HII - Earnings call transcript Q3 2019 | Huntington Ingalls Industries, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2019 Huntington Ingalls Industries Inc. Earnings Conference Call. [Operator Instructions]. I would like to hand the conference over to your speaker today, Dwayne Blake, Vice President, Investor Relations. Please go ahead, sir.

Dwayne Blake

Michelle. Thanks, welcome Call. Ingalls and XXXX Third the Conference Earnings to morning, Industries Huntington Quarter Good today Mike Business us Chris Financial With are: Kastner, Officer; Chief Officer. Executive and Executive Vice President, Management Chief Petters, and President and

a federal are historical that securities and made laws. fact today's Safe the statements not pursuant forward-looking reminder, to statements considered Harbor As in are call made are provisions of

will to of are Chris included cause and posted for actual may earnings measures. Mike Actual measures to appendix to their the factors is refer refer a website. filings description Please SEC our Reconciliations the metrics of in of differ. our these from results that in materially our GAAP presentation may results vary non-GAAP Also, comparable the anticipated of some that certain to results. on today, remarks

link We to the during the our at presentation and turn huntingtoningalls.com plan and Please over With the as that, earnings call CEO, I'll release. President to Relations view posted address on access to Mike? our comments. well as Petters. website to call slides click Mike our our the presentation the supplement Investor

Michael Petters

Thanks, for on call. joining and everyone, the Dwayne. us morning, Good thanks

on some quarter $X.X Let the me EPS Sales $X.XX. higher diluted was approximately Slide highlights X than presentation. quarter X.X% billion share the starting were of the from of for XXXX, and

at of the approximately end funded. billion of $X billion is during $XX resulting $XX.X were awards quarter backlog contract quarter the of billion New approximately the which in

in $X.XX dividend $X.XX Earlier Turning XX% of we approved announced quarterly to week, that from this increase Board moment. to Directors per a share for our a per share. capital deployment our

free to and $X.X $X.X commitment demonstrate generation continued path program from business share most of flow from our XXXX shareholders. to supports all recent the confidence October flow billion authority increased decisions billion to of the cash the our the return to in cash These substantially XXXX October also free that term XXXX. repurchase to extended our We

the in fiscal Authorization conference the and Regarding hopeful are conferencing are year National Defense encouraged for Senate are be timely XXXX. activities that Bill produced a we Washington, agreement will House and that

the lines pleased for and which chains years for fiscal ships the future funding production submarines, LHA aircraft We acceleration warships balance permit these platforms. the and for year combatants, strong In amphibious efficiently shipbuilding and amphibious XXXX best Appropriations funding will carriers Pentagon included very with of by the support across both high leverage Committee, surface will to and Senate warships, incremental investment the X, are autonomous for particular, LPD-XX plan. defense supply

While the urge is quickly as Congress continue late government to continuing possible. we the our currently at final appropriations measures November, pass through to as resolution operating

trials achieved for earlier Black, Washington USS track work News, Tripoli, Delbert expectations Ingalls, Lauderdale half completed is George next in late more complete complex ship expected was this late half to in The team Now in is ship to and the the of and be the delivered end acceptance remains in will let of remains me few and share completion overhaul next our Cost first to highlights the quarter. of on and on performance at business is from the Stone undocked segment launched X July early delivery and the line of in the significant in the now XXXX late external NSC structural activities XX% with At XX early XXXX. than a planned redelivered ship to and the recently is ship And an CVN and milestone from the was for team performed. year. this refueling year recover is for impact be At birth outfitting next LHA-X moved performance incident year. favorable to year. or where is Fort delivered XX, Navy be the D. September the launched, next XXX, testing anticipated to outfitting LPD and planned final Newport DDG and of on continues XXXX. first be the October.

XX year. is for starting ceremony her and dock the complete CVN to with dry performance team the dock the last of and flooding planning track by and December with the dry Kennedy remains floating approximately from in ship is on XX% X exit That for ship preparing ship The end for expectations. week. the christening our launch, is line on

October achieve SSN the SSN Delaware Block on in for complete the with of XXXX. pressure planned delivery first our IV XXX Montana, delivered delivery month and remains first milestone hull On program, XXX the to half late submarine track next

the shipbuilding V and contract award finally, is And year. on by productive exciting for the our teams. for of this an time This end Block track extremely is

Delaware, the redelivered Over the sea Tripoli, started Washington, launch of past process post-shakedown XX R. Gerald and we on undocked Kennedy USS trials SSN month delivered XXX completed George completed acceptance for the and CVN availability CVN so, have XX or LHA-X trials for USS

