HII (NYSE:HII) reported third quarter 2023 revenues of $2.8
billion, up 7.2% from the third quarter of 2022, driven primarily
by growth at its Mission Technologies and Ingalls Shipbuilding
segments.
Operating income in the third quarter of 2023 was $172 million
and operating margin was 6.1%, compared to $131 million and 5.0%,
respectively, in the third quarter of 2022. The increases were
primarily driven by higher segment operating income1 compared to
the prior year, favorable changes to the operating FAS/CAS
adjustment, and favorable non-current state income taxes.
Segment operating income1 in the third quarter of 2023 was $187
million and segment operating margin1 was 6.6%, compared to $166
million and 6.3%, respectively, in the third quarter of 2022. The
increases were primarily driven by higher volumes, favorable
changes in contract estimates, and improved performance, partially
offset by contract incentives on the Columbia-class (SSBN 826)
submarine program in the prior year period.
Net earnings in the quarter were $148 million, compared to $138
million in the third quarter of 2022. Diluted earnings per share in
the quarter was $3.70, compared to $3.44 in the third quarter of
2022.
Net cash provided by operating activities in the quarter was
$335 million and free cash flow1 was $293 million, compared to cash
used in operating activities of $19 million and free cash flow1 of
negative $96 million in the third quarter of 2022.
New contract awards in the third quarter of 2023 were $5.4
billion, bringing total backlog to approximately $49 billion as of
September 30, 2023.
“It was another outstanding quarter of growth across all three
divisions. Our financial results demonstrate our commitment to
achieving our goals of steady operational performance, execution on
our existing contracts, and strong free cash flow generation,” said
Chris Kastner, HII’s president and CEO. "We continue to support our
customers' top national defense priorities by delivering quality
platforms, technologies and solutions, thereby creating value for
all of our stakeholders - our employees, customers, shareholders,
suppliers and communities."
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations.2The financial outlook, expectations and other
forward looking statements provided by the company for 2023 and
beyond reflect the company's judgment based on information
available at the time of this release.
Results of Operations
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
September 30 |
|
|
|
|
|
September 30 |
|
|
|
|
($ in
millions, except per share amounts) |
|
|
2023 |
|
|
|
2022 |
|
|
$ Change |
|
% Change |
|
|
2023 |
|
|
|
2022 |
|
|
$ Change |
|
% Change |
Sales and service revenues |
|
$ |
2,816 |
|
|
$ |
2,626 |
|
|
$ |
190 |
|
7.2 |
% |
|
$ |
8,277 |
|
|
$ |
7,864 |
|
|
$ |
413 |
|
|
5.3 |
% |
Operating income |
|
|
172 |
|
|
|
131 |
|
|
|
41 |
|
31.3 |
% |
|
|
469 |
|
|
|
460 |
|
|
|
9 |
|
|
2.0 |
% |
Operating margin % |
|
|
6.1 |
% |
|
|
5.0 |
% |
|
|
|
112 bps |
|
|
5.7 |
% |
|
|
5.8 |
% |
|
|
|
(18) bps |
Segment operating income1 |
|
|
187 |
|
|
|
166 |
|
|
|
21 |
|
12.7 |
% |
|
|
512 |
|
|
|
567 |
|
|
|
(55 |
) |
|
(9.7)% |
Segment operating margin
%1 |
|
|
6.6 |
% |
|
|
6.3 |
% |
|
|
|
32 bps |
