HUNTINGTON INGALLS INDUSTRIES REPORTS SECOND QUARTER 2018 RESULTS

NEWPORT NEWS, Va., (Aug. 02, 2018) -- Huntington Ingalls Industries (NYSE:HII) reported second quarter 2018 revenues of $2.0 billion, up 8.7 percent from the same period last year. The increase was driven primarily by higher volume at HII’s Newport News Shipbuilding segment.

Operating income in the quarter was $257 million and operating margin was 12.7 percent, compared to $241 million and 13.0 percent, respectively, in the second quarter of 2017. The increase in operating income was mainly the result of a higher Operating FAS/CAS Adjustment compared to the prior year, partially offset by lower segment operating income. The decrease in operating margin was due to lower segment operating margin, partially offset by a higher Operating FAS/CAS Adjustment compared to the prior year.

Diluted earnings per share in the quarter was $5.40, compared to $3.21 in the same period of 2017. The increase was predominantly due to a claim for higher research and development tax credits for the post-spin-off 2011 through 2015 tax years, a lower statutory federal income tax rate, a favorable change in the non-operating portion of retirement benefit expense and higher operating income.

Second quarter cash from operations was $239 million and free cash flow1 was $154 million, compared to $186 million and $107 million, respectively, in the second quarter of 2017.

New contract awards in the quarter were approximately $1.1 billion, bringing total backlog to approximately $21 billion as of June 30.

“I am pleased with our solid financial performance for the first half of the year,” said HII President and CEO Mike Petters. “Our team remains focused on program execution and capturing quality contract awards that support long-term, sustainable value creation.”

1Non-GAAP measure. See Exhibit B for definition and reconciliation.

Results of Operations June 30 (in millions, except per share amounts) 2018 2017 $ Change % Change 2018 2017 $ Change % Change Sales and service revenues $ 2,020 $ 1,858 $ 162 8.7 % $ 3,894 $ 3,582 $ 312 8.7 % Operating income (loss) 257 241 16 6.6 % 448 409 39 9.5 % Operating margin % 12.7 % 13.0 % (25) bps 11.5 % 11.4 % 9 bps Segment operating income (loss)1 181 187 (6 ) (3.2 )% 298 307 (9 ) (2.9 )% Segment operating margin %1 9.0 % 10.1 % (110) bps 7.7 % 8.6 % (92) bps Net earnings (loss) 239 147 92 62.6 % 395 266 129 48.5 % Diluted earnings (loss) per share $ 5.40 $ 3.21 $ 2.19 68.2 % $ 8.86 $ 5.77 $ 3.09 53.6 % Weighted-average diluted shares outstanding 44.3 45.8 44.6 46.1

1 Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for definitions and reconciliations.

Ingalls Shipbuilding June 30 ($ in millions) 2018 2017 $ Change % Change 2018 2017 $ Change % Change Revenues $ 629 $ 639 $ (10 ) (1.6 )% $ 1,214 $ 1,189 $ 25 2.1 % Segment operating income (loss)1 83 98 (15 ) (15.3 )% 147 164 (17 ) (10.4 )% Segment operating margin %1 13.2 % 15.3 % (214) bps 12.1 % 13.8 % (168) bps 1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Ingalls Shipbuilding revenues for the second quarter were $629 million, a decrease of $10 million, or 1.6 percent, from the same period in 2017, primarily due to decreased revenues in the Legend-class National Security Cutter (NSC) program and surface combatants, partially offset by increased amphibious assault ship revenues. NSC program revenues decreased due to lower volumes on Midgett (NSC 8) and Kimball (NSC 7), partially offset by higher volume on Stone (NSC 9). Surface combatant revenues decreased primarily due to lower volumes on the delivered USS Ralph Johnson (DDG 114) and Lenah H. Sutcliffe Higbee (DDG 123), partially offset by higher volumes on USS Fitzgerald (DDG 62) repair and restoration and Delbert D. Black (DDG 119). Higher amphibious assault ship revenues were mainly the result of higher volumes on Fort Lauderdale (LPD 28), Bougainville (LHA 8) and Richard M. McCool Jr. (LPD 29), partially offset by lower volumes on the delivered USS Portland (LPD 27) and Tripoli (LHA 7).

