HUNTINGTON INGALLS INDUSTRIES REPORTS SECOND QUARTER 2016 RESULTS

-Revenues were $1.70 billion -Operating margin was 12.8% -Segment operating margin was 10.8% -Diluted earnings per share was $2.80 -Cash and cash equivalents at the end of t-he quarter were $852 millioN

NEWPORT NEWS, Va., Aug. 04, 2016 (GLOBE NEWSWIRE) -- Huntington Ingalls Industries (NYSE:HII) reported second quarter 2016 revenues of $1.7 billion, down 2.6 percent from the same period last year. Diluted earnings per share in the quarter was $2.80, compared to $3.20 in the same period of 2015. Diluted earnings per share in the second quarter of 2015 included a favorable insurance litigation settlement of $1.80 per share and a goodwill impairment charge of $0.96 per share.

Operating income in the quarter was $217 million, compared to $269 million in the same period last year. Operating margin in the quarter was 12.8 percent, compared to 15.4 percent in the same period last year. Operating income and margin in the second quarter of 2015 included a favorable insurance litigation settlement of $136 million and a goodwill impairment charge of $59 million. Adjusting for these items, adjusted operating income in the quarter increased $25 million to $217 million from $192 million in the second quarter of last year, and adjusted operating margin in the quarter increased 184 basis points to 12.8 percent, from 10.9 percent in the second quarter of 2015. These increases were primarily driven by strong operating performance at Ingalls Shipbuilding and the favorable FAS/CAS Adjustment.

New business awards for the quarter were approximately $900 million, bringing total backlog to $20.5 billion as of June 30, 2016.

“We delivered another quarter of solid operating results driven by strong program execution at Ingalls,” said Mike Petters, HII’s president and CEO. “We had a very strong first half of the year. However, the second half will be challenging at Newport News as we continue to work through the test program on CVN-78 Gerald R. Ford and get the ship ready for sea trials and delivery, while Ingalls focuses on delivering DDG-113 John Finn and NSC-6 Munro.”

Results of Operations

Three Months Ended Six Months Ended June 30 June 30 (in millions, except per share amounts)20162015% Change 20162015% ChangeSales and service revenues$1,700 $1,745 (2.6)% $3,463 $3,315 4.5%Operating income217 269 (19.3)% 415 425 (2.4)% Operating margin %12.8%15.4%(265) bps 12.0%12.8%(84) bps Segment operating income1184 243 (24.3)% 350 371 (5.7)% Segment operating margin %110.8%13.9%(310) bps 10.1%11.2%(108) bps Net earnings133 156 (14.7)% 269 243 10.7%Diluted earnings per share$2.80 $3.20 (12.5)% $5.68 $4.99 13.8% Weighted-average diluted shares outstanding47.5 48.8 47.4 48.7 Adjusted sales and service revenues2$1,700 $1,758 (3.3)% $3,463 $3,328 4.1%Adjusted operating income2,3217 192 13.0% 415 348 19.3% Adjusted operating margin %2,312.8%10.9%184 bps 12.0%10.5%153 bps Adjusted segment operating income1,2,3184 166 10.8% 350 294 19.0% Adjusted segment operating margin %1,2,310.8%9.4%138 bps 10.1%8.8%127 bps Adjusted net earnings4110 97 13.4% 224 166 34.9%Adjusted diluted earnings per share4$2.32 $1.99 16.6% $4.73 $3.41 38.7%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 impacts of the FAS/CAS Adjustment in 2016 and 2015 and the after-tax impacts of the insurance litigation settlement at the Ingalls segment and the goodwill impairment charge at the Other segment in second quarter 2015. See Exhibit B for reconciliations.

Segment Operating Results

Ingalls Shipbuilding

Three Months Ended Six Months Ended June 30 June 30 ($ in millions)20162015% Change 20162015% ChangeRevenues$585 $546 7.1% $1,171 $1,015 15.4%Segment operating income188 198 (55.6)% 170 243 (30.0)%Segment operating margin %115.0%36.3%NM3 14.5%23.9%NM3 Adjusted revenues1,2585 559 4.7% 1,171 1,028 13.9%Adjusted segment operating income1,288 62 41.9% 170 107 58.9%Adjusted segment operating margin %1,215.0%11.1%395 bps 14.5%10.4%411 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.3 NM means the % change is "not meaningful".

