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Huntington Ingalls Industries Reports First Quarter Results; Segment Operating Margin Continues To Improve

Stocks in this article: HII

  • Revenues were $1.56 billion for the first quarter of 2013
  • Segment operating margin was 7.7 percent, a 124 bps improvement over Q1 2012
  • Total operating margin was 6.1 percent, up from 5.1 percent in the same period last year
  • Diluted earnings per share was $0.87 for the quarter
  • Cash and cash equivalents at the end of the quarter were $652 million

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."

First Quarter 2013 Highlights
  Three Months Ended    
  March 31    
(In millions, except per share amounts) 2013 2012 $ Change % Change
Revenues  $ 1,562  $ 1,568  $ (6) (0.4)%
Segment operating income 1 120 101 19 18.8%
 Segment operating margin % 7.7% 6.4%   124 bps
Total operating income 95 80 15 18.8%
 Total operating margin % 6.1% 5.1%   98 bps
Net earnings 44 33 11 33.3%
Diluted earnings per share  $ 0.87  $ 0.67  $ 0.20 29.9%
Weighted-average diluted shares outstanding 50.3 49.5    
Pension-adjusted Operating Highlights        
Total operating income 95 80    
FAS/CAS Adjustment 23 17    
Pension-adjusted operating income 2 118 97 21 21.6%
 Pension-adjusted operating margin % 2 7.6% 6.2%   137 bps
Pension-adjusted Net Earnings        
Net earnings 44 33    
After-tax FAS/CAS Adjustment 3 15 11    
Pension-adjusted net earnings 2 59 44    
Weighted-average diluted shares outstanding 50.3 49.5    
Pension-adjusted diluted earnings per share 2  $ 1.17  $ 0.89  $ 0.28 31.5%
1 Non-GAAP metric that excludes non-segment factors affecting operating income. See Exhibit B for definition and reconciliation.
2 Non-GAAP metric - see Exhibit B for definition.
3 Tax effected at 35% federal statutory tax rate.
Operating Segment Results
Ingalls Shipbuilding
  Three Months Ended    
  March 31    
(In millions) 2013 2012 $ Change % Change
Revenues  $ 631  $ 692  $ (61) (8.8)%
Operating income (loss) 26 20 6 30.0%
Operating margin % 4.1% 2.9%   123 bps

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.

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