HII (NYSE: HII) reported first quarter 2024 revenues of $2.8
billion, up 4.9% from the first quarter of 2023, driven primarily
by growth at its Mission Technologies segment.
Operating income in the first quarter of 2024 was $154 million
and operating margin was 5.5%, compared to $141 million and 5.3%,
respectively, in the first quarter of 2023. The increases were
primarily driven by higher segment operating income2 compared to
the prior year.
Segment operating income2 in the first quarter of 2024 was $170
million and segment operating margin2 was 6.1%, compared to $156
million and 5.8%, respectively, in the first quarter of 2023. The
increases were primarily driven by higher volumes at the Mission
Technologies and Ingalls segments.
Net earnings in the quarter were $153 million, compared to $129
million in the first quarter of 2023. Diluted earnings per share in
the quarter was $3.87, compared to $3.23 in the first quarter of
2023.
Net cash used in operating activities in the quarter was $202
million and free cash flow1 was negative $274 million, compared to
cash used in operating activities of $9 million and free cash flow1
of negative $49 million in the first quarter of 2023.
New contract awards in the first quarter of 2024 were $3.1
billion, bringing total backlog to approximately $48.4 billion as
of March 31, 2024.
“The first quarter was a good start to the year,” said Chris
Kastner, HII’s president and CEO. "Strong growth in Mission
Technologies and stable shipbuilding progress provide a solid
foundation for the balance of 2024 and beyond."
1The financial outlook, expectations and other forward looking
statements provided by the company for 2024 and beyond reflect the
company's judgment based on information available at the time of
this release.2Non-GAAP measures. See Exhibit B for definitions and
reconciliations.
Results of Operations
|
|
Three Months Ended |
|
|
|
|
|
|
March 31 |
|
|
|
|
($ in
millions, except per share amounts) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
Sales and service revenues |
|
$ |
2,805 |
|
|
$ |
2,674 |
|
|
$ |
131 |
|
4.9 |
% |
Operating income |
|
|
154 |
|
|
|
141 |
|
|
|
13 |
|
9.2 |
% |
Operating margin % |
|
|
5.5 |
% |
|
|
5.3 |
% |
|
|
|
22 bps |
Segment operating income1 |
|
|
170 |
|
|
|
156 |
|
|
|
14 |
|
9.0 |
% |
Segment operating margin %1 |
|
|
6.1 |
% |
|
|
5.8 |
% |
|
|
|
23 bps |
Net earnings |
|
|
153 |
|
|
|
129 |
|
|
|
24 |
|
18.6 |
% |
Diluted earnings per
share |
|
$ |
3.87 |
|
|
$ |
3.23 |
|
|
$ |
0.64 |
|
19.8 |
% |
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 |
|
|
|
|
|
|
March 31 |
|
|
|
|
($ in
millions) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
Revenues |
|
$ |
655 |
|
|
$ |
577 |
|
|
$ |
78 |
|
13.5 |
% |
Segment operating income1 |
|
|
60 |
|
|
|
55 |
|
|
|
5 |
|
9.1 |
% |
Segment operating margin
%1 |
|
|
9.2 |
% |
|
|
9.5 |
% |
|
|
|
(37) bps |
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
Ingalls Shipbuilding revenues for the first quarter of 2024 were
$655 million, an increase of $78 million, or 13.5%, from the same
period in 2023, primarily driven by higher volumes in surface
combatants and amphibious assault ships, partially offset by lower
volumes in the Legend class National Security Cutter program.
Ingalls Shipbuilding segment operating income1 for the first
quarter of 2024 was $60 million, an increase of $5 million from the
same period in 2023. Segment operating margin1 in the first quarter
of 2024 was 9.2% compared to 9.5% in the same period last year. The
increase in operating income and decrease in operating margin was
primarily driven by the changes in volumes described above.
Key Ingalls Shipbuilding milestones for the quarter:
- Completed Builder's and Acceptance trials for Richard M. McCool
Jr. (LPD 29)
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations.
Newport News Shipbuilding
|
|
Three Months Ended |
|
|
|
|
|
|
|
March 31 |
|
|
|
|
|
($ in
millions) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
Revenues |
|
$ |
1,434 |
|
|
$ |
1,506 |
|
|
$ |
(72 |
) |
|
(4.8 |
)% |
Segment operating income1 |
|
|
82 |
|
|
|
84 |
|
|
|
(2 |
) |
|
(2.4 |
)% |
Segment
operating margin %1 |
|
|
5.7 |
% |
|
|
5.6 |
% |
|
|
|
14 bps |
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
|
Newport News Shipbuilding revenues for the first quarter of 2024
were $1.4 billion, a decrease of $72 million or 4.8%, from the same
period in 2023, primarily driven by lower volumes in aircraft
carriers and the Virginia class submarine program.
Newport News Shipbuilding segment operating income1 and segment
operating margin1 were primarily driven by the lower volumes
described above.
Key Newport News Shipbuilding milestones for the quarter:
- Floated off Massachusetts (SSN 798)
- Completed acceptance trials for New Jersey (SSN 796)
- Awarded advance planning contract for the refueling and complex
overhaul of USS Harry S. Truman (CVN 75)
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations.
Mission Technologies
|
|
Three Months Ended |
|
|
|
|
|
|
March 31 |
|
|
|
|
($ in
millions) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
Revenues |
|
$ |
750 |
|
|
$ |
624 |
|
|
$ |
126 |
|
20.2 |
% |
Segment operating income1 |
|
|
28 |
|
|
|
17 |
|
|
|
11 |
|
64.7 |
% |
Segment operating margin
%1 |
|
|
3.7 |
% |
|
|
2.7 |
% |
|
|
|
101 bps |
1 Non-GAAP
measures. See Exhibit B for definitions and reconciliations. |
|
|
|
|
|
|
|
Mission Technologies revenues for the first quarter of 2024 were
$750 million, an increase of $126 million, or 20.2%, from the
same period in 2023. The increase was primarily due to higher
volumes in C5ISR and cyber, electronic warfare and space.
Mission Technologies segment operating income1 for the first
quarter of 2024 was $28 million, compared to $17 million in the
first quarter of 2023. Segment operating margin1 in the first
quarter of 2024 was 3.7%, compared to 2.7% in the same period last
year. The increases were primarily driven by the higher volumes
described above.
Mission Technologies results included approximately $25 million
of amortization of purchased intangible assets in the first quarter
of 2024, compared to approximately $27 million in the same period
last year.
Mission Technologies EBITDA margin1 in the first quarter of 2024
was 7.7%, a decrease from 8.0% in the first quarter of 2023.
Key Mission Technologies milestones for the quarter:
- Awarded $305 million contract to protect U.S. regional
interests in the Republic of Korea
- Awarded $74 million contract to research, analyze and develop
enhanced capabilities for vertical launching systems (VLS) onboard
U.S. Navy surface ships
- Awarded an order to build a REMUS 620 unmanned underwater
vehicle for an international customer
1Non-GAAP measures. See Exhibit B for definitions and
reconciliations
HII Financial Outlook1
- Reaffirming FY24 outlook
- Reaffirming 5 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 |
$2.7B - $2.75B |
|
|
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 |
($90M) |
|
|
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, May 9th by calling (866) 813-9403 or (929)
458-6194 and using access code 793592.
