Huntington Ingalls Industries Reports Third Quarter Results; Reaches Significant Milestones on Path to 2015 Financial Targets
Nov 8, 2012 (Menafn - GlobeNewswire via COMTEX) --
--Revenues were 1.60 billion for the third quarter 2012
--Diluted earnings per share was 0.26 for the quarter
--Adjusted diluted earnings per share, which excludes a non-cash workers'
compensation charge and the impact of a non-cash tax expense, was 0.74
--Cash and cash equivalents were 766 million at quarter-end
NEWPORT NEWS, Va., Nov. 8, 2012 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries HII reported third quarter 2012 revenues of 1.60 billion, up 0.2 percent from the same period last year. Third quarter diluted earnings per share was 0.26, compared with a 5.07 loss per share in the same period of 2011.
Segment operating income in the quarter was 89 million, with a segment operating margin of 5.6 percent, compared to a loss of 187 million in the same period last year. Total operating income for the quarter was 66 million, compared to a loss of 190 million in the same period of 2011. The increase was primarily attributable to the absence in 2012 of the goodwill impairment charge recorded in 2011. Total operating margin was 4.1 percent for the quarter.
Cash provided by operating activities in the third quarter was 137 million, down 95 million from the same period last year. New business awards for the quarter were 1.7 billion, bringing total backlog to 16.4 billion as of Sept. 30, of which 12.9 billion is funded.
"Core operating performance at HII continues to improve, and the company remains on pace to deliver 9 percent plus operating margins by 2015," said Mike Petters, HII's president and chief executive officer. "Although the underperforming ships at Ingalls continue to prove challenging, we delivered LPD-23 Anchorage during the third quarter, and we expect to deliver LPD-24 Arlington by the end of this year. Our backlog remains healthy at 16.4 billion and we are working diligently with our Navy and Coast Guard customers to provide affordable and high-quality warships."
Results of Operations
The company maintains self-insured workers' compensation plans that require an estimation of liabilities for such claims based on certain actuarial and discount rate assumptions that are evaluated at least annually. During Q3 2012, the decline in discount rates from 2011 resulted in a 24 million non-cash workers' compensation charge to segment operating income.
Three Months Ended
September 30,
-----------------------------------------------------------------------------------------------------------
AsAs
Adjusted1Adjusted2
(In millions, except per share amounts)2012201220112011 Change3% Change3
-------------------------------------------------------------------------------------------------
Revenues 1,596 1,5961,593 1,593 30.2%
Total segment operating income (loss)89113(187)113--.0%
Segment operating margin %5.6%7.1%nm7.1%(1) bps
Total operating income (loss)6690(190)110(20)(18.2)%
Operating margin %4.1%5.6%nm6.9%(127) bps
Net earnings (loss)1337(248)52(15)(28.8)%
Diluted earnings per share 0.26 0.74 (5.07) 1.05 (0.31)(29.5)%
Weighted average diluted shares
outstanding50.350.348.949.5
-------------------------------------------------------------------------------------------------
1Non-GAAP metrics that exclude the impact of the non-cash workers' compensation charge and a non-cash tax
expense related to the Tax Matters Agreement. See Exhibit B for reconciliation.
2Non-GAAP metrics that exclude the non-cash goodwill impairment charge. See Exhibit B for reconciliation.
3Comparison of "As Adjusted 2012" to "As Adjusted 2011" figures. On an unadjusted basis, total segment
operating income (loss) increased by 276 million, total operating income (loss) increased by 256 million,
net earnings (loss) increased by 261 million and diluted earnings per share increased by 5.33.
Adjusting for the 2012 non-cash workers' compensation charge and a non-cash goodwill impairment charge in 2011, adjusted segment operating income was 113 million in Q3 2012, flat compared to Q3 2011 on an adjusted basis. Adjusted segment operating margin was 7.1 percent in the third quarter, flat compared with the same period in 2011 on an adjusted basis.
Operating income in Q3 2012 was 66 million, whereas adjusted total operating income was 90 million, a decrease of 20 million, or 18.2 percent, from the same period of 2011 on an adjusted basis, primarily as a result of a higher FAS/CAS Adjustment. Operating margin in the third quarter was 4.1 percent, while adjusted total operating margin was 5.6 percent, a decline of 127 basis points from Q3 2011 on an adjusted basis.