Ford to Navy. the

All of towards as numerous have these that activities for technologies is completion weapons with both and complex This supports possible. technologies and advanced Navy Spencer on Secretary, XX% exciting incorporated are Assistant sea another and I is soon this performed the Geurts rewarding. Secretary both the of well including aligned get of as The the ship recent to systems, to on spoken regarding these new the trials. ship trials ever the plan directly we ready XXXX. and elevators deployment in sea demonstrate operating completing of margins X% manufacturing Ford, ship and step produced. achieving an shipbuilding And rhythm operating most the

Shipbuilding, Navy Ford to to that We nation team that superior great Navy will other and industry on I includes and News our come. capability Newport experts the the a bring our have and for confident to collective efforts am decades

stage execution awards of focusing contracts for capturing existing In our portfolio, business new on the team Technical help performed Solutions the well growth. set segment, the while across to

to site. additional pursuing TS Department the nuclear critical ramp-up their has multiple opportunities For and program UUV Along in River, for began through of teammate, provide that growth at is and continue contracts flagship Savannah to Navy's to the significant of production And markets. support Nevada the with bowing potential XLUUV, long-term example, DOE Los Alamos the Energy TS nuclear for growth.

threats won nation also won and and from new recently contract the TS to our opportunities several provide programs provide our Aside Air other large unmanned services the of a analytic that including and for XLUUV, contract Defense undersea TS number new critical services number is provide And pursuing a support surface awareness A a growth, large cybersecurity network markets. NAVWAR maintain to U.S. unmanned a multiple-award allies. to Intelligence also contract vehicle contracts provide Agency operational architecture a of services -- CXISR to and to Force. installation global float situational to and in

to was right our on to summary, need to now with are will performance very I efficiently multiple executing team and fronts shareholders, the the am company the to the customers our remains financials. future and the progress our in on the Overall, achieve Technical that Solutions I the and chain and by quarter XX% a amphibious significant our results laser-focused employees. on with pleased being solid, the for very also achieving Kastner the -- our am warship, I drive and am the path supply remarks of lines the to our is backlog top X% Technical turn to we value pleased long-term and to segments, single-digit production taking margin X% I by And position Senate positioned steps create for XXXX. in over order XXXX. achieve margin low Solutions Appropriation Chris call sustainable to in to creation shipbuilding some shipbuilding leverage Chris? growth for recognition in for encouraged high made In the team X% line Committee's

Christopher Kastner

morning. Thanks, Mike, good

or primarily quarter result, revenues review slide I X in results to Operating offset operating and the related Carrier submarine last submarine the programs workers' to period well Slide division growth in benefit XXXX, to current lower income our prior News. Newport website. services. income. on of year in the with million our quarter may the of $XX Newport our an $XXX fleet quarter quarter changes volumes due for at posted Primarily of of presentation X.X% News XX.X% by along at million support same we acquisitions adjustment the million $XX third to and driven the you to segment consolidated Aircraft third in contract These increased third Beginning GX on from margin of by compared quarter basis X.X% XXX decreases were points. decreased morning the follow and $X.X operating FAS/CAS as with as primarily billion a our operating third to the XXXX, Solutions of Technical decreased As compensation presentation, year compared Fulcrum this higher in due financial primarily a period partially lower our due

to expenditures XXXX. cash or million expenditures quarter, quarter, operations of capital Through net or capital the million million. and the $XXX net in presentation. totaled $XXX were of in net $XXX X third Turning X.X% capital Slide of to quarter the operations Cash million compared $XX $XXX of of was the from million expenditures third used revenues in

approximately X% the will capital the be for expect We expenditures full year of sales.

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

At also approximately on bringing $XX credit $X.XX cash our million. or $XXX of We XXX,XXX paid million million repurchased balance $XX dividends and of outstanding per our a we quarter-end cost share shares $XX had million, to end, quarter at revolving facility.

Slide decreased from in Ingalls' programs. were due volumes of quarter Ingalls third mainly $XX last and quarter to program. million million due XXXX, X.X% $XX lower the of retirement revenues X and operating NSC of the lower NSC year down to margin of on quarter on period the of to the the income presentation. million from Moving on same in LHA the $XXX risk

Turning the to of Slide presentation. X

X.X% the News billion from year, submarine Newport increased due same last to aircraft of in mostly the higher carrier in and period revenues $X.X constructions. quarter volumes

million income operating X.X% primarily last quarter benefit same and margin compensation a million $XXX in the year-over-year, period the workers' year. of to News of of were down due in Newport $XX

due from of well revenues as in period services the solutions revenue last GX year, Solutions growth $XXX Technical the in and fleet presentation. Technical of mainly Slide in on to in $XX contributed X million gas the to Fulcrum, of XX.X% as the same of Now support quarter collectively and which acquisitions increased oil the quarter million revenues.

