HII - Earnings call transcript Q1 2018 | Huntington Ingalls Industries, Inc.

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Operator

Good day, ladies and gentlemen. And welcome to the First Quarter 2018 Huntington Ingalls Industries Inc Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time [Operator instructions].

As a reminder, this conference is being recorded. to President like Mr. Investor now would introduce of Vice Relations, I Blake. Dwayne Please go ahead, sir.

Dwayne Blake

morning. to Management us And Industries’ Good Vice Executive Andrew. Thanks welcome Kastner, Chris Financial XXXX Petters, and Executive conference Officer. Officer Mike and first of the earnings call. Chief are With Business today President President Chief and quarter Ingalls Huntington

We that posted to earnings comments. to on our the federal call the huntingtoningalls.com filings vary to are As that for of of a appendix Harbor click a access supplement CEO, securities comparable Petters. statements our Also, Mike description site. of our facts, anticipated and to With at to our GAAP made Mike? from I'll the release. measures are will is the call posted cause in differ. Please slides during included to to some historical Actual plan Please in to Reconciliations address presentation provisions reminder, of statements certain our law. our results of are Web that link Chris call as well presentation made metrics and remarks the and site on as earnings may Relations results SEC the measures. today, that, factors and considered the these actual results. turn not the in Safe pursuant may materially to refer today’s the refer our forward-looking Web President non-GAAP view over Investor presentation, Mike the

Mike Petters

of business results in released morning, Today, joining segments. first XXXX Thanks, that us financial our everyone three Dwayne. on we for growth thanks revenue all included all. Good quarter and the

the Diluted of Sales end some million $X.X was for on billion backlog We which of approximately EPS $XXX Slide of $X.XX quarter. the at XXXX. $XX received $X.XX X.X% approximately resulting were in the let me billion highlights contract is higher operating billion of and was starting than So cash presentation. the share $XX during the new quarter, quarter quarter, billion the in funded. for awards of X

the capital XX as next time XX, Flight V, is that capacity forms supports exciting XXXX, into of our if getting to talk of improve want five options of multiyear CVN investing XX you under XX XX before is we in end and II. Block efficiency, or procurement, and will amount about years the that environment. approximately the and QX business seen our constructed in segments, contract I So expected a award contracting are the XX the $X.X XX in to business At approximately sales work next result and of near XXXX, to end facilities. the discussion term all This as for this the foundation At ships will our our billion This already for have had goes By to exercised shipbuilding. my be outlook years, the most in planned, NSC time facilities LPD affordability. and the to we the XX shipbuilding current VCS in you have for DDG of be and I activity the we tell that know, significant base to new XX support same XX of to includes I years. ships. see XX-plus contracts to the

resetting sales expected we the shipbuilding on As range. portfolio transitions, the are return

we new through new that over on production now normal. remains are we to News at the and of return two is the transition as return while for with on be our begin to a rate. long-term range and lower call, bit Recognizing expect for this period I experiencing continue X% programs may expect more on And fall that target the experience X% out Newport this XXXX contracts to time-to-time below sales and sales and XX% balance During we the in years at is range we of mix that than transition X% of blended on sales work Ingalls. the What phenomenon, in programs next QX range, shipbuilding slightly the commented shipbuilding the the from on pressure and return to the end XXXX. puts the

overall. to complete and with approximately well facilities segments. additional in better future of DDG same interest produce pushing as the Ingalls XXXX. time, accelerate So of to Ingalls, help months will on to is is a and And At provide At is assault east began XX% that the next-generation this will us modernization LHA and NSC to as Kennedy half to for procurement of including are this now, I the continues expectations, ship and work, future X prepare News, second complete Ingalls’ business ships The our the by on These launch the Pascagoula team facilities reactivating River. surface year. XX provide XX% was of of multiyear the combatants. At and capacity DDG team are on for quarter line next Newport bank points completion few our XXX, focused programs, preparing submitted amphibious for Navy. shipbuilding XX the construction support the they CVN results fourth structurally as three proposal the in recently current X

prepared submarine delivery is the for SSN quarter. in and Indiana the On sea trials to Navy XXX second the program,