Additionally, excluding an 8 million non-cash tax expense in 2012 related to the spin-off Tax Matters Agreement with Northrop Grumman, adjusted diluted earnings per share was 0.74 in the third quarter, compared with 1.05 in the same period of 2011 on an adjusted basis. Reported diluted earnings per share was 0.26 for Q3 2012.
Awards
The value of new contract awards during the three months ended Sept. 30 was approximately 1.7 billion. Significant new awards during this period included the construction contract for LPD-27 (unnamed) and continued long-lead-time procurement and construction preparation for CVN-79 John F. Kennedy.
Operating Segment Results
Ingalls Shipbuilding
Three Months Ended
September 30,
--------------------------------------------------------------------------------------------------------------------
AsAs
Adjusted1Adjusted2
( in millions)2012201220112011Change3% Change3
----------------------------------------------------------------------------------------------------------
Revenues 670 670 740 740 (70)(9.5)%
Operating income (loss)110(281)19(9)(47.4)%
Operating margin %0.1%1.5%nm2.6%(108) bps
----------------------------------------------------------------------------------------------------------
1Non-GAAP metrics that exclude the impact of the non-cash workers' compensation charge. See Exhibit B for
reconciliation.
2Non-GAAP metrics that exclude the non-cash goodwill impairment charge. See Exhibit B for reconciliation.
3Comparison of "As Adjusted 2012" to "As Adjusted 2011" figures. On an unadjusted basis, operating income (loss)
increased by 282 million.
Ingalls revenues for the third quarter decreased 70 million, or 9.5 percent, from the same period in 2011, driven by lower sales in amphibious assault ships, partially offset by higher sales in surface combatants and the National Security Cutter (NSC) program. The decrease in amphibious assault ships was primarily attributable to the deliveries of LPD-22 USS San Diego in 2011 and LPD-23 Anchorage in 2012, partially offset by higher sales on LPD-26 John P. Murtha, LPD-27 (unnamed) and LHA-7 Tripoli. Surface combatants sales were higher, primarily driven by increased sales on DDG-114 Ralph Johnson. NSC program sales were higher due to higher sales on NSC-4 Hamilton and NSC-5 Joshua James and the advance procurement contract on NSC-6 (unnamed).
Ingalls operating income for the third quarter was 1 million, compared with a loss of 281 million in Q3 2011. Excluding the 9 million non-cash workers' compensation charge in 2012 and the 2011 non-cash goodwill impairment charge, Ingalls adjusted operating income for the third quarter 2012 was 10 million, compared with 19 million in the same period in 2011. Ingalls adjusted operating margin was 1.5 percent for the quarter, a decline of 108 basis points from the same period prior year on an adjusted basis. The decrease in adjusted operating income was primarily a result of unfavorable cumulative adjustments on the LPD-22 through LPD-25 contract, mainly related to LPD-24 Arlington.
Key Ingalls program milestones for the quarter:
--Delivered LPD-23 Anchorage, the company's seventh amphibious transport
dock ship
--Successfully completed builder's trials for LPD-24 Arlington
--Awarded a 1.5 billion fixed-price incentive contract for the
construction of LPD-27 (unnamed)
--Started construction on LPD-27 (unnamed)
--Started fabrication on the next Aegis guided missile destroyer, DDG-113
John Finn
--Awarded an 83.3 million contract for continued life-cycle engineering,
modernization and support services on the fleet of USS Ticonderoga-class
(CG 47) Aegis guided missile cruisers
Newport News Shipbuilding
Three Months Ended
September 30,
--------------------------------------------------------------------
As
Adjusted1
%
( in millions)201220122011Change2Change2
------------------------------------------------------------
Revenues 944 944 876 687.8%
Operating income881039499.6%
Operating margin %9.3%10.9%10.7%18 bps
------------------------------------------------------------
1Non-GAAP metric that excludes the impact of the non-cash workers'
compensation charge. See Exhibit B for reconciliation.
2Comparison of "As Adjusted 2012" to "2011" figures. On an unadjusted
basis, operating income declined by 6 million.
Newport News revenues for the third quarter increased 68 million, or 7.8 percent, from the same period in 2011, primarily driven by higher sales in aircraft carriers. The increase in aircraft carriers sales was primarily driven by higher sales on the construction of CVN-78 Gerald R. Ford, construction preparation for CVN-79 John F. Kennedy, and advance planning for the CVN-72 USS Abraham Lincoln refueling and complex overhaul (RCOH) and a favorable resolution of an outstanding contract adjustment on the CVN-65 USS Enterprise extended dry-docking selected restricted availability (EDSRA) that was completed in 2010. These increases were partially offset by lower sales on the CVN-71 USS Theodore Roosevelt RCOH and engineering for CVN-78 Gerald R. Ford. Submarines sales were steady as higher sales on Block III SSN-774 Virginia-class submarines (VCS) were offset by lower sales on Block II. Energy-related service revenues were higher due to maintenance services at the Kesselring site.
Newport News operating income for the third quarter was 88 million, compared with 94 million in the same period of 2011, and operating margin was 9.3 percent, down 141 basis points from prior year. Excluding the 15 million non-cash workers' compensation charge in 2012, adjusted operating income was 103 million, an increase of 9 million over Q3 2011. The increase was primarily due to the higher sales volume and the favorable contract resolution described above. Newport News adjusted operating margin was 10.9 percent in Q3 2012, up 18 basis points from the same period prior year.
Key Newport News program milestones for the quarter:
--Reached 87 percent structural completion of CVN-78 Gerald R. Ford
--Awarded a 43.4 million modification to a previously awarded contract
for purchase of materials for CVN-79 John F. Kennedy
--Awarded a 296 million contract modification, under a previously awarded
contract, for continuation of long-lead-time material procurement and
construction preparation of CVN-79 John F. Kennedy
The Company
Huntington Ingalls Industries (HII) designs, builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard and provides after-market services for military ships around the globe. For more than a century, HII has built more ships in more ship classes than any other U.S. naval shipbuilder. Employing more than 37,000 in Virginia, Mississippi, Louisiana and California, its primary business divisions are Newport News Shipbuilding and Ingalls Shipbuilding. For more information, please visit www.huntingtoningalls.com.
Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. EST on Nov. 8. 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.
The Huntington Ingalls Industries, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=9418
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 costs and perform effectively; risks related to our spin-off from Northrop Grumman (including our increased costs and leverage); our ability to realize the expected benefits from consolidation of our Ingalls facilities; natural disasters; adverse economic conditions in the United States and globally; 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 obligations to update any forward-looking statements.
Exhibit A: Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
Nine Months Ended
September 30September 30
------------------------------------
(in millions, except per share
amounts)2012201120122011
---------------------------------------------------------------------
Sales and service revenues
Product sales1,3671,3844,2244,201
Service revenues229209661639
--------------------------------
Total sales and service revenues1,5961,5934,8854,840
Cost of sales and service revenues
Cost of product sales1,1871,1663,5783,543
Cost of service revenues186173562557
Income (loss) from operating
investments, net791317
General and administrative expenses164153506471
Goodwill impairment--300--300
--------------------------------
Operating income (loss)66(190)252(14)
Other income (expense)
Interest expense(29)(30)(88)(75)
--------------------------------
Earnings (loss) before income taxes37(220)164(89)
Federal income taxes24286874
--------------------------------
Net earnings (loss)13(248)96(163)
================================
Basic earnings (loss) per share0.26(5.07)1.95(3.34)
Weighted-average common shares
outstanding49.648.949.348.8
Diluted earnings (loss) per share0.26(5.07)1.92(3.34)
Weighted-average diluted shares
outstanding50.348.949.948.8
Net earnings (loss) from above13(248)96(163)
Other comprehensive income (loss)
Change in unamortized benefit plan
costs23126851
Tax benefit (expense) on change in
unamortized benefit plan costs(6)(4)(23)(19)
--------------------------------
Other comprehensive income (loss),
net of tax1784532
--------------------------------
Comprehensive income (loss)30(240)141(131)
================================
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(Unaudited)
SeptemberDecember
3031
( in millions)20122011
-------------------------------------------
Assets
Current Assets
Cash and cash equivalents766915
Accounts receivable, net883711
Inventoried costs, net332380
Deferred income taxes214232
Prepaid expenses and
other current assets3130
-----------------
Total current assets2,2262,268
Property, plant, and
equipment, net1,9882,033
Other Assets
Goodwill844844
Other purchased
intangibles, net of
accumulated amortization
of 387 in 2012 and 372
in 2011552567
Pension plan assets6464
Debt issuance costs4248
Long-term deferred tax
asset67128
Miscellaneous other
assets8049
-----------------
Total other assets1,6491,700
-----------------
Total assets5,8636,001
=================
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited) -- CONTINUED
SeptemberDecember
( in millions, except share3031
amounts)20122011
-----------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities
Trade accounts payable292380
Current portion of long-term debt4329
Current portion of workers'
compensation liabilities216201
Current portion of postretirement
plan liabilities172172
Accrued employees' compensation194221
Advance payments and billings in
excess of costs incurred112101
Provision for contract losses419
Other current liabilities206249
-----------------
Total current liabilities1,2391,372
Long-term debt1,7941,830
Other postretirement plan
liabilities594581
Pension plan liabilities762936
Workers' compensation liabilities383361
Other long-term liabilities5349
-----------------
Total liabilities4,8255,129
Commitments and Contingencies (Note
13)----
Stockholders' Equity
Common stock, 0.01 par value;
150,000,000 shares authorized;
49,583,109 issued and outstanding
as of September 30, 2012;
48,821,563 issued and outstanding
as of December 31, 2011----
Additional paid-in capital1,8871,862
Retained earnings (deficit)(45)(141)
Accumulated other comprehensive
income (loss)(804)(849)
-----------------
Total stockholders' equity1,038872
-----------------
Total liabilities and stockholders'
equity5,8636,001
=================
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
------------------
( in millions)20122011
------------------------------------------------------
Operating Activities
Net earnings (loss)96(163)
Adjustments to reconcile to net cash
provided by (used in) operating
activities
Depreciation122123
Amortization of purchased
intangibles1515
Amortization of debt issuance costs64
Stock-based compensation2522
Deferred income taxes44--
Goodwill impairment--300
Change in
Accounts receivable(172)(53)
Inventoried costs57(173)
Prepaid expenses and other assets(8)(36)
Accounts payable and accruals(134)(74)
Retiree benefits(93)89
Other non-cash transactions, net1--
----------------
Net cash provided by (used in)
operating activities(41)54
Investing Activities
Additions to property, plant, and
equipment(92)(119)
----------------
Net cash provided by (used in)
investing activities(92)(119)
Financing Activities
Proceeds from issuance of long-term
debt--1,775
Repayment of long-term debt(22)(14)
Debt issuance costs--(54)
Repayment of notes payable to former
parent and accrued interest--(954)
Dividend to former parent in
connection with spin-off--(1,429)
Proceeds from stock option exercises61
Net transfers from (to) former parent--1,276
Net cash provided by (used in)
financing activities(16)601
----------------
Change in cash and cash equivalents(149)536
Cash and cash equivalents, beginning
of period915--
----------------
Cash and cash equivalents, end of
period766536
================
Supplemental Cash Flow Disclosure
Cash paid for income taxes2834
Cash paid for interest10255
Non-Cash Investing and Financing
Activities
Capital expenditures accrued in
accounts payable23
Exhibit B: Reconciliations
We make reference to "segment operating income," "segment operating margin," "adjusted segment operating income," "adjusted segment operating margin," "adjusted operating income," adjusted operating margin," "adjusted net earnings," and "adjusted diluted earnings per share."
Segment operating income is defined as operating income before the FAS/CAS Adjustment and deferred state income taxes.
Segment operating margin is segment operating income as a percentage of total sales and service revenues.
Adjusted segment operating income is defined as segment operating income as adjusted for the impact of the workers' compensation charge in 2012 and the impact of the goodwill impairment charge in 2011.
Adjusted segment operating margin is defined as adjusted segment operating income as a percentage of segment sales and service revenues.
Adjusted operating income is defined as operating income adjusted for the impact of the workers' compensation charge in 2012 and the impact of the goodwill impairment charge in 2011.
Adjusted operating margin is defined as adjusted operating income as a percentage of total sales and service revenues.
Adjusted net earnings is defined as net income adjusted for the tax-adjusted impact of the workers' compensation charge and the tax expense related to the spin-off Tax Matters Agreement with Northrop Grumman in 2012, and the impact of the goodwill impairment charge in 2011.
Adjusted diluted earnings per share is defined as adjusted net earnings divided by the adjusted weighted-average diluted common shares outstanding.
Segment operating income and segment operating margin are two of the key metrics we use to evaluate operating performance because they exclude items that do not affect segment performance. We believe adjusted segment operating income, adjusted segment operating margin, adjusted operating income, adjusted operating margin, adjusted net earnings and adjusted diluted earnings per share are also useful metrics because they exclude non-operating items that we do not consider indicative of our core operating performance. Therefore, we believe it is appropriate to disclose these measures to help investors analyze our operating performance. However, these measures are not measures of financial performance under GAAP and may not be defined or calculated by other companies in the same manner.
