HUNTINGTON INGALLS INDUSTRIES REPORTS FOURTH QUARTER AND 2012 RESULTS; POSTS STRONG YEAR-OVER-YEAR IMPROVEMENT IN SEGMENT PERFORMANCE

• Revenues were $1.82 billion for the fourth quarter and $6.71 billion for 2012


• Segment operating margin was 7.7 percent for the fourth quarter and 6.8 percent for 2012


• Total operating margin was 5.8 percent for the fourth quarter and 5.3 percent for 2012


• Diluted earnings per share was $0.98 for the quarter and $2.91 for 2012


• Cash and cash equivalents were $1.1 billion at year-end

NEWPORT NEWS, Va., Feb. 27, 2013 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported fourth quarter 2012 revenues of $1.82 billion, up 5.1 percent from the same period last year. Segment operating income for the fourth quarter was $140 million, compared to $127 million in the same period last year. Total operating income for the fourth quarter was $106 million, compared to $121 million in the same period last year. Pension-adjusted total operating income for the fourth quarter was $131 million, or 7.2 percent of revenue, compared to $118 million, or 6.8 percent of revenue in the comparable period of 2011, which excludes the $10 millionnon-cash goodwill impairment finalization adjustment. The increase was primarily attributable to improved segment operating performance at Ingalls.

Fourth quarter diluted earnings per share was $0.98, compared to diluted earnings per share of $1.35 in the same period of 2011. Fourth quarter pension-adjusted diluted earnings per share was $1.30, compared to $1.25 in the comparable period of 2011.

For the year, revenues were $6.71 billion, an increase of 2.0 percent over 2011. Segment operating income for the year was $457 million, compared to $122 million in 2011. Total operating income for the year was $358 million, compared to $100 million in 2011. Pension-adjusted total operating income for the year was $438 million, or 6.5 percent of revenue, compared to $413 million, or 6.3 percent of revenue in 2011, which excludes the impact of a $290 million non-cash goodwill impairment charge in 2011.

Diluted earnings per share was $2.91 in 2012, compared to a loss of $2.05 in 2011. Pension-adjusted diluted earnings per share was $3.95 in 2012 compared to $4.15 in 2011.

Cash provided by operating activities in the fourth quarter of 2012 was $373 million, a decrease of $101 million from the same period last year, and for the year was $332 million, a decrease of $196 million from 2011. Cash flows in 2012 were impacted by increased pension contributions.

New business awards for 2012 were approximately $6 billion, of which $1 billion was awarded in the fourth quarter, bringing total backlog to $15.5 billion as of Dec. 31, 2012. Significant awards in 2012 included contracts for detail design and construction of LHA-7 Tripoli and LPD-27 (unnamed), planning efforts for the CVN-72 USSAbraham Lincoln refueling and complex overhaul (RCOH), and continued long-lead time procurement and construction preparation for CVN-79 John F. Kennedy.

"Since we were spun off as an independent, publicly traded company, we have been focused on execution, retiring risk and driving improved performance and margins at Ingalls Shipbuilding while improving performance and maintaining stability at Newport News Shipbuilding," said Mike Petters, HII's president and chief executive officer. "I am pleased to say that we made significant progress in these areas in 2012 and continue on the path to achieving 9-plus percent operating margins by 2015."

Fourth Quarter and 2012 Highlights




Three Months Ended

Year Ended




December 31,

December 31,



(In millions, except per share amounts)
2012
2011
% Change
2012
2011
% Change


Revenues
$ 1,823
$ 1,735
5.1%
$ 6,708
$ 6,575
2.0%


Total segment operating income
140
127
10.2%
457
122
274.6%


Segment operating margin %
7.7%
7.3%
36 bps
6.8%
1.9%
496 bps


Adjusted segment operating income1
140
117
19.7%
457
412
10.9%


Adjusted segment operating margin %1
7.7%
6.7%
94 bps
6.8%
6.3%
55 bps


Total operating income
106
121
(12.4%)
358
100
258.0%


Operating margin %
5.8%
7.0%
(116 bps)
5.3%
1.5%
382 bps


Pension-adjusted total operating income2
131
118
11.0%
438
413
6.1%


Pension-adjusted operating margin %2
7.2%
6.8%
38 bps
6.5%
6.3%
25 bps


Net earnings (loss)
50
67
(25.4%)
146
(100)
246.0%


Diluted earnings (loss) per share
$ 0.98
$ 1.35
(27.4%)
$ 2.91
$ (2.05)
242.0%


Pension-adjusted diluted earnings per share2
$ 1.30
$ 1.25
4.0%
$ 3.95
$ 4.15
(4.8%)


