ in
millions) |
2020 |
2019 |
$ Change |
% Change |
|
2020 |
2019 |
$ Change |
% Change |
|
Revenues |
$ |
311 |
|
$ |
350 |
|
|
$ |
(39 |
) |
|
(11.1 |
) |
% |
|
$ |
1,268 |
|
$ |
1,237 |
|
|
31 |
|
2.5 |
|
% |
| Segment operating income1 |
18 |
|
(23 |
) |
|
$ |
41 |
|
|
178.3 |
|
% |
|
41 |
|
(14 |
) |
|
55 |
|
(392.9 |
) |
% |
| Segment operating margin
%1 |
5.8 |
% |
(6.6 |
) |
% |
|
1236 bps |
|
3.2 |
% |
(1.1 |
) |
% |
|
437 bps |
| 1 Non-GAAP measures.
See Exhibit B for definitions and reconciliations. |
|
|
|
|
|
Technical Solutions revenues for the fourth quarter of 2020 were
$311 million, a decrease of $39 million from the same period in
2019, primarily driven by lower revenue at our oil and gas
reporting unit, as well as lower revenue at the San Diego Shipyard
due to the conclusion of several repair contracts, partially offset
by the acquisition of Hydroid in March 2020.
Technical Solutions segment operating income for the fourth
quarter was $18 million, compared to a segment operating loss of
$23 million in the fourth quarter of 2019. The increase was
primarily driven by a goodwill impairment at our oil and gas
reporting unit and a loss on a fleet support services contract,
both recorded in the prior year period.
For the full year, Technical Solutions revenues were $1.3
billion, an increase of $31 million, or 2.5%, from 2019, primarily
due to the acquisition of Hydroid in 2020, partially offset by
lower volume at our San Diego Shipyard due to the conclusion of
several repair contracts.
For the full year, Technical Solutions segment operating income
was $41 million, compared to an operating loss of $14 million in
2019. The increase was primarily due to a goodwill impairment at
our oil and gas reporting unit and a loss on a fleet support
services contract in 2019, as well as higher equity income from our
nuclear and environmental joint ventures and improved performance
in our Defense and Federal Solutions business unit.
Key Technical Solutions milestones for the quarter:
- Acquired the autonomy business of Spatial Integrated Systems
Inc. The acquisition further expands HII’s unmanned systems
capabilities with a highly skilled team and proven unmanned surface
vessel solutions
- Delivered new REMUS 100 Unmanned Underwater Vehicles to the
German Navy. The vehicles will be used to expand the German Navy’s
current fleet of REMUS 100 UUVs used for mine countermeasure
operations
2021 Outlook
The financial outlook, expectations and other forward looking
statements provided by the company for 2021 and beyond, reflect the
company's judgment based on the information available at the time
of this release.
The COVID-19 global pandemic has had wide ranging effects on the
global health environment and disrupted the global and U.S.
economies and financial markets, including impacts to our
employees, customers, suppliers, and communities. The pandemic is
also impacting our operations, and the full impacts of COVID-19 on
our fiscal year 2021 financial results and beyond are uncertain. We
believe that the most significant elements of uncertainty are the
intensity and duration of the impact on our employees’ ability to
work effectively, disruption in our supply chain, disruption of the
U.S. Government's and our other customers' abilities to perform
their obligations, and impact on pension assets and other
investment performance.
We have incurred and expect to continue incurring costs related
to our COVID-19 response, including paid leave, quarantining
employees and recurring facility cleaning. While our shipyards and
other facilities remainopen and productive, we experienced
temporary decreases in workforce attendance, which impacted our
operations due to delay and disruption from the lack of
availability of critical skills and out-of-sequence work. As of
December 31, 2020, workforce attendance has returned to standard
rates.
