NEWS

NEWS RELEASE

HUNTINGTON INGALLS INDUSTRIES REPORTS THIRD QUARTER 2016 RESULTS

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  • Revenues were $1.68 billion

  • Total operating margin was 10.4%

  • Segment operating margin was 8.3%

  • Diluted earnings per share was $2.27

  • Cash and cash equivalents at the end of the quarter were $957 million

NEWPORT NEWS, Va., Nov. 03, 2016 (GLOBE NEWSWIRE) — Huntington Ingalls Industries (NYSE:HII) reported third quarter 2016 revenues of $1.68 billion, down 6.5 percent from the same period last year. Diluted earnings per share in the quarter was $2.27, compared to $2.29 in the same period of 2015.

Operating income in the quarter was $175 million, compared to $200 million in the same period last year. Operating margin in the quarter was 10.4 percent, compared to 11.1 percent in the same period last year. These decreases were driven by lower volumes and lower risk retirements in shipbuilding, partially offset by the favorable FAS/CAS Adjustment.

New business awards for the quarter were approximately $1.2 billion, bringing total backlog to $20.0 billion as of Sept. 30, 2016.

“Our third quarter financial results reflect solid overall operating performance, driven by program execution at Ingalls,” said Mike Petters, HII’s president and CEO. “Given our strong year-to-date performance, and despite challenges at Newport News, we expect 2016 revenues and operating margin to be relatively similar to 2015.”

Results of Operations

 

Three Months Ended

  

Nine Months Ended

 
 

September 30

  

September 30

 

(in millions, except per share amounts)

2016

2015

% Change

 

2016

2015

% Change

Sales and service revenues

$

1,683

 

$

1,800

 

(6.5

)%

 

$

5,146

 

$

5,115

 

0.6

%

Operating income

175

 

200

 

(12.5

)%

 

590

 

625

 

(5.6

)%

Operating margin %

10.4

%

11.1

%

(71) bps

  

11.5

%

12.2

%

(75) bps

 

Segment operating income1

140

 

172

 

(18.6

)%

 

490

 

543

 

(9.8

)%

Segment operating margin %1

8.3

%

9.6

%

(124) bps

  

9.5

%

10.6

%

(109) bps

 

Net earnings

107

 

111

 

(3.6

)%

 

376

 

354

 

6.2

%

Diluted earnings per share

$

2.27

 

$

2.29

 

(0.9

)%

 

$

7.93

 

$

7.28

 

8.9

%

        

Weighted-average diluted shares outstanding

47.2

 

48.4

   

47.4

 

48.6

  
                  
                  

Adjusted sales and service revenues2

$

1,683

 

$

1,800

 

(6.5

)%

 

$

5,146

 

$

5,128

 

0.4

%

Adjusted operating income2,3

175

 

200

 

(12.5

)%

 

590

 

548

 

7.7

%

Adjusted operating margin %2,3

10.4

%

11.1

%

(71) bps

  

11.5

%

10.7

%

78 bps

 

Adjusted segment operating income1,2,3

140

 

172

 

(18.6

)%

 

490

 

466

 

5.2

%

Adjusted segment operating margin %1,2,3

8.3

%

9.6

%

(124) bps

  

9.5

%

9.1

%

43 bps

 

Adjusted net earnings4

83

 

96

 

(13.5

)%

 

306

 

263

 

16.3

%

Adjusted diluted earnings per share4

$

1.76

 

$

1.98

 

(11.1

)%

 

$

6.45

 

$

5.41

 

19.2

%

1 Non-GAAP measures that exclude non-segment factors affecting operating income.  See Exhibit B for reconciliations.

2 Non-GAAP measures that exclude the impact of an insurance litigation settlement at the Ingalls segment in second quarter 2015.  See Exhibit B for reconciliations.

3 Non-GAAP measures that exclude the impact of a goodwill impairment charge at the Other segment in second quarter 2015.  See Exhibit B for reconciliations.

