Q1 2022 Huntington Ingalls Industries Inc Earnings Call
Two weeks ago, we renamed our technical solutions Division emission technologies to better reflect our portfolio of capabilities and our commitment to delivering advanced technologies and multi domain expertise to our support of our national security customers.
Contract Awards emission technologies have had a slow start to the year, but this was largely due to the continuing resolution and the resulting lack of adjudication of awards.
Looking ahead, we're very excited about our pipeline of new business submission technologies and are confident it will support our growth objectives.
We currently have almost $6 billion of proposals and evaluation with $3 billion in proposal development and a total qualified pipeline of more than 25 billion.
We had a significant win in unmanned with a selection of our <unk> 300 vehicle at the U S. Navy's next generation small UV program of record.
We also recently released Odyssey, a suite of advanced autonomy solutions that offer scalable autonomy across a variety of platforms and is aligned with the industry open architecture standards.
Regarding our shipbuilding workforce I'm glad to report that we finalize the collective bargaining agreements at both shipyards are annual apprentice School graduation at Newport News Shipbuilding saw a 170 graduates and over 200 individuals will complete their apprenticeship program in may at Ingalls Shipbuilding and we continue to work with local high schools and community.
College's on our core hiring and development needs.
Through the end of the quarter, we had hired over 1000 craft personnel towards our plan of over 5000 for the year, we remain focused on hiring and retaining a strong workforce as we continued to face the headwinds of a tight labor market.
Turning to activities in Washington, Congress finalized appropriations for fiscal year 2022 in March.
We saw continued bipartisan support for our program is reflected in the final defense Appropriations Act, including funding for two Arleigh Burke class destroyers, and two Virginia class attack submarines.
Additionally, the appropriations measures provided $250 million for advanced procurement funding for LPG 32 advanced procurement for <unk> as well as funding for our other programs.
Also in March the President submitted his fiscal year 2023 budget request now under consideration by Congress. The proposed budget reflects continued investment in our shipbuilding programs funding to amphibious ships opening 32, and <unk> nine to DDG 51 surface combatants and two block five Virginia class submarines.
The budget request continues funding Ford class nuclear aircraft carriers and aircraft carrier refueling programs and construction of Columbia class submarines as well as investment in the submarine industrial base.
Beyond shipbuilding the fiscal year 2023 request reflect an emphasis on research and development with increased investments in capability enablers, such as AI cyber electronic warfare, <unk>, ISR and autonomous systems that align well with our advanced technology capabilities of our emission technologies Division.
In conclusion, we remain well positioned to execute on our shipbuilding backlog and leverage it to generate significant free cash flow, while continuing to capture anticipated work and growth within our emission technologies Division.
So with that I'll turn the call over to Tom for some remarks on our financial results Tom.
Thanks, Chris and good morning today I'll briefly review, our first quarter results for more detail on our segment results. Please refer to the earnings release issued this morning and posted to our website <unk>.
Beginning with our consolidated results on slide four of the presentation. Our first quarter revenues of $2 6 billion increased approximately 13% compared to the same period last year. This was largely due to revenue attributable to the acquisition of a line in the third quarter of 2021.
Operating income for the quarter of $130 million decreased by $9 million from the first quarter of 2021 and operating margin of five 4% decreased 110 basis points.
These decreases were largely due to lower segment operating income driven by lower risk retirement at Newport News shipbuilding, partially offset by more favorable non current state income taxes, and operating <unk> adjustment compared to the prior year.
Our effective tax rate in the quarter was approximately 25% compared to approximately 14, 5% in the first quarter of 2021, the lower rate in the first quarter of 2021 was primarily due to divestitures during that quarter net.
<unk> net earnings in the quarter were $140 million compared to $148 million in the first quarter of 2021.
Diluted earnings per share in the quarter were $3 50.
Compared to $3 68 in the first quarter of 2021.
Turning to slide five cash used by operations was $83 million in the quarter and net capital expenditures were $43 million or one 7% of revenues, resulting in free cash flow of negative $126 million.
