HII (NYSE:HII) reported second quarter 2022 revenues of $2.7
billion, up 19.3% from the second quarter of 2021, primarily driven
by revenue attributable to the acquisition of Alion Science and
Technology (Alion) in the third quarter of 2021, as well as growth
at Newport News Shipbuilding.
Operating income in the second quarter of 2022 was $191 million
and operating margin was 7.2%, compared to $128 million and 5.7%,
respectively, in the second quarter of 2021. The increases in
operating income and operating margin were primarily driven by
higher segment operating income1, as well as more favorable
non-current state income taxes and a more favorable operating
FAS/CAS adjustment compared to the prior year.
Segment operating income1 in the second quarter of 2022 was $225
million and segment operating margin1 was 8.5%, compared to $169
million and 7.6%, respectively, in the second quarter of 2021. The
increases in segment operating income1 and segment operating
margin1 were driven by improved results across all three divisions
compared to the prior year.
Net earnings in the quarter were $178 million, compared to $129
million in the second quarter of 2021. Diluted earnings per share
in the quarter was $4.44, compared to $3.20 in the second quarter
of 2021.
Net cash provided by operating activities in the quarter was
$267 million and free cash flow1 was $208 million, compared to cash
provided by operating activities of $96 million and free cash flow1
of $23 million in the second quarter of 2021.
New contract awards in the second quarter of 2022 were
approximately $2.0 billion, bringing total backlog to approximately
$47.2 billion as of June 30, 2022.
“We are pleased with another quarter of consistent shipbuilding
program execution and stronger operating income at each of our
divisions compared to the prior year,” said Chris Kastner, HII’s
president and CEO. "We remain confident in the positioning of the
business for long-term value creation given the tremendous volume
of shipbuilding work we have secured in backlog and a Mission
Technologies division that is poised for robust growth in markets
of critical importance to our customers.”
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations. Reconciliations of forward-looking GAAP and
non-GAAP measures are not provided because we are unable to provide
such reconciliations without unreasonable effort due to the
uncertainty and inherent difficulty of predicting the future
occurrence and financial impact of certain elements of GAAP and
non-GAAP measures.
Results of Operations
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
|
June 30 |
|
|
($ in
millions, except per share amounts) |
|
2022 |
|
|
2021 |
|
$ Change |
% Change |
|
|
2022 |
|
|
2021 |
|
$ Change |
% Change |
Sales and service revenues |
$ |
2,662 |
|
$ |
2,231 |
|
$ |
431 |
19.3 |
% |
|
$ |
5,238 |
|
$ |
4,509 |
|
$ |
729 |
16.2 |
% |
Operating income |
|
191 |
|
|
128 |
|
|
63 |
49.2 |
% |
|
|
329 |
|
|
275 |
|
|
54 |
19.6 |
% |
Operating margin % |
|
7.2 |
% |
|
5.7 |
% |
|
144 bps |
|
|
6.3 |
% |
|
6.1 |
% |
|
18 bps |
Segment operating income1 |
|
225 |
|
|
169 |
|
|
56 |
33.1 |
% |
|
|
401 |
|
|
360 |
|
|
41 |
11.4 |
% |
Segment operating margin %1 |
|
8.5 |
% |
|
7.6 |
% |
|
88 bps |
|
|
7.7 |
% |
|
8.0 |
% |
|
(33) bps |
Net earnings |
|
178 |
|
|
129 |
|
|
49 |
38.0 |
% |
|
|
318 |
|
|
277 |
|
|
41 |
14.8 |
% |
Diluted earnings per
share |
$ |
4.44 |
|
$ |
3.20 |
|
$ |
1.24 |
38.8 |
% |
|
$ |
7.93 |
|
$ |
6.87 |
|
$ |
1.06 |
15.4 |
% |
1Non-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 |
|
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
|
June 30 |
|
|
($ in
millions) |
|
2022 |
|
|
2021 |
|
$ Change |
% Change |
|
|
2022 |
|
|
2021 |
|
$ Change |
% Change |
Revenues |
$ |
658 |
|
$ |
670 |
|
$ |
(12 |
) |
(1.8 |