|
|
6.2 |
% |
|
|
7.2 |
% |
|
|
|
(102) bps |
Net earnings |
|
|
148 |
|
|
|
138 |
|
|
|
10 |
|
7.2 |
% |
|
|
407 |
|
|
|
456 |
|
|
|
(49 |
) |
|
(10.7)% |
Diluted earnings per
share |
|
$ |
3.70 |
|
|
$ |
3.44 |
|
|
$ |
0.26 |
|
7.6 |
% |
|
$ |
10.18 |
|
|
$ |
11.37 |
|
|
$ |
(1.19 |
) |
|
(10.5)% |
1 Non-GAAP
measures that exclude non-segment factors affecting operating
income. See Exhibit B for definitions and reconciliations. |
Segment Operating Results
Ingalls Shipbuilding
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
September 30 |
|
|
|
|
|
September 30 |
|
|
|
|
($ in
millions) |
|
|
2023 |
|
|
|
2022 |
|
|
$ Change |
|
% Change |
|
|
2023 |
|
|
|
2022 |
|
|
$ Change |
|
% Change |
Revenues |
|
$ |
711 |
|
|
$ |
623 |
|
|
$ |
88 |
|
14.1 |
% |
|
$ |
1,952 |
|
|
$ |
1,912 |
|
|
$ |
40 |
|
|
2.1 |
% |
Segment operating income1 |
|
|
73 |
|
|
|
50 |
|
|
|
23 |
|
46.0 |
% |
|
|
193 |
|
|
|
242 |
|
|
|
(49 |
) |
|
(20.2)% |
Segment operating margin
%1 |
|
|
10.3 |
% |
|
|
8.0 |
% |
|
|
|
224 bps |
|
|
9.9 |
% |
|
|
12.7 |
% |
|
|
|
(277) bps |
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
Ingalls Shipbuilding revenues for the third quarter of 2023 were
$711 million, an increase of $88 million, or 14%, from the same
period in 2022, primarily driven by higher volumes in amphibious
assault ships and surface combatants.
Ingalls Shipbuilding segment operating income1 for the third
quarter of 2023 was $73 million, an increase of $23 million from
the same period in 2022. Segment operating margin1 in the third
quarter of 2023 was 10.3%, compared to 8.0% in the same period last
year. The increase was primarily driven by higher volumes described
above and favorable changes in contract estimates.
Key Ingalls Shipbuilding milestones for the quarter:
- Launched amphibious assault ship Bougainville (LHA 8)
- Authenticated keel of amphibious assault ship Fallujah (LHA
9)
- Completed acceptance trials for National Security Cutter
Calhoun (NSC 10)
- Launched and christened guided missile destroyer Ted Stevens
(DDG 128)
- Awarded $155 million contract for the modernization of USS
Zumwalt (DDG 1000)
- Awarded construction contract for seven Arleigh Burke-class
(DDG 51) destroyers
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations.
Newport News Shipbuilding
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
September 30 |
|
|
|
|
|
September 30 |
|
|
|
|
($ in
millions) |
|
|
2023 |
|
|
|
2022 |
|
|
$ Change |
|
% Change |
|
|
2023 |
|
|
|
2022 |
|
|
$ Change |
|
% Change |
Revenues |
|
$ |
1,453 |
|
|
$ |
1,445 |
|
|
$ |
8 |
|
|
0.6 |
% |
|
$ |
4,468 |
|
|
$ |
4,268 |
|
|
$ |
200 |
|
|
4.7 |
% |
Segment operating income1 |
|
|
90 |
|
|
|
102 |
|
|
|
(12 |
) |
|
(11.8)% |
|
|
269 |
|
|
|
277 |
|
|
|
(8 |
) |
|
(2.9)% |
Segment operating margin
%1 |
|
|
6.2 |
% |
|
|
7.1 |
% |
|
|
|
(86) bps |
|
|
6.0 |
% |
|
|
6.5 |
% |
|
|
|
(47) bps |
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
Newport News Shipbuilding revenues for the third quarter of 2023
were $1.5 billion, an increase of $8 million or 1%, from the same
period in 2022, primarily driven by higher volumes in aircraft
carrier construction, partially offset by lower volumes in aircraft
carrier refueling and complex overhaul.