For further information on the potential impact of COVID-19 to
the company, see “Risk Factors” in our 2020 Form 10-K.
|
|
|
2021 Outlook |
|
Shipbuilding Revenue1 |
|
$8.2B - $8.4B |
| Shipbuilding Operating
Margin1 |
|
7.0% - 8.0% |
| Technical Solutions
Revenue2 |
|
~$1.0B |
| Technical Solutions Segment
Operating Margin1,2 |
|
3.0% - 5.0% |
| Technical Solutions EBITDA
Margin1,2 |
|
7.0% - 9.0% |
| |
|
|
| Operating FAS/CAS
Adjustment |
|
($163M) |
| Non-current State Income Tax
Expense |
|
~($5M) |
| Interest Expense |
|
($72M) |
| Non-operating Retirement
Benefit |
|
$181M |
| Effective Tax Rate |
|
~22% |
| |
|
|
| Depreciation &
Amortization |
|
~$260M |
| Capital Expenditures |
|
~3.5% of Sales |
| Free
Cash Flow1 |
|
$150M - $250M |
1 Non-GAAP measures. See Exhibit B for definitions.2 Includes
results for the month of January 2021 for Universal Pegasus
International and the San Diego Shipyard.
About Huntington Ingalls Industries
Huntington Ingalls Industries is America’s largest military
shipbuilding company and a provider of professional services to
partners in government and industry. For more than a century, HII’s
Newport News and Ingalls shipbuilding divisions in Virginia and
Mississippi have built more ships in more ship classes than any
other U.S. naval shipbuilder. HII’s Technical Solutions division
supports national security missions around the globe with unmanned
systems, defense and federal solutions, and nuclear and
environmental services. Headquartered in Newport News, Virginia,
HII employs more than 42,000 people operating both domestically and
internationally. For more information, please visit
www.huntingtoningalls.com.
Conference Call Information
Huntington Ingalls Industries will webcast its earnings
conference call at 9 a.m. Eastern time today. A live audio
broadcast of the conference call and supplemental presentation will
be available on the investor relations page of the company’s
website: www.huntingtoningalls.com. A telephone replay of the
conference call will be available from noon today through Thursday,
February 18 by calling toll-free (877) 344-7529 or (412) 317-0088
and using conference ID 10150920.
Forward-Looking Statements
Statements in this release, other than statements of historical
fact, constitute “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve risks and uncertainties that
could cause our actual results to differ materially from those
expressed in these statements. Factors that may cause such
differences include: changes in government and customer priorities
and requirements (including government budgetary constraints,
shifts in defense spending, and changes in customer short-range and
long-range plans); our ability to estimate our future contract
costs and perform our contracts effectively; changes in procurement
processes and government regulations and our ability to comply with
such requirements; our ability to deliver our products and services
at an affordable life cycle cost and compete within our markets;
natural and environmental disasters and political instability; our
ability to execute our strategic plan, including with respect to
share repurchases, dividends, capital expenditures and strategic
acquisitions; adverse economic conditions in the United States and
globally; health epidemics, pandemics and similar outbreaks,
including the COVID-19 pandemic; changes in key estimates and
assumptions regarding our pension and retiree health care costs;
security threats, including cyber security threats, and related
disruptions; and other risk factors discussed in our filings with
the U.S. Securities and Exchange Commission. There may be other
risks and uncertainties that we are unable to predict at this time
or that we currently do not expect to have a material adverse
effect on our business, and we undertake no obligation to update
any forward-looking statements. You should not place undue reliance
on any forward-looking statements that we may make. This release
also contains non-GAAP financial measures and includes a GAAP
reconciliation of these financial measures. Non-GAAP financial
measures should not be construed as being more important than
comparable GAAP measures.
