Huntington Ingalls Industries, Inc. (NYSE:HII) Q4 2022 Earnings Call Transcript

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Tom Stiehle: Sure. If I can hop on the back of that, right? So we talked about Block IV here and what we took back in Q2 of 2020, I would tell you the portfolio with Colombia that’s coming on board and sales. So that’s a new stock program that’s booking along right now across that contract. I have some change, change in unadjudicated change that still has to get proposed and pushed through the system. So that’s going to increase, we are very conservative on that until those unadjudicated changes are definitized. That’s boat RC 73 and 74 as is in infancy too both cost type contracts. So the portfolio just has a little bit higher level of that as we see it. And then, lastly, I think, as we go forward, burn down risk as 79 marches to its completion, as Chris said earlier, there’s a potential with good performance there for additional upside here.

So I think we just find ourselves in a situation where the ships are right now, not too many milestones, a little bit of drag on overhead, down on labor. And I think we are booking prudently to conservatively right now as we want to see us pushing ships over the goal line. Those deliveries I mentioned is two each for 2023 and 2024, and I think, that will assist in the margin list, as well as Block IV gets small in the portfolio mix with the potential of Block V as we move forward. I think the Columbia program will mature and with 73 out of here at this year, a 74 focus and maturity will assist the portfolio of profitability as well.

Doug Harned: So if I have it right, then Block IV, the overhang of these past charges is a contributor, but there’s still other — there are a number of other things you just raised. So it’s sort of a blend of things that you are working through. I just wondered General Dynamics when they did their Q4 call and highlighted the number of issues that somewhat similar related to labor across shipyards and they did mention Virginia-class. Can you talk about how you are working with electric boat sort of together to deal with these problems and if they have been changed over time and how the — how you work together and work through attrition issues

Chris Kastner: Yeah.

Doug Harned: inflation, all these sorts of things.

Chris Kastner: Thank you for that question, Doug. It’s an important one. The Newport News and EV team, they work very closely together in understanding when the work, what work and how that work gets executed. So there could be movement of work between the yards where it’s most efficiently done if there’s labor issues and they are working very closely together. Their objectives are completely aligned to deliver all the Block IV boats. And I would add also the Navy is engaged as well. It’s all from the deck plate to the senior executive force. Everybody is all in and all of our objectives are aligned to get those Block IV boats delivered. And I will say that we are fully staffed on Block IV and Colombia, and we are working very hard on execution there. And not only is a Newport News working between each other, but working to ensure that any sort of outsourcing is effectively managed to ensure that we get — that we meet our production schedules.

Doug Harned: Okay. Very good. Thank you.

Chris Kastner: Sure.

Operator: Thank you. Our next question comes from Gautam Khanna from Cowen. Please go ahead. Your line is now open.

Chris Kastner: Gautam, are you out there. Are you on mute, Gautam?

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