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

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Chris Kastner: Not really. I will — Mission Technologies is pretty stable, adding throughout the year with really industry standard attrition rates in a very competitive market. We plan to add about 5,000 shipbuilders throughout the year and then there are some positive indications in not only hiring, but also over time, attendance and attrition. So there are some positive indicators. I wouldn’t necessarily relate it back to margin. Newport News will hire more this year than Ingalls. We don’t break that out separately. But I wouldn’t necessarily relate that back to margin, no.

Robert Spingarn: Okay. And then just as a follow-up to that, could there be upside to the 3% topline growth if Congress appropriated more funds to expand shipyard capacity and the fund training and apprenticeship programs?

Chris Kastner: Yeah. But the constraint is labor. Our shipyards are facilitized to grow in excess really of that 3% and — but we need to be conservative and how we project — how we are going to add labor over the next few years. But is there upside? Yes, of course.

Robert Spingarn: Yeah. I guess I am asking you is can they help you attract labor faster and train labor faster. The benefit to get the ship…

Chris Kastner: Yeah. Interesting enough, there’s a lot of initiatives both at the state and federal level to help in workforce development. And we are actively communicating with both states that are involved in that and the federal government for infrastructure and workforce development support.

Robert Spingarn: Okay. Thanks, Chris.

Chris Kastner: Sure.

Operator: Thank you. Our next question comes from Scott Deuschle from Credit Suisse. Please go ahead. Your line is now open.

Scott Deuschle: Hey. Good morning.

Chris Kastner: Good morning, Scott.

Scott Deuschle: Tom, did CVN 79 book a net-net negative EAC in Q4? Just trying to interpret what’s in the press release on the year-over-year comparison there? Thanks.

Tom Stiehle: Yeah. So we don’t provide the actual margin booking rates to step up, so step backs on any individual program. I would tell you — to give you some color on that, on the adjustments, there was nothing significant either are up or down on any individual program. So the answer to your question is no on that. I would tell you that the effect that you are seeing at Newport News there is, although it’s net down as far as the adjustments it has, it was really a function of not having the upside that we would normally see. So if you kind of range bound to what we saw on the downside of EAC adjustments, because the timing on the milestones and just where they saw a little bit of a draw short on labor, a little bit of pressure on overhead costs, overhead absorption is a little bit higher on all the programs there and CVN 79 is not immune to that effect as well. But it was not significant enough as you see it’s not called out in the K.

Chris Kastner: Scott, I’d also add that

Scott Deuschle: Okay.

Chris Kastner: CVN 79 had a pretty solid year. They met their compartment commitments for the year, EMALS is essentially built out. It’s pretty amazing. I was up there last week and the equipment is in and they started that test program. The topside test program has begun. So they have got a bit of momentum. I hate to use football reference, but the big game is this weekend, but 79 is what I call four yards in a cloud of dust, right? They are — every week they are executing on a lot of volume work. They met their commitments for last year. They have got a lot of work in front of them, but I have high hopes for success on that program.

Scott Deuschle: Great. And then, Chris, what were the, sorry, if I missed this, but what were the gross and net headcount additions in the Shipbuilding business in 2022 and then just curious on how attrition trended in Q4 sequentially relative to Q3? Thank you.

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