HUNTINGTON INGALLS INDUSTRIES REPORTS SECOND QUARTER 2015 RESULTS

• Revenues were $1.75 billion


• Diluted earnings per share was $3.20


• Adjusted diluted earnings per share was $1.99, which excludes the impacts of an insurance litigation settlement, a goodwill impairment charge and the FAS/CAS Adjustment


• Cash and cash equivalents at the end of the quarter were $960 million

NEWPORT NEWS, Va., Aug. 6, 2015 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported second quarter 2015 revenues of $1.75 billion, up 1.5 percent compared to the same period last year. Diluted earnings per share was $3.20, compared to diluted earnings per share of $2.04 in the same period of 2014. Adjusted diluted earnings per share for the quarter was $1.99, compared to $1.75 in the same period of 2014.

Segment operating income for the second quarter was $243 million, compared to $163 million in the same period last year. Total operating income for the quarter was $269 million, compared to $181 million in the same period last year. The increase in operating income was primarily due to an insurance litigation settlement and favorable FAS/CAS Adjustment, partially offset by a non-cash goodwill impairment charge related to the Other segment.

New contract awards for the quarter were approximately $4.5 billion, bringing total backlog at the end of Q2 2015 to $24.3 billion, of which $13.7 billion was funded.

"Our persistent focus on program execution and risk retirement resulted in solid operating performance during the quarter, and we continue to make progress toward meeting our commitment of achieving 9-plus percent shipbuilding operating margin in 2015," said HII President and CEO Mike Petters.

Second Quarter 2015 Highlights




Three Months Ended





June 30




(in millions, except per share amounts)
2015
2014
$ Change
% Change


Sales and service revenues
$ 1,745
$ 1,719
$ 26
1.5%


Segment operating income1
243
163
80
49.1%


Segment operating margin %1
13.9%
9.5%

444 bps


Total operating income
269
181
88
48.6%


Operating margin %
15.4%
10.5%

489 bps


Net earnings
156
100
56
56.0%


Diluted earnings per share
$ 3.20
$ 2.04
$ 1.16
56.9%


Weighted-average diluted shares outstanding
48.8
49.1











Adjusted Figures






Sales and service revenues2
$ 1,758
$ 1,719
$ 39
2.3%


Segment operating income1,2,3
$ 166
$ 163
3
1.8%


Segment operating margin %1,2,3
9.4%
9.5%

-4 bps


Total operating income2,3
$ 192
$ 181
11
6.1%


Operating margin %2,3
10.9%
10.5%

39 bps


Net earnings4
97
86
11
12.8%


Diluted earnings per share4
$ 1.99
$ 1.75
$ 0.24
13.7%


Weighted-average diluted shares outstanding
48.8
49.1







1 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 insurance litigation settlement in 2015. See Exhibit B for reconciliation.


3 Non-GAAP metrics that exclude the impact of the goodwill impairment charge in 2015. See Exhibit B for reconciliation.


4 Non-GAAP metrics that exclude the after-tax impacts of the insurance litigation settlement and the non-cash goodwill impairment charge in 2015 and the FAS/CAS Adjustment. See Exhibit B for reconciliation.



Q2 2015 Significant Events

Hurricane-related Insurance Litigation Settlement

During the second quarter of 2015, the company settled an insurance litigation matter involving its Ingalls Shipbuilding segment and received $150 million in cash. The settlement decreased Ingalls revenues by $13 million due to overhead credits to the customer and increased Ingalls operating income by $136 million.

Goodwill Impairment Charge

During the second quarter of 2015, the company recorded a non-cash goodwill impairment charge of $59 million related to its Other segment. The impairment was due to continued deterioration of the market fundamentals in the oil and gas industry, including further decline in projected oil and gas prices, significant cutbacks in customers' capital spending plans and additional project delays by customers. The company determined that no events occurred and no circumstances changed that would reduce the fair value of the company's remaining reporting segments below their carrying value as of June 30, 2015.

Impact of the Significant Events on Q2 2015 Financial Results

Reported revenues for the second quarter were $1.75 billion, a 1.5 percent increase over the same period in 2014. Adjusting for the $13 million unfavorable impact of the insurance litigation settlement, second quarter revenues were $1.76 billion, a 2.3 percent increase over the same period last year.

Segment operating income in the quarter was $243 million and segment operating margin was 13.9 percent. Adjusting for the $136 million favorable impact of the insurance litigation settlement and the unfavorable impact of the $59 million goodwill impairment charge, segment operating income in the quarter was $166 million and segment operating margin was 9.4 percent.

Total operating income in the quarter was $269 million and total operating margin was 15.4 percent. Adjusting for the $136 million favorable impact of the insurance litigation settlement and the unfavorable impact of the $59 million goodwill impairment charge, total operating income in the quarter was $192 million and total operating margin was 10.9 percent.

Reported diluted earnings per share in the quarter was $3.20, compared to $2.04 in the same period last year. Adjusted diluted earnings per share in the quarter was $1.99, which excludes the after-tax impacts of the insurance litigation settlement of $1.80 per share, the goodwill impairment charge of $0.96 per share and the FAS/CAS adjustment of $0.37 per share. This compares to adjusted diluted earnings per share in the second quarter 2014 of $1.75, which excludes the after-tax FAS/CAS adjustment of $0.29 per share.

Operating Segment Results

Ingalls Shipbuilding




Three Months Ended





June 30




(in millions)
2015
2014
$ Change
% Change


Revenues
$ 546
$ 572
$ (26)
(4.5)%


Operating income (loss)
198
59
139
235.6%


Operating margin %
36.3%
10.3%

2595 bps


Adjusted revenues1
559
572
(13)
(2.3)%


Adjusted operating income1
62
59
3
5.1%


Adjusted operating margin %1
11.1%
10.3%

78 bps


1 Non-GAAP metrics that exclude the impact of insurance litigation settlement in 2015. See Exhibit B for reconciliation.



Ingalls revenues for the second quarter decreased $26 million, or 4.5 percent, from the same period in 2014, due to lower revenues in amphibious assault ships and the National Security Cutter (NSC) program and a $13 million decline that resulted from the insurance litigation settlement, which was partially offset by higher revenues in surface combatants. Adjusting for the insurance litigation settlement, Ingalls revenues of $559 million decreased $13 million or 2.3 percent from the same period last year. Lower amphibious assault ships revenues were due to lower volumes on the LPD program, partially offset by higher volume on LHA-7 Tripoli. Lower revenues on the NSC program were due to lower volume on NSC-4 USCGC Hamilton, partially offset by higher volumes on NSC-8 Midgett and NSC-7 Kimball. Higher surface combatants revenues were due to increased volumes on DDG-121 (unnamed), DDG-119 Delbert D. Black and DDG-117 Paul Ignatius, partially offset by lower volumes on delivered ships in the DDG-1000 Zumwalt-class destroyer program.

Ingalls operating income for the quarter was $198 million, an increase of $139 million over the same period in 2014, and operating margin was 36.3 percent for the quarter, which included a $136 million favorable impact from the insurance litigation settlement. Adjusting for the insurance litigation settlement, operating income was $62 million, an increase of $3 million over Q2 2014, and operating margin was 11.1 percent, compared to 10.3 percent in Q2 2014. These increases were primarily due to risk retirement on DDG-113 John Finn, NSC-5 James and NSC-6 Munro, partially offset by lower revenues.

Key Ingalls highlights for the quarter:

• Christened the Arleigh Burke-class destroyer John Finn (DDG 113)


• Delivered NSC-5 James to the U.S. Coast Guard


• Mississippi Governor Phil Bryant signed a $20 million bond bill that will help fund capital expenditure investments, including a new dry dock and covered work facilities.

Newport News Shipbuilding




Three Months Ended





June 30




(in millions)
2015
2014
$ Change
% Change


Revenues
$ 1,166
$ 1,129
$ 37
3.3%


Operating income (loss)
109
104
5
4.8%


Operating margin %
9.3%
9.2%

14 bps



Newport News revenues for the quarter increased $37 million, or 3.3 percent, from the same period in 2014, primarily due to higher revenues in submarines and fleet support services, 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 boats, partially offset by lower volumes on Block III boats. Higher fleet support services revenues were primarily due to increased volumes associated with aircraft carrier support services. Lower aircraft carriers revenues were due to lower volumes on the execution contract for the CVN-72 USS Abraham Lincoln refueling and complex overhaul (RCOH) and on the CVN-78 Gerald R. Ford construction contract, partially offset by increased volume for the CVN-79 John F. Kennedy construction preparation contract.

Newport News operating income for the quarter was $109 million, a $5 million increase over the same period last year. Operating margin was 9.3 percent for the quarter, compared to 9.2 percent in Q2 2014. These increases were primarily due to performance improvement and higher risk retirement on the VCS program, partially offset by lower performance on CVN-78 Gerald R. Ford and lower volumes on aircraft carrier RCOH programs.

Key Newport News highlights for the quarter:

• Delivered Virginia-class submarine SSN-785 John Warner to the U.S Navy


• Hosted keel-laying ceremony for Virginia-class submarine SSN-789 Indiana


• Awarded a $3.35 billion detail design and construction contract for the construction of CVN-79 John F. Kennedy


• SN3 and its partner, Wastren Advantage Inc., received a two-year, $65 million contract extension to work at the Department of Energy Environmental Restoration Disposal Facility in Hanford, Washington.

Other




Three Months Ended





June 30




(in millions)
2015
2014
$ Change
% Change


Revenues
$ 35
$ 20
$ 15
75.0%


Operating income (loss)
(64)
—
(64)
—%


Operating margin %
(182.9)%
—

—


Adjusted operating income (loss)1
(5)
—
(5)
—%


Adjusted operating margin %1
(14.3)%
—

—


1 Non-GAAP metrics that exclude the impact of the goodwill impairment charge in 2015. See Exhibit B for reconciliation.



Revenues in the Other segment were $35 million in the quarter. Operating loss in the quarter was $64 million, which included a $59 million non-cash goodwill impairment charge. Adjusting for the non-cash goodwill impairment charge, the operating loss in the quarter was $5 million.

The Company

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 approximately 38,000 people operating both domestically and internationally. For more information, please visit

Huntington Ingalls Industries will webcast its earnings conference call today, Aug. 6, at 9 a.m. EDT. A live audio broadcast of the conference call and supplemental presentation will be available on the investor relations page of the company's website: