HII Reports Third Quarter 2024 Results and Provides Updated Outlook
HII reported third quarter 2024 results with revenues of $2.7 billion, down 2.4% year-over-year. Net earnings were $101 million with diluted EPS of $2.56, compared to $148 million and $3.70 in Q3 2023. Operating margin decreased to 3.0% from 6.1% last year. The company updated its FY24 outlook, expecting shipbuilding revenue of approximately $8.8B with operating margin between 5.0-6.0%, and free cash flow between $0-$100M. Performance was impacted by labor inefficiencies, supply chain issues, and uncertainty around Navy contract agreements.
HII ha riportato i risultati del terzo trimestre del 2024 con ricavi di $2,7 miliardi, in calo del 2,4% rispetto all'anno precedente. Gli utili netti sono stati di $101 milioni con un utile per azione diluito di $2,56, rispetto a $148 milioni e $3,70 nel terzo trimestre del 2023. Il margine operativo è diminuito dal 6,1% al 3,0% rispetto all'anno scorso. L'azienda ha aggiornato le previsioni per l'anno fiscale 2024, prevedendo ricavi dalla costruzione navale di circa $8,8 miliardi con un margine operativo tra il 5,0% e il 6,0%, e un flusso di cassa libero compreso tra $0 e $100 milioni. Le performance sono state colpite da inefficienze lavorative, problemi nella catena di approvvigionamento e incertezze riguardo agli accordi sui contratti con la Marina.
HII informó los resultados del tercer trimestre de 2024 con ingresos de $2.7 mil millones, una disminución del 2.4% interanual. Las ganancias netas fueron de $101 millones con un EPS diluido de $2.56, en comparación con $148 millones y $3.70 en el tercer trimestre de 2023. El margen operativo disminuyó al 3.0% desde el 6.1% del año pasado. La empresa actualizó su perspectiva para el año fiscal 2024, esperando ingresos por construcción naval de aproximadamente $8.8 mil millones con un margen operativo entre el 5.0% y el 6.0%, y flujo de caja libre entre $0 y $100 millones. El desempeño se vio afectado por ineficiencias laborales, problemas en la cadena de suministro y la incertidumbre en torno a los acuerdos de contratos navales.
HII는 2024년 3분기 결과를 보고하며 수익이 $27억으로 작년 대비 2.4% 감소했다고 발표했습니다. 순이익은 $1억 1천만이며 희석 EPS는 $2.56로, 2023년 3분기의 $1억 4천8백만과 $3.70에 비해 감소했습니다. 운영 마진은 작년 6.1%에서 3.0%로 감소했습니다. 회사는 FY24 전망을 업데이트하여 약 $88억의 조선 수익과 5.0-6.0%의 운영 마진, $0-$1억의 자유 현금 흐름을 예상하고 있습니다. 성과는 노동 비효율, 공급망 문제 및 해군 계약 합의에 대한 불확실성에 의해 영향을 받았습니다.
HII a annoncé les résultats du troisième trimestre 2024 avec des revenus de $2,7 milliards, en baisse de 2,4% par rapport à l'année précédente. Les bénéfices nets s'élevaient à $101 millions avec un bénéfice par action dilué de $2,56, par rapport à 148 millions de dollars et 3,70 $ au troisième trimestre 2023. La marge opérationnelle a chuté à 3,0 % contre 6,1 % l'année précédente. L'entreprise a mis à jour ses prévisions pour l'exercice 2024, s'attendant à des revenus de construction navale d'environ 8,8 milliards de dollars avec une marge opérationnelle comprise entre 5,0 % et 6,0 %, et un flux de trésorerie libre compris entre 0 $ et 100 millions de dollars. La performance a été affectée par des inefficacités de travail, des problèmes de chaîne d'approvisionnement et des incertitudes concernant les accords de contrats avec la Marine.
