HUNTINGTON INGALLS INDUSTRIES REPORTS THIRD QUARTER 2014 RESULTS

• Revenues Were $1.72 Billion for the Third Quarter of 2014


• Segment Operating Margin for the Quarter Was 8.8 Percent


• Total Operating Margin Was 10.0 Percent, a 220 bps Improvement Over Q3 2013


• Diluted Earnings Per Share Was $1.96 for the Quarter


• Cash and Cash Equivalents at the End of the Quarter Were $769 Million

NEWPORT NEWS, Va., Nov. 6, 2014 -- Huntington Ingalls Industries (NYSE:HII) reported third quarter 2014 revenues of $1.72 billion, up 4.9 percent compared to the same period last year. Third quarter diluted earnings per share was $1.96, compared to diluted earnings per share of $1.36 in the same period of 2013. Adjusted diluted earnings per share for the quarter was $1.67, compared to $1.17 in the same period of 2013.

Segment operating income for the third quarter was $151 million, compared to $142 million in the same period last year. Total operating income for the quarter was $171 million, compared to $127 million in the same period last year. The increase in operating income was primarily attributable to performance improvement and risk retirement at Ingalls Shipbuilding on the LPD-17 San Antonio class and a favorable FAS/CAS Adjustment, partially offset by the net favorable impact in the prior year of hurricane insurance recoveries and the closure of the Gulfport Composite Center of Excellence.

New contract awards for the quarter were approximately $0.4 billion, bringing total backlog at the end of Q3 2014 to $22.8 billion, of which $13.1 billion, or 57.5 percent, was funded.

"Our healthy backlog continues to support our businesses as we progress toward our goal of achieving 9-plus percent operating margin in 2015," said Mike Petters, HII's president and CEO. "Despite the challenging budgetary environment, we remain focused on continued program execution, risk retirement and cash generation."



Third Quarter 2014 Highlights










Three Months Ended





September 30




($ in millions, except per share amounts)
2014
2013
$ Change
% Change


Revenues
$ 1,717
$ 1,637
$ 80
4.9%


Segment operating income1
151
142
9
6.3%


Segment operating margin %1
8.8%
8.7%

12 bps


Total operating income
171
127
44
34.6%


Operating margin %
10.0%
7.8%

220 bps


Net earnings
96
69
27
39.1%


Diluted earnings per share
$ 1.96
$ 1.36
$ 0.60
44.1%


Weighted-average diluted shares outstanding
49.0
50.6











Adjusted Figures






Revenues2
$ 1,717
$ 1,665
$ 52
3.1%


Segment operating income1,2
$ 151
$ 113
38
33.6%


Segment operating margin %1,2
8.8%
6.8%

201 bps


Total operating income2
$ 171
$ 98
73
74.5%


Operating margin %2
10.0%
5.9%

407 bps


Net earnings2,3
82
59
23
39.0%


Diluted earnings per share2,3
$ 1.67
$ 1.17
$ 0.50
42.7%


Weighted-average diluted shares outstanding
49.0
50.6







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 hurricane insurance recoveries and the Gulfport closure in 2013. See Exhibit B for reconciliation.


3 Non-GAAP metrics that exclude the after-tax FAS/CAS Adjustment. See Exhibit B for reconciliation.









Operating Segment Results










Ingalls Shipbuilding











Three Months Ended





September 30




(In millions)
2014
2013
As Adjusted1 2013
$ Change2
% Change2


Revenues
$ 559
$ 565
$ 593
$ (34)
(5.7)%


Operating income (loss)
55
46
17
38
223.5%


Operating margin %
9.8%
8.1%
2.9%

697 bps


1 Non-GAAP metrics that exclude the impact of hurricane insurance recoveries and the Gulfport closure. See Exhibit B for reconciliation.