)% |
|
$ |
1,289 |
|
$ |
1,319 |
|
$ |
(30 |
) |
(2.3) |
% |
Segment operating income1 |
|
106 |
|
|
80 |
|
|
26 |
|
32.5 |
% |
|
|
192 |
|
|
171 |
|
|
21 |
|
12.3 |
% |
Segment operating margin
%1 |
|
16.1 |
% |
|
11.9 |
% |
|
417 bps |
|
|
14.9 |
% |
|
13.0 |
% |
|
193 bps |
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
Ingalls Shipbuilding revenues for the second quarter of 2022
were $658 million, a decrease of $12 million, or 1.8%, from the
same period in 2021, primarily driven by lower revenues in the
Arleigh Burke-class guided missile destroyer (DDG) program,
partially offset by higher revenues in the amphibious transport
dock (LPD) and amphibious assault ship (LHA) programs. DDG program
revenues decreased due to lower volumes on Jeremiah Denton (DDG
129) and USS Jack H. Lucas (DDG 125), partially offset by higher
volume on Thad Cochran (DDG 135). Amphibious ship program revenues
increased due to higher volumes on Pittsburgh (LPD 31), Harrisburg
(LPD 30), LHA 9 (unnamed) and amphibious class planning yard
services, partially offset by lower volume on the recently
delivered Fort Lauderdale (LPD 28).
Ingalls Shipbuilding segment operating income1 for the second
quarter of 2022 was $106 million, an increase of $26 million from
the same period in 2021. Segment operating margin1 in the second
quarter of 2022 was 16.1%, compared to 11.9% in the same period
last year. The increases were primarily driven by favorable changes
in contract estimates from facilities capital and price adjustment
clauses and higher risk retirement on Harrisburg (LPD 30),
partially offset by lower risk retirement on USS Jack H. Lucas (DDG
125) related to a capital expenditure incentive in 2021.
Key Ingalls Shipbuilding milestones for the quarter:
- Launched and christened National Security Cutter Calhoun (NSC
10)
- Christened amphibious transport dock Richard M. McCool Jr. (LPD
29)
- Awarded advanced procurement contract for LPD 32
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations.
Newport News Shipbuilding
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
|
June 30 |
|
|
($ in
millions) |
|
2022 |
|
|
2021 |
|
$ Change |
% Change |
|
|
2022 |
|
|
2021 |
|
$ Change |
% Change |
Revenues |
$ |
1,433 |
|
$ |
1,363 |
|
$ |
70 |
5.1 |
% |
|
$ |
2,823 |
|
$ |
2,770 |
|
$ |
53 |
1.9 |
% |
Segment operating income1 |
|
94 |
|
|
76 |
|
|
18 |
23.7 |
% |
|
|
175 |
|
|
169 |
|
|
6 |
3.6 |
% |
Segment
operating margin %1 |
|
6.6 |
% |
|
5.6 |
% |
|
98 bps |
|
|
6.2 |
% |
|
6.1 |
% |
|
10 bps |
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
Newport News Shipbuilding revenues for the second quarter of
2022 were $1.4 billion, an increase of $70 million, or 5.1%, from
the same period in 2021, primarily driven by higher revenues in
aircraft carriers, partially offset by lower revenues in naval
nuclear support services. 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), John F. Kennedy (CVN 79) and
Enterprise (CVN 80), partially offset by lower volume on the RCOH
of USS George Washington (CVN 73). 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 were relatively flat compared to the
prior year, with lower volumes on Block IV boats of the
Virginia-class submarine (VCS) program largely offset by higher
volumes on Block V boats of the VCS program and higher volume in
the Columbia-class submarine program.
Newport News Shipbuilding segment operating income1 for the
second quarter of 2022 was $94 million, an increase of $18 million
from the same period in 2021. Segment operating margin1 in the
second quarter of 2022 was 6.6%, compared to 5.6% in the same
period last year. The increases were primarily due favorable
changes in contract estimates from facilities capital and price
adjustment clauses, partially offset by lower risk retirement on
the VCS program.
