Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - HUNTINGTON INGALLS INDUSTRIES, INC. | d352165d8k.htm |
| EX-99.2 - EARNINGS PRESENTATION - HUNTINGTON INGALLS INDUSTRIES, INC. | d352165dex992.htm |
Exhibit 99.1
| ||
| Contacts:
Jerri Fuller Dickseski (Media) jerri.dickseski@hii-co.com 757-380-2341
Andy Green (Investors) andy.green@hii-co.com 757-688-5572 |
Huntington Ingalls Industries Reports First Quarter Results; Continues Segment Operating Margin Improvement
| • | Sales were $1.57 billion for the first quarter 2012 |
| • | Segment operating margin improved to 6.4 percent from 5.0 percent in Q1 2011 |
| • | Total operating margin was 5.1 percent, up from 5.0 percent in the same period last year |
| • | Diluted earnings per share was $0.67 |
| • | Cash and cash equivalents at the end of the quarter was $551 million |
NEWPORT NEWS, Va. (May 9, 2012) – Huntington Ingalls Industries (NYSE: HII) reported first quarter 2012 sales of $1.57 billion, down 6.9 percent from the same period last year, and segment operating margin of 6.4 percent, up from 5.0 percent for the same period last year. Total operating margin was 5.1 percent, up 0.1 percent from the first quarter of last year, and first quarter diluted earnings per share was $0.67, compared with $0.92 in the same period of 2011. Cash used in operating activities in the first quarter of 2012 was $329 million, an improvement of $35 million over the same period last year. New business awards for the 2012 first quarter were approximately $0.8 billion, bringing total backlog to $15.5 billion as of March 31, 2012.
“The end of the first quarter marked our one-year anniversary as an independent, publicly-traded company, and we are on track to deliver the performance targets we laid out at the time of the spin,” said Mike Petters, HII’s president and chief executive officer. “The first quarter was highlighted by our steady performance at Newport News and continued progress toward margin expansion at Ingalls, coupled with new business opportunities outside of shipbuilding such as the start-up of nuclear maintenance services support at Kesselring.”
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
First Quarter Highlights
| Three Months Ended March 31, |
||||||||||||||||
| (In millions, except per share amounts) |
2012 | 2011 | $ Change | % Change | ||||||||||||
| Sales |
$ | 1,568 | $ | 1,684 | $ | (116 | ) | (6.9 | )% | |||||||
| Total segment operating income1 |
101 | 84 | 17 | 20.2 | % | |||||||||||
| Segment operating margin % 1 |
6.4 | % | 5.0 | % | 145 bps | |||||||||||
| Total operating income |
80 | 85 | (5 | ) | (5.9 | )% | ||||||||||
| Operating margin % |
5.1 | % | 5.0 | % | 5 bps | |||||||||||
| Net earnings |
33 | 45 | (12 | ) | (26.7 | )% | ||||||||||
| Diluted earnings per share |
$ | 0.67 | $ | 0.92 | $ | (0.25 | ) | (27.1 | )% | |||||||
| Weighted average diluted shares outstanding |
49.5 | 48.8 | ||||||||||||||
| 1 | Non-GAAP metric. See Exhibit B for reconciliation. |
First quarter consolidated sales decreased $116 million from the same period in 2011, driven by lower sales volume following the delivery of NSC-3 USCGC Stratton and LPD-22 San Diego in 2011 and lower sales volume on the CVN-71 USS Theodore Roosevelt refueling and complex overhaul (RCOH) and the SSN-774 Virginia-class submarine construction program, partially offset by higher sales on the advance construction contract for CVN-79 John F. Kennedy and the advance planning contract for the CVN-72 USS Abraham Lincoln RCOH.
Segment operating income in the quarter was $101 million, up $17 million from the same 2011 period. The increase was primarily due to performance improvements on the SSN-774 Virginia-class submarine construction program and the absence of unfavorable performance adjustments realized in the first quarter of 2011 on the LPD program and CVN-78 Gerald R. Ford. Total operating income was $80 million, down from $85 million in the same period last year. Total operating margin was 5.1 percent for the quarter, up 0.1 percent from the first quarter of 2011. The decrease in operating income was primarily driven by higher FAS/CAS adjustment in 2012.
Awards
The value of new contract awards during the three months ended March 31, 2012 was approximately $0.8 billion. Significant new awards during this period included contracts for advance procurement for construction of LPD-27 (unnamed) and NSC-6 (unnamed), as well as advance planning efforts for the CVN-72 USS Abraham Lincoln RCOH.