4 Non-GAAP measures that exclude the after-tax impact of the FAS/CAS Adjustment in 2016 and 2015, the after-tax impact of the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment, each in second quarter 2015, and the after-tax impact of the loss on the early extinguishment of debt in the third quarter of 2015.  See Exhibit B for reconciliations.

 

Segment Operating Results

Ingalls Shipbuilding

 

Three Months Ended

  

Nine Months Ended

 
 

September 30

  

September 30

 

($ in millions)

2016

2015

% Change

 

2016

2015

% Change

Revenues

$

577

 

$

593

 

(2.7

)%

 

$

1,748

 

$

1,608

 

8.7

%

Segment operating income1

66

 

77

 

(14.3

)%

 

236

 

320

 

(26.3

)%

Segment operating margin %1

11.4

%

13.0

%

(155) bps

  

13.5

%

19.9

%

(640) bps

 

Adjusted revenues1,2

577

 

593

 

(2.7

)%

 

1,748

 

1,621

 

7.8

%

Adjusted segment operating income1,2

66

 

77

 

(14.3

)%

 

236

 

184

 

28.3

%

Adjusted segment operating margin %1,2

11.4

%

13.0

%

(155) bps

  

13.5

%

11.4

%

215 bps

 

1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

2 Non-GAAP measures that exclude the impact of the insurance litigation settlement in second quarter 2015. See Exhibit B for reconciliations.

 

Ingalls revenues for the third quarter decreased $16 million, or 2.7 percent, from the same period in 2015, due to lower revenues in Amphibious Assault Ships and the Legend-class National Security Cutter (NSC) program, partially offset by higher revenues in Surface Combatants. Lower Amphibious Assault Ships revenues were due to the delivery of LPD-26 USS John P. Murtha in the second quarter of 2016 and decreased volume on LPD-27 Portland, partially offset by increased volume on LPD-28 Fort Lauderdale. Lower NSC program revenues were due to the delivery of NSC-5 USCGC James in 2015 and decreased volume on NSC-6 Munro. Higher Surface Combatant revenues were primarily due to increased volumes on DDG-121 Frank E. Petersen Jr. and DDG-123 Lenah H. Sutcliffe Higbee, partially offset by decreased volume on DDG-113 John Finn.

Ingalls segment operating income for the third quarter was $66 million, a decrease of $11 million from the same period last year. Segment operating margin in the quarter was 11.4 percent, compared to 13.0 percent in the same period last year. These decreases were primarily due to lower risk retirement on the LHA-6 America-class program.

Key Ingalls milestones for the quarter:

  • Awarded an $88.2 million contract to purchase long-lead material for a ninth NSC

  • Awarded two contracts totaling $32.8 million for design work on the amphibious warfare ship replacement known as LX(R)

  • Awarded a $14 million contract to overhaul DDG-61 USS Ramage

  • Completed builder’s sea trials for NSC-6 Munro

Newport News Shipbuilding

 

Three Months Ended

  

Nine Months Ended

 
 

September 30

  

September 30

 

($ in millions)

2016

2015

% Change

 

2016

2015

% Change

Revenues

$

1,072

 

$

1,177

  

(8.9

)%

 

$

3,315

 

$

3,404

  

(2.6

)%

Segment operating income1

79

 

100

  

(21.0

)%

 

270

 

302

  

(10.6

)%

Segment operating margin %1

7.4

%

8.5

%

 

(113) bps

  

8.1

%

8.9

%

 

(73) bps

 

1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

 

Newport News revenues for the third quarter decreased $105 million, or 8.9 percent, from the same period in 2015, primarily driven by lower revenues in Aircraft Carriers and Submarines. Lower Aircraft Carriers revenues were due to decreased volumes on the construction contract for CVN-78 Gerald R. Ford and the execution contract for the CVN-72 USS Abraham Lincoln refueling and complex overhaul (RCOH), partially offset by increased volumes on the construction contract for CVN-79 John F. Kennedy and the advance planning contract for the CVN-73 USS George Washington RCOH. Lower Submarines revenues related to the SSN-774 Virginia-class submarine (VCS) program were due to decreased volumes on Block III boats, partially offset by increased volumes on Block IV boats.