Vermont, to to team The the IV buy the CVN in The under quality, to facilities Shipbuilding more the and The the for stabilizing the efficiently. Defense two and maritime Technical manage Turing materials growth. a to Newport in News next In establish the supports XX-plus pricing the in College Australia's sustainment also JV venture Shipbuilding aircraft Department years. ship new industry of in will of support purchase that contract KBR. sequencing support its Institute, cost is carriers preparing line Naval In the five investing proposal and their recapitalize contract. we next activities joint addition, base, purchase response Block News CVN XX the years, and over in to we closing, team a request shipbuilding in Newport ship outlook the over are seeing XX future recently and the a submitted provide sales supplier reduces mission Australia's team the as they and two by between the national module workforce Technical top the of this of stages for allowing quarter. construction and Solutions. growth of completed early are and first Solutions during Navy's boat, to XXX Naval shipped the to final our awarded SSN shipbuilding

on Solutions will segment, my our create our the for cases, the partnership the in finally, Our programs. shareholders, I to sustainable to Chris some key Kastner remarks keep and shipbuilding Technical And concludes plus employees. path solid for And and accelerated on coupled with remarks. on under a the us to are our now new program allow execution segments, financials. Chris? some Congress Navy in our turn at our the work wins funding and contract that stable, and call provide long-term work with administration over customers And value horizon for

Chris Kastner

good and morning. Mike Thanks,

we’ve comment some on discuss would like new I that our to quarter first I implemented. standards Before accounting results,

adopted quarter, recognition the the presentation During and revenue standards. we cost new pension

our the We report. and are recent implemented identified also certain on in clearly resulting equity. quarterly guidance tax changes from in tax explained the FASB reform reclassification effects of These

margin basis billion partially quarter the in million volumes increases primarily Ingalls, increased on X These of higher adjustment. Moving XX.X% the the consolidated offset income program increased in at on at by volume. FAS/CAS NSE volumes primarily of favorable X.X%, lower of and due million to $XXX higher support Revenues XXXX, XX.X% services results amphibious carriers increased in XX a ships were navy presentation. operating aircraft quarter in quarter first and by Slide News, $X.X and points. of or Newport the driven from Operating nuclear $XX operating

the Cash the to presentation. in was quarter million XXXX. first Slide million. X.X% operations of from cash expenditures million $XX in or in $XXX was were million compared of the to flow Net of quarter capital and quarter Turning X $XX free revenues the $XX

benefit our qualified to contributed our to and we million quarter, contributions pension $XX the in of discretionary retirement plans post Additionally, plans. million were $XX which

also We per of $X.XX shares at XXX,XXX a or share our million. $XXX quarter cost repurchased bringing dividends paid balance approximately $XXX million, to of million, end cash $XX and

that note to the please to in a results, one-time income segment employees address bonuses segment paid expense million operating reform. tax for related I $XX quarter our Before included

on from last down income the $XXX the operating first offset quarter margin the higher presentation. of Ingalls retirement on Ingalls’ of revenues program. NSC million quarter year, XX.X% program. by Slide by by retirement LPD the mainly $XX in and increased driven volume volume risk to were increased offset and on of programs, on million from NSC risk due lower LHA quarter partially the on period to program, decreased same X.X% partially Moving X LPD of in XXXX, the

Turning Slide presentation. to the X of

and mostly were $X.X to News volume XX.X% services. support aircraft increased higher from carrier programs the Newport period last same RCOH revenues submarine in and due year, billion the quarter,

in related Newport year-over-year, and of quarter of to in contract one-time primarily of bonuses down and margin the income of News reform the operating were mix. because $XX changes million X.X% payment tax

million the and partially of reform. reserve $XX to presentation. quarter revenues as concludes from Technical support higher the gas turn one-time Now services, over last taken Technical mainly of Technical the the on bonus million Westinghouse, lower for in to X.X% quarter offset environmental call by and back Solutions’ income due to revenue. the the of result That a in of operating of year, my in million Solutions $XX remarks. the is first accounts in tax increased Dwayne related nuclear slide against X million to partially of from I’ll increased XXXX, quarter oil quarter from $X payment due the same and Q&A. XXXX period by Solutions fleet offset $XXX receivable revenue first

Dwayne Blake

Chris. Thanks,

initial everyone possible. queue turn Q&A. please we manage you As over to a reminder follow-up, get can the call, yourself one many through to on one to to as as the it and so the I’ll question people limit Andrew,

Operator

our Instructions]. And from question of the [Operator first comes with Doug Harned Bernstein. line you Thank

now is line Your open.

