HUNTINGTON INGALLS INDUSTRIES REPORTS FIRST QUARTER 2014 RESULTS

Huntington Ingalls Industries Reports First Quarter Results

• Revenues were $1.59 billion for the first quarter of 2014


• Segment operating margin was 8.6 percent, a 91 bps improvement over Q1 2013


• Total operating margin was 10.0 percent, up from 6.1 percent in the same period last year


• Diluted earnings per share was $1.81 for the quarter


• Adjusted diluted earnings per share, which excludes the FAS/CAS Adjustment, was $1.53 for the quarter


• Cash and cash equivalents at the end of the quarter were $742 million

NEWPORT NEWS, Va., May 8, 2014 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported first quarter 2014 revenues of $1.59 billion, up 2.0 percent compared to the same period last year. First quarter diluted earnings per share was $1.81, compared to diluted earnings per share of $0.87 in the same period of 2013. Adjusted diluted earnings per share for the quarter was $1.53, compared to $1.17 in the comparable period of 2013.

Segment operating income for the first quarter was $137 million, compared to $120 million in the same period last year. Total operating income for the quarter was $159 million, compared to $95 million in the same period last year. Adjusted operating income for the first quarter, which excludes the FAS/CAS Adjustment, was $137 million, or 8.6 percent of revenue, compared to $118 million, or 7.6 percent of revenue, in the comparable period of 2013. The increase in adjusted operating income was primarily attributable to risk retirement at Ingalls on the LPD-17 San Antonio-class (LPD) program and National Security Cutter (NSC) program and at Newport News on the CVN-78 Gerald R. Ford construction contract.

New business awards for the quarter were approximately $2.2 billion, consisting primarily of contracts for continued construction preparation for CVN-79 John F. Kennedy and construction of NSC-7 Kimball. Total backlog at the end of Q1 2014 was $18.7 billion, of which $13.0 billion was funded.

"Notwithstanding continued debate surrounding the defense budget and the impact of sequestration, HII has continued to maintain a healthy backlog and strong operating performance at both segments," said Mike Petters, HII's president and chief executive officer. "With the delivery of LHA-6 America in April 2014, HII has reached a significant milestone on its path to 9 plus percent margins in 2015."

First Quarter 2014 Highlights




Three Months Ended





March 31




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


Revenues
$ 1,594
$ 1,562
$ 32
2.0%


Segment operating income1
137
120
17
14.2%


Segment operating margin %1
8.6%
7.7%

91 bps


Total operating income
159
95
64
67.4%


Total operating margin %
10.0%
6.1%

389 bps


Net earnings
90
44
46
104.5%


Diluted earnings per share
$ 1.81
$ 0.87
$ 0.94
108.0%


Weighted-average diluted shares outstanding
49.7
50.3











Adjusted Operating Highlights






Total operating income
159
95
64
67.4%


FAS/CAS Adjustment
(22)
23
(45)
(195.7)%


Adjusted operating income2
137
118
19
16.1%


Adjusted operating margin %2
8.6%
7.6%

104 bps









Adjusted Net Earnings






Net earnings
90
44
46
104.5%


After-tax FAS/CAS Adjustment3
(14)
15
(29)
(193.3)%


Adjusted net earnings2
76
59
17
28.8%


Weighted-average diluted shares outstanding
49.7
50.3




Adjusted diluted earnings per share2
$ 1.53
$ 1.17
$ 0.36
30.8%


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.



HII realigned its segments in January to optimize its operating structure. As a result of this realignment, the AMSEC and Continental Maritime of San Diego (CMSD) businesses were transferred from the Ingalls segment to the Newport News segment. This 2014 realignment has been reflected in prior financial reporting periods on an "as-if" basis, which has resulted in the transfer of revenue, operating profit, assets and liabilities between the Ingalls and Newport News segments.

Operating Segment Results

Ingalls Shipbuilding




Three Months Ended





March 31




(In millions)
2014
2013
$ Change
% Change


Revenues
$ 547
$ 550
$ (3)
(0.5)%


Operating income (loss)
43
24
19
79.2%


Operating margin %
7.9%
4.4%

350 bps



Ingalls revenues for the first quarter decreased $3 million, or 0.5 percent, from the same period in 2013, driven by lower sales in amphibious assault ships, partially offset by higher sales in the NSC program and surface combatants. The decrease in amphibious assault ships revenues was due to lower volumes on LHA-6 America and LPD-25 USS Somerset, partially offset by higher volumes on LPD-27 Portland. Revenues on the NSC program were higher due to higher volumes on NSC-5 James and NSC-6 Munro construction contracts. Surface combatants revenues were higher due to higher volumes on DDG-117 Paul Ignatius and DDG-114 Ralph Johnson construction contracts.

Ingalls operating income for the quarter was $43 million, an increase of $19 million over the same period in 2013. Ingalls operating margin was 7.9 percent for the quarter as compared to 4.4 percent in Q1 2013. These increases were primarily due to risk retirement on the LPD and NSC programs.

Key Ingalls highlights for the quarter:

• LPD-25 USS Somerset sailed away from the Avondale Shipyard


• LHA-6 America completed successful acceptance sea trials


• Received a $602 million contract modification to fund construction of the Arleigh Burke-class guided missile destroyer DDG 119


• Received a $497 million contract to fund construction of NSC-7 Kimball

Newport News Shipbuilding




Three Months Ended






March 31





(In millions)
2014
2013
$ Change
% Change


Revenues
$ 1,047
$ 1,012
$ 35
3.5%


Operating income (loss)
94
96
(2)
(2.1)%


Operating margin %
9.0%
9.5%

-51 bps



Newport News revenues for the first quarter increased $35 million, or 3.5 percent, from the same period in 2013, primarily driven by higher sales in aircraft carriers and the acquisition of The S.M. Stoller Corp. Higher revenues in aircraft carriers were primarily due to increased volumes on the execution contract for the CVN-72 USS Abraham Lincoln refueling and complex overhaul (RCOH) and the inactivation contract for CVN-65 USS Enterprise, partially offset by lower volumes on the execution contract for the CVN-71 USS Theodore Roosevelt RCOH and the construction contract for CVN-78 Gerald R. Ford. Submarine revenues related to the SSN-774 Virginia-class submarine (VCS) program remained stable as lower volumes on Block II boats following the delivery of SSN-783 USS Minnesota were offset by higher volumes on Block III construction and Block IV advance procurement.

Newport News operating income for the quarter was $94 million, a $2 million decrease from the same period in 2013. Newport News operating margin was 9.0 percent for the quarter, down from 9.5 percent in Q1 2013. These decreases were mainly related to lower risk retirement on the VCS program and the execution contract for CVN-71 USS Theodore Roosevelt RCOH, partially offset by risk retirement on the construction contract for CVN-78 Gerald R. Ford.

Key Newport News highlights for the quarter:

• Acquired The S.M. Stoller Corp., a leading provider of environmental, nuclear, and technical consulting and engineering services to the Department of Energy, Department of Defense and private sector


• Opened a field office in Aiken, S.C., as part of its continuing efforts to expand the company's business in the Department of Energy and commercial energy markets


• Received a $1.295 billion contract modification to a previously awarded construction preparation contract for CVN-79 John F. Kennedy

The Company

Huntington Ingalls Industries 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 more than 38,000 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:

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: