Huntington Ingalls Industries (NYSE:HII) reported first quarter
2021 revenues of $2.3 billion, up less than 1% from the first
quarter of 2020.
Operating income in the quarter was $147 million and operating
margin was 6.5%, compared to $215 million and 9.5%, respectively,
in the first quarter of 2020. The decreases in operating income and
operating margin were primarily the result of a less favorable
operating FAS/CAS adjustment, partially offset by stronger segment
operating results compared to the prior year.
Segment operating income1 in the quarter was $191 million and
segment operating margin1 was 8.4%, compared to $156 million and
6.9%, respectively, in the first quarter of 2020. The increases in
segment operating income1 and segment operating margin1 were
primarily the result of higher risk retirement at Ingalls
Shipbuilding and improved performance at Technical Solutions.
Net earnings in the quarter were $148 million, compared to $172
million in the first quarter of 2020. Diluted earnings per share in
the quarter was $3.68, compared to $4.23 in the same period of
2020. Excluding the impacts of pension, adjusted earnings per
share1 in the quarter was $3.56, compared to $2.43 in the same
period of 2020.
First quarter cash from operations was $43 million and free cash
flow1 was negative $16 million, compared to $68 million and $2
million, respectively, in the first quarter of 2020.
New contract awards in the quarter were approximately $5.3
billion, bringing total backlog to approximately $48.8 billion as
of March 31, 2021.
“We are pleased with first quarter results that demonstrate
another quarter of consistent program execution,” said Mike
Petters, HII’s president and CEO. "We are well positioned to drive
long-term value creation, with an unprecedented level of backlog
in-hand and a workforce that has become more capable while working
through the challenges posed by COVID-19."
1Non-GAAP measure. See Exhibit B for definition and
reconciliation.
Results of Operations
|
|
Three Months Ended |
|
|
|
|
March 31 |
|
|
($ in
millions, except per share amounts) |
|
2021 |
2020 |
$ Change |
% Change |
Sales and service revenues |
|
$ |
2,278 |
|
$ |
2,263 |
|
$ |
15 |
|
|
0.7 |
% |
|
Operating income |
|
147 |
|
215 |
|
(68 |
) |
|
(31.6 |
)% |
|
Operating margin % |
|
6.5 |
% |
9.5 |
% |
|
(305) bps |
|
|
Segment operating income1 |
|
191 |
|
156 |
|
35 |
|
|
22.4 |
% |
|
Segment operating margin %1 |
|
8.4 |
% |
6.9 |
% |
|
149 bps |
|
|
Net earnings |
|
148 |
|
172 |
|
(24 |
) |
|
(14.0 |
)% |
|
Diluted earnings per
share |
|
$ |
3.68 |
|
$ |
4.23 |
|
$ |
(0.55 |
) |
|
(13.0 |
)% |
|
|
|
|
|
|
|
Pension Adjusted
Figures |
|
|
|
|
|
Net earnings2 |
|
143 |
|
99 |
|
44 |
|
|
44.4 |
% |
|
Diluted
earnings per share2 |
|
$ |
3.56 |
|
$ |
2.43 |
|
$ |
1.13 |
|
|
46.5 |
% |
|
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 reconciliation. |
|
|
Segment Operating Results
Ingalls Shipbuilding
|
|
Three Months Ended |
|
|
|
|
March 31 |
|
|
($ in
millions) |
|
2021 |
2020 |
$ Change |
% Change |
Revenues |
|
$ |
649 |
|
$ |
629 |
|
$ |
20 |
|
3.2 |
% |
Segment operating income1 |
|
91 |
|
68 |
|
23 |
|
33.8 |
% |
Segment operating margin
%1 |
|
14.0 |
% |
10.8 |
% |
|
321 bps |
|
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
|
Ingalls Shipbuilding revenues for the first quarter of 2021 were
$649 million, an increase of $20 million, or 3.2%, from the same
period in 2020, primarily driven by higher revenues in the Arleigh
Burke-class DDG program, partially offset by lower revenues in the
Legend-class National Security Cutter (NSC) program. DDG program
revenues increased due to higher volumes on George M. Neal (DDG
131), Jeremiah Denton (DDG 129) and Jack H. Lucas (DDG 125),
partially offset by lower volumes on USS Fitzgerald (DDG 62)
restoration and modernization following its redelivery and Delbert
D. Black (DDG 119) following its delivery. Revenues on the NSC
program decreased due to lower volume on Stone (NSC 9) following
its delivery. Amphibious assault ship revenues were flat as a
result of higher volumes on Pittsburgh (LPD 31), Bougainville (LHA
8) and LHA 9 (unnamed), partially offset by lower volumes on
Richard M. McCool Jr. (LPD 29), Fort Lauderdale (LPD 28) and USS
Tripoli (LHA 7).
