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Huntington Ingalls Industries' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Overall, our programs continue to perform in line with our expectations and we remain confident that we can deliver 9%-plus total operating margin by 2015. In the near term for the second half of 2012, we expect segment revenue and margins to be similar to the first half.

Regarding the threat of sequestration, I don’t have much more to say on the subject as the potential negative impacts it will have on the industry, our workforce and our supply chain have been well-publicized, and while we hope that an alternative is found to avoid the automatic and indiscriminate spending cuts triggered sequestration, it is the law of the land. What we are doing is communicating to members of Congress and other leaders, along with our industry partners, about how this could impact us and we’re telling them that our supply chain – nearly 5,000 companies that span all 50 states – is at risk. They are likely to feel the impacts of sequestration much more rapidly than HII because their contracts and orders tend to cover much shorter periods than our longer term contracts.

Our formula for success is continuing to perform well on our contracts and meeting all of our commitments on safety, quality, cost and schedule; and that’s what we focus on each and every day.

Now to hit a few highlights of our major programs at Ingalls. As I mentioned earlier, LPD-23 Anchorage, constructed at our Avondale shipyard, has successfully completed acceptance trials and delivery should occur in September, about one month later than previously planned. The delay is due to the insulation of non-compliant bolts associated with certain propulsion system components. Although I am disappointed with the delay, I am proud that one of our own people identified the issue and that we are correcting it ourselves. We estimate the total cost of inspection and replacement to be less than $1 million.

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