HII - Earnings call transcript Q2 2018 | Huntington Ingalls Industries, Inc.

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Operator

Good day, ladies and gentlemen. And welcome to the Huntington Ingalls Industries Inc.

Second Quarter 2018 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 host of like Dwayne today's now Vice Blake, Investor would introduce for your conference I Relations. Sir, you may begin.

Dwayne Blake

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

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

Mike Petters

quarter performance all This call joining for that three business us reflects morning solid and the across Dwayne. Thanks, everyone results Good we second released financial morning today. segments. XXXX thanks on

contract and additional development We were the of color for on $X.XX of funded. of billion of starting during diluted higher taxes credits on and resulting awards was his the approximately share at X.X% EPS XXXX, $XX approximately year will in for end me backlog than and quarter presentation. the tax the Chris prior some of quarter benefit provide new a included $XX let some which So claim second the of during received $X of quarter, billion the is quarter Sales research remarks. three in slide highlights billion billion $X.X a the

and Regarding activities the bill and in the Conference the passed XX now for Washington Authorization ready both National recently House Defense the Senate signature. is President's Agreement

II warships of with also advance each Defense Bills to progress procurement to in that the aircraft a includes purchase and it support the We anticipated under chains. be shipbuilding carriers navy and expeditiously. for for contract Appropriations class amphibious which if LPD XX the production leverage it supports following: measure, we are shipbuilding supply and final very pleased We're It four the forward remain supports process CVNXX. by single of continue XX and will proceed but confirmed savings chamber, the appropriations purchase can the very encouraged also lines CVN Flight the in of high Navy authorizes hopeful the supportive of

year. and team ships Now completion toward few LHA-X to a trials Ingalls of I'll in At quarter segments. DDG-XXX deliveries with drive interest half business of and Paul first and to Tripoli NSC-X the is provide for points Kimball Ignatius, fourth our the stay these on the next continuing expected

complete reached the well during On performing and LPD program is and both costs LPD-XX XX% Fort vessel quarter the Lauderdale on schedule.

DDG radar also is H. in together complete system News At and program air E. that is with overall Lucas launched construction lift execution lifts complete DDG the dry super and stage XXX the recently each of the work. the XX% this and team includes the XXX this approximately team structurally levels efficient that focused Jack XX% and III Newport is of fabrication of At missile on CVN Petersen On started Kennedy dock. increased Ingalls XX joined pre-Operator three XXX of ship fitting Fight new first XXX has incorporates the Frank on Jr. DEG a defense [ph]

these at Importantly am from we are pleased the assembly seeing progress the of workspaces drive our the meeting ahead ship. team with is toward work of to an the in hard the is of of the There's this covered year. benefits earlier investments platen, next actions still continuing expectations from and on and I ship lot us the capital performance end very launch on a but,

at III the deliver boat is to and in of SSN the of half program be to XXX year. navy first On XXX delivered submarine June delivered Delaware Indiana on track SSN the end the next by News the Block to final Newport

Now has continue but activities, turning business to realize benefits a our having focused back to the reached on solutions, of we is capabilities. that entire portfolio segment of non-ship building technical to

certain early to the partnership design flagship with next contract proud systems previously phase we select of level portfolio, following to Energy at Savannah we of months for our site. and Los in contracts we unmanned initial team subcontractor down complex example Nevada the the navy's portfolio management during XX project nuclear includes In a program, the have DOE be At a XLUUV expertise our site. each Security of Alamos skills Department For National expanded Alamos River year. is the we of and production UUV National our of these bring just the significantly operation prototype minority unmatched concentrated now The significant partner managing of Los the customer. trusted or past of and to continue are site strengthen are the lead, whether award expected the and site, areas remediation the an sites Laboratory of the we and management partner

business contract Canada gas that we one United driving and of companies a the several have development systems. research in of States seen in the UUV in support in and increased Additionally, Navy's markets. recently activity that is for hiring a we and finally the both activities rebound were received to oil family And project

advantage we to to just well positioned a had result we've are In execution to first and of this momentum energy that. a closing half. doing maintaining success very year unrelenting As the conditions look and strong the half take of forward are our market solid an improving and project of customer commitment in second

trained to our actions, on shareholders, and focus track, to and These new a Our strategy with existing path work our and on long-term quality continue executing value XXXX customers our on path engaged is our contract sustainable and creating force, contracts. remains keep for capturing work employees. us combined well our near-term

will my remarks concludes turn Chris to Chris? that And the financials. the Kastner some over for call now I Now on remarks.