Exhibit A: Financial Statements
HUNTINGTON INGALLS INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
| |
|
Year Ended December 31 |
| (in
millions, except per share amounts) |
|
2020 |
|
2019 |
|
2018 |
|
Sales and service revenues |
|
|
|
|
|
|
|
Product sales |
|
$ |
6,850 |
|
|
|
$ |
6,265 |
|
|
|
$ |
6,023 |
|
|
|
Service revenues |
|
2,511 |
|
|
|
2,634 |
|
|
|
2,153 |
|
|
|
Sales and service revenues |
|
9,361 |
|
|
|
8,899 |
|
|
|
8,176 |
|
|
| Cost of sales and service
revenues |
|
|
|
|
|
|
|
Cost of product sales |
|
5,621 |
|
|
|
5,158 |
|
|
|
4,627 |
|
|
|
Cost of service revenues |
|
2,070 |
|
|
|
2,210 |
|
|
|
1,758 |
|
|
|
Income from operating investments, net |
|
32 |
|
|
|
22 |
|
|
|
17 |
|
|
|
Other income and gains |
|
1 |
|
|
|
— |
|
|
|
14 |
|
|
|
General and administrative expenses |
|
904 |
|
|
|
788 |
|
|
|
871 |
|
|
|
Goodwill impairment |
|
— |
|
|
|
29 |
|
|
|
— |
|
|
|
Operating income |
|
799 |
|
|
|
736 |
|
|
|
951 |
|
|
| Other income (expense) |
|
|
|
|
|
|
|
Interest expense |
|
(114 |
) |
|
|
(70 |
) |
|
|
(58 |
) |
|
|
Non-operating retirement benefit |
|
119 |
|
|
|
12 |
|
|
|
74 |
|
|
|
Other, net |
|
6 |
|
|
|
5 |
|
|
|
4 |
|
|
| Earnings before income
taxes |
|
810 |
|
|
|
683 |
|
|
|
971 |
|
|
| Federal and foreign income
taxes |
|
114 |
|
|
|
134 |
|
|
|
135 |
|
|
|
Net earnings |
|
$ |
696 |
|
|
|
$ |
549 |
|
|
|
$ |
836 |
|
|
| |
|
|
|
|
|
|
| Basic earnings per share |
|
$ |
17.14 |
|
|
|
$ |
13.26 |
|
|
|
$ |
19.09 |
|
|
| Weighted-average common shares
outstanding |
|
40.6 |
|
|
|
41.4 |
|
|
|
43.8 |
|
|
| |
|
|
|
|
|
|
| Diluted earnings per
share |
|
$ |
17.14 |
|
|
|
$ |
13.26 |
|
|
|
$ |
19.09 |
|
|
| Weighted-average diluted
shares outstanding |
|
40.6 |
|
|
|
41.4 |
|
|
|
43.8 |
|
|
| |
|
|
|
|
|
|
| Dividends declared per
share |
|
$ |
4.23 |
|
|
|
$ |
3.61 |
|
|
|
$ |
3.02 |
|
|
| |
|
|
|
|
|
|
| Net earnings from above |
|
$ |
696 |
|
|
|
$ |
549 |
|
|
|
$ |
836 |
|
|
| Other comprehensive
income |
|
|
|
|
|
|
|
Change in unamortized benefit plan costs |
|
(187 |
) |
|
|
(167 |
) |
|
|
(232 |
) |
|
|
Other |
|
2 |
|
|
|
3 |
|
|
|
(2 |
) |
|
|
Tax expense for items of other comprehensive income |
|
47 |
|
|
|
43 |
|
|
|
59 |
|
|
|
Other comprehensive income (loss), net of tax |
|
(138 |
) |
|
|
(121 |
) |
|
|
(175 |
) |
|
|
Comprehensive income |
|
$ |
558 |
|
|
|
$ |
428 |
|
|
|
$ |
661 |
|
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
| ($ in
millions) |
|
December 31,2020 |
|
December 31,2019 |
|
Assets |
|
|
|
|
| Current
Assets |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
512 |
|
|
|
$ |
75 |
|
|
| Accounts receivable, net of
allowance for doubtful accounts of $2 million as of 2020 and $3
million as of 2019 |
|
397 |
|
|
|
318 |
|
|
| Contract assets |
|
1,049 |
|
|
|
989 |
|
|
| Inventoried costs, net |
|
137 |
|
|
|
136 |
|
|
| Income taxes receivable |
|
171 |
|
|
|
148 |
|
|
| Assets held for sale |
|
133 |
|
|
|
95 |
|
|
| Prepaid expenses and other
current assets |
|
45 |
|
|
|
24 |
|
|
|
Total current assets |
|
2,444 |
|
|
|
1,785 |
|
|
| Property, Plant, and
Equipment |
|
|
|
|
| Land and land
improvements |
|
309 |
|
|
|
282 |
|
|
| Buildings and leasehold
improvements |
|
2,442 |
|
|
|
2,384 |
|
|
| Machinery and other