This compares to cash from operations of $43 million and net capital expenditures of $59 million and free cash flow of negative 16 in the first quarter of 2021.
Cash contributions to our pension and other postretirement benefit plans were $10 million in the quarter of which less than $1 million were discretionary contributions to our qualified pension plans.
During the first quarter, we paid dividends of $1 18.
Per share of <unk> $47 million, we also repurchased 51000 shares during the quarter at an aggregate cost of $10 million.
Moving on to slide six Ingalls revenues of $631 million in the quarter decreased $18 million or two 8% from the same period last year, driven primarily by lower revenues on the DDG program, partially offset by higher amphibious assault ship revenues.
Ingalls operating income of $86 million and margin of 13, 6% in the quarter were down slightly from last year due to lower risk retirement on the <unk> and DDG programs, which was largely offset by increased risk retirement on the <unk> program. Following the delivery of <unk> 28.
At Newport News revenues of $1 4 billion decreased by $17 million or one 2% from the same period last year due to lower aircraft carrier and naval nuclear support service revenues, largely offset by higher submarine revenue.
Newport News operating income of $81 million and margin of five 8% were down from last year, primarily due to lower risk retirement on the Vcs program, partially offset by higher risk retirement on <unk> 78.
Admission technologies revenues of $590 million increased $331 million compared to the first quarter of 2021, primarily driven by the acquisition of line in the third quarter of 2021, partially offset by the divestiture of our oil and gas business and the contribution of the San Diego shipyard to a joint venture in the first quarter of 2012.
One.
Mission technologies operating income of $9 million compared to an operating income of $7 million in the first quarter of 2021.
First quarter 2022 results included approximately 24 million of amortization of align related purchase intangible assets mission technology.
<unk> EBITDA margin in the first quarter was seven 3%.
Turning to slide seven we are reaffirming our 2022 sales margin and free cash flow expectations and have slightly revised our pension expectations.
In the quarter, we reached a labor agreement with the United Steelworkers at Newport News Shipbuilding. The contract includes increases in pension benefits triggering a pension re measurement, which also takes into account discount rate changes and asset returns through late February .
Regarding our near term outlook, our first quarter results were positively impacted by a very high quality delivery for LTE 28, which allowed us to retire a significant amount of risk for that ship in the first quarter as reflected in the Ingalls operating margin through.
The remaining shipbuilding milestones, we expect to achieve in 2022 are back end weighted given that backdrop, we expect the second quarter shipbuilding revenue to be relatively flat sequentially and shipbuilding operating margins to be approximately 7%.
Regarding emission technologies, we expect results will ramp through the year with second quarter sales up approximately 5% sequentially and operating margin in line with our full year guidance of approximately two 5%.
Regarding our longer term targets, we remain confident in our free cash flow of $3 2 billion from 2020 through 2024. This outlook does assume that continue to expensing of research and development costs for tax purposes. As a reminder, we believe the impact to 2022 free cash flow would be approximately $100 million if the current <unk>.
R&D amortization treatment remains in place.
On slide eight we provided a walk from our 2022 to 2020 for free cash flow outlook. This is consistent with the chart. We began providing last quarter. Additionally, we are reaffirming our capital allocation priorities, which include significant deleveraging in the near term along with continued modest dividend growth and balance share repurchases.
We will continue to evaluate M&A, but no significant capability gap today in.
In closing we are pleased with the operational milestones achieved in the first quarter along with the financial results notwithstanding the challenges of the current environment. We remain enthusiastic regarding our long term outlook with nearly $50 billion in backlog strong budgetary and customer support for our shipbuilding programs and emission technology business that we believe is poised for various.
Strong growth, we are laser focused on consistent execution and generating sustainable long term value now I'll turn the call back over to Christy for Q&A.
Thanks, Tom as a reminder to everyone on the call. Please limit yourself to one initial question and one follow up so we can get as many people through the queue as possible.
Operator, I will turn it over to you to manage the Q&A.
Thank you very much if you would like to ask a question reminder, press star followed by one on your telephone keypad.
Our first question guys from Robert Stallard from vertical research. Your line is now open Robert Please go ahead with your question.
Alright, thanks, so much good morning.
Good morning, Rob.
Chris I'll start off with you a bigger picture question on the FY 'twenty to request it looks like the.
Navy is changing its planned for amphibious special release proposing today.
Do you think this could play out and what's potentially the risk.
To HII and then second numbers question, perhaps for Tom you mentioned on slide eight the potential for margin growth in our mission and I was wondering what that is.
What a better long term margin could be for this division is two and half since pretty low expense other companies in the industry. Thank you.
Okay, Rob I'll start.
With the budget the 23 budget request and then.
Tompkins.
Talk about emission technologies margins.
One thing we should always remember with the budgetary process. As this is the first step of the process.
We'll work through that.
Throughout the year.
All of our major ship building programs were supported.
The one line we do have to work on is the answer of line as you identified we need to get <unk> hundred 32 under contract you need to get.
<unk> nine under contract that we need to work on opening 33.
And ensure that we support the Marines and the Navy and the Congress really.
And analyzing that program going forward, so you're right.
Would you need to work on the <unk> line.
But I'm positive as we worked through this process.
That will get to a solution that.
That makes a lot of sense from a long term big picture perspective.
Think that the budget really does support our long term growth rate I'm comfortable with the 3%.
Sure Robin.
I'll pick up the question on empty from a margin perspective, yes, one 5%, so we guided 1% sorry.
Got it that's coming off of two 7% Ross last year to 7%.
Last year for Q1, and two 9% a quarter ago in Q4, I would tell you that because of the purchase intangibles, both with MTA about $30 million in alliance specifically for 24 net return on sales metric is not probably okay.
Lead indicators, where we want to land Thats, probably kind of give you the EBITDA perspective from eight to eight 5% quarter here, which was seven 3%.
Unexpected because we guided you.
From a ros perspective, only at 1% I wish I knew what the CRA voice sales.
Light and obviously the margin will follow the sale so.
Comfortable with where we stand and from our perspective, and where we can we've told you for the year. It's eight to eight 5% from an EBIT perspective as a percent of revenue.
From now going through 2024, we've highlighted.
More appropriate to think about 8% to 10%.
<unk> were empty and land.
Alright, that's great that's great. Thanks, so much.
Thanks, Rob.
Our next.
<unk> comes from peaks Dubinsky from global Pete. Your line is now open. Please go ahead with your question.
Hey, good morning, everyone.
Good morning, Chris.
Chris also a question on the fit up one thing Thats always a little bit harder to tell timing wise is just maintenance trend shipbuilding maintenance trends could you give us a sense of.
If you look at the fit up.
Should mean it would be a tailwind for you guys are starting to flatten out I was just wondering what your thoughts were.
I think it's pretty flat theyre coming through.
The submarine.
Maintenance schedule and how Theyre going to proceed with Allied class and Virginia class submarines from a maintenance standpoint, but we think it's pretty pretty flat from our perspective.
What's going to go into how they execute the SIOP, but we think it's pretty flat.
Okay. Okay, and then one last question kind of off the beaten path. There was an export notification back in December for for E mails and advanced arresting gear to France, and both of you guys in general Atomics, we're excited.
Is that any kind of a meaningful or a real revenue opportunity for you guys.
And I'm, just curious about the timing as well on that.
Not for US now remember we don't.
It provides a system so not for us now.
Okay. Thank you.
Thank you.
Our next question comes from Simon <unk> from J P. Morgan.
Your line is now open. Please go ahead with your question.
Hey, Thanks, very much John good morning, everyone.
Good morning, guys I think you mentioned.
Okay.
On the last call you mentioned that.
You guys had a lot of confidence in.
The hiring your ability to hire this year.
And you started off.
This call.
Focusing especially on the on the tight labor market. So maybe if you could just give.
A little bit of color on how things are tracking there and any metrics we can.
Think about kind of.
What you need to do and then Todd.
Where the risk would be in the financial plan.
To the extent that.
The hiring situation gets tougher.
Sure Seth Thanks January and February were tough.
<unk> really impacted our attendance.
But in March attendance recovered and we're back to attendance levels.
We're used to seeing within both of our shipyards.
Hired over 1000 people.
Through the end of March we need to hire over 5000, so we're a bit behind but we're really focused on our relationships with our partner schools, our high schools community colleges and we expect that to ramp over the summer months. Congratulations happened. So it's definitely a watch item we need to we.
We need to hire we need to train and we need to be productive so still comfortable with our guidance, but labor is a watch item for us as we move through the year.
And just a follow up is it more about I mean, I would think people come in in the summer of <unk>.
There's probably only so much contribution they can make them.
And so.
Is this really more about kind of setting up for <unk>.
'twenty three.
And then to the extent to the extent you have an idea of how you're set up for 'twenty three that would affect your.
The risk tolerance that you have in here.
Estimates at completion.
Yes, well when they come out of the apprentice school. They are ready to go and if it could come out of the community colleges in the high schools, where we have programs in place whether theyre learning theyre going to fill a critical role within the shipyard now they're not going to be first class.
Shipbuilders right away, but theyre going to be earning theyre going to be making progress on executing its all I'll comment on our shipbuilding teams didn't make sure theyre trained up and they've got the right mastership when we do that very well so yes, they're not going to be first class shipbuilders coming out of the out of the gate, but we expect them to contribute.
Okay. Thanks very much.
Sure.
Thank you. Our next question comes from Doug Harned from Bernstein. Your line is now open. Please go ahead with your question.
Thank you good morning.
I would like to.
I'd like to.
Just spend a little bit of time on on Virginia class I mean, it was identified as a margin headwind.
In this quarter and.
With Newport News, if I go back to when you had the issues back in 2020, and it was the Montana, The New Jersey and Massachusetts.
I mean, the Montana deliver in new Jersey slowed off.
And one of the Big issues. Then was this question of lots of new people in a complex environment and needing to train them and so some of the issues you had them were attributed to that.
If you look at the situation on Virginia class today.
Where does it stand because it seems that you might run into some of these similar issues as you try and bring a lot of new people in.
So how are you looking at Virginia class performance right now.
Yes, Doug it's a good question and I appreciate it remember the issues. We had previously and we were in the heart of Covid right and we had a significant outs and significant.
Labor issues within Newport News, which drove which drove a lot of that but what we're seeing now is it's interesting we talk about zero production a lot, but the Vcs program is really a production line.
And when you Miss you Miss schedule, there is a knock on effect.
So.
As you know we missed a couple of schedules at the end of the year that drifted into Q1, we've accomplished those.
And it's really had an impact on on the future shifts and so we had to deal with that in the quarter, we reassessed our risk.
And you'll see the results in Q1.
<unk> said there is some stability in that workforce now the tenants has recovered.
We're a bit short of our hiring plans, but it is not like what happened during COVID-19. The team is very focused on meeting their interim milestones working offers operating system very diligently.
A lot of confidence that there's actually some upside as we move through the next couple of years on the Vcs program.
So so if you look at kind of going forward you are finishing the Massachusetts your own your own boats in the Arkansas and then you'll go into block five.
How do you how do you how should we think about.
Kind of performance and margin trajectory as you move through those as well as the work that youre doing for the electric boat.
<unk> for electric boat I mean, how.
How is this risk retirement likely to move in in your thinking.
Yes.
Sure.
We've assessed.
Based on the risk on not only block forward with block five boats.
And reset aace's based upon how we.
How we project them to perform over the life of both of those blocks. So we don't necessarily get margin guidance.
Guidance.
At a program level, but I didn't see after resetting that risk.
On block five going forward there is potential for upside if we're able to meet our milestones.
Okay. Okay very good thank you.
Thanks, Doug.
Sure.
Yes.
Thank you very much. Our next question comes from Myles Walton from UBS. Michael Your line is now open. Please go ahead with your question.
Thanks.
Good morning, I wanted to ask about carriers for a second and in particular the $79 73.
On the 79 I think the progress the completion metric you guys provided in the press release every quarter. It really hasnt moved in the last several quarters and I know.
One of the adjustments, which were the single phase delivery, but I don't think that would have played out here in the first quarter. So any reason why there wasn't progress there and then just a comment on the 73 and if the slip to 2023 made any difference for your financials. Thanks.
So I'll take the 70 people on the back end of that.
Right now we're still.
Bringing that ship, Hong and trying to target for year end completion.
EAC practice, we are evaluating some risk to the schedule on that and that was incorporated into the Q1 EAC sure.
Yes, 70, 879 miles, we're absolutely making progress on that ship.
We are heavily into the volume part of that shift completing compartments. If you walk through the you walked through the basin that ship right now Youll see a lot of installation of tank, which is a good place to be when you think about an aircraft carrier attacking that volume and then starting to test program I don't know specifically about the math around the around the progress.
Christy ill fill you in on that after the call, but theyre very.
Dedicated in and making progress.
Really on a weekly basis on the aircraft carrier.
So no movement to the expected delivery on that on that vessel.
No absolutely not.
Okay. Thanks.
Yes.
Thank you very much. Our next question comes from Tim Connor from Cowen.
Your line is now open please ask your question.
Hey, Thanks, guys I was wondering if you could refresh us on how your contracts.
Adjust for higher input costs, whether it be steel whether or what have you everything's like you mentioned at the outset.
It is moving up in price.
How do you recover those what does that do to margins is just a pass through where it actually dampens margins. Just if you could walk through the mechanics there. Thanks Charles.
It's Tom Good morning, Yes, so from an inflation perspective, I break that down I know your question is focused just on the existing contracts in hand.
I'll hit that but also now we're watching inflation as it applies to our new <unk>.
Two part answer here, but from the mechanics that we have on how that hits.
Spoken.
I'll talk about this in other earnings calls and it really starts with our understanding of what were buying and how we contract with these contracts being anywhere from four to eight years long long lead contracts upfront.
Understanding.
The material and the bill of materials, we have a very disciplined and dedicated process to make sure that we have live quotes and bids go handful up making sure the quotes.
The procurement side and our soft locked into the contract.
We are starting.
The endpoint so while we have a clear understanding of what we're buying and our tenant lease contracts, we have a good bit.
Our our suppliers, we do run into from time to time.
Forward, where the contracts awarded thanks for purchased after that Andrew.
Commodity buys and we do see increases tied to China on raw materials.
And commodities I will tell you that when we know.
The long lead phase of the contract.
Operator, almost like a cost type contract and are rolling those actual essential construction eventuality.
The construction in water so thats helpful.
Another piece of that is when you look at it youll see in the Q, we kind of break out across the three divisions.
<unk> of cost type versus fixed price contracts from NHI.
Entirely perspective, it's about $52 48 fixed price and cost. So this recruitment dara in the contract type.
Yes.
<unk> technologies is north of 90%.
Newport News is $50 50, so that offset.
Several of our contracts do have EPA clauses, which kind of recognized just things that we don't put on Patrick immediately we have that risk covered with our Mrs.
Estimated cost from.
We see at the time of award.
Actual costs that we pay can get adjusted depending on inflationary indices for the industry. So that helps us out.
On that side as well, even though flexible flexibly.
Flexibly priced contracts.
Does it finish.
Chevron in that so we work ourselves through that as well.
I think the tool set that we have on how we manage our existing contracts as well as the change management process. When we take on new orders to make sure that we maintain the equity of those contracts keeps the Senate relatively safe.
So that's one.
A large majority of the cost of our existing contracts is on the labor side and we have.
Come through.
Union agreements, a full year down at Ingalls and a five year at Newport News, So we understand those costs and theirs.
There is a schedule one of increases and we use that when we.
Put things on contract so I think overall.
<unk>.
Founded process and how we handle it.
Plays well against these inflationary times on the new data I will tell you that we're very we are seeing on new base price increases.
Longer lead times, and we are seeing.
Higher costs.
Year over year.
Sure that we followed that same dedicated process of getting live quotes.
Our customer sets.
Standing of that I mean, there.
They're saying deflationary pressures across.
Across the industry.
And we bring that cost and pricing data.
Valuation and make sure that we strike a reasonable.
Risk balance here.
And inflation against the New awards.
And just the mechanics, if you wouldn't mind on it.
Do you have an EPA you got it.
So is.
Is that just with increased revenue and cost and therefore.
<unk> two.
Profit margins.
Yes, Charles the backend of your question, so with all that as a backdrop.
Mechanics of that obviously you go through.
Disciplined quarterly EAC process.
Costs.
Costs weekly a monthly program obviously.
Obviously, our quarterly EAC process. So we can see how the.
The material is trending both against the existing orders that we have in Cherry Hill.
And any papa requirements.
We'll evaluate that.
<unk> is improving.
<unk> and the associated risks that we thought.
But we're going to be retired for the quarter and the rest of that.
Yes.
The remaining scope on those contracts.
If there is an increase obviously there'll be an increase in costs will run that for us our profit.
Tables.
The booking rate accordingly, so all that gets factored in.
By shifting the pro.
And then it kind of rolls up into our adjustments that you see here.
I guess the portfolio, yes, I'd also add that if there is protection.
An increase in sales without it without the resultant impact on margin. So that does provide us additional protection and thats in our EAC process as well every quarter.
Thanks, guys.
Thanks Scott.
Our next question comes from Robert Spingarn from <unk> Research.
Your line is now open. Please go ahead with your question.
Thank you good morning, Chris covering raw question sort of higher level.
A lot of talk about upside in defense spending from Europe , and while the export opportunity probably isn't great for the shipbuilding side, what kind of products and services from M. T. Do you think will interest European countries.
Yes, that's a really good question, we think about a lot unmanned.
We sold internationally about 30% of our unmanned sales.
Have historically been international to NATO countries.
In nature, and then you think about ISR surveillance.
Big data platforms.
Cyber Intel.
All of that.
As part of emission technologies.
It gets some traction internationally.
So we work on that we're very tactical in how we do that we will make sure the opportunity is valid.
But all of those are our opportunities in Europe , and actually any NATO country actually.
Okay, and then on the domestic side. The Navy leadership has been talking about priorities are as follows.
Our top priority is Columbia class than readiness modernization in reality improvements and then third capacity. So knowing that the commitment to Colombia is rock solid and capacity is really a function of the budgets future budgets. How do we think about <unk> access to the middle part of the readiness and the modernization part and then again how does that tie.
Empty.
Yes, so interesting readiness and modernization empty as very interesting tools related to big data and data analytics that that absolutely support that so it definitely helps provide tools and access for our customer to improve their readiness.
So.
Actually thank you for that question. It's a very interesting thing we're working on with our customer it's all upside right, but it'll just give our customers additional capabilities. So thanks for that.
Chris do you see any timing.
Any visibility on when these things start to come through.
No I think I think unmanned can happen very quickly. The award is small it's very important.
It provides us additional opportunity to sell that internationally. The other stuff, we'll just have to see but I don't see a short term sort of upside related to it.
Got it thank you.
Sure.
Our next question comes from David Strauss from Barclays. David Your line is now open. Please go ahead with your question.
Thanks, Good morning.
Good morning, guys.
Hey, Chris.
It was on the last call you talked about discussion.
Discussions with the Navy in terms of additional.