HII berichtete über die Ergebnisse des dritten Quartals 2024 mit Einnahmen von $2,7 Milliarden, was einem Rückgang von 2,4% im Jahresvergleich entspricht. Der Nettogewinn betrug $101 Millionen mit einem verwässerten Gewinn pro Aktie von $2,56, verglichen mit $148 Millionen und $3,70 im Q3 2023. Die operative Marge fiel auf 3,0% von 6,1% im Vorjahr. Das Unternehmen aktualisierte seine Prognose für das Geschäftsjahr 2024 und erwartet Schiffsbaum-Einnahmen von etwa $8,8 Milliarden mit einer operativen Marge zwischen 5,0% und 6,0% und einem freien Cashflow zwischen $0 und $100 Millionen. Die Leistung wurde durch Arbeitsineffizienzen, Lieferkettenprobleme und Unsicherheiten bezüglich der Marinevertragsvereinbarungen beeinträchtigt.
- New contract awards of $3.6 billion in Q3, with total backlog reaching $49.4 billion
- Mission Technologies segment showing growth and increased revenue guidance to $2.8-2.85B
- Mission Technologies operating margin guidance increased to approximately 3.75%
- Revenue declined 2.4% year-over-year to $2.7 billion
- Operating margin decreased to 3.0% from 6.1% in Q3 2023
- Net earnings dropped to $101 million from $148 million in Q3 2023
- Free cash flow guidance significantly reduced to $0-100M from previous $600-700M
- Shipbuilding operating margin guidance lowered to 5.0-6.0% from 7.6-7.8%
- Withdrawal of five-year free cash flow outlook
Insights
HII's Q3 2024 results reveal significant operational challenges, with
Two critical issues stand out: delayed contract negotiations for Virginia-class and Columbia-class submarines and persistent operational challenges including supply chain disruptions and workforce inexperience. The
The shipbuilding sector's post-COVID challenges are exemplified in HII's results. The company's admission that pre-COVID contract pricing failed to account for workforce disruption and inflation presents a structural industry problem. Labor inefficiency and rework issues highlight the broader challenge of skilled workforce retention in the defense manufacturing sector.
The withdrawal of the 5-year free cash flow outlook suggests long-term visibility issues that could affect the entire naval shipbuilding industry. This situation may lead to fundamental changes in how defense contracts are structured, potentially including more flexible pricing mechanisms to account for macroeconomic uncertainties.
NEWPORT NEWS, Va., Oct. 31, 2024 (GLOBE NEWSWIRE) -- HII (NYSE: HII) today reported results for the third quarter of fiscal 2024 and provided an update on its outlook.
Highlights
- Third quarter revenues were
$2.7 billion - Third quarter net earnings were
$101 million or$2.56 diluted earnings per share - Third quarter free cash flow1 was
$136 million - Company is providing updated fiscal 2024 outlook
- Company is withdrawing 5-year free cash flow1 outlook
Third Quarter Results
Third quarter 2024 revenues of
Operating income in the third quarter of 2024 was
Segment operating income1 in the third quarter of 2024 was
Net earnings in the quarter were
Net cash provided by operating activities in the quarter was
New contract awards in the third quarter of 2024 were
1Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Commentary on Third Quarter Results
"Two issues have impacted our results and guidance for the year," said Chris Kastner, HII’s president and CEO.
"First, based on constructive discussions with our Navy partner, we expected to reach an agreement for Virginia-class Block V and Block VI and Columbia-class submarines in the second half of 2024.
"Starting this fall, some uncertainty emerged about the timing of that agreement. While we are confident an agreement will be reached and discussions continue, we have updated our profitability and cash flow assumptions based on the uncertain timing and structure of the award.
"We continue to pursue innovative contracting approaches that incentivize greater investments in our workforce, facilities and technology. These investments are critical to yield accelerated program schedules that meet the urgent needs of the Navy.
"Second, our assumptions of performance improvement and risk reduction have not been achieved, due to late critical material deliveries from the supply chain and reduced experience levels within our teams, both in production touch labor and supervision. This leads to labor inefficiency, and in some cases to rework, which can affect program schedules.
"It bears repeating that nearly all of the ships currently under construction were negotiated prior to COVID, and since those contracts were signed we have seen a significant loss of shipbuilding experience in our yards. Those ship contracts, which we are still operating under at Newport News, did not anticipate in their cost targets and risk limiting clauses the significant disruption of our workforce and supply chain, or extended periods of heightened cost inflation.
"Let me be clear: delays and cost increases on these ships are unacceptable to me, my team, and all of us at HII. Looking ahead, we continue to take decisive actions to focus on the fundamentals of shipbuilding to ensure that we finish these ships, get them delivered to the Navy, and transition to ships negotiated in the context of our current economic reality.
"To summarize, we remain focused on optimizing our operations, improving our cost structure and shipbuilding performance, and driving higher throughput. We firmly believe the actions we are taking will enable us to stabilize performance as we continue to work through these ship contracts."
HII Financial Outlook1
- FY24 shipbuilding revenue2 expected to be approximately
$8.8B - FY24 shipbuilding operating margin2 expected to be between
5.0% and6.0% - Increasing FY24 Mission Technologies expected revenue range to between
$2.8B and$2.85B - Increasing FY24 Mission Technologies expected operating margin2 to approximately
3.75% - Capital expenditures expected to be approximately
3.4% of sales - FY24 free cash flow2,3 expected to be between
$0M and$100M - Withdrawing previous five-year (2024-2028) free cash flow2 outlook
| Prior FY24 Outlook1 | Current FY24 Outlook1 | ||
| Shipbuilding Revenue2 | ~ | ||
| Shipbuilding Operating Margin2 | |||
| Mission Technologies Revenue | |||
| Mission Technologies Segment Operating Margin2 | ~ | ||
| Mission Technologies EBITDA Margin2 | |||
| Operating FAS/CAS Adjustment | ( | ( | |
| Non-current State Income Tax Benefit/Expense2,4 | ~ | ~ | |
| Interest Expense | ( | ( | |
| Non-operating Retirement Benefit | |||
| Effective Tax Rate | ~ | ~ | |
| Depreciation & Amortization | ~ | ~ | |
| Capital Expenditures | ~ of Sales | ~ of Sales | |
| Free Cash Flow2,3 |
1The financial outlook, expectations and other forward-looking statements provided by the company for 2024 and beyond reflect the company's judgment based on the information available at the time of this release.
2Non-GAAP measures. See Exhibit B for definitions. In reliance upon Item 10(e)(1)(i)(B) of Regulation S-K, reconciliations of forward–looking GAAP and non–GAAP measures are not provided because of the unreasonable effort associated with providing such reconciliations due to the variability in the occurrence and the amounts of certain components of GAAP and non-GAAP measures. For the same reasons, we are unable to address the significance of the unavailable information, which could be material to future results.
3Outlook is based on current tax law and assumes the provisions requiring capitalization of R&D expenditures for tax purposes are not deferred or repealed.
4Outlook is based on current tax law. Repeal or deferral of provisions requiring capitalization of R&D expenditures would result in elevated non-current state income tax expense.
Results of Operations
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September 30 | September 30 | |||||||||||||||||||||||||||||
| ($ in millions, except per share amounts) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||
| Sales and service revenues | $ | 2,749 | $ | 2,816 | $ | (67 | ) | (2.4 | )% | $ | 8,531 | $ | 8,277 | $ | 254 | 3.1 | % | |||||||||||||
| Operating income | 82 | 172 | (90 | ) | (52.3 | )% | 425 | 469 | (44 | ) | (9.4 | )% | ||||||||||||||||||
| Operating margin % | 3.0 | % | 6.1 | % | (313) bps | 5.0 | % | 5.7 | % | (68) bps | ||||||||||||||||||||
| Segment operating income1 | 97 | 187 | (90 | ) | (48.1 | )% | 470 | 512 | (42 | ) | (8.2 | )% | ||||||||||||||||||
| Segment operating margin %1 | 3.5 | % | 6.6 | % | (311) bps | 5.5 | % | 6.2 | % | (68) bps | ||||||||||||||||||||
| Net earnings | 101 | 148 | (47 | ) | (31.8 | )% | 427 | 407 | 20 | 4.9 | % | |||||||||||||||||||
| Diluted earnings per share | $ | 2.56 | $ | 3.70 | $ | (1.14 | ) | (30.8 | )% | $ | 10.81 | $ | 10.18 | $ | 0.63 | 6.2 | % | |||||||||||||
| 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) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||
| Revenues | $ | 664 | $ | 711 | $ | (47 | ) | (6.6 | )% | $ | 2,031 | $ | 1,952 | $ | 79 | 4.0 | % | |||||||||||||
| Segment operating income1 | 49 | 73 | (24 | ) | (32.9 | )% | 165 | 193 | (28 | ) | (14.5 | )% | ||||||||||||||||||
| Segment operating margin %1 | 7.4 | % | 10.3 | % | (289) bps | 8.1 | % | 9.9 | % | (176) bps | ||||||||||||||||||||
| 1 Non-GAAP measures. See Exhibit B for definitions and reconciliations. | ||||||||||||||||||||||||||||||
Ingalls Shipbuilding revenues for the third quarter of 2024 were
Legend-class National Security Cutter program, partially offset by higher volumes in surface combatants.
