HII - Earnings call transcript Q4 2019 | Huntington Ingalls Industries, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q4 2019 Huntington Ingalls Industries, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Dwayne Blake, Vice President of Investor Relations. sir. ahead, go Please

Dwayne Blake

Chris morning, XXXX to us earnings President Officer; Mike Good Chief President Industries Officer. Financial today Huntington fourth Petters, and Executive Chief quarter conference and Executive and Josh. Vice the and welcome Ingalls are Kastner, Thanks, call. With

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

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

and comments. Relations as supplement our We our website plan call the release. well to to huntingtoningalls.com on address during the Please the presentation access slides earnings to view presentation click the our as posted at link Investor

the over With turn CEO, call Mike? I’ll to and our Mike that, Petters. President

Mike Petters

and Thanks, Dwayne. us a today’s I our principles their execute joining an year commitment thanks Good with and unwavering schedule. was cost our and thank of XXXX to want core for morning, for HII personally each continuing to for great to safety, call. of on employees everyone XX,XXX daily quality, activities

the affordability, XXXX enhanced of contract employees billion five-year continuous record shipbuilding characterize improvement, online program. $XX year. we is generational our fourth completed our of backlog innovation on projects the we for to major a of driving by as bringing awards challenged the our would I in captured while creativity. and year improve focused CapEx We And end efficiency remain facilities execution, at to future. and resulted new year positioning the a that We of

destroyer, USS redelivered we and USS guided delivered submarine, we Security three Paul Ignatius, R. ships, attack during National missile the Cutter, Midgett Gerald the the and the specifically XXXX, Now Delaware, USS

post following historic Gerald shakedown an awarded R. billion her to were two Ford contract availability. more build We $XX

Ford-class $X expectations. navigated second the our transition And the an year submarines. as for in shipbuilding return our as aircraft were billion V and Block successfully through program Virginia-class on of we shipbuilding carriers line achieve sales that well with maturity contract

our in early well expanded XXXX, additional acquiring We Hydroid acquisition with continuing pending divest to the was as oil decision last that business. by Fulcrum activities and gas shaping recent portfolio the and week our announced portfolio are of as

to The recently Additionally, announced Diego Group yesterday agreement venture we an shipyard assets Carlyle contribute backed sustainment fleet Capital Management. by a Stellex our and San formed to

as as growth, in key All returns. risk generating well driving recent strong with portfolio and of our mind the XXXX approached outcomes three were activities shaping activities, managing

provide the the was pending the gas more in the which sale for the and of charge So quarter this some and X% of year now EPS, for Slide of on highlights record X for the company. quarter me billion his charge full oil of full Sales the quarter and let full higher on year. and for from a highs full related starting for were EPS Chris non-cash represent presentation. XXXX $XX.XX comments. $X.XX details the year. business billion share for additional impairment to $X.X the than excludes $XX.XX year approximately quarter and the our impact Adjusted for $X.XX was the Diluted $X.X will and

XXXX. Defense passed activities And the and Act Authorization that of the well restored Senate submarines and defense. year and The These of XX, of both CVN USS legislation backlog pleased as combatants, we and of the and at approximately ship in measures the Block refueling end imperatives, platforms, environmental Harry XX construction and contract complex for were approval resulting repair the LHA awards New of and the of $XX LPD-XX during House National billion strongly appropriations the security supported incremental acceleration fiscal very X as billion regarding approximately are all $XX V as and also measures surface overhaul which Energy, contract nuclear year investment enacted supported Truman including billion, VCS of quarter as other national S. in unmanned Washington, including Department funded. cyber aforementioned $XX the is programs in well President funding.

budget as to within to working week leverage the integration as XXXX look so, and outcomes CVN well and of critical request, of unmanned amphibious fiscal tradeoffs once destroyers, top administration’s the class, forward with supportive including hot priorities, expertise again including restoration President’s chains across release deliver lines, increased Columbia submarines shipbuilding in requires. to this Congress administration see we the made ships, accounts, our that pleased line. ballistic our the investment budget the are Now capabilities complex ships with and nation as missile XX were and overhaul and our CXISR. We year production various refueling for earlier the underwater capabilities fit best service our such to vehicles of supply that Even

working year. assembly Black in essentially preparing activities NSC few At approximately launch the is is team and first Stone Tripoli track year. weeks. the few is business XX% complete it’s first track redelivery and it’s of final this X, December DDG in DDG first finally, on and this year. Fitzgerald share sea and Ingalls, this the for complete half Now Fort this it’s for delivery on the And in delivery is through from segment USS week later progressing in for half quarter. a highlights the trials test Lauderdale LHA the for of half on in the and last delivery XX, trials builder’s completed is towards LPD track Delbert and year. X, next of XX, completed let D. me XXX,

with was we systems XX% ship has XX, subsequently is into remains December test Newport and to in XX% and refueling Navy the complete our and life. late final and Kennedy in launched overhaul and is its phase. XXXX. CVN The transitioned the expectations. has christened the At successfully is and outfitting complex redelivery performance final ship CVN Washington approximately and bring The the into XX, transitioned to pier USS complete test approximately assembly for line George scheduled ship at activities News as in

Jersey submarine hall achieve track in pressure program, SSN to on And milestone milestone the the Solutions first half the achieved complete SSN healthy remains our deliver the is haul New XXXX. across December In performance in XXXX. and Montana the complete On late to in on of track business. segment XXX, Technical pressure XXX, remains

a energy Alamos, to continue with and of and Nevada sites, business great Air ISR job Los on supporting teams more at training the our new key the opportunities both including Security domestically activities department strong the Force horizon. Energy, is example, For Savannah Performance of Department and do National abroad. with River site

vehicles. acquisition And evolving to the production large as recent growing focus shaping year key we XXXX. business, innovative customer ended to Boeing unmanned And a and portfolio future the unmanned and requirements. surface sharpened create positioned extra of activities are we undersea support well for allow create heading And their the continue the with solutions to with which compete their vehicle. TS momentum, partner Hydroid, of undersea for a of them for in into lot the will

very summary, are where In we I’m excited company. about a as

provides backlog captured Our that record we be and unmatched well stability continue have shipbuilding programs $XX a to supported billion visibility. Washington and in

seeing are sales, trained are And our a and that We modern produce workforce execution operational that well creating return driving that in laser-focused to efficiently facilities recapitalized on we is shipbuilding improving right line our with we creativity. execute while innovation continuous performance and was improvement, in XXXX. have contracts expectations on

in of portfolio team position to In systems a autonomous our systems, activities to maritime opportunities addition, defense this environmental solutions, acquisition capture maritime recent and and federal the focus exciting in particularly entity one our business technical and business, of leading Hydroid the create nuclear and unmanned shaping combine we is the companies in solutions The world. unit unmanned growth and form as with the unmanned systems services. sharpened

the term manage and continue employees. in strong that steps risk, create generate returns, will we believe taking sustainable turn value growth, and right long our our our for firmly I to to drive which customers, are shareholders,

I will turn remarks some to the now call Chris So Kastner for Chris? over the financials. on

Chris Kastner

morning. on how and Thanks, some year XXXX. will good view Today, and we Mike, consolidated information quarter our and fourth results full additional I provide review

more detail morning this and the results, on to For please earnings to website. release refer posted issued our the segment

a by announced Hydroid, the Mike solutions refine strategic the of division. which of expect earlier, will we the close focus XX recently of acquisition of EBITDA, to we purchase benefits. This areas price As expected continued times, related quarter. our within million multiple $XXX technical approximately $XX end The first the mentioned We million. adjusting of when is XXXX tax total for approximately represents

and Moving on held our as now an considered sale as such is balance on UPI our business, reflected for gas asset and oil sheet.

$XX to quarter, impairment valuation asset goodwill related non-cash business. we the divest as of fourth During a that we million to primarily associated prepare recorded the charge, UPI with

very forward. moving a a year in they good UPI and backlog strong XXXX had have

$XX.XX was and adjusted quarter diluted quarter of $X.XX for UPI, year. the EPS the $X.XX for impact the Excluding the full the full $XX.XX year. for the was at and impairment EPS GAAP for

class results quarter Slide X Fulcrum. the to GX division, our quarter the for of XXXX, and increased of fourth of due in growth submarine fourth acquisitions primarily Turning into revenues and construction in Columbia quarter the on billion Newport and our primarily in volumes over X.X% consolidated News, Technical presentation, $X.X due Solutions Virginia to in boats higher

For Fulcrum of GX revenues approximately the $XX and million. contributed quarter,

decreased decreased by gas the decreases less and for adjustment impairment and business. favorable of were our to and quarter primarily an asset basis $XX related of a of operating charge million, XXX XX.X% driven or quarter income margin XXXX FAS/CAS X.X%, operating Operating oil fourth million points. $XXX from These

fleet and News gas and to the onto X.X% year from XXXX. increase This services on carriers, billion support results revenues. due Moving X, was an our volumes driven as and in primarily higher division, oil of consolidated aircraft $X.X the were higher nuclear for acquisitions year, growth Technical the by Newport in support revenues in and Slide in for submarines primarily as Navy GX well increase of Fulcrum, full Solutions

$XXX the revenues approximately and year, of GX Fulcrum For million. contributed

operating related Operating our Ingalls. FAS/CAS well income compared oil and $XXX income on to impairment to operating was in and as XXXX, contract, XX.X% million margin and to compares to the were services retirement decreases a operating The fleet an margin adjustment gas at of losses as for XXXX. and million favorable This support was due business year X.X%. primarily risk charge operating of $XXX asset less lower a

on changes in Newport the retirement services, support CVN contract by on submarine These higher RCOH offset higher were risk partially XX News contract. and volume

effective Our the and quarter for tax in year full through full income compares by tax tax for research XXXX fourth quarter tax years. was This and for XX.X% estimated credits for development XX.X% X.X% XX.X% and the rates higher driven respectively. rate lower XXXX were The year. and XXXX to the XXXX

Turning $XXX flow of million cash flow cash quarter in the the was was X Slide operations on to cash from presentation, $XXX free million. and

the were full $XXX year, $XXX and expenditures $XXX qualified $XXX cash of were and X.X% was for free was million our the $XX quarter discretionary cash year, million the capital year, and from Fourth post expenditures million. our to For million contributions plans million were flow were operations which million retirement capital or contributions to of benefit plans. in pension sales. $XX Cash

at we in shares of repurchased shares cost cost $XXX a at XXX,XXX million. a XXXX the to million, of Additionally, quarter number total approximately approximately the bringing million in X of repurchased $XX

We paid also share the $XX total $X.XX paid for dividends the to of bringing $XXX million dividends in year or per quarter, million.

pension. Slide let an to provide X, turning me on update Now

will announced cost CAS method we adopt program transition accounting Safe to reduces for methodology predictability. The CAS cost XXXX. Safe we As costs volatility Harbor and beginning January, improves the in pension Harbor late in pension

long term. unfavorable XXXX, is an flow EPS GAAP neutral starting over While the impact create the cash in does transition to it

table As forward. well beginning fairly on contributions Cash cash provided see the on become recoveries and can Slide you pension XXXX and X. in matched moving

FAS/CAS analysis, adjustment ease for expect first adjusted or with we results. For of expect quarter XXXX begin we’ll to starting providing EPS

Slide provide shown update me items XXXX on let additional with Now as you on some X. an

shipbuilding We revenue XXXX. in X% between and expect X% grow to

weighted return towards shipbuilding be in significant part sales X% sales of in expect first shipbuilding for events risk of XXXX, with return averaging majority the latter on We X% resulting year, three retirement on quarters. to the the the

in XXXX. revenues Solutions, expect XXXX. on of San closes Also recent the in Hydroid assumes underway, the billion we Regarding figure first Technical return This approximately quarter for portfolio range. in X% Solutions X% $X shipyard the and shaping be given sales acquisition UPI in to excludes events be the we expect from the and to Diego results Technical to

we’ve Slide modeling XXXX considerations for X, taxes, expenditures. and your reference, interest On capital depreciation and expense, provided also including amortization

provided we’ve X, major shipbuilding program XXXX Slide on updated an and of Finally, view milestones XXXX. for anticipated

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

Dwayne Blake

Thanks, Chris.

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

Operator

with [Operator Myles you. from Our Instructions] first UBS. Walton Thank question comes

your with You may proceed question.

Myles Walton

maybe And deployment, wondering for didn’t Thanks, XXXX where reverses was cash significantly the good did that XXXX? you repurchase in the kind effort look free at capital up then morning. expectations. that of quarter I really in wondering if out pick fourth and you flow the came your as versus on

Mike Petters

Yes.

a bit News, million it cash in to below weren’t was into paid. at expectation below, shifted that $XX primarily So That QX some was little receipts Newport million timing – XXXX. with $XX only

about concerned deployment, normalizing. that change. don’t Relative we really really is that, capital a see not to So

share to to least the opportunistic, still the XX% really invest we’re shipyards XXXX, share throughout our in But increase at continue a comply and consistent XXXX this buyback, change continuous years pretty – but that in no relative with analyze commitment in pretty there. to was obviously previous going year We’re with our increase then it and year. XX% buyback, in dividends

Myles Walton

– But still cash is cash to flow free to band aid versus all return shareholders. the

Mike Petters

no stands. that commitment is There XXXX in change to No. commitment. That definitely

Myles Walton

you. Okay. Thank

Operator

Thank you.

Our next question Research. Melius comes from Carter Copeland with

question. your with proceed may You

Carter Copeland

color part going you maybe One the gentlemen. on. housekeeping, could Hey, EACs more and us there ones. on competitive helpful. if just the lot opportunity, Two Mike, bit But and then that little unmanned market there’s detail a in term landscape you be to if of you growth longer any give acquisition the a wondered good see just the I evolving, I And how realize morning, and gross the would speak Chris, Thanks. net? and quick Hydroid might

Chris Kastner

first. Yes. Let housekeeping, me do that,

plus is $XX positive XX% So million, negative $XX that net About $XX million. News. Newport million, was of

Carter Copeland

Thank Awesome. you.

Mike Petters

Sure.

to footprint didn’t with several being move in out Navy. two – while either just ago. And unmanned we both, Navy’s Okay. and operated be was towards to could people in recall, guess, actually began tested you a a not or manpower platform unmanned, we was was we that the lot unmanned Relative many being where be not customers, a what water They Hydroid, had City more I on a the used and or vehicles – in or company it the small was unmanned systems we we Ford that there. which invested talking platform man that – that that engineered Navy two and not Proteus, We was a the Panama have identified of in design, about. years potential recognize or had by called the we was about were really talking particular,

thing and very acquired whole there’s we we set and people and was familiar of customers a group We that technologies the found not first and out processes were with. that that

well of access, that technology as actually we not course adoption a own to get this some of some us. our bring that And business only the technology create for did access. can in capability accelerate we so of the And as that, realize there, area we the we got core then might some

unmanned somebody their build sea, to put but vehicle. with Boeing, led it. had it actually They’d needed arrangement invested that And they in large at who to an

a And company unmanned UUV around, Hydroid We’ve, of So lot get bear of the undersea bring okay, expertise our really on the big saw in smaller in we’re did that, of manufacturing side. to smaller was we on realized that. that. noticed looked We we player and of there��s when space. But we could was an course that, large vehicles. really we these kind we the a that understanding a to starting activity

that a to undersea the signed a things of the industry we gives and them, journey the and basically Navy go hope. I so footprint process they belief unmanned to say way that and walk lots they for – we acquisition they need of faster. to lot and Kongsberg We’ve have but we capability. when to a close that personally, provide deal, And full a began through And do, that have, that need the do in is resulting can hope lots that us but it of with want to agreement of I that things our get mean kind they and can in speaks there range larger they it the can a

our is, contact bring expertise, technology, view to our our our build so our some And ability capability, let’s of information. workforce, our manufacturing

Let’s bring customer. this on to all the in space of that to behalf accelerate the of space unmanned of our development bear

is And think that so in step this a that we direction.

learning on lot the folks As a if water. there’s What I you who could lot say, is going in you’re would that, a there’s that the tell would you in talk about it you’re I there. say about and this we’re water, And of in but scientifically.

we’re business that where happy we’re is and about optimistic about And to really so this go. going

Chris Kastner

that that, organically business the digits. HII add will grow getting transaction single high also in complete would I Yes. just posts at with

near growth business. we the rate see that’s term So in that

better it only believe get can beyond So we that.

Carter Copeland

gents. Thanks my be going was color, That for the follow-up. to

Mike Petters

bet sir. You

Operator

Thank you.

with Our next question Citi. comes from Raviv Jon

question. proceed with You your may

Jon Raviv

Good Thanks much. morning. very

Any receipts, else News following this in we just heading flow the terms million down you a blocks should think about flow? million we $XX – XXXX. know, on keep rely come perhaps. Anything question, CapEx in mind big bit building mentioned, On underlying something $XX into I year. in cash Newport of a other should up the on to cash

Chris Kastner

aware, program cash major as the such down XXXX. the year What ramping get this really, that we become a story. us free Not cash start is term and back is to you’re year you’re our X.X% over million our to of sales flow see a near in going last capital of we $XXX

XXXX, tell at to million happens that. new flow. of whether ramp for end free that the day, $XXX the can’t we’re or the becomes for XXXX, normal in I But towards XXXX Now cash you HII going

Jon Raviv

pension Chris, clarify, to without And just or with a that’s benefit?

Chris Kastner

That’s all in.

Jon Raviv

thank Okay, more last you quick back that on nature little the there comp… I some margin follow-up mentioned a know, just then this the in you. loaded be And on can talk cadence, a of call, year. could – what’s probably the you

Chris Kastner

year, life Sure. The of excuse the CVN test XXX their CVN to major of half CVN me, XX and items, all X, to NSC then to and pressure XX Yes. bringing our the program. back delivery complete getting XX,

Jon Raviv

Thank you.

Operator

Thank you.

Our comes from with next question Bernstein. Harned Doug

with proceed may You your question.

Doug Harned

Navy back systems. manned. here? about your to moves in go proceed while had larger Mike, aggressive back about XXX-ship mix? and kind business talked Thank morning. think manning, laid been the it is of including the which to a And Esper what’s might how related this, And core affect discussion aggressively Navy is ships smaller moving how strategy this direction, about asked if but Marine to, core XXXX, understanding with I as looking lower the to your Secretary that a I programs, last I your it’s you. in of the that optionally the out, Good to platforms, week, want different pretty unmanned Navy very you

Mike Petters

match support they Well, see trying is to continues – the Doug, the is requirements ability the they it. like out Navy they the The this industry I with that in this feel world to to of evolve. that need up think,

to that them on so is need be evolve view And of help edge to that that we and the trying that. of front our

$XX last they’ve Relative years for though, three billion, been. career, about the the discussion and been to shipbuilding talk and I core years, what’s year-in last all you just to even over year $XX back of strategy we’ve with business that I my doesn’t days few have whole three been mean, historically high actually if the about still of sort And three our for been all shipbuilding anyway, mean they’ve $XX this at how go accounts year-out. the the billion budget year, our short a in going it’s billion. that last for past thing, of $XX years, on the billion the high, over the

so going we’re anymore to think is, a people think going what okay, see see unmanned say, left we’re going that going them with – to Navy And you’re big evolution. platforms on going need and I to going make you’re is see to you’re to hard an we have don’t we’re a to where and where completely not here that’s turn

You’re that of the Navy the amplification going space to platforms needs. presence unmanned see become the and

so counting ship And as of sort that a discussion because that don’t and about and an I that of interesting of counts becomes works kind thing all stay what know out how actually that. I just

to it to in of bring the they on bear have. industry problems terms about of the more to that think capability and Navy provide technology for I the presence ability the

think their going have more that be to that then partner, them is there as want make to unmanned see we that the right goes and and want where they with principal successful. we there. to towards Navy amplify And moving from that them be be systems help to platforms the I

Doug Harned

range think the of year And growth revenue that think giving guidance line, about that, top factors repair Well. create I uncertainty as growth or this of rate do about milestones? shipbuilding you’re Is this work long mean, range I about that What on this X%. guidance? outcomes? you the year When five-year of you broader how X%. a of timing in – you’ve get X% to business because – predictable gave talked you of because contracts. But around fairly of very

Mike Petters

new you help that the out of not timing us contract. indicate could of X% that. some issues But on between already of It’s some and really of that awards move majority There’s under our although some X% is as programs. timing programs that, new would material really of it the some minor on drive

Doug Harned

you. Thank great. Okay,

Operator

you. Thank

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

You question. may proceed with your

Ron Epstein

contract you if on Air Hey, you you doing for division, follow-on right? maybe could then work background good us some got on I a the little support work So $XXX the ISR more give Mike, a that’s in more question. us Tech Europe, for that And million give morning. could in Force background of guys that? color the services right? have And

Chris Kastner

Yes.