Christopher Kastner

Mike, Thanks, and good morning.

you the our As consolidated I slide may included of quarter results provide with slide the second with on follow earnings release our review to along our results presentation four and updates this the Beginning with financial presentation. we full few morning. year, a

Our of Navy the from driven quarter as in same the second XXXX, quarter particularly income. nuclear by of the in X.X% primarily aircraft billion of was the in favorable quarter XX.X%. a spun was given quarter in revenue $X XXXX, compared $X News. in Operating second higher this growth we Revenues first support by period increase partially generated was operating quarter. or the marks lower The Newport adjustment X.X% quarter revenues XXXX. $XX income and of increased to strong quarter by we operating time driven segment million second margin Operating d carriers in offset in million increased $XXX FAS/CAS services over in volumes excess that since billion quarter

contributing to of Year-to-date, XXXX. million in $XX Turning a our expect of cash and the as operations cash of slide the million And were contributions period the plans. previously, five with $XX of post-retirement Net the to quarter million balance our pension plans. contributions we were discretionary $XXX capital discretionary million of have quarter of in $XXX Free make occurring benefit revenues contributed to $XX $XX same quarter our was plans, the discussed we plans in third qualified $XX presentation, to $XXX the in or our after to total which million quarter. in the from to in million. qualified XXXX, X.X% flow to expenditures compared million was qualified million

$XXX capital to bringing We returned X% the million. million $XXX our at shares X% almost million shareholders cost revenues. paying approximately the million balance to our end between to a be quarter of We in at expect $XXX and in of year continue the dividends, and for to X.X million quarter the expenditures of by repurchasing $XX cash

million Ingalls' volumes commercial LHA X and of programs and due Now XX.X% settlement respectively, recoveries and offset offset and from X.X% decreased same quarter LPD a on by the related surface six XXX margin volume in revenues period a the year, points driven by NSE operating of program. of and NSE and partially income on $XXX results on program, retirement the increased to $XX to last contract. the $XX in on income the on partially the higher quarter risk million the LPD $XX the year-over-year basis were from presentation. slide of segment DDG retirement million the of program million combatants, lower by down risk mainly involving decreased Ingalls legacy

higher Navy presentation, support the in Turning billion last nuclear volumes carriers aircraft News year, revenues same services. quarter, from Newport slide the increased period were and seven to $X.X XX.X% due to of the approximately mostly in

in million Newport was of the $XX News higher of quarter up year-over-year, because $XX primarily operating income million revenues.

Newport basis was contract to lower mix. year, of same than primarily changes points News the the XX margin in due operating last X.X% quarter in period

$XXX in because the of quarter lower decreased services. quarter Solutions basis eight slide year-over-year operating X.X% of respectively, support points flat on Technical Solutions million the margin and $X the in Solutions Technical to revenues performance in fleet presentation, income were million quarter XXXX. million of in $X XX revenues Technical primarily Now relatively of of and second to

quarter turn expected to federal our me the rate tax I and back full than year. for over address call the effective the lower expectation Before Q&A, for income for Dwayne the let

rate for from of post I'll XXXX Our remarks. for rate income concludes tax the income tax for XXXX of call effective over the our rate deferred years. my expect through We now statutory turn spin-off the XXXX XX.X%. research X.X% That because Dwayne the effective claim and higher development be quarter the Q&A. tax approximately credits federal to to back for tax

Dwayne Blake

Thanks, Chris.

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

Operator

you. Thank Bernstein. comes [Operator first of Instructions] from Doug question Harned Our

open. line Your is

Doug Harned

morning. Good you. Thank

Mike Petters

Good morning, Doug.

Doug Harned

to next News. of sense a you the wanted little Newport CVN better a the get And foresee year at some profile on that give margin we program? risk profile at - to look news? particularly go us In Newport you could other words, according see that at when XX, understanding things you margins according I of can plan, if in to just improvement do

Mike Petters

XX to we're we're happy about in be we year. of and Doug, XXXX, risk next but fall we've the And to now to is of sort major while get before, EACs, this hard for of quarterly going talked between the milestone the is launch for launch. on this that. next reassessment at team pushing do on about But launched. not going risk schedule time, we be and beginning seem from the a our track probably do done is any to nominal major event the launch risk-retirement the And really that

Doug Harned

Okay.

I'm Block potential Newport IV improvement more mean, I we into for trying well if to margin to just News understand Block see start trying think So for XX launch CVN Class. potential some broadly. of on on upside. would if there Virginia if you I should get are also that some if just there? - to would you think, IV And understand matures. levers what early as I'm and be you're

Christopher Kastner

will Chris. it's well. point, Block as XX will Doug, IV a be That's No, good maturing maturing really be

with quarters, X% So XX are we programs could for of you comfortable maturing. to have But on fluctuate along with those still the shipbuilding. X% the are both but X% pretty some comfortable we X% return with to It sales.

Doug Harned

Great, thank you.

Operator

you. Thank

Research. Melius question next comes from Carter of Our Copeland

is line open. now Your

Carter Copeland

morning, gentlemen. Good

Mike Petters

morning. Good

Carter Copeland

some quick favorable cumulative. then that unfavorable One, the with us you far will into been NDA Just that thoughts got for. opportunities? you've contracting I the these take gross How does looking for? for of now Mike, things ones. for that of if been supportive that clear support on what very the you've around play a some Chris, many your couple How updated of us, out you've looking timing of clarify can just And of wondered

Christopher Kastner

that of XX first XX. positive take adjustments, kick I'll then it negative Sure, was were XX% million of Mike. $XX adjustments the over and net I'll net for to There Ingalls.

Carter Copeland

Thanks, Chris.

Christopher Kastner

Sure.

Mike Petters

to that Carter goes, pleased that Bill. with - finally way NDAA and look encouraged through. through forward Bill far process There as And work an President to on mentioned, as came we the out. still is I very the appropriations the that as we're self signing the has

before, exciting offer and I aircraft think just time an into we're We to in the doing I've build this if that actually years. And I seen XX two shipbuilding step Navy said right what is back carriers. now. look the most have at in you

into Our team has support XX are now of submarines. right we their the an in to LPDs. that's for a XX of procurement offer Navy multi-year for our And competition build destroyers and share

we we're yet. in but of not way and encouraged process all to actually the this. But are authorizations these appropriations engaged nation both where So go very execute requires appropriations that we're the all decisions by process, its the through makes and

at all line. And are that so, goal across you or know happening, be not we place happening long things get have enough been to don't a to goal the across line. the the but we're points need where get until you around that And

done far that that to to going be going to year for done and going going scoreboard, the these we're and first very to piece I we're able the of - XX term next at keep I about get to encouraged the years get as encouraged to we the X XX before over next we're of shipbuilding and and things do business contracts the to up get trying look months to that's for to we're as that. view, not all am But So, ships think of that set I longer am balance. our yet

Doug Harned

Mike. it. like Thanks I

Mike Petters

bet. You

Operator

you. Thank

of comes Our Shapiro Research. from Shapiro next question George

now Your is open. line

George Shapiro

several Yes, you you for and the now have for growth I wanted had like to more know next the suggesting X% X% Mike years. revenue year first were half over

this want second what's that on of kind change in to or expect You growth estimate here the and going do you half?

Mike Petters

we Yes, about with couple over X% about think period. a of quarters, several a longer that George, Yes, over I timeframe. year talked had we our comfortable we're X%, the talked good we've estimate it but

Christopher Kastner

add right is availabilities. we point. Chris. That's CAGR X% the three with that in Newport at submarines not this we've George, is a be I overtime. over But are in now really this long-term, consistent News comfortable lumpy may it'll work still

George Shapiro

see accurate that Chris Okay. so year had more And the a Ingalls, we later probably on you starting, at less margins just lower is then see as still in follow-up, new before said coming, an EACs, we statement? would ships you'll have that

Christopher Kastner

over return we've I Yes, opportunity X% overtime should X% couple for there I less have be that, is margins, had think the new as think as still higher years. the comfortable we get we're shipbuilding. to Ingalls, what for last with on of they sales at said ships

George Shapiro

Okay, thanks.

Christopher Kastner

Sure.

