HII (NYSE: HII) reported second quarter 2024 revenues of $3.0
billion, up 6.8% from the second quarter of 2023, driven by growth
across all segments.
Operating income in the second quarter of 2024 was
$189 million and operating margin was 6.3%, compared to $156
million and 5.6%, respectively, in the second quarter of 2023. The
increases were primarily driven by higher segment operating income2
compared to the prior year.
Segment operating income2 in the second quarter of
2024 was $203 million and segment operating margin2 was 6.8%,
compared to $169 million and 6.1%, respectively, in the second
quarter of 2023. The increases were driven by stronger results at
Mission Technologies and Newport News Shipbuilding compared to the
prior year, partially offset by Ingalls Shipbuilding results.
Net earnings in the quarter were $173 million,
compared to $130 million in the second quarter of 2023. Diluted
earnings per share in the quarter was $4.38, compared to $3.27 in
the second quarter of 2023.
Net cash used in operating activities in the
quarter was $9 million and free cash flow2 was negative $99
million, compared to cash provided by operating activities of $82
million and free cash flow2 of $14 million in the second quarter of
2023.
New contract awards in the second quarter of 2024
were $3.1 billion, bringing total backlog to approximately $48.5
billion as of June 30, 2024.
“Mission Technologies achieved another quarter of
strong performance and robust growth, which has allowed us to raise
our Mission Technologies revenue guidance range for the year,” said
Chris Kastner, HII’s president and CEO. "Our shipyards achieved
critical milestones during the quarter, delivering Virginia-class
submarine SSN 796 New Jersey and LPD 29 Richard M. McCool Jr. We
are pleased to reiterate our full year shipbuilding guidance and
see meaningful opportunities for shipbuilding operating margin2
improvement in the second half of the year."1
1The financial outlook, expectations and other
forward looking statements provided by the company for 2024 and
beyond reflect the company's judgment based on information
available at the time of this release.2Non-GAAP measures. See
Exhibit B for definitions and reconciliations.
Results of Operations
| |
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
| |
|
June 30 |
|
|
|
|
|
June 30 |
|
|
|
|
|
($ in millions, except per share amounts) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
Sales and service revenues |
|
$ |
2,977 |
|
|
$ |
2,787 |
|
|
$ |
190 |
|
6.8 |
% |
|
$ |
5,782 |
|
|
$ |
5,461 |
|
|
$ |
321 |
|
5.9 |
% |
|
Operating income |
|
|
189 |
|
|
|
156 |
|
|
|
33 |
|
21.2 |
% |
|
|
343 |
|
|
|
297 |
|
|
|
46 |
|
15.5 |
% |
|
Operating margin % |
|
|
6.3 |
% |
|
|
5.6 |
% |
|
|
|
75 bps |
|
|
5.9 |
% |
|
|
5.4 |
% |
|
|
|
49 bps |
|
Segment operating income1 |
|
|
203 |
|
|
|
169 |
|
|
|
34 |
|
20.1 |
% |
|
|
373 |
|
|
|
325 |
|
|
|
48 |
|
14.8 |
% |
|
Segment operating margin %1 |
|
|
6.8 |
% |
|
|
6.1 |
% |
|
|
|
76 bps |
|
|
6.5 |
% |
|
|
6.0 |
% |
|
|
|
50 bps |
|
Net earnings |
|
|
173 |
|
|
|
130 |
|
|
|
43 |
|
33.1 |
% |
|
|
326 |
|
|
|
259 |
|
|
|
67 |
|
25.9 |
% |
|
Diluted earnings per share |
|
$ |
4.38 |
|
|
$ |
3.27 |
|
|
$ |
1.11 |
|
33.9 |
% |
|
$ |
8.25 |
|
|
$ |
6.49 |
|
|
$ |
1.76 |
|
27.1 |
% |
|
|
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 |
|
|
|
|
|
Six Months Ended |
|
|
|
|
| |
|
June 30 |
|
|
|
|
|
June 30 |
|
|
|
|
|
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
Revenues |
|
$ |
712 |
|
|
$ |
664 |
|
|
$ |
48 |
|
|
7.2 |
% |
|
$ |
1,367 |
|
|
$ |
1,241 |
|
|
$ |
126 |
|
|
10.2 |
% |
|
Segment operating income1 |
|
|
56 |
|
|
|
65 |
|
|
|
(9 |
) |
|
(13.8) |
% |
|
|
116 |
|
|
|
120 |
|
|
|
(4 |
) |
|
(3.3) |
% |
|
Segment operating margin %1 |
|
|
7.9 |
% |
|
|
9.8 |
% |
|
|
|
(192) bps |
|
|
8.5 |
% |
|
|
9.7 |
% |
|
|
|
(118) bps |
|
|
Ingalls Shipbuilding revenues for the second
quarter of 2024 were $712 million, an increase of $48 million, or
7.2%, from the same period in 2023, primarily driven by higher
volumes in amphibious assault ships and surface combatants,
partially offset by lower volumes in the Legend-class National
Security Cutter program.