Newport News Shipbuilding segment operating income1 for the
third quarter of 2023 was $90 million, a decrease of $12 million
from the same period in 2022. Segment operating margin1 in the
third quarter of 2023 was 6.2%, compared to 7.1% in the same period
last year. The decreases were primarily due to contract incentives
on the Columbia-class (SSBN 826) submarine program in 2022,
partially offset by improved performance on the Virginia- class
(SSN 774) submarine program.
Key Newport News Shipbuilding milestones for the quarter:
- Authenticated keel of Virginia-class submarine Oklahoma (SSN
802)
- Reached pressure hull complete on Virginia-class submarine
Arkansas (SSN 800)
- Awarded $528 million contract to support maintenance of
nuclear-powered aircraft carriers ported in San Diego
Mission Technologies
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
September 30 |
|
|
|
|
|
September 30 |
|
|
|
|
($ in
millions) |
|
|
2023 |
|
|
|
2022 |
|
|
$ Change |
|
% Change |
|
|
2023 |
|
|
|
2022 |
|
|
$ Change |
|
% Change |
Revenues |
|
$ |
685 |
|
|
$ |
595 |
|
|
$ |
90 |
|
15.1 |
% |
|
$ |
1,954 |
|
|
$ |
1,785 |
|
|
$ |
169 |
|
9.5 |
% |
Segment operating income1 |
|
|
24 |
|
|
|
14 |
|
|
|
10 |
|
71.4 |
% |
|
|
50 |
|
|
|
48 |
|
|
|
2 |
|
4.2 |
% |
Segment operating margin
%1 |
|
|
3.5 |
% |
|
|
2.4 |
% |
|
|
|
115 bps |
|
|
2.6 |
% |
|
|
2.7 |
% |
|
|
|
(13) bps |
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
|
|
|
|
|
|
|
|
Mission Technologies revenues for the third quarter of 2023 were
$685 million, an increase of $90 million, or 15%, from the same
period in 2022. The increase was primarily due to higher volumes in
mission based solutions, driven by growth in C5ISR, as well as
cyber, electronic warfare and space programs.
Mission Technologies segment operating income1 for the third
quarter of 2023 was $24 million, compared to $14 million in the
third quarter of 2022. Segment operating margin1 in the third
quarter of 2023 was 3.5%, compared to 2.4% in the same period last
year. The increases were primarily driven by higher volumes in
mission based solutions and improved performance in unmanned
systems.
Mission Technologies results included approximately $27 million
of amortization of purchased intangible assets in the third quarter
of 2023, compared to approximately $30 million in the same period
last year.
Mission Technologies EBITDA margin1 in the third quarter of 2023
was 8.2%.
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations
Key Mission Technologies milestones for the quarter:
- Awarded $1.4 billion Joint Network Engineering and Emerging
Operations task order under the General Services Administration's
ASTRO contract
- Awarded $347 million contract for Lionfish Small Unmanned
Undersea Vehicle production, training, and engineering by the U.S.
Navy
- Awarded $244 million task order to integrate Minotaur software
products into maritime platforms by the U.S. Navy, U.S. Marine
Corps. and U.S. Coast Guard
- Awarded $138 million contract to support planning and
acquisition of critical warfighting capabilities by the U.S. Air
Force
- Awarded $134 million U.S. Naval Surface Warfare Center Software
Dahlgren Division, integrated training systems, software
development contract
- Awarded $84 million contract to support National Geospatial
Agency's enterprise cloud migration
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations.
