Huntington Ingalls Industries Reports First Quarter Results; Segment Operating Margin Continues to Improve
NEWPORT NEWS, Va., May 8, 2013 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported first quarter 2013 revenues of $1.56 billion, relatively flat compared to the same period last year. Segment operating income for the first quarter was $120 million, compared to $101 million in the same period last year. Total operating income for the quarter was $95 million, compared to $80 million in the same period last year. Pension-adjusted operating income for the first quarter was $118 million, or 7.6 percent of revenue, compared to $97 million, or 6.2 percent of revenue, in the comparable period of 2012. These increases were primarily attributable to additional risk retirement at Newport News on the SSN-774 Virginia-class (VCS) program and the absence of unfavorable cumulative adjustments on the LPD-17 San Antonio-class (LPD) program at Ingalls.
First quarter diluted earnings per share was $0.87, compared to diluted earnings per share of $0.67 in the same period of 2012. Pension-adjusted diluted earnings per share for the quarter was $1.17, compared to $0.89 in the comparable period of 2012.
New business awards for the quarter were approximately $3.2 billion, consisting primarily of contracts for the CVN-72 USS Abraham Lincoln refueling and complex overhaul (RCOH) and continued construction preparation for CVN-79 John F. Kennedy.
"HII continues to execute well on its programs at Ingalls Shipbuilding and Newport News Shipbuilding," said Mike Petters, HII's president and chief executive officer. "Even with the continued uncertainty surrounding the defense budget, HII continues to garner support for its programs through alignment with the Navy's priorities and is focused on driving performance to our goal of 9-plus percent operating margin by 2015."
Ingalls revenues for the first quarter decreased $61 million, or 8.8 percent, from the same period in 2012, driven by lower sales in amphibious assault programs, partially offset by higher sales in the National Security Cutter (NSC) program. The decrease in amphibious assault program revenues was due to lower sales on LPD-23 USS Anchorage, LPD-24 USS Arlington, LPD-25 Somerset and LHA-6 America, partially offset by higher sales on LPD-26 John P. Murtha, LPD-27 Portland and LHA-7 Tripoli. Revenues on the NSC program were higher due to higher sales on the construction contracts of NSC-4 Hamilton and NSC-5 James and the advance procurement contract on NSC-6 Munro. Surface combatants revenues remained constant from the same period in 2012 as higher sales on DDG-113 John Finn were offset by lower sales on DDG-114 Ralph Johnson.
Ingalls operating income for the quarter was $26 million, an increase of $6 million over the same period in 2012. The increase was primarily due to the absence of unfavorable cumulative adjustments on the LPD program.
Key Ingalls program milestones for the quarter:
Newport News revenues for the first quarter increased $55 million, or 6.1 percent, from the same period in 2012, primarily driven by higher sales in submarines and fleet support services. Submarine revenues increased due to higher sales on the VCS program, primarily driven by risk retirement and the favorable resolution of outstanding contract changes. Higher revenues in fleet support services were primarily the result of increased volumes associated with repair work on SSN-765 USS Montpelier and the CVN-70 USS Carl Vinson planned incremental availability. Aircraft carrier revenues remained stable from the same period in 2012 as higher sales volumes on the construction preparation contract for CVN-79 John F. Kennedy and the advance planning contract for the CVN-72 USS Abraham Lincoln RCOH were offset by lower sales volumes on the execution contract for the CVN-71 USS Theodore Roosevelt RCOH and on an engineering contract on CVN-78 Gerald R. Ford.
Newport News operating income for the quarter was $94 million, a $13 million increase over the same period in 2012. The increase was mainly related to the VCS program, primarily driven by risk retirement and the favorable resolution of outstanding contract changes.
Key Newport News program milestones for the quarter:
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 at its Newport News Shipbuilding and Ingalls Shipbuilding divisions. Employing about 37,000 in Virginia, Mississippi, Louisiana and California, HII also provides a wide variety of products and services to the commercial energy industry and other government customers, including the Department of Energy. For more information, please visit www.huntingtoningalls.com.
Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. ET on May 8. 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.
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 government regulations and procurement processes and our ability to comply with such requirements; our ability to realize the expected benefits from consolidation of our Ingalls facilities; natural disasters; adverse economic conditions in the United States and globally; risks related to our indebtedness and leverage; 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 obligations to update any forward-looking statements. You should not place undue reliance on any forward-looking statements that we may make.
Exhibit B: Reconciliations
We make reference to "segment operating income," "segment operating margin," "pension-adjusted operating income," "pension-adjusted operating margin," "pension-adjusted net earnings," and "pension-adjusted diluted earnings per share."
Segment operating income is operating income before the FAS/CAS Adjustment and deferred state income taxes.
Segment operating margin is segment operating income as a percentage of total sales and service revenues.
Pension-adjusted operating income is total operating income adjusted for the FAS/CAS Adjustment.
Pension-adjusted operating margin is pension-adjusted operating income as a percentage of total sales and service revenues.
Pension-adjusted net earnings is net income adjusted for the tax adjusted FAS/CAS Adjustment.
Pension-adjusted diluted earnings per share is pension-adjusted net earnings divided by the weighted-average diluted common shares outstanding.
Segment operating income and segment operating margin are two of the key metrics we use to evaluate operating performance because they exclude items that do not affect segment performance. We believe pension-adjusted operating income, pension-adjusted operating margin, pension-adjusted net earnings and pension-adjusted diluted earnings per share are also useful metrics because they exclude non-operating items that we do not consider indicative of our core operating performance. Therefore, we believe it is appropriate to disclose these measures to help investors analyze our operating performance. However, these measures are not measures of financial performance under GAAP and may not be defined or calculated by other companies in the same manner.
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