NEWPORT NEWS, Va., Aug. 04, 2022 (GLOBE NEWSWIRE) — HII (NYSE:HII) reported second quarter 2022 revenues of $2.7 billion, up 19.3% from the second quarter of 2021, primarily driven by revenue attributable to the acquisition of Alion Science and Technology (Alion) in the third quarter of 2021, as well as growth at Newport News Shipbuilding.
Operating income in the second quarter of 2022 was $191 million and operating margin was 7.2%, compared to $128 million and 5.7%, respectively, in the second quarter of 2021. The increases in operating income and operating margin were primarily driven by higher segment operating income1, as well as more favorable non-current state income taxes and a more favorable operating FAS/CAS adjustment compared to the prior year.
Segment operating income1 in the second quarter of 2022 was $225 million and segment operating margin1 was 8.5%, compared to $169 million and 7.6%, respectively, in the second quarter of 2021. The increases in segment operating income1 and segment operating margin1 were driven by improved results across all three divisions compared to the prior year.
Net earnings in the quarter were $178 million, compared to $129 million in the second quarter of 2021. Diluted earnings per share in the quarter was $4.44, compared to $3.20 in the second quarter of 2021.
Net cash provided by operating activities in the quarter was $267 million and free cash flow1 was $208 million, compared to cash provided by operating activities of $96 million and free cash flow1 of $23 million in the second quarter of 2021.
New contract awards in the second quarter of 2022 were approximately $2.0 billion, bringing total backlog to approximately $47.2 billion as of June 30, 2022.
“We are pleased with another quarter of consistent shipbuilding program execution and stronger operating income at each of our divisions compared to the prior year,” said Chris Kastner, HII’s president and CEO. “We remain confident in the positioning of the business for long-term value creation given the tremendous volume of shipbuilding work we have secured in backlog and a Mission Technologies division that is poised for robust growth in markets of critical importance to our customers.”
1Non-GAAP measures. See Exhibit B for definitions and reconciliations. Reconciliations of forward-looking GAAP and non-GAAP measures are not provided because we are unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the future occurrence and financial impact of certain elements of GAAP and non-GAAP measures.
Results of Operations
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| June 30 | June 30 | ||||||||||||||||||||
| ($ in millions, except per share amounts) | 2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||||||||||
| Sales and service revenues | $ | 2,662 | $ | 2,231 | $ | 431 | 19.3 | % | $ | 5,238 | $ | 4,509 | $ | 729 | 16.2 | % | |||||
| Operating income | 191 | 128 | 63 | 49.2 | % | 329 | 275 | 54 | 19.6 | % | |||||||||||
| Operating margin % | 7.2 | % | 5.7 | % | 144 bps | 6.3 | % | 6.1 | % | 18 bps |
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| Segment operating income1 | 225 | 169 | 56 | 33.1 | % | 401 | 360 | 41 | 11.4 | % | |||||||||||
| Segment operating margin %1 | 8.5 | % | 7.6 | % | 88 bps | 7.7 | % | 8.0 | % | (33) bps |
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| Net earnings | 178 | 129 | 49 | 38.0 | % | 318 | 277 | 41 | 14.8 | % | |||||||||||
| Diluted earnings per share | $ | 4.44 | $ | 3.20 | $ | 1.24 | 38.8 | % | $ | 7.93 | $ | 6.87 | $ | 1.06 | 15.4 | % | |||||
| 1Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for definitions and reconciliations. | |||||||||||||||||||||
Segment Operating Results
Ingalls Shipbuilding
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30 | June 30 | ||||||||||||||||||||||
| ($ in millions) | 2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||||||||||||
| Revenues | $ | 658 | $ | 670 | $ | (12 | ) | (1.8 | )% | $ | 1,289 | $ | 1,319 | $ | (30 | ) | (2.3) | % | |||||
| Segment operating income1 | 106 | 80 | 26 | 32.5 | % | 192 | 171 | 21 | 12.3 | % | |||||||||||||
| Segment operating margin %1 | 16.1 | % | 11.9 | % | 417 bps | 14.9 | % | 13.0 | % | 193 bps | |||||||||||||
| 1 Non-GAAP measures. See Exhibit B for definitions and reconciliations. | |||||||||||||||||||||||
Ingalls Shipbuilding revenues for the second quarter of 2022 were $658 million, a decrease of $12 million, or 1.8%, from the same period in 2021, primarily driven by lower revenues in the Arleigh Burke-class guided missile destroyer (DDG) program, partially offset by higher revenues in the amphibious transport dock (LPD) and amphibious assault ship (LHA) programs. DDG program revenues decreased due to lower volumes on Jeremiah Denton (DDG 129) and USS Jack H. Lucas (DDG 125), partially offset by higher volume on Thad Cochran (DDG 135). Amphibious ship program revenues increased due to higher volumes on Pittsburgh (LPD 31), Harrisburg (LPD 30), LHA 9 (unnamed) and amphibious class planning yard services, partially offset by lower volume on the recently delivered Fort Lauderdale (LPD 28).
Ingalls Shipbuilding segment operating income1 for the second quarter of 2022 was $106 million, an increase of $26 million from the same period in 2021. Segment operating margin1 in the second quarter of 2022 was 16.1%, compared to 11.9% in the same period last year. The increases were primarily driven by favorable changes in contract estimates from facilities capital and price adjustment clauses and higher risk retirement on Harrisburg (LPD 30), partially offset by lower risk retirement on USS Jack H. Lucas (DDG 125) related to a capital expenditure incentive in 2021.
Key Ingalls Shipbuilding milestones for the quarter:
- Launched and christened National Security Cutter Calhoun (NSC 10)
- Christened amphibious transport dock Richard M. McCool Jr. (LPD 29)
- Awarded advanced procurement contract for LPD 32
1Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Newport News Shipbuilding
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| June 30 | June 30 | ||||||||||||||||||||
| ($ in millions) | 2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||||||||||
| Revenues | $ | 1,433 | $ | 1,363 | $ | 70 | 5.1 | % | $ | 2,823 | $ | 2,770 | $ | 53 | 1.9 | % | |||||
| Segment operating income1 | 94 | 76 | 18 | 23.7 | % | 175 | 169 | 6 | 3.6 | % | |||||||||||
| Segment operating margin %1 | 6.6 | % | 5.6 | % | 98 bps | 6.2 | % | 6.1 | % | 10 bps | |||||||||||
| 1 Non-GAAP measures. See Exhibit B for definitions and reconciliations. | |||||||||||||||||||||
Newport News Shipbuilding revenues for the second quarter of 2022 were $1.4 billion, an increase of $70 million, or 5.1%, from the same period in 2021, primarily driven by higher revenues in aircraft carriers, partially offset by lower revenues in naval nuclear support services. Aircraft carrier revenues increased primarily as a result of higher volumes on the refueling and complex overhaul (RCOH) of USS John C. Stennis (CVN 74), and the construction of Doris Miller (CVN 81), John F. Kennedy (CVN 79) and Enterprise (CVN 80), partially offset by lower volume on the RCOH of USS George Washington (CVN 73). Naval nuclear support service revenues decreased primarily as a result of lower volumes in submarine fleet support services and facility maintenance services, partially offset by higher volumes in carrier fleet support services. Submarine revenues were relatively flat compared to the prior year, with lower volumes on Block IV boats of the Virginia-class submarine (VCS) program largely offset by higher volumes on Block V boats of the VCS program and higher volume in the Columbia-class submarine program.
Newport News Shipbuilding segment operating income1 for the second quarter of 2022 was $94 million, an increase of $18 million from the same period in 2021. Segment operating margin1 in the second quarter of 2022 was 6.6%, compared to 5.6% in the same period last year. The increases were primarily due favorable changes in contract estimates from facilities capital and price adjustment clauses, partially offset by lower risk retirement on the VCS program.
Key Newport News Shipbuilding milestones for the quarter:
- Launched Virginia-class submarine New Jersey (SSN 796)
- Reached approximate 97% completion of the RCOH of USS George Washington (CVN 73)
- Reached approximate 86% completion of John F. Kennedy (CVN 79)
- Recently turned over the 1,000th compartment of the 2,615 total spaces to the crew of John F. Kennedy (CVN 79)
1Non-GAAP measures. See Exhibit B for definitions and reconciliations.
Mission Technologies
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||
| ($ in millions) | 2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | ||||||||||||
| Revenues | $ | 600 | $ | 237 | $ | 363 | 153.2 | % | $ | 1,190 | $ | 496 | 694 | 139.9 | % | |||||
| Segment operating income1 | 25 | 13 | $ | 12 | 92.3 | % | 34 | 20 | 14 | 70.0 | % | |||||||||
| Segment operating margin %1 | 4.2 | % | 5.5 | % | (132) bps | 2.9 | % | 4.0 | % | (118) bps | ||||||||||
| 1Non-GAAP measures. See Exhibit B for definitions and reconciliations. | ||||||||||||||||||||
Mission Technologies revenues for the second quarter of 2022 were $600 million, an increase of $363 million from the same period in 2021. The increase was primarily due to higher volumes in Defense & Federal Solutions (DFS) attributable to the acquisition of Alion in the third quarter of 2021.
