Huntington Ingalls Industries [HII] announced Nov. 3 that its operating income totaled $175 million in the third quarter, down 12.5 percent from the same period last year, as revenue declined 6.5 percent to $1.68 billion.
The Ingalls Shipbuilding division saw lower revenue for the Navy’s Amphibious Assault Ships and the Coast Guard’s National Security Cutter program, which was partially offset by higher revenue from Navy Arleigh Burke-class (DDG-51) destroyers. The Newport News Shipbuilding division reported lower revenue mainly due to declines in Navy aircraft carriers and Virginia-class submarines.
Despite the quarterly revenue decrease, HII said the results reflect a “solid overall operating performance” and that it expects revenue for the year to be similar to that of 2015. The company received about $1.2 billion in new contract awards in the third quarter, and its total backlog was $20 billion at the end of the quarter.
Mike Petters, HII president and chief executive officer, outlined several potential growth areas for Ingalls, including the Navy’s LX(R) amphibious warship replacement, the new Flight III version of the Navy’s DDG-51 and the Coast Guard’s planned heavy polar icebreakers. He also said that while the first Ford-class carrier (CVN-78) built by Newport News has had cost overruns and schedule delays, the second carrier (CVN-79) is meeting its labor cost goals and “hitting our targets.”
According to Petters, a key issue for Navy shipbuilding overall is finding a way to fund the Ohio Replacement Program (ORP) so it does not compete with other programs. Newport News is slated to have 20 percent of the work on the new ballistic missile submarine.
“If you try to take the ORP funding out of the Navy shipbuilding account, it’s going to squeeze programs down and delay them, which will have effect in our shipbuilding business,” Petters warned. “We think that’s an industry-wide problem. It’s not just an HII problem.”
The return of across-the-board federal budget cuts, known as sequestration, would also hurt shipbuilding and needs to be addressed, Petters added. “We’ve got to get that fixed,” he insisted.
Christopher Kastner, HII’s chief financial officer, said the Navy has told the company that it plans to make a decision before year’s end on the reimbursement of contractor costs for the 2014 closure of HII’s Avondale, La., shipyard. Kastner expects to be able to report that decision when the company announces its year-end financial results.