Ingalls Shipbuilding segment operating income for the first
quarter was $91 million, an increase of $23 million from the same
period last year. Segment operating margin in the quarter was
14.0%, compared to 10.8% in the same period last year. The
increases were primarily driven by higher risk retirement on
Bougainville (LHA 8).
Key Ingalls Shipbuilding milestones for the quarter:
- Began fabrication of guided-missile destroyer Jeremiah Denton
(DDG 129)
- Awarded Life-Cycle Engineering Contract on U.S. Navy’s LPD
Program
Newport News Shipbuilding
|
|
Three Months Ended |
|
|
|
|
March 31 |
|
|
($ in
millions) |
|
2021 |
2020 |
$ Change |
% Change |
Revenues |
|
$ |
1,407 |
|
$ |
1,341 |
|
$ |
66 |
|
|
4.9 |
% |
|
Segment operating income1 |
|
93 |
|
95 |
|
(2 |
) |
|
(2.1 |
)% |
|
Segment
operating margin %1 |
|
6.6 |
% |
7.1 |
% |
|
(47) bps |
|
|
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
|
Newport News Shipbuilding revenues for the first quarter of 2021
were $1.4 billion, an increase of $66 million, or 4.9%, from the
same period in 2020, driven primarily by higher revenues in
aircraft carriers, naval nuclear support services, and submarines.
Aircraft carrier revenues increased primarily as a result of higher
volumes on Enterprise (CVN 80), the refueling and complex overhaul
(RCOH) of USS John C. Stennis (CVN 74) and Doris Miller (CVN 81),
partially offset by lower volumes on the John F. Kennedy (CVN 79)
and the RCOH of USS George Washington (CVN 73). Naval nuclear
support services revenues increased primarily as a result of higher
volumes in carrier and submarine fleet support services, offset by
lower volume in facility maintenance services. Submarine revenues
increased primarily as a result of higher volumes on the
Columbia-class submarine program and the Virginia-class submarine
(VCS) program. The higher volume on the VCS program was due to
higher volumes on Block V boats, offset by lower volumes on Block
IV boats.
Newport News Shipbuilding segment operating income for the first
quarter was $93 million, compared to operating income of $95
million for the same period last year. Segment operating margin in
the quarter was 6.6%, compared to 7.1% in the same period last
year. The decreases were primarily due to lower risk retirement on
the RCOH of USS George Washington (CVN 73), partially offset by
higher risk retirement on Block IV of the VCS program.