Ingalls Shipbuilding segment operating income1 for the third quarter of 2024 was
Key Ingalls Shipbuilding milestones for the quarter:
- Awarded a
$9.6 billion multi-ship procurement contract for the construction of LPD 33, 34 and 35 and large-deck amphibious ship LHA 10
1Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Newport News Shipbuilding
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September 30 | September 30 | |||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||
| Revenues | $ | 1,412 | $ | 1,453 | $ | (41 | ) | (2.8 | )% | $ | 4,381 | $ | 4,468 | $ | (87 | ) | (1.9 | )% | ||||||||||||
| Segment operating income1 | 15 | 90 | (75 | ) | (83.3 | )% | 208 | 269 | (61 | ) | (22.7 | )% | ||||||||||||||||||
| Segment operating margin %1 | 1.1 | % | 6.2 | % | (513) bps | 4.7 | % | 6.0 | % | (127) bps | ||||||||||||||||||||
| 1 Non-GAAP measures. See Exhibit B for definitions and reconciliations. | ||||||||||||||||||||||||||||||
Newport News Shipbuilding revenues for the third quarter of 2024 were
Newport News Shipbuilding segment operating income1 for the third quarter of 2024 was
Key Newport News Shipbuilding milestones for the quarter:
- Shipped final module of Virginia-class submarine Utah (SSN 801)
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Mission Technologies
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
| September 30 | September 30 | |||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||
| Revenues | $ | 709 | $ | 685 | $ | 24 | 3.5 | % | $ | 2,224 | $ | 1,954 | $ | 270 | 13.8 | % | ||||||||||||
| Segment operating income1 | 33 | 24 | 9 | 37.5 | % | 97 | 50 | 47 | 94.0 | % | ||||||||||||||||||
| Segment operating margin %1 | 4.7 | % | 3.5 | % | 115 bps | 4.4 | % | 2.6 | % | 180 bps | ||||||||||||||||||
| 1 Non-GAAP measures. See Exhibit B for definitions and reconciliations. | ||||||||||||||||||||||||||||
Mission Technologies revenues for the third quarter of 2024 were
Mission Technologies segment operating income1 for the third quarter of 2024 was
Mission Technologies results included approximately
Mission Technologies EBITDA margin1 in the third quarter of 2024 was
Key Mission Technologies milestones for the quarter:
- Awarded
$6.7 billion contract to provide electronic warfare engineering and technical services support for the U.S. Air Force - Awarded
$3 billion Federal Government task order for national security services and new and emerging technology - Awarded
$458 million contract to modernize communications and information technology (IT) networks for the U.S. Department of Defense - Awarded
$209 million contract to support U.S. Air Force weapons systems development and sustainment - Awarded
$197 million contract to research and develop technology enhancements for U.S. Army ground combat vehicles - Awarded
$75 million task order to provide systems engineering support for integrated training systems used onboard ships to enhance combat preparedness for sailors - Awarded task order to support U.S. Air Force sustainment of special-purpose aircraft
- Delivered advanced REMUS 620 UUVs to NOAA less than 24 months after unveiling
- Awarded five-year contract to provide global supply chain services to the Australian Government’s Department of Defence
- Achieved funded book-to-bill of 2.2x in the third quarter and 1.3x year to date
1Non-GAAP measures. See Exhibit B for definitions and reconciliations
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, November 7th by calling (866) 813-9403 or (929) 458-6194 and using access code 916957.