2023 Financial Outlook1
- Increasing shipbuilding midpoint and Mission Technologies
revenue guidance
- Revising FY23 shipbuilding revenue2 from $8.4 - $8.6 billion to
$8.5 - $8.6 billion
- Increasing FY23 Mission Technologies revenue from approximately
$2.5 billion to approximately $2.55 billion
- Reaffirming shipbuilding and Mission Technologies FY23 margin
guidance
- Expect shipbuilding operating margin2 between 7.7% and 8.0% for
FY23
- Expect Mission Technologies segment operating margin2 between
2.5% and 3.0%, and Mission Technologies EBITDA margin2 between 8.0%
and 8.5% for FY23
- Increasing free cash flow2 guidance for FY23
- Increasing FY23 free cash flow2 from $400 - $450 million to
approximately $500 million3
- Expect cumulative FY20-FY24 free cash flow2 of approximately
$2.9 billion3
|
|
FY23 Outlook |
Shipbuilding Revenue2 |
|
$8.5 - $8.6B |
Shipbuilding Operating
Margin2 |
|
7.7% - 8.0% |
Mission Technologies
Revenue |
|
~$2.55B |
Mission Technologies Segment
Operating Margin2 |
|
2.5% - 3.0% |
Mission Technologies EBITDA
Margin2 |
|
8.0% - 8.5% |
|
|
|
Operating FAS/CAS
Adjustment |
|
($70M) |
Non-current State Income Tax
Benefit4 |
|
~$8M |
Interest Expense |
|
($100M) |
Non-operating Retirement
Benefit |
|
$149M |
Effective Tax Rate |
|
~21% |
|
|
|
Depreciation &
Amortization |
|
~$365M |
Capital Expenditures |
|
~3.0% of Sales |
Free Cash Flow2,3 |
|
~$500M |
1The financial outlook, expectations and other forward-looking
statements provided by the company for 2023 and beyond reflect the
company's judgment based on the information available at the time
of this release.2Non-GAAP measures. See Exhibit B for definitions.
In reliance upon Item 10(e)(1)(i)(B) of Regulation S-K,
reconciliations of forward–looking GAAP and non–GAAP measures are
not provided because of the unreasonable effort associated with
providing such reconciliations due to the variability in the
occurrence and the amounts of certain components of GAAP and
non-GAAP measures. For the same reasons, we are unable to address
the significance of the unavailable information, which could be
material to future results.3Outlook is based on current tax law and
assumes the provisions requiring capitalization of R&D
expenditures for tax purposes are not deferred or repealed.4Outlook
is based on current tax law. Repeal or deferral of provisions
requiring capitalization of R&D expenditures would result in
elevated non-current state income tax expense.
About Huntington Ingalls Industries
HII is a global, all-domain defense provider. HII’s mission is
to deliver the world’s most powerful ships and all-domain solutions
in service of the nation, creating the advantage for our customers
to protect peace and freedom around the world.
As the nation’s largest military shipbuilder, and with a more
than 135-year history of advancing U.S. national security, HII
delivers critical capabilities extending from ships to unmanned
systems, cyber, ISR, AI/ML and synthetic training. Headquartered in
Virginia, HII’s workforce is 44,000 strong. For more information,
please visit www.HII.com.
Conference Call Information
HII 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, November 9th by calling (866) 813-9403 or (929)
458-6194 and using access code 143820.
