8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________ 

FORM 8-K

 _____________________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

November 3, 2016

  _____________________________________

HUNTINGTON INGALLS INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 _____________________________________

DELAWARE	1-34910	90-0607005
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
4101 Washington Avenue, Newport News, Virginia		23607
(Address of principal executive offices)		(Zip Code)

(757) 380-2000

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On November 3, 2016, Huntington Ingalls Industries, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1 hereto. Also furnished as Exhibit 99.2 is the corporation’s earnings presentation for its third quarter 2016 earnings release conference call.

Item 9.01.	Financial Statements and Exhibits.
(d)	Exhibits.

Exhibit No.	Description
99.1	Press Release dated November 3, 2016.
99.2	Earnings Presentation dated November 3, 2016.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	HUNTINGTON INGALLS INDUSTRIES, INC.
Date: November 3, 2016	By:	/s/ Christopher D. Kastner
		Christopher D. Kastner
		Executive Vice President, Business Management and Chief Financial Officer

EX-99.1

Exhibit 99.1 News Release

Contacts:

Jerri Fuller Dickseski (Media)

jerri.dickseski@hii-co.com

757-380-2341

Dwayne Blake (Investors)

dwayne.blake@hii-co.com

757-380-2104

Huntington Ingalls Industries Reports Third Quarter 2016 Results

• Revenues were $1.68 billion

• Total operating margin was 10.4%

• Segment operating margin was 8.3%

• Diluted earnings per share was $2.27

• Cash and cash equivalents at the end of the quarter were $957 million

NEWPORT NEWS, Va. (Nov. 3, 2016) - Huntington Ingalls Industries (NYSE:HII) reported third quarter 2016 revenues of $1.68 billion, down 6.5 percent from the same period last year. Diluted earnings per share in the quarter was $2.27, compared to $2.29 in the same period of 2015.

Operating income in the quarter was $175 million, compared to $200 million in the same period last year. Operating margin in the quarter was 10.4 percent, compared to 11.1 percent in the same period last year. These decreases were driven by lower volumes and lower risk retirements in shipbuilding, partially offset by the favorable FAS/CAS Adjustment.

New business awards for the quarter were approximately $1.2 billion, bringing total backlog to $20.0 billion as of Sept. 30, 2016.

“Our third quarter financial results reflect solid overall operating performance, driven by program execution at Ingalls,” said Mike Petters, HII’s president and CEO. “Given our strong year-to-date performance, and despite challenges at Newport News, we expect 2016 revenues and operating margin to be relatively similar to 2015.”

Results of Operations

	Three Months Ended								Nine Months Ended
	September 30								September 30
(in millions, except per share amounts)	2016			2015			% Change		2016			2015			% Change
Sales and service revenues	$	1,683		$	1,800		(6.5	)%	$	5,146		$	5,115		0.6	%
Operating income	175			200			(12.5	)%	590			625			(5.6	)%
Operating margin %	10.4		%	11.1		%	(71) bps		11.5		%	12.2		%	(75) bps
Segment operating income1	140			172			(18.6	)%	490			543			(9.8	)%
Segment operating margin %1	8.3		%	9.6		%	(124) bps		9.5		%	10.6		%	(109) bps
Net earnings	107			111			(3.6	)%	376			354			6.2	%
Diluted earnings per share	$	2.27		$	2.29		(0.9	)%	$	7.93		$	7.28		8.9	%
Weighted-average diluted shares outstanding	47.2			48.4					47.4			48.6
Adjusted sales and service revenues2	$	1,683		$	1,800		(6.5	)%	$	5,146		$	5,128		0.4	%
Adjusted operating income2,3	175			200			(12.5	)%	590			548			7.7	%
Adjusted operating margin %2,3	10.4		%	11.1		%	(71) bps		11.5		%	10.7		%	78 bps
Adjusted segment operating income1,2,3	140			172			(18.6	)%	490			466			5.2	%
Adjusted segment operating margin %1,2,3	8.3		%	9.6		%	(124) bps		9.5		%	9.1		%	43 bps
Adjusted net earnings4	83			96			(13.5	)%	306			263			16.3	%
Adjusted diluted earnings per share4	$	1.76		$	1.98		(11.1	)%	$	6.45		$	5.41		19.2	%
1 Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for reconciliations.
2 Non-GAAP measures that exclude the impact of an insurance litigation settlement at the Ingalls segment in second quarter 2015. See Exhibit B for reconciliations.
3 Non-GAAP measures that exclude the impact of a goodwill impairment charge at the Other segment in second quarter 2015. See Exhibit B for reconciliations.
4 Non-GAAP measures that exclude the after-tax impact of the FAS/CAS Adjustment in 2016 and 2015, the after-tax impact of the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment, each in second quarter 2015, and the after-tax impact of the loss on the early extinguishment of debt in the third quarter of 2015. See Exhibit B for reconciliations.

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 2 of 15

Segment Operating Results

Ingalls Shipbuilding

	Three Months Ended								Nine Months Ended
	September 30								September 30
($ in millions)	2016			2015			% Change		2016			2015			% Change
Revenues	$	577		$	593		(2.7	)%	$	1,748		$	1,608		8.7	%
Segment operating income1	66			77			(14.3	)%	236			320			(26.3	)%
Segment operating margin %1	11.4		%	13.0		%	(155) bps		13.5		%	19.9		%	(640) bps
Adjusted revenues1,2	577			593			(2.7	)%	1,748			1,621			7.8	%
Adjusted segment operating income1,2	66			77			(14.3	)%	236			184			28.3	%
Adjusted segment operating margin %1,2	11.4		%	13.0		%	(155) bps		13.5		%	11.4		%	215 bps
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
2 Non-GAAP measures that exclude the impact of the insurance litigation settlement in second quarter 2015. See Exhibit B for reconciliations.