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
Page 2 of 10
Operating Segment Results
Ingalls Shipbuilding
| Three Months Ended March 31, |
||||||||||||||||
| ($ in millions) |
2012 | 2011 | $ Change | % Change | ||||||||||||
| Sales |
$ | 692 | $ | 761 | $ | (69 | ) | (9.1 | )% | |||||||
| Operating income |
20 | 17 | 3 | 17.6 | % | |||||||||||
| Operating margin % |
2.9 | % | 2.2 | % | 66 bps | |||||||||||
Ingalls revenues for the first quarter decreased $69 million from the same period in 2011, driven by lower sales in the National Security Cutter (NSC) and Amphibious Assault Ships programs. The decrease in the NSC program sales was primarily the result of the delivery of NSC-3 USCGC Stratton in 2011. The decrease in Amphibious Assault Ships sales was primarily due to lower sales volume on the LPD program following the delivery of LPD-22 San Diego in 2011.
Ingalls operating income for the first quarter was $20 million compared with $17 million in the same period in 2011. The increase was primarily the result of the absence of unfavorable performance adjustments realized in 2011 on LPD-22 San Diego. Ingalls operating margin was 2.9 percent for the quarter, up from 2.2 percent in the same quarter of 2011.
Key Ingalls program milestones for the quarter:
| • | LPD-22 San Diego sailed away from Pascagoula en route to her commissioning site in San Diego |
| • | Awarded $70 million additional advance procurement work for LPD-27 (unnamed) |
| • | Awarded $76 million advance procurement contract for NSC-6 (unnamed) |
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
Page 3 of 10
Newport News Shipbuilding
| Three Months Ended March 31, |
||||||||||||||||
| ($ in millions) |
2012 | 2011 | $ Change | % Change | ||||||||||||
| Sales |
$ | 895 | $ | 940 | $ | (45 | ) | (4.8 | )% | |||||||
| Operating income |
81 | 67 | 14 | 20.9 | % | |||||||||||
| Operating margin % |
9.1 | % | 7.1 | % | 192 bps | |||||||||||
Newport News revenues for the first quarter decreased $45 million, or 4.8 percent, from the first quarter 2011, primarily driven by lower sales volume on the CVN-71 USS Theodore Roosevelt RCOH and the SSN-774 Virginia-class submarine construction program, partially offset by higher sales volume on the advance construction contract for CVN-79 John F. Kennedy and the advance planning contract for the CVN-72 USS Abraham Lincoln RCOH.
Newport News operating income for the first quarter was $81 million compared with $67 million in the same period in 2011. The increase was due primarily to the impact of performance improvements on the SSN-774 Virginia-class submarine construction program in 2012, and the absence of unfavorable performance adjustments realized on CVN-78 Gerald R. Ford in 2011. Newport News operating margin was 9.1 percent for the quarter, compared with 7.1 percent in the same quarter of 2011.
Key Newport News program milestones for the quarter:
| • | Reached 75 percent structural completion of CVN-78 Gerald R. Ford |
| • | Awarded $383 million of planning work for the CVN-72 USS Abraham Lincoln RCOH |
| • | Assumed maintenance responsibilities at Kesselring, the Navy’s nuclear propulsion facility in upstate New York |
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
Page 4 of 10
The Company
Huntington Ingalls Industries (HII) 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. Employing nearly 38,000 in Virginia, Mississippi, Louisiana and California, its primary business divisions are Newport News Shipbuilding and Ingalls Shipbuilding. For more information, please visit www.huntingtoningalls.com.
Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. EDT on May 9. A live audio broadcast of the conference call and supplemental presentation will be available on the investor relations page of the company’s website: www.huntingtoningalls.com.
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); our ability to realize the expected benefits from consolidation of our Ingalls 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.