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); significant delays in appropriations for our
programs and U.S. government funding more broadly; 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; our ability to attract, train and retain a qualified
workforce; disruptions impacting global supply, including those
resulting from the ongoing conflict between Russia and Ukraine;
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 Annual Report on Form 10-K for the year ended
December 31, 2022 and our other 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 EndedSeptember 30 |
|
Nine Months EndedSeptember 30 |
(in millions, except per share amounts) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Sales and service revenues |
|
|
|
|
|
|
|
|
Product sales |
|
$ |
1,835 |
|
|
$ |
1,774 |
|
|
$ |
5,543 |
|
|
$ |
5,327 |
|
Service revenues |
|
|
981 |
|
|
|
852 |
|
|
|
2,734 |
|
|
|
2,537 |
|
Sales and service revenues |
|
|
2,816 |
|
|
|
2,626 |
|
|
|
8,277 |
|
|
|
7,864 |
|
Cost of
sales and service revenues |
|
|
|
|
|
|
|
|
Cost of product sales |
|
|
1,541 |
|
|
|
1,517 |
|
|
|
4,711 |
|
|
|
4,511 |
|
Cost of service revenues |
|
|
859 |
|
|
|
747 |
|
|
|
2,411 |
|
|
|
2,252 |
|
Income from operating investments, net |
|
|
9 |
|
|
|
13 |
|
|
|
25 |
|
|
|
47 |
|
General and administrative expenses |
|
|
253 |
|
|
|
244 |
|
|
|
711 |
|
|
|
688 |
|
Operating income |
|
|
172 |
|
|
|
131 |
|
|
|
469 |
|
|
|
460 |
|
Other
income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(22 |
) |
|
|
(27 |
) |
|
|
(70 |
) |
|
|
(79 |
) |
Non-operating retirement benefit |
|
|
37 |
|
|
|
71 |
|
|
|
111 |
|
|
|
209 |
|
Other, net |
|
|
2 |
|
|
|
(13 |
) |
|
|
11 |
|
|
|
(30 |
) |
Earnings
before income taxes |
|
|
189 |
|
|
|
162 |
|
|
|
521 |
|
|
|
560 |
|
Federal
and foreign income tax expense |
|
|
41 |
|
|
|
24 |
|
|
|
114 |
|
|
|
104 |
|
Net earnings |
|
$ |
148 |
|
|
$ |
138 |
|
|
$ |
407 |
|
|
$ |
456 |
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share |
|
$ |
3.70 |
|
|
$ |
3.44 |
|
|
$ |
10.18 |
|
|
$ |
11.37 |
|
Weighted-average common shares outstanding |
|
|
40.0 |
|
|
|
40.1 |
|
|
|
40.0 |
|
|
|
40.1 |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share |
|
$ |
3.70 |
|
|
$ |
3.44 |
|
|
$ |
10.18 |
|
|
$ |
11.37 |
|
Weighted-average diluted shares outstanding |
|
|
40.0 |
|
|
|
40.1 |
|
|
|
40.0 |
|
|
|
40.1 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per share |
|
$ |
1.24 |
|
|
$ |
1.18 |
|
|
$ |
3.72 |
|
|
$ |
3.54 |
|
|
|
|
|
|
|
|
|
|
Net
earnings from above |
|
$ |
148 |
|
|
$ |
138 |
|
|
$ |
407 |
|
|
$ |
456 |
|
Other
comprehensive income (loss) |
|
|
|
|
|
|
|
|
Change in unamortized benefit plan costs |
|
|
4 |
|
|
|
12 |
|
|
|
13 |
|
|
|
(61 |
) |
Other |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(2 |
) |
Tax benefit (expense) for items of other comprehensive income |
|
|
(2 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
16 |
|
Other comprehensive income (loss), net of tax |
|
|
2 |
|
|
|
8 |
|
|
|
9 |
|
|
|
(47 |
) |
Comprehensive income |
|
$ |
150 |
|
|
$ |
146 |
|
|
$ |
416 |
|
|
$ |
409 |
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED)
($ in
millions) |
|
September 30,2023 |
|