equipment |
|
2,017 |
|
|
|
1,909 |
|
|
| Capitalized software
costs |
|
234 |
|
|
|
218 |
|
|
| |
|
5,002 |
|
|
|
4,793 |
|
|
| Accumulated depreciation and
amortization |
|
(2,024 |
) |
|
|
(1,961 |
) |
|
|
Property, Plant, and Equipment |
|
2,978 |
|
|
|
2,832 |
|
|
| Other
Assets |
|
|
|
|
| Operating lease assets |
|
192 |
|
|
|
201 |
|
|
| Goodwill |
|
1,617 |
|
|
|
1,373 |
|
|
| Other intangible assets, net
of accumulated amortization of $655 million as of 2020 and $599
million as of 2019 |
|
512 |
|
|
|
492 |
|
|
| Deferred tax assets |
|
133 |
|
|
|
108 |
|
|
| Miscellaneous other
assets |
|
281 |
|
|
|
240 |
|
|
|
Total other assets |
|
2,735 |
|
|
|
2,414 |
|
|
|
Total assets |
|
$ |
8,157 |
|
|
|
$ |
7,031 |
|
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(continued)
| ($ in
millions) |
|
December 31,2020 |
|
December 31,2019 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
| Current
Liabilities |
|
|
|
|
|
Trade accounts payable |
|
$ |
460 |
|
|
|
$ |
497 |
|
|
| Accrued employees’
compensation |
|
293 |
|
|
|
265 |
|
|
| Current portion of
postretirement plan liabilities |
|
133 |
|
|
|
130 |
|
|
| Current portion of workers’
compensation liabilities |
|
225 |
|
|
|
225 |
|
|
| Contract liabilities |
|
585 |
|
|
|
373 |
|
|
| Liabilities held for sale |
|
68 |
|
|
|
77 |
|
|
| Other current liabilities |
|
462 |
|
|
|
323 |
|
|
|
Total current liabilities |
|
2,226 |
|
|
|
1,890 |
|
|
| Long-term debt |
|
1,686 |
|
|
|
1,286 |
|
|
| Pension plan liabilities |
|
960 |
|
|
|
975 |
|
|
| Other postretirement plan
liabilities |
|
401 |
|
|
|
380 |
|
|
| Workers’ compensation
liabilities |
|
511 |
|
|
|
457 |
|
|
| Long-term operating lease
liabilities |
|
157 |
|
|
|
164 |
|
|
| Other long-term
liabilities |
|
315 |
|
|
|
291 |
|
|
|
Total liabilities |
|
6,256 |
|
|
|
5,443 |
|
|
| Commitments and
Contingencies |
|
|
|
|
| Stockholders’
Equity |
|
|
|
|
| Common stock, $0.01 par value;
150 million shares authorized; 53.3 million shares issued and 40.5
million shares outstanding as of December 31, 2020, and 53.2
million shares issued and 40.8 million shares outstanding as of
December 31, 2019 |
|
1 |
|
|
|
1 |
|
|
| Additional paid-in
capital |
|
1,972 |
|
|
|
1,961 |
|
|
| Retained earnings |
|
3,533 |
|
|
|
3,009 |
|
|
| Treasury stock |
|
(2,058 |
) |
|
|
(1,974 |
) |
|
| Accumulated other
comprehensive loss |
|
(1,547 |
) |
|
|
(1,409 |
) |
|
|
Total stockholders’ equity |
|
1,901 |
|
|
|
1,588 |
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
8,157 |
|
|
|
$ |
7,031 |
|
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS
| |
|
Year Ended December 31 |
| ($ in
millions) |
|
2020 |
|
2019 |
|
2018 |
|
Operating Activities |
|
|
|
|
|
|
|
Net earnings |
|
$ |
696 |
|
|
|
$ |
549 |
|
|
|
$ |
836 |
|
|
| Adjustments to reconcile to
net cash provided by (used in) operating activities |
|
|
|
|
|
|
|
Depreciation |
|
191 |
|
|
|
180 |
|
|
|
167 |
|
|
|
Amortization of purchased intangibles |
|
56 |
|
|
|
47 |
|
|
|
36 |
|
|
|
Amortization of debt issuance costs |
|
7 |
|
|
|
3 |
|
|
|
4 |
|
|
|
Provision for doubtful accounts |
|
(1 |
) |
|
|
(6 |
) |
|
|
(4 |
) |
|
|
Stock-based compensation |
|
23 |
|
|
|
30 |
|
|
|
36 |
|
|
|
Deferred income taxes |
|
23 |
|
|
|
97 |
|
|
|
10 |