So that’s – that through Chris. revenue. contract, Air about Persistent Ron, our five one We’ve over of That’s all Operations, that’s is done ISR this split years, or it. work Force four contract Multi-Role acquisitions. And we’re really excited similar

this really I different really be they’re careful So with is into call. a got an going think about on go follow-on we’re forward. detail to essentially scope. it’s We the can’t much I that. important too excited doing. But area what

Ron Epstein

maybe broader then, Mike, just Okay. a question. And

things going of just beyond there’s One need underwater kind future, to out the see around and view, underwater part of where typical – class, this to a underwater Naval as you the Virginia of that a met unmanned up be the are for of up broader infrastructure we’ve there’s some more conversations strategy. infrastructure? play potentially building class, that’s Columbia that underwater operations broader a in had come do you you Do

Mike Petters

Well, submarine officer. you’re Ron, that talking a you I remind former to

the on out in the that So is undersea do I There’s my lots can’t it need the in to fleet gives that thing and entire an But kind environment up the environment that. can bottle can undersea platforms submarine see it, about Harbor look they you advantage. and are harbor And single very an Safe of asymmetric. fact port. a the across of history of

you underwater There’s you for lot capability. of is so that, your a a send not may on do of the multiplier just to class a a multiplier go that bunch Virginia underwater do. And simple undersea it that with being a is just people that the things to your submarine fact want can

able things something on sort there’s to – want be submarine fully engagement all like Virginia underwater thing. the hand, that, you and or do rules you other amount class have of a to a being man, that so And able of capable to that want that complying with fully of to of significant

want that to do be You to too. able

asymmetry did And years the capacity. see take being and right? going you take And getting to advantage that to that and was technology vertical. just to find be at suddenly there more has doing that of back, mean, in back now, to was undersea be this shot that off, this There curve was systems there enough if being to a and so what to and look it. a but something start go get aerial the from close how is you is we the of. comes just of gosh, XX way go it’s were nobody developed enough a almost wasn’t then the wanted Everybody we unmanned could where kind knee I literally curve Navy

maturation space are the to of art the starting knee the of the possible aerial getting curve now I the would and vehicles I you’re And space. environment terms I’m or undersea say XX not like when water unmanned the of is did. harder space it. is. what and technologies, folks going undersea they’re in We’ve for the the come the unmanned more much see curve going – undersea the been believe talking in XX to years in sure understand the to a of unmanned is probably in is knee years physics getting unmanned the about in look space to the for more space, the

just if a acceleration. And – it’s so in it’s whether or the curve knee an there

now. there of kind think we’re getting I

– lot in just historian where put see can thing, all a them. amateur Ron think to is the talking it do important to And you money And can you undersea. no The full want, final is, is the view afford into I’d countries for see personal it so longer I years middle about submarines what be us just want asymmetric goes. now of because a is that for Navy you of it’s my that. say, and can when that own they’re really could the that, they buy think that’s Navy I they that this from that they XX more

mean, that because So, from think that way quite it’ll I I don’t have know here keeps conflict. that, and we presence history is out becoming conflict important, presence actually says that I play hot

I it’s I so to the is a that. But of marriage, presence a capability undersea the understanding for go. way with great us And marrying think in think has Navy

Ron Epstein

you. Thank Great.

Operator

you. Thank

Suisse. Our comes next from Robert Credit with question Spingarn

You may proceed with your question.

Robert Spingarn

morning. the that from of to XXXX kind margin for you more both you looking understand of I QX upon conservatively write-up of the beginning we detail I the CVN in good little the were very ask book on and for wanted some perspective Well, trying to forward launch. program, XX? a shipbuilding think also So

So about QX? relative us this and X% carrier CVN look happening in between in is divide to can Ingalls how what’s EACs News to way maybe at tell Newport the and the XXXX you Chris, XX with plan? anything other then does And the

Chris Kastner

I’ll indicated you lot then and XX comment ships. evaluated that had risk milestone. if front that like. a you I on risk us met But there’s in Well, previously the on margin, XX, talk can We about of CVN Mike, of QX, their

be In both Ingalls did material our So issue and News mention. it just simply X%. there. we Newport I enough Newport an in actually. very XXXX, Ingalls wasn’t But expect good them I QX material News both shipbuilding and enough both get of – to expect to at

Robert Spingarn

Okay.

launch is it the thinking that the milestone that EAC on fair out a was would positive amount or talking of the system year’s I next carrier, with build you’re QX about? I wrong mean, release Just in

Mike Petters

going any kind lead for lead is that Ford Kennedy think we came as on technology The together ship be this. test risk whole bunch program, our and that our view is I’ve was really walking – a work of just was we’re through into than systems, seen. that we conservative test Yes, Ford But better the on about program tested had we’re of to actually now we incurred I in way ship ever of to new the the this a there. we the which

frankly, to expected the program really part on is I a conservative risk. floodgate. it would of actually next pretty be we launch going the but think And that floodgates launch And open way to that retirement. not those this risks. And was that we to we’re our risk that’s, for So ever that. a don’t team on together on put step, continue be downstream retire the was We mitigate early until go a us just,

Robert Spingarn

on you XX? with Are plan

Mike Petters

are. We

Robert Spingarn

Okay. Thank you.

Operator

you. Thank

next comes Shapiro. question from with George Shapiro Our

You may proceed with your question.

George Shapiro

you Yes. contract. to to in then I in can wanted from just margin up you and little specific Thank Block on the us mentioned Rob. that in pick the just wanted last – question you. a I bit to Can also just follow-up explain, EACs the good follow morning. got you V give quarter you the

So favorable the that assumes that contract was what thought before. might’ve than more you

benefit you you margin. comment also there services other had the class that. on then If the support the And increase in that could ships LA on

Chris Kastner

Yes.

was even the V results. is Block recall it. mention back Columbus, material So Newport your question, What question get News can’t all George. one in neither It’s enough the first the don’t included I I number. to again? in first to

George Shapiro

the are EACs? what Like,

Chris Kastner

News. gave at beginning. XX% already of was that Newport XX%, the I [indiscernible] of favorable gross It that being of unfavorable XX% to

George Shapiro

were? changes how what can a contract Okay. I the support more about And be LA the mean, you for little class specific referenced? they then that you

Mike Petters

embedded all No. in They performance Newport quarter. were in the News

George Shapiro

And general then Mike. one, just more Okay. one

looked it Virginia-class are for less detail bit You Congress mean, as XX you also the destroyer, to that One there support I is? in Columbia. leaves quite changes, right? Do budget shipbuilding. of a one at less think

Mike Petters

seen I’ve sure that going as Well, leave not any the George, Congress I’m administration’s budget I’m of to that, the is. part suggest ever

budget process. process It’s not the bills. appropriating about talking just to And about submission I all go of budget. to a of the the a the a And long from talking defense, think I’m of beginning I’m submitting is so areas budget the that

the it’s now the sometimes way not process and think out the would several way So play just to I and it’s of �� the if and like. think works it it’s role most right this of it? going to typically kind going necessarily it – So in we’re we I want, work sometimes our beginning we’ve But talk the what’s what and at years the do we to months. that’s this to worked you next to out is very the efficient that’s over way over

George Shapiro

you have like to it in What changed? would

Mike Petters

been pay about way Well, I to the along. biggest to think the that talking here we’ve that that find you for is And Columbia. a got one issue all is

arm to time squeeze If the as under going at shipbuilding ended I out well then done at advantage you unless have. over that, very you account, up. how up we lot have to pay that very a ramp our you’re going there’s as that’s time of the get decide to the backlog the to strategy into Columbia we’ve for ships that And and budget. possibly years, a three you’re we when up budget going inside was you’re where Columbia stuff of the it’s come budget of that can, because take push much with think the going And going a the beginning think last the I and contract in wrestling

pay has we keep to programs it’s if it think national and how I to priority. it’s up with you’re showed for Columbia have show room that’s I be, you up. the other the really go for a elephant were pay I just to to because what But have be I that’s really pay out minuses here. for The you to I in Columbia. going about going think go the to that the going. to uncertainty squeezed And absolutely is pluses But think dealt want think think And going and all

but just we’d that’s they’re industry. like certainly think goes. where better So whole they’re see this to for – ultimately us, better more I better the for ships ship, Each and not are

happy. advocate to continue for But and a the we’ll to healthy that. industrial way keep that’s base So

George Shapiro

Okay. much. Thanks very

Operator

Thank you.

Alembic from next Our comes Skibitski question Global. Pete with

with You may proceed question. your

Pete Skibitski

follow-on. about plan, the I bit think. morning, are How you’ve the know And of trying ships Ingalls new the how feeling out got good of bring helped Mike, Navy’s feeling Bit I now? a of budget. you Hey, forward in Congress you kind little are at big to one been guys. has we’ve the a amphibs deck about that now? right for right outlook

Mike Petters

I pretty of just to the an I wants push through. about some and Marine ways minuses. is Frankly, Core it, example, pluses Congress Well, it good to think the it. find it’s trying feel the

much I the air the that the think really from can budget budget standpoint. what there’s balloon so you the submission go see is into in squeezing, only

pretty good about I So it. feel

that do think can there’s I deck the amphibs they today. a doing lot are of what and there what out support for big

And in to really and on. feel optimistic to going outcome. to going end it we’re kind where total when good place we good to so, it’s up and about when a that’s up. days going wonder end going think There’s a I good we be I of ultimately about But going remain – days where it’s in be

Pete Skibitski

Okay. Got it.

Just one follow-up me. for

I to of I revenue, was sale $XXX positive On Maritime maybe thought Coast a to so. the the always million it’s lot Carlyle, Continental on yard as think of guys. repair it a viewed don’t you But West have a for or

thinking just that I’m about So wondering, how you’re now?