Newport News segment operating income for the third quarter was $79 million, a decrease of $21 million from the same period last year. Segment operating margin was 7.4 percent for the quarter, compared to 8.5 percent in the same period last year. These decreases were due to lower risk retirement on the VCS program, as well as the resolution of outstanding contract changes on the CVN-71 USS Theodore Roosevelt RCOH in the third quarter of 2015.

Key Newport News milestones for the quarter:

  • Awarded a contract with a potential value of $400 million over the next five years to perform repair work on in-service nuclear-powered submarines, special mission submersibles, moored training ships and submarine support facilities

  • Awarded a $195 million contract modification to continue advance planning for the RCOH of CVN-73 USS George Washington

  • Awarded a $109 million contract to provide engineering, design, logistics and other support for the U.S. Navy’s Los Angeles-class, Seawolf-class, Virginia-class and Ohio-class submarines

  • Awarded a $52 million contract for repair and modernization work on CVN-75 USS Harry S. Truman

  • Awarded a $17.7 million contract for planning and maintenance work on SSN-725 USS Helena

  • Redelivered SSN-785 USS John Warner to the U.S. Navy following its post-shakedown availability (PSA), the first PSA for a Virginia-class submarine conducted by Newport News

Other

 

Three Months Ended

  

Nine Months Ended

 
 

September 30

  

September 30

 

($ in millions)

2016

2015

% Change

 

2016

2015

% Change

Revenues

$

33

 

$

30

 

10.0

%

 

$

84

 

$

105

 

(20.0

)%

Segment operating (loss)1

(5

)

(5

)

%

 

(16

)

(79

)

(79.7

)%

Segment operating margin %1

(15.2

)%

(16.7

)%

152 bps

  

(19.0

)%

(75.2

)%

NM3

 

Adjusted segment operating (loss)1,2

(5

)

(5

)

%

 

(16

)

(20

)

(20.0

)%

Adjusted segment operating margin %1,2

(15.2

)%

(16.7

)%

152 bps

  

(19.0

)%

(19.0

)%

0 bps

 

1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.

2 Non-GAAP measures that exclude the impact of a goodwill impairment charge in second quarter 2015.  See Exhibit B for reconciliation.

NM means the % change is “not meaningful”.

 

Revenues in the Other segment for the third quarter increased $3 million, or 10.0 percent, from the same period last year, due to higher volumes in oil and gas services. Segment operating loss for the quarter was $5 million, which was consistent with third quarter 2015.

About Huntington Ingalls Industries

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 nearly 35,000 people operating both domestically and internationally. For more information, please visit www.huntingtoningalls.com

Conference Call Information

Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. ET today. A live audio broadcast of the conference call and supplemental presentation will be available on the investor relations page of the company’s website: www.huntingtoningalls.com. A telephone replay of the conference call will be available from 12 noon today through Thursday, Nov. 10 by calling toll-free (855) 859-2056 or (404) 537-3406 and using conference ID 91634496.

Forward-Looking Statements

Statements in this release, other than statements of historical fact, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Factors that may cause such differences include: changes in government and customer priorities and requirements (including government budgetary constraints, shifts in defense spending, and changes in customer short-range and long-range plans); our ability to obtain new contracts, estimate our future contract costs and perform our contracts effectively; changes in procurement processes and government regulations and our ability to comply with such requirements; our ability to deliver our products and services at an affordable life cycle cost and compete within our markets; natural disasters; adverse economic conditions in the United States and globally; changes in key estimates and assumptions regarding our pension and retiree health care costs; security threats, including cyber security threats, and related disruptions; and other risk factors discussed in our filings with the U.S. Securities and Exchange Commission. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business, and we undertake no obligation to update any forward-looking statements. You should not place undue reliance on any forward-looking statements that we may make. This release also contains non-GAAP financial measures and includes a GAAP reconciliation of these financial measures. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures.

