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 2024 revenues of $2.7 billion were down 2.4% from the third quarter of 2023, driven by lower volume at Ingalls Shipbuilding and Newport News Shipbuilding, partially offset by growth at Mission Technologies.
Operating income in the third quarter of 2024 was $82 million and operating margin was 3.0%, compared to $172 million and 6.1%, respectively, in the third quarter of 2023. The decreases were primarily driven by lower segment operating income1 compared to the prior year.
Segment operating income1 in the third quarter of 2024 was $97 million and segment operating margin1 was 3.5%, compared to $187 million and 6.6%, respectively, in the third quarter of 2023. The decreases were driven primarily by performance at Newport News Shipbuilding, which included a net unfavorable cumulative adjustment of $78 million, as well as lower performance at Ingalls Shipbuilding.
Net earnings in the quarter were $101 million, compared to $148 million in the third quarter of 2023. Diluted earnings per share in the quarter was $2.56, compared to $3.70 in the third quarter of 2023.
Net cash provided by operating activities in the quarter was $213 million and free cash flow1 was $136 million, compared to net cash provided by operating activities of $335 million and free cash flow1 of $293 million in the third quarter of 2023.
New contract awards in the third quarter of 2024 were $3.6 billion, bringing total backlog to approximately $49.4 billion as of September 30, 2024. Awards in the third quarter of 2024 included approximately $565 million related to the multi-ship amphibious award at Ingalls Shipbuilding.
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% and 6.0%
- 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 | $8.8B - $9.1B | ~$8.8B | |
| Shipbuilding Operating Margin2 | 7.6% - 7.8% | 5.0% - 6.0% | |
| Mission Technologies Revenue | $2.75B - $2.8B | $2.8B - $2.85B | |
| Mission Technologies Segment Operating Margin2 | 3.0% - 3.5% | ~3.75% | |
| Mission Technologies EBITDA Margin2 | 8.0% - 8.5% | 8.0% - 8.5% | |
| Operating FAS/CAS Adjustment | ($63M) | ($61M) | |
| Non-current State Income Tax Benefit/Expense2,4 | ~$0M | ~$0M | |
| Interest Expense | ($95M) | ($97M) | |
| Non-operating Retirement Benefit | $178M | $180M | |
| Effective Tax Rate | ~21% | ~17% | |
| Depreciation & Amortization | ~$350M | ~$350M | |
| Capital Expenditures | ~5.3% of Sales | ~3.4%
of Sales | |
| Free Cash Flow2,3 | $600M - $700M | $0M - $100M |
2Non-GAAP measures. See Exhibit B for definitions. In reliance upon Item 10(e)(1)(i)(B) of Regulation S-K, reconciliations of forward-looking GAAP and non-GAAP measures are not provided because of the unreasonable effort associated with providing such reconciliations due to the variability in the occurrence and the amounts of certain components of GAAP and non-GAAP measures. For the same reasons, we are unable to address the significance of the unavailable information, which could be material to future results.
3Outlook is based on current tax law and assumes the provisions requiring capitalization of R&D expenditures for tax purposes are not deferred or repealed.
4Outlook is based on current tax law. Repeal or deferral of provisions requiring capitalization of R&D expenditures would result in elevated non-current state income tax expense.
Results of Operations
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September 30 | September 30 | |||||||||||||||||||||||||||||
| ($ 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 $664 million, a decrease of $47 million, or 6.6%, from the same period in 2023, primarily driven by lower volumes in amphibious assault ships and the
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 $49 million, a decrease of $24 million from the same period in 2023. Segment operating margin1 in the third quarter of 2024 was 7.4%, compared to 10.3% in the same period last year. The decreases were primarily driven by lower performance on amphibious assault ships and surface combatants.
Key Ingalls Shipbuilding milestones for the quarter:
- Awarded a $9.6 billion multi-ship procurement contract for the construction of LPD 33, 34 and 35 and large-deck amphibious ship LHA 10
Newport News Shipbuilding
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September 30 | September 30 | |||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||
| Revenues | $ | 1,412 | $ | 1,453 | $ | (41 | ) | (2.8 | )% | $ | 4,381 | ()[\]\\.,;:\s@\"]+)*)|(\".+\"))@((\[[0-9]{1,3}\.[0-9]{1,3}\.[0-9]{1,3}\.[0-9]{1,3}\])|(([a-zA-Z\-0-9]+\.)+[a-zA-Z]{2,}))$/;return b.test(a)}$(document).ready(function(){if(performance.navigation.type==2){location.reload(true)}$("iframe[data-lazy-src]").each(function(b){$(this).attr("src",$(this).attr("data-lazy-src"))});if($(".owl-article-body-images").length){$(".owl-article-body-images").owlCarousel({items:1,loop:true,center:false,dots:false,autoPlay:true,mouseDrag:false,touchDrag:false,pullDrag:false,nav:true})}var a=$("#display_full_text").val();if(a==0){$.ajax({url:"/ajax/set-article-cookie",type:"POST",data:{cmsArticleId:$("#cms_article_id").val()},dataType:"json",success:function(b){},error:function(b,d,c){}})}$(".read-full-article").on("click",function(d){d.preventDefault();var b=$(this).attr("data-cmsArticleId");var c=$(this).attr("data-productId");var f=$(this).attr("data-href");dataLayer.push({event:"paywall_click",paywall_name:"the_manila_times_premium",paywall_id:"paywall_article_"+b});$.ajax({url:"/ajax/set-article-cookie",type:"POST",data:{cmsArticleId:b,productId:c},dataType:"json",success:function(e){window.location.href=$("#BASE_URL").val()+f},error:function(e,h,g){}})});$(".article-embedded-newsletter-form .close-btn").on("click",function(){$(".article-embedded-newsletter-form").fadeOut(1000)})});$(document).on("click",".article-embedded-newsletter-form .newsletter-button",function(){var b=$(".article-embedded-newsletter-form .newsletter_email").val();var d=$("#ga_user_id").val();var c=$("#ga_user_yob").val();var a=$("#ga_user_gender").val();var e=$("#ga_user_country").val();if(validateEmail(b)){$.ajax({url:"/ajax/sendynewsletter",type:"POST",data:{email:b},success:function(f){$(".article-embedded-newsletter-form .nf-message").html(f);$(".article-embedded-newsletter-form .nf-message").addClass("show");setTimeout(function(){$(".article-embedded-newsletter-form .nf-message").removeClass("show");$(".article-embedded-newsletter-form .nf-message").html("")},6000);dataLayer.push({event:"newsletter_sub",user_id:d,product_name:"newsletter",gender:a,yob:c,country:e})},error:function(f,h,g){}})}else{$(".article-embedded-newsletter-form .nf-message").html("Please enter a valid email address.");$(".article-embedded-newsletter-form .nf-message").addClass("show");setTimeout(function(){$(".article-embedded-newsletter-form .nf-message").removeClass("show");$(".article-embedded-newsletter-form .nf-message").html("")},6000)}});$(document).on("click",".article-embedded-newsletter-form .nf-message",function(){$(this).removeClass("show");$(this).html("")});
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