Ingalls Shipbuilding segment operating income1 for
the second quarter of 2024 was $56 million, a decrease of $9
million from the same period in 2023. Segment operating margin1 in
the second quarter of 2024 was 7.9%, compared to 9.8% in the same
period last year. The decreases were primarily driven by lower risk
retirement on surface combatants, partially offset by a delivery
contract incentive on Richard M. McCool Jr. (LPD 29).
Key Ingalls Shipbuilding milestones for the
quarter:
- Delivered amphibious transport dock
Richard M. McCool Jr. (LPD 29)
1Non-GAAP measures. See Exhibit B for definitions
and reconciliations.
Newport News Shipbuilding
| |
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
| |
|
June 30 |
|
|
|
|
|
June 30 |
|
|
|
|
|
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
Revenues |
|
$ |
1,535 |
|
|
$ |
1,509 |
|
|
$ |
26 |
|
1.7 |
% |
|
$ |
2,969 |
|
|
$ |
3,015 |
|
|
$ |
(46 |
) |
|
(1.5) |
% |
|
Segment operating income1 |
|
|
111 |
|
|
|
95 |
|
|
|
16 |
|
16.8 |
% |
|
|
193 |
|
|
|
179 |
|
|
|
14 |
|
|
7.8 |
% |
|
Segment operating margin %1 |
|
|
7.2 |
% |
|
|
6.3 |
% |
|
|
|
94 bps |
|
|
6.5 |
% |
|
|
5.9 |
% |
|
|
|
56 bps |
|
|
Newport News Shipbuilding revenues for the second
quarter of 2024 were $1.5 billion, an increase of $26 million, or
1.7%, from the same period in 2023. The increase was driven
primarily by higher volumes in the Columbia-class submarine
program.
Newport News Shipbuilding segment operating income1
for the second quarter of 2024 was $111 million, an increase of $16
million from the same period in 2023. Segment operating margin1 in
the second quarter of 2024 was 7.2% compared to 6.3% in the same
period last year. The increases were primarily driven by contract
adjustments, incentives and volume on the Refueling and Complex
Overhaul ("RCOH") program, partially offset by lower performance on
aircraft carrier construction and the Virginia-class submarine
program.
Key Newport News Shipbuilding milestones for the
quarter:
- Delivered Virginia-class submarine New
Jersey (SSN 796)
- Completed dry dock work for aircraft
carrier USS John C. Stennis (CVN 74) RCOH
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations.
Mission Technologies
| |
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
| |
|
June 30 |
|
|
|
|
|
June 30 |
|
|
|
|
|
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
Revenues |
|
$ |
765 |
|
|
$ |
645 |
|
|
$ |
120 |
|
18.6 |
% |
|
$ |
1,515 |
|
|
$ |
1,269 |
|
|
$ |
246 |
|
19.4 |
% |
|
Segment operating income1 |
|
|
36 |
|
|
|
9 |
|
|
|
27 |
|
300.0 |
% |
|
|
64 |
|
|
|
26 |
|
|
|
38 |
|
146.2 |
% |
|
Segment operating margin %1 |
|
|
4.7 |
% |
|
|
1.4 |
% |
|
|
|
331 bps |
|
|
4.2 |
% |
|
|
2.0 |
% |
|
|
|
218 bps |
|
|
|
|
|
|
|
|
|
|
Mission Technologies revenues for the second
quarter of 2024 were $765 million, an increase of $120 million, or
18.6%, from the same period in 2023. The increase was primarily due
to higher volumes in C5ISR and cyber, electronic warfare &
space.
Mission Technologies segment operating income1 for
the second quarter of 2024 was $36 million, compared to $9 million
in the second quarter of 2023. Segment operating margin1 in the
second quarter of 2024 was 4.7%, compared to 1.4% in the same
period last year. The increases were primarily driven by the higher
volumes described above, a $6 million loss in 2023 on the sale of
our interest in an unconsolidated ship repair and specialty
fabrication joint venture, and stronger performance in fleet
sustainment.
Mission Technologies results included approximately
$25 million of amortization of purchased intangible assets in the
second quarter of 2024, compared to approximately $28 million in
the same period last year.
Mission Technologies EBITDA margin1 in the second
quarter of 2024 was 8.5%, an increase from 6.7% in the second
quarter of 2023.
Key Mission Technologies milestones for the
quarter:
- Announced strategic executive
leadership appointments to advance AUKUS goals in Australia
- Announced the sale of three REMUS 100s
and five REMUS 300s to the U.K. Royal Navy
- Awarded $65 million to perform high
quality specialized research and analysis for the Deputy Director
of Joint Warfighting Development
1Non-GAAP measures. See Exhibit B for definitions
and reconciliations
HII Financial
Outlook1
- Reaffirming FY24 outlook for
shipbuilding revenue2 and operating margin2
- Raising FY24 Mission Technologies
revenue guidance range
- Reaffirming FY24 outlook for Mission
Technologies operating margin2
- Updating interest expense outlook
- Reaffirming five-year (2024-2028) free
cash flow2,3 outlook of $3.6B
|
|
|
|
|
|
|
FY24 Outlook1 |
| Shipbuilding Revenue2 |
|
$8.8B - $9.1B |
| Shipbuilding Operating
Margin2 |
|
7.6% - 7.8% |
| Mission Technologies
Revenue |
|
$2.75B - $2.8B |
| Mission Technologies Segment
Operating Margin2 |
|
3.0% - 3.5% |
| Mission Technologies EBITDA
Margin2 |
|
8.0% - 8.5% |
| |
|
|
| Operating FAS/CAS
Adjustment |
|
($63M) |
| Non-current State Income Tax
Benefit/Expense4 |
|
~$0M |
| Interest Expense |
|
($95M) |
| Non-operating Retirement
Benefit |
|
$178M |
| Effective Tax Rate |
|
~21% |
| |
|
|
| Depreciation &
Amortization |
|
~$350M |
| Capital Expenditures |
|
~5.3% of Sales |
| Free Cash Flow2,3 |
|
$600M - $700M |
| |
|
|
1The financial outlook, expectations and other
forward-looking statements provided by the company for 2024 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 HII
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, August 8th by calling (866) 813-9403 or
(929) 458-6194 and using access code 671690.
Cautionary Statement Regarding
Forward-Looking Statements and Projections
Statements in this earnings release, other than
statements of historical fact, constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. In some cases, you can 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; 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 and
in the Middle East; 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 other filings with the U.S.
Securities and Exchange Commission ("SEC"). Additional factors
include those described in our Annual Report on Form 10-K for the
year ended December 31, 2023, including under the captions
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business," in our subsequent quarterly
reports on Form 10-Q, including under the captions "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and in our subsequent filings with the
SEC. 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 or revise 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 Ended June 30 |
|
Six Months Ended June 30 |
|
(in millions, except per share amounts) |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
Sales and service revenues |
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
1,926 |
|
|
$ |
1,879 |
|
|
$ |
3,713 |
|
|
$ |
3,708 |
|
|
Service revenues |
|
|
1,051 |
|
|
|
908 |
|
|
|
2,069 |
|
|
|
1,753 |
|
|
Sales and service revenues |
|
|
2,977 |
|
|
|
2,787 |
|
|
|
5,782 |
|
|
|
5,461 |
|
|
Cost of sales and service revenues |
|
|
|
|
|
|
|
|
|
Cost of product sales |
|
|
1,627 |
|
|
|
1,602 |
|
|
|
3,164 |
|
|
|
3,170 |
|
|
Cost of service revenues |
|
|
918 |
|
|
|
796 |
|
|
|
1,811 |
|
|
|
1,552 |
|
|
Income from operating investments, net |
|
|
11 |
|
|
|
4 |
|
|
|
23 |
|
|
|
16 |
|
|
Other income and gains, net |
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
General and administrative expenses |
|
|
255 |
|
|
|
238 |
|
|
|
487 |
|
|
|
458 |
|
|
Operating income |
|
|
189 |
|
|
|
156 |
|
|
|
343 |
|
|
|
297 |
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(24 |
) |
|
|
(24 |
) |
|
|
(45 |
) |
|
|
(48 |
) |
|
Non-operating retirement benefit |
|
|
46 |
|
|
|
37 |
|
|
|
90 |
|
|
|
74 |
|
|
Other, net |
|
|
5 |
|
|
|
— |
|
|
|
12 |
|
|
|
9 |
|
|
Earnings before income taxes |
|
|
216 |
|
|
|
169 |
|
|
|
400 |
|
|
|
332 |
|
|
Federal and foreign income tax expense |
|
|
43 |
|
|
|
39 |
|
|
|
74 |
|
|
|
73 |
|
|
Net earnings |
|
$ |
173 |
|
|
$ |
130 |
|
|
$ |
326 |
|
|
$ |
259 |
|
| |
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
4.38 |
|
|
$ |
3.27 |
|
|
$ |
8.25 |
|
|
$ |
6.49 |
|
|
Weighted-average common shares outstanding |
|
|
39.5 |
|
|
|
39.8 |
|
|
|
39.5 |
|
|
|
39.9 |
|
| |
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
4.38 |
|
|
$ |
3.27 |
|
|
$ |
8.25 |
|
|
$ |
6.49 |
|
|
Weighted-average diluted shares outstanding |
|
|
39.5 |
|
|
|
39.8 |
|
|
|
39.5 |
|
|
|
39.9 |
|
| |
|
|
|
|
|
|
|
|
|
Dividends declared per share |
|
$ |
1.30 |
|
|
$ |
1.24 |
|
|
$ |
2.60 |
|
|
$ |
2.48 |
|
| |
|
|
|
|
|
|
|
|
|
Net earnings from above |
|
$ |
173 |
|
|
$ |
130 |
|
|
$ |
326 |
|
|
$ |
259 |
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
Change in unamortized benefit plan costs |
|
|
4 |
|
|
|
5 |
|
|
|
9 |
|
|
|
9 |
|
|
Tax expense for items of other comprehensive income |
|
|
— |
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
Other comprehensive income, net of tax |
|
|
4 |
|
|
|
4 |
|
|
|
7 |
|
|
|
7 |
|
|