December 31,2022 |
Assets |
|
|
|
|
Current Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
109 |
|
|
$ |
467 |
|
Accounts
receivable, net of allowance for doubtful accounts of $2 million as
of 2023 and 2022 |
|
|
698 |
|
|
|
636 |
|
Contract
assets |
|
|
1,300 |
|
|
|
1,240 |
|
Inventoried costs |
|
|
194 |
|
|
|
183 |
|
Income
taxes receivable |
|
|
180 |
|
|
|
170 |
|
Prepaid
expenses and other current assets |
|
|
106 |
|
|
|
50 |
|
Total current assets |
|
|
2,587 |
|
|
|
2,746 |
|
Property, Plant, and Equipment, net of accumulated depreciation of
$2,448 million as of 2023 and $2,319 million as of 2022 |
|
|
3,201 |
|
|
|
3,198 |
|
Operating lease assets |
|
|
248 |
|
|
|
282 |
|
Goodwill |
|
|
2,618 |
|
|
|
2,618 |
|
Other
intangible assets, net of accumulated amortization of $977 million
as of 2023 and $881 million as of 2022 |
|
|
923 |
|
|
|
1,019 |
|
Pension
plan assets |
|
|
670 |
|
|
|
600 |
|
Miscellaneous other assets |
|
|
374 |
|
|
|
394 |
|
Total assets |
|
$ |
10,621 |
|
|
$ |
10,857 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
Current Liabilities |
|
|
|
|
Trade
accounts payable |
|
|
535 |
|
|
|
642 |
|
Accrued
employees’ compensation |
|
|
361 |
|
|
|
345 |
|
Current
portion of long-term debt |
|
|
255 |
|
|
|
399 |
|
Current
portion of postretirement plan liabilities |
|
|
134 |
|
|
|
134 |
|
Current
portion of workers’ compensation liabilities |
|
|
223 |
|
|
|
229 |
|
Contract
liabilities |
|
|
878 |
|
|
|
766 |
|
Other
current liabilities |
|
|
431 |
|
|
|
380 |
|
Total current liabilities |
|
|
2,817 |
|
|
|
2,895 |
|
Long-term debt |
|
|
2,213 |
|
|
|
2,506 |
|
Pension
plan liabilities |
|
|
219 |
|
|
|
214 |
|
Other
postretirement plan liabilities |
|
|
257 |
|
|
|
260 |
|
Workers’
compensation liabilities |
|
|
452 |
|
|
|
463 |
|
Long-term operating lease liabilities |
|
|
212 |
|
|
|
246 |
|
Deferred
tax liabilities |
|
|
341 |
|
|
|
418 |
|
Other
long-term liabilities |
|
|
377 |
|
|
|
366 |
|
Total liabilities |
|
|
6,888 |
|
|
|
7,368 |
|
Commitments and Contingencies |
|
|
|
|
Stockholders’ Equity |
|
|
|
|
Common
stock, $0.01 par value; 150,000,000 shares authorized; 53,595,352
shares issued and 39,779,936 shares outstanding as of September 30,
2023, and 53,503,317 shares issued and 39,863,456 shares
outstanding as of December 31, 2022 |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
2,038 |
|
|
|
2,022 |
|
Retained
earnings |
|
|
4,532 |
|
|
|
4,276 |
|
Treasury
stock |
|
|
(2,248 |
) |
|
|
(2,211 |
) |
Accumulated other comprehensive loss |
|
|
(590 |
) |
|
|
(599 |
) |
Total stockholders’ equity |
|
|
3,733 |
|
|
|
3,489 |
|
Total liabilities and stockholders’ equity |
|
$ |
10,621 |
|
|
$ |
10,857 |
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
|
Nine Months EndedSeptember 30 |
($ in millions) |
|
2023 |
|
|
|
2022 |
|
Operating Activities |
|
|
|
Net earnings |
$ |
407 |
|
|
$ |
456 |
|
Adjustments to reconcile to
net cash used in operating activities |
|
|
|
Depreciation |
|
163 |
|
|
|
158 |
|
Amortization of purchased intangibles |
|
96 |
|
|
|
105 |
|
Amortization of debt issuance costs |
|
6 |
|
|
|
6 |
|
Provision for doubtful accounts |
|
— |
|
|
|
(7 |
) |
Stock-based compensation |