Mission Technologies segment operating income1 for the second quarter of 2022 was $25 million, compared to $13 million in the second quarter of 2021. Segment operating margin1 in the second quarter of 2022 was 4.2%, compared to 5.5% in the same period last year. The increase in segment operating income1 was primarily driven by higher equity income from a ship repair and specialty fabrication joint venture of which we are a minority owner.
The decrease in the segment operating margin1 was primarily driven by approximately $24 million of amortization of Alion related purchased intangible assets. Mission Technologies EBITDA margin1 in the second quarter of 2022 was 10.7%.
Key Mission Technologies milestones for the quarter:
- Launched Odyssey, a suite of advanced autonomy solutions
- Awarded the Mobility Air Forces Distributed Mission Operations prime contract
- Successfully demonstrated the Pharos system for launching and retrieving unmanned underwater vehicles from amphibious warships
1Non-GAAP measures. See Exhibit B for definitions and reconciliations.
2022 Financial Outlook1
- Reaffirming shipbuilding revenue2, shipbuilding operating margin2, Mission Technologies segment operating margin2 and free cash flow2 guidance
- Revising Mission Technologies revenue guidance to a range given slower overall award and contracting pace in the first half of 2022
- Expect FY22 shipbuilding revenue2 between $8.2 and $8.5 billion; expect shipbuilding operating margin2 between 8.0% and 8.1%
- Expect FY22 Mission Technologies revenue between $2.4 and $2.6 billion, segment operating margin2 of approximately 2.5%; and expect Mission Technologies EBITDA margin2 of between 8.0% and 8.5%
- Expect FY22 free cash flow2 of between $300 and $350 million4
- Expect cumulative FY20-FY24 free cash flow2 of approximately $3.2 billion4
| Prior Outlook |
Current Outlook |
|||
| Shipbuilding Revenue2 | $8.2B – $8.5B | $8.2B – $8.5B | ||
| Shipbuilding Operating Margin2 | 8.0% – 8.1% | 8.0% – 8.1% | ||
| Mission Technologies Revenue | ~$2.6B | $2.4B – $2.6B | ||
| Mission Technologies Segment Operating Margin2 | ~2.5% | ~2.5% | ||
| Mission Technologies EBITDA Margin2 | 8.0% – 8.5% | 8.0% – 8.5% | ||
| Operating FAS/CAS Adjustment | ($143M) | ($143M) | ||
| Non-current State Income Tax Expense3 | ($5M) | ($5M) | ||
| Interest Expense | ($102M) | ($102M) | ||
| Non-operating Retirement Benefit | $273M | $273M | ||
| Effective Tax Rate | ~21% | ~21% | ||
| Depreciation & Amortization | $365M | $365M | ||
| Capital Expenditures | 2.5% – 3.0% of Sales |
2.5% – 3.0% of Sales |
||
| Free Cash Flow2assuming Sec. 174 Tax Deferral4 | $300M – $350M | $300M – $350M | ||
| Free Cash Flow2based on current tax law5 | $200M – $250M | $200M – $250M |
1The financial outlook, expectations and other forward looking statements provided by the company for 2022 and beyond reflect the company’s judgment based on the information available at the time of this release.
2 Non-GAAP measures. See Exhibit B for definitions. Reconciliations of forward–looking GAAP and non–GAAP measures are not provided because we are unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the future occurrence and financial impact of certain elements of GAAP and non-GAAP measures.
3 Outlook is based on current tax law. Repeal or deferral of legislation requiring capitalization of R&D expenditures would result in elevated non-current state income tax expense.
4 Outlook assumes the legislation requiring capitalization of R&D expenditures for tax purposes is deferred.
See Exhibit B for additional information.
5 Reflects $100 million of projected impact of the current tax law on our free cash flow guidance for 2022. See appendix for additional information.
About Huntington Ingalls Industries
HII is an all-domain defense and technologies partner, recognized worldwide as America’s largest shipbuilder. With a 135-year history of trusted partnerships in advancing U.S. national security, HII delivers critical capabilities ranging from the most powerful and survivable naval ships ever built, to unmanned systems, ISR and AI/ML analytics. HII leads the industry in mission-driven solutions that support and enable an all-domain force. Headquartered in Virginia, HII’s skilled workforce is 44,000 strong. For more information, please visit www.HII.com.
