Huntington Ingalls Industries Reports Strong Second Quarter Results; Significant Progress on Key Programs

Huntington Ingalls Industries Reports Strong Second Quarter Results;
Significant Progress on Key Programs

  *Revenues were $1.72 billion for the second quarter 2012
  *Segment operating margin improved to 7.4 percent from 6.3 percent in Q2
    2011
  *Total operating margin rose to 6.2 percent, up from 5.8 percent in the
    same period 2011
  *Diluted earnings per share was $1.00, up 20 cents over second quarter 2011
  *Cash provided from operating activities was $151 million for the quarter

NEWPORT NEWS, Va., Aug. 8, 2012 (GLOBE NEWSWIRE) -- Huntington Ingalls
Industries (NYSE:HII) reported second quarter 2012 revenues of $1.72 billion,
up 10.1 percent from the same period last year, and segment operating margin
of 7.4 percent, up from 6.3 percent in Q2 2011. Total operating margin was 6.2
percent, up 34 basis points from the second quarter of last year, and second
quarter diluted earnings per share was $1.00, compared with $0.80 in the same
period of 2011, an increase of $0.20. Cash provided by operating activities in
the second quarter of 2012 was $151 million, $35 million less than the same
period last year. New business awards for the 2012 second quarter were
approximately $2.5 billion, bringing total backlog to $16.2 billion, of which
$12.6 billion is funded.

"The second quarter reflected the strong execution of our existing contracts
and demonstrated the steady progress toward restoring margins at Ingalls,"
said Mike Petters, HII's president and chief executive officer. "Several of
our large programs reached key milestones during the quarter, including the
launch of two ships, LPD-25 Somerset and LHA-6 America, and the successful
completion of sea trials on LPD-23 Anchorage."

Second Quarter Highlights

                                         Three Months Ended         
                                         June 30,                  
(In millions, except per share amounts)   2012      2011     $ Change % Change
Revenues                                  $1,721  $1,563 $158   10.1%
Total segment operating income^1          127       98      29      29.6%
Segment operating margin %^1             7.4%      6.3%             111 bps
Total operating income                    106       91      15      16.5%
Operating margin %                       6.2%      5.8%             34 bps
Net earnings                              50       40      10      25.0%
Diluted earnings per share                $1.00   $0.80  $0.20  25.0%
Weighted average diluted shares           50.1     49.6            
outstanding
^1Non-GAAP metric. See Exhibit B for                               
reconciliation.

Second quarter consolidated revenues increased $158 million from the same
period in 2011, driven by higher sales at the Ingalls and Newport News
segments. The increase in Ingalls revenues was primarily attributable to
higher sales in amphibious assault ships. Newport News revenues increased due
to higher sales in aircraft carriers and submarines, offset by lower fleet
support services.

Segment operating income in the quarter was $127 million, up $29 million from
the same 2011 period. The increase was primarily due to higher sales as well
as performance improvements in the Virginia-class submarine construction (VCS)
program, lower unfavorable performance adjustments in 2012 on the LPD-17 San
Antonio-class (LPD) program and receipt of $7 million in resolution of a
contract dispute with a private party. Total operating income was $106
million, up from $91 million in the same period last year. The increase was
primarily due to the improvement in segment operating income, offset by a
higher FAS/CAS adjustment. Total operating margin was 6.2 percent for the
quarter, up 34 basis points from the second quarter of 2011.

Awards

The value of new contract awards during the three months ended June 30 was
approximately $2.5 billion. Significant new awards during this period included
contracts for the detail design and construction of LHA-7 Tripoli, advance
procurement for construction of LPD-27 (unnamed) and planning efforts for the
CVN-72 USS Abraham Lincoln refueling complex overhaul (RCOH).

Operating Segment Results

Ingalls Shipbuilding

                  Three Months Ended         
                  June 30,                  
($ in millions)    2012      2011     $ Change % Change
Revenues           $ 756     $ 708    $ 48     6.8%
Operating income   38       19      19      100.0%
Operating margin % 5.0%      2.7%             234 bps

Ingalls revenues for the second quarter increased $48 million from the same
period in 2011, driven by higher sales in amphibious assault ships. The
increase in amphibious assault ships was due to higher sales on LHA-7 Tripoli,
partially offset by lower sales on LHA-6 America. Surface combatants revenue
remained stable as a result of higher sales on the DDG-1000 Zumwalt-class
destroyer program, offset by lower sales on the DDG-51 Arleigh Burke-class
destroyer program. LPD program revenues remained constant as higher sales on
LPD-27 (unnamed) and LPD-25 Somerset were offset by lower sales following the
delivery of LPD-22 USS San Diego in 2011 and in the construction of LPD-24
Arlington. The National Security Cutter (NSC) program remained flat due to
lower sales following the delivery of NSC-3 USCGC Stratton in 2011, offset by
higher sales on the construction of NSC-4 Hamilton and NSC-5 Joshua James and
the advance procurement contract on NSC-6 (unnamed).