|
|
|
Goodwill impairment |
|
— |
|
|
|
29 |
|
|
|
— |
|
|
|
Loss on early extinguishment of debt |
|
21 |
|
|
|
— |
|
|
|
— |
|
|
|
Loss (gain) on investments in marketable securities |
|
(17 |
) |
|
|
(11 |
) |
|
|
— |
|
|
|
Asset impairments |
|
13 |
|
|
|
6 |
|
|
|
— |
|
|
|
Change in |
|
|
|
|
|
|
|
Accounts receivable |
|
(70 |
) |
|
|
(51 |
) |
|
|
195 |
|
|
|
Contract assets |
|
22 |
|
|
|
32 |
|
|
|
(242 |
) |
|
|
Inventoried costs |
|
11 |
|
|
|
(11 |
) |
|
|
40 |
|
|
|
Prepaid expenses and other assets |
|
(62 |
) |
|
|
(93 |
) |
|
|
(40 |
) |
|
|
Accounts payable and accruals |
|
344 |
|
|
|
4 |
|
|
|
335 |
|
|
|
Retiree benefits |
|
(176 |
) |
|
|
80 |
|
|
|
(454 |
) |
|
|
Other non-cash transactions, net |
|
12 |
|
|
|
11 |
|
|
|
(5 |
) |
|
|
Net cash provided by operating activities |
|
1,093 |
|
|
|
896 |
|
|
|
914 |
|
|
| Investing
Activities |
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
Capital expenditure additions |
|
(353 |
) |
|
|
(530 |
) |
|
|
(463 |
) |
|
|
Grant proceeds for capital expenditures |
|
17 |
|
|
|
94 |
|
|
|
61 |
|
|
|
Acquisitions of businesses, net of cash received |
|
(417 |
) |
|
|
(195 |
) |
|
|
(77 |
) |
|
|
Investment in affiliates |
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
|
Proceeds from disposition of assets |
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
Other investing activities, net |
|
(6 |
) |
|
|
4 |
|
|
|
— |
|
|
|
Net cash used in investing activities |
|
(759 |
) |
|
|
(627 |
) |
|
|
(476 |
) |
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
| |
|
Year Ended December 31 |
| ($ in
millions) |
|
2020 |
|
2019 |
|
2018 |
|
Financing Activities |
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
1,000 |
|
|
|
— |
|
|
|
— |
|
|
|
Repayment of long-term debt |
|
(600 |
) |
|
|
— |
|
|
|
— |
|
|
|
Proceeds from line of credit borrowings |
|
385 |
|
|
|
5,119 |
|
|
|
95 |
|
|
|
Repayment of line of credit borrowings |
|
(385 |
) |
|
|
(5,119 |
) |
|
|
(95 |
) |
|
|
Debt issuance costs |
|
(13 |
) |
|
|
— |
|
|
|
— |
|
|
|
Premiums and fees related to early extinguishment of debt |
|
(15 |
) |
|
|
— |
|
|
|
— |
|
|
|
Dividends paid |
|
(172 |
) |
|
|
(149 |
) |
|
|
(132 |
) |
|
|
Repurchases of common stock |
|
(84 |
) |
|
|
(262 |
) |
|
|
(742 |
) |
|
|
Employee taxes on certain share-based payment arrangements |
|
(13 |
) |
|
|
(23 |
) |
|
|
(25 |
) |
|
|
Net cash provided by (used in) financing activities |
|
103 |
|
|
|
(434 |
) |
|
|
(899 |
) |
|
|
Change in cash and cash equivalents |
|
437 |
|
|
|
(165 |
) |
|
|
(461 |
) |
|
| Cash and cash equivalents,
beginning of period |
|
75 |
|
|
|
240 |
|
|
|
701 |
|
|
|
Cash and cash equivalents, end of period |
|
$ |
512 |
|
|
|
$ |
75 |
|
|
|
$ |
240 |
|
|
| Supplemental Cash Flow
Disclosure |
|
|
|
|
|
|
| Cash paid for income
taxes |
|
$ |
155 |
|
|
|
$ |
137 |
|
|
|
$ |
142 |
|
|
| Cash paid for interest |
|
$ |
89 |
|
|
|
$ |
75 |
|
|
|
$ |
62 |
|
|
| Non-Cash Investing and
Financing Activities |
|
|
|
|
|
|
| Capital expenditures accrued
in accounts payable |
|
$ |
7 |
|
|
|
$ |
22 |
|
|
|
$ |
55 |
|
|
| Accrued repurchases of common
stock |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
48 |
|
|
Exhibit B: Non-GAAP Measures Definitions &
Reconciliations