Key Newport News Shipbuilding milestones for the quarter:
- Launched Virginia-class submarine New Jersey (SSN 796)
- Reached approximate 97% completion of the RCOH of USS George
Washington (CVN 73)
- Reached approximate 86% completion of John F. Kennedy (CVN
79)
- Recently turned over the 1,000th compartment of the 2,615 total
spaces to the crew of John F. Kennedy (CVN 79)
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations.
Mission Technologies
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
|
June 30 |
|
|
($ in
millions) |
|
2022 |
|
|
2021 |
|
$ Change |
% Change |
|
|
2022 |
|
|
2021 |
|
$ Change |
% Change |
Revenues |
$ |
600 |
|
$ |
237 |
|
$ |
363 |
153.2 |
% |
|
$ |
1,190 |
|
$ |
496 |
|
694 |
139.9 |
% |
Segment operating income1 |
|
25 |
|
|
13 |
|
$ |
12 |
92.3 |
% |
|
|
34 |
|
|
20 |
|
14 |
70.0 |
% |
Segment operating margin
%1 |
|
4.2 |
% |
|
5.5 |
% |
|
(132) bps |
|
|
2.9 |
% |
|
4.0 |
% |
|
(118) bps |
1Non-GAAP
measures. See Exhibit B for definitions and
reconciliations. |
Mission Technologies revenues for the second quarter of 2022
were $600 million, an increase of $363 million from the same period
in 2021. The increase was primarily due to higher volumes in
Defense & Federal Solutions (DFS) attributable to the
acquisition of Alion in the third quarter of 2021.
Mission Technologies segment operating income1 for the second
quarter of 2022 was $25 million, compared to $13 million in the
second quarter of 2021. Segment operating margin1 in the second
quarter of 2022 was 4.2%, compared to 5.5% in the same period last
year. The increase in segment operating income1 was primarily
driven by higher equity income from a ship repair and specialty
fabrication joint venture of which we are a minority owner.
The decrease in the segment operating margin1 was primarily
driven by approximately $24 million of amortization of Alion
related purchased intangible assets. Mission Technologies EBITDA
margin1 in the second quarter of 2022 was 10.7%.
Key Mission Technologies milestones for the quarter:
- Launched Odyssey, a suite of advanced autonomy solutions
- Awarded the Mobility Air Forces Distributed Mission Operations
prime contract
- Successfully demonstrated the Pharos system for launching and
retrieving unmanned underwater vehicles from amphibious
warships
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations.
2022 Financial Outlook1
- Reaffirming shipbuilding revenue2, shipbuilding operating
margin2, Mission Technologies segment operating margin2 and free
cash flow2 guidance
- Revising Mission Technologies revenue guidance to a range given
slower overall award and contracting pace in the first half of
2022
- Expect FY22 shipbuilding revenue2 between $8.2 and $8.5
billion; expect shipbuilding operating margin2 between 8.0% and
8.1%
- Expect FY22 Mission Technologies revenue between $2.4 and $2.6
billion, segment operating margin2 of approximately 2.5%; and
expect Mission Technologies EBITDA margin2 of between 8.0% and
8.5%
- Expect FY22 free cash flow2 of between $300 and $350
million4
- Expect cumulative FY20-FY24 free cash flow2 of approximately
$3.2 billion4
|
|
PriorOutlook |
|
CurrentOutlook |
Shipbuilding Revenue2 |
|
$8.2B - $8.5B |
|
$8.2B - $8.5B |
Shipbuilding Operating
Margin2 |
|
8.0% - 8.1% |
|
8.0% - 8.1% |
Mission Technologies Revenue |
|
~$2.6B |
|
$2.4B - $2.6B |
Mission Technologies Segment
Operating Margin2 |
|
~2.5% |
|
~2.5% |
Mission Technologies EBITDA
Margin2 |
|
8.0% - 8.5% |
|
8.0% - 8.5% |
|
|
|
|
|
Operating FAS/CAS Adjustment |
|
($143M) |
|
($143M) |
Non-current State Income Tax
Expense3 |
|
($5M) |
|
($5M) |
Interest Expense |
|
($102M) |
|
($102M) |
Non-operating Retirement
Benefit |
|
$273M |
|
$273M |
Effective Tax Rate |
|
~21% |
|
~21% |
|
|
|
|
|
Depreciation &
Amortization |
|
$365M |
|
$365M |
Capital Expenditures |
|
2.5% - 3.0%of Sales |
|
2.5% - 3.0%of Sales |
Free Cash Flow2assuming Sec. 174
Tax Deferral4 |
|
$300M - $350M |
|
$300M - $350M |
Free Cash Flow2based on current
tax law5 |
|
$200M - $250M |
|
$200M - $250M |
1The financial outlook, expectations and other forward looking
statements provided by the company for 2022 and beyond reflect the
company's judgment based on the information available at the time
of this release.2 Non-GAAP measures. See Exhibit B for definitions.