Ingalls revenues for the third quarter decreased $16 million, or 2.7 percent, from the same period in 2015, due to lower revenues in Amphibious Assault Ships and the Legend-class National Security Cutter (NSC) program, partially offset by higher revenues in Surface Combatants. Lower Amphibious Assault Ships revenues were due to the delivery of LPD-26 USS John P. Murtha in the second quarter of 2016 and decreased volume on LPD-27 Portland, partially offset by increased volume on LPD-28 Fort Lauderdale. Lower NSC program revenues were due to the delivery of NSC-5 USCGC James in 2015 and decreased volume on NSC-6 Munro. Higher Surface Combatant revenues were primarily due to increased volumes on DDG-121 Frank E. Petersen Jr. and DDG-123 Lenah H. Sutcliffe Higbee, partially offset by decreased volume on DDG-113 John Finn.

Ingalls segment operating income for the third quarter was $66 million, a decrease of $11 million from the same period last year. Segment operating margin in the quarter was 11.4 percent, compared to 13.0 percent in the same period last year. These decreases were primarily due to lower risk retirement on the LHA-6 America-class program.

Key Ingalls milestones for the quarter:

• Awarded an $88.2 million contract to purchase long-lead material for a ninth NSC

• Awarded two contracts totaling $32.8 million for design work on the amphibious warfare ship replacement known as LX(R)

• Awarded a $14 million contract to overhaul DDG-61 USS Ramage

• Completed builder's sea trials for NSC-6 Munro

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 3 of 15

Newport News Shipbuilding

	Three Months Ended								Nine Months Ended
	September 30								September 30
($ in millions)	2016			2015			% Change		2016			2015			% Change
Revenues	$	1,072		$	1,177		(8.9	)%	$	3,315		$	3,404		(2.6	)%
Segment operating income1	79			100			(21.0	)%	270			302			(10.6	)%
Segment operating margin %1	7.4		%	8.5		%	(113) bps		8.1		%	8.9		%	(73) bps
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Newport News revenues for the third quarter decreased $105 million, or 8.9 percent, from the same period in 2015, primarily driven by lower revenues in Aircraft Carriers and Submarines.Lower Aircraft Carriers revenues were due to decreased volumes on the construction contract for CVN-78 Gerald R. Ford and the execution contract for the CVN-72 USS Abraham Lincoln refueling and complex overhaul (RCOH), partially offset by increased volumes on the construction contract for CVN-79 John F. Kennedy and the advance planning contract for the CVN-73 USS George Washington RCOH. Lower Submarines revenues related to the SSN-774 Virginia-class submarine (VCS) program were due to decreased volumes on Block III boats, partially offset by increased volumes on Block IV boats.

Newport News segment operating income for the third quarter was $79 million, a decrease of $21 million from the same period last year. Segment operating margin was 7.4 percent for the quarter, compared to 8.5 percent in the same period last year. These decreases were due to lower risk retirement on the VCS program, as well as the resolution of outstanding contract changes on the CVN-71 USS Theodore Roosevelt RCOH in the third quarter of 2015.

Key Newport News milestones for the quarter:

• Awarded a contract with a potential value of $400 million over the next five years to perform repair work on in-service nuclear-powered submarines, special mission submersibles, moored training ships and submarine support facilities

• Awarded a $195 million contract modification to continue advance planning for the RCOH of CVN-73 USS George Washington

• Awarded a $109 million contract to provide engineering, design, logistics and other support for the U.S. Navy's Los Angeles-class, Seawolf-class, Virginia-class and Ohio-class submarines

• Awarded a $52 million contract for repair and modernization work on CVN-75 USS Harry S. Truman

• Awarded a $17.7 million contract for planning and maintenance work on SSN-725 USS Helena

• Redelivered SSN-785 USS John Warner to the U.S. Navy following its post-shakedown availability (PSA), the first PSA for a Virginia-class submarine conducted by Newport News

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 4 of 15

Other

	Three Months Ended								Nine Months Ended
	September 30								September 30
($ in millions)	2016			2015			% Change		2016			2015			% Change
Revenues	$	33		$	30		10.0	%	$	84		$	105		(20.0	)%
Segment operating (loss)1	(5		)	(5		)	—	%	(16		)	(79		)	(79.7	)%
Segment operating margin %1	(15.2		)%	(16.7		)%	152 bps		(19.0		)%	(75.2		)%	NM3
Adjusted segment operating (loss)1,2	(5		)	(5		)	—	%	(16		)	(20		)	(20.0	)%
Adjusted segment operating margin %1,2	(15.2		)%	(16.7		)%	152 bps		(19.0		)%	(19.0		)%	0 bps
1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.
2 Non-GAAP measures that exclude the impact of a goodwill impairment charge in second quarter 2015. See Exhibit B for reconciliation.
3 NM means the % change is "not meaningful".

Revenues in the Other segment for the third quarter increased $3 million, or 10.0 percent, from the same period last year, due to higher volumes in oil and gas services. Segment operating loss for the quarter was $5 million, which was consistent with third quarter 2015.

About Huntington Ingalls Industries

Huntington Ingalls Industries is America’s largest military shipbuilding company and a provider of engineering, manufacturing and management services to the nuclear energy, oil and gas markets. For more than a century, HII’s Newport News and Ingalls shipbuilding divisions in Virginia and Mississippi have built more ships in more ship classes than any other U.S. naval shipbuilder. Headquartered in Newport News, Virginia, HII employs nearly 35,000 people operating both domestically and internationally. For more information, please visit www.huntingtoningalls.com.

Conference Call Information

Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. ET today. A live audio broadcast of the conference call and supplemental presentation will be available on the investor relations page of the company's website: www.huntingtoningalls.com. A telephone replay of the conference call will be available from 12 noon today through Thursday, Nov. 10 by calling toll-free (855) 859-2056 or (404) 537-3406 and using conference ID 91634496.