2 Comparison of 2014 to "As Adjusted 2013" figures. On an unadjusted basis, operating income increased by $9 million.



Ingalls revenues for the third quarter decreased $6 million, or 1.1 percent, from the same period in 2013, due to lower sales in amphibious assault ships, partially offset by higher sales in the National Security Cutter (NSC) program and surface combatants and the $28 million net unfavorable impact in the prior year for hurricane insurance recoveries and the Gulfport closure. Adjusting for the hurricane insurance recoveries and the Gulfport closure in 2013, Ingalls revenues of $559 million decreased $34 million or 5.7 percent from the same period last year. The decrease in amphibious assault ships revenues was due to lower volumes on LHA-6 USS America and LPD-25 USS Somerset, partially offset by higher volumes on LPD-26 John P. Murtha and LHA-7 Tripoli. Increased revenues on the NSC program were driven by higher volumes on NSC-5 James, NSC-6 Munro, NSC-4 Hamilton and NSC-7 Kimball. Surface combatants revenues increased due to higher volumes on DDG-117 Paul Ignatius and DDG-119 (unnamed), partially offset by lower volumes on the DDG-1000 Zumwalt-class program.

Ingalls operating income for the quarter was $55 million, an increase of $9 million over the same period in 2013. Operating margin was 9.8 percent for the quarter, compared to 8.1 percent in Q3 2013. These increases were primarily due to performance improvement and risk retirement on the LPD program, partially offset by the net favorable impact in the prior year of hurricane insurance recoveries and the Gulfport closure. Adjusting for the $46 million favorable hurricane insurance recoveries and the $17 million unfavorable Gulfport closure impact in Q3 2013, operating income increased $38 million and operating margin increased 697 basis points over same period last year.

Key Ingalls highlights for the quarter:

• Started fabrication on DDG-117 Paul Ignatius


• Delivered composite deckhouse for DDG-1001 Michael Monsoor to the U.S. Navy


• Delivered NSC-4 Hamilton to the U.S. Coast Guard


• Authenticated the keel for DDG-114 Ralph Johnson


• Received a $23.5 million design contract for early industry involvement to reduce the construction cost of the amphibious assault ship LHA-8

Newport News Shipbuilding










Three Months Ended





September 30




($ in millions)
2014
2013
$ Change
% Change


Revenues
$ 1,097
$ 1,073
$ 24
2.2%


Operating income (loss)
101
96
5
5.2%


Operating margin %
9.2%
8.9%

26 bps



Newport News revenues for the third quarter increased $24 million, or 2.2 percent, from the same period in 2013, primarily driven by the acquisition of The S.M. Stoller Corp., which was completed in January 2014, and higher revenues in submarines and energy, 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 primarily driven by increased commercial volumes. Lower aircraft carriers revenues were driven by decreased volumes on CVN-78 Gerald R. Ford, the CVN-71 USS Theodore Roosevelt refueling and complex overhaul (RCOH) and the CVN-79 John F. Kennedy construction preparation contract, partially offset by increased volumes on the CVN-72 USS Abraham Lincoln RCOH.

Newport News operating income for the quarter was $101 million, a $5 million increase over the same period last year. Operating margin was 9.2 percent for the quarter, compared to 8.9 percent in Q3 2013. These increases were driven primarily by higher risk retirement on the VCS program, partially offset by lower risk retirement on CVN-78 Gerald R. Ford.

Key Newport News highlights for the quarter:

• Christened and launched SSN-785 John Warner


• Installed the final section of the CVN-72 USS Abraham Lincoln main mast


• Awarded a 12-month $49.6 million contract to begin planning for work on CVN-73 USS George Washington

The Company

Huntington Ingalls Industries designs, builds and manages the life-cycle of the most complex nuclear and conventionally-powered ships for the U.S. Navy and Coast Guard. 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. HII also provides engineering and project management services expertise to the commercial energy industry, the Department of Energy and other government customers. Headquartered in Newport News, Va., HII employs more than 39,000 people operating both domestically and internationally. For more information, visit:

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