We make reference to "segment operating income," "segment
operating margin," "shipbuilding revenue," "shipbuilding operating
margin," "Technical Solutions EBITDA margin," "adjusted net
earnings," "adjusted diluted earnings per share" and "free cash
flow."
We internally manage our operations by reference to segment
operating income and segment operating margin, which are not
recognized measures under GAAP. When analyzing our operating
performance, investors should use segment operating income and
segment operating margin in addition to, and not as alternatives
for, operating income and operating margin or any other performance
measure presented in accordance with GAAP. They are measures that
we use to evaluate our core operating performance. We believe that
segment operating income, segment operating margin and shipbuilding
operating margin reflect an additional way of viewing aspects of
our operations that, when viewed with our GAAP results, provide a
more complete understanding of factors and trends affecting our
business. We believe these measures are used by investors and are a
useful indicator to measure our performance. Because not all
companies use identical calculations, our presentation of segment
operating income and segment operating margin may not be comparable
to similarly titled measures of other companies.
Adjusted net earnings and adjusted diluted earnings per share
are not measures recognized under GAAP. They should be considered
supplemental to and not a substitute for financial information
prepared in accordance with GAAP. We believe these measures are
useful to investors because they exclude items that do not reflect
our core operating performance. They may not be comparable to
similarly titled measures of other companies.
Shipbuilding revenue, shipbuilding operating margin and
Technical Solutions EBITDA margin are not measures recognized under
GAAP. They should be considered supplemental to and not a
substitute for financial information prepared in accordance with
GAAP. They may not be comparable to similarly titled measures of
other companies.
Free cash flow is not a measure recognized under GAAP. Free cash
flow has limitations as an analytical tool and should not be
considered in isolation from, or as a substitute for, analysis of
our results as reported under GAAP. We believe free cash flow is an
important measure for our investors because it provides them
insight into our current and period-to-period performance and our
ability to generate cash from continuing operations. We also use
free cash flow as a key operating metric in assessing the
performance of our business and as a key performance measure in
evaluating management performance and determining incentive
compensation. Free cash flow may not be comparable to similarly
titled measures of other companies.
Segment operating income (loss) is defined as
operating income (loss) for the relevant segment(s) before the
Operating FAS/CAS Adjustment and non-current state income
taxes.
Segment operating margin is defined as segment
operating income (loss) as a percentage of sales and service
revenues.
Shipbuilding revenue is defined as the combined
sales and service revenues from our Newport News Shipbuilding
segment and Ingalls Shipbuilding segment.
