Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - HUNTINGTON INGALLS INDUSTRIES, INC. | d254361d8k.htm |
| EX-99.1 - EXHIBIT 99.1 - HUNTINGTON INGALLS INDUSTRIES, INC. | d254361dex991.htm |
 Q3
2011 Earnings Presentation November 10, 2011
Mike Petters
President and Chief Executive Officer
Barb Niland
Corporate Vice President, Business Management
& Chief Financial Officer
Exhibit 99.2 |
 2
Safe Harbor
2
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 costs and
perform effectively; risks related to our spin-off from Northrop Grumman (including
our increased costs and leverage); risks related to the amount of the estimated
goodwill impairment charge versus the final amount and any additional impairment
charges; our ability to realize the expected benefits from consolidation of our Gulf
Coast facilities; natural disasters; adverse economic conditions
in the United States
and globally; 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. |
 3
Highlights from the Quarter
Adjusted diluted EPS* of $1.05
Total adjusted operating margin* improved to 6.9% from 4.6% last
year and up
sequentially from 5.8%
Newport News operating margin was 10.7%, up 1.0% over last year and up
sequentially from 9.1%
Ingalls adjusted operating margin* was 2.6% up from last year and flat sequentially
from 2.7%
Operating cash flow was $232 million for the quarter
Announced contract for DDG-114, the fifth National Security Cutter and several
U.S. Navy support services contracts
Delivered the third U.S. Coast Guard National Security Cutter (WMSL 752)
Delivered the SSN-781 USS California
* Adjusted for non-cash goodwill impairment charge. See Appendix for
reconciliation to the net loss per share and operating margin determined
under GAAP |
 4
Third Quarter 2011 Consolidated Results
* Adjusted for non-cash goodwill impairment charge. See Appendix for
reconciliation to the operating income, operating margin and net loss per
share determined under GAAP |
 Ingalls Shipbuilding
5
Ingalls sales were down YoY due to
lower volumes on DDG-51 program,
partially offset by higher volume on NSC
program
Adjusted segment operating income*
improved over last year due to lower net
unfavorable performance adjustments in
2011
* Adjusted for non-cash goodwill impairment charge. See Appendix for
reconciliation to the operating income and operating margin determined under
GAAP |
 6
6
Newport News Shipbuilding
6
Newport News sales were down YoY due
to lower volumes on Ford
& Roosevelt
RCOH, partially offset by Lincoln RCOH
planning effort & construction contract for
Kennedy
Segment operating income and operating
margin increased due to positive
performance adjustments on Virginia-class
submarines |
 2012
Net Pension Adjustment 7
2011 YTD actual return on plan assets is 6.5% as of October 31, 2011
Based on the current environment, for 2012, we expect:
o
FAS discount rate of 5.25% to 5.50%
o
Net OPEB expense of approximately $15 million
o
Net cash pension contributions of $75 million to $100 million
-10.00%
(193)
(173)
(154)
(136)
(118)
(100)
-5.00%
(176)
(157)
(138)
(119)
(101)
(84)
0.00%
(151)
(132)
(113)
(94)
(76)
(58)
5.00%
(127)
(107)
(88)
(69)
(51)
(33)
8.00%
(112)
(92)
(73)
(54)
(36)
(18)
8.50%
(109)
(89)
(70)
(51)
(33)
(15)
2012 FAS / CAS Pension Income / (Expense) ($M)
Actual
2011
Asset
Return
FAS Discount Rate
4.50%
4.75%
5.00%
5.25%
5.50%
5.75%
The FAS/CAS pension adjustment is equal to the pension cost recorded under U.S. Government Cost
Accounting Standards (CAS) less the pension costs required to be recognized in accordance with
the Financial Accounting Standards (FAS) under US GAAP. The above chart shows the impact of changes in the FAS discount rate
assumption and 2011 actual plan asset rates of return on the 2012 FAS/CAS pension adjustment.
The final FAS discount rate and the actual rate of return on plan assets will be determined at
12/31/11. The above is not meant to represent the range of all possible outcomes. Additional factors including changes in census data will impact
the actual 2012 FAS/CAS pension adjustment. The amounts shown above are based on a long term
expected return on asset assumption of 8.0%. As noted, the 2012 FAS/CAS adjustment will
be based on market conditions at 12/31/2011. |
 Appendix |
 9
Reconciliations
We
make
reference
to
“segment
operating
income,”
“adjusted
segment
operating
income,”
“adjusted
segment
operating
margin,”
“adjusted
operating
income,”
adjusted
operating
margin,”
“adjusted
net
earnings,”
and
“adjusted
diluted
earnings
per
share.”