Forward-Looking Statements

Statements in this release, other than statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Factors that may cause such differences include: changes in government and customer priorities and requirements (including government budgetary constraints, shifts in defense spending, and changes in customer short-range and long-range plans); our ability to obtain new contracts, estimate our future contract costs and perform our contracts effectively; changes in procurement processes and government regulations and our ability to comply with such requirements; our ability to deliver our products and services at an affordable life cycle cost and compete within our markets; natural disasters; adverse

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 5 of 15

economic conditions in the United States and globally; changes in key estimates and assumptions regarding our pension and retiree health care costs; security threats, including cyber security threats, and related disruptions; and other risk factors discussed in our filings with the U.S. Securities and Exchange Commission. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business, and we undertake no obligation to update any forward-looking statements. You should not place undue reliance on any forward-looking statements that we may make. This release also contains non-GAAP financial measures and includes a GAAP reconciliation of these financial measures. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures.

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 6 of 15

Exhibit A: Financial Statements

HUNTINGTON INGALLS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended September 30						Nine Months Ended September 30
(in millions, except per share amounts)	2016			2015			2016			2015
Sales and service revenues
Product sales	$	1,327		$	1,461		$	4,120		$	4,137
Service revenues	356			339			1,026			978
Sales and service revenues	1,683			1,800			5,146			5,115
Cost of sales and service revenues
Cost of product sales	1,059			1,164			3,241			3,121
Cost of service revenues	308			292			887			846
Income (loss) from operating investments, net	6			6			7			9
General and administrative expenses	147			150			435			473
Goodwill impairment	—			—			—			59
Operating income (loss)	175			200			590			625
Other income (expense)
Interest expense	(19		)	(25		)	(56		)	(73		)
Other, net	1			—			(1		)	—
Earnings (loss) before income taxes	157			175			533			552
Federal income taxes	50			64			157			198
Net earnings (loss)	$	107		$	111		$	376		$	354
Basic earnings (loss) per share	$	2.28		$	2.31		$	8.00		$	7.33
Weighted-average common shares outstanding	46.9			48.0			47.0			48.3
Diluted earnings (loss) per share	$	2.27		$	2.29		$	7.93		$	7.28
Weighted-average diluted shares outstanding	47.2			48.4			47.4			48.6
Dividends declared per share	$	0.50		$	0.40		$	1.50		$	1.20
Net earnings (loss) from above	$	107		$	111		$	376		$	354
Other comprehensive income (loss)
Change in unamortized benefit plan costs	20			21			59			65
Other	1			(7		)	1			(7		)
Tax benefit (expense) for items of other comprehensive income	(8		)	(4		)	(23		)	(22		)
Other comprehensive income (loss), net of tax	13			10			37			36
Comprehensive income (loss)	$	120		$	121		$	413		$	390

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 7 of 15

HUNTINGTON INGALLS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

($ in millions)	September 30, 2016			December 31, 2015
Assets
Current Assets
Cash and cash equivalents	$	957		$	894
Accounts receivable, net	1,046			1,074
Inventoried costs, net	268			285
Prepaid expenses and other current assets	73			31
Total current assets	2,344			2,284
Property, plant, and equipment, net of accumulated depreciation of $1,592 million as of 2016 and $1,489 million as of 2015	1,841			1,827
Goodwill	956			956
Other intangible assets, net of accumulated amortization of $481 million as of 2016 and $465 million as of 2015	479			495
Deferred tax asset	253			336
Miscellaneous other assets	135			126
Total assets	$	6,008		$	6,024
Liabilities and Stockholders' Equity
Current Liabilities
Trade accounts payable	$	293		$	317
Accrued employees’ compensation	211			215
Current portion of postretirement plan liabilities	143			143
Current portion of workers’ compensation liabilities	227			227
Advance payments and billings in excess of revenues	99			125
Other current liabilities	255			247
Total current liabilities	1,228			1,274
Long-term debt	1,277			1,273
Pension plan liabilities	866			1,001
Other postretirement plan liabilities	424			423
Workers’ compensation liabilities	462			460
Other long-term liabilities	99			103
Total liabilities	4,356			4,534
Commitments and Contingencies
Stockholders’ Equity
Common stock, $0.01 par value; 150 million shares authorized; 52.6 million shares issued and 46.5 million shares outstanding as of September 30, 2016, and 52.0 million shares issued and 46.9 million shares outstanding as of December 31, 2015	1			1
Additional paid-in capital	1,949			1,978
Retained earnings (deficit)	1,154			848
Treasury stock	(644		)	(492		)
Accumulated other comprehensive income (loss)	(808		)	(845		)
Total stockholders’ equity	1,652			1,490
Total liabilities and stockholders’ equity	$	6,008		$	6,024

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 8 of 15

HUNTINGTON INGALLS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30
($ in millions)	2016			2015
Operating Activities
Net earnings (loss)	$	376		$	354
Adjustments to reconcile to net cash provided by (used in) operating activities
Depreciation	123			116
Amortization of purchased intangibles	16			19
Amortization of debt issuance costs	4			6
Stock-based compensation	22			29
Deferred income taxes	59			5
Proceeds from insurance settlement related to investing activities	—			(21		)
Goodwill impairment	—			59
Loss on early extinguishment of debt	—			4
Change in
Accounts receivable	28			(245		)
Inventoried costs	17			31
Prepaid expenses and other assets	(51		)	(39		)
Accounts payable and accruals	(42		)	108
Retiree benefits	(75		)	(1		)
Other non-cash transactions, net	—			3
Net cash provided by (used in) operating activities	477			428
Investing Activities
Additions to property, plant, and equipment	(145		)	(86		)
Acquisitions of businesses, net of cash received	—			(6		)
Proceeds from disposition of assets	4			32
Proceeds from insurance settlement related to investing activities	—			21
Net cash provided by (used in) investing activities	(141		)	(39		)
Financing Activities
Repayment of long-term debt	—			(395		)
Debt issuance costs	—			(9		)
Dividends paid	(70		)	(58		)
Repurchases of common stock	(152		)	(192		)
Employee taxes on certain share-based payment arrangements	(51		)	(54		)
Net cash provided by (used in) financing activities	(273		)	(708		)
Change in cash and cash equivalents	63			(319		)
Cash and cash equivalents, beginning of period	894			990
Cash and cash equivalents, end of period	$	957		$	671
Supplemental Cash Flow Disclosure
Cash paid for income taxes	$	198		$	210
Cash paid for interest	$	36		$	68
Non-Cash Investing and Financing Activities
Capital expenditures accrued in accounts payable	$	11		$	3

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 9 of 15

Exhibit B: Non-GAAP Measures Definitions & Reconciliations

We make reference to “segment operating income (loss),” “segment operating margin,” “adjusted sales and service revenues,” “adjusted segment operating income (loss),” “adjusted segment operating margin,” “adjusted operating income,” “adjusted operating margin,” “adjusted net earnings,” and “adjusted diluted earnings per share."

We internally manage our operations by reference to "segment operating income (loss)" and "segment operating margin," which are not recognized measures under GAAP. When analyzing our operating performance, investors should use segment operating income (loss) and segment operating margin in addition to, and not as alternatives for, operating income and operating margin or any other performance measure presented in accordance with GAAP. They are measures that we use to evaluate our core operating performance. We believe that segment operating income (loss) and segment operating margin reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. We believe these measures are used by investors and are a useful indicator to measure our performance. Because not all companies use identical calculations, our presentation of segment operating income (loss) and segment operating margin may not be comparable to similarly titled measures of other companies.

Adjusted sales and service revenues, adjusted operating income, adjusted operating margin, adjusted segment operating income (loss), adjusted segment operating margin, adjusted net earnings and adjusted diluted earnings per share are not measures recognized under GAAP. They should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. We believe these measures are useful to investors because they exclude items that do not reflect our core operating performance. They may not be comparable to similarly titled measures of other companies.

Segment operating income (loss) is defined as operating income (loss) for the relevant segment(s) before the FAS/CAS Adjustment and deferred state income taxes.

Segment operating margin is defined as segment operating income (loss) as a percentage of sales and service revenues.

Adjusted sales and service revenues is defined as sales and service revenues adjusted for the impact of the insurance litigation settlement at the Ingalls segment in second quarter 2015.

Adjusted segment operating income (loss) is defined as segment operating income (loss) adjusted for the impacts of the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment in second quarter 2015.

Adjusted segment operating margin is defined as adjusted segment operating income (loss) as a percentage of adjusted sales and service revenues.

Adjusted operating income is defined as operating income adjusted for the impacts of the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment, each in second quarter 2015.

Adjusted operating margin is defined as adjusted operating income as a percentage of adjusted sales and service revenues.

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 10 of 15

Adjusted net earnings is defined as net earnings adjusted for the after-tax impacts of: the loss on early extinguishment of debt in third quarter 2015, the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment, each in second quarter 2015; and the FAS/CAS Adjustment.

Adjusted diluted earnings per share is defined as adjusted net earnings divided by the weighted-average diluted common shares outstanding.

FAS/CAS Adjustment is defined as the difference between our pension and postretirement plan expense under GAAP Financial Accounting Standards and the same expense under U.S. Cost Accounting Standards (CAS). Our pension and postretirement plan expense is charged to our contracts under CAS.

Deferred state income taxes are defined as the change in deferred state tax assets and liabilities in the relevant period. These amounts are recorded within operating income, while the current period state income tax expenses are charged to contract costs and included in segment operating income.

We present financial measures adjusted for the FAS/CAS Adjustment and deferred state income tax to reflect the company’s performance based upon the pension costs and state tax expense charged to our contracts under CAS. We use these adjusted measures as internal measures of operating performance and for performance-based compensation decisions.

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 11 of 15

Reconciliation of Segment Operating Income and Segment Operating Margin

	Three Months Ended						Nine Months Ended
	September 30						September 30
($ in millions)	2016			2015			2016			2015
Ingalls revenues	$	577		$	593		$	1,748		$	1,608
Newport News revenues	1,072			1,177			3,315			3,404
Other revenues	33			30			84			105
Intersegment eliminations	1			—			(1		)	(2		)
Sales and Service Revenues	1,683			1,800			5,146			5,115
Segment Operating Income
Ingalls	66			77			236			320
As a percentage of Ingalls revenues	11.4		%	13.0		%	13.5		%	19.9		%
Newport News	79			100			270			302
As a percentage of Newport News revenues	7.4		%	8.5		%	8.1		%	8.9		%
Other	(5		)	(5		)	(16		)	(79		)
As a percentage of Other revenues	(15.2		)%	(16.7		)%	(19.0		)%	(75.2		)%
Segment Operating Income	140			172			490			543
As a percentage of sales and service revenues	8.3		%	9.6		%	9.5		%	10.6		%
Non-segment factors affecting operating income:
FAS/CAS Adjustment	37			27			107			82
Deferred state income taxes	(2		)	1			(7		)	—
Operating Income	175			200			590			625
Interest expense	(19		)	(25		)	(56		)	(73		)
Other, net	1			—			(1		)	—
Federal income taxes	(50		)	(64		)	(157		)	(198		)
Net Earnings	$	107		$	111		$	376		$	354