Ingalls operating income for the second quarter was $38 million compared with
$19 million in the same period in 2011. The increase was primarily due to
lower unfavorable performance adjustments on LPD-22 USS San Diego and higher
favorable performance adjustments on LPD-25 Somerset in 2012 compared to the
same period in 2011, as well as receipt of $7 million in resolution of a
contract dispute with a private party. This increase was partially offset by
higher unfavorable performance adjustments on LPD-24 Arlington and lower
favorable performance adjustments on LPD-23 Anchorage in 2012 compared to the
same period in 2011. Ingalls operating margin was 5.0 percent for the quarter,
up from 2.7 percent in the same quarter of 2011.

Key Ingalls program milestones for the quarter:

  *Launched LPD-25 Somerset at Avondale shipyard
  *Awarded $133.7 million advance procurement contract for LPD-27 (unnamed)
  *Awarded $2.38 billion contract for detail design and construction of LHA-7
    Tripoli
  *Launched the U.S. Navy's next amphibious assault ship, LHA-6 America, at
    Pascagoula shipyard
  *Successfully completed U.S. Navy acceptance trials for LPD-23 Anchorage

Newport News Shipbuilding

                  Three Months Ended         
                  June 30,                  
($ in millions)    2012      2011     $ Change % Change
Revenues           $ 979     $ 872    $ 107    12.3%
Operating income   89       79      10      12.7%
Operating margin % 9.1%      9.1%             3 bps

Newport News revenues for the second quarter increased $107 million, or 12.3
percent, from the second quarter 2011, primarily driven by higher sales on
aircraft carriers and submarines, offset by lower fleet support services.
Aircraft carrier revenues increased due to higher sales on the construction
contract for CVN-78 Gerald R. Ford, the advance construction contract for
CVN-79 John F. Kennedy, the advance planning contract for the CVN-72 USS
Abraham Lincoln RCOH and the advance planning contract for CVN-65 USS
Enterprise inactivation, offset by lower sales on the execution contract for
the CVN-71 USS Theodore Roosevelt RCOH and an engineering contract for CVN-78
Gerald R. Ford. The increase in submarines was primarily a result of higher
sales on the VCS construction program, due to the continued transition to a
two-boat-per-year production rate, partially offset by lower sales following
the delivery of SSN-781 USS California in 2011. The reduction in fleet support
services was primarily attributable to the redelivery of the SSN-753 USS
Albany in the third quarter 2011.

Newport News operating income for the second quarter was $89 million compared
with $79 million in the same period in 2011. The increase was due primarily to
the higher sales volume and the impact of performance improvements on the VCS
construction program in 2012. Newport News operating margin was 9.1 percent
for the quarter, flat compared to the same quarter of 2011.

Key Newport News program milestones for the quarter:

  *Reached 80 percent structural completion of CVN-78 Gerald R. Ford
  *Broke ground on the new Apprentice School, which will include an
    80,000-square-foot school, workforce housing, retail space and a parking
    garage
  *Achieved "pressure hull complete," a major construction milestone, on the
    submarine SSN-783 Minnesota; slated for delivery in 2013

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.

HII will webcast its earnings conference call at 9 a.m. EDT on Aug. 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:
www.huntingtoningalls.com.

The Huntington Ingalls Industries, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=9418

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.

Exhibit A: Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
                                                                   
                                          Three Months Ended Six Months Ended
                                          June 30            June 30
(in millions, except per share amounts)    2012      2011     2012     2011
Sales and service revenues                                          
Product sales                              $1,504    $1,351   $2,857   $2,817
Service revenues                           217       212      432      430
Total sales and service revenues           1,721     1,563    3,289    3,247
Cost of sales and service revenues                                  
Cost of product sales                      1,252     1,124    2,391    2,377
Cost of service revenues                   191       183      376      384
Income (loss) from operating investments,  4         4        6        8
net
General and administrative expenses        176       169      342      318
Operating income (loss)                    106       91       186      176
Other income (expense)                                              
Interest expense                           (29)      (30)     (59)     (45)
Earnings (loss) before income taxes        77        61       127      131
Federal income taxes                       27        21       44       46
Net earnings (loss)                        $50       $40      $83      $85
                                                                   
Basic earnings (loss) per share            $1.01     $0.81    $1.69    $1.73
Weighted-average common shares outstanding 49.5      48.8     49.2     48.8
                                                                   
Diluted earnings (loss) per share          $1.00     $0.80    $1.67    $1.72
Weighted-average diluted shares            50.1      49.6     49.8     49.2
outstanding
                                                                   
Net earnings (loss) from above             $50       $40      $83      $85
Other comprehensive income (loss)                                   
Change in unamortized benefit plan costs   21        11       45       39
Tax benefit (expense) on change in         (8)       (4)      (17)     (15)
unamortized benefit plan costs
Other comprehensive income (loss), net of  13        7        28       24
tax
Comprehensive income (loss)                $63       $47      $111     $109
                                                                   

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
                                                                 
                                                          June30 December31
($ in millions)                                           2012    2011
Assets                                                            
Current Assets                                                    
Cash and cash equivalents                                  $669    $915
Accounts receivable, net                                   878     711
Inventoried costs, net                                     357     380
Deferred income taxes                                      222     232
Prepaid expenses and other current assets                  41      30
Total current assets                                       2,167   2,268
Property, plant, and equipment, net                        1,992   2,033
Other Assets                                                      
Goodwill                                                   844     844
Other purchased intangibles, net of accumulated            557     567
amortization of $382 in 2012 and $372 in 2011
Pension plan assets                                        64      64
Debt issuance costs                                        44      48
Long-term deferred tax asset                               92      128
Miscellaneous other assets                                 52      49
Total other assets                                         1,653   1,700
Total assets                                               $5,812  $6,001

                                                                 
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) -
CONTINUED
                                                                 
                                                          June30 December31
($ in millions, except share amounts)                     2012    2011
Liabilities and Stockholders' Equity                              
Current Liabilities                                               
Trade accounts payable                                     $314    $380
Current portion of long-term debt                          36      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  70      101
Provision for contract losses                              6       19
Other current liabilities                                  229     249
Total current liabilities                                  1,217   1,372
Long-term debt                                             1,808   1,830
Other postretirement plan liabilities                      589     581
Pension plan liabilities                                   791     936
Workers' compensation liabilities                          364     361
Other long-term liabilities                                49      49
Total liabilities                                          4,818   5,129
Commitments and Contingencies                              —       —
Stockholders' Equity                                              
Common stock, $0.01 par value; 150,000,000 shares
authorized; 49,494,305issued and outstanding as of June   —      —
30, 2012; 48,821,563 issued and outstanding as of December
31, 2011
Additional paid-in capital                                 1,873   1,862
Retained earnings (deficit)                                (58)    (141)
Accumulated other comprehensive income (loss)              (821)   (849)
Total stockholders' equity                                 994     872
Total liabilities and stockholders' equity                 $5,812  $6,001

                                                                     
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                                                    
                                                             Six Months Ended
                                                             June 30
($ in millions)                                               2012    2011
Operating Activities                                                 
Net earnings (loss)                                           $83     $85
Adjustments to reconcile to net cash provided by (used in)           
operating activities
Depreciation                                                  82      81
Amortization of purchased intangibles                         10      10
Amortization of debt issuance costs                           4       2
Stock-based compensation                                      16      13
Change in                                                            
Accounts receivable                                           (167)   (171)
Inventoried costs                                             25      (114)
Prepaid expenses and other assets                             (11)    (40)
Accounts payable and accruals                                 (158)   (77)
Deferred income taxes                                         29      (19)
Retiree benefits                                              (92)    59
Other non-cash transactions, net                              1       (7)
Net cash provided by (used in) operating activities           (178)   (178)
Investing Activities                                                 
Additions to property, plant, and equipment                   (57)    (83)
Net cash provided by (used in) investing activities           (57)    (83)
Financing Activities                                                 
Proceeds from issuance of long-term debt                      —       1,775
Repayment of long-term debt                                   (15)    (7)
Debt issuance costs                                           —       (54)
Repayment of notes payable to former parent and accrued       —       (954)
interest
Dividend to former parent in connection with spin-off         —       (1,429)
Proceeds from stock option exercises                          4       1
Net transfers from (to) former parent                         —       1,310
Net cash provided by (used in) financing activities           (11)    642
Change in cash and cash equivalents                           (246)   381
Cash and cash equivalents, beginning of period                915     —
Cash and cash equivalents, end of period                      $669    $381
Supplemental Cash Flow Disclosure                                    
Cash paid for income taxes                                    $8      $11
Cash paid for interest                                        $55     $8
Non-Cash Investing and Financing Activities                          
Capital expenditures accrued in accounts payable              $2      $1

Exhibit B: Reconciliations

We make reference to "segment operating income" and "segment operating
margin." Segment operating income is defined as operating income before the
FAS/CAS Adjustment and deferred state income taxes.Segment operating margin
is segment operating income as a percentage of total sales and service
revenues. 

Segment operating income and segment operating margin are some of the key
metrics we use to evaluate operating performance because they exclude 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 and Segment Operating Margin

                                              Three Months Ended
                                              June 30,
($ in millions)                                2012      2011
Sales and Service Revenues                              
Ingalls                                        $756    $708
Newport News                                   979      $872
Intersegment eliminations                      (14)     (17)
Total sales and service revenues               $1,721  $1,563
Operating Income (Loss)                                 
Ingalls                                        $38     $19
As a percentage of sales                      5.0%      2.7%
Newport News                                   89       79
As a percentage of sales                      9.1%      9.1%
Total Segment Operating Income (Loss)          127      98
As a percentage of sales                       7.4%      6.3%
Non-segment factors affecting operating income          
FAS/CAS Adjustment                             (19)     (4)
Deferred state income taxes                   (2)      (3)
Total operating income (loss)                  $106    $91
As a percentage of sales                       6.2%      5.8%
Interest expense                               (29)     (30)
Federal income taxes                           (27)     (21)
Total net earnings (loss)                      $50     $40

CONTACT: Jerri Fuller Dickseski (Media)
         jerri.dickseski@hii-co.com
         757-380-2341
        
         Andy Green (Investors)
         andy.green@hii-co.com
         757-688-5572

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