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
Page 5 of 10
Exhibit A: Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (Unaudited)
| Three Months Ended March 31 |
||||||||
| (in millions, except per share amounts) |
2012 | 2011 | ||||||
| Sales and service revenues |
||||||||
| Product sales |
$ | 1,353 | $ | 1,466 | ||||
| Service revenues |
215 | 218 | ||||||
|
|
|
|
|
|||||
| Total sales and service revenues |
1,568 | 1,684 | ||||||
|
|
|
|
|
|||||
| Cost of sales and service revenues |
||||||||
| Cost of product sales |
1,152 | 1,253 | ||||||
| Cost of service revenues |
186 | 197 | ||||||
| General and administrative expenses |
150 | 149 | ||||||
|
|
|
|
|
|||||
| Operating income (loss) |
80 | 85 | ||||||
| Other income (expense) |
||||||||
| Interest expense |
(30 | ) | (15 | ) | ||||
|
|
|
|
|
|||||
| Earnings (loss) before income taxes |
50 | 70 | ||||||
| Federal income taxes |
17 | 25 | ||||||
|
|
|
|
|
|||||
| Net earnings (loss) |
$ | 33 | $ | 45 | ||||
|
|
|
|
|
|||||
| Basic earnings (loss) per share |
$ | 0.67 | $ | 0.92 | ||||
| Weighted-average common shares outstanding |
49.0 | 48.8 | ||||||
|
|
|
|
|
|||||
| Diluted earnings (loss) per share |
$ | 0.67 | $ | 0.92 | ||||
| Weighted-average diluted shares outstanding |
49.5 | 48.8 | ||||||
|
|
|
|
|
|||||
| Net earnings (loss) from above |
$ | 33 | $ | 45 | ||||
| Other comprehensive income (loss) |
||||||||
| Change in unamortized benefit plan costs |
24 | 28 | ||||||
| Tax benefit (expense) on change in unamortized benefit plan costs |
(9 | ) | (11 | ) | ||||
|
|
|
|
|
|||||
| Other comprehensive income (loss), net of tax |
15 | 17 | ||||||
|
|
|
|
|
|||||
| Comprehensive income (loss) |
$ | 48 | $ | 62 | ||||
|
|
|
|
|
|||||
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
Page 6 of 10
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
| ($ in millions) |
March 31 2012 |
December 31 2011 |
||||||
| Assets |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
$ | 551 | $ | 915 | ||||
| Accounts receivable, net |
954 | 711 | ||||||
| Inventoried costs, net |
384 | 380 | ||||||
| Deferred income taxes |
235 | 232 | ||||||
| Prepaid expenses and other current assets |
32 | 30 | ||||||
|
|
|
|
|
|||||
| Total current assets |
2,156 | 2,268 | ||||||
|
|
|
|
|
|||||
| Property, plant, and equipment, net |
2,005 | 2,033 | ||||||
|
|
|
|
|
|||||
| Other Assets |
||||||||
| Goodwill |
844 | 844 | ||||||
| Other purchased intangibles, net of accumulated amortization of $377 in 2012 and $372 in 2011 |
562 | 567 | ||||||
| Pension plan assets |
64 | 64 | ||||||
| Debt issuance costs, net |
46 | 48 | ||||||
| Long-term deferred tax asset |
99 | 128 | ||||||
| Miscellaneous other assets |
48 | 49 | ||||||
|
|
|
|
|
|||||
| Total other assets |
1,663 | 1,700 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 5,824 | $ | 6,001 | ||||
|
|
|
|
|
|||||
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
Page 7 of 10
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited) – CONTINUED
| ($ in millions, except share amounts) |
March 31 2012 |
December 31 2011 |
||||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current Liabilities |
||||||||
| Trade accounts payable |
293 | 380 | ||||||
| Current portion of long-term debt |
29 | 29 | ||||||
| Current portion of workers’ compensation liabilities |
201 | 201 | ||||||
| Current portion of postretirement plan liabilities |
172 | 172 | ||||||
| Accrued employees’ compensation |
189 | 221 | ||||||
| Advance payments and billings in excess of costs incurred |
118 | 101 | ||||||
| Provision for contract losses |
12 | 19 | ||||||
| Other current liabilities |
238 | 249 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
1,252 | 1,372 | ||||||
|
|
|
|
|
|||||
| Long-term debt |
1,822 | 1,830 | ||||||
| Other postretirement plan liabilities |
586 | 581 | ||||||
| Pension plan liabilities |
833 | 936 | ||||||
| Workers’ compensation liabilities |
362 | 361 | ||||||
| Other long-term liabilities |
51 | 49 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
4,906 | 5,129 | ||||||
|
|
|
|
|
|||||
| Commitments and Contingencies |
— | — | ||||||
| Stockholders’ Equity |
||||||||
| Common stock, $.01 par value; 150,000,000 shares authorized; 49,445,957 issued and outstanding as of March 31, 2012; 48,821,563 issued and outstanding as of December 31, 2011 |