Key Newport News Shipbuilding milestones for the quarter:
- Launched Virginia-class submarine Montana (SSN 794)
- Achieved pressure hull complete on Virginia-class submarine New
Jersey (SSN 796)
- Awarded $3 billion contract for USS John C. Stennis (CVN 74)
RCOH
- Awarded contract modification for construction of the 10th
Virginia-class Block V submarine
- John F. Kennedy (CVN 79) is approximately 81% complete
- RCOH of USS George Washington (CVN 73) is approximately 87%
complete
Technical Solutions
|
|
Three Months Ended |
|
|
|
|
March 31 |
|
|
($ in
millions) |
|
2021 |
2020 |
$ Change |
% Change |
Revenues |
|
$ |
259 |
|
$ |
317 |
|
|
(58 |
) |
|
(18.3 |
)% |
|
Segment operating income1 |
|
7 |
|
(7 |
) |
|
14 |
|
|
200.0 |
% |
|
Segment operating margin
%1 |
|
2.7 |
% |
(2.2 |
)% |
|
|
491 bps |
|
|
1 Non-GAAP measures. See
Exhibit B for definitions and reconciliations. |
|
|
|
|
|
|
|
|
|
|
|
Technical Solutions revenues for the first quarter of 2021 were
$259 million, a decrease of $58 million from the same period in
2020, primarily due to the divestitures of our oil and gas business
and the San Diego Shipyard, as well as lower volumes in Defense
& Federal Solutions, partially offset by the acquisition of
Hydroid in March of 2020.
Technical Solutions segment operating income for the first
quarter was $7 million, compared to a segment operating loss of $7
million in the first quarter of 2020. The increase was primarily
driven by improved performance in Defense & Federal Solutions
and Nuclear & Environmental Services, as well as a gain on the
sale of our oil and gas business.
Key Technical Solutions milestones for the quarter:
- Completed the first phase of Unmanned Systems Center of
Excellence campus with the construction of a 22,000 square foot
facility
- Awarded position on a $250 million U.S. Navy Intelligence,
Surveillance and Reconnaissance Support Contract
- Awarded a contract to provide maintenance, training and
planning support for U.S. Navy aircraft carriers
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 approximately 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,
May 13 by calling toll-free (877) 344-7529 or (412) 317-0088 and
using conference ID 10153869.
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 (UNAUDITED)
|
|
Three Months Ended March 31 |
(in
millions, except per share amounts) |
|
2021 |
|
2020 |
Sales and service revenues |
|
|
|
|
Product sales |
|
$ |
1,721 |
|
|
|
$ |
1,624 |
|
|
Service revenues |
|
557 |
|
|
|
639 |
|
|
Sales and service revenues |
|
2,278 |
|
|
|
2,263 |
|
|
Cost of sales and service
revenues |
|
|
|
|
Cost of product sales |
|
1,454 |
|
|
|
1,290 |
|
|
Cost of service revenues |
|
482 |
|
|
|
550 |
|
|
Income from operating investments, net |
|
8 |
|
|
|
6 |
|
|
Other income and gains |
|
3 |
|
|
|
— |
|
|
General and administrative expenses |
|
206 |
|
|
|
214 |
|
|
Operating income |
|
147 |
|
|
|
215 |
|
|
Other income (expense) |
|
|
|
|
Interest expense |
|
(21 |
) |
|
|
(16 |
) |
|
Non-operating retirement benefit |
|
46 |
|
|
|
30 |
|
|
Other, net |
|
1 |
|
|
|
(13 |
) |
|
Earnings before income taxes |
|
173 |
|
|
|
216 |
|
|
Federal and foreign income
taxes |
|
25 |
|
|
|
44 |
|
|
Net earnings |
|
$ |
148 |
|
|
|
$ |
172 |
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
3.68 |
|
|
|
$ |
4.23 |
|
|
Weighted-average common shares
outstanding |
|
40.2 |
|
|
|
40.7 |
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
3.68 |
|
|
|
$ |
4.23 |
|
|
Weighted-average diluted shares
outstanding |
|
40.2 |
|
|
|
40.7 |
|
|
|
|
|
|
|
Dividends declared per share |
|
$ |
1.14 |
|
|
|
$ |
1.03 |
|
|
|
|
|
|
|
Net earnings from above |
|
$ |
148 |
|
|
|
$ |
172 |
|
|
Other comprehensive income |
|
|
|
|
Change in unamortized benefit plan costs |
|
29 |
|
|
|
23 |
|
|
Other |
|
2 |
|
|
|
(2 |
) |
|
Tax expense for items of other comprehensive income |
|
(7 |
) |
|
|
(6 |
) |
|
Other comprehensive income (loss), net of tax |
|
24 |
|
|
|
15 |
|
|
Comprehensive income |
|
$ |
172 |
|
|
|
$ |
187 |
|
|
|
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
($ in
millions) |
|
March 31,2021 |
|
December 31,2020 |
Assets |
|
|
|
|
Current
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
407 |
|
|
$ |
512 |
|
Accounts receivable, net of
allowance for doubtful accounts of $2 million as of 2021 and
2020 |
|
407 |
|
|
397 |
|
Contract assets |
|
1,288 |
|
|
1,049 |
|
Inventoried costs, net |
|
142 |
|
|
137 |
|
Income taxes receivable |
|
133 |
|
|
171 |
|
Assets held for sale |
|
— |
|
|
133 |
|
Prepaid expenses and other
current assets |
|
66 |
|
|
45 |
|
Total current assets |
|
2,443 |
|
|
2,444 |
|
Property, Plant, and Equipment,
net of accumulated depreciation of $2,055 million as of 2021 and
$2,024 million as of 2020 |
|
2,988 |
|
|
2,978 |
|
Operating lease assets |
|
195 |
|
|
192 |
|
Goodwill |
|
1,604 |
|
|
1,617 |
|
Other intangible assets, net of
accumulated amortization of $668 million as of 2021 and $655
million as of 2020 |
|
512 |
|
|
512 |
|
Deferred tax assets |
|
95 |
|
|
133 |
|
Miscellaneous other assets |
|
377 |
|
|
281 |
|
Total assets |
|
$ |
8,214 |
|
|
$ |
8,157 |
|
|
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED) (continued)
($ in
millions) |
|
March 31,2021 |
|
December 31,2020 |
Liabilities and Stockholders' Equity |
|
|
|
|
Current
Liabilities |
|
|
|
|
Trade accounts payable |
|
$ |
397 |
|
|
|
$ |
460 |
|
|
Accrued employees’
compensation |
|
302 |
|
|
|
293 |
|
|
Current portion of postretirement
plan liabilities |
|
133 |
|
|
|
133 |
|
|
Current portion of workers’
compensation liabilities |
|
227 |
|
|
|
225 |
|
|
Contract liabilities |
|
700 |
|
|
|
585 |
|
|
Liabilities held for sale |
|
— |
|
|
|
68 |
|
|
Other current liabilities |
|
531 |
|
|
|
462 |
|
|
Total current liabilities |
|
2,290 |
|
|
|
2,226 |
|
|
Long-term debt |
|
1,688 |
|
|
|
1,686 |
|
|
Pension plan liabilities |
|
869 |
|
|
|
960 |
|
|
Other postretirement plan
liabilities |
|
397 |
|
|
|
401 |
|
|
Workers’ compensation
liabilities |
|
515 |
|
|
|
511 |
|
|
Long-term operating lease
liabilities |
|
159 |
|
|
|
157 |
|
|
Other long-term liabilities |
|
317 |
|
|
|
315 |
|
|
Total liabilities |
|
6,235 |
|
|
|
6,256 |
|
|
Commitments and
Contingencies |
|
|
|
|
Stockholders’
Equity |
|
|
|
|
Common stock, $0.01 par value;
150 million shares authorized; 53.4 million shares issued and 40.3
million shares outstanding as of March 31, 2021, and 53.3 million
shares issued and 40.5 million shares outstanding as of December
31, 2020 |
|
1 |
|
|
|
1 |
|
|
Additional paid-in capital |
|
1,974 |
|
|
|
1,972 |
|
|
Retained earnings |
|
3,635 |