Shipbuilding operating margin is defined as the
combined segment operating income of our Newport News Shipbuilding
segment and Ingalls Shipbuilding segment as a percentage of
shipbuilding revenue.
Technical Solutions EBITDA margin is defined as
Technical Solutions segment operating income before interest
expense, income taxes, depreciation, and amortization as a
percentage of Technical Solutions revenues.
Adjusted net earnings is defined as net
earnings adjusted for the after-tax impact of the FAS/CAS
Adjustment.
Adjusted diluted earnings per share is defined
as adjusted net earnings divided by the weighted-average diluted
common shares outstanding.
Free cash flow is defined as net cash provided
by (used in) operating activities less capital expenditures net of
related grant proceeds.
FAS/CAS Adjustment is defined as the difference
between expenses for pension and other postretirement benefits
determined in accordance with GAAP (FAS) and the expenses
determined in accordance with U.S. Cost Accounting Standards
(CAS).
Operating FAS/CAS Adjustment is defined as the
difference between the service cost component of our pension and
other postretirement expense determined in accordance with GAAP
(FAS) and our pension and other postretirement expense under U.S.
Cost Accounting Standards (CAS).
Non-current state income taxes are defined as
deferred state income taxes, which reflect the change in deferred
state tax assets and liabilities and the tax expense or benefit
associated with changes in state uncertain tax positions in the
relevant period. These amounts are recorded within operating
income. Current period state income tax expense is charged to
contract costs and included in cost of sales and service revenues
in segment operating income.
We present financial measures adjusted for the Operating FAS/CAS
Adjustment and non-current state income taxes to reflect the
company’s performance based upon the pension costs and state tax
expense charged to our contracts under CAS. We use these adjusted
measures as internal measures of operating performance and for
performance-based compensation decisions.
Reconciliations of Segment Operating Income and Segment
Operating Margin
| |
|
Three Months Ended |
|
Year Ended |
| |
|
December 31 |
|
December 31 |
| ($ in
millions) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Ingalls revenues |
|
$ |
752 |
|
|
|
$ |
702 |
|
|
|
$ |
2,678 |
|
|
|
$ |
2,555 |
|
|
| Newport News revenues |
|
1,750 |
|
|
|
1,399 |
|
|
|
5,571 |
|
|
|
5,231 |
|
|
| Technical Solutions
revenues |
|
311 |
|
|
|
350 |
|
|
|
1,268 |
|
|
|
1,237 |
|
|
| Intersegment eliminations |
|
(56 |
) |
|
|
(39 |
) |
|
|
(156 |
) |
|
|
(124 |
) |
|
| Sales and Service
Revenues |
|
2,757 |
|
|
|
2,412 |
|
|
|
9,361 |
|
|
|
8,899 |
|
|
| |
|
|
|
|
|
|
|
|
| Operating
Income |
|
305 |
|
|
|
186 |
|
|
|
799 |
|
|
|
736 |
|
|
|
Operating FAS/CAS Adjustment |
|
(62 |
) |
|
|
(30 |
) |
|
|
(248 |
) |
|
|
(124 |
) |
|
|
Non-current state income taxes |
|
(1 |
) |
|
|
17 |
|
|
|
4 |
|
|
|
19 |
|
|
| Segment Operating
Income |