Doug Harned

you’re big Pascagoula how forward. little going would wanted that looking about River, you going to more at to side of bit a looks be profile you’re a the east Since understand CapEx announced reactivate project. the that like I the

models Is that And little CapEx interested so to you’re that. how Could profile how -- going higher you’re in use a you LSR. about tied in? more new do bit to that that fits volumes and toward or you how like I am about thinking talk how

Mike Petters

we driven that drive expansion this talked so to The really started contracting has are let well ships, the non-nuclear just We bank programs, workload these capital by, for of as to it expansion especially east reset put-in positioned well ahead it. under about pretty their I’ll a the to issue at we to contract. get we Navy specifics actually about, the around efficiencies overall that the of -- in us. some becomes talk the capacity And ships the drive look on competitive and this that Chris we’re need and extra

Chris Kastner

talked The all included numbers we $X.X the previously is east of billion about. activation in bank the -- that the

we think tapers X% down next year relatively sales that of X% from to So is it year, this and there. about flat the identified

Doug Harned

any more existing the but So than mean to you the flexibility volume for expectation that, this is of up you assumes give this outlook might would ships in it go for circumstances? tied tied do ships this to -- under I future. the would the new this that basically

Mike Petters

now expansion do I to capital in we Destroyer back when the of Well, to that’s position off mean, need probably shipbuilding what XXXX. contract all were the extra programs, is steady kicked talked LPD expansion right in us where done if we bank we think that we between seeing a not that we’re programs, ran that But interesting. efficiently, capacity. east a I have we state would back program that about the place the drives of the the we programs, Frigate

that's expansion. the made so And on where decision to we’ve add that

Chris Kastner

will Ingalls help the bank is regard east relentless that about team pretty improving as well. and Doug, efficiency in activation the

Operator

Raviv you. next Thank Citi. our John the comes And of line from question with

is now line open. Your

Colin Canfield

for on of line John Canfield Colin is Raviv. This the

of how TS, that and you a little about payments Newport range respect out range. Just out could bit we in to terms the you just if XX% bit impacting What talk of of and on and with falling little that margins the for? there shipbuilding bonus long are X% a are News to margins, drivers then the

Chris Kastner

First was five that on of Newport the numbers, News was three. TS $XX was XX million and Ingalls

Mike Petters

out about -- couple on where as about years, over a is same we’ve the been that you're balance been from out when a stock have the we’ve work get of that XX% end of you balance contracting got delayed on shipbuilding years recognize shipbuilding we if for the of completing front be talking the Newport last a you enterprise should we healthy range. the the few that And lot that and the balance. you’re and until the healthy for. we've now retire the sequestered about margins, regarding you work a the risk. amount talked of income we’re program of here and where blend of And pipeline, don't you’re That been in is a right What of you’re ever this seeing since News, amount and the little to X% well, bit executing in carrier at the we’ve

of little So coming executing of into important balance that to major to and see couple us out so even more pipeline, as out years we we’re amount we And the the down everyone shipbuilding of it's we a put go understand the we’re next think And going that's for just over we out well. bit look balance. the really now phase.

not many well is opportunity and front of And part we to to right not our risk certainly, up pipeline. we’re there really in margins executing the putting We’re seen that have business. drive end to income work every going News, more opportunities. and are many in And more Newport time, retire as now as mean capture The of at on before. be the as the

we trade really just wouldn't we’re a good so I And everybody place anything. make for to that position right want now. in sure this understands

us go these next We’re they’re the XX to They years. under execution to five going ships to not well having to need problems. contract. need serve be and get contracts We good for

And so exciting is the most be frankly, the years. shipbuilding that’s XX to this why I over this find -- exciting environment in most

the two huge a couple of guess recognize where thinking when risk; I in the out, that’s the to can I’ve so didn’t that And that go, that’s is retire matter is back matter. through because And shipbuilding; you and first risk, can before small mistakes have make income on lived major you that not my margins you one there's retire you a a the those. you

will We not at here do HII. that

contracts mistake go second to you The you can can make sign end the can revenue, and is you contracts. trying bad signing the volume fill you up up to and start and

future forward. phase in for biggest the good is We’re success is, company, to right of make we a we going sure contracts driver now where the have get this

we So to where want exactly me, to is this be.