|
|
|
3,533 |
|
|
Treasury stock |
|
(2,108 |
) |
|
|
(2,058 |
) |
|
Accumulated other comprehensive
loss |
|
(1,523 |
) |
|
|
(1,547 |
) |
|
Total stockholders’ equity |
|
1,979 |
|
|
|
1,901 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
8,214 |
|
|
|
$ |
8,157 |
|
|
|
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Three Months Ended March 31 |
($ in
millions) |
|
2021 |
|
2020 |
Operating Activities |
|
|
|
|
Net earnings |
|
$ |
148 |
|
|
|
$ |
172 |
|
|
Adjustments to reconcile to net
cash provided by (used in) operating activities |
|
|
|
|
Depreciation |
|
52 |
|
|
|
47 |
|
|
Amortization of purchased intangibles |
|
13 |
|
|
|
11 |
|
|
Amortization of debt issuance costs |
|
2 |
|
|
|
1 |
|
|
Stock-based compensation |
|
9 |
|
|
|
7 |
|
|
Deferred income taxes |
|
31 |
|
|
|
18 |
|
|
Gain on disposition of business |
|
(3 |
) |
|
|
— |
|
|
Loss (gain) on investments in marketable securities |
|
(4 |
) |
|
|
16 |
|
|
Change in |
|
|
|
|
Accounts receivable |
|
(10 |
) |
|
|
(93 |
) |
|
Contract assets |
|
(239 |
) |
|
|
(140 |
) |
|
Inventoried costs |
|
(5 |
) |
|
|
(6 |
) |
|
Prepaid expenses and other assets |
|
(6 |
) |
|
|
(1 |
) |
|
Accounts payable and accruals |
|
116 |
|
|
|
46 |
|
|
Retiree benefits |
|
(65 |
) |
|
|
(13 |
) |
|
Other non-cash transactions, net |
|
4 |
|
|
|
3 |
|
|
Net cash provided by operating activities |
|
43 |
|
|
|
68 |
|
|
Investing
Activities |
|
|
|
|
Capital expenditures |
|
|
|
|
Capital expenditure additions |
|
(60 |
) |
|
|
(71 |
) |
|
Grant proceeds for capital expenditures |
|
1 |
|
|
|
5 |
|
|
Acquisitions of businesses, net of cash received |
|
— |
|
|
|
(378 |
) |
|
Investment in affiliates |
|
(12 |
) |
|
|
— |
|
|
Proceeds from disposition of business |
|
25 |
|
|
|
— |
|
|
Net cash used in investing activities |
|
(46 |
) |
|
|
(444 |
) |
|
|
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (continued)
|
|
Three Months Ended March 31 |
($ in
millions) |
|
2021 |
|
2020 |
Financing Activities |
|
|
|
|
Proceeds from line of credit borrowings |
|
— |
|
|
|
385 |
|
|
Repayment of line of credit borrowings |
|
— |
|
|
|
(5 |
) |
|
Net borrowings on commercial paper |
|
— |
|
|
|
88 |
|
|
Dividends paid |
|
(46 |
) |
|
|
(42 |
) |
|
Repurchases of common stock |
|
(49 |
) |
|
|
(84 |
) |
|
Employee taxes on certain share-based payment arrangements |
|
(7 |
) |
|
|
(13 |
) |
|
Net cash provided by (used in) financing activities |
|
(102 |
) |
|
|
329 |
|
|
Change in cash and cash equivalents |
|
(105 |
) |
|
|
(47 |
) |
|
Cash and cash equivalents,
beginning of period |
|
512 |
|
|
|
75 |
|
|
Cash and cash equivalents, end of period |
|
$ |
407 |
|
|
|
$ |
28 |
|
|
Supplemental Cash Flow
Disclosure |
|
|
|
|
Cash paid for income taxes (net
of refunds) |
|
$ |
(42 |
) |
|
|
$ |
2 |
|
|
Cash paid for interest |
|
$ |
1 |
|
|
|
$ |
1 |
|
|
Non-Cash Investing and
Financing Activities |
|
|
|
|
Capital expenditures accrued in
accounts payable |
|
$ |
12 |
|
|
|
$ |
10 |
|
|
Accrued repurchases of common
stock |
|
$ |
1 |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit B: Non-GAAP Measures Definitions &
Reconciliations
We make reference to "segment operating income," "segment
operating 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 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.