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," “guidance,” “projections,” “outlook,” 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, labor challenges or other factors and our efforts to recover or offset such costs and/or changes in estimated contract costs, and perform our contracts effectively; the adequacy and sufficiency of our resources, including labor and facilities, to allow us to meet our production schedules and timelines and achieve desired performance improvement and risk reduction targets over time; 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; the availability and pricing of raw materials and components from our suppliers; adverse economic conditions in the United States and globally; health epidemics, pandemics, and similar outbreaks; our ability to attract, retain, and train 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; investigations, claims, disputes, enforcement actions, litigation (including criminal, civil and administrative) and/or other legal proceedings, including the impact that any such proceedings may have on our reputation or ability to do business; improper conduct of employees, agents, subcontractors, suppliers, business partners, or joint ventures in which we participate; security threats, including cyber security threats, and related disruptions; and other risk factors discussed herein and in our other filings with the SEC. Additional factors include those described in our 2023 Annual Report on Form 10-K, including under the captions “Risk Factors,” “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 September 30 | Nine Months Ended September 30 | |||||||||||||||
| (in millions, except per share amounts) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Sales and service revenues | ||||||||||||||||
| Product sales | $ | 1,761 | $ | 1,835 | $ | 5,474 | $ | 5,543 | ||||||||
| Service revenues | 988 | 981 | 3,057 | 2,734 | ||||||||||||
| Sales and service revenues | 2,749 | 2,816 | 8,531 | 8,277 | ||||||||||||
| Cost of sales and service revenues | ||||||||||||||||
| Cost of product sales | 1,556 | 1,541 | 4,720 | 4,711 | ||||||||||||
| Cost of service revenues | 871 | 859 | 2,682 | 2,411 | ||||||||||||
| Income from operating investments, net | 12 | 9 | 35 | 25 | ||||||||||||
| General and administrative expenses | 252 | 253 | 739 | 711 | ||||||||||||
| Operating income | 82 | 172 | 425 | 469 | ||||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | (23 | ) | (22 | ) | (68 | ) | (70 | ) | ||||||||
| Non-operating retirement benefit | 44 | 37 | 134 | 111 | ||||||||||||
| Other, net | 9 | 2 | 21 | 11 | ||||||||||||
| Earnings before income taxes | 112 | 189 | 512 | 521 | ||||||||||||
| Federal and foreign income tax expense | 11 | 41 | 85 | 114 | ||||||||||||
| Net earnings | $ | 101 | $ | 148 | $ | 427 | $ | 407 | ||||||||
| Basic earnings per share | $ | 2.56 | $ | 3.70 | $ | 10.81 | $ | 10.18 | ||||||||
| Weighted-average common shares outstanding | 39.5 | 40.0 | 39.5 | 40.0 | ||||||||||||
| Diluted earnings per share | $ | 2.56 | $ | 3.70 | $ | 10.81 | $ | 10.18 | ||||||||
| Weighted-average diluted shares outstanding | 39.5 | 40.0 | 39.5 | 40.0 | ||||||||||||
| Dividends declared per share | $ | 1.30 | $ | 1.24 | $ | 3.90 | $ | 3.72 | ||||||||
| Net earnings from above | $ | 101 | $ | 148 | $ | 427 | $ | 407 | ||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Change in unamortized benefit plan costs | 5 | 4 | 14 | 13 | ||||||||||||
| Tax expense for items of other comprehensive income | (2 | ) | (2 | ) | (4 | ) | (4 | ) | ||||||||
| Other comprehensive income, net of tax | 3 | 2 | 10 | 9 | ||||||||||||
| Comprehensive income | $ | 104 | $ | 150 | $ | 437 | $ | 416 | ||||||||
HUNTINGTON INGALLS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