Operator

our Thank of with And from comes line you. next Research. Shapiro the question George Shapiro

open. is now line Your

George Shapiro

unique Is And what the -- lot growth. this you this if give the on just the color strong. subsequent Thanks. slower adjustments X% a mean then something were that in extraordinarily subsequently to quarter? -- Chris was of quarters, some going Mike, the this sales see in you growth? on we’re were quarter EAC I for saying us quarter

Chris Kastner

Well, I’ll adjustments. EAC start the with

Our positive Ingalls, $XX it was Mike, like. strong -- you start sales million a I quarter. negative $XX net XX% a for sales, I’ll million off if mean XX on was

five the than we’re in Obviously, X% that year all be sequestration CAGR. comfortable the our could have pretty with growth. comfortable pretty getting awarded still and things it the planned and were X% that. if ships contract, perfectly We’re with But under CAGR process better we of budget

George Shapiro

that caused subsequent in that unique quarters? something was strength the this won’t repeat There particular quarter

Chris Kastner

the of RCOH News increased that’s throttle. Really Newport volume. hitting majority the and out with of seeing coming Not really, program, really you’re full XX just

Operator

Thank you. of question Khanna And Gautam our the with next comes Cowen. line from

Your line is now open.

Gautam Khanna

give But give on Chris, are of I can for you ballpark the where us quarter. range us was reimbursement CAX last could you calendar you may in on I trend outcomes directional gave a some XXXX ’XX? color pension us XXXX. hoping what know

Chris Kastner

’XX apologize we into to -- information, to be because that going think for ’XX some I additional give ’XX. it I was just was guys before thought ’XX. that and There’s was go it gave that could pension through give the I have it. for so reason you factors Gautam, my I appropriate answer you calculation But acceleration.

think be I reminiscent I’d So information providing that directionally.

Gautam Khanna

you Could it’s us least down -- going presumably, give at some of sense to it be right?

Chris Kastner

our said, up X.XX%, assumption rates of and of discount there’s I Like gone X.X% the have versus returns year-to-date asset the are was what is our to quarter. -- at calculation end X.XX%,

the to of directionally will opposing directions. going into calculation ’XX. are those that the happens and in on all opposite go And what ’XX So

rather point. into the So get this I’d not at directional really numbers

Gautam Khanna

quarter, stepping margins any add back -- the at there -- back payments, a And there one-time if basis, But negative in were not on X.X%. we Newport $XX we that quarter? in million the we EACs of were add if to the bonus net underlying can. Were the

Chris Kastner

Mike it’s that None about at News. run relative significant said, the Newport individually of programs taking conservatism amount is mention, some a enough significant what big to rate really to up are

Gautam Khanna

the big going way up? And we’re earlier risk year there’s shipbuilding or that fair? to your that X% positive Is to see you Is next events to or -- X% just guidance just negative. we comment assume so at major major opportunity to should positive catch afford of that would this allow a no much that take not MMS milestones margin, retirement the in the about

Chris Kastner

major carrier here the a up we show correct, out program until that’s IV. quarterly you’re starting but millstones aircraft XXXX. relative Block But executed have being I Well, do submarine basis. that’s EACs don’t the for just on evaluate think is Gautam, to our we And

Operator

comes Sam question Fargo. next line our with Pearlstein from the And you. Wells of Thank

Instructions]. please mute button Pearlstein, Mr. your [Operator open. now is check line Your

of of the comes line Our from Epstein next with Ron America. question Bank

Your line open. is now

Ron Epstein

So the from that jump centers XX. five deal, years? that to go block that to XX, Does if back X.X construction all the roughly just through. that CVN On imply goes years

Mike Petters

Well, a submitted Navy. costs how this just plan how that, over how the our to to some the that’s few to and We The of certainly next way we program. shape. does execute discussion we’ll out proposal drive months week to they exactly plan -- the take more is contract have the that

seen that certainly six can said Our would that we’ve -- view that, where the of more three go the you about cool, it place and multi-ship carriers. or to XX That’s multi-year you or like I’m get a getting years year say to four, will away proposal. overall Having you we a if theme from will get to can centers and of efficient. I something is get more first be over time talked back aircraft carriers, submitted my procurement that we’ve procurement in pretty two-carrier that’s five

get And multi-ship we have been ambition whether the got proposal it contracts in us and multi-year which couple now proposal, of next We procurement selected it’s to a a now, the That’s what right we’ve we Destroyers. that’s multi-ship submitted be. the of years. II. strong to from folks not to because a able or sole whether pretty source five years these place provider you’ll that is right, firsthand, important really see be Flight the remember will for submitted be contracting for submarines of LXR, for We’ve LPD was

Ron Epstein

to number it? a that? labor military to years. My pipefitter understanding labor master a of have handle takes mean, the train And do handle I you to shipbuilding. It the is do have for

Mike Petters

we’re development We’re core to company create of up But having how workforce. our workforce company. to know the We is now. a that labor

some of young and take are the It's to in training really of come folks our watch our senior schools, engage that. exciting Newport up technology ramping some period training we faster. we a new we senior get workforce cracked in folks have of digital digital And and more at to our craftsmen tools, for and them actually time using been our now. programs, speed to to have show have our We workforce News have

how we’re And So and that's Ingalls excitement waterfront Newport going creating now to this in get we’re workforce. done, terms lot work of of and new true there's it’s News how a at the right true on as at well.

And what on to a the chain. supply we��re business more needed support we’re standpoint. about to do confident workforce we have track that concern I so from

the biggest government on need spend the entire right they a request now virtually two carrier We X,XXX us serious have state -- make need costs suppliers support especially every the the to could is supply I the signals to The ramp-up of that they this in sure union. proposal, they lot in workforce with they the that will we back chain are the sent to time fact create, that and that supply a that size proposal solicitation. carriers, get those they the invest, there to suppliers across the for we in need now, go Pentagon the the to two critical sent And chain that of that a about Navy have Navy. signal that

with it, that get invest in so And let's and done. let’s and and run go workforce signal our invest our in facilities let’s this take

So chain. we’re and seeing we our are supply that about excitement in that now excited

Ron Epstein

then that recoverable is on overtime? will is go And Chris. quick going be that to When the east the in look bank east at the you volume all through bank, question for of detail little investment the one

Chris Kastner

Absolutely.

Operator

of Thank with from you. next Stifel. Joseph line our comes DeNardi And question

is line now Your open.

Joseph DeNardi

construction, just maybe experience range Mike, carrier that assumptions just margins. assume the the bottom you challenges end around range of Does or you. driving some XX% on Thank what's talk on that margin. guys that about maybe of the

Chris Kastner

just where that’s mix Joe, under mentioned transition to a the programs program, are Newport within taking the News. are the and It’s it’s we no on that contract issue what Newport place in contract really already Mike on News. it’s individual relative

Mike Petters

credit contract, many till we front would into risk put in register go times. about just the as talked don't entire any we take I for we We retired. And that of its us add every evidence to and

we that be because a we we a of If but that it it’s if retire, setbacks it that major see only one have we we -- coming. take did back if not foresee, didn't yet. didn’t for taking a in coming, it program, step will we’re credit just we a not so saw because we on it's risk not program, And because

us the be. that’s to when we think the --that’s about way So ought what where informs business

I business make biggest time. like recognizing fall before in you so sin to the this And is not can said, And going income that its just into trap. we’re

Joseph DeNardi

guess, of high. any the I what clarify ask you was the little what end what to to there trying maybe bottom is, range that I and X% gets to a the gets bit? you Is to way

Mike Petters

just right mean contracts, time around the a you great next have volume now. to And opportunities us recognize It’s is is actually work, the work the just couple and the might that all the income -- of of this can say create I in in, this to a expect for have volume we of of that really of for years. problem along the coming we composite good. puts that’s it’s what band that is way. us the This

Chris Kastner

would no add, retirement over balance of second three were and I quarter, the had ship deliveries the we the major half risk milestones in year. there the in also

Joseph DeNardi

to shipbuilders call others. consolidation, want you and margins that maybe at Why you’re the certain on translates business? into of on of only one a sustainable Mike, the sole you’re programs level, maybe if higher it risk less just that more source two for can’t degree

Mike Petters

need our situations about the we’re the target about a the place might the But really negotiations we’re our on we contract. much what a about to of we when we contract, we’ve of we’re most government price usually contract -- in really and in where is talked contract. the negotiating a talking think not negotiate I little risk of mean as contract. go And bit needs I contract, in and the the Well,

walk So there with in to risk how have differing the contract we And when happy on is program. us of out of room, of are a views room the we with. we both that the both go much have

of on procurement, that and ship ship. multiyear -- the it you happens every the on get every it so -- happens but in larger block. happen every case happens And In procurements on that a

accomplished risk risk previous affects the discussion that goes whatever on that ship so And in way a retirement that you've next the contract.

that think my well to healthy think so that's of going it I in us I government, the that's way going for over it’s in And the keeps go pretty for the view. the it’s band healthy forward. And years. worked relative performance and the and And it’s

refueling If here, you a to themselves bit the lot in last Newport we’ve the process had in up. when put a That or started out or skill pressure we’ve for was whack through as discussion have and what had remember to a there five talked two-year inefficient back about of bad a been goes way News from four the A today Exhibit laying Where it’s the are absolutely of was me, two by the ago then year, bringing years about and those sequestration on such sequestration that the -- of was we is a we getting back when deal. that we really start it’s standpoint of most were business execute. management talking a a a in we and News overhaul to that Newport got why off, little it overhaul has rate terms place delayed people to by where of program the set to ramp happen, And go year. idea. budget put And was a actually they year people

done. way from deal companies what a others. most is discussion a this deal different budget lot happens in actually We A benefits that two-year about are a two-year having are budget than company after the

insulates possibly to much on window as two-year we as get that. our this objective back under during us, the of is end happens this from For us And what of contract can. it ramp larger Not be. like is is we’ve seen up build I’d that completely Reagan than the And up entirely, but since ramp this a up. certainly shipbuilding any not it place to

we’re where that’s So going.

Operator

Thank Fargo. you. the line Pearlstein And our next of with question comes Sam from Wells

now is line open. Your

Sam Pearlstein

already, Can asked in press stuff the You that a on of was little there timing I late. about guess apologize bit talked I any and about in about some just talk is terms the this construction, you issues and being execution, Indiana delivery? if

Mike Petters

We’re -- retests, normal through. lot delivery. business, it I a is delivered anything programmatic certainly a We be causing as of And romance just us the working it and This don’t of would nothing and things. anything abnormal. those through that’s certifications just of process and like checks working submarine whole second the the kinds the requires delivery concern. be but The see exceptionally of other sooner to than to of

Sam Pearlstein

to you delivery comes upon see however it might, that But or as when impacting retirement risk it? it would

Mike Petters

-- We’re we if the it. it moves opportunity have the take we’ll quarter and going as to an we’ll EAC evaluate through

Operator

our Shapiro And Research. the of you. from question Thank George line with comes next Shapiro

Your now line open. is

George Shapiro

the to a XXXX. might to I way projecting been you mean, situation follow-up same the we and clue? as last are as Kennedy. Mike, we things in have were Or the better some are quarter we the that learning I until attracting really are know points wanted have won’t still along we with anything accelerated curve there data

Mike Petters

tracking hour beginning, out. challenge a We on The George. man Kennedy tracking, the on and to take the took challenge that we invested took to we still we’re ship, Well, at pretty hours the we’re significant that. man

to little we in invested leadership things working off a team the early. The the that paying is to launch are us. for ship so And try bit

that go But EACs We’re that. quarter we on program we, as as forward. supportive evaluating said, Chris will each of we be

George Shapiro

any that could to we look for? that there data ought time is you or I specific lines to be out point Well, mean points

Chris Kastner

be really tracking. are milestone good launches think we I should that

George Shapiro

and the in other And you out for are get then to one I down. takes charge bonus year took I mean, the quick still profits got improvements year. it this that even what if out the TS business? The adjust is, for it that actually last

Chris Kastner

a Mike already. talked think I it Well, bit about

We’re in to we’re bit a now be transition transition right a while. and a going in for that

adding We’re It’s your George, is about that’s new a TS? programs. -- place question

George Shapiro

Yes.

Chris Kastner

doing things. we’re So right all the

things for Nevada the doing both space won in I a now. the LANL into think TS. we’re of We two all DOE test those site, the programs within and right transitioning

within oil government and gas fairly are rich pipelines and services. Our in

it get we TS, contract see under oil I and the and So a as you in think within to gas see recovery you'll start recovery.

Mike Petters

further. go I’ll a step

traction right I now. TS real think we’re getting in

laboratory, test last with a As capability the customer. significant Los year, of channel looking second basically is we our next site And to same over create of customer amount the of that to. to shipbuilding ratified is view important XX in can next -- a Nevada out do both of the the Chris a very years that new and the those work mentioned, next awards awards a half pretty DOE basically the Alamos time

that in getting and they expand improving and the on to our space. a for Department our getting stuff position and so And that now there do our Energy way hard working the foot right is work of in us

the getting You We UUV with not were a know a being agreement this business. Boeing we business that teaming is years there anywhere we’re near on think we ago. have traction and seven

in we’re be. one we now. right does But to And those a is so that going to part where that activity estimation discussion be is that going to decision increasing my UUV complete trying to out readiness a of there, the think plays good what get The about solutions. want right are technical AMSEC of and its businesses places a support to is of lot business position and in Navy's people

them So of excited And us. there. planning, And us some part we've of a and I'm ripen couple that’s that's been about part Technical comfortable to really the lot they’re I seeds traction move, Solutions glad the starting do they’re I business on of now. good am to years and in going we’ve that for are the getting feel our what the planning over of last we're business, been that

George Shapiro

And likely the rate go forward Chris for quarter year? XX% the is little tax the in rate one, just one.

Chris Kastner

point, change So tax I’m -- for the with XX% at projection rate I this the I wouldn’t that. think is comfortable

Operator

Thank and Khanna you. Cowen Gautam of And next our from comes Company. the line question with

is line now open. Your

Gautam Khanna

bridge Chris, we mentioned wondering some recovery. year. you you if flow cash items was I like the help on next us This have Avondale year could non-recurring

poses clarify of could you what type moving headwind the year XXX you then And if how -- items? think the of years. in for ultimately and much I that next recover what

Chris Kastner

the I’ve XXXX for I already. the question I’ll cash this can answer Thanks Gautam. talked time. at question, if see about right

the ’XX, is of Really about $XXX pressure $XXX finished in restructuring which the million. our from We that recovery. and was number million -- included only have cash

in to significant So the that is be difference only ’XX difference pension. the between and ’XX going

$XXX got just relative think things about have you same the capital then And you all assuming for there. million I is difference if assuming same focus you assumptions of set that So the on to about remain a that reasonable pension. ’XX is

Gautam Khanna

showed that. something pension associated with of the there year cash year. Last guys you a benefit table contributing this where you just So the plan. tax dropping provided Obviously, next quarter, tax XXX to XX follow-up to that is on to

this rate, next the The So thinking about $XXX that XXX then one year's it’s it’s of is should so year-to-year XXX marginal in the we tax delta XX, XX. XXX is, rate terms next year, tax times year's year-to-year minus whatever And actually at minus be XXX. million -- change year of last XX marginal of cash… not

Chris Kastner

the so the about, think we cash to Gautam taxes are here, way ’XX don’t it’s about and -- phone better on A same do ’XX. in just calculations

Gautam Khanna

taxes okay. same, the are Cash

So is after net million is on tax pension the basis, your difference in the $XXX year-to-year? point net

Chris Kastner

$XXX in for the same and about are and pension ’XX. Its cash taxes million net ’XX

Gautam Khanna

on how the on follow-up want XXX much that Avondale know And books, recover? this the you versus is the year to question, But ultimately of year? just much the in I how was next

Chris Kastner

on your through million the the to it rates. through through has and is contract, the overhead profitability remember, billing then expense, your So $XXX contracts go

majority that restructuring, you will that number it’s to do have would on ’XX. So I specifics relative the because the vast will contract-by-contract recovered be recovered in be all it say to basis. a

in some in recovered ’XX also QX. We

Gautam Khanna

million, on you But where or $XXX gets guys just you million. and $XXX of recover it share call a to is the clear, half? all half, there be Do it actually cost government the get

Chris Kastner

That’s right.

Gautam Khanna

So half million of last most this of ultimately of it in is QX year? it year, $XXX the some recovered,

Chris Kastner

here, with to, to because Gautam, share number are dealing a I to really you lines. get trying difficult know but it’s you’re precise

contract contact where doing protection have you’re actually Some adjustments for them.

Some line have and you don't where you’re just share. share XX-XX writing

mentioned -- vast all would it's pressure in be million I will the that ’XX. and in majority the So recovered $XXX it

Gautam Khanna

about free and the are something the a cash people the by revision year with considering annoying here to on questions, I to equal So everything net before guidance is guidance trying executions… but sorry on should net assuming flow margin rise basis, to earnings, be anchor on million The or earnings. next am about $XXX

Chris Kastner

is contracts lumpy pension across where we remember can standpoint move large do everything be have equal and can period. predecessor used the -- Assuming as cash my a to large invoices because say, from assumption

yes, correct. assumption fundamental So your is

Operator

Thank And of question our next Melius Research. Copeland the you. with comes line from Carter

Your line is now open.

Carter Copeland

last is last the the following growth any, incremental this what quarter. us wondered just submarines. if to about language color type maybe you’re quarter beyond quarter? one about final on Angeles I class incremental on about the you the of Los decade in extension that, the you talked outlook setup? decade, different next than that ships here service the that by Navy evolution of And Mike, the that life of quarter Any talked and give the you of around one talking can commentary XXX instead on and How end this much

Mike Petters

that’s what country and requirements to There Navy been fixation answer number, short its the saying. a the because communicates not is than we’ve on much Congress the is, The to how what are. different

up you plan that. come get they years before to was they number, put to couple As be of with decades into when it know, a that many a going they many, close

question we if then really there And back fast need we there to as XXX so going we a is you need really ships saying can. -- as get if lot of

you go that go got. that hour, have. a about that of need also So you as and not is for that everything most other we’ve assets kind the to only as you’re And of can can getting to along which citizens the not there ships you been what for do hard to ask up construction, the sure fast the if care and to you talking means ramp last you take pay doing Navy bring bigger of you’ve you make

a need many few this to is Destroyers, extensions talked that of, it’s as a be to to ago assessment number, all think you that there our refueling all get We of be do Navy need was places bring there Navy whether half they probably possibly precision stuff I ships. consistent worthwhile, of as and our part of are trapped. be their out to of cruisers on tempos high, them that So or our they XXXs the or in don’t ships too Navy is the can. is all The short that about back but maybe and the maybe was internal came year that’s have reality own -- that out operating enough they saying in XX% assessment they to and that are some that with Navy asking assessed we’re

you So you not you’re can fixated that don’t spend the Navy on What I of a as and lot counting count not because XXX you’re terribly now right time is tell this I the a back its into come Reagan that about era. I a space, procurement haven’t on the as is in am what -- since does a And the discussion a and they’re ship, way That I in to all in that. what the really this us number, get multi-ship for and counting is platforms. across to with forward out most complex moving space. that’s this we moving why time and is exciting be change seen most major

XXX-ship XXX. You may never Reagan buildup that the remember for was to we Carter got Navy,

I think the we from into XXXs that got backed we before that. away

that carrier are a huge the So so two-ship the expand doing. are they that’s why Navy. I going the Releasing the to focus for the what RFP I on is to number much we industry as signal don’t fixate on

I word to saying I now practice like so said last quarter, am the believer. I And a have growth.

happen to We is the principal are Navy moving we’re this that and down that. and about be company going excited path expand a the in making partner to

Carter Copeland

It’s not the great. got not about it. journey, destination, That’s about it’s the the --

Mike Petters

right. exactly That’s

Operator

no Thank showing further questions you. I this time. And at am

to CEO, with So Petters conference Mr. I’ll the back Mike any turn that, further remarks. over for

Mike Petters

want I everybody the for us to call. joining on Well, thank

the excited is It’s are you I have high, because have I on today. having to and traction today. pressure getting team business Solutions range. in been lot If contracts about As well to equally to pressure we’re choose choose to partnered having I the over the get division excitedly couple in or done. years I new seven a that can about balance where And material piece and where is out to the years. because with margin work is scale, our to going about we’re done This too executing contracts, to headed. be not of the low I to am be work go am the contracting that’s all to But actually many we've getting the we excited we doing tell, that on of us absolutely our going big Technical I’d be I of end of a work, this am new the put executing shipbuilding going out have end XX% to move and of of am talking Pentagon scale. between are next we the positioned low get this where X% well, the very for of

that's we and the because do of what about that. we will focus hallmark do So on continue been that, to excited as I’m we execution,

and thanks to for joining morning, I us look seeing you. forward this So

Operator

Everyone have thank program disconnect. a all gentlemen, does and and in today’s participating you conference. wonderful Ladies for may This conclude day. the you

Huntington Ingalls Industries (HII) 3 May 182018 Q1 Earnings call transcript