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.
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 |
|
|
March 31 |
($ in
millions) |
|
2021 |
|
2020 |
Ingalls revenues |
|
$ |
649 |
|
|
|
$ |
629 |
|
|
Newport News revenues |
|
1,407 |
|
|
|
1,341 |
|
|
Technical Solutions
revenues |
|
259 |
|
|
|
317 |
|
|
Intersegment eliminations |
|
(37 |
) |
|
|
(24 |
) |
|
Sales and Service
Revenues |
|
2,278 |
|
|
|
2,263 |
|
|
|
|
|
|
|
Operating
Income |
|
147 |
|
|
|
215 |
|
|
Operating FAS/CAS Adjustment |
|
40 |
|
|
|
(63 |
) |
|
Non-current state income taxes |
|
4 |
|
|
|
4 |
|
|
Segment Operating
Income |
|
191 |
|
|
|
156 |
|
|
As a percentage of sales and service revenues |
|
8.4 |
% |
|
|
6.9 |
% |
|
Ingalls segment operating income |
|
91 |
|
|
|
68 |
|
|
As a percentage of Ingalls revenues |
|
14.0 |
% |
|
|
10.8 |
% |
|
Newport News segment operating income |
|
93 |
|
|
|
95 |
|
|
As a percentage of Newport News revenues |
|
6.6 |
% |
|
|
7.1 |
% |
|
Technical Solutions segment operating income |
|
7 |
|
|
|
(7 |
) |
|
As a percentage of Technical Solutions revenues |
|
2.7 |
% |
|
|
(2.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Net Earnings
and Adjusted Diluted Earnings Per Share
|
|
Three Months Ended |
|
|
March 31 |
($ in
millions, except per share amounts) |
|
2021 |
|
2020 |
|
|
|
|
|
Net earnings |
|
$ |
148 |
|
|
|
$ |
172 |
|
|
After-tax FAS/CAS
Adjustment(1) |
|
(5 |
) |
|
|
(73 |
) |
|
Adjusted Net
Earnings |
|
$ |
143 |
|
|
|
$ |
99 |
|
|
|
|
|
|
|
Diluted earnings per
share |
|
$ |
3.68 |
|
|
|
$ |
4.23 |
|
|
After-tax FAS/CAS Adjustment
per share(1) |
|
(0.12 |
) |
|
|
(1.79 |
) |
|
Adjusted Diluted
EPS** |
|
$ |
3.56 |
|
|
|
$ |
2.43 |
|
|
|
|
|
|
|
(1) FAS/CAS
Adjustment |
|
$ |
(6 |
) |
|
|
$ |
(93 |
) |
|
Tax effect* |
|
(1 |
) |
|
|
(20 |
) |
|
After-tax impact |
|
$ |
(5 |
) |
|
|
$ |
(73 |
) |
|
Weighted-average diluted
shares outstanding |
|
40.2 |
|
|
|
40.7 |
|
|
Per share impact** |
|
$ |
(0.12 |
) |
|
|
$ |
(1.79 |
) |
|
|
|
|
|
|
*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 |
|
|
March 31 |
($ in
millions) |
|
2021 |
|
2020 |
Net cash provided by operating activities |
|
$ |
43 |
|
|
|
$ |
68 |
|
|
Less capital
expenditures: |
|
|
|
|
Capital expenditure additions |
|
(60 |
) |
|
|
(71 |
) |
|
Grant proceeds for capital expenditures |
|
1 |
|
|
|
5 |
|
|
Free cash flow |
|
$ |
(16 |
) |
|
|
$ |
2 |
|
|
|
|
Contacts:
Jerri Fuller Dickseski
(Media)jerri.dickseski@hii-co.com757-380-2341
Dwayne Blake (Investors)dwayne.blake@hii-co.com757-380-2104
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