| ($ in millions) | September 30, 2024 | December 31, 2023 | ||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 10 | $ | 430 | ||||
| Accounts receivable, net of allowance for expected credit losses of | 436 | 461 | ||||||
| Contract assets | 1,714 | 1,537 | ||||||
| Inventoried costs | 205 | 186 | ||||||
| Income taxes receivable | 173 | 183 | ||||||
| Prepaid expenses and other current assets | 91 | 83 | ||||||
| Total current assets | 2,629 | 2,880 | ||||||
| Property, Plant, and Equipment, net of accumulated depreciation of | 3,384 | 3,296 | ||||||
| Operating lease assets | 249 | 262 | ||||||
| Goodwill | 2,618 | 2,618 | ||||||
| Other intangible assets, net of accumulated amortization of | 809 | 891 | ||||||
| Pension plan assets | 985 | 888 | ||||||
| Miscellaneous other assets | 408 | 380 | ||||||
| Total assets | $ | 11,082 | $ | 11,215 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Trade accounts payable | 579 | 554 | ||||||
| Accrued employees’ compensation | 345 | 382 | ||||||
| Short-term debt and current portion of long-term debt | 898 | 231 | ||||||
| Current portion of postretirement plan liabilities | 129 | 129 | ||||||
| Current portion of workers’ compensation liabilities | 224 | 224 | ||||||
| Contract liabilities | 743 | 1,063 | ||||||
| Other current liabilities | 418 | 449 | ||||||
| Total current liabilities | 3,336 | 3,032 | ||||||
| Long-term debt | 1,709 | 2,214 | ||||||
| Pension plan liabilities | 219 | 212 | ||||||
| Other postretirement plan liabilities | 232 | 241 | ||||||
| Workers’ compensation liabilities | 448 | 449 | ||||||
| Long-term operating lease liabilities | 213 | 228 | ||||||
| Deferred tax liabilities | 316 | 367 | ||||||
| Other long-term liabilities | 406 | 379 | ||||||
| Total liabilities | 6,879 | 7,122 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, | 1 | 1 | ||||||
| Additional paid-in capital | 2,037 | 2,045 | ||||||
| Retained earnings | 5,026 | 4,755 | ||||||
| Treasury stock | (2,449 | ) | (2,286 | ) | ||||
| Accumulated other comprehensive loss | (412 | ) | (422 | ) | ||||
| Total stockholders’ equity | 4,203 | 4,093 | ||||||
| Total liabilities and stockholders’ equity | $ | 11,082 | $ | 11,215 | ||||
HUNTINGTON INGALLS INDUSTRIES, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Nine Months Ended September 30 | |||||||
| ($ in millions) | 2024 | 2023 | |||||
| Operating Activities | |||||||
| Net earnings | $ | 427 | $ | 407 | |||
| Adjustments to reconcile net cash provided by operating activities: | |||||||
| Depreciation | 160 | 163 | |||||
| Amortization of purchased intangibles | 82 | 96 | |||||
| Other non-cash transactions, net | 7 | 16 | |||||
| Stock-based compensation | 15 | 27 | |||||
| Deferred income taxes | (55 | ) | (81 | ) | |||
| Gain on investments in marketable securities | (22 | ) | (10 | ) | |||
| Change in | |||||||
| Accounts receivable | 31 | (62 | ) | ||||
| Contract assets | (177 | ) | (60 | ) | |||
| Inventoried costs | (19 | ) | (12 | ) | |||
| Prepaid expenses and other assets | (9 | ) | (66 | ) | |||
| Accounts payable and accruals | (354 | ) | 45 | ||||
| Retiree benefits | (84 | ) | (55 | ) | |||
| Net cash provided by operating activities | 2 | 408 | |||||
| Investing Activities: | |||||||
| Capital expenditures | |||||||
| Capital expenditure additions | (253 | ) | (164 | ) | |||
| Grant proceeds for capital expenditures | 14 | 14 | |||||
| Investment in affiliates | — | (24 | ) | ||||
| Proceeds from disposition of equity method investments | — | 61 | |||||
| Other investing activities, net | 1 | 2 | |||||
| Net cash used in investing activities | (238 | ) | (111 | ) | |||
| Financing Activities: | |||||||
| Repayment of long-term debt | (229 | ) | (455 | ) | |||
| Proceeds from revolving credit facility borrowings | 42 | — | |||||
| Repayment of revolving credit facility borrowings | (42 | ) | — | ||||