Operator

Thank you.

from comes Citi. Our next question John Raviv of

Your line now open. is

Jonathan Raviv

the million are year-on-year million on year, down year-on-year, then for beyond $XXX flow mechanical swing for intimated XXXX. would pension? targets you $XXX the the have year, some think in On XXXX Thank I imply And can blocks free which cash you. what the of building this just you from revisit the Chris million $XXX

Christopher Kastner

then we about guidance, of last that of $XXX Yes, our coming And and pension finished cash provide will $XXX free I $XXX on There now. don't million the net accelerated are plan we're pension year cash but discussed to where XXXX to puts based and and other significant pressure last our takes cash finished million. XXXX. swing had into contribution, in go million year just we flow around we

be we call So the the color. evolve I'll when more through provide as able to things you year-end into and get year

Jonathan Raviv

almost pretty question sustainable net on pension inflow out to obviously sustainable flow, the And speak? so mechanics can now. to When like you to taking anything of due right sort hole, related do is cash that significant starts is that then there pension to that shrinking fill is

Christopher Kastner

FAS, right funded, cash then through XXXX program, $X.X now Well, swings that for And as makes through we for don't by in sense direction the so for is pension capital overtime XXXX. which you a driven us more great all cash that pension. we become billion CAS it necessarily and think hole, as major We right. think and XXXX The think are our additional directionally XXXX, we fully we'll the guidance and plan or is cash come for provided where come provide XXXX we'll information should down. and FAS/CAS additional and of

So and and capital cash capital lot there really it's is a moving pension net when about you think parts, not fairly working and capital working of consistent. is shipbuilding,

of to as operation don't need So, we business. it hole just we really of normal the it's think fill, a a

Jonathan Raviv

Chris. you, Thank Understood.

Christopher Kastner

Sure.

Operator

you. Thank

next Fargo. open. line comes of Wells your from Our now question Sam is Pearlstein Sir,

Sam Pearlstein

morning. Good

Mike Petters

Good morning.

Sam Pearlstein

the to or mentioned couple for this think go trying back wanted competitions in have. the in X% sales XX profile longer is that the term are growth, rate? those things do on outlook And frigate the about you different how out DDG guess Flight a I How the terms that the those icebreaker things break there. buy of about just Because like we and that split. of how or think you terms mentioned growth of in you IIIs you I their and to how

Christopher Kastner

a but of into perfectly, programs. The shipbuilding adjusted XXXX. things question. all evolve CAGR good If it's competitions things on those and more revenue those risk between a it at all of now really fall is be risk could how could viewpoint a consideration than taking that, adjusted It's really X% look and

Sam Pearlstein

ones where this And price. split? the we've the seen Mike, loser similar the different we a of expect you competition, to destroyers? get other or this the Should Anything XX-XX winners' is competition ones prior some III have Flight versus about in might

Mike Petters

same came I of quantity value how box. the well that that think of Yes, to get solicitation perspective, a as came trying my is main to time came it's but a but it's box, this out this - as say radar with different by they're out Block - upgrade. the figure I the it's in I'd Because around it's view Navy in the the considering they they to in think this also to is this part

to and And to evaluation yard between And and can't scenarios they return. so think I at Navy's quantities to to and complementary their but we those competitor's how figure different our of schedules of several scenarios optimize our actually speak process, I price the yard. all different trying of ships looking were had out

created if you proposal is For circumstance want the faster, to that a ships do that. the opportunity in basically us, there an it

it's And is this so to it going we're see on going for least like at the out going Navy where all how the going support going trying And I turns think is a it to matter to out. be from I a I think industrial be however be think And turns us. good be pretty box, for how to be out. to in this just going be to said we're going interesting same no but where case base the good to backend. pretty turns pretty the standpoint. be quantity good, that's I it's to It's But

Sam Pearlstein

you. Thank

Operator

Thank you.

question Our Gautam Company. next & Cowen comes Khanna, from

is line open. Your

Gautam Khanna

morning. good you, Thank

Mike Petters

Good morning.

Gautam Khanna

$XX I year? was of first us kind of year-to-date versus skewed that first half catch half cumulative could the flavor you unfavorable look ups and it to wondering on how is NNS mix is, give any gross if you Is changed if that last million. whatever

Christopher Kastner

would And that me. you I like. have front specific first could don't address. through year months versus last you cumulative is of if this for that today of this materially walk Gautam I the year year believe there the I adjustments anything later don't we in six year Yes, the was

Gautam Khanna

you with last get that a at No of the you have helpful. - source gross CVM cost Or unfavorable? of would on just on are sort quarters. plan I'm couple that the over be of is XX to estimates Okay. been trying

Christopher Kastner

we're No, we comfortable on with where XX. are

Gautam Khanna

- you where in even if hoping beyond pension CapEx XXXX bound us have something outcomes? it that XXXX. that have floor $XXX on some year any of on recovery trends you of your give (inaudible) so us directional was drop can we pension based guidance it you're FAS/CAS color five I a like sort Chris, million on the what on Okay. plan. appears would you some lower could the I sort giving mean, give Do framework perhaps recovery

Christopher Kastner

update and Gautam, now. process don't planning I the you and right on both for our year-end through and provide XXXX analysis pension our call. that going be We're I'll for XXXX to to able

Gautam Khanna

and And the you last of expect you Okay. sort any deliveries on we the year on that sort MMS? at one, for can sequential is margin of Newport's have color QX just based or QX, a the of you margin watermark should of high cadence forecasting quarter do this give us sort are

Christopher Kastner

don't X% we is Yes, be don't sales it Gautam, shipbuilding we know, will in guidance. - said, as years. margin next return the you we provide X% for on What have two to

Gautam Khanna

All right. thought you. Thank I I'd try.

Operator

you. Thank

comes David Sir, of question Barclays. Our Strauss next from your open. is line

David Strauss

from the about think repurchase are going stand and - or Thanks. of to how a coming the on or in Thanks. you've raise we about return, today increase you of to to where doing rest so year? pension pension amount plan ask should you've far share QX. heavy should due debt in think the the given had through about your debt you Wanted share that here How we got year-to-date cash fund repurchase, fund

Mike Petters

in QX, through QX our $X.X to to billion billion we then Yes, think XXXX. strategy free to to our it. we balance off have kicked part pension in I and first million is cash we in is flow investing have execute strategy that we're of did continue all we raising n our share of consistent that necessarily going don't in we And in Relative shipyards, What essential $XXX our to our where invest returning repurchase with shipyards debt, that substantially do for revolver. $X.X back we XXXX contribution need and a an cash we're shareholders.

that deal strong that. a balance with sheet have we can So, we

David Strauss

Los you said as potentially the you've business the kind in on timeframe. How X% of TS, Alamos - follow-up And that margin does Nevada Okay. a change targeted think change past I and story? XXXX that business in a

Christopher Kastner

of was an It's that space, story. be in job done has part there. to an DOE of all strategy within team the It's excellent TS essential the successful part

of here. I think facilities two the Mike's done

wants So, comment if to he it. on

Mike Petters

XXXX, of just TS I kind to said, - with would I in watched business. over at of try and And as a lines. in Yes, Savannah offer time, new business strategy. created end the we team the is Nevada site. would that our we that after River. - the we're created and part on over this separate one at At have Chris test essential of the and was down on have more really business XX division And an XX much only some chase this And I we business. this of leadership became since we that years my become the years established success focused reorganized going and that we

contract. M&O team We we're the Los the clean-up. on Los the for prime Alamos Alamos to at the are And subcontractor legacy

awards won after won we've XX So, one. years in months basically XX only three where had we

So, we're of I next with is going next I to excited about the supportive. the where going TS principle really has am said, an decades. essential over said, to now as Department Chris of be very couple proud there just several and of over We're but Energy and years, And not a business the with profile and business. that we're go, part where it's partner

David Strauss

my Thanks questions. for taking

Mike Petters

You bet.

Christopher Kastner

Sure.

Operator

you. Thank

America question Lynch. from with Bank Merrill Ronald next comes Our Epstein of

open. is line Your

Ronald Epstein

guys. Hey, good morning,

Christopher Kastner

Good Ron. morning,

Ronald Epstein

in carrier some growth the X%, your growth environment that assumption of Mike, so of back believe comes X% revenue it questions, XX years two hard words talked any is if two to Maybe comments that XX that block being forth. on a in to and about your seen you've actually environment potentially best stuff being the And for submarines through? a the and that's it's of so if

Mike Petters

as is not kind this but we're home said X% the we're there. is the adjusted. of like on Chris encouraged We're Yes, Ron two not carriers, risk

on. one there's going the Congress The end ship program, five maybe competition There's adding competition of ship considering either. of the And sure and go we're option is share couple V that's business contract point how is is we're how XX submarine really LPD next up destroyer play an the to that, year to the at that's really with XXXX in out. to II, a the On that for so of to XX a on sure working desire we're but that. ships business LXR Block of not not RFP the more, not ships frigate award multi-years play going but to in out. is so LPD, Flight way yet front XX

of a our different good these we said and where view that, our as let break of know. but confidence a of risk from so X%, definitely as right break And way to adjustment it going are is to things things Chris see number than if see happy that we it all and we back to some and If number more you start think is go now. way those it's things our think step be an handicap we'd work X% standpoint we to make some and with a from

Ronald Epstein

with that to ship have that some on in guys maybe fair XX CVN talk were can while Okay, you lifts and had of to visiting little a all down maybe walk learned and what's seeing when on around question ship. the shipyard lessons that we about the and everyone And just XX enough. another going Can the yes, CVN terms super on you efficiency. then back you of apply

we the stability next about see the we margin maybe more how uplift? maybe think to or carrier as So transition margin could even potentially

Mike Petters

that's market pretty approaching as on going talking advance in we've digital here are buying to the go targeted then, that XX go to with bear the man we create bring the opportunity talked you there. of and hour we you technologies here, XX. then opportunities stable push material shipyard Ron and for it to reduce the significant all right News were if two that you just when that chain a on to those oppose And transformation about like approaching think create this through there and and for of to work and two should them and and real to you the us so to and as go ships when the opportunities. enterprise, there's efficiencies and our worth we can suppliers ought reductions cost out have in you to those that's as efficiencies you some And of contract Newport be and everybody with capital labor about move have Shift one XX able the we the we I happen in floor that you able the we from carrier we prosecute well is pretty how when side on if the of to XX. and on believe just that there complex gears manufacturing all well. that talked you're to have teams you're supply between it contract Especially able Sure, XX do contract inside continue the pretty saw and XX do made over investment work doing the significant to were XX to two a see reduction you doing going as the where ship to in

had for for XX we preparing for So the for we're the proposal into do say we us - about ship CVN where were year producing by for XX. and the have very encouraged If down and what are the and support Navy today. the Navy sets I really keep CVN that were a we think XX that you proceeding Navy both one we're We to in and seeing Congress a that we a and foundation river ago as the lot and and lapse saying are carriers future across inside delivering about we if encouraged of excited Today proposal aircraft affordably for path. time today us. a and able broad means

Ronald Epstein

you Okay, very great. Thank much.

Mike Petters

bet. You

Operator

you. Thank

Krishna Sinha next comes of Our Research. question Vertical from

Your now line open. is

Krishna Sinha

Hi, question. thanks for the taking

or event, that be is you of risk sea more launch that most to you in XXX, delivered yet you earlier that still would bit a like expected taken that's little On at of this trials. did of at risk take given XQ date? the an something the have Indiana a to reserve that Is and reserve booked, quarter on a quarter. the completed be I

Christopher Kastner

adjustments Well, still couple for on that Indiana. think on about I basis, of quarterly adjusted forward, X% anticipate we years. material previously the and the next assess right to is welcome. to issues don't to question over business related going We way Krishna the X% both and a that I that, those the thanks have believe

Krishna Sinha

XQ the events, milestones, events, the then you sort risk events. this major Can just any should risk major XQ? there of think we - that future was other And milestones in I talk are on Yes. aware about of and year, other programs XXX launch be EAC - reserve on that

Mike Petters

a we'll delivery two NSC incremental had number this moving half milestones assess delivery do of year on of down year. boats, on we the We of basis. X then this XXX have path year, that X of first then we're the ships half a the and LHA on the of and other quarterly And DDG back towards next

Krishna Sinha

Are of adjustment the the a sort taking. adjustments date EAC looking launch more typically Are bulk program, at are when single the they or date? towards of EAC in delivery the

Christopher Kastner

have program ship have to program you and will its each each risk assess Well, individual register. and each

the all that's program, register cycle. milestones, on is that not determined runs a there path the each as specific on ship, of on through specific So manufacturing it for formula the based the risk it's

Mike Petters

to the each to we evaluate we retired we not Yes, of a risk and milestone. the we the a or program. actually to or work risk whether we tend we milestone that contract have next we regard. program Or that have risk off recognize the own see And discipline we that that to that actually at conservative didn't has evaluate in pretty milestone, another not, retire - its where in we come do all risk. at continue be we the we when map we if profile, that can milestones retire process, Every

tend for the it. of eight we we not and recognize talking risk retired about I'd blend we been now. That recognize so want to sort we to go And sure have it and have - programs, that for we years almost before know early in say retirement, don't that

has each its bias the a got programs, towards as but probably of is Chris backend said. profile, there own So, one

Krishna Sinha

next plan. your long out it spread is easy revenues, earlier environment and over NDA even years Is or stands one it you adjusted the see bit you'll positively quick and a how If risk where very on go some or then your plan, that's to say there right sub-committee talked period? particular the a things write-ups And XX year little in the Yes. one shipbuilding builds, surge a really new about way breaking obviously as now.

Mike Petters

out it, actually has you But and playing sequence bit own that that a right seen. after to ships. if us Yes, and in the because is time two contract now pretty unique happening in the special little path FY really back big at two appropriations, I'd about this what's there a is why a in exciting surge, it, what really we for and actually I here, makes shipbuilding, for position question for in bit in, each go that just have window unique we're kicks is what program there say surge the In a look There ship process happened in that's step most to good it's industry a authorizations you back years XXXX, issue and its XXXX win is for the XXXX little FY what a think particular think that. the with regard I year process, the these pretty happens is happens sequestration for shipbuilding.

us contract Our view lot get is that to going before a unique a pretty of in under place. work XXXX puts that we're the

to I for then snake it of the - the this be lump at to at that indication going and a to new be think level this job have even we get a the we through rat to the and five think and where But keep of I we're same - an new just sustained that's under is years. better business lump going and out go going over see we'll we kind sustained the than be you a next we to in the is to activity now it If do have level. work business. how we're that The the figure or are for right follow-on, just XXXX - before, XXXX going contract is in that ten the business described

Krishna Sinha

Okay, that's great. Thank you guys.

Operator

Stifel. [Operator Instructions] DeNardi Joseph next question with Our comes from

Your line is open. now

Joseph DeNardi

Yes, in at are pretty terms just on Class. you guys of from share you our Virginia Mike thank Columbia in looks doing just much. Class if it work the standpoint what similar you very look

are aspects you we the on out just pretty normal be out, commonality should but a that? kind about there I ways that lead know it's would assume that being it maybe because margin that So could gate right margin of of profile some to of or actually think actually some the business good curious more there's curve, how

Mike Petters

Well, different I Class. little mean, work it the is a share on bit Virginia is than

those Class will be any of whereas half We not ships programs. delivering we deliver of the Virginia

We we're will doing those. for be building units work design and

moving new. for going than on into scope Virginia ship about half, ship we're our a is and be really less Our on XXX% to is lead that environment Columbia that's scope

and don't into that is we can as would as as to need volume to program. a of to I to just new we're treat so of and the misread. phase be gate be be as much going just This to But in the gate this moving and it's think be from I around I period it's going as new think next want say Virginia expansion program from the a time success And we're design incredibly the And opening years - a think can. the same you we of as turn it program next you supportive construction. for a make few the

Joseph DeNardi

a like business. key look out? you could that you what then And of range upper the falls items you. times Wondered if risk of at the of mentioned adjusted that'll plays see in risk the are that would what then end couple way? of kind if everything kind growth of Mike you Okay. your that share And determine how looking some you're Thank the

Mike Petters

could RFP on for options going be to going on on by only to out and to whatever make going into time. by start pick. and top want a one builder getting Yes, you Destroyers assumption. on based be as to going up that I come the simple Frigate the that's it's any driven you completely is be they're guess time, think to Is award your And entirely I there it or think picked as are the assumptions driven it something And not. line

know that to there's don't value in I do that. So much trying

way is of that adjusted Our think all to risk where and that we've view now right is a going make to business X% best the seems business from is looked about that that the at sense. talk standpoint position the we to

our happy a if I and we our describe start you. you with As to mentioned to be before break changes and would things couple way it view discuss with it that

Christopher Kastner

the ship, revenue. delay could revenue, a and but be very ship a ship, building could acquiring important six which on your very could have impact that is timing on impact month you successful your month delay Also six

those a the of risk on based adjusted knowledge is all really So factors. answer X%

Joseph DeNardi

you. Thank

Operator

you. Thank

Spingarn Our of Suisse. next Rob Credit question comes from

now is line open. Your

Robert Spingarn

Good morning.

Mike Petters

Good morning, Rob.

Robert Spingarn

what a you to on have guidance something X% in something these cash is this is on flow that's relates else? hopefully jumping relative and to the of be the little haven't to sales? X% the it going any net Columbia proceeds would for been or And if whether see forward recurring or CapEx. to first asked, color your late Chris like - some to gross that for on wanted there going CapEx offsetting of grant some one of are I'm so And statement I'm I

Christopher Kastner

that… Yes

Robert Spingarn

for one have I you. Mike And

Christopher Kastner

to shipyard all X% the included Mississippi. State in from sale the that X% of from Well the proceeds future of that's of

Robert Spingarn

specific So program is okay so - it's nothing obviously across to that's or do it with programs Columbia Ingalls Ingalls? for therefore just

Christopher Kastner

across No Ingalls.

Robert Spingarn

would the have wanted on just - think to for really competition winning the what XX to split, you And the on how on would be priced the how have Mike would loser you then accept? this options the is the multi-year then split? And be ask price XX about Do indication an mean? Okay. ships we how DDG

Mike Petters

more was unique the was than we half actually of than What offer. we our submitted - scenarios about actually programs. We've and scenarios included less indication. no proposal the half several that put those price building have and I building Actually,

think situation priced since per turns - it that, it's this bid choice. And make I will the good Navy unique the of is and go then pedestal industry. this in they cost of all think competition. that out. see we I on a one how So, with because those And whole a I for will will their think that's the Navy quantity we And

Robert Spingarn

Does kind of that XX-XX mean it say like let's could be thing or? than more XX-XX,

Mike Petters

you've - past. No. But be think leave just that. more the at and what in seen yes, would I let's I it don't than any

Robert Spingarn

on cutter, for a - the should schedule actually your just Last are question I cutters? the strong ships about since what the we Okay. think wanted ask on those from to outlook deliveries, the on they margin Guard how delivery looks Coast the perspective, cutter like often for

Mike Petters

of next year. back of X half NSE Yes, NSE X and part first this

Robert Spingarn

very you much. Thank

Mike Petters

You bet.

Operator

Thank you.

Citi. of Our next from question Raviv comes Jon

line Your is open. now

Jonathan Raviv

the follow for Hey, thanks taking up.

Mike Petters

Sure.

Jonathan Raviv

other about companies ask of broadly space, where understood have in we strategy will we've part defense M&A. not more I but this And growth, important mindset will What's contributing pension, the cash this sizeable on cash current seen I an I beyond is about deployment that repo to ask deployment. seen repo?

Christopher Kastner

ago years really few and going it. invest a business. hasn't since changed in to our in posture core Current we came We're described

investment every share to commitment we're we've to year. and have And we're shareholders in dividends been of from that cash or our we middle in capital substantially our going So, of move a right capital that either the of free then increase you when large now. return form the all to to the free and dividends buyback - investment cash,

to the That's be we enough As expect path opportunities goes, balance have to of, sheet we to - do on be far able That's to is path strong we that if advantage believe our XXXX. we've we'd been that. through take on. as the M&A

and buyback back I in at what posture little had we share think we've that said point. consistent the this we're more quarter not we that's a bit XXXX with past, changing this but had than completely in

Jonathan Raviv

interest opportunities look or focused if M&A, core - evaluate on pipeline in shipbuilding going appears which well are see to market And it thus expanding which on the seems you services you you more could far? u or - at we be be to or as the some evaluate them,

Mike Petters

there evaluate [indiscernible] We shipbuilding always environmental But of training, opportunities. and markets stand unmanned in DOE. we'd even support restricted work management TS, such the agile as the then vehicles, development, software advanced core within are underwater close and to

else, So, we're Jon? and disciplined going process to to stay Anything close to - the very core fair a evaluate a those. utilize

Jonathan Raviv

No, no. I said you thank very much.

Christopher Kastner

welcome. You're

Mike Petters

Yes, we just didn't hear that.

Operator

would this the I back call further Thank you. to At time, over and questions no turn like showing to am Mike Petters.

Mike Petters

us Well, the this for joining morning. thanks call everybody on

is this some much DOE our of planted now very years that to rest And years that the I an couple come. the and we is with As have Not time for feeling the exciting wins joining ago only are encouraged TS growth time to we but mentioned, really in of we few to a seen it for that business. in key starting division and look all see the the exciting us. business years, seeds sprout. by most the you And UUV that. the shipbuilding a in our that our Bye. XX footprint we've we're very forward in Thank for of business. year in We

Operator

Ladies This conference. and gentlemen thank the concludes you for participation in today's program.

disconnect. may now You

Huntington Ingalls Industries (HII) 2 Aug 182018 Q2 Earnings call transcript