Reconciliations of forward–looking GAAP and non–GAAP measures are
not provided because we are unable to provide such reconciliations
without unreasonable effort due to the uncertainty and inherent
difficulty of predicting the future occurrence and financial impact
of certain elements of GAAP and non-GAAP measures.3 Outlook is
based on current tax law. Repeal or deferral of legislation
requiring capitalization of R&D expenditures would result in
elevated non-current state income tax expense.4 Outlook assumes the
legislation requiring capitalization of R&D expenditures for
tax purposes is deferred. See Exhibit B for additional
information.5 Reflects $100 million of projected impact of the
current tax law on our free cash flow guidance for 2022. See
appendix for additional information.
About Huntington Ingalls Industries
HII is an all-domain defense and technologies partner,
recognized worldwide as America’s largest shipbuilder. With a
135-year history of trusted partnerships in advancing U.S. national
security, HII delivers critical capabilities ranging from the most
powerful and survivable naval ships ever built, to unmanned
systems, ISR and AI/ML analytics. HII leads the industry in
mission-driven solutions that support and enable an all-domain
force. Headquartered in Virginia, HII’s skilled workforce is 44,000
strong. For more information, please visit www.HII.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.HII.com. A telephone replay of the conference call
will be available from noon today through Thursday, August 11th by
calling (866) 813-9403 or (929) 458-6194 and using access code
740364.
Cautionary Statement Regarding 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. You can
generally identify forward-looking statements by words such as
"may," "will," "should," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential,"
"continue," and similar words or phrases or the negative of these
words or phrases. These statements relate to future events or our
future financial performance and involve known and unknown risks,
uncertainties, and other factors that may cause our actual results,
levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance,
or achievements expressed or implied by these forward-looking
statements. Although we believe the expectations reflected in the
forward-looking statements are reasonable when made, we cannot
guarantee future results, levels of activity, performance, or
achievements. There are a number of important factors that could
cause our actual results to differ materially from the results
anticipated by our forward-looking statements, which include, but
are not limited to: 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, including cost increases due to inflation, 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, and the impacts of vaccination
mandates on our workforce; disruptions impacting the global supply,
including those attributable to the ongoing COVID-19 pandemic and
the ongoing conflict between Russia and Ukraine; our ability to
effectively integrate the operations of Alion Science and
Technology into our business; 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.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
|
|
Three Months EndedJune 30 |
|
Six Months EndedJune 30 |
(in millions, except per share amounts) |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Sales and service revenues |
|
|
|
|
|
|
|
|
Product sales |
|
$ |
1,829 |
|
|
$ |
1,763 |
|
|
$ |
3,553 |
|
|
$ |
3,484 |