Segment
operating
income
is
defined as operating income before net pension and post-retirement benefits adjustment and
deferred state income taxes. Adjusted segment operating income is defined as segment
operating income as adjusted for the impact of the goodwill impairment charge, and
adjusted segment operating margin is defined as adjusted segment operating income
as a percentage of segment
sales and service revenues. Adjusted operating income is defined
as operating income adjusted
for the impact of the goodwill impairment charge, and adjusted operating margin is defined as
adjusted operating income as a percentage of total sales and service revenues. Adjusted
net earnings is defined as net income adjusted for the impact of the
goodwill impairment charge.
Adjusted diluted earnings per share is defined as diluted earnings per share adjusted for the
impact of the goodwill impairment charge.
Segment operating income is one of the key metrics we use to evaluate operating performance
because it excludes items that do not affect segment performance. We believe adjusted
segment operating income, adjusted segment operating margin, adjusted operating income,
adjusted operating margin, adjusted net earnings and adjusted diluted earnings per share
are useful because they exclude the goodwill impairment charge, a non-recurring item
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. |
 10
10
Reconciliation of Non-GAAP Measure –
Segment Operating Income
Three Months Ended
September 30
$ in millions
2011
2010
Sales and Service Revenues
Ingalls
740
$
759
$
Newport News
876
928
$
Intersegment eliminations
(23)
(22)
Total sales and service revenues
1,593
$
1,665
$
Operating Income (Loss)
Ingalls
(281)
$
(1)
$
As a percentage of sales
-38.0%
-0.1%
Newport News
94
90
As a percentage of sales
10.7%
9.7%
Total Segment Operating Income (Loss)
(187)
89
As a percentage of sales
-11.7%
5.3%
Non-segment factors affecting operating income
Net pension and post-retirement benefits adjustment
(1)
(7)
Deferred state income taxes
(2)
(5)
Total operating income (loss)
(190)
$
77
$
Interest expense
(30)
(10)
Federal income taxes
(28)
(25)
Total net earnings (loss)
(248)
$
42
$
|
 Reconciliation of Non-GAAP Measure –
Adjusted Figures
11
1)
Adjusted diluted average common shares outstanding is a non-GAAP
measure defined as weighted average common shares outstanding plus the dilutive effect of stock options and stock awards. This measure has been provided for consistency and
comparability of the 2011 results with earnings per share from prior
periods. 2)
Adjusted diluted EPS is a non-GAAP measure defined as earnings per
share before the per share 2011 goodwill impairment charge impact. Adjusted diluted EPS from continuing operations has been provided for consistency and comparability of the 2011
results with results of operations from prior periods.
3)
Per share amounts are based on basic weighted average shares
outstanding, as use of dilutive securities (ie. stock options and stock awards) would result in a lesser per share loss.
Three Months Ended
September 30
$ in millions
2011
2010
Sales and Service Revenues
Ingalls
740
$
759
$
Newport News
876
928
$
Intersegment eliminations
(23)
(22)
Total sales and service revenues
1,593
$
1,665
$
Adjusted Operating Income (Loss)
Ingalls
(281)
$
(1)
$
Adjustment for goodwill impairment
300
-
Adjusted Ingalls
19
(1)
As a % of sales
2.6%
-0.1%
Newport News
94
90
Total Adjusted Segment Operating Income (Loss)
113
89
As a % of sales
7.1%
5.3%
Non-segment factors affecting adjusted operating income
Net pension and post-retirement benefits adjustment
(1)
(7)
Deferred state income taxes
(2)
(5)
Total adjusted operating income (loss)
110
$
77
$
As a % of sales
6.9%
4.6%
Non-operating factors affecting adjusted net income
Interest expense
(30)
(10)
Federal income taxes
(28)
(25)
Total adjusted net earnings (loss)
52
$
42
$
Per Share Amounts
Weighted average common shares outstanding
48.9
48.8
Dilutive effect of stock options and stock awards
0.6
-
Adjusted diluted average common shares outstanding
(1)
49.5
48.8
Earnings Per Share (EPS) Calculations
Adjusted net earnings from above
52
$
42
$
Adjusted diluted average common shares outstanding
(1)
49.5
48.8
Adjusted diluted EPS
(2)
1.05
$
0.86
$
Reported net loss
(248)
$
Weighted average common shares outstanding
(3)
48.9
Net loss per share
(5.07)
$ |