Cautionary Statement Regarding Forward-Looking
Statements and Projections
Statements in this earnings release and in our other filings
with the Securities and Exchange Commission ("SEC"), as well as
other statements we may make from time to time, 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 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 March 31 |
(in millions, except per share amounts) |
|
|
2024 |
|
|
|
2023 |
|
Sales and service revenues |
|
|
|
|
Product sales |
|
$ |
1,787 |
|
|
$ |
1,829 |
|
Service revenues |
|
|
1,018 |
|
|
|
845 |
|
Sales and service revenues |
|
|
2,805 |
|
|
|
2,674 |
|
Cost of sales and service
revenues |
|
|
|
|
Cost of product sales |
|
|
1,537 |
|
|
|
1,568 |
|
Cost of service revenues |
|
|
893 |
|
|
|
756 |
|
Income from operating investments, net |
|
|
12 |
|
|
|
12 |
|
Other income and gains (losses), net |
|
|
(1 |
) |
|
|
(1 |
) |
General and administrative expenses |
|
|
232 |
|
|
|
220 |
|
Operating income |
|
|
154 |
|
|
|
141 |
|
Other income (expense) |
|
|
|
|
Interest expense |
|
|
(21 |
) |
|
|
(24 |
) |
Non-operating retirement benefit |
|
|
44 |
|
|
|
37 |
|
Other, net |
|
|
7 |
|
|
|
9 |
|
Earnings before income
taxes |
|
|
184 |
|
|
|
163 |
|
Federal and foreign income tax
expense |
|
|
31 |
|
|
|
34 |
|
Net earnings |
|
$ |
153 |
|
|
$ |
129 |
|
|
|
|
|
|
Basic earnings per share |
|
$ |
3.87 |
|
|
$ |
3.23 |
|
Weighted-average common shares
outstanding |
|
|
39.5 |
|
|
|
39.9 |
|
|
|
|
|
|
Diluted earnings per
share |
|
$ |
3.87 |
|
|
$ |
3.23 |
|
Weighted-average diluted
shares outstanding |
|
|
39.5 |
|
|
|
39.9 |
|
|
|
|
|
|
Dividends declared per
share |
|
$ |
1.30 |
|
|
$ |
1.24 |
|
|
|
|
|
|
Net earnings from above |
|
$ |
153 |
|
|
$ |
129 |
|
Other comprehensive income
(loss) |
|
|
|
|
Change in unamortized benefit plan costs |
|
|
5 |
|
|
|
4 |
|
Tax expense for items of other comprehensive income |
|
|
(2 |
) |
|
|
(1 |
) |
Other comprehensive income, net of tax |
|
|
3 |
|
|
|
3 |
|
Comprehensive income |
|
$ |
156 |
|
|
$ |
132 |
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED)
($ in
millions) |
|
March 31,2024 |
|
December 31,2023 |
Assets |
|
|
|
|
Current
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
10 |
|
|
$ |
430 |
|
Accounts receivable, net of
allowance for expected credit losses of $5 million as of 2024 and
$8 million as of 2023 |
|
|
718 |
|
|
|
461 |
|
Contract assets |
|
|
1,661 |
|
|
|
1,537 |
|
Inventoried costs |
|
|
199 |
|
|
|
186 |
|
Income taxes receivable |
|
|
140 |
|
|
|
183 |
|
Prepaid expenses and other
current assets |
|
|
105 |
|
|
|
83 |
|
Total current assets |
|
|
2,833 |
|
|
|
2,880 |
|
Property, Plant, and
Equipment, net of accumulated depreciation of $2,515 million as of
2024 and $2,467 million as of 2023 |
|
|
3,298 |
|
|
|
3,296 |
|
Operating lease assets |
|
|
251 |
|
|
|
262 |
|
Goodwill |
|
|
2,618 |
|
|
|
2,618 |
|
Other intangible assets, net
of accumulated amortization of $1,036 million as of 2024 and $1,009
million as of 2023 |
|
|
864 |
|
|
|
891 |
|
Pension plan assets |
|
|
920 |
|
|
|
888 |
|
Miscellaneous other
assets |
|
|
383 |
|
|
|
380 |
|
Total assets |
|
$ |
11,167 |
|
|
$ |
11,215 |
|
Liabilities and
Stockholders' Equity |
|
|
|
|
Current
Liabilities |
|
|
|
|
Trade accounts payable |
|
|
608 |
|
|
|
554 |
|
Accrued employees’
compensation |
|
|
342 |
|
|
|
382 |
|
Short-term debt and current
portion of long-term debt |
|
|
203 |
|
|
|
231 |
|
Current portion of
postretirement plan liabilities |
|
|
129 |
|
|
|
129 |
|
Current portion of workers’
compensation liabilities |
|
|
225 |
|
|
|
224 |
|
Contract liabilities |
|
|
936 |
|
|
|
1,063 |
|
Other current liabilities |
|
|
505 |
|
|
|
449 |
|
Total current liabilities |
|
|
2,948 |
|
|
|
3,032 |
|
Long-term debt |
|
|
2,235 |
|
|
|
2,214 |
|
Pension plan liabilities |
|
|
214 |
|
|
|
212 |
|
Other postretirement plan
liabilities |
|
|
239 |
|
|
|
241 |
|
Workers’ compensation
liabilities |
|
|
451 |
|
|
|
449 |
|
Long-term operating lease
liabilities |
|
|
217 |
|
|
|
228 |
|
Deferred tax liabilities |
|
|
351 |
|
|
|
367 |
|
Other long-term
liabilities |
|
|
386 |
|
|
|
379 |
|
Total liabilities |
|
|
7,041 |
|
|
|
7,122 |
|
Commitments and
Contingencies |
|
|
|
|
Stockholders’
Equity |
|
|
|
|
Common stock, $0.01 par value;
150,000,000 shares authorized; 53,709,837 shares issued and
39,509,640 shares outstanding as of March 31, 2024, and 53,595,748
shares issued and 39,618,880 shares outstanding as of December 31,
2023 |
|
|
1 |
|
|
|
1 |
|
Additional paid-in
capital |
|
|
2,038 |
|
|
|
2,045 |
|
Retained earnings |
|
|
4,855 |
|
|
|
4,755 |
|
Treasury stock |
|
|
(2,349 |
) |
|
|
(2,286 |
) |
Accumulated other
comprehensive loss |
|
|
(419 |
) |
|
|
(422 |
) |
Total stockholders’ equity |
|
|
4,126 |
|
|
|
4,093 |
|
Total liabilities and stockholders’
equity |
|
$ |
11,167 |
|
|
$ |
11,215 |
|
HUNTINGTON INGALLS INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
|
|
Three Months Ended March 31 |
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
Operating Activities |
|
|
|
|
Net earnings |
|
$ |
153 |
|
|
$ |
129 |
|
Adjustments to reconcile to
net cash used in operating activities |
|
|
|
|
Depreciation |
|
|
53 |
|
|
|
55 |
|
Amortization of purchased intangibles |
|
|
27 |
|
|
|
32 |
|
Amortization of debt issuance costs |
|
|
2 |
|
|
|
2 |
|
Provision for expected credit losses |
|
|
(3 |
) |
|
|
— |
|
Stock-based compensation |
|
|
14 |
|
|
|
12 |
|
Deferred income taxes |
|
|
(17 |
) |
|
|
(30 |
) |
Loss (gain) on investments in marketable securities |
|
|
(8 |
) |
|
|
(8 |
) |
Change in |
|
|
|
|
Accounts receivable |
|
|
(253 |
) |
|
|
(119 |
) |
Contract assets |
|
|
(124 |
) |
|
|
(58 |
) |
Inventoried costs |
|
|
(13 |
) |
|
|
(7 |
) |
Prepaid expenses and other assets |
|
|
25 |
|
|
|
30 |
|
Accounts payable and accruals |
|
|
(34 |
) |
|
|
(31 |
) |
Retiree benefits |
|
|
(27 |
) |
|
|
(18 |
) |
Other non-cash transactions, net |
|
|
3 |
|
|
|
2 |
|
Net cash used in operating activities |
|
|
(202 |
) |
|
|
(9 |
) |
Investing
Activities |
|
|
|
|
Capital expenditures |
|
|
|
|
Capital expenditure additions |
|
|
(75 |
) |
|
|
(43 |
) |
Grant proceeds for capital expenditures |
|
|
3 |
|
|
|
3 |
|
Investment in affiliates |
|
|
— |
|
|
|
(20 |
) |
Other investing activities, net |
|
|
1 |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(71 |
) |
|
|
(60 |
) |
Financing
Activities |
|
|
|
|
Repayment of long-term debt |
|
|
(145 |
) |
|
|
(10 |
) |
Proceeds from revolving credit facility borrowings |
|
|
42 |
|
|
|
— |
|
Repayment of revolving credit facility borrowings |
|
|
(20 |
) |
|
|
— |
|
Net borrowings on commercial paper |
|
|
117 |
|
|
|
— |
|
Dividends paid |
|
|
(51 |
) |
|
|
(49 |
) |
Repurchases of common stock |
|
|
(62 |
) |
|
|
(9 |
) |
Employee taxes on certain share-based payment arrangements |
|
|
(25 |
) |
|
|
(12 |
) |
Other financing activities, net |
|
|
(3 |
) |
|
|
— |
|
Net cash used in financing activities |
|
|
(147 |
) |
|
|
(80 |
) |
Change in cash and cash equivalents |
|
|
(420 |
) |
|
|
(149 |
) |
Cash and cash equivalents,
beginning of period |
|
|
430 |
|
|
|
467 |
|
Cash and cash equivalents, end
of period |
|
$ |
10 |
|
|
$ |
318 |
|
Supplemental Cash Flow
Disclosure |
|
|
|
|
Cash paid for interest |
|
$ |
10 |
|
|
$ |
12 |
|
Non-Cash Investing and
Financing Activities |
|
|
|
|
Capital expenditures accrued
in accounts payable |
|
$ |
6 |
|
|
$ |
8 |
|
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 |
|
|
March 31 |
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
Ingalls revenues |
|
$ |
655 |
|
|
$ |
577 |
|
Newport News revenues |
|
|
1,434 |
|
|
|
1,506 |
|
Mission Technologies
revenues |
|
|
750 |
|
|
|
624 |
|
Intersegment eliminations |
|
|
(34 |
) |
|
|
(33 |
) |
Sales and Service
Revenues |
|
|
2,805 |
|
|
|
2,674 |
|
|
|
|
|
|
Operating
Income |
|
|
154 |
|
|
|
141 |
|
Operating FAS/CAS Adjustment |
|
|
17 |
|
|
|
19 |
|
Non-current state income taxes |
|
|
(1 |
) |
|
|
(4 |
) |
Segment Operating
Income |
|
|
170 |
|
|
|
156 |
|
As a percentage of sales and service revenues |
|
|
6.1 |
% |
|
|
5.8 |
% |
Ingalls segment operating income |
|
|
60 |
|
|
|
55 |
|
As a percentage of Ingalls revenues |
|
|
9.2 |
% |
|
|
9.5 |
% |
Newport News segment operating income |
|
|
82 |
|
|
|
84 |
|
As a percentage of Newport News revenues |
|
|
5.7 |
% |
|
|
5.6 |
% |
Mission Technologies segment operating income |
|
|
28 |
|
|
|
17 |
|
As a percentage of Mission Technologies revenues |
|
|
3.7 |
% |
|
|
2.7 |
% |
Reconciliation of Free Cash
Flow
|
|
Three Months Ended |
|
|
March 31 |
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
Net cash used in operating activities |
|
$ |
(202 |
) |
|
$ |
(9 |
) |
Less capital
expenditures: |
|
|
|
|
Capital expenditure additions |
|
|
(75 |
) |
|
|
(43 |
) |
Grant proceeds for capital expenditures |
|
|
3 |
|
|
|
3 |
|
Free cash flow |
|
$ |
(274 |
) |
|
$ |
(49 |
) |
Reconciliation of Mission Technologies EBITDA and EBITDA
Margin
|
|
Three Months Ended |
|
|
March 31 |
($ in millions) |
|
|
2024 |
|
|
|
2023 |
|
Mission Technologies sales and service
revenues |
|
$ |
750 |
|
|
$ |
624 |
|
|
|
|
|
|
Mission Technologies
segment operating income |
|
$ |
28 |
|
|
$ |
17 |
|
Mission Technologies
depreciation expense |
|
|
3 |
|
|
|
3 |
|
Mission Technologies
amortization expense |
|
|
25 |
|
|
|
27 |
|
Mission Technologies state tax
expense |
|
|
2 |
|
|
|
3 |
|
Mission Technologies
EBITDA |
|
$ |
58 |
|
|
$ |
50 |
|
Mission Technologies
EBITDA margin |
|
|
7.7 |
% |
|
|
8.0 |
% |
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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