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 12 of 15

Reconciliation of Adjusted Sales and Service Revenues, Adjusted Segment Operating Income, Adjusted Segment Operating Margin, Adjusted Operating Income and Adjusted Operating Margin

	Three Months Ended						Nine Months Ended
	September 30						September 30
($ in millions)	2016			2015			2016			2015
Ingalls revenues	$	577		$	593		$	1,748		$	1,608
Adjustment for insurance litigation settlement	—			—			—			13
Adjusted Ingalls revenues	577			593			1,748			1,621
Newport News revenues	1,072			1,177			3,315			3,404
Other revenues	33			30			84			105
Intersegment eliminations	1			—			(1		)	(2		)
Adjusted Sales and Service Revenues	$	1,683		$	1,800		$	5,146		$	5,128
Operating income	$	175		$	200		$	590		$	625
As a percentage of sales and service revenues	10.4		%	11.1		%	11.5		%	12.2		%
Non-segment factors affecting operating income:
FAS/CAS Adjustment	(37		)	(27		)	(107		)	(82		)
Deferred state income taxes	2			(1		)	7			—
Unadjusted Segment Operating Income	$	140		$	172		$	490		$	543
As a percentage of sales and service revenues	8.3		%	9.6		%	9.5		%	10.6		%
Adjustments affecting segment operating income (loss):
Ingalls segment operating income	$	66		$	77		$	236		$	320
Adjustment for insurance litigation settlement	—			—			—			(136		)
Adjusted Ingalls segment operating income	66			77			236			184
As a percentage of Ingalls adjusted revenues	11.4		%	13.0		%	13.5		%	11.4		%
Newport News segment operating income	79			100			270			302
As a percentage of Newport News revenues	7.4		%	8.5		%	8.1		%	8.9		%
Other segment operating (loss)	(5		)	(5		)	(16		)	(79		)
Adjustment for goodwill impairment	—			—			—			59
Adjusted Other segment operating (loss)	(5		)	(5		)	(16		)	(20		)
As a percentage of Other revenues	(15.2		)%	(16.7		)%	(19.0		)%	(19.0		)%
Adjusted Segment Operating Income	$	140		$	172		$	490		$	466
As a percentage of adjusted sales and service revenues	8.3		%	9.6		%	9.5		%	9.1		%
Operating income	$	175		$	200		$	590		$	625
As a percentage of sales and service revenues	10.4		%	11.1		%	11.5		%	12.2		%
Adjustment for insurance litigation settlement	—			—			—			(136		)
Adjustment for goodwill impairment	—			—			—			59
Adjusted Operating Income	$	175		$	200		$	590		$	548
As a percentage of adjusted sales and service revenues	10.4		%	11.1		%	11.5		%	10.7		%

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 13 of 15

Reconciliation of Adjusted Net Earnings

	Three Months Ended						Nine Months Ended
	September 30						September 30
($ in millions)	2016			2015			2016			2015
Net Earnings	$	107		$	111		$	376		$	354
After-tax adjustment for insurance litigation settlement (1)	—			—			—			(88		)
After-tax adjustment for goodwill impairment charge (2)	—			—			—			47
After-tax adjustment for loss on early extinguishment of debt (3)	—			3			—			3
After-tax adjustment for FAS/CAS Adjustment (4)	(24		)	(18		)	(70		)	(53		)
Adjusted Net Earnings	$	83		$	96		$	306		$	263

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 14 of 15

Reconciliation of Adjusted Diluted Earnings per Share

	Three Months Ended						Nine Months Ended
	September 30						September 30
(in millions, except for per share amounts)	2016			2015			2016			2015
Diluted earnings per share	$	2.27		$	2.29		$	7.93		$	7.28
After-tax insurance litigation settlement per share (1)	—			—			—			(1.81		)
After-tax impairment of goodwill per share (2)	—			—			—			0.97
After-tax loss on early extinguishment of debt per share(3)	—			0.06			—			0.06
After-tax FAS/CAS Adjustment per share (4)	(0.51		)	(0.37		)	(1.48		)	(1.09		)
Adjusted Diluted EPS	$	1.76		$	1.98		$	6.45		$	5.41
(1) Insurance litigation settlement	—			—			—			(136		)
Tax effect at 35% statutory rate*	—			—			—			48
After-tax effect	—			—			—			(88		)
Weighted-Average Diluted Shares Outstanding	47.2			48.4			47.4			48.6
Per share impact**	—			—			—			(1.81		)
(2) Goodwill impairment charge	—			—			—			59
Discrete federal tax impact*	—			—			—			(12		)
After-tax effect	—			—			—			47
Weighted-Average Diluted Shares Outstanding	47.2			48.4			47.4			48.6
Per share impact**	—			—			—			0.97
(3) Loss on early extinguishment of debt	—			5			—			5
Tax effect at 35% statutory rate*	—			(2		)	—			(2		)
After-tax effect	—			3			—			3
Weighted-Average Diluted Shares Outstanding	47.2			48.4			47.4			48.6
Per share impact**	—			0.06			—			0.06
(4) FAS/CAS Adjustment	(37		)	(27		)	(107		)	(82		)
Tax effect at 35% statutory rate*	13			9			37			29
After-tax effect	(24		)	(18		)	(70		)	(53		)
Weighted-Average Diluted Shares Outstanding	47.2			48.4			47.4			48.6
Per share impact**	(0.51		)	(0.37		)	(1.48		)	(1.09		)
*The income tax impact is calculated using the tax rate in effect for the relevant non-GAAP adjustment.
**Amounts may not recalculate exactly due to rounding.