Exhibit A: Financial Statements

HUNTINGTON INGALLS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

 
  

Three Months Ended
September 30

 

Nine Months Ended
September 30

(in millions, except per share amounts)

 

2016

 

2015

 

2016

 

2015

Sales and service revenues

        

Product sales

 

$

1,327

  

$

1,461

  

$

4,120

  

$

4,137

 

Service revenues

 

356

  

339

  

1,026

  

978

 

Sales and service revenues

 

1,683

  

1,800

  

5,146

  

5,115

 

Cost of sales and service revenues

        

Cost of product sales

 

1,059

  

1,164

  

3,241

  

3,121

 

Cost of service revenues

 

308

  

292

  

887

  

846

 

Income (loss) from operating investments, net

 

6

  

6

  

7

  

9

 

General and administrative expenses

 

147

  

150

  

435

  

473

 

Goodwill impairment

 

  

  

  

59

 

Operating income (loss)

 

175

  

200

  

590

  

625

 

Other income (expense)

        

Interest expense

 

(19

)

 

(25

)

 

(56

)

 

(73

)

Other, net

 

1

  

  

(1

)

 

 

Earnings (loss) before income taxes

 

157

  

175

  

533

  

552

 

Federal income taxes

 

50

  

64

  

157

  

198

 

Net earnings (loss)

 

$

107

  

$

111

  

$

376

  

$

354

 
         

Basic earnings (loss) per share

 

$

2.28

  

$

2.31

  

$

8.00

  

$

7.33

 

Weighted-average common shares outstanding

 

46.9

  

48.0

  

47.0

  

48.3

 
         

Diluted earnings (loss) per share

 

$

2.27

  

$

2.29

  

$

7.93

  

$

7.28

 

Weighted-average diluted shares outstanding

 

47.2

  

48.4

  

47.4

  

48.6

 
         

Dividends declared per share

 

$

0.50

  

$

0.40

  

$

1.50

  

$

1.20

 
         

Net earnings (loss) from above

 

$

107

  

$

111

  

$

376

  

$

354

 

Other comprehensive income (loss)

        

Change in unamortized benefit plan costs

 

20

  

21

  

59

  

65

 

Other

 

1

  

(7

)

 

1

  

(7

)

Tax benefit (expense) for items of other comprehensive income

 

(8

)

 

(4

)

 

(23

)

 

(22

)

Other comprehensive income (loss), net of tax

 

13

  

10

  

37

  

36

 

Comprehensive income (loss)

 

$

120

  

$

121

  

$

413

  

$

390

 
                 


 

HUNTINGTON INGALLS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

 

($ in millions)

 

September 30,
 2016

 

December 31,
2015

Assets

    

Current Assets

    

Cash and cash equivalents

 

$

957

  

$

894

 

Accounts receivable, net

 

1,046

  

1,074

 

Inventoried costs, net

 

268

  

285

 

Prepaid expenses and other current assets

 

73

  

31

 

Total current assets

 

2,344

  

2,284

 

Property, plant, and equipment, net of accumulated depreciation of $1,592 million as of 2016 and $1,489 million as of 2015

 

1,841

  

1,827

 

Goodwill

 

956

  

956

 

Other intangible assets, net of accumulated amortization of $481 million as of 2016 and $465 million as of 2015

 

479

  

495

 

Deferred tax asset

 

253

  

336

 

Miscellaneous other assets

 

135

  

126

 

Total assets

 

$

6,008

  

$

6,024

 

Liabilities and Stockholders’ Equity

    

Current Liabilities

    

Trade accounts payable

 

$

293

  

$

317

 

Accrued employees’ compensation

 

211

  

215

 

Current portion of postretirement plan liabilities

 

143

  

143

 

Current portion of workers’ compensation liabilities

 

227

  

227

 

Advance payments and billings in excess of revenues

 

99

  

125

 

Other current liabilities

 

255

  

247

 

Total current liabilities

 

1,228

  

1,274

 

Long-term debt

 

1,277

  

1,273

 

Pension plan liabilities

 

866

  

1,001

 

Other postretirement plan liabilities

 

424

  

423

 

Workers’ compensation liabilities

 

462

  

460

 

Other long-term liabilities

 

99

  

103

 

Total liabilities

 

4,356

  

4,534

 

Commitments and Contingencies

    

Stockholders’ Equity

    

Common stock, $0.01 par value; 150 million shares authorized; 52.6 million shares issued and 46.5 million shares outstanding as of September 30, 2016, and 52.0 million shares issued and 46.9 million shares outstanding as of December 31, 2015

 

1

  

1

 

Additional paid-in capital

 

1,949

  

1,978

 

Retained earnings (deficit)

 

1,154

  

848

 

Treasury stock

 

(644

)

 

(492

)

Accumulated other comprehensive income (loss)

 

(808

)

 

(845

)

Total stockholders’ equity

 

1,652

  

1,490

 

Total liabilities and stockholders’ equity

 

$

6,008

  

$

6,024

 

 

HUNTINGTON INGALLS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

   
  

Nine Months Ended
September 30

($ in millions)

 

2016

 

2015

Operating Activities

    

Net earnings (loss)

 

$

376

  

$

354

 

Adjustments to reconcile to net cash provided by (used in) operating activities

    

Depreciation

 

123

  

116

 

Amortization of purchased intangibles

 

16

  

19

 

Amortization of debt issuance costs

 

4

  

6

 

Stock-based compensation

 

22

  

29

 

Deferred income taxes

 

59

  

5

 

Proceeds from insurance settlement related to investing activities

 

  

(21

)

Goodwill impairment

 

  

59

 

Loss on early extinguishment of debt

 

  

4

 

Change in

    

Accounts receivable

 

28

  

(245

)

Inventoried costs

 

17

  

31

 

Prepaid expenses and other assets

 

(51

)

 

(39

)

Accounts payable and accruals

 

(42

)

 

108

 

Retiree benefits

 

(75

)

 

(1

)

Other non-cash transactions, net

 

  

3

 

Net cash provided by (used in) operating activities

 

477

  

428

 

Investing Activities

    

Additions to property, plant, and equipment

 

(145

)

 

(86

)

Acquisitions of businesses, net of cash received

 

  

(6

)

Proceeds from disposition of assets

 

4

  

32

 

Proceeds from insurance settlement related to investing activities

 

  

21

 

Net cash provided by (used in) investing activities

 

(141

)

 

(39

)

Financing Activities

    

Repayment of long-term debt

 

  

(395

)

Debt issuance costs

 

  

(9

)

Dividends paid

 

(70

)

 

(58

)

Repurchases of common stock

 

(152

)

 

(192

)

Employee taxes on certain share-based payment arrangements

 

(51

)

 

(54

)

Net cash provided by (used in) financing activities

 

(273

)

 

(708

)

Change in cash and cash equivalents

 

63

  

(319

)

Cash and cash equivalents, beginning of period

 

894

  

990

 

Cash and cash equivalents, end of period

 

$

957

  

$

671

 

Supplemental Cash Flow Disclosure

    

Cash paid for income taxes

 

$

198

  

$

210

 

Cash paid for interest

 

$

36

  

$

68

 

Non-Cash Investing and Financing Activities

    

Capital expenditures accrued in accounts payable

 

$

11

  

$

3

 
         

Exhibit B: Non-GAAP Measures Definitions & Reconciliations

We make reference to “segment operating income (loss),” “segment operating margin,” “adjusted sales and service revenues,” “adjusted segment operating income (loss),” “adjusted segment operating margin,” “adjusted operating income,” “adjusted operating margin,” “adjusted net earnings,” and “adjusted diluted earnings per share.”