Ingalls revenues for the second quarter increased $39 million, or 7.1 percent, from the same period in 2015, due to higher revenues in Surface Combatants and Amphibious Assault Ships, partially offset by lower revenues in the Legend-class National Security Cutter (NSC) program and an unfavorable $13 million impact in second quarter 2015 from an insurance litigation settlement. Adjusting for the insurance litigation settlement, Ingalls adjusted revenues in the second quarter of 2016 of $585 million increased $26 million, or 4.7 percent, from the same period last year. Higher Surface Combatant revenues were primarily due to increased volumes on DDG-121 Frank E. Petersen Jr., DDG-123 Lenah H. Sutcliffe Higbee and planning yard services, partially offset by lower volume on DDG-113 John Finn. Higher Amphibious Assault Ships revenues were primarily due to increased volumes on LPD-28 Ft. Lauderdale and LHA-7 Tripoli, partially offset by decreased volume on LPD-27 Portland. Lower NSC program revenues were primarily due to the delivery of NSC-5 USCGC James in 2015 and decreased volume on NSC-6 Munro, partially offset by increased volume on NSC-8 Midgett.

Ingalls segment operating income for the second quarter was $88 million, a decrease of $110 million from the same period last year. Segment operating margin in the quarter was 15.0 percent, compared to 36.3 percent in the same period last year. Segment operating income and margin in the second quarter of 2015 included an insurance litigation settlement of $136 million. Adjusting for the insurance litigation settlement, Ingalls adjusted segment operating income in second quarter 2016 of $88 million increased $26 million from the second quarter of 2015, and segment operating margin of 15.0 percent increased 395 basis points from the same period last year. These increases were primarily due to higher risk retirement on the LPD program, partially offset by lower risk retirement on the NSC program.

Key Ingalls milestones for the quarter:

-Awarded a $272 million planning, advanced engineering and long-lead material contract for the construction of the amphibious assault ship LHA-8 -Awarded the majority of the manhours to perform contract design work for the U.S. Navy's amphibious warfare ship replacement LX(R) -Delivered LPD-26 John P. Murtha to the U.S. Navy -Christened LPD-27 Portland and DDG-114 Ralph Johnson -Authenticated the keel on DDG-119 Delbert D. Black

Newport News Shipbuilding

Three Months Ended Six Months Ended June 30 June 30 ($ in millions)20162015 % Change 20162015 % ChangeRevenues$1,090 $1,166 (6.5)% $2,243 $2,227 0.7%Segment operating income1102 109 (6.4)% 191 202 (5.4)%Segment operating margin %19.4%9.3% NM2 8.5%9.1% (56) bps 1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.2 NM means the % change is "not meaningful".

Newport News revenues for the second quarter decreased $76 million, or 6.5 percent, from the same period in 2015, primarily driven by lower revenues in Aircraft Carriers, Submarines and Energy. 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 advanced 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. Lower Energy revenues were due to decreased volumes associated with environmental remediation programs.

Newport News segment operating income for the second quarter was $102 million, a decrease of $7 million from the same period last year. The decrease was primarily due to lower risk retirement on the VCS program and lower volumes on the execution contract for the CVN-72 USS Abraham Lincoln RCOH and CVN-78 Gerald R. Ford, partially offset by higher volume on CVN-79 John F. Kennedy. Segment operating margin was 9.4 percent for the quarter, compared to 9.3 percent in the same period last year.

Key Newport News milestones for the quarter:

-Performed a turn ship for CVN-78 Gerald R. Ford, rotating the ship 180 degrees and docking it back to the pier -Awarded a $152 million advanced planning contract for the construction of CVN-80 Enterprise -Hosted keel-laying ceremony for Virginia-class submarine SSN-791 Delaware -Placed a 965-ton superlift into the dry dock, continuing construction of CVN-79 Kennedy. The superlift was built with more than twice the amount of the outfitting accomplished on CVN-78 Gerald R. Ford.

Other

Three Months Ended Six Months Ended June 30 June 30 ($ in millions)20162015% Change 20162015% ChangeRevenues$27 $35 (22.9)% $51 $75 (32.0)%Segment operating (loss)1(6)(64)(90.6)% (11)(74)(85.1)%Segment operating margin %1(22.2)%(182.9)%NM3 (21.6)%(98.7)%NM3 Adjusted segment operating (loss)1,2(6)(5)20.0% (11)(15)(26.7)%Adjusted segment operating margin %1,2(22.2)%(14.3)%NM3 (21.6)%(20.0)%(157) 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.3 NM means the % change is "not meaningful".

Revenues in the Other segment for the second quarter decreased $8 million, or 22.9 percent, from the same period last year, primarily due to lower volumes in oil and gas services and contract mix. The segment operating loss for the quarter was $6 million, compared to a segment operating loss of $64 million in the same period last year. The segment operating loss in the second quarter of 2015 included a goodwill impairment charge of $59 million. Adjusting for the goodwill impairment charge, the adjusted segment operating loss in the second quarter of 2015 was $5 million.