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 15 of 15

EX-99.2

Q3 2016 Earnings Presentation November 3, 2016 Mike Petters President and Chief Executive Officer Chris Kastner Executive Vice President, Business Management and Chief Financial Officer

2 Forward-Looking Statements Statements in this presentation, other than statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Factors that may cause such differences include: changes in government and customer priorities and requirements (including government budgetary constraints, shifts in defense spending, and changes in customer short-range and long-range plans); our ability to obtain new contracts, estimate our future contract costs and perform our contracts effectively; changes in procurement processes and government regulations and our ability to comply with such requirements; our ability to deliver our products and services at an affordable life cycle cost and compete within our markets; natural disasters; adverse economic conditions in the United States and globally; changes in key estimates and assumptions regarding our pension and retiree health care costs; security threats, including cyber security threats, and related disruptions; and other risk factors discussed in our filings with the U.S. Securities and Exchange Commission. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business, and we undertake no obligation to update any forward-looking statements. You should not place undue reliance on any forward-looking statements that we may make. This presentation also contains non-GAAP financial measures and includes a GAAP reconciliation of these financial measures. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures.

3 Q3 2016 Highlights *Non-GAAP measure. See appendix for definition and reconciliation.  Revenues were approximately $1.7 billion in the quarter  Diluted EPS was $2.27 in the quarter, compared to $2.29 in Q3 2015.  Strong cash flow generation in the quarter and YTD o Cash from operations was $254 million in the quarter; $477 million YTD o Free cash flow* was $194 million in the quarter; $332 million YTD  Total backlog at the end of the quarter was $20.0 billion o New contract awards in the quarter totaled $1.2 billion

4 Acquisition Transaction Summary Transaction Overview Financial Summary Integration Plan o HII signed a definitive agreement to acquire Camber Corporation, a government services company headquartered in Huntsville, Alabama o The transaction has been approved by HII’s Board of Directors o Purchase price: $380 million includes $25 million of acquired tax benefits o Multiple: 8.6x adjusted EBITDA for fiscal year ended June 30, 2016 o Funding: cash on balance sheet o Expected to be cash flow and EPS accretive in 2017 o Focused on a smooth transition, integration and employee retention o Camber will become a core part of our new reportable operating segment HII Technical Solutions o Subject to certain regulatory approvals and customary closing conditions o Expected to close by the end of 2016 Approvals & Timing

5 Q3 2016 Consolidated Results $1,800 $1,683 $1,500 $1,575 $1,650 $1,725 $1,800 $1,875 Q3 2015 Q3 2016 ($ in m illi on s) Revenues $200 $175 $— $50 $100 $150 $200 $250 Q3 2015 Q3 2016 ($ in m illi on s) Operating Income 11.1 % 10.4 % —% 2.0 % 4.0 % 6.0 % 8.0 % 10.0 % 12.0 % Q3 2015 Q3 2016 Operating Margin $2.29 $2.27 $— $0.50 $1.00 $1.50 $2.00 $2.50 Q3 2015 Q3 2016 Diluted EPS

6 $22 $70 $68 $152 $— $40 $80 $120 $160 $200 $240 Q3 2016 Q3 2016 YTD ($ in m illi on s) Shareholder Distributions Dividends Share Repurchases ($ at cost) Q3 & YTD 2016 Capital Deployment *Non-GAAP measure. See appendix for definition and reconciliation.  Capital expenditures were 3.6% of revenues in the quarter; 2.8% YTD.  We now expect capital spend between 4.0% and 4.5% of revenues for the full year.  Distributed to shareholders, $222 million of the free cash flow* generated YTD. Total $90 Total $222 $254 $477 $60 $145 $194 $332 $— $100 $200 $300 $400 $500 $600 Q3 2016 Q3 2016 YTD ($ in m illi on s) Cash Flow Generation Cash from Operations CAPEX Free Cash Flow*

7 Q3 2016 Ingalls Shipbuilding Results  Ingalls revenues down 2.7% YoY due to decreased volumes on the LPD and NSC programs, partially offset by increased volume on the DDG program.  Segment operating income* and margin* down YoY due to lower volumes on the LPD and NSC programs and lower risk retirement on the LHA-6 America-class program. *Non-GAAP measures. See appendix for definitions and reconciliations. $593 $577 $— $150 $300 $450 $600 $750 Q3 2015 Q3 2016 ($ in m illi on s) Revenues $77 $66 $— $20 $40 $60 $80 $100 Q3 2015 Q3 2016 ($ in m illi on s) Segment Operating Income* 13.0 % 11.4 % —% 3.0 % 6.0 % 9.0 % 12.0 % 15.0 % Q3 2015 Q3 2016 Segment Operating Margin*

8 Q3 2016 Newport News Shipbuilding Results  Newport News revenues down 8.9% YoY due to lower volumes on Aircraft Carriers and the VCS program.  Segment operating income* and margin* down YoY due to lower volumes, lower risk retirement on the VCS program and the Q3 2015 resolution of outstanding contract changes on the CVN-71 RCOH. *Non-GAAP measures. See appendix for definitions and reconciliations. $1,177 $1,072 $— $200 $400 $600 $800 $1,000 $1,200 $1,400 Q3 2015 Q3 2016 ($ in m illi on s) Revenues $100 $79 $— $20 $40 $60 $80 $100 $120 Q3 2015 Q3 2016 ($ in m illi on s) Segment Operating Income* 8.5 % 7.4 % —% 2.0 % 4.0 % 6.0 % 8.0 % 10.0 % Q3 2015 Q3 2016 Segment Operating Margin*

9 (16.7)% (15.2)% (20.0)% (10.0)% —% 10.0 % Segment Operating Margin* $(5) $(5) $(10) $(5) $— $5 ($ in m illi on s) Segment Op rati g Loss* Q3 2016 Other Segment Results Q3 2015 Q3 2016 Q3 2016 Q3 2015  Other revenues up 10% YoY due to higher volumes in oil and gas services.  Adjusted segment operating loss* in the quarter was consistent with Q3 2015. *Non-GAAP measures. See appendix for definitions and reconciliations. $30 $33 $— $10 $20 $30 $40 Q3 2015 Q3 2016 ($ in m illi on s) Revenues

10 2016 Expectation Update *Non-GAAP measure. See appendix for definitions and reconciliations. Revenues Relatively flat to 2015 FAS/CAS Adjustment ~$145 Million Deferred State Income Taxes ~$10 Million Expense Interest Expense ~$75 Million Effective Tax Rate 30% - 32% Range Capital Expenditures 4% - 4.5% of Revenues

11 Appendix

12 Non-GAAP Measures Definitions & Reconciliations We make reference to “segment operating income (loss),” “segment operating margin,” “adjusted sales and service revenues,” “adjusted segment operating income (loss),” “adjusted segment operating margin,” “adjusted operating income,” “adjusted operating margin,” “adjusted net earnings,” and “adjusted diluted earnings per share." We internally manage our operations by reference to "segment operating income (loss)" and "segment operating margin," which are not recognized measures under GAAP. When analyzing our operating performance, investors should use segment operating income (loss) and segment operating margin in addition to, and not as alternatives for, operating income and operating margin or any other performance measure presented in accordance with GAAP. They are measures that we use to evaluate our core operating performance. We believe that segment operating income (loss) and segment operating margin reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. We believe these measures are used by investors and are a useful indicator to measure our performance. Because not all companies use identical calculations, our presentation of segment operating income (loss) and segment operating margin may not be comparable to similarly titled measures of other companies. Adjusted sales and service revenues, adjusted operating income, adjusted operating margin, adjusted segment operating income (loss), adjusted segment operating margin, adjusted net earnings and adjusted diluted earnings per share are not measures recognized under GAAP. They should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. We believe these measures are useful to investors because they exclude items that do not reflect our core operating performance. They may not be comparable to similarly titled measures of other companies. Free cash flow is not a measure recognized under GAAP. Free cash flow has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, analysis of our results as reported under GAAP. We believe free cash flow is an important measure for our investors because it provides them insight into our current and period-to-period performance and our ability to generate cash from continuing operations. We also use free cash flow as a key operating metric in assessing the performance of our business and as a key performance measure in evaluating management performance and determining incentive compensation. Free cash flow may not be comparable to similarly titled measures of other companies.

13 Non-GAAP Measures Definitions & Reconciliations Cont’d Segment operating income (loss) is defined as operating income (loss) for the relevant segment(s) before the FAS/CAS Adjustment and deferred state income taxes. Segment operating margin is defined as segment operating income (loss) as a percentage of sales and service revenues. Adjusted sales and service revenues is defined as sales and service revenues adjusted for the impact of the insurance litigation settlement at the Ingalls segment in second quarter 2015. Adjusted segment operating income (loss) is defined as segment operating income (loss) adjusted for the impacts of the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment in second quarter 2015. Adjusted segment operating margin is defined as adjusted segment operating income (loss) as a percentage of adjusted sales and service revenues. Adjusted operating income is defined as operating income adjusted for the impacts of the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment, each in second quarter 2015. Adjusted operating margin is defined as adjusted operating income as a percentage of adjusted sales and service revenues. Adjusted net earnings is defined as net earnings adjusted for the after-tax impacts: of the loss on early extinguishment of debt in third quarter 2015, the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment, each in second quarter 2015; and the FAS/CAS Adjustment. Adjusted diluted earnings per share is defined as adjusted net earnings divided by the weighted-average diluted common shares outstanding. FAS/CAS Adjustment is defined as the difference between our pension and postretirement plan expense under GAAP Financial Accounting Standards and the same expense under U.S. Cost Accounting Standards (CAS). Our pension and postretirement plan expense is charged to our contracts under CAS. Deferred state income taxes are defined as the change in deferred state tax assets and liabilities in the relevant period. These amounts are recorded within operating income, while the current period state income tax expenses are charged to contract costs and included in segment operating income. Free cash flow is defined as net cash provided by (used in) operating activities less capital expenditures. We present financial measures adjusted for the FAS/CAS Adjustment and deferred state income tax to reflect the company’s performance based upon the pension costs and state tax expense charged to our contracts under CAS. We use these adjusted measures as internal measures of operating performance and for performance-based compensation decisions.

14 Reconciliation – Segment Operating Income & Segment Operating Margin ($ in millions) 2016 2015 2016 2015 Ingalls revenues 577$ 593$ 1,748$ 1,608$ Newport News revenues 1,072 1,177 3,315 3,404 Other revenues 33 30 84 105 Intersegment eliminations 1 — (1) (2) Sales and Service Revenues 1,683 1,800 5,146 5,115 Segment Operating Income Ingalls 66 77 236 320 As a percentage of Ingalls revenues 11.4 % 13.0 % 13.5 % 19.9 % Newport News 79 100 270 302 As a percentage of Newport News revenues 7.4 % 8.5 % 8.1 % 8.9 % Other (5) (5) (16) (79) As a percentage of Other revenues (15.2)% (16.7)% (19.0)% (75.2)% Segment Operating Income 140 172 490 543 As a percentage of sales and service revenues 8.3 % 9.6 % 9.5 % 10.6 % Non-segment factors affecting operating income: FAS/CAS Adjustment 37 27 107 82 Deferred state income taxes (2) 1 (7) — Operating Income 175 200 590 625 Interest expense (19) (25) (56) (73) Other, net 1 — (1) — Federal income taxes (50) (64) (157) (198) Net Earnings 107$ 111$ 376$ 354$ Three Months Ended Nine Months Ended September 30 September 30