We internally manage our operations by reference to “segment operating income (loss)” and “segment operating margin,” which are not recognized measures under GAAP. When analyzing our operating performance, investors should use segment operating income (loss) and segment operating margin in addition to, and not as alternatives for, operating income and operating margin or any other performance measure presented in accordance with GAAP. They are measures that we use to evaluate our core operating performance. We believe that segment operating income (loss) and segment operating margin reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. We believe these measures are used by investors and are a useful indicator to measure our performance. Because not all companies use identical calculations, our presentation of segment operating income (loss) and segment operating margin may not be comparable to similarly titled measures of other companies.

Adjusted sales and service revenues, adjusted operating income, adjusted operating margin, adjusted segment operating income (loss), adjusted segment operating margin, adjusted net earnings and adjusted diluted earnings per share are not measures recognized under GAAP. They should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. We believe these measures are useful to investors because they exclude items that do not reflect our core operating performance. They may not be comparable to similarly titled measures of other companies.

Segment operating income (loss) is defined as operating income (loss) for the relevant segment(s) before the FAS/CAS Adjustment and deferred state income taxes.

Segment operating margin is defined as segment operating income (loss) as a percentage of sales and service revenues.

Adjusted sales and service revenues is defined as sales and service revenues adjusted for the impact of the insurance litigation settlement at the Ingalls segment in second quarter 2015.

Adjusted segment operating income (loss) is defined as segment operating income (loss) adjusted for the impacts of the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment in second quarter 2015.

Adjusted segment operating margin is defined as adjusted segment operating income (loss) as a percentage of adjusted sales and service revenues.

Adjusted operating income is defined as operating income adjusted for the impacts of the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment, each in second quarter 2015.

Adjusted operating margin is defined as adjusted operating income as a percentage of adjusted sales and service revenues.

Adjusted net earnings is defined as net earnings adjusted for the after-tax impacts of: the loss on early extinguishment of debt in third quarter 2015, the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment, each in second quarter 2015; and the FAS/CAS Adjustment.

Adjusted diluted earnings per share is defined as adjusted net earnings divided by the weighted-average diluted common shares outstanding.

FAS/CAS Adjustment is defined as the difference between our pension and postretirement plan expense under GAAP Financial Accounting Standards and the same expense under U.S. Cost Accounting Standards (CAS). Our pension and postretirement plan expense is charged to our contracts under CAS.

Deferred state income taxes are defined as the change in deferred state tax assets and liabilities in the relevant period. These amounts are recorded within operating income, while the current period state income tax expenses are charged to contract costs and included in segment operating income.

We present financial measures adjusted for the FAS/CAS Adjustment and deferred state income tax to reflect the company’s performance based upon the pension costs and state tax expense charged to our contracts under CAS. We use these adjusted measures as internal measures of operating performance and for performance-based compensation decisions.

Reconciliation of Segment Operating Income and Segment Operating Margin

     
  

Three Months Ended

 

Nine Months Ended

  

September 30

 

September 30

($ in millions)

 

2016

 

2015

 

2016

 

2015

Ingalls revenues

 

$

577

  

$

593

  

$

1,748

  

$

1,608

 

Newport News revenues

 

1,072

  

1,177

  

3,315

  

3,404

 

Other revenues

 

33

  

30

  

84

  

105

 

Intersegment eliminations

 

1

  

  

(1

)

 

(2

)

Sales and Service Revenues

 

1,683

  

1,800

  

5,146

  

5,115

 

Segment Operating Income

        

Ingalls

 

66

  

77

  

236

  

320

 

As a percentage of Ingalls revenues

 

11.4

%

 

13.0

%

 

13.5

%

 

19.9

%

Newport News

 

79

  

100

  

270

  

302

 

As a percentage of Newport News revenues

 

7.4

%

 

8.5

%

 

8.1

%

 

8.9

%

Other

 

(5

)

 

(5

)

 

(16

)

 