Additional investment in the shipyards and how that was potentially going to be split and what potentially for the day.
The expected Capex draw down can you just update us on where things stand there.
Yes, we're still working on it I think you saw in the 'twenty three budget.
Additional funding allocated to capital in support of infrastructure in the supply base, we are in discussions with the Navy.
On that now and we'll just we'll just continue to discuss that with them in order to make the investments to support their critical that critical program.
Okay.
And.
Tom.
The working capital side, I think net working capital as a percent of sales you guys calculate it was around 10% this quarter I think that's the highest we've.
<unk> seen in a while even.
Adjusting for typical seasonality can you just talk about.
The working capital trend through the course of this year and again kind of what you're baking into that.
Free cash flow forecast for for 'twenty, three 'twenty four from a working capital perspective. Thanks.
Sure David Yes, so it was 10% so and Thats just upfront.
Timing on the on the working capital that we have with the timing on the receipts for the accounts receivable.
Our collections to payments with the accounts payable.
Dissipated would be high on the front end right now a little bit of a draw as we talked about these milestones just kind of have just stretched a little bit on the Vcs program and as we work through the back half of the year I see that.
We will we will finish the 2020 year out higher than we were in 2021, but then it starts to come back and break our way in 2023.
Okay.
What are you targeting from a networking capital as a percent of sales in 'twenty three 'twenty four specifically.
So we don't give guidance specifically on that.
You're talking about a normal range of our expectations due to the 6% to 8%.
10%.
Hi on that range, but not unexpected, but how we saw the quarter playing out and then the impact that.
We've discussed here.
I would get back more into that range.
23 23.
Yes.
Help on cash and then for 2000 and it's about neutral 'twenty three 'twenty four we've talked about more ship milestones and deliveries in the out years and that helps.
Yeah.
To facilitate that working capital coming down.
From 10% and be more internet six 6% to 8% range.
Alright, thanks very much.
Mhm.
Thank you very much and our next question comes from George shopping from Sharp Eye Research George Your line is now open. Please go ahead with your question.
Yes.
Tom I was wondering if you could just provide what the ea's net EAC where in the quarter by.
Decision.
Sure Yeah on the net EAC George was $445 million.
Split of that was.
90%, Ingalls and 10% admission technologies.
Just wanted to touch.
I'm sorry.
Yes.
Say that again I missed the last comment yes.
Yes. It was 107 favorable 62 unfavorable four net of 45.
Okay, and then you had said that the LTV.
88 was a major help in the quarter.
Is that a singled out number in the queue or no.
Youll see that for.
$17 million favorable consumer Joseph Yes, and also it was a clean DDG 50 or delivery that we had in Q1, we usually.
Excellent.
Deliveries the following quarter will do a hot wash the remaining work and as such.
Sometimes some profitability it will happen in the next quarter. So that's been pulled into this quarter too that kind of factored in some of my opening remarks of the 7% shipbuilding expectation in Q2, as we pull that margin into the Q1 timeframe.
And then if the second quarter was 7% it would imply that the third and the fourth quarter's got to average at.
At least as good as the first quarter, if not a little better. So if you had this one time major benefit in the first quarter. What are the benefits you get into Q3 or Q4 to get that margin better than eight 3%.
<unk> had the year of $8 to $8 one.
So we have several milestones on the back half of the year we continue.
<unk> processed on the <unk> program milestones that we have on those shifts.
And.
As we bring people back on board.
Sales will rise with a margin perspective, and there's some efficiency gains on that.
So.
We still feel comfortable with the 88, 1% we had highlighted at the beginning of the on the February call that it would be light upfront and both the sales and the margin will come out on the back half of the year.
Okay.
Thanks very much.
Thank you very much I am not showing any further questions. At this time I would now like to hand, the call back over to Mr. Cashman for any closing remarks.
Thank you again for joining us on today's call and your interest in HII has appreciated we welcome your continued engagement and feedback we'll see out there.
Okay.
Sure.