Technical income income to nuclear $XX quarter quarter million $XX of of and the performance operating primarily improved third due XXXX Solutions million of contracts. on compares to in operating the in environmental

outlook. and We've XXXX pension postretirement X. and our XXXX updated Slide to Turning benefits

to change our decrease Our XXXX FAS projected and resulting $XXX from update $XX CAS actuarial an expense. economic expense assumptions. has to This projected by by no primarily of million demographic million declined driven $XXX updated million is estimates from with

primarily increased by CAS our by from XXXX, Projected to XXXX million, in partially total favorable anticipated outlook return assets initial $XXX to lower has due on discount million offset rates expense in XXXX. $XXX an

has projected prior increased FAS/CAS for also the from $XXX be Consequently, adjustment XXXX the million is to and the now outlook year.

our expected lower which cash to of million, discount is contribution by contributions from to the initial $XX contributions increased Additionally, our due have cash million qualified primarily increase in discretionary $XXX $XXX plans. XXXX the The million our rates. to is outlook

basis are Please provided XXX FAS measurement points pension-related subject remember rate discount of in August including February Slide of XX%. are our X assumes to that asset based performance X.XX%, update XXXX a as criteria. projections XXXX month-end, on year-end numbers on since which and fallen approximately returns has data of by and The

quarter call pension provide fourth We earnings XXXX XXXX and February. updated for estimates in on will our

in expect to ramp year approximately for on to continue that XX% X% full X% and business remain that achieve we to margins Finally, will the return confident shipbuilding our sales will XXXX.

I'll my for over the Dwayne to turn back That call remarks. concludes Q&A.

Dwayne Blake

[Operator Q&A. I'll to turn Chris. Michelle, the Thanks, over Instructions]. manage to you it

Operator

[Operator Instructions].

comes from Our with of line Research. first the Melius question Carter Copeland

Carter Copeland

for that the Any the if like looks boat V planned could towards I Block you think and the Obviously, there talked would I us higher progress cost what about profile about I -- is be contract. might some little kind quantities. talk color there bit if of a give originally there, in BCS than impacted Mike, versus helpful. around you color that means moving the the the bit past? the a little But and per risk it you've wondered wondered what

Michael Petters

Yes.

where at I be. we've out think and there, it's a good contract see to are the the really the business a process authorization question. sense fashion to and now point appropriation that's to that's we our partners contract. Dynamics we challenges the there at going that need been Navy the very We're hard where to go the General working of with with makes the in And in out

contract And the submarines, to I -- able more we're contract all And And have that's view authorizers I value going so going going pretty the a appropriators for by no And to here the that have, I that. that. to that to provide for we we've have. many we're the with a as contract. create we're the we think contract we said, have submarines of good matter balance that have to in the been -- how that's to think be of heading they the that personal Navy, think on with end as negotiations I track think, a get that to worked going year. to to is tried priorities more. the want our that other make And that clear to address hard My result sure we're going we're

Carter Copeland

Great. us And for the then follow-up, EACs as just wondered I quarter? a if the give you Chris, might

Christopher Kastner

Yes. the gross for gross quarter, adjustments -- or unfavorable the XX%, XX%. cume were were Sure. The adjustments favorable

Newport Of of it's was Ingalls, was net, was News, XX%. that of net that XX% So and XX%. a TS XX%

Operator

next of Bernstein. line from Doug with the And our Harned question comes

Caius Slater

for Slater Doug. signing Caius in It's

on Mike, you'd look to if said second So the again to is risk execution there in at and quarter, management the business ask to any improve see opportunities leaders that. you

opportunities? previously, you think, more talked the at? that the structural you've are the sort Where in hiccups are what things are have look challenges? execution, What but eliminating about I what found? they Just of can

Michael Petters

deep are pockets well, had were were and try really we into execution and some understand That's did that a a there of there. that dive good sort there question. pockets back business, do We to this parts of go why and inconsistencies and handling weren't the

expanding kind so the operating developing what be all at that we're the And and little waterfront, a comprehensive it's think doing to basically protocol of bit. for a around gets And is, in structure, can to when would standard to this then we're way it that company. it but programs the have a point of all system starts have interesting move the that you we the

we're on some that. we're track so discipline put to And going for more it. and into scratch And

Caius Slater

they just there, The very then a on That's follow-up Technical be great. And Solutions. is quick diverse. business appear to

how do So a do offerings? you fit range that all together? and you manage of across And how those service customers

Christopher Kastner

get shipbuilding goes make Technical -- That's to the to the in much make Our general and that case but authority to case to accountability the the operating to We to can. customer, as facing that they when model make do in the authority that are sure to organization is is Solutions so support that that's they the the their we the have want distributed need with divisions that delegate authority decisions as it we too. customer, in divisions right. the and accountability

imagine we And support include probably operating how becomes the of, the perimeters -- consider would on. and our be That in then with need all one, customer. there to the to the can that here, kind one, a okay. -- customer, in general, you this that make this need in for we go operate sense we system deeper and Regarding details in

Actually, customer this and so that very pretty to Here you through to is TS work as with well do doesn't right that well see. the speak now, can have our way one that. guys we

that -- hard structure I so overarching be to that it's going create for. think And to don't an bring

Operator

UBS. the line And Myles from Walton next our with of question comes

Myles Walton

Ford. guarantees in on if some liabilities post-delivery could how level, maybe that with you higher the a experiments? at Mike, of the exist And of going one warranties maybe at that's shipbuilding. the being talk about the all changing still talk for I frigate wondering versus And about was forward if particular,

Michael Petters

Yes.

that's set So Myles. there, complex a really questions of

mean, you Ford pertains. it begin the in been So these that ships, point becomes go the is that the of time news -- There how the the comes operate. in carrier think the most in of to has recently has the I even I for important if there think need that to to a of Navy around where with X,XXX comes a the its a people including there aircraft city all on that be city, airport, still in time if to point are operate functions of own where city done. things and

the to how let the and course In work And you we so that's ship operate go up that, to the stuff of delivery there's back that it. a that need to comes on. of go Navy get

ship, The that will engage the the change normal It for ship of A will you while. change -- In arrangements the track with ship of deliver, to X a it. a where delivery availability. technology. Our in not ship is the for contract go or us technology. Navy the post-shakedown and lead a the a It's it incremental pursue to allow X the case especially case shipyard lead will it's back is for of usually Ford, come of in an generations are not developing. operate

so accommodate to flexible environment, And on you new as the the need that how agile with for develop technologies a ship. them try production move you're have to into operate and balance you Navy do going to and be and those the

we way that we have whole proceeded the So have range the out of that's across there. technologies that

will contract. the Some continue construction of base work that under

of of covered in it's be work, a case if warranty. then Some that complete, will

change. maturity we're depends of becomes and that and about. technology the that a just scope becomes new the the some talking item And And contract on of it all

Christopher Kastner

have those EACs but the include of to on post-delivery don't always a frigate booking wouldn't generally off. things Chris. Myles, want on at We -- it to within in worked or specifically liabilities because I is rates delivery. see generally ships amount liabilities our contracts. that There competitive, be is and don't within the Yes. I we comment are obviously the material this our

Myles Walton

That guidance, cash sense. but like the the pension moving year-on-year. is Chris, XXXX, sounds year make it parts, flow not And I neutral flow into range CapEx Great. cash asking effect right? Are I into I'm year. toward effectively obviously, know, net you, a the maybe, X And have that X% next into those walk while next trends the for of

Christopher Kastner

related an yes, XXXX well a the pretty our you've was year for And provide XXXX. Yes. No, update in for year, thanks our move pension asking got there related of to factors as update and guidance thanks give estimate. on next for But and we'll because I'll not that high capital for significant last right. those is But in there year-end on it updated an about call. all to

Operator

And line the our Raviv Citi. with comes from question next Jon of

Jonathan Raviv

following last XXXX the question, next you should can And other year that just is still capital, release about CapEx I'll on year? being high Is up year above maybe year? Chris, also. think not clarify to that? include just the so you is going impact XXXX to on said, pension it fair Or we XXXX expect modestly cash in

Christopher Kastner

Yes.

XXXX related in can in working minus always capital we $XX where said, what last or again? north And being that show finished to up week. million still last So question, here million. was was plus year, $XXX the XXXX is to which the there million That $XXX

Michael Petters

Capital.

Christopher Kastner

Capital, yes.

years. to the billion So $X.X for capital, X it's $X.X billion

to high down we And get capital then XXXX. in in of a level X.X% back XXXX. still sales the So of

Jonathan Raviv

follow-up, as big release, more year-on-year. is we maybe we Block we a in item. down releases? capital when working that your some then perspective balances the out deal revolver. running pretty just be some And And repurchasing are signed swing can moves those here. How just a now few much and see on What's big should can shares And the Okay. some past this for have All the held year-on-year, aggressive repoised get carrier flat tight you Got cash quarters, being expect you. when since V? on of

some question to sort overall really cash it that? of of what on balance just So and takes

Christopher Kastner

Yes.

we're not balance. our cash So concerned with overly

adequate have We commercial paper program. our capacity within

from are cash we're comfortable where we really standpoint. a So

that have line year-end. on all of get to invoices we're sight managing of We to the

last north pretty slightly that's So of with. comfortable year we're

XX% the over capital working and Relative has our back bit. made course, to shareholders. actually little it in commitment move us share free to cash with all 'XX buyback Of we dividend around annually that we executed are We've share return flow return. increased can a XXX% the substantially as our program at comfortable to buyback, least

move on So we're with going to continue from We're that it, here. comfortable just strategy. and we'll

Operator

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

Jeffrey Molinari

Molinari Jeff is on This for Gautam.

little adjust kind seen program you've about schedule about talk performance. helpful. you're curve? how are be and Can I'd kind what Virginia-class like color would of on to the you So where the you bit performing a cost? challenges or on versus ask And learning Any of

Michael Petters

a complexity good A That's that Yes. question. question. in of lot

challenges the I year come front-end Virginia-class in requires into and think enhancement to you personnel X That required development. may which to program, handicapped -- we submarine a through sequester regarding expanded challenges had start program. to reductions X of on of program -- back had We the we Some the recall, have before where some. some had We Newport the to with the News go up rate that was production that workforce year. fought we through from a some submarines

of our in slow negotiate buy we The to gone Block and coming program And of contract. the took We reflected block. which material, the affected contract a facilities It sure long gun we've where in -- we're speed probably is, that We've into their expand very we're I'm invested also seeing a a are V at out went the schedule. teams. of at rate. But and We're what's today, capacity production out start right a But mature. today not tremendous the are as block, little we were the beginning. that's the to were that to actually ramping off. teams the that sprint we've coming kind in also time negotiate the to happening learning

this program through where we submarine that's it's are now of going behind out bit there prosecuting on day. We on continuing tough with at a parts, went all learning and every point. and those with matter little on curves of the we're comfortable a pretty that And I the period of moving but today. to think I'm single -- prove So us just a

Jeffrey Molinari

don't quick That's retirement other you through walk if guess, gears? you key in through Can you to follow-up, XXXX very upcoming helpful some switching QX ending to early I the milestones mind. on hear. One of Can horizon? walk risk and kind

Michael Petters

QX the previous XXXX provided milestones Well, we for in are all on schedule.

We update and expect balance the our those to an the happen XXXX on for over call. of year year-end we'll provide

Operator

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

George Shapiro

One for that $XX Los is class, million? the time? you, Was EACs? that was Angeles the roughly for of adjustment is maybe the Chris. contract magnitude, And Or one Newport News part in the

Christopher Kastner

wasn't but enough it on specifically. was comment It won't comment the QX. quarter, material Helena to I in in

George Shapiro

workers' mean, from comp No. something offset so be But, the you substantial I year. put it in I benefited saying race, last it the partially must figured

Christopher Kastner

the it Well, booking did rate value, And mention that the mention, enough program. -- a We basis, going-forward it'll on be but George. to adjust it. would was enough obviously wasn't it to for on better EAC the

George Shapiro

And Okay. Mike. for you, then

on Just V. to follow-up Block

the the only going or XX they're than to that rather X ships is So so. implying have Navy

it about specifically? I evidently, you but just call, know it's through, go little cost, talked I you the If assume a and touched in bit on earlier could I I don't think it you mean,

Michael Petters

our getting working through way that contract. still we're Well,

that the I of think less talk specifics want I So contract. to about

contract of year. balance the folks shape a it. done that I And interested this of be and are end good expect to be in will for that involved all the of We think by the that

we thing on that standpoint important that a behind sets from And think we're the for are ahead. in very early challenges well us, Block that IV, V is really most my us. Block and moving the I think up

Operator

our Robert Suisse. question next of from with comes Spingarn the line And Crédit

Robert Spingarn

just questions, We'll wanted with with to of guys. start a I couple Chris. follow-up carrier

reflect on Just so alluded we half? a you When us XX? Mike. upside to. some I in there slip on the just ship the second risk of next potential the that then in the a all fully just And There's QX float have retirement risk into Can here for sense you year? follow-up of the give to happened you EAC

Christopher Kastner

That's a good Rob. question,

think get front launch, evaluate of they of have every I to quarter, going them. as they're in you're evaluate going risk And going to risk. But a lot the obviously. some you're to risk you to --

in risk there on well XX program. milestones the So test as related XXXX to are retirement

QX and a next issue it's a So, issue. it's year

Robert Spingarn

the Is majority QX?

Christopher Kastner

I would than more XXXX. say risk is XXXX in there in

Robert Spingarn

it the And XX on the is then do with trial, trials, to the -- if and And regard Okay. Mike this? there implications the do frame on for we shock the other Ford, ships? where stand on if potential fails shock how Ford-class you

Michael Petters

something we're process there of the is executing there getting happens, you've today Well, deployment. of of where to done We've taken there from class trial shock maturity we through the what lot It's trial are go that to the you've shock whole the out a to and before trial trial then or question make is about be okay, data is be answered do The it been where place. that that's ship into the the going has analyzed. want pretty part kind the make. would and the trial not cycle It's then would it getting to its analyzing assumptions better. the a to the to that ship asked that do really well-understood process. the is the you of of on still to part between and or these -- the have the ship for is typically, required for almost And and shock to frame-by-frame, shape the trial, of just to go during say to onto initial going I or deployment. is react how trials. be the ready and third to ship case is going the failed ship, kind to be a data a component-by-competent, the allow second really lead shock of recovering you passed the what and not done on point full-scale trial It's on did

So a this with path to to is unique. path. whatever be happy partner go But down, Navy we're them that's okay. the -- assist We'll them wants along that and

Robert Spingarn

didn't again, But on sounds lead changes you do would might the if to ship? to more on be if have the than normally have then making do like you you second you ship, it one

Michael Petters

not I electrical the quite to frankly. the how the that follow-on going the more ship from change handicap don't and places. mechanical are know or usually change over places they're The ships in lead to system whole be in to component the

so really I of know that broad-brush how one. don't to kind And

Operator

comes question from Alembic. of line next our Pete the Skibitski And with

Peter Skibitski

some carriers I were of don't that maybe behind docked ship press it, there's, really know there trade that maintenance in and for now. Mike, I in reasoning the you result could sense at can that but from X a Norfolk us give work right the maybe outlook the news general. the carrier think maintenance

Michael Petters

than that maintenance really start maintenance capacity one done to to the right more me Let do is in overall with outlook the system be for there ship is first. The second now it. there's

because get to hard how CNO, Assistant terms more the working the to in translates try readiness Secretary, have dollar the maintenance language. do into so the been And readiness per of industry figure you out Secretary,

How are large Navy's and the bundle at contracts, have to, maybe we other that kinds secretary's coming differently, they asked out from those working do let's maintenance? in more there's a time? them this industries talked of get some more lots that are been get to contract period credit, around ideas dollar of at gone little readiness you we push right. do And how fleets, and maybe maybe you creativity we do more the it. brought How do bit the planning, they've of per they've that for, looked And get do they've being frankly, level next the

carriers, We're a So we're first part we through are ready the they on crunch to where of helping And those we Navy and -- Navy to the this get little any -- discussion. way involved the a that. deploy. them couple in a that the help bit get assisting of we with in think, can ships how cases, in in that deeply helping I to discussion can carriers can. place are of Navy the in Relative support

Peter Skibitski

Okay.

is that if I tech services one CR. Just we're November. about or of February of now it the And think goes how QX? so? all HII, in CR to do services kind business that guess, at right quick kind think tech overall impact your on in short-cycle feeling into the and Is I you follow-up

Michael Petters

Yes.

it seeing yet. into issue. seeing it become we're not we're could as QX not of But next So moves impact anything any yet. year, an If

Operator

comes question with David from of next line And Strauss the Barclays. our

David Strauss

what ask just If milestone there, sequentially wouldn't I more versus out in X% QX you've of so just that, it what's like and that. came got what XXXX. October assuming opportunity up you there seem through potentially on perspective you do from touch kind better to a I wanted merger looks given to shipbuilding and guidance do the you're in than relatively flat put about for it QX. like the math Can

Christopher Kastner

And Chris. assess all that the the we'll That still out David, at X% to lot being makes in with said, assess milestones. sense accordingly. we there. and all X%. QX We'll ACs comfortable a still us. of this adjust everything we're is But look

David Strauss

said I half think remarks, Montana, you what prepared first but your hear are I XXXX Mike, of did said And had on at Okay. did versus I now? previously. on you slip looking thought XXXX that that, we on

Michael Petters

Did I say that?

Christopher Kastner

Yes.

Michael Petters

Yes.

David Strauss

Okay.

slip? did it So

Christopher Kastner

pressure That's Yes. slip. I indicated, then this Mike right. and we mean, hull a quarter will complete it got

David Strauss

I fair me, for is cash to one particularly least conversion. doing had free last XXX% think what XXXX I now before about at close good we looking this XXXX. talking think think about since could is cash CAS we're not pretty know, that here, the I XXXX Is comment conversion. to you guess, about, Chris, about your free flow on in still then a at 'XX And talked flow just place but said Okay. you prior

Christopher Kastner

David. I think that's fair,

in week, that winding think normalized was nature -- bit. the achieve I pension then but year, -- is in little All capital a last which net with a or down here that have to benefit the becoming here somewhat everyone, good out we've conversion And being cash down nonrecurring the the and way $XXX a last capital a slowing achieve. should would about cash to think been million X at factors working good end X.X that's from That bit great you to we it. received 'XX an in what the crawling of last $XXX 'XX expected of was quarters year. in stabilizing million and over been for think that said, it this

Operator

line of question next from comes Sullivan Seaport the Josh Global. our with And

Joshua Sullivan

do see this looking thoughts assessment more upcoming you're structure at the the for are Potentially a puts Just the what some and at little architecture, distributed thinking you there? of What opportunities on the are takes about? point?

Michael Petters

could new ships have the assessment that see some would a There where could really been to the than we I now in assessment. -- expansion. see anticipated industry, that of create that new we do that of four four see now that. it. capacity future as been have know the higher contract. And can of operating the place hard lot I we leadership building We capability. opportunity is, rethink we're kind this ago to done opportunity we're the put about a we Navy was there tempo structure under the that actually of that And thinking that had up Well. And years the there has maybe be through at a support we think the ahead -- structure was could Navy We're

that. Marine about the thinking Core I has been think hard really

we in to those and that can discussions, way stand engaged sense. ways assist any We're that we make by in in

you the right can't recognition of the hard that. make a hard And very that so I is a there because capacity. a its Navy has leadership or dependent for strong left industry turn go its very a think is understanding mature Navy upon just in turn I Navy and think

production what's about that sitting next What the the phase here think to a those so us for What very to that I at a least think that's are happen. look positive stand And industry, to HII's ready backlog think discussion is And like? like? part, record like? look next the to with going to the it the ships for for nation. What for amphibs And like? the going the be today look time the -- few years, are I are of we carriers look of think make help shipbuilding going go we

Joshua Sullivan

to forward? milestones? the Got rolling see that how you're we in the just the at then of us Newport just walk benefit it. And automation regards through some should up And going standing yard. efforts, Can with

Michael Petters

now. XX that Well, That role We're This they're XX using with very them those results not on now, and some in we contracts. savings were implementation. is XX assume and these saying. in pleased we're there how said, CVN the product are -- we a using we're utilized of being and being

we're how it's going. look they're developed very how with being and basis. being We how pleased So very recurring implemented on at they're a

So to XX, of we on well. as look the implementing lot XX, Columbia-class forward actually, and a

Operator

the next with of our line Goldman And question comes from Poponak Sachs. Noah

Noah Poponak

almost reflect being perception our on just precisely for of to question that on to sequentially get the staggered more quarters margin more entirely when does Does is just maybe launch? the flat back the big reflect not launch several the implied X% on the to previously going knowing item milestone relief catchup it risk the shipbuilding Chris, there's next quarter then that one about fourth XX cume occurs? still a Or year. that

Christopher Kastner

the every to you of great right? retire to rest in Noah, risk risk I happens knows latter, launch, program. is it's question, but lot think got that a absolutely the shipbuilder when a that's QX -- and you There

is you're So think probably one. a latter perception the I better

Noah Poponak

sense. is class out from change separate that? contract you net the positive services makes that is XX Or The the in it Okay. That item in called only release, it cume catcher?

Christopher Kastner

in. is. It's It

Noah Poponak

it? It's in

Christopher Kastner

Yes.

Noah Poponak

million? million And less than or $XX than $XX is it more

Christopher Kastner

Noah. We a don't I'm sorry. specific give number,

Noah Poponak

Okay. I try thought, I anyway. that would

cash is or flow statement 'XX, much up proceeds, versus your that those are projection the XXXX free On that grant grow excluding cash just statement, true so year-over-year? year-over-year flow the that since

Christopher Kastner

calculation. all That's in No. the

Noah Poponak

grant not it Is proceeds? up the excluding

Christopher Kastner

Grant and flow free and don't are Yes. specifics all in to cash the net statement into on in I the to want the this on cash the but in last relative year call, 'XX flow proceeds get in. 'XX. year it's

Noah Poponak

you is we're a last still And Okay. how flow several -- the on there -- hone could maybe in on on past trying lot opportunity the to the left. see lastly, then over working capital successes years still there we've and update much talked your statement, of the case if we in about how just

see in what it do XXXX? where maybe you XXXX? with ending So can that And you

Christopher Kastner

Yes.

be. forward, be the good going we I X% And of to I capital achieve working think to operating we'll is sales well. that place can X% think, if percent a very

Noah Poponak

kind terms rate should our of more of year-over-year change is forward? of So think going I of that in stabilizing

Christopher Kastner

Correct. a Yes, think great that's way it. to about

X% of to programs kick sustained but think in time-to-time, a forward. you to from course, good Of X% phases have a way I the is on that basis think going about

Operator

line comes with question Citi. the Jon our Raviv next And of from

Jonathan Raviv

the past just Mike, you'd, few TS on those if perspective some of you get inorganic can making over I wonder years. some obviously, appetite

and/or You And what impacting and of your are still growth margin kind that do see you and an what if in interested opportunity size? the customers that scale to you areas build how profile? and/or out some in, business, capabilities so, of profile see

Michael Petters

ahead. seeds a to that the lot of way moving a now, business We Yes. TS planted right sprouts. see lot in And There's that with area very, the been the a what we're very DOE Since is question. Alamos. in over pleased shipbuilding, business prime we've we've DOE the we prime winning at Los now have we -- since separated for we're contractor from -- for X DOE, and team on doing

more nuclear and and is think to take opportunity operation think -- there skills. skills our our there advantage for that we So environmental we

us. a important that's to so And pretty area

cases, in principal But that's unbanned partnership business. in space. I our our customer space, the we that's unmanned that, this unmanned the see little going, those than mature the the very Navy for interested surface undersea particularly, is is Our of in space is think more both where bit a customer

that. so going forward. going the trying support that Make have our that And -- have customer us way the are need we're best capabilities to we the on sure find think Navy that to for to is to we

part that to work we're business. -- to strengthen our continue of so we And

-- a built to Force things, pursue and kinds we've other those good We years, find for XX-some capability capability we it's for of in always, one and in as there, or that to of we've simulation we've areas capability intelligence. world. we cyber within some XX Army. the really have around continue Whether that, have and need And modeling last even also -- some of the months. to be And has we built all capability last business, and built every least a more fleet all the those operational supporting really, the the opportunities. the or the for been at Air support training some And

We've enhanced capability there. our

of have, constant review are our being do So is customer's in what big of pursue the don't pursue that find gap. sake right there And capabilities to we we the an a being big. Scale the we're are because I is that what the way interesting discussion always think for capabilities a gap? needs, we to want

be creates actually flexibility particular On the local customer. a other for more can hand, sometimes, scale that something

that's So we're thinking kind of about how it.

as we as this evaluating would can. gaps are pretty those valuations are trying point. at we We opportunities that say to to our evaluating close pretty high also creative and and so be gaps active And in

sometimes, so best go. us do to is to And let for thing the it

And table. our that as so we on continue to have an option

in what we to trying our very acquire we're where very do believe great and disciplined place that to that a we approach in build value continues We're not deliberate we're about moves. the everything So and company.

Operator

like And for turn further at I back further And would Mike Petters questions I'm any over showing the remarks. no time. conference this to to

Michael Petters

know our February Well, process outlook views the XX. will management up evening things presentation the event XX meeting a business. reception in for and are This include I'd City Investor on February our like New York to and you letting be on for arrangements the and by the will of Day finalizing we wrap held of share to that in an

tuned today's months. additional look joining So We seeing to the again we time your in for soon. on and us and stay forward for appreciate coming call. details interest, you Thanks really

Operator

this gentlemen, for participating. Thank today's you and concludes call. Ladies conference

You now disconnect. may

Huntington Ingalls Industries (HII) 7 Nov 192019 Q3 Earnings call transcript