Weighted average diluted shares outstanding
50.8
49.7

50.1
48.8



1Non-GAAP metrics that exclude the impact of the non-cash goodwill impairment in 2011. See Exhibit B for reconciliation.


2Non-GAAP metrics that exclude the FAS/CAS Adjustment and the non-cash goodwill impairment. See Exhibit B for reconciliation.



Fourth quarter 2012 revenues increased $88 million and full year revenues increased $133 million from the comparable periods in 2011. Adjusted segment operating income in the fourth quarter increased $23 million, or 19.7 percent to $140 million. Adjusted segment operating margin for 2012 expanded 55 basis points to 6.8 percent, compared to 6.3 percent in 2011.

Operating Segment Results

Ingalls Shipbuilding




Three Months Ended

Year Ended




December 31,

December 31,



(In millions)
2012
2011
% Change
2012
2011
% Change


Revenues
$ 722
$ 676
6.8%
$ 2,840
$ 2,885
(1.6%)


Operating income (loss)
38
25
52.0%
97
(220)
144.1%


Operating margin %
5.3%
3.7%
156 bps
3.4%
nm



Adjusted operating income1
38
15
153.3%
97
70
38.6%


Adjusted operating margin %1
5.3%
2.2%
304 bps
3.4%
2.4%
99 bps


1Non-GAAP metrics that exclude the non-cash goodwill impairment in 2011. See Exhibit B for reconciliation.



Ingalls revenues for the fourth quarter increased $46 million, or 6.8 percent from the same period in 2011, driven by an increase in amphibious assault programs. The increase in amphibious assault programs for the fourth quarter was attributable to higher sales on LHA-7 Tripoli, partially offset by lower sales following deliveries of LPD-23 Anchorage in the third quarter of 2012 and LPD-22 USS San Diego in the fourth quarter of 2011. For the full year, Ingalls revenues decreased by $45 million, or 1.6 percent, due to lower sales volume in amphibious assault programs, partially offset by higher sales volume in the Legend-class NSC program. The decrease in amphibious assault program revenues was due to lower sales following the deliveries of LPD-23 Anchorage and LPD-24 Arlington in 2012 and following the delivery of LPD-22 USS San Diego in 2011, partially offset by higher sales volume on LHA-7 Tripoli, LPD-27 (unnamed), LPD-26 John P. Murtha and LPD-25 Somerset. The increase in revenues on the Legend-class NSC program was the result of higher sales volume on the construction of NSC-4 Hamilton and NSC-5 Joshua James and the advance procurement contract on NSC-6 (unnamed), partially offset by lower sales following the delivery of NSC-3 USCGC Stratton in 2011. Surface combatants revenues remained stable for 2012 as higher sales on the DDG-51 Arleigh Burke-class destroyer construction program, driven by higher sales on DDG-114 Ralph Johnson, partially offset by lower sales on DDG-110 USS William P. Lawrence delivered in 2011, and higher sales on the DDG-1000 Zumwalt-class destroyer program, were offset by lower revenues in surface combatants support services.

Ingalls operating income for the fourth quarter was $38 million, an increase of $13 million over the same period in 2011. Ingalls adjusted operating income in the fourth quarter increased by $23 million over the same period in 2011. Ingalls operating margin was 5.3 percent for the quarter, an increase of 304 basis points over the same period in 2011 on an adjusted basis. For the year, Ingalls operating income was $97 million, compared to a loss of $220 million in 2011. Ingalls adjusted operating income in 2012 increased by $27 million, or 38.6 percent, over the prior year. The increase in adjusted operating income was primarily the result of improved overall performance and the receipt of $7 million in resolution of a contract dispute with a private party, partially offset by increased workers' compensation expense.