|
Service revenues |
|
|
833 |
|
|
|
468 |
|
|
|
1,685 |
|
|
|
1,025 |
|
Sales and service revenues |
|
|
2,662 |
|
|
|
2,231 |
|
|
|
5,238 |
|
|
|
4,509 |
|
Cost of sales and service
revenues |
|
|
|
|
|
|
|
|
Cost of product sales |
|
|
1,526 |
|
|
|
1,495 |
|
|
|
2,994 |
|
|
|
2,949 |
|
Cost of service revenues |
|
|
746 |
|
|
|
414 |
|
|
|
1,505 |
|
|
|
896 |
|
Income from operating investments, net |
|
|
27 |
|
|
|
12 |
|
|
|
34 |
|
|
|
20 |
|
Other income and gains (losses), net |
|
|
1 |
|
|
|
(2 |
) |
|
|
— |
|
|
|
1 |
|
General and administrative expenses |
|
|
227 |
|
|
|
204 |
|
|
|
444 |
|
|
|
410 |
|
Operating income |
|
|
191 |
|
|
|
128 |
|
|
|
329 |
|
|
|
275 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(26 |
) |
|
|
(18 |
) |
|
|
(52 |
) |
|
|
(39 |
) |
Non-operating retirement benefit |
|
|
67 |
|
|
|
44 |
|
|
|
138 |
|
|
|
90 |
|
Other, net |
|
|
(10 |
) |
|
|
7 |
|
|
|
(17 |
) |
|
|
8 |
|
Earnings before income taxes |
|
|
222 |
|
|
|
161 |
|
|
|
398 |
|
|
|
334 |
|
Federal and foreign income tax
expense |
|
|
44 |
|
|
|
32 |
|
|
|
80 |
|
|
|
57 |
|
Net earnings |
|
$ |
178 |
|
|
$ |
129 |
|
|
$ |
318 |
|
|
$ |
277 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
4.44 |
|
|
$ |
3.20 |
|
|
$ |
7.93 |
|
|
$ |
6.87 |
|
Weighted-average common shares
outstanding |
|
|
40.1 |
|
|
|
40.3 |
|
|
|
40.1 |
|
|
|
40.3 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
4.44 |
|
|
$ |
3.20 |
|
|
$ |
7.93 |
|
|
$ |
6.87 |
|
Weighted-average diluted shares
outstanding |
|
|
40.1 |
|
|
|
40.3 |
|
|
|
40.1 |
|
|
|
40.3 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per share |
|
$ |
1.18 |
|
|
$ |
1.14 |
|
|
$ |
2.36 |
|
|
$ |
2.28 |
|
|
|
|
|
|
|
|
|
|
Net earnings from above |
|
$ |
178 |
|
|
$ |
129 |
|
|
$ |
318 |
|
|
$ |
277 |
|
Other comprehensive income
(loss) |
|
|
|
|
|
|
|
|
Change in unamortized benefit plan costs |
|
|
13 |
|
|
|
30 |
|
|
|
(73 |
) |
|
|
59 |
|
Other |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
2 |
|
Tax benefit (expense) for items of other comprehensive income |
|
|
(3 |
) |
|
|
(8 |
) |
|
|
19 |
|
|
|
(15 |
) |
Other comprehensive income (loss), net of tax |
|
|
9 |
|
|
|
22 |
|
|
|
(55 |
) |
|
|
46 |
|
Comprehensive income |
|
$ |
187 |
|
|
$ |
151 |
|
|
$ |
263 |
|
|
$ |
323 |
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED)
($ in
millions) |
|
June 30,2022 |
|
December 31,2021 |
Assets |
|
|
|
|
Current
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
375 |
|
|
$ |
627 |
|
Accounts receivable, net of
allowance for doubtful accounts of $2 million as of 2022 and $9
million as of 2021 |
|
|
681 |
|
|
|
433 |
|
Contract assets |
|
|
1,366 |
|
|
|
1,310 |
|
Inventoried costs |
|
|
196 |
|
|
|
161 |
|
Income taxes receivable |
|
|
128 |
|
|
|
209 |
|
Prepaid expenses and other
current assets |
|
|
74 |
|
|
|
50 |
|
Total current assets |
|
|
2,820 |
|
|
|
2,790 |
|
Property, Plant, and Equipment,
net of accumulated depreciation of $2,234 million as of 2022 and
$2,149 million as of 2021 |
|
|
3,102 |
|
|
|
3,107 |
|
Other
Assets |
|
|
|
|
Operating lease assets |
|
|
226 |
|
|
|
241 |
|
Goodwill |
|
|
2,634 |
|
|
|
2,628 |
|
Other intangible assets, net of
accumulated amortization of $811 million as of 2022 and $741
million as of 2021 |
|
|
1,089 |
|
|
|
1,159 |
|
Pension plan assets |
|
|
314 |
|
|
|
281 |
|
Miscellaneous other assets |
|
|
401 |
|
|
|
421 |
|
Total other assets |
|
|
4,664 |
|
|
|
4,730 |
|
Total assets |
|
$ |
10,586 |
|
|
$ |
10,627 |
