- Revenues were $1.93 billion for the quarter and $6.96 billion for the year
- Segment operating margin was 7.0 percent for the quarter and 8.4 percent for the year
- Total operating margin was 7.5 percent for the quarter and 9.4 percent for the year
- Excluding a $47 million non-cash goodwill impairment charge:
- Segment operating margin was 9.4 percent for the quarter and 9.1 percent for the year
- Total operating margin was 9.9 percent for the quarter and 10.1 percent for the year
- Diluted earnings per share was $1.05 for the quarter and $6.86 for the year
- Adjusted diluted earnings per share was $2.19 for the quarter and $7.14 for the year
- Cash from operations was $402 million for the quarter and $716 million for the year
NEWPORT NEWS, Va., Feb. 19, 2015 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported fourth quarter 2014 revenues of $1.93 billion, compared to $1.94 billion in the same period of 2013. Total operating income was $144 million and total operating margin was 7.5 percent in the fourth quarter of 2014, compared to $174 million and 9.0 percent in the same period last year.
Diluted earnings per share in the fourth quarter of 2014 was $1.05, compared to $1.82 in the same period of 2013. Diluted earnings per share in the fourth quarter of 2014 included $0.75 for the non-cash goodwill impairment charge and $0.49 for the one-time expense for early extinguishment of debt. Diluted earnings per share in the fourth quarter of 2013 included $0.24 for the favorable hurricane insurance recoveries. Fourth quarter 2014 diluted earnings per share included $0.10 of benefit for the FAS/CAS Adjustment, compared to $0.08 of expense in fourth quarter 2013. Adjusting for these items, diluted earnings per share was $2.19 in the fourth quarter of 2014, compared to $1.66 in the fourth quarter of 2013.
Cash provided by operating activities in the fourth quarter of 2014 was $402 million, an increase of $110 million from the same period in 2013. Free cash flow in the fourth quarter was $328 million, an increase of $90 million from the same period last year. These increases were due primarily to decreases in accounts receivable partially offset by increases in capital expenditures.
For the full year, revenues were $6.96 billion, an increase of $137 million or 2.0 percent over 2013. Total operating income was $655 million and total operating margin was 9.4 percent in 2014, compared to $512 million and 7.5 percent in 2013.
Diluted earnings per share in 2014 was $6.86, compared to $5.18 in the prior year. Diluted earnings per share in 2014 included $0.75 for the non-cash goodwill impairment charge and $0.49 for the one-time expense for early extinguishment of debt. Diluted earnings per share in 2013 included $0.83 for the favorable hurricane insurance recoveries and $0.22 for the closure of the Gulfport facility. Diluted earnings per share in 2014 included $0.96 of benefit for the FAS/CAS Adjustment, compared to $0.79 of expense in 2013. Adjusting for these items, diluted earnings per share was $7.14 in 2014, compared to $5.36 in 2013.
Cash from operating activities for 2014 was $716 million, an increase of $480 million from 2013. Free cash flow in 2014 was $551 million, an increase of $454 million from 2013. These increases were due primarily to decreases in accounts receivable and retirement benefit funding, partially offset by increases in capital expenditures.
New business awards for 2014 were approximately $10.1 billion, of which $0.5 billion was awarded in the fourth quarter, bringing total backlog to $21.4 billion as of Dec. 31, 2014.
"Overall, 2014 was a great year for our company," said Mike Petters, HII's president and CEO. "Strong execution at Ingalls and Newport News helped us achieve solid operational performance and improved financial results, which mitigated the impact of pressure at Universal Pegasus due to the drop in oil prices. We delivered improved margin performance and strong cash flow for the year and are on track to achieve our 2015 segment operating margin goal."
2014 Goodwill Impairment Charge
During the fourth quarter of 2014, the company recorded a non-cash goodwill impairment of $47 million related to its Other segment. The Other segment, established in the second quarter of 2014 following the acquisition of UPI, is sensitive to developments in the oil and gas industry. The impairment was primarily driven by the recent drop in oil prices and the resulting decrease in industry market multiples. The company evaluates goodwill values for impairment annually on November 30, or when evidence of potential impairment exists. The company determined that the estimated fair value of its remaining reporting units exceeded their corresponding carrying values as of November 30, 2014.
Results of Operations
Three Months Ended
Year Ended
December 31
December 31
(in millions, except per share amounts)
2014
2013
% Change
2014
2013
% Change
Sales and service revenues
$ 1,927
$ 1,938
(0.6)%
$ 6,957
$ 6,820
2.0%
Segment operating income1
134
169
(20.7)%
585
567
3.2%
Segment operating margin %1
7.0%
8.7%
-177 bps
8.4%
8.3%
10 bps
Total operating income
144
174
(17.2)%
655
512
27.9%
Operating margin %
7.5%
9.0%
-151 bps
9.4%
7.5%
191 bps
Net earnings
52
91
(42.9)%
338
261
29.5%
Diluted earnings per share
$ 1.05
$ 1.82
(42.3)%
$ 6.86
$ 5.18
32.4%
Adjusted Figures
Sales and service revenues2
$ 1,927
$ 1,907
1.0%
$ 6,957
$ 6,817
2.1%
Segment operating income1,2,3
$ 181
$ 151
19.9%
$ 632
$ 520
21.5%
Segment operating margin %1,2,3
9.4%
7.9%
147 bps
9.1%
7.6%
146 bps
Total operating income2,3
$ 191
$ 156
22.4%
$ 702
$ 465
51.0%
Operating margin %2,3
9.9%
8.2%
173 bps
10.1%
6.8%
327 bps
Net earnings2,3,4,5
108
83
30.1%
352
270
30.4%
Diluted earnings per share2,3,4,5
$ 2.19
$ 1.66
31.9%
$ 7.14
$ 5.36
33.2%
Non-GAAP metrics that exclude non-segment factors affecting operating income. See Exhibit B for reconciliation.
2 Non-GAAP metrics that exclude the impact of hurricane insurance recoveries in the third and fourth quarters of 2013 and the Gulfport closure in the third quarter of 2013. See Exhibit B for reconciliation.
3 Non-GAAP metrics that exclude the impact of the goodwill impairment in 2014. See Exhibit B for reconciliation.
4 Non-GAAP metrics that exclude the after-tax loss on early extinguishment of debt in 2014. See Exhibit B for reconciliation.
5 Non-GAAP metrics that exclude the after-tax FAS/CAS Adjustment. See Exhibit B for reconciliation.
Operating Segment Results
Ingalls Shipbuilding
Three Months Ended
Year Ended
December 31
December 31
(In millions)
2014
2013
% Change
2014
2013
% Change
Revenues
$ 608
$ 734
(17.2)%
$ 2,286
$ 2,441
(6.3)%
Operating income (loss)
72
64
12.5%
229
165
38.8%
Operating margin %
11.8%
8.7%
312 bps
10.0%
6.8%
326 bps
Adjusted revenues1
608
703
(13.5)%
2,286
2,438
(6.2)%
Adjusted operating income1
72
46
56.5%
229
118
94.1%
Adjusted operating margin %1
11.8%
6.5%
530 bps
10.0%
4.8%
518 bps
1
Non-GAAP metrics that exclude the impact of hurricane insurance recoveries in the third and fourth quarters of 2013 and the Gulfport closure in the third quarter of 2013. See Exhibit B for reconciliation.
2013 reflects the realignment of AMSEC and CMSD from Ingalls Shipbuilding to Newport News Shipbuilding
Ingalls revenues for the fourth quarter decreased $126 million, or 17.2 percent, from the same period in 2013 due to lower volumes in amphibious assault ships, the
Legend-class National Security Cutter (NSC) program and surface combatants, as well as the favorable impact in the prior year of hurricane insurance recoveries. Amphibious assault ships revenues were lower due to the deliveries of LHA-6 USS
America and LPD-25
Somerset and decreased volumes on LPD-27
Portland. NSC revenues were lower primarily due to the delivery of NSC-4
Hamilton, partially offset by increased volumes on NSC-8
Midgett advance procurement and NSC-7
Kimball construction contracts. Surface combatant revenues were lower due to the delivery of the deckhouse for DDG-1001
Michael Monsoor, partially offset by increased volumes on the advance procurement contracts of DDG-119 (unnamed) and DDG-121 (unnamed) and increased volumes on the construction contract of DDG-117
Paul Ignatius. Adjusting for $31 million of favorable hurricane insurance recoveries in the fourth quarter of 2013, revenues in the fourth quarter of 2014 decreased $95 million, or 13.5 percent, from the same period in 2013.
Ingalls operating income for the fourth quarter was $72 million, an increase of $8 million over the same period last year. Operating margin was 11.8 percent for the quarter, an increase of 312 basis points over the same period last year. These increases were primarily driven by performance improvement and risk retirement on the LPD program, partially offset by the net favorable impact in the prior year of hurricane insurance recoveries. Adjusting for $18 million of favorable hurricane insurance recoveries in the fourth quarter of 2013, operating income for the fourth quarter of 2014 increased $26 million and operating margin increased 530 basis points over the same period last year.
For the full year, Ingalls revenues decreased $155 million, or 6.3 percent, from 2013 due to lower volumes in amphibious assault ships, partially offset by higher volumes in the NSC program and surface combatants. The decrease in amphibious assault ships revenue was due to lower volumes on LHA-6 USS
America and LPD-25 USS
Somerset, partially offset by higher volumes on LHA-7
Tripoli and LPD-26
John P. Murtha. Revenues on the NSC program increased due to higher volumes on NSC-6
Munro, NSC-7
Kimball and NSC-5
James, partially offset by lower volumes on NSC-4
Hamilton. Surface combatants revenues increased due to higher volumes on the construction contracts of DDG-117
Paul Ignatius, DDG-119 (unnamed) and DDG-114
Ralph Johnson, partially offset by lower volumes on the DDG-1000
Zumwalt-class destroyer program.
For 2014, Ingalls operating income was $229 million, up $64 million from the prior year. Operating margin was 10.0 percent for the year, compared to 6.8 percent in 2013. These increases were primarily due to performance improvement and risk retirement on the LPD and NSC programs, partially offset by the net favorable impact in the prior year of hurricane insurance recoveries and the Gulfport closure. Adjusting for $64 million of favorable hurricane insurance recoveries and $17 million of unfavorable Gulfport closure costs in 2013, 2014 operating income increased $111 million and operating margin increased 518 basis points over 2013.
Key Ingalls milestones for the quarter:
- Authenticated the keel on NSC-6 Munro (WMSL-755)
- Launched the 10th amphibious transport dock LPD-26 John P. Murtha
- NSC-4 Hamilton (WMSL-753) sailed away
Newport News Shipbuilding
Three Months Ended
Year Ended
December 31
December 31
(In millions)
2014
2013
% Change
2014
2013
% Change
Revenues
$ 1,263
$ 1,205
4.8%
$ 4,536
$ 4,382
3.5%
Operating income (loss)
116
105
10.5%
415
402
3.2%
Operating margin %
9.2%
8.7%
47 bps
9.1%
9.2%
(2) bps
2013 reflects the realignment of AMSEC and CMSD from Ingalls Shipbuilding to Newport News Shipbuilding
Newport News revenues for the fourth quarter increased $58 million, or 4.8 percent, from the same period in 2013, primarily driven by higher revenues in submarines and energy, partially offset by lower revenues in aircraft carriers. Higher submarines revenues related to the SSN-774
Virginia-class submarine (VCS) program were due to increased volumes on Block IV advance procurement and Block III construction contracts. Higher energy revenues were driven by the acquisition of The S.M. Stoller Corp. (Stoller) in January 2014 and increased commercial volumes. Lower aircraft carriers revenues were due to decreased volumes on CVN-78
Gerald R. Ford, CVN-72 USS
Abraham Lincoln refueling and complex overhaul (RCOH) and CVN-71 USS
Theodore Roosevelt RCOH.
