Huntington Ingalls CFO says company doesn't expect to be 'made whole' on COVID program delays

The chief financial officer of Huntington Ingalls said today that while the company expects to be reimbursed for COVID-19 costs like testing and facility cleaning, it does not expect to "be made whole" when it comes to pandemic-related program delays.

Speaking at a virtual Credit Suisse conference, Chris Kastner said he breaks COVID-19 cost reimbursement into two categories.

The first is COVID-related costs, such as those connected with quarantining, facility cleanings, testing and Section 3610, which allows contractors to be reimbursed for keeping employees unable to work in a “ready state.”

In that area, “I don’t think it’s a material number, but I expect us to be made whole,” Kastner said.

But the second area is pandemic-generated delays in HII’s programs.

“The Navy’s obligated to fund those programs -- they’re incentive and cost-type contracts,” Kastner said. “The question is: are they going to have to pull that funding out of existing programs?”

He noted the Pentagon would prefer to have additional funding. DOD officials in the fall estimated they would need $10 billion to $20 billion to address costs incurred by defense contractors from mid-March to mid-September.

Kastner said the company isn’t counting on reimbursement in this area.

“Do I think that we’ll be made whole relative to that?” he told conference attendees. “I just don’t. I think that’s too long a putt.”

As a result, “anything we would receive would be upside,” Kastner added.