Reconciliation of Segment Operating Income and Segment Operating Margin
Three Months Ended
September 30
-------------------
in millions20122011
----------------------------------------------
Sales and Service Revenues
Ingalls 670 740
Newport News944 876
Intersegment eliminations(18)(23)
----------------------------------------------
Total sales and service
revenues 1,596 1,593
----------------------------------------------
Operating Income (Loss)
Ingalls 1 (281)
As a percentage of sales0.1%(38.0%)
Newport News8894
As a percentage of sales9.3%10.7%
----------------------------------------------
Total Segment Operating
Income (Loss)89(187)
As a percentage of sales5.6%(11.7%)
Non-segment factors
affecting operating income
FAS/CAS Adjustment(19)(1)
Deferred state income
taxes(4)(2)
----------------------------------------------
Total operating income (loss) 66 (190)
----------------------------------------------
As a percentage of sales4.1%(11.9%)
Interest expense(29)(30)
Federal income taxes(24)(28)
----------------------------------------------
Total net earnings (loss) 13 (248)
----------------------------------------------
Reconciliation of Adjusted Segment Operating Income, Adjusted Segment Operating Margin, Adjusted Operating Income and Adjusted Operating Margin
Three Months Ended
September 30
-------------------
in millions20122011
----------------------------------------------
Adjusted Operating Income
(Loss)
Operating Income (Loss) 66 (190)
As a percentage of sales4.1%(11.9%)
Non-segment factors
affecting adjusted
operating income
FAS/CAS Adjustment191
Deferred state income
taxes42
----------------------------------------------
Total Segment Operating
Income (loss) 89 (187)
As a percentage of sales5.6%(11.7%)
Ingalls 1 (281)
Adjustment for non-cash
workers' compensation
charge9--
Adjustment for non-cash
goodwill impairment--300
-----------------
Adjusted Ingalls1019
As a percentage of sales1.5%2.6%
Newport News8894
Adjustment for non-cash
workers' compensation
charge15--
-----------------
Adjusted Newport News10394
As a percentage of sales10.9%10.7%
----------------------------------------------
Total Adjusted Segment
Operating Income (Loss) 113 113
As a percentage of sales7.1%7.1%
----------------------------------------------
Total Adjusted Operating
Income (Loss)
Operating Income (Loss) 66 (190)
As a percentage of sales4.1%(11.9%)
Adjustment for non-cash
workers' compensation
charge24--
Adjustment for non-cash
goodwill impairment--300
----------------------------------------------
Total Adjusted Operating
Income (Loss) 90 110
As a percentage of sales5.6%6.9%
----------------------------------------------
Reconciliation of Adjusted Net Earnings and Adjusted Diluted Earnings per Share
Three Months Ended
September 30
-------------------
in millions20122011
------------------------------------------------------------
Adjusted Net Earnings (Loss)
Net Earnings (Loss) 13 (248)
Adjustment for non-cash workers'
compensation charge(1)16--
Adjustment for non-cash goodwill
impairment--300
Adjustment for non-cash tax expense8--
------------------------------------------------------------
Adjusted Net Earnings (Loss)3752
Per Share Amounts
Weighted-Average Diluted Shares Outstanding50.348.9
Dilutive impact excluded due to net loss
position--0.6
------------------------------------------------------------
Adjusted Weighted-Average Diluted Shares
Outstanding(2)50.349.5
------------------------------------------------------------
Adjusted Diluted EPS
Diluted earnings (loss) per share0.26(5.07)
After-tax non-cash workers' compensation
charge per share0.32--
Non-cash tax expense per share0.16--
Non-cash goodwill impairment per share--6.13
Impact of Adjusted Weighted-Average
Diluted Shares Outstanding--(0.01)
------------------------------------------------------------
Adjusted Diluted EPS0.741.05
(1) Tax effected at 35% federal statutory tax rate.
(2) Adjusted diluted average common shares outstanding is a
non-GAAP measure defined as weighted average common shares
outstanding plus the dilutive effect of stock options and stock
awards. This measure has been provided for consistency and
comparability of the 2011 results with earnings per share from
2012.
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SOURCE: Huntington Ingalls Industries, Inc.
(Logo:http://media.primezone.com/cache/14858/int/10236.jpg)
CONTACT: Jerri Fuller Dickseski (Media)
jerri.dickseski@hii-co.com
757-380-2341
Andy Green (Investors)
andy.green@hii-co.com
757-688-5572
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