HII reports 1Q 2020 results and provides COVID-19 update
Huntington Ingalls Industries (NYSE: HII) reported first quarter 2020 revenues of $2.3 billion, up 8.8% from the first quarter of 2019. The increase was driven primarily by higher volume at HII’s Newport News and Ingalls shipbuilding divisions, as well as growth at HII’s Technical Solutions division.
Operating income in the quarter was $215 million and operating margin was 9.5%, compared to $161 million and 7.7%, respectively, in the first quarter of 2019. The increases in operating income and operating margin were mainly the result of a more favorable operating FAS/CAS adjustment and higher risk retirement at both Newport News and Ingalls shipbuilding divisions.
Net earnings in the quarter were $172 million, compared to $118 million in the first quarter of 2019. The increase in net earnings for the quarter was mainly the result of higher operating income and a more favorable FAS (non-service) pension benefit, partially offset by a $16 million loss recorded in Other, net as a result of lower returns on marketable securities related to our non-qualified benefit plans.
Diluted earnings per share in the quarter was $4.23, compared to $2.85 in the same period of 2019. Excluding the impacts of pension, adjusted earnings per share1 in the quarter was $2.43, compared to $2.14 in the same period of 2019.
First quarter cash from operations was $68 million and free cash flow1 was $2 million, compared to $11 million and negative $63 million, respectively, in the first quarter of 2019.
New contract awards in the quarter were approximately $900 million, primarily driven by an award for the construction of guided missile destroyer Sam Nunn (DDG 133). As of March 31, 2020, backlog totaled approximately $45.2 billion.
“As the COVID-19 pandemic unfolds, the health and safety of our employees remains paramount even as we continue our important work to support the nation’s defense,” said Mike Petters, HII president and CEO. “We are aggressively managing our response to the pandemic and have put in place a number of policies and procedures to mitigate the exposure to and spread of COVID-19 in accordance with guidelines provided by the Centers for Disease Control and Prevention (CDC) and other state and local government health agencies.” Petters continued, “We have done our best to provide employees with the resources they need to stay safe and healthy while also continuing to support our customers, suppliers and communities during this unprecedented situation.” Employee health and safety initiatives include:
- Implemented liberal leave policies that provide employees flexibility and job security
- Implemented processes aligned with CDC guidelines to work with any exposed individual on the necessary quarantine period and the process to return to work
- Adjusting policies, procedures and workspaces to support social distancing, including re-balancing shifts to reduce concurrent headcount, and the utilization of face masks
- Significantly increased workplace sanitation and deep cleaning
- Suspended all non-essential work travel
- Offering telecommute and work from home options where feasible