| Net borrowings on commercial paper | 396 | — | |||||
| Debt issuance costs | (7 | ) | — | ||||
| Dividends paid | (154 | ) | (149 | ) | |||
| Repurchases of common stock | (162 | ) | (37 | ) | |||
| Employee taxes on certain share-based payment arrangements | (25 | ) | (13 | ) | |||
| Other financing activities, net | (3 | ) | (1 | ) | |||
| Net cash used in financing activities | (184 | ) | (655 | ) | |||
| Change in cash and cash equivalents | (420 | ) | (358 | ) | |||
| Cash and cash equivalents, beginning of period | 430 | 467 | |||||
| Cash and cash equivalents, end of period | $ | 10 | $ | 109 | |||
| Supplemental Cash Flow Disclosure | |||||||
| Cash paid for income taxes (net of refunds) | $ | 170 | $ | 227 | |||
| Cash paid for interest | $ | 66 | $ | 63 | |||
| Non-Cash Investing and Financing Activities | |||||||
| Capital expenditures accrued in accounts payable | $ | 12 | $ | 6 | |||
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 | Nine Months Ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Ingalls revenues | $ | 664 | $ | 711 | $ | 2,031 | $ | 1,952 | ||||||||
| Newport News revenues | 1,412 | 1,453 | 4,381 | 4,468 | ||||||||||||
| Mission Technologies revenues | 709 | 685 | 2,224 | 1,954 | ||||||||||||
| Intersegment eliminations | (36 | ) | (33 | ) | (105 | ) | (97 | ) | ||||||||
| Sales and Service Revenues | 2,749 | 2,816 | 8,531 | 8,277 | ||||||||||||
| Operating Income | 82 | 172 | 425 | 469 | ||||||||||||
| Operating FAS/CAS Adjustment | 16 | 19 | 48 | 55 | ||||||||||||
| Non-current state income taxes | (1 | ) | (4 | ) | (3 | ) | (12 | ) | ||||||||
| Segment Operating Income | 97 | 187 | 470 | 512 | ||||||||||||
| As a percentage of sales and service revenues | 3.5 | % | 6.6 | % | 5.5 | % | 6.2 | % | ||||||||
| Ingalls segment operating income | 49 | 73 | 165 | 193 | ||||||||||||
| As a percentage of Ingalls revenues | 7.4 | % | 10.3 | % | 8.1 | % | 9.9 | % | ||||||||
| Newport News segment operating income | 15 | 90 | 208 | 269 | ||||||||||||
| As a percentage of Newport News revenues | 1.1 | % | 6.2 | % | 4.7 | % | 6.0 | % | ||||||||
| Mission Technologies segment operating income | 33 | 24 | 97 | 50 | ||||||||||||
| As a percentage of Mission Technologies revenues | 4.7 | % | 3.5 | % | 4.4 | % | 2.6 | % | ||||||||
Reconciliation of Free Cash Flow
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Net cash provided by operating activities | $ | 213 | $ | 335 | $ | 2 | $ | 408 | ||||||||
| Less capital expenditures: | ||||||||||||||||
| Capital expenditure additions | (88 | ) | (53 | ) | (253 | ) | (164 | ) | ||||||||
| Grant proceeds for capital expenditures | 11 | 11 | 14 | 14 | ||||||||||||
| Free cash flow | $ | 136 | $ | 293 | $ | (237 | ) | $ | 258 | |||||||
Reconciliation of Mission Technologies EBITDA and EBITDA Margin
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Mission Technologies sales and service revenues | $ | 709 | $ | 685 | $ | 2,224 | $ | 1,954 | ||||||||
| Mission Technologies segment operating income | $ | 33 | $ | 24 | $ | 97 | $ | 50 | ||||||||
| Mission Technologies depreciation expense | 3 | 2 | 8 | 8 | ||||||||||||
| Mission Technologies amortization expense | 25 | 27 | 75 | 82 | ||||||||||||
| Mission Technologies state tax expense | 2 | 3 | 6 | 9 | ||||||||||||
| Mission Technologies EBITDA | $ | 63 | $ | 56 | $ | 186 | $ | 149 | ||||||||
| Mission Technologies EBITDA margin | 8.9 | % | 8.2 | % | 8.4 | % | 7.6 | % | ||||||||
Contacts:
Brooke Hart (Media)
brooke.hart@hii-co.com
202-264-7108
Christie Thomas (Investors)
christie.thomas@hii-co.com
757-380-2104
FAQ
What was HII's revenue in Q3 2024?
What is HII's updated free cash flow guidance for FY2024?
What was HII's backlog as of September 30, 2024?
What is HII's revised shipbuilding operating margin guidance for FY2024?