0 | 0 | ||||||
| Additional paid-in capital |
1,860 | 1,862 | ||||||
| Retained earnings (deficit) |
(108 | ) | (141 | ) | ||||
| Accumulated other comprehensive income (loss) |
(834 | ) | (849 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
918 | 872 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 5,824 | $ | 6,001 | ||||
|
|
|
|
|
|||||
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
Page 8 of 10
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| Three Months Ended March 31 |
||||||||
| ($ in millions) |
2012 | 2011 | ||||||
| Operating Activities |
||||||||
| Net earnings (loss) |
$ | 33 | $ | 45 | ||||
| Adjustments to reconcile to net cash provided by (used in) operating activities |
||||||||
| Depreciation |
42 | 40 | ||||||
| Amortization of purchased intangibles |
5 | 5 | ||||||
| Amortization of debt issuance costs |
2 | 0 | ||||||
| Stock-based compensation |
8 | 4 | ||||||
| Change in |
||||||||
| Accounts receivable |
(243 | ) | (168 | ) | ||||
| Inventoried costs |
5 | (110 | ) | |||||
| Prepaid expenses and other assets |
2 | (38 | ) | |||||
| Accounts payable and accruals |
(125 | ) | (131 | ) | ||||
| Deferred income taxes |
17 | (33 | ) | |||||
| Retiree benefits |
(75 | ) | 31 | |||||
| Other non-cash transactions, net |
0 | (9 | ) | |||||
|
|
|
|
|
|||||
| Net cash provided by (used in) operating activities |
(329 | ) | (364 | ) | ||||
|
|
|
|
|
|||||
| Investing Activities |
||||||||
| Additions to property, plant, and equipment |
(27 | ) | (63 | ) | ||||
|
|
|
|
|
|||||
| Net cash provided by (used in) investing activities |
(27 | ) | (63 | ) | ||||
|
|
|
|
|
|||||
| Financing Activities |
||||||||
| Proceeds from issuance of long-term debt |
0 | 1,775 | ||||||
| Repayment of long-term debt |
(8 | ) | 0 | |||||
| Debt issuance costs |
0 | (50 | ) | |||||
| Repayment of notes payable to former parent and accrued interest |
0 | (954 | ) | |||||
| Dividend to former parent in connection with spin-off |
0 | (1,429 | ) | |||||
| Net transfers from (to) former parent |
0 | 1,310 | ||||||
|
|
|
|
|
|||||
| Net cash provided by (used in) financing activities |
(8 | ) | 652 | |||||
|
|
|
|
|
|||||
| Change in cash and cash equivalents |
(364 | ) | 225 | |||||
| Cash and cash equivalents, beginning of period |
915 | 0 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents, end of period |
$ | 551 | $ | 225 | ||||
|
|
|
|
|
|||||
| Supplemental Cash Flow Disclosure |
||||||||
| Cash paid for income taxes |
$ | 4 | $ | 0 | ||||
| Cash paid for interest |
$ | 47 | $ | 0 | ||||
|
|
|
|
|
|||||
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
Page 9 of 10
Exhibit B: Reconciliations
We make reference to “segment operating income.” Segment operating income is defined as operating income before FAS/CAS adjustment and deferred state income taxes.
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. 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.
Reconciliation of Segment Operating Income
| Three Months Ended March 31, |
||||||||
| $ in millions |
2012 | 2011 | ||||||
| Sales and Service Revenues |
||||||||
| Ingalls |
$ | 692 | $ | 761 | ||||
| Newport News |
895 | $ | 940 | |||||
| Intersegment eliminations |
(19 | ) | (17 | ) | ||||
|
|
|
|
|
|||||
| Total sales and service revenues |
$ | 1,568 | $ | 1,684 | ||||
|
|
|
|
|
|||||
| Operating Income (Loss) |
||||||||
| Ingalls |
$ | 20 | $ | 17 | ||||
| As a percentage of sales |
2.9 | % | 2.2 | % | ||||
| Newport News |
81 | 67 | ||||||
| As a percentage of sales |
9.1 | % | 7.1 | % | ||||
|
|
|
|
|
|||||
| Total Segment Operating Income (Loss) |
101 | 84 | ||||||
| As a percentage of sales |
6.4 | % | 5.0 | % | ||||
| Non-segment factors affecting operating income |
||||||||
| Net pension and post-retirement benefits adjustment |
(17 | ) | (4 | ) | ||||
| Deferred state income taxes |
(4 | ) | 5 | |||||
|
|
|
|
|
|||||
| Total operating income (loss) |
$ | 80 | $ | 85 | ||||
|
|
|
|
|
|||||
| Interest expense |
(30 | ) | (15 | ) | ||||
| Federal income taxes |
(17 | ) | (25 | ) | ||||
|
|
|
|
|
|||||
| Total net earnings (loss) |
$ | 33 | $ | 45 | ||||
|
|
|
|
|
|||||
Huntington Ingalls Industries
4101 Washington Ave. • Newport News, VA 23607
www.huntingtoningalls.com
Page 10 of 10