Ingalls Shipbuilding segment operating income for the second quarter was $83 million, a decrease of $15 million from the same period last year. Segment operating margin in the quarter was 13.2 percent, compared to 15.3 percent in the same period last year. These decreases were primarily the result of lower risk retirement on Tripoli (LHA 7) and the NSC program, partially offset by higher risk retirement on the Arleigh Burke-class (DDG 51) and San Antonio-class (LPD 17) programs, as well as recoveries related to a settlement agreement.

Key Ingalls Shipbuilding milestones for the quarter:

• Started fabrication of the Arleigh Burke-class (DDG 51) destroyer Jack H. Lucas (DDG 125)
• Awarded $27 million follow yard services contract for the USS Arleigh Burke (DDG 51) program with a total potential contract value, including options, of $181.4 million

Newport News Shipbuilding

Three Months Ended Six Months Ended June 30 June 30 ($ in millions)20182017$ Change% Change 20182017$ Change% ChangeRevenues$1,183 $1,001 $182 18.2% $2,265 $1,972 $293 14.9%Segment operating income (loss)191 80 11 13.8% 142 152 (10)(6.6)%Segment operating margin %17.7%8.0% (30)bps 6.3%7.7% (144)bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Newport News Shipbuilding revenues for the second quarter were $1.2 billion, an increase of $182 million, or 18.2 percent, from the same period in 2017, mainly due to higher revenues in aircraft carriers and naval nuclear support services. Higher aircraft carrier revenues were primarily the result of increased volumes on the execution contract for the refueling and complex overhaul (RCOH) of USS George Washington (CVN 73), the construction contract for John F. Kennedy (CVN 79) and the advance planning contract for Enterprise (CVN 80), partially offset by decreased volumes on the execution contract for the RCOH of the redelivered USS Abraham Lincoln (CVN 72), the inactivation of the decommissioned aircraft carrier Enterprise (CVN 65) and the construction contract for the delivered USS Gerald R. Ford (CVN 78). The increase in naval nuclear support services revenues was mainly the result of higher volumes in submarine support and facility maintenance services, partially offset by lower aircraft carrier support volume.

Newport News Shipbuilding segment operating income for the second quarter was $91 million, an increase of $11 million from the same period last year. Segment operating margin was 7.7 percent for the quarter, compared to 8.0 percent in the same period last year. The increase in segment operating income was primarily driven by the higher volumes described above, and the decrease in segment operating margin was due to year over year changes in contract mix.

Key Newport News Shipbuilding milestones for the quarter:

• Delivered the Virginia-class submarine Indiana (SSN 789) to the U.S. Navy
• Began a 25-month overhaul of the Los Angeles-class submarine USS Boise (SSN 764)
• Authenticated the keel of the Virginia-class submarine Montana (SSN 794)
• Completed the inactivation of the aircraft carrier Enterprise (CVN 65)

Technical Solutions

Three Months Ended Six Months Ended June 30 June 30 ($ in millions)20182017$ Change% Change 20182017% Change% ChangeRevenues$243 $244 $(1)(0.4)% $476 $469 7 1.5%Segment operating income (loss)17 9 $(2)(22.2)% 9 (9)18 200.0%Segment operating margin %12.9%3.7% (81) bps 1.9%(1.9)% 381 bps1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Technical Solutions revenues for the second quarter were $243 million, a decrease of $1 million from the same period in 2017, primarily due to lower integrated mission solutions, fleet support and nuclear and environmental revenues, offset by higher oil and gas services revenue.

Technical Solutions segment operating income for the second quarter was $7 million, a decrease of $2 million from the same period last year. The decrease was primarily driven by lower performance in fleet support services.

Key Technical Solutions milestones for the quarter:

• Triad National Security, a joint venture supported by HII’s Technical Solutions segment, was awarded the contract to manage and operate the Los Alamos National Laboratory.
• N3B, a joint venture between HII’s Technical Solutions segment and a segment of BWX Technologies, Inc., completed the transition period of the Los Alamos Legacy Cleanup Contract.