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED) (continued)
($ in
millions) |
|
June 30,2022 |
|
December 31,2021 |
Liabilities and Stockholders' Equity |
|
|
|
|
Current
Liabilities |
|
|
|
|
Trade accounts payable |
|
$ |
528 |
|
|
$ |
603 |
|
Accrued employees’
compensation |
|
|
339 |
|
|
|
361 |
|
Current portion of postretirement
plan liabilities |
|
|
137 |
|
|
|
137 |
|
Current portion of workers’
compensation liabilities |
|
|
255 |
|
|
|
252 |
|
Contract liabilities |
|
|
757 |
|
|
|
651 |
|
Other current liabilities |
|
|
431 |
|
|
|
423 |
|
Total current liabilities |
|
|
2,447 |
|
|
|
2,427 |
|
Long-term debt |
|
|
3,102 |
|
|
|
3,298 |
|
Pension plan liabilities |
|
|
396 |
|
|
|
351 |
|
Other postretirement plan
liabilities |
|
|
363 |
|
|
|
368 |
|
Workers’ compensation
liabilities |
|
|
496 |
|
|
|
506 |
|
Long-term operating lease
liabilities |
|
|
181 |
|
|
|
194 |
|
Deferred tax liabilities |
|
|
293 |
|
|
|
313 |
|
Other long-term liabilities |
|
|
356 |
|
|
|
362 |
|
Total liabilities |
|
|
7,634 |
|
|
|
7,819 |
|
Commitments and
Contingencies |
|
|
|
|
Stockholders’
Equity |
|
|
|
|
Common stock, $0.01 par value;
150 million shares authorized; 53.5 million shares issued and 40.0
million shares outstanding as of June 30, 2022, and 53.4 million
shares issued and 40.0 million shares outstanding as of December
31, 2021 |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
2,002 |
|
|
|
1,998 |
|
Retained earnings |
|
|
4,113 |
|
|
|
3,891 |
|
Treasury stock |
|
|
(2,186 |
) |
|
|
(2,159 |
) |
Accumulated other comprehensive
loss |
|
|
(978 |
) |
|
|
(923 |
) |
Total stockholders’ equity |
|
|
2,952 |
|
|
|
2,808 |
|
Total liabilities and stockholders’ equity |
|
$ |
10,586 |
|
|
$ |
10,627 |
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
|
Six Months EndedJune 30 |
($ in millions) |
|
2022 |
|
|
|
2021 |
|
Operating Activities |
|
|
|
Net earnings |
$ |
318 |
|
|
$ |
277 |
|
Adjustments to reconcile to net
cash provided by (used in) operating activities |
|
|
|
Depreciation |
|
104 |
|
|
|
102 |
|
Amortization of purchased intangibles |
|
70 |
|
|
|
26 |
|
Amortization of debt issuance costs |
|
4 |
|
|
|
3 |
|
Provision for doubtful accounts |
|
(7 |
) |
|
|
— |
|
Stock-based compensation |
|
16 |
|
|
|
12 |
|
Deferred income taxes |
|
(1 |
) |
|
|
31 |
|
Loss (gain) on investments in marketable securities |
|
26 |
|
|
|
(12 |
) |
Change in |
|
|
|
Accounts receivable |
|
(241 |
) |
|
|
(45 |
) |
Contract assets |
|
(56 |
) |
|
|
(127 |
) |
Inventoried costs |
|
(35 |
) |
|
|
(3 |
) |
Prepaid expenses and other assets |
|
47 |
|
|
|
(29 |
) |
Accounts payable and accruals |
|
8 |
|
|
|
(32 |
) |
Retiree benefits |
|
(65 |
) |
|
|
(70 |
) |
Other non-cash transactions, net |
|
(4 |
) |
|
|
6 |
|
Net cash provided by operating activities |
|
184 |
|
|
|
139 |
|
Investing
Activities |
|
|
|
Capital expenditures |
|
|
|
Capital expenditure additions |
|
(102 |
) |
|
|
(134 |
) |
Grant proceeds for capital expenditures |
|
— |
|
|
|
2 |
|
Investment in affiliates |
|
(5 |
) |
|
|
(22 |
) |
Proceeds from disposition of business |
|
— |
|
|
|
20 |
|
Other investing activities, net |
|
6 |
|
|
|
— |
|
Net cash used in investing activities |
|
(101 |
) |
|
|
(134 |
) |
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED) (continued)
|
Six Months EndedJune 30 |
($ in millions) |
|
2022 |
|
|
|
2021 |
|
Financing Activities |
|
|
|
Repayment of long-term debt |
|
(200 |
) |
|
|
— |
|
Dividends paid |
|
(94 |
) |
|
|
(92 |
) |
Repurchases of common stock |
|
(27 |
) |
|
|
(70 |
) |
Employee taxes on certain share-based payment arrangements |
|
(14 |
) |
|
|
(7 |
) |
Net cash used in financing activities |
|
(335 |
) |
|
|
(169 |
) |
Change in cash and cash equivalents |
|
(252 |
) |
|
|
(164 |
) |
Cash and cash equivalents,
beginning of period |
|
627 |
|
|
|
512 |
|
Cash and cash equivalents, end of
period |
$ |
375 |
|
|
$ |
348 |
|
Supplemental Cash Flow
Disclosure |
|
|
|
Cash paid for income taxes (net
of refunds) |
$ |
15 |
|
|
$ |
21 |
|
Cash paid for interest |
$ |
49 |
|
|
$ |
37 |
|
Non-Cash Investing and
Financing Activities |
|
|
|
Capital expenditures accrued in
accounts payable |
$ |
6 |
|
|
$ |
5 |
|
Exhibit B: Non-GAAP Measures Definitions &
Reconciliations
We make reference to “segment operating income,” “segment
operating margin,” “shipbuilding revenue,” “shipbuilding operating
margin,” “Mission Technologies EBITDA margin” 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 and 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.
Shipbuilding revenue, shipbuilding operating margin and Mission
Technologies EBITDA margin are not measures recognized under GAAP.
They are measures that we use to evaluate our core operating
performance. When analyzing our operating performance, investors
should use shipbuilding revenue, shipbuilding operating margin and
Mission Technologies EBITDA margin in addition to, and not as
alternatives for, operating income and operating margin or any
other performance measure presented in accordance with GAAP. We
believe that shipbuilding revenue, shipbuilding operating margin
and Mission Technologies EBITDA 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.
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 net earnings
as a measure of our performance or net cash provided or used by
operating activities as a measure of our liquidity. 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.
A provision of the Tax Cuts and Jobs Act of 2017 that was
effective January 1, 2022 requires companies to capitalize and
amortize research and development costs over five years rather than
deducting such costs in the year incurred for tax purposes. Unless
the provision is deferred, modified, or repealed, we currently
estimate that this change could have a $100 million impact on our
free cash flow guidance for 2022, which currently assumes the
legislation will be deferred, modified or repealed. Unless the
provision is deferred, modified, or repealed, we currently estimate
that this change could have a $250 million impact on our free cash
flow guidance for 2022 through 2024, which currently assumes the
legislation will be deferred, modified or repealed.
Reconciliations of forward-looking GAAP and non-GAAP measures
are not provided because we are unable to provide such
reconciliations without unreasonable effort due to the uncertainty
and inherent difficulty of predicting the future occurrence and
financial impact of certain elements of GAAP and non-GAAP
measures.
Segment operating income is defined as
operating income 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 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.
Mission Technologies EBITDA margin is defined
as Mission Technologies segment operating income before interest
expense, income taxes, depreciation, and amortization as a
percentage of Mission Technologies revenues.
Free cash flow is defined as net cash provided
by (used in) operating activities less capital expenditures net of
related grant proceeds.
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 |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
($ in millions) |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Ingalls revenues |
|
$ |
658 |
|
|
$ |
670 |
|
|
$ |
1,289 |
|
|
$ |
1,319 |
|
Newport News revenues |
|
|
1,433 |
|
|
|
1,363 |
|
|
|
2,823 |
|
|
|
2,770 |
|
Mission Technologies
revenues |
|
|
600 |
|
|
|
237 |
|
|
|
1,190 |
|
|
|
496 |
|
Intersegment eliminations |
|
|
(29 |
) |
|
|
(39 |
) |
|
|
(64 |
) |
|
|
(76 |
) |
Sales and Service
Revenues |
|
|
2,662 |
|
|
|
2,231 |
|
|
|
5,238 |
|
|
|
4,509 |
|
|
|
|
|
|
|
|
|
|
Operating
Income |
|
|
191 |
|
|
|
128 |
|
|
|
329 |
|
|
|
275 |
|
Operating FAS/CAS Adjustment |
|
|
35 |
|
|
|
37 |
|
|
|
72 |
|
|
|
77 |
|
Non-current state income taxes |
|
|
(1 |
) |
|
|
4 |
|
|
|
— |
|
|
|
8 |
|
Segment Operating
Income |
|
|
225 |
|
|
|
169 |
|
|
|
401 |
|
|
|
360 |
|
As a percentage of sales and service revenues |
|
|
8.5 |
% |
|
|
7.6 |
% |
|
|
7.7 |
% |
|
|
8.0 |
% |
Ingalls segment operating income |
|
|
106 |
|
|
|
80 |
|
|
|
192 |
|
|
|
171 |
|
As a percentage of Ingalls revenues |
|
|
16.1 |
% |
|
|
11.9 |
% |
|
|
14.9 |
% |
|
|
13.0 |
% |
Newport News segment operating income |
|
|
94 |
|
|
|
76 |
|
|
|
175 |
|
|
|
169 |
|
As a percentage of Newport News revenues |
|
|
6.6 |
% |
|
|
5.6 |
% |
|
|
6.2 |
% |
|
|
6.1 |
% |
Mission Technologies operating income |
|
|
25 |
|
|
|
13 |
|
|
|
34 |
|
|
|
20 |
|
As a percentage of Mission Technologies revenues |
|
|
4.2 |
% |
|
|
5.5 |
% |
|
|
2.9 |
% |
|
|
4.0 |
% |
Reconciliation of Free Cash Flow
|
|
Six Months Ended |
|
|
June 30 |
($ in millions) |
|
|
2022 |
|
|
|
2021 |
|
Net cash provided by operating activities |
|
$ |
184 |
|
|
$ |
139 |
|
Less capital
expenditures: |
|
|
|
|
Capital expenditure additions |
|
|
(102 |
) |
|
|
(134 |
) |
Grant proceeds for capital expenditures |
|
|
— |
|
|
|
2 |
|
Free cash flow |
|
$ |
82 |
|
|
$ |
7 |
|
Reconciliation of Mission Technologies EBITDA and EBITDA
Margin
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
($ in millions) |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Mission Technologies sales and service
revenues |
|
$ |
600 |
|
|
$ |
237 |
|
|
$ |
1,190 |
|
|
$ |
496 |
|
|
|
|
|
|
|
|
|
|
Mission Technologies
segment operating income |
|
$ |
25 |
|
|
$ |
13 |
|
|
$ |
34 |
|
|
$ |
20 |
|
Mission Technologies
depreciation expense |
|
|
3 |
|
|
|
1 |
|
|
|
5 |
|
|
|
2 |
|
Mission Technologies
amortization expense |
|
|
30 |
|
|
|
8 |
|
|
|
60 |
|
|
|
16 |
|
Mission Technologies state tax
expense |
|
|
4 |
|
|
|
5 |
|
|
|
6 |
|
|
|
6 |
|
Mission Technologies other,
net |
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Mission Technologies
EBITDA |
|
$ |
64 |
|
|
$ |
27 |
|
|
$ |
107 |
|
|
$ |
44 |
|
Mission Technologies
EBITDA margin |
|
|
10.7 |
% |
|
|
11.4 |
% |
|
|
9.0 |
% |
|
|
8.9 |
% |
Contacts: Brooke Hart
(Media)brooke.hart@hii-co.com 202-264-7108
Christie Thomas
(Investors)christie.thomas@hii-co.com757-380-2104
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