15 Reconciliation – Adjusted Sales and Service Revenues ($ in millions) 2016 2015 2016 2015 Ingalls revenues 577$ 593$ 1,748$ 1,608$ Adjustment for insurance litigation settlement — — — 13 Adjusted Ingalls revenues 577 593 1,748 1,621 Newport News revenues 1,072 1,177 3,315 3,404 Other revenues 33 30 84 105 Intersegment eliminations 1 — (1) (2) Adjusted Sales and Service Revenues 1,683$ 1,800$ 5,146$ 5,128$ Three Months Ended Nine Months Ended September 30 September 30

16 Reconciliation – Adjusted Segment Operating Income & Adjusted Segment Operating Margin ($ in millions) 2016 2015 2016 2015 Operating income 175$ 200$ 590$ 625$ As a percentage of sales and service revenues 10.4 % 11.1 % 11.5 % 12.2 % Non-segment factors affecting operating income: FAS/CAS Adjustment (37) (27) (107) (82) Deferred state income taxes 2 (1) 7 — Unadjusted Segment Operating Income 140$ 172$ 490$ 543$ As a percentage of sales and service revenues 8.3 % 9.6 % 9.5 % 10.6 % Adjustments affecting segment operating income (loss): Ingalls segment operating income 66$ 77$ 236$ 320$ Adjustment for insurance litigation settlement — — — (136) Adjusted Ingalls segment operating income 66 77 236 184 As a percentage of Ingalls adjusted revenues 11.4 % 13.0 % 13.5 % 11.4 % Newport News segment operating income 79 100 270 302 As a percentage of Newport News revenues 7.4 % 8.5 % 8.1 % 8.9 % Other segment operating (loss) (5) (5) (16) (79) Adjustment for goodwill impairment — — — 59 Adjusted Other segment operating (loss) (5) (5) (16) (20) As a percentage of Other revenues (15.2)% (16.7)% (19.0)% (19.0)% Adjusted Segment Operating Income 140$ 172$ 490$ 466$ As a percentage of adjusted sales and service revenues 8.3 % 9.6 % 9.5 % 9.1 % September 30 September 30 Three Months Ended Nine Months Ended

17 Reconciliation – Adjusted Operating Income & Adjusted Operating Margin ($ in millions) 2016 2015 2016 2015 Operating income 175$ 200$ 590$ 625$ As a percentage of sales and service revenues 10.4 % 11.1 % 11.5 % 12.2 % Adjustment for insurance litigation settlement — — — (136) Adjustment for goodwill impairment — — — 59 Adjusted Operating Income 175$ 200$ 590$ 548$ As a percentage of adjusted sales and service revenues 10.4 % 11.1 % 11.5 % 10.7 % Three Months Ended Nine Months Ended September 30 September 30

18 Reconciliation – Adjusted Net Earnings & Adjusted Diluted EPS 18 ($ in millions) 2016 2015 2016 2015 Net Earnings 107$ 111$ 376$ 354$ After-tax adjustment for insurance litigation settlement (1) — — — (88) After-tax adjustment for goodwill impairment charge (2) — — — 47 After-tax adjustment for loss on early extinguishment of debt (3) — 3 — 3 After-tax adjustment for FAS/CAS Adjustment (4) (24) (18) (70) (53) Adjusted Net Earnings 83$ 96$ 306$ 263$ Three Months Ended Nine Months Ended September 30 September 30 2016 2015 2016 2015 Diluted e rnings per share 2. 7$ 2.29$ 7.93$ 7.28$ fter-tax insurance litigation settlement per share (1) — — — (1.81) After-tax impairment of goodwill per share (2) — — — 0.97 After-tax loss on early extinguishment of debt per share (3) — 0.06 — 0.06 After-tax FAS/CAS Adjustment per share (4) (0.51) (0.37) (1.48) (1.09) Adjusted Diluted EPS 1.76$ 1.98$ 6.45$ 5.41$ Three Months Ended Nine Months Ended September 30 September 30

19 Reconciliation – Adjusted Net Earnings & Adjusted Diluted EPS Cont’d 19 *The income tax impact is calculated using the tax rate in effect for the relevant non-GAAP adjustment. **Amounts may not recalculate exactly due to rounding. 2016 2015 2016 2015 (1) Insurance litigation settlement — — — (136)$ Tax effect at 35% statutory rate* — — — 48 After-tax effect — — — (88)$ Weighted-Average Diluted Shares Outstanding 47.2 48.4 47.4 48.6 Per share impact** — — — (1.81)$ (2) Goodwill impairment charge — — — 59$ Discrete federal tax impact* — — — (12) After-tax effect — — — 47$ Weighted-Average Diluted Shares Outstanding 47.2 48.4 47.4 48.6 Per share impact** — — — 0.97$ (3) Loss on early extinguishment of debt — 5$ — 5$ Tax effect at 35% statutory rate* — (2) — (2) After-tax effect — 3$ — 3$ Weighted-Average Diluted Shares Outstanding 47.2 48.4 47.4 48.6 Per share impact** — 0.06$ — 0.06$ (4) FAS/CAS Adjustment (37)$ (27)$ (107)$ (82)$ Tax effect at 35% statutory rate* 13 9 37 29 After-tax effect (24)$ (18)$ (70)$ (53)$ Weighted-Average Diluted Shares Outstanding 47.2 48.4 47.4 48.6 Per share impact** (0.51)$ (0.37)$ (1.48)$ (1.09)$ September 30 September 30 Three Months Ended Nine Months Ended

20 Reconciliation – Free Cash Flow 20 ($ in millions) 2016 2015 2016 2015 Net cash provided by (used in) operating activities 254$ 252$ 477$ 428$ Less: Capital expenditures (60) (37) (145) (86) Free cash flow 194$ 215$ 332$ 342$ September 30 September 30 Nine Months EndedThree Months Ended