|
27 |
|
|
|
28 |
|
Deferred income taxes |
|
(81 |
) |
|
|
(14 |
) |
Loss (gain) on investments in marketable securities |
|
(10 |
) |
|
|
34 |
|
Change in |
|
|
|
Accounts receivable |
|
(62 |
) |
|
|
(281 |
) |
Contract assets |
|
(60 |
) |
|
|
(254 |
) |
Inventoried costs |
|
(12 |
) |
|
|
(13 |
) |
Prepaid expenses and other assets |
|
(66 |
) |
|
|
(4 |
) |
Accounts payable and accruals |
|
45 |
|
|
|
48 |
|
Retiree benefits |
|
(55 |
) |
|
|
(99 |
) |
Other non-cash transactions, net |
|
10 |
|
|
|
2 |
|
Net cash provided by operating activities |
|
408 |
|
|
|
165 |
|
Investing
Activities |
|
|
|
Capital expenditures |
|
|
|
Capital expenditure additions |
|
(164 |
) |
|
|
(179 |
) |
Grant proceeds for capital expenditures |
|
14 |
|
|
|
— |
|
Investment in affiliates |
|
(24 |
) |
|
|
(5 |
) |
Proceeds from equity method investments |
|
61 |
|
|
|
6 |
|
Other investing activities, net |
|
2 |
|
|
|
— |
|
Net cash used in investing activities |
|
(111 |
) |
|
|
(178 |
) |
Financing
Activities |
|
|
|
Repayment of long-term debt |
|
(455 |
) |
|
|
(300 |
) |
Dividends paid |
|
(149 |
) |
|
|
(142 |
) |
Repurchases of common stock |
|
(37 |
) |
|
|
(41 |
) |
Employee taxes on certain share-based payment arrangements |
|
(13 |
) |
|
|
(14 |
) |
Other financing activities, net |
|
(1 |
) |
|
|
— |
|
Net cash used in financing activities |
|
(655 |
) |
|
|
(497 |
) |
Change in cash and cash equivalents |
|
(358 |
) |
|
|
(510 |
) |
Cash and cash equivalents,
beginning of period |
|
467 |
|
|
|
627 |
|
Cash and cash equivalents, end
of period |
$ |
109 |
|
|
$ |
117 |
|
Supplemental Cash Flow
Disclosure |
|
|
|
Cash paid for income taxes
(net of refunds) |
$ |
227 |
|
|
$ |
107 |
|
Cash paid for interest |
$ |
63 |
|
|
$ |
61 |
|
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," “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, Mission
Technologies EBITDA 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, Mission Technologies EBITDA 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,
Mission Technologies EBITDA 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. Because not all companies use
identical calculations, our presentation of shipbuilding revenue,
shipbuilding operating margin, Mission Technologies EBITDA and
Mission Technologies EBITDA margin 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 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.
In reliance upon Item 10(e)(1)(i)(B) of Regulation S-K,
reconciliations of forward-looking GAAP and non-GAAP measures are
not provided because of the unreasonable effort associated with
providing such reconciliations due to the variability in the
occurrence and the amounts of certain components of GAAP and
non-GAAP measures. For the same reasons, we are unable to address
the significance of the unavailable information, which could be
material to future results.
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 is defined as
Mission Technologies segment operating income before interest
expense, income taxes, depreciation, and amortization.
Mission Technologies EBITDA margin is defined
as Mission Technologies EBITDA 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.