Newport News operating income for the fourth quarter was $116 million, an increase of $11 million over the same period last year. Operating margin was 9.2 percent for the quarter, compared to 8.7 percent in the same period last year. These increases were primarily due to performance improvement and higher risk retirement on the VCS program and improved commercial performance, partially offset by lower risk retirement on the CVN-71 USS
Theodore Roosevelt RCOH.
For the full year, Newport News revenues increased $154 million, or 3.5 percent, from 2013, primarily driven by the Stoller acquisition, as well as higher revenues in submarines and energy, partially offset by lower revenues in aircraft carriers and fleet support services. Submarines revenues related to the VCS program were higher due to increased volumes on Block IV advance procurement and Block III construction contracts, partially offset by lower volumes on Block II boats following the delivery of SSN-783 USS
Minnesota. Energy revenues were higher primarily driven by increased commercial volumes. Aircraft carriers revenues were lower primarily due to decreased volumes on the execution contract for the CVN-71 USS
Theodore Roosevelt RCOH and the construction contract for CVN-78
Gerald R. Ford, partially offset by higher volumes on the execution contract for CVN-72 USS
Abraham Lincoln RCOH and the inactivation contract for the CVN-65 USS
Enterprise. Fleet support services revenues were lower primarily due to decreased volumes associated with repair work on SSN-765 USS
Montpelier.
For 2014, Newport News operating income was $415 million, up $13 million from the prior year. The increase was primarily due to higher volumes and higher risk retirement on the construction contract for CVN-78
Gerald R. Ford and the VCS program, partially offset by lower risk retirement on the CVN-71 USS
Theodore Roosevelt RCOH. Operating margin was 9.1 percent for the year, compared to 9.2 percent in 2013.
Key Newport News milestones for the quarter:
- Undocked CVN-72 USS Abraham Lincoln
- Hosted keel laying ceremony for Virginia-class submarine SSN-787 USS Washington
Other
Three Months Ended
Year Ended
December 31
December 31
(In millions)
2014
2013
$ Change
2014
2013
$ Change
Revenues
$ 56
$ —
$ 56
$ 137
$ —
$ 137
Operating income (loss)
(54)
—
(54)
(59)
—
(59)
Operating margin %
(96.4)%
—
(43.1)%
—
Adjusted operating income1
(7)
—
(7)
(12)
—
(12)
Adjusted operating margin %1
(12.5)%
—
(8.8)%
—
1 Non-GAAP metrics that exclude the impact of the goodwill impairment in 2014. See Exhibit B for reconciliation.
Revenues in the Other segment were $56 million in the fourth quarter. The operating loss for the quarter was $54 million, which included $47 million of non-cash goodwill impairment charge. Adjusting for the non-cash goodwill impairment charge, the operating loss in the quarter was $7 million.
Revenues in the Other segment were $137 million for the year. The operating loss for the full year was $59 million, which included $47 million of non-cash goodwill impairment charge. Adjusting for the non-cash goodwill impairment charge, operating loss was $12 million for the full year.
The Company
Huntington Ingalls Industries is America's largest military shipbuilding company and a provider of manufacturing, engineering and management services to the commercial and non-commercial oil, gas and energy 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, Va., HII employs approximately 38,000 people operating both domestically and internationally. For more information, please visit
Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. EST on Feb. 19. A live audio broadcast of the conference call and supplemental presentation will be available on the investor relations page of the company's website: 