|
242 |
|
|
|
173 |
|
|
|
555 |
|
|
|
631 |
|
|
|
As a percentage of sales and service revenues |
|
8.8 |
|
% |
|
7.2 |
|
% |
|
5.9 |
|
% |
|
7.1 |
|
% |
|
Ingalls segment operating income |
|
96 |
|
|
|
59 |
|
|
|
281 |
|
|
|
235 |
|
|
|
As a percentage of Ingalls revenues |
|
12.8 |
|
% |
|
8.4 |
|
% |
|
10.5 |
|
% |
|
9.2 |
|
% |
|
Newport News segment operating income |
|
128 |
|
|
|
137 |
|
|
|
233 |
|
|
|
410 |
|
|
|
As a percentage of Newport News revenues |
|
7.3 |
|
% |
|
9.8 |
|
% |
|
4.2 |
|
% |
|
7.8 |
|
% |
|
Technical Solutions segment operating income |
|
18 |
|
|
|
(23 |
) |
|
|
41 |
|
|
|
(14 |
) |
|
|
As a percentage of Technical Solutions revenues |
|
5.8 |
|
% |
|
(6.6 |
) |
% |
|
3.2 |
|
% |
|
(1.1 |
) |
% |
Reconciliation of Adjusted Net Earnings
and Adjusted Diluted Earnings Per Share
| |
|
Three Months Ended |
|
Year Ended |
| |
|
December 31 |
|
December 31 |
| ($ in
millions, except per share amounts) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
249 |
|
|
|
$ |
149 |
|
|
|
$ |
696 |
|
|
|
$ |
549 |
|
|
| After-tax FAS/CAS
adjustment(1) |
|
(73 |
) |
|
|
(27 |
) |
|
|
(290 |
) |
|
|
(107 |
) |
|
| Adjusted Net
Earnings |
|
$ |
176 |
|
|
|
$ |
122 |
|
|
|
$ |
406 |
|
|
|
$ |
442 |
|
|
| |
|
|
|
|
|
|
|
|
| Diluted earnings per
share |
|
$ |
6.15 |
|
|
|
$ |
3.61 |
|
|
|
$ |
17.14 |
|
|
|
$ |
13.26 |
|
|
| After-tax FAS/CAS adjustment
per share(1) |
|
(1.80 |
) |
|
|
(0.65 |
) |
|
|
(7.14 |
) |
|
|
(2.60 |
) |
|
| Adjusted Diluted
EPS** |
|
$ |
4.35 |
|
|
|
$ |
2.96 |
|
|
|
$ |
10.00 |
|
|
|
$ |
10.66 |
|
|
| |
|
|
|
|
|
|
|
|
| (1) FAS/CAS
Adjustment |
|
$ |
(92 |
) |
|
|
$ |
(34 |
) |
|
|
$ |
(367 |
) |
|
|
$ |
(136 |
) |
|
| Tax effect* |
|
(19 |
) |
|
|
(7 |
) |
|
|
(77 |
) |
|
|
(29 |
) |
|
| After-tax impact |
|
(73 |
) |
|
|
(27 |
) |
|
|
$ |
(290 |
) |
|
|
$ |
(107 |
) |
|
| Weighted-average diluted
shares outstanding |
|
40.5 |
|
|
|
41.3 |
|
|
|
40.6 |
|
|
|
41.4 |
|
|
| Per share impact** |
|
$ |
(1.80 |
) |
|
|
$ |
(0.65 |
) |
|
|
$ |
(7.14 |
) |
|
|
$ |
(2.60 |
) |
|
| |
|
|
|
|
|
|
|
|
| *The income tax
impact is calculated using the tax rate in effect for the relevant
non-GAAP adjustment. |
| **Amounts may not
recalculate exactly due to rounding. |
Reconciliation of Free Cash
Flow
| |
|
Three Months Ended |
|
Year Ended |
| |
|
December 31 |
|
December 31 |
| ($ in
millions) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Net cash provided by operating activities |
|
$ |
602 |
|
|
|
$ |
566 |
|
|
|
$ |
1,093 |
|
|
|
$ |
896 |
|
|
| Less capital
expenditures: |
|
|
|
|
|
|
|
|
|
Capital expenditure additions |
|
(133 |
) |
|
|
(181 |
) |
|
|
(353 |
) |
|
|
(530 |
) |
|
|
Grant proceeds for capital expenditures |
|
— |
|
|
|
23 |
|
|
|
17 |
|
|
|
94 |
|
|
|
Free cash flow |
|
$ |
469 |
|
|
|
$ |
408 |
|
|
|
$ |
757 |
|
|
|
$ |
460 |
|
|
Contacts:
Jerri Fuller Dickseski
(Media)jerri.dickseski@hii-co.com757-380-2341
Dwayne Blake (Investors)dwayne.blake@hii-co.com757-380-2104
Huntington Ingalls Indus... (NYSE:HII)
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