Certain of the financial measures we present are 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 |
|
Nine Months Ended |
|
|
September 30 |
|
September 30 |
($ in millions) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Ingalls revenues |
|
$ |
711 |
|
|
$ |
623 |
|
|
$ |
1,952 |
|
|
$ |
1,912 |
|
Newport News revenues |
|
|
1,453 |
|
|
|
1,445 |
|
|
|
4,468 |
|
|
|
4,268 |
|
Mission Technologies
revenues |
|
|
685 |
|
|
|
595 |
|
|
|
1,954 |
|
|
|
1,785 |
|
Intersegment eliminations |
|
|
(33 |
) |
|
|
(37 |
) |
|
|
(97 |
) |
|
|
(101 |
) |
Sales and Service
Revenues |
|
|
2,816 |
|
|
|
2,626 |
|
|
|
8,277 |
|
|
|
7,864 |
|
|
|
|
|
|
|
|
|
|
Operating
Income |
|
|
172 |
|
|
|
131 |
|
|
|
469 |
|
|
|
460 |
|
Operating FAS/CAS Adjustment |
|
|
19 |
|
|
|
36 |
|
|
|
55 |
|
|
|
108 |
|
Non-current state income taxes |
|
|
(4 |
) |
|
|
(1 |
) |
|
|
(12 |
) |
|
|
(1 |
) |
Segment Operating
Income |
|
|
187 |
|
|
|
166 |
|
|
|
512 |
|
|
|
567 |
|
As a percentage of sales and service revenues |
|
|
6.6 |
% |
|
|
6.3 |
% |
|
|
6.2 |
% |
|
|
7.2 |
% |
Ingalls segment operating income |
|
|
73 |
|
|
|
50 |
|
|
|
193 |
|
|
|
242 |
|
As a percentage of Ingalls revenues |
|
|
10.3 |
% |
|
|
8.0 |
% |
|
|
9.9 |
% |
|
|
12.7 |
% |
Newport News segment operating income |
|
|
90 |
|
|
|
102 |
|
|
|
269 |
|
|
|
277 |
|
As a percentage of Newport News revenues |
|
|
6.2 |
% |
|
|
7.1 |
% |
|
|
6.0 |
% |
|
|
6.5 |
% |
Mission Technologies segment operating income |
|
|
24 |
|
|
|
14 |
|
|
|
50 |
|
|
|
48 |
|
As a percentage of Mission Technologies revenues |
|
|
3.5 |
% |
|
|
2.4 |
% |
|
|
2.6 |
% |
|
|
2.7 |
% |
Reconciliation of Free Cash
Flow
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30 |
|
September 30 |
($ in millions) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net cash provided by (used in) operating activities |
|
$ |
335 |
|
|
$ |
(19 |
) |
|
$ |
408 |
|
|
$ |
165 |
|
Less capital
expenditures: |
|
|
|
|
|
|
|
|
Capital expenditure additions |
|
|
(53 |
) |
|
|
(77 |
) |
|
|
(164 |
) |
|
|
(179 |
) |
Grant proceeds for capital expenditures |
|
|
11 |
|
|
|
— |
|
|
|
14 |
|
|
|
— |
|
Free cash flow |
|
$ |
293 |
|
|
$ |
(96 |
) |
|
$ |
258 |
|
|
$ |
(14 |
) |
Reconciliation of Mission Technologies EBITDA and EBITDA
Margin
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30 |
|
September 30 |
($ in millions) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Mission Technologies sales and service
revenues |
|
$ |
685 |
|
|
$ |
595 |
|
|
$ |
1,954 |
|
|
$ |
1,785 |
|
|
|
|
|
|
|
|
|
|
Mission Technologies
segment operating income |
|
$ |
24 |
|
|
$ |
14 |
|
|
$ |
50 |
|
|
$ |
48 |
|
Mission Technologies
depreciation expense |
|
|
2 |
|
|
|
3 |
|
|
|
8 |
|
|
|
8 |
|
Mission Technologies
amortization expense |
|
|
27 |
|
|
|
30 |
|
|
|
82 |
|
|
|
90 |
|
Mission Technologies state tax
expense |
|
|
3 |
|
|
|
3 |
|
|
|
9 |
|
|
|
9 |
|
Mission Technologies
EBITDA |
|
$ |
56 |
|
|
$ |
50 |
|
|
$ |
149 |
|
|
$ |
155 |
|
Mission Technologies
EBITDA margin |
|
|
8.2 |
% |
|
|
8.4 |
% |
|
|
7.6 |
% |
|
|
8.7 |
% |
|
|
Contacts: |
|
Brooke Hart
(Media) brooke.hart@hii-co.com202-264-7108 |
Christie Thomas
(Investors)christie.thomas@hii-co.com757-380-2104 |
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