(79

)

As a percentage of Other revenues

 

(15.2

)%

 

(16.7

)%

 

(19.0

)%

 

(75.2

)%

Segment Operating Income

 

140

  

172

  

490

  

543

 

As a percentage of sales and service revenues

 

8.3

%

 

9.6

%

 

9.5

%

 

10.6

%

Non-segment factors affecting operating income:

        

FAS/CAS Adjustment

 

37

  

27

  

107

  

82

 

Deferred state income taxes

 

(2

)

 

1

  

(7

)

 

 

Operating Income

 

175

  

200

  

590

  

625

 

Interest expense

 

(19

)

 

(25

)

 

(56

)

 

(73

)

Other, net

 

1

  

  

(1

)

 

 

Federal income taxes

 

(50

)

 

(64

)

 

(157

)

 

(198

)

Net Earnings

 

$

107

  

$

111

  

$

376

  

$

354

 
                 

 

Reconciliation of Adjusted Sales and Service Revenues, Adjusted Segment Operating Income, Adjusted Segment Operating Margin, Adjusted Operating Income and Adjusted Operating Margin

 
  

Three Months Ended

 

Nine Months Ended

  

September 30

 

September 30

($ in millions)

 

2016

 

2015

 

2016

 

2015

Ingalls revenues

 

$

577

  

$

593

  

$

1,748

  

$

1,608

 

Adjustment for insurance litigation settlement

 

  

  

  

13

 

Adjusted Ingalls revenues

 

577

  

593

  

1,748

  

1,621

 

Newport News revenues

 

1,072

  

1,177

  

3,315

  

3,404

 

Other revenues

 

33

  

30

  

84

  

105

 

Intersegment eliminations

 

1

  

  

(1

)

 

(2

)

Adjusted Sales and Service Revenues

 

$

1,683

  

$

1,800

  

$

5,146

  

$

5,128

 
         
         

Operating income

 

$

175

  

$

200

  

$

590

  

$

625

 

As a percentage of sales and service revenues

 

10.4

%

 

11.1

%

 

11.5

%

 

12.2

%

Non-segment factors affecting operating income:

        

FAS/CAS Adjustment

 

(37

)

 

(27

)

 

(107

)

 

(82

)

Deferred state income taxes

 

2

  

(1

)

 

7

  

 

Unadjusted Segment Operating Income

 

$

140

  

$

172

  

$

490

  

$

543

 

As a percentage of sales and service revenues

 

8.3

%

 

9.6

%

 

9.5

%

 

10.6

%

         

Adjustments affecting segment operating income (loss):

        

Ingalls segment operating income

 

$

66

  

$

77

  

$

236

  

$

320

 

Adjustment for insurance litigation settlement

 

  

  

  

(136

)

Adjusted Ingalls segment operating income

 

66

  

77

  

236

  

184

 

As a percentage of Ingalls adjusted revenues

 

11.4

%

 

13.0

%

 

13.5

%

 

11.4

%

Newport News segment operating income

 

79

  

100

  

270

  

302

 

As a percentage of Newport News revenues

 

7.4

%

 

8.5

%

 

8.1

%

 

8.9

%

Other segment operating (loss)

 

(5

)

 

(5

)

 

(16

)

 

(79

)

Adjustment for goodwill impairment

 

  

  

  

59

 

Adjusted Other segment operating (loss)

 

(5

)

 

(5

)

 

(16

)

 

(20

)

As a percentage of Other revenues

 

(15.2

)%

 

(16.7

)%

 

(19.0

)%

 

(19.0

)%

Adjusted Segment Operating Income

 

$

140

  

$

172

  

$

490

  

$

466

 

As a percentage of adjusted sales and service revenues

 

8.3

%

 

9.6

%

 

9.5

%

 

9.1

%

         
         

Operating income

 

$

175

  

$

200

  

$

590

  

$

625

 

As a percentage of sales and service revenues

 

10.4

%

 

11.1

%

 

11.5

%

 

12.2

%

Adjustment for insurance litigation settlement

 

  

  

  

(136

)

Adjustment for goodwill impairment

 

  

  

  

59

 

Adjusted Operating Income

 

$

175

  

$

200

  

$

590

  

$

548

 

As a percentage of adjusted sales and service revenues

 

10.4

%

 

11.1

%

 

11.5

%

 

10.7

%

             

 

Reconciliation of Adjusted Net Earnings

 
  

Three Months Ended

 

Nine Months Ended

  

September 30

 

September 30

($ in millions)

 

2016

 

2015

 

2016

 

2015

         

Net Earnings

 

$

107

  

$

111

  

$

376

  

$

354

 

After-tax adjustment for insurance litigation settlement (1)

 

  

  

  

(88

)

After-tax adjustment for goodwill impairment charge (2)

 

  

  

  

47

 

After-tax adjustment for loss on early extinguishment of debt (3)

 

  

3

  

  

3

 

After-tax adjustment for FAS/CAS Adjustment (4)

 

(24

)

 

(18

)

 

(70

)

 

(53

)

Adjusted Net Earnings

 

$

83

  

$

96

  

$

306

  

$

263

 
                 

 

Reconciliation of Adjusted Diluted Earnings per Share

     
  

Three Months Ended

 

Nine Months Ended

  

September 30

 

September 30

(in millions, except for per share amounts)

 

2016

 

2015

 

2016

 

2015

         

Diluted earnings per share

 

$

2.27

  

$

2.29

  

$

7.93

  

$

7.28

 

After-tax insurance litigation settlement per share (1)

 

  

  

  

(1.81

)

After-tax impairment of goodwill per share (2)

 

  

  

  

0.97

 

After-tax loss on early extinguishment of debt per share (3)

 

  

0.06

  

  

0.06

 

After-tax FAS/CAS Adjustment per share (4)

 

(0.51

)

 

(0.37

)

 

(1.48

)

 

(1.09

)

Adjusted Diluted EPS

 

$

1.76

  

$

1.98

  

$

6.45

  

$

5.41

 
         

(1) Insurance litigation settlement

 

  

  

  

(136

)

Tax effect at 35% statutory rate*

 

  

  

  

48

 

After-tax effect

 

  

  

  

(88

)

Weighted-Average Diluted Shares Outstanding

 

47.2

  

48.4

  

47.4

  

48.6

 

Per share impact**

 

  

  

  

(1.81

)

         

(2) Goodwill impairment charge

 

  

  

  

59

 

Discrete federal tax impact*

 

  

  

  

(12

)

After-tax effect

 

  

  

  

47

 

Weighted-Average Diluted Shares Outstanding

 

47.2

  

48.4

  

47.4

  

48.6

 

Per share impact**

 

  

  

  

0.97

 
         

(3) Loss on early extinguishment of debt

 

  

5

  

  

5

 

Tax effect at 35% statutory rate*

 

  

(2

)

 

  

(2

)

After-tax effect

 

  

3

  

  

3

 

Weighted-Average Diluted Shares Outstanding

 

47.2

  

48.4

  

47.4

  

48.6

 

Per share impact**

 

  

0.06

  

  

0.06

 
         

(4) FAS/CAS Adjustment

 

(37

)

 

(27

)

 

(107

)

 

(82

)

Tax effect at 35% statutory rate*

 

13

  

9

  

37

  

29

 

After-tax effect

 

(24

)

 

(18

)

 

(70

)

 

(53

)

Weighted-Average Diluted Shares Outstanding

 

47.2

  

48.4

  

47.4

  

48.6

 

Per share impact**

 

(0.51

)

 

(0.37

)

 

(1.48

)

 

(1.09

)

*The income tax impact is calculated using the tax rate in effect for the relevant non-GAAP adjustment.

**Amounts may not recalculate exactly due to rounding.

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Danny Hernandez
Director of Public Affairs
(202) 580-9086
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