Mike Petters

to We that contributed we’re asset contributed, of be just part this venture. now so clear, joint the we

step model business the that back. me is let – view our So

kind responsibility now. activity more before. through support model is the this talked allow Navy area right I demand that’s to trying for that for its the is think work requirements going there it There have. they the in Pacific business But way a than to of efficient capacity provide is of about repair for I’ve more to

little business with kind our that of bit. struggled we’ve In changed, case, we’ve the – model a has as

this is, business view Our needed we anyway. to restructure

our can to the the a get have for to demand, help way where we’ve been business the I business had Navy’s a and get actually able restructured that the – closed. right that where a is effectively in we’ve in be to and way what us had there capacity the mean, figure space where get meet Navy actually the to it doing. keep hand place cases industry Here’s the support operations out in not enough business

And here so say, back we and part and of that. on something there’s have you to going step need be bigger to

us and way other – are assets Vigor to engage make a for this and with sure So that, also the discussion. is and Navy that working the solution. we Stellex what try part to is be solution. we Carlyle a And we find a there. is we and But effectively MHI, this need of think think to to We help that find have

Pete Skibitski

Okay.

you’re not guidance. you’re that, revenue of because accounting from losing So change, the for losing the the either

Mike Petters

Correct.

Pete Skibitski

Thanks Okay. guys.

Mike Petters

You bet.

Operator

you. Thank

from Gautam with comes Khanna question next Cowen Our & Co.

question. with You may your proceed

Jeff Molinari

my is This on Thanks Jeff Hi. for Good Molinari Gautam for morning. today. taking questions.

answered had questions So just been some the already. cleanups, all

Hydroid or be What to has you normal. could pieces of excluded assuming few guided $X the sales you of sales, are JV? and than even for helpful. Thanks. kind it’d pieces for those for divested be the moving TS So because businesses kind margins if annualized be moving size us, of billion, Three to just more

Chris Kastner

Yes.

think return of provided probably So billion modeling we data sales X% yet. you that haven’t a we $X as get I given sales, provided we of that X% haven’t the and and on should to standpoint. But from there

Jeff Molinari

and then And margins, of at continuing that do bumping we level? the three enough. XXXX Fair the first about shipbuilding think about you margins then QX. through momentum quarters that Okay. talked up on X% How kind substantially into in

Mike Petters

I executes around good long know if the that good. we business bound think experience executes that that you’re business over surprises quarter-by-quarter, what to here and our haul, you not that, at Well, have this is the shipbuilding think maybe so at But I X%. look and – this industry is

think that out over you long I ambition haul, And better. is our execute to our So that where that’s at level the or are. backlog we there see

so maturation seeing the the And of the a specific hangover of backlog. year of seeing kind of the we’re that little we’re this. that’s for bit driver way this is still The

we that while the towards heavy need we’ve that whole to think that set here portfolio long it and brand start just mix. But over sustainable we’ve And we a added And through pretty of We accumulate milestones had we’re carriers a to new couple to haul. takes where of submarines them more two weighted gone up. another get a work. little years a into the

Jeff Molinari

guys. Thanks. for Thanks color Okay. the

Operator

you. Thank

next Seifman question Seth JPMorgan. from Our comes with

You may proceed question. your with

Seth Seifman

Thanks very morning. good much and

Mike Petters

Good morning.

Seth Seifman

about thinking that how So you’re fit award you kind how frigate of positioning work are kind wonder talk a could expecting an this Ingall? July? could you And and the Mike, with I there if ultimately of bit still and the in little the in about

Mike Petters

bids forward. in foot and the put are Well, best our we

build And in able plan they execution invested robust have want some we’re be do. that a the and facilities to standing have platform. decide just We to help Navy what very to we to by

is competition the half in first But the of year. we’re say tough, Now expecting award still that. I’ll the

Seth Seifman

of And in percentage of maybe that but X%? would So percentage grows, and maintainable business receipts you that had a sales working real Okay. the low up. the a significantly. follow slightly a sales of of the $XX about probably the level Chris, million Is capital pretty then as X% quick even still quarter, if have of dollars not capital up working maybe down capital sort a working been year-on-year. fourth slightly

Chris Kastner

It’ll time, a good I move think shipbuilding. X% for from to is but bit target time really around a

Seth Seifman

much. very you Thank Great.

Operator

you. Thank

Our next from Barclays. with comes question Strauss David

You with may your proceed question.

David Strauss

morning. Good Thanks.

Chris Kastner

Good morning.

David Strauss

an XX% not doable of still think looking target anymore? I for range margin you XXXX. So in previously about shipbuilding And had to Is XX% XXXX talked further XX% is aspirational X% kind in out.

Chris Kastner

the coming risk the allowed there, this is XXXX retirement programs David, were X%. which to seeing in unfold It going to us at Chris. the to potential our simply how plan arrive and was and

best going have think way better the are organization it quarters X% that is always better. X% think than to worse moving about do and We than I X%. challenge We’re forward. the to to But

David Strauss

helps down kind pension, CAS of like, But couple I of $XXX CapEx another did you looks probably cash what for then about $XXX probably million, headwind. you about course million years, of the know one XXXX is you’ve you it talked in flow, free getting Can got building $XXX off over the about less The you, equivalent – contribution And million. in Okay. coming at guess, next to. Chris. I by of

us takes to what million? million from So $XXX $XXX

Chris Kastner

going grow. We’re right? Margin improving well. growth, as it’s to Well, is

and $XXX ships, $XXX to get you over pension milestones normalizing the that years. So with to reaching expenditures you on reduced of float two It’s naturally going couple to the million million. cash up next capital free and

David Strauss

Thanks. Okay.

Chris Kastner

Sure.

Operator

you. Thank

DeNardi Our Stifel. with comes Joseph from question next

your question. You may proceed with

Joseph DeNardi

look component your greater growing. years, just on that next of the be out will cost business that over plus fixed some production, profile than Mike, of a the I of of you morning going forward. Good side that if business probably the peers. get margin the of price Yes. several your there’s the it’s the that’s business more But that

you. why term, potentially it tailwind go margin to some that XX% Thank is that longer such so, margin X% maybe the a can XX% to to from point? profile And at XX%

Mike Petters

now Well, at you were ends up I say it. I and the you blend every could at which the I and that and can mean, wish right. But is go look if that you looked way gone whole fact we’ve back this

end You you are. a in up where place no matter where

first and you know to you a mature new executing discussion whole good programs. do you’re that that’s to want of programs is, want you you’re And The and well, well. mix that thing in around executing have you’re was, to where if actually came the X% range XX% from

of And out high, low, out that of range range executing you’re not that out new with of either if overweighted programs. or probably balance you’re you’re that well mature If you’re on that means programs. you’re

year. programs. on came through a where new with end right $XX-some-billion work the $XX from. we We’ve maturing of kind on backlog, So to we’ve gone last our that’s years And of kind backlog but it added couple billion now, the of just heavy where been a programs,

the just And that is, else. So go we’re programs takes mature account over entire everything I or to side of years, our and industry and continue at the XX XX that. if industry that’s But new the just the operate in know, work going X%. programs it to last, look at and don’t tends other to risk of through you

a so or teams $XX XX%. years. out X% business our that’s our of XX ambition. I is to think our aspire to the think We about to But this plays over way push level in that And a we XX businesses, backlog the that terms and with next billion

Joseph DeNardi

see as Thank mix fixed transitioning helpful. That’s What looks years in and given just as of costs the terms submarine carrier from fix. growth to Could you. maybe versus like you it five cost from now you Okay. quantify, a whole.

Chris Kastner

moving contracts think is RCOH plus the about are forward. cost The to the contracts way that

the plus work So but the our really I base. don’t cost have majority of that’s in a specific percentage,

Joseph DeNardi

Okay. Thank you.

Chris Kastner

Sure.

Operator

you. Thank

comes with Goldman Sachs. Our question Noah Poponak last from

You your question. may proceed with

Noah Poponak

good morning, everyone. Hey,

Mike Petters

Good morning.

Noah Poponak

the in try from Chris, X% CapEx growth backend million, that’s of large have you $XX heard zone is else question billion just it I kind there share grant sounded, today’s per to correctly, with if your and the business but the largely it’s to pension million recently because it if only flat, a in wanted really walk answer to I growth X% with again, segments or to of top growing $X margins offsetting. David’s down it be line, when But XXXX, proceeds million, of to it’s to just cash free had comes it of that time of free that Should segments? that more cash outside in XXXX could for the flow something when the Or been said – likely you the is you’ve something segments? to compound year. just XXXX, $XXX $XX

Chris Kastner

Yes.

new there’s that years next how the ships it’s to look three through normal. the also capital. you compounding the there. becomes plans works So our But When at million gets it over and $XXX working plans the timing and some of that our all through and really milestones going our

So think it essentially I right, you’ve Noah. got

Noah Poponak

margin of XX%. as comments the And now to X% X% Okay. you’ve versus then shipbuilding stated when that pointing a prior to

as you’ve plan? you ship us thought specific that kind into you What on inputs Can of plan stated really different in moved changed just versus You in itself? with the what specific the that, specific help that’s previously? are the things XXXX honing

Chris Kastner

Noah just really that out opportunities ship, and to it. that on those the would nothing look the on years over next It’s there. the each risk specific the I going best at retirement there’s ships laying and them way looking risk drop at No, through was X% few

Noah Poponak

Okay.

So of versus business type a by ship it’s framework. up what of directional the capable plan is a bottoms ship of moving more to just of sort prior

Chris Kastner

these the it of had the we previous these contracts fact plan – is some have. And a of that we, lot didn’t

out now. teams going and of with play our So it the is plan through is our how it as execution working to of comes contracting all and large into that that. volume And our

of like important we that. to felt it’s So clarify really kind just

Noah Poponak

see. I

much. so Thanks Okay.

Chris Kastner

Thanks, Noah.

Operator

to Thank Petters back any you. I over call And any at now turn I’m further questions remarks. this showing not further for the time. would to Mr. like

Mike Petters

you to participate webcast. It’s at Okay. for meeting I Well, the sign week X thanks in can next remind still Day you starting to o’clock. our joining that want via on morning XXth Investor up us. Tuesday

our Relations So huntingtoningalls.com. website link Investor at Day to Click just go the on the follow and Investor register. to page

chance the will what and to with about excited five We’re more share meet you bring. all think a lot we the detail, years next

call. we So And soon. look to us we joining today’s you appreciate seeing you on forward

Operator

ladies you today’s Thank for concludes and call. gentlemen. you, conference Thank participating. This

disconnect. now may You

Huntington Ingalls Industries (HII) 13 Feb 202019 Q4 Earnings call transcript