Comprehensive income |
|
$ |
177 |
|
|
$ |
134 |
|
|
$ |
333 |
|
|
$ |
266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED)
|
($ in millions) |
|
June 30,2024 |
|
December 31,2023 |
|
Assets |
|
|
|
|
|
Current Assets |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
11 |
|
|
$ |
430 |
|
|
Accounts receivable, net of allowance for expected credit losses of
$2 million as of 2024 and $8 million as of 2023 |
|
|
706 |
|
|
|
461 |
|
|
Contract assets |
|
|
1,694 |
|
|
|
1,537 |
|
|
Inventoried costs |
|
|
198 |
|
|
|
186 |
|
|
Income taxes receivable |
|
|
197 |
|
|
|
183 |
|
|
Prepaid expenses and other current assets |
|
|
106 |
|
|
|
83 |
|
|
Total current assets |
|
|
2,912 |
|
|
|
2,880 |
|
|
Property, Plant, and Equipment, net of accumulated depreciation of
$2,494 million as of 2024 and $2,467 million as of 2023 |
|
|
3,342 |
|
|
|
3,296 |
|
|
Operating lease assets |
|
|
259 |
|
|
|
262 |
|
|
Goodwill |
|
|
2,618 |
|
|
|
2,618 |
|
|
Other intangible assets, net of accumulated amortization of $1,063
million as of 2024 and $1,009 million as of 2023 |
|
|
837 |
|
|
|
891 |
|
|
Pension plan assets |
|
|
952 |
|
|
|
888 |
|
|
Miscellaneous other assets |
|
|
390 |
|
|
|
380 |
|
|
Total assets |
|
$ |
11,310 |
|
|
$ |
11,215 |
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Trade accounts payable |
|
|
652 |
|
|
|
554 |
|
|
Accrued employees’ compensation |
|
|
354 |
|
|
|
382 |
|
|
Short-term debt and current portion of long-term debt |
|
|
942 |
|
|
|
231 |
|
|
Current portion of postretirement plan liabilities |
|
|
129 |
|
|
|
129 |
|
|
Current portion of workers’ compensation liabilities |
|
|
225 |
|
|
|
224 |
|
|
Contract liabilities |
|
|
886 |
|
|
|
1,063 |
|
|
Other current liabilities |
|
|
375 |
|
|
|
449 |
|
|
Total current liabilities |
|
|
3,563 |
|
|
|
3,032 |
|
|
Long-term debt |
|
|
1,715 |
|
|
|
2,214 |
|
|
Pension plan liabilities |
|
|
216 |
|
|
|
212 |
|
|
Other postretirement plan liabilities |
|
|
235 |
|
|
|
241 |
|
|
Workers’ compensation liabilities |
|
|
451 |
|
|
|
449 |
|
|
Long-term operating lease liabilities |
|
|
224 |
|
|
|
228 |
|
|
Deferred tax liabilities |
|
|
341 |
|
|
|
367 |
|
|
Other long-term liabilities |
|
|
387 |
|
|
|
379 |
|
|
Total liabilities |
|
|
7,132 |
|
|
|
7,122 |
|
|
Commitments and Contingencies |
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
Common stock, $0.01 par value; 150,000,000 shares authorized;
53,710,514 shares issued and 39,260,208 shares outstanding as of
2024, and 53,595,748 shares issued and 39,618,880 shares
outstanding as of 2023 |
|
|
1 |
|
|
|
1 |
|
|
Additional paid-in capital |
|
|
2,029 |
|
|
|
2,045 |
|
|
Retained earnings |
|
|
4,977 |
|
|
|
4,755 |
|
|
Treasury stock |
|
|
(2,414 |
) |
|
|
(2,286 |
) |
|
Accumulated other comprehensive loss |
|
|
(415 |
) |
|
|
(422 |
) |
|
Total stockholders’ equity |
|
|
4,178 |
|
|
|
4,093 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
11,310 |
|
|
$ |
11,215 |
|
|
|
|
|
|
|
|
|
|
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
Six Months Ended June 30 |
|
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
|
Operating Activities |
|
|
|
|
|
|
|
Net earnings |
|
$ |
326 |
|
|
$ |
259 |
|
|
Adjustments to reconcile net cash provided by (used in) operating
activities: |
|
|
|
|
Depreciation |
|
|
106 |
|
|
|
110 |
|
|
Amortization of purchased intangibles |
|
|
54 |
|
|
|
64 |
|
|
Other non-cash transactions, net |
|
|
2 |
|
|
|
14 |
|
|
Stock-based compensation |
|
|
7 |
|
|
|
18 |
|
|
Deferred income taxes |
|
|
(28 |
) |
|
|
(62 |
) |
|
Gain on investments in marketable securities |
|
|
(11 |
) |
|
|
(12 |
) |
|
Change in |
|
|
|
|
Accounts receivable |
|
|
(239 |
) |
|
|
(149 |
) |
|
Contract assets |
|
|
(157 |
) |
|
|
(27 |
) |
|
Inventoried costs |
|
|
(12 |
) |
|
|
(7 |
) |
|
Prepaid expenses and other assets |
|
|
(38 |
) |
|
|
(42 |
) |
|
Accounts payable and accruals |
|
|
(164 |
) |
|
|
(57 |
) |
|
Retiree benefits |
|
|
(57 |
) |
|
|
(36 |
) |
|
Net cash provided by (used in) operating activities |
|
|
(211 |
) |
|
|
73 |
|
|
Investing Activities: |
|
|
|
|
Capital expenditures |
|
|
|
|
Capital expenditure additions |
|
|
(165 |
) |
|
|
(111 |
) |
|
Grant proceeds for capital expenditures |
|
|
3 |
|
|
|
3 |
|
|
Investment in affiliates |
|
|
— |
|
|
|
(24 |
) |
|
Proceeds from disposition of equity method investments |
|
|
— |
|
|
|
61 |
|
|
Other investing activities, net |
|
|
— |
|
|
|
1 |
|
|
Net cash used in investing activities |
|
|
(162 |
) |
|
|
(70 |
) |
|
Financing Activities: |
|
|
|
|
Repayment of long-term debt |
|
|
(229 |
) |
|
|
(30 |
) |
|
Proceeds from revolving credit facility borrowings |
|
|
42 |
|
|
|
— |
|
|
Repayment of revolving credit facility borrowings |
|
|
(42 |
) |
|
|
— |
|
|
Net borrowings on commercial paper |
|
|
440 |
|
|
|
— |
|
|
Dividends paid |
|
|
(102 |
) |
|
|
(99 |
) |
|
Repurchases of common stock |
|
|
(127 |
) |
|
|
(16 |
) |
|
Employee taxes on certain share-based payment arrangements |
|
|
(25 |
) |
|
|
(12 |
) |
|
Other financing activities, net |
|
|
(3 |
) |
|
|
— |
|
|
Net cash used in financing activities |
|
|
(46 |
) |
|
|
(157 |
) |
|
Change in cash and cash equivalents |
|
|
(419 |
) |
|
|
(154 |
) |
|
Cash and cash equivalents, beginning of period |
|
|
430 |
|
|
|
467 |
|
|
Cash and cash equivalents, end of period |
|
$ |
11 |
|
|
$ |
313 |
|
|
Supplemental Cash Flow Disclosure |
|
|
|
|
Cash paid for income taxes (net of refunds) |
|
$ |
157 |
|
|
$ |
172 |
|
|
Cash paid for interest |
|
$ |
51 |
|
|
$ |
51 |
|
|
Non-Cash Investing and Financing Activities |
|
|
|
|
Capital expenditures accrued in accounts payable |
|
$ |
9 |
|
|
$ |
4 |
|
|
|
|
|
|
|
|
|
|
|
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
additional ways 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 |
|
Six Months Ended |
| |
|
June 30 |
|
June 30 |
|
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
Ingalls revenues |
|
$ |
712 |
|
|
$ |
664 |
|
|
$ |
1,367 |
|
|
$ |
1,241 |
|
|
Newport News revenues |
|
|
1,535 |
|
|
|
1,509 |
|
|
|
2,969 |
|
|
|
3,015 |
|
|
Mission Technologies revenues |
|
|
765 |
|
|
|
645 |
|
|
|
1,515 |
|
|
|
1,269 |
|
|
Intersegment eliminations |
|
|
(35 |
) |
|
|
(31 |
) |
|
|
(69 |
) |
|
|
(64 |
) |
|
Sales and Service Revenues |
|
|
2,977 |
|
|
|
2,787 |
|
|
|
5,782 |
|
|
|
5,461 |
|
| |
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
189 |
|
|
|
156 |
|
|
|
343 |
|
|
|
297 |
|
|
Operating FAS/CAS Adjustment |
|
|
15 |
|
|
|
17 |
|
|
|
32 |
|
|
|
36 |
|
|
Non-current state income taxes |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
(8 |
) |
|
Segment Operating Income |
|
|
203 |
|
|
|
169 |
|
|
|
373 |
|
|
|
325 |
|
|
As a percentage of sales and service revenues |
|
|
6.8 |
% |
|
|
6.1 |
% |
|
|
6.5 |
% |
|
|
6.0 |
% |
|
Ingalls segment operating income |
|
|
56 |
|
|
|
65 |
|
|
|
116 |
|
|
|
120 |
|
|
As a percentage of Ingalls revenues |
|
|
7.9 |
% |
|
|
9.8 |
% |
|
|
8.5 |
% |
|
|
9.7 |
% |
|
Newport News segment operating income |
|
|
111 |
|
|
|
95 |
|
|
|
193 |
|
|
|
179 |
|
|
As a percentage of Newport News revenues |
|
|
7.2 |
% |
|
|
6.3 |
% |
|
|
6.5 |
% |
|
|
5.9 |
% |
|
Mission Technologies segment operating income |
|
|
36 |
|
|
|
9 |
|
|
|
64 |
|
|
|
26 |
|
|
As a percentage of Mission Technologies revenues |
|
|
4.7 |
% |
|
|
1.4 |
% |
|
|
4.2 |
% |
|
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Free Cash
Flow
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30 |
|
June 30 |
|
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
Net cash provided by (used in) operating activities |
|
$ |
(9 |
) |
|
$ |
82 |
|
|
$ |
(211 |
) |
|
$ |
73 |
|
|
Less capital expenditures: |
|
|
|
|
|
|
|
|
|
Capital expenditure additions |
|
|
(90 |
) |
|
|
(68 |
) |
|
|
(165 |
) |
|
|
(111 |
) |
|
Grant proceeds for capital expenditures |
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
3 |
|
|
Free cash flow |
|
$ |
(99 |
) |
|
$ |
14 |
|
|
$ |
(373 |
) |
|
$ |
(35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Mission Technologies
EBITDA and EBITDA Margin
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30 |
|
June 30 |
|
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
Mission Technologies sales and service
revenues |
|
$ |
765 |
|
|
$ |
645 |
|
|
$ |
1,515 |
|
|
$ |
1,269 |
|
| |
|
|
|
|
|
|
|
|
|
Mission Technologies segment operating income |
|
$ |
36 |
|
|
$ |
9 |
|
|
$ |
64 |
|
|
$ |
26 |
|
|
Mission Technologies depreciation expense |
|
|
2 |
|
|
|
3 |
|
|
|
5 |
|
|
|
6 |
|
|
Mission Technologies amortization expense |
|
|
25 |
|
|
|
28 |
|
|
|
50 |
|
|
|
55 |
|
|
Mission Technologies state tax expense |
|
|
2 |
|
|
|
3 |
|
|
|
4 |
|
|
|
6 |
|
|
Mission Technologies EBITDA |
|
$ |
65 |
|
|
$ |
43 |
|
|
$ |
123 |
|
|
$ |
93 |
|
|
Mission Technologies EBITDA margin |
|
|
8.5 |
% |
|
|
6.7 |
% |
|
|
8.1 |
% |
|
|
7.3 |
% |
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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