Key Ingalls program milestones for the quarter:

• Delivered LPD-24 Arlington, the company's eighth amphibious transport dock


• Delivered the composite deckhouse for Zumwalt (DDG-1000)


• Christened LHA-6 America, the first in a new class of multi-purpose amphibious ships


• Awarded a $54 million contract for LPD-17 USS San Antonio class life-cycle engineering and support services

Newport News Shipbuilding




Three Months Ended

Year Ended




December 31,

December 31,



(In millions)
2012
2011
% Change
2012
2011
% Change


Revenues
$ 1,122
$ 1,078
4.1%
$ 3,940
$ 3,766
4.6%


Operating income (loss)
102
102
unchg
360
342
5.3%


Operating margin %
9.1%
9.5%
(37 bps)
9.1%
9.1%
6 bps



Newport News revenues for the fourth quarter increased $44 million, or 4.1 percent, from the same period in 2011. For the full year, Newport News revenues increased by$174 million, or 4.6 percent. For both periods, these increases were primarily driven by higher sales volume in aircraft carrier programs and energy and fleet support services, partially offset by lower sales volume in submarine programs. The increase in aircraft carriers was primarily due to higher revenues on the construction contract for CVN-78 Gerald R. Ford, the advance construction contract for CVN-79 John F. Kennedy, the advance planning contract for the CVN-72 USS Abraham Lincoln RCOH, and the favorable resolution of outstanding contract changes on the CVN-65 USS Enterprise extended dry-docking selected restricted availability (EDSRA), partially offset by lower revenues on the execution contract for the CVN-71 USS Theodore Roosevelt RCOH and an engineering contract for CVN-78 Gerald R. Ford. Energy services revenues were higher due to maintenance services at the Kesselring site. Fleet support revenues increased due primarily to increased maintenance work on in-service aircraft carriers. The decrease in submarine program revenues was the result of lower sales volume on the SSN-774 Virginia-class submarine construction program due to the timing of procurement of production materials.

Newport News operating income for the fourth quarter was $102 million, unchanged from the same period in 2011. Operating margin for the quarter was 9.1 percent, compared to 9.5 percent in the comparable period in 2011. The reduction was driven primarily by finalization of the non-cash workers' compensation expense in the fourth quarter of 2012. For the year, Newport News operating income was $360 million, or 9.1 percent of revenue, an increase of $18 million over 2011. The increase in operating income was primarily the result of the increased sales volume described above, favorable performance on the execution contract for the CVN-71 USS Theodore Roosevelt RCOH, and the favorable resolution of outstanding contract changes on the CVN-65 USS Enterprise EDSRA, partially offset by higher workers' compensation expense.

Key Newport News program milestones for the quarter:

• Reached 90 percent structural completion of CVN-78 Gerald R. Ford


• Christened and launched SSN-783 Minnesota, the 10th Virginia-class submarine


• Awarded a $143 million contract option, under a previously awarded contract, for work on operational and decommissioning U.S. Navy submarines, conversion submarines, special mission submersibles, submarine support facilities and related programs

Additional Information

The company recently identified errors in the valuation of one of its post-retirement benefit plans. The errors, which relate to the valuation methodologies associated with the company's monthly spending cap under the plan, impacted the projected accumulated post-retirement benefit obligation in every year since 1999. Corrections to previously issued financial results include decreased net earnings for the three months and year ended Dec. 31, 2011, by $2 million and $6 million, respectively, which have been reflected in this press release. The corrections had no impact on segment operating income or cash flow for any period. The cumulative effects of these errors, which management believes are not material to its previously issued consolidated financial statements, will be corrected in the company's financial statements included in its Annual Report on Form 10-K for the Fiscal Year ended Dec. 31, 2012, that the company will file with the U.S. Securities and Exchange Commission.

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. HII also provides a wide variety of products and services to the commercial energy industry and other government customers, including the Department of Energy. Employing about 37,000 inVirginia, Mississippi, Louisiana and California, its primary business divisions are Newport News Shipbuilding and Ingalls Shipbuilding. For more information, please visit

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Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. EST on Feb. 27. A live audio broadcast of the conference call and supplemental presentation will be available on the investor relations page of the company's website: