- Total sales were $1.74 billion for the fourth quarter and $6.58 billion for 2011
- Adjusted total operating margin was 6.6 percent for the fourth quarter and 6.1 percent for 2011
- Adjusted diluted earnings per share was $1.19 for the fourth quarter and $3.97 for 2011
- Cash provided by operations was $474 million for the fourth quarter and $528 million for 2011
NEWPORT NEWS, Va., March 28, 2012 -- Huntington Ingalls Industries (NYSE:HII - News) reported fourth quarter 2011 sales of $1.74 billion, consistent with the fourth quarter of 2010. The impact of a $10 million non-cash goodwill impairment finalization adjustment resulted in reported net earnings of $69 million for the quarter and $1.39 diluted earnings per share on a GAAP basis. Excluding the goodwill impairment adjustment in the fourth quarter, total operating margin was 6.6 percent, up from 6.0 percent for the same period last year, and diluted earnings per share was $1.19 for the quarter.
For the full year 2011, sales were $6.58 billion, down 2.2 percent from 2010. The impact of a $290 million non-cash goodwill impairment charge resulted in a reported net loss of $94 million for 2011 and a $1.93 loss per share on a GAAP basis. Excluding the charge, total operating margin was 6.1 percent, up from 3.7 percent last year, and diluted earnings per share was $3.97 for 2011, up from $2.77 in 2010.
Cash provided by operations in the fourth quarter of 2011 was $474 million, up $266 million, or 128 percent, over the fourth quarter of 2010. Full year 2011 cash provided by operations was $528 million, up $169 million, or 47 percent, over 2010. New business awards for 2011 were $5.6 billion, of which $0.8 billion was awarded in the fourth quarter, bringing total backlog to $16.3 billion as of Dec. 31, 2011.
"Our overall performance was very strong for the quarter, and we remain on track to deliver our long-term financial performance goals," said Mike Petters, HII's president and chief executive officer. "In addition, the delivery of the amphibious ship LPD-22
San Diego in December marked a major milestone toward completing the turnaround at our Ingalls Shipbuilding segment. Despite the uncertainty around the defense budget, our focus remains on continuing to deliver high-quality ships that are valued by our customers, the U.S. Navy and Coast Guard."
Fourth Quarter and 2011 Highlights
Fourth Quarter
Fiscal Year
Reported
Adjusted1
Reported
Adjusted1
(In millions, except per share amounts)
2011
2011
2010
% Change2
2011
2011
2010
% Change2
Sales
$ 1,735
$ 1,735
$ 1,736
(.1)%
$ 6,575
$ 6,575
$ 6,723
(2.2)%
Total segment operating income
127
117
116
.9%
122
412
294
40.1%
Segment operating margin %
7.3%
6.7%
6.7%
6 bps
1.9%
6.3%
4.4%
189 bps
Total operating income
124
114
104
9.6%
110
400
248
61.3%
Operating margin %
7.1%
6.6%
6.0%
58 bps
1.7%
6.1%
3.7%
239 bps
Net earnings (loss)
69
59
63
(6.3)%
(94)
196
135
45.2%
Diluted earnings per share
$ 1.39
$ 1.19
$ 1.29
(8.0)%
$ (1.93)
$ 3.97
$ 2.77
43.4%
Weighted average diluted shares outstanding
49.7
49.7
48.8
48.8
49.4
48.8
1Non-GAAP metric which, for the fourth quarter, excludes the favorable adjustment of the prior quarter non-cash goodwill impairment charge and, for the fiscal year, excludes the goodwill impairment charge. See Exhibit B for reconciliation.
2Comparison of "2010" to "Adjusted 2011" figures. On a GAAP basis, for the fourth quarter and fiscal year 2011, total segment operating income increased by $11 million and decreased by $172 million, total operating income increased by $20 million and decreased by $138 million, net earnings (loss) increased by $6 million and decreased by $229 million, and diluted earnings per share increased $0.10 and decreased by $4.70, respectively.
Fourth quarter 2011 sales decreased $1 million and 2011 sales decreased $148 million from the comparable periods in 2010, driven by lower sales volume following the delivery of DDG-110 USS
William P. Lawrence in the first quarter 2011 and lower sales volume on the LPD 22-25 contract, the CVN-71 USS
Theodore Roosevelt Refueling Complex Overhaul (RCOH), the CVN-65 USS
Enterprise Extended Drydocking Selected Restricted Availability (EDSRA) and the Post Shakedown Availability (PSA) for CVN-77 USS
George H.W. Bush. These decreases were partially offset by higher sales on DDG-113
John Finn, the advance procurement contract for LPD-27
, the LHA program,the fourth National Security Cutter (NSC), 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
Virginia-class submarine construction program. The delivery of DDG-107 USS
Gravely in the third quarter 2010 also negatively affected the 2011 to 2010 fiscal year sales comparison, partially offset by higher sales volume on LPD-26
John P. Murtha.
Due to adverse equity market conditions that began in the second quarter of 2011 and the resultant decline in industry market multiples and the company's market capitalization, the company recorded a non-cash goodwill impairment charge of $300 million in the Ingalls segment during the third quarter 2011, which represented the company's preliminary estimate of the impairment charge. During the fourth quarter 2011, the company finalized the goodwill impairment calculation and, as a result, decreased the non-cash goodwill impairment charge in the Ingalls segment by $10 million to $290 million. "As adjusted" figures have excluded the third quarter goodwill impairment charge and the fourth quarter adjustment to the charge for comparison purposes.
Adjusted segment operating income in the quarter was $117 million, an increase of $1 million from the fourth quarter of 2010. Adjusted total operating income was $114 million, up from $104 million in the same quarter last year. Adjusted total operating margin was 6.6 percent for the quarter, compared with 6.0 percent in the same period of 2010. The total operating income and margin increase was primarily driven by a lower FAS/CAS adjustment in 2011.
Adjusted segment operating income for 2011 was $412 million, up from $294 million in 2010. Adjusted total operating income was $400 million, compared to $248 million last year. Adjusted total operating margin was 6.1 percent for the year, compared with 3.7 percent in 2010. These increases were primarily due to net unfavorable performance adjustments recorded in 2010 of $132 million on the LPD-22 through LPD-25 contract, including the effect of the $113 million pre-tax charge resulting from the decision to wind down shipbuilding operations at the Avondale facility and an unfavorable performance adjustment in 2010 of $30 million to reflect additional costs to complete post-delivery work on LHD-8 USS
Makin Island.
Awards
The value of new contract awards during the fourth quarter of 2011 was approximately $0.8 billion. Significant new awards during this period included contracts for advance construction of CVN-79
John F. Kennedy, engineering and support services on the LPD
San Antonio-class ships and continued work on the DDG-1000 class of destroyers. The total value of new contract awards for 2011 was approximately $5.6 billion. In addition to the fourth quarter awards, significant new awards during 2011 included contracts for the construction of LPD-26
John P. Murtha, DDG-113
John Finn, DDG-114
Ralph Johnson and NSC-5, maintenance services at Kesselring Research and Development site, continued engineering and construction of CVN-78
Gerald R. Ford, advance planning efforts for the CVN-72 USS
Abraham Lincoln RCOH, and the continued execution of the CVN-71 USS
Theodore Roosevelt RCOH.
Operating Segment Results
Ingalls Shipbuilding
Fourth Quarter
Fiscal Year
($ in millions)
As Reported
2011
As Adjusted1
2011
2010
% Change2
As Reported
2011
As Adjusted1
2011
2010
% Change2
Sales
$ 676
$ 676
$ 727
(7.0)%
$ 2,885
$ 2,885
$ 3,027
(4.7)%
Operating income (loss)
25
15
10
50.0%
(220)
70
(61)
Operating margin %
3.7%
2.2%
1.4%
84 bps
nm
2.4%
nm
1Non-GAAP metric which, for the fourth quarter, excludes the favorable adjustment of the prior quarter non-cash goodwill impairment charge and, for the fiscal year, excludes the goodwill impairment charge. See Exhibit B for reconciliation.
2Comparison of "2010" to "As Adjusted 2011" figures. On a GAAP basis, operating income (loss) increased by $15 million for the fourth quarter and decreased by $159 million for 2011.
Ingalls sales for the fourth quarter of 2011 decreased $51 million and 2011 sales decreased $142 million from the comparable periods in 2010, primarily driven by lower sales in the DDG-51 program and the LPD 22-25 contract and the delivery of NSC-3 USCGC
Stratton in the third quarter 2011, partially offset by higher sales in the NSC program, the LHA program, the advance procurement contract for LPD-27and the construction of DDG-113
John Finn. The decrease in the DDG-51 program was primarily due to the delivery of DDG-110 USS
William P. Lawrence in the first quarter of 2011. The decrease in the LPD program was due to lower sales volume on LPD-22
San Diegoand LPD-24
Arlington. The delivery of DDG-107 USS
Gravely in the third quarter 2010 also negatively affected the 2011 to 2010 fiscal year sales comparison, partially offset by higher sales volume on LPD-26
John P. Murtha.
Ingalls adjusted operating income for the fourth quarter of 2011 was $15 million, compared with operating income of $10 million in the fourth quarter of 2010. Ingalls adjusted operating margin was 2.2 percent for the quarter, compared to 1.4 percent for the fourth quarter of 2010, driven by progress on the LPD program and new contracts.
Ingalls adjusted operating income for 2011 was $70 million, compared with an operating loss of $61 million in 2010. Ingalls adjusted operating margin was 2.4 percent for the year. The increase in adjusted operating income was primarily due to net unfavorable performance adjustments recorded in 2010 of $132 million on the LPD-22 through LPD-25 contract, including the effect of the $113 million pre-tax charge resulting from the decision to wind down shipbuilding operations at the Avondale facility and an unfavorable performance adjustment in 2010 of $30 million to reflect additional costs to complete post-delivery work on LHD-8 USS
Makin Island.
Key Ingalls milestones for the quarter:
- Delivered LPD-22 San Diego, the company's sixth amphibious transport dock
- Completed stern release on LHA-6 America
- Began pre-fabrication of U.S. Coast Guard's fifth National Security Cutter
Newport News Shipbuilding
Fourth Quarter
Fiscal Year
($ in millions)
2011
2010
% Change
2011
2010
% Change
Sales
$ 1,078
$ 1,027
5.0%
$ 3,766
$ 3,775
(.2)%
Operating income
102
106
(3.8)%
342
355
(3.7)%
Operating margin %
9.5%
10.3%
-86 bps
9.1%
9.4%
-32 bps
Newport News sales for the fourth quarter of 2011 increased $51 million, or 5.0 percent, from the fourth quarter of 2010, primarily driven by higher sales volume on 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
Virginia-class submarine construction program. These increases were partially offset by lower sales volume on the CVN-71 USS
Theodore Roosevelt RCOH, the CVN-65 USS
Enterprise EDSRA and the PSA for CVN-77 USS
George H.W. Bush.
Newport News sales for 2011 decreased $9 million, or 0.2 percent, primarily driven by the decrease in aircraft carrier sales volume described in the preceding paragraph and lower fleet support sales volume, partially offset by higher sales volume on the
Virginia-class submarine construction program.
Newport News operating income for the fourth quarter of 2011 was $102 million, compared with $106 million in the fourth quarter of 2010. Newport News operating margin was 9.5 percent for the quarter, compared with 10.3 percent in the same period of 2010. These decreases were primarily due to higher revenues on lower-margin programs and risk retirement that occurred in 2010 on CVN-70 USS
Carl Vinson and CVN-77 USS
George H. W. Bush, partially offset by risk retirement on the
Virginia-class submarine construction program in 2011. For the year, Newport News operating income was $342 million, down $13 million from 2010. Newport News operating margin was 9.1 percent in 2011, compared to 9.4 percent in 2010. These decreases were primarily driven by the items described above.
Key Newport News milestones for the quarter:
- Successfully transitioned contract to manage Kesselring prototype maintenance in support of the Navy's Nuclear Propulsion Program
- Awarded contract for work including engineering, design, configuration management, integrated logistic support, database management and modernization support on Los Angeles-class, Seawolf-class, Virginia-class and Ohio-class submarines, special mission submersible interfaces, submarine support facilities and related programs
- Reached 66 percent completion on structural work of CVN-78 Gerald R. Ford
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 nearly 38,000 in Virginia, Mississippi, Louisiana and California, its primary business divisions are Newport News Shipbuilding and Ingalls Shipbuilding. For more information, please visit
The Huntington Ingalls Industries, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=9418
Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. EDT on March 28. A live audio broadcast of the conference call and supplemental presentation will be available on the investor relations page of the company's website:
