Huntington Ingalls Industries Reports Third Quarter Results; Reaches Significant Milestones on Path to 2015 Financial Targets

Huntington Ingalls Industries Reports Third Quarter Results; Reaches
Significant Milestones on Path to 2015 Financial Targets

  *Revenues were $1.60 billion for the third quarter 2012
  *Diluted earnings per share was $0.26 for the quarter
  *Adjusted diluted earnings per share, which excludes a non-cash workers'
    compensation charge and the impact of a non-cash tax expense, was $0.74
  *Cash and cash equivalents were $766 million at quarter-end

NEWPORT NEWS, Va., Nov. 8, 2012 (GLOBE NEWSWIRE) -- Huntington Ingalls
Industries (NYSE:HII) reported third quarter 2012 revenues of $1.60 billion,
up 0.2 percent from the same period last year. Third quarter diluted earnings
per share was $0.26, compared with a $5.07 loss per share in the same period
of 2011.

Segment operating income in the quarter was $89 million, with a segment
operating margin of 5.6 percent, compared to a loss of $187 million in the
same period last year. Total operating income for the quarter was $66 million,
compared to a loss of $190 million in the same period of 2011. The increase
was primarily attributable to the absence in 2012 of the goodwill impairment
charge recorded in 2011. Total operating margin was 4.1 percent for the
quarter.

Cash provided by operating activities in the third quarter was $137 million,
down $95 million from the same period last year. New business awards for the
quarter were $1.7 billion, bringing total backlog to $16.4 billion as of Sept.
30, of which $12.9 billion is funded.

"Core operating performance at HII continues to improve, and the company
remains on pace to deliver 9 percent plus operating margins by 2015," said
Mike Petters, HII's president and chief executive officer. "Although the
underperforming ships at Ingalls continue to prove challenging, we delivered
LPD-23 Anchorage during the third quarter, and we expect to deliver LPD-24
Arlington by the end of this year. Our backlog remains healthy at $16.4
billion and we are working diligently with our Navy and Coast Guard customers
to provide affordable and high-quality warships."

Results of Operations

The company maintains self-insured workers' compensation plans that require an
estimation of liabilities for such claims based on certain actuarial and
discount rate assumptions that are evaluated at least annually. During Q3
2012, the decline in discount rates from 2011 resulted in a $24 million
non-cash workers' compensation charge to segment operating income.

             Three Months Ended                                             
             September 30,                                                  
(In millions,           As                    As
except per    2012      Adjusted^1  2011      Adjusted^2  $         %        
share                   2012                  2011        Change^3  Change^3
amounts)
Revenues      $1,596  $1,596    $1,593 $1,593    $3      0.2%     
Total segment
operating     89       113        (187)    113        --      .0%      
income (loss)
Segment
operating     5.6%      7.1%        nm        7.1%                 (1) bps 
margin %
Total
operating     66       90         (190)    110        (20)     (18.2)% 
income (loss)
Operating     4.1%      5.6%        nm        6.9%                 (127)   
margin %                                                            bps
Net earnings  13       37         (248)    52         (15)     (28.8)% 
(loss)
Diluted
earnings per  $0.26   $0.74     $(5.07) $1.05     $(0.31) (29.5)% 
share
Weighted
average
diluted       50.3     50.3       48.9     49.5                       
shares
outstanding
^1Non-GAAP metrics that exclude the impact of the non-cash workers'
compensation charge and a non-cash tax expense related to the Tax Matters    
Agreement.See Exhibit B for reconciliation.
^2Non-GAAP metrics that exclude the non-cash goodwill impairment charge.See 
Exhibit B for reconciliation.
^3Comparison of "As Adjusted 2012" to "As Adjusted 2011" figures.On an
unadjusted basis, total segment operating income (loss) increased by $276
million, total operating income (loss) increased by $256 million, net        
earnings (loss) increased by $261 million and diluted earnings per share
increased by $5.33.

Adjusting for the 2012 non-cash workers' compensation charge and a non-cash
goodwill impairment charge in 2011, adjusted segment operating income was $113
million in Q3 2012, flat compared to Q3 2011 on an adjusted basis. Adjusted
segment operating margin was 7.1 percent in the third quarter, flat compared
with the same period in 2011 on an adjusted basis.

Operating income in Q3 2012 was $66 million, whereas adjusted total operating
income was $90 million, a decrease of $20 million, or 18.2 percent, from the
same period of 2011 on an adjusted basis, primarily as a result of a higher
FAS/CAS Adjustment. Operating margin in the third quarter was 4.1 percent,
while adjusted total operating margin was 5.6 percent, a decline of 127 basis
points from Q3 2011 on an adjusted basis.

Additionally, excluding an $8 million non-cash tax expense in 2012 related to
the spin-off Tax Matters Agreement with Northrop Grumman, adjusted diluted
earnings per share was $0.74 in the third quarter, compared with $1.05 in the
same period of 2011 on an adjusted basis. Reported diluted earnings per share
was $0.26 for Q3 2012.

Awards

The value of new contract awards during the three months ended Sept. 30 was
approximately $1.7 billion. Significant new awards during this period included
the construction contract for LPD-27 (unnamed) and continued long-lead-time
procurement and construction preparation for CVN-79 John F. Kennedy.

Operating Segment Results

Ingalls Shipbuilding

                Three Months Ended
                September 30,
                        As                   As
($ in millions)  2012   Adjusted^1   2011    Adjusted^2  $ Change^3 % Change^3
                        2012                 2011
Revenues         $ 670  $ 670        $ 740   $ 740       $ (70)     (9.5)%
Operating income 1     10         (281)  19         (9)       (47.4)%
(loss)
Operating margin 0.1%   1.5%         nm      2.6%                  (108) bps
%
^1Non-GAAP metrics that exclude the impact of the non-cash workers'
compensation charge.See Exhibit B for reconciliation.
^2Non-GAAP metrics that exclude the non-cash goodwill impairment charge.See
Exhibit B for reconciliation.
^3Comparison of "As Adjusted 2012" to "As Adjusted 2011" figures.On an
unadjusted basis, operating income (loss) increased by $282 million.

Ingalls revenues for the third quarter decreased $70 million, or 9.5 percent,
from the same period in 2011, driven by lower sales in amphibious assault
ships, partially offset by higher sales in surface combatants and the National
Security Cutter (NSC) program. The decrease in amphibious assault ships was
primarily attributable to the deliveries of LPD-22 USS San Diego in 2011 and
LPD-23 Anchorage in 2012, partially offset by higher sales on LPD-26 John P.
Murtha, LPD-27 (unnamed) and LHA-7 Tripoli. Surface combatants sales were
higher, primarily driven by increased sales on DDG-114 Ralph Johnson. NSC
program sales were higher due to higher sales on NSC-4 Hamilton and NSC-5
Joshua James and the advance procurement contract on NSC-6 (unnamed).

Ingalls operating income for the third quarter was $1 million, compared with a
loss of $281 million in Q3 2011. Excluding the $9 million non-cash workers'
compensation charge in 2012 and the 2011 non-cash goodwill impairment charge,
Ingalls adjusted operating income for the third quarter 2012 was $10 million,
compared with $19 million in the same period in 2011. Ingalls adjusted
operating margin was 1.5 percent for the quarter, a decline of 108 basis
points from the same period prior year on an adjusted basis. The decrease in
adjusted operating income was primarily a result of unfavorable cumulative
adjustments on the LPD-22 through LPD-25 contract, mainly related to LPD-24
Arlington.

Key Ingalls program milestones for the quarter:

  *Delivered LPD-23 Anchorage, the company's seventh amphibious transport
    dock ship
  *Successfully completed builder's trials for LPD-24 Arlington
  *Awarded a $1.5 billion fixed-price incentive contract for the construction
    of LPD-27 (unnamed)
  *Started construction on LPD-27 (unnamed)
  *Started fabrication on the next Aegis guided missile destroyer, DDG-113
    John Finn
  *Awarded an $83.3 million contract for continued life-cycle engineering,
    modernization and support services on the fleet of USS Ticonderoga-class
    (CG 47) Aegis guided missile cruisers

Newport News Shipbuilding

                    Three Months Ended
                    September 30,
($ in millions)      2012     As Adjusted^1    2011    $ Change^2  % Change^2
                              2012
Revenues             $ 944    $ 944            $ 876   $ 68        7.8%
Operating income     88      103             94     9          9.6%
Operating margin %   9.3%     10.9%            10.7%              18 bps
^1Non-GAAP metric that excludes the impact of the non-cash workers'
compensation charge.See Exhibit B for reconciliation.
^2Comparison of "As Adjusted 2012" to "2011" figures.On an unadjusted basis,
operating income declined by $6 million.

Newport News revenues for the third quarter increased $68 million, or 7.8
percent, from the same period in 2011, primarily driven by higher sales in
aircraft carriers. The increase in aircraft carriers sales was primarily
driven by higher sales on the construction of CVN-78 Gerald R. Ford,
construction preparation for CVN-79 John F. Kennedy, and advance planning for
the CVN-72 USS Abraham Lincoln refueling and complex overhaul (RCOH) and a
favorable resolution of an outstanding contract adjustment on the CVN-65 USS
Enterprise extended dry-docking selected restricted availability (EDSRA) that
was completed in 2010. These increases were partially offset by lower sales on
the CVN-71 USS Theodore Roosevelt RCOH and engineering for CVN-78 Gerald R.
Ford. Submarines sales were steady as higher sales on Block III SSN-774
Virginia-class submarines (VCS) were offset by lower sales on Block II.
Energy-related service revenues were higher due to maintenance services at the
Kesselring site.

Newport News operating income for the third quarter was $88 million, compared
with $94 million in the same period of 2011, and operating margin was 9.3
percent, down 141 basis points from prior year. Excluding the $15 million
non-cash workers' compensation charge in 2012, adjusted operating income was
$103 million, an increase of $9 million over Q3 2011. The increase was
primarily due to the higher sales volume and the favorable contract resolution
described above. Newport News adjusted operating margin was 10.9 percent in Q3
2012, up 18 basis points from the same period prior year.

Key Newport News program milestones for the quarter:

  *Reached 87 percent structural completion of CVN-78 Gerald R. Ford
  *Awarded a $43.4 million modification to a previously awarded contract for
    purchase of materials for CVN-79 John F. Kennedy
  *Awarded a $296 million contract modification, under a previously awarded
    contract, for continuation of long-lead-time material procurement and
    construction preparation of CVN-79 John F. Kennedy

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 more than 37,000 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. EST on Nov. 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 Nine Months Ended
                                          September 30       September 30
(in millions, except per share amounts)   2012     2011      2012     2011
Sales and service revenues                                         
Product sales                             $1,367   $1,384    $4,224   $4,201
Service revenues                          229      209       661      639
Total sales and service revenues          1,596    1,593     4,885    4,840
Cost of sales and service revenues                                 
Cost of product sales                     1,187    1,166     3,578    3,543
Cost of service revenues                  186      173       562      557
Income (loss) from operating investments, 7        9         13       17
net
General and administrative expenses       164      153       506      471
Goodwill impairment                       —        300       —        300
Operating income (loss)                   66       (190)     252      (14)
Other income (expense)                                             
Interest expense                          (29)     (30)      (88)     (75)
Earnings (loss) before income taxes       37       (220)     164      (89)
Federal income taxes                      24       28        68       74
Net earnings (loss)                       $13      $(248)    $96      $(163)
                                                                  
Basic earnings (loss) per share           $0.26    $(5.07)   $1.95    $(3.34)
Weighted-average common shares            49.6     48.9      49.3     48.8
outstanding
                                                                  
Diluted earnings (loss) per share         $0.26    $(5.07)   $1.92    $(3.34)
Weighted-average diluted shares           50.3     48.9      49.9     48.8
outstanding
                                                                  
Net earnings (loss) from above            $13      $(248)    $96      $(163)
Other comprehensive income (loss)                                  
Change in unamortized benefit plan costs  23       12        68       51
Tax benefit (expense) on change in        (6)      (4)       (23)     (19)
unamortized benefit plan costs
Other comprehensive income (loss), net of 17       8         45       32
tax
Comprehensive income (loss)               $30      $(240)    $141     $(131)



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)

($ in millions)                                       September30 December31
                                                      2012         2011
Assets                                                            
Current Assets                                                    
Cash and cash equivalents                             $766         $915
Accounts receivable, net                              883          711
Inventoried costs, net                                332          380
Deferred income taxes                                 214          232
Prepaid expenses and other current assets             31           30
Total current assets                                  2,226        2,268
Property, plant, and equipment, net                   1,988        2,033
Other Assets                                                      
Goodwill                                              844          844
Other purchased intangibles, net of accumulated       552          567
amortization of $387 in 2012 and $372 in 2011
Pension plan assets                                   64           64
Debt issuance costs                                   42           48
Long-term deferred tax asset                          67           128
Miscellaneous other assets                            80           49
Total other assets                                    1,649        1,700
Total assets                                          $5,863       $6,001



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited) -- CONTINUED

($ in millions, except share amounts)                 September30 December31
                                                      2012         2011
Liabilities and Stockholders' Equity                              
Current Liabilities                                               
Trade accounts payable                                $292         $380
Current portion of long-term debt                     43           29
Current portion of workers' compensation liabilities  216          201
Current portion of postretirement plan liabilities    172          172
Accrued employees' compensation                       194          221
Advance payments and billings in excess of costs      112          101
incurred
Provision for contract losses                         4            19
Other current liabilities                             206          249
Total current liabilities                             1,239        1,372
Long-term debt                                        1,794        1,830
Other postretirement plan liabilities                 594          581
Pension plan liabilities                              762          936
Workers' compensation liabilities                     383          361
Other long-term liabilities                           53           49
Total liabilities                                     4,825        5,129
Commitments and Contingencies (Note 13)               —            —
Stockholders' Equity                                              
Common stock, $0.01 par value; 150,000,000 shares
authorized; 49,583,109 issued and outstanding as of   —            —
September 30, 2012; 48,821,563 issued and outstanding
as of December 31, 2011
Additional paid-in capital                            1,887        1,862
Retained earnings (deficit)                           (45)         (141)
Accumulated other comprehensive income (loss)         (804)        (849)
Total stockholders' equity                            1,038        872
Total liabilities and stockholders' equity            $5,863       $6,001



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

                                               Nine Months Ended September 30
($ in millions)                                 2012           2011
Operating Activities                                          
Net earnings (loss)                             $96            $(163)
Adjustments to reconcile to net cash provided                 
by (used in) operating activities
Depreciation                                    122            123
Amortization of purchased intangibles           15             15
Amortization of debt issuance costs             6              4
Stock-based compensation                        25             22
Deferred income taxes                           44             —
Goodwill impairment                             —              300
Change in                                                     
Accounts receivable                             (172)          (53)
Inventoried costs                               57             (173)
Prepaid expenses and other assets               (8)            (36)
Accounts payable and accruals                   (134)          (74)
Retiree benefits                                (93)           89
Other non-cash transactions, net                1              —
Net cash provided by (used in) operating        (41)           54
activities
Investing Activities                                          
Additions to property, plant, and equipment     (92)           (119)
Net cash provided by (used in) investing        (92)           (119)
activities
Financing Activities                                          
Proceeds from issuance of long-term debt        —              1,775
Repayment of long-term debt                     (22)           (14)
Debt issuance costs                             —              (54)
Repayment of notes payable to former parent and —              (954)
accrued interest
Dividend to former parent in connection with    —              (1,429)
spin-off
Proceeds from stock option exercises            6              1
Net transfers from (to) former parent           —              1,276
Net cash provided by (used in) financing        (16)           601
activities
Change in cash and cash equivalents             (149)          536
Cash and cash equivalents, beginning of period  915            —
Cash and cash equivalents, end of period        $766           $536
Supplemental Cash Flow Disclosure                             
Cash paid for income taxes                      $28            $34
Cash paid for interest                          $102           $55
Non-Cash Investing and Financing Activities                   
Capital expenditures accrued in accounts        $2             $3
payable

Exhibit B: Reconciliations

We make reference to "segment operating income," "segment operating margin,"
"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 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. 

Adjusted segment operating income is defined as segment operating income as
adjusted for the impact of the workers' compensation charge in 2012 and the
impact of the goodwill impairment charge in 2011.

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 workers' compensation charge in 2012 and the impact of the
goodwill impairment charge in 2011.

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 tax-adjusted
impact of the workers' compensation charge and the tax expense related to the
spin-off Tax Matters Agreement with Northrop Grumman in 2012, and the impact
of the goodwill impairment charge in 2011.

Adjusted diluted earnings per share is defined as adjusted net earnings
divided by the adjusted weighted-average diluted common shares outstanding.

Segment operating income and segment operating margin are two of the key
metrics we use to evaluate operating performance because they exclude 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 also useful metrics because they exclude non-operating items 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.

Reconciliation of Segment Operating Income and Segment Operating Margin

                                              Three Months Ended
                                              September 30
$ in millions                                  2012      2011
Sales and Service Revenues                              
Ingalls                                        $670    $740
Newport News                                   944       $876
Intersegment eliminations                      (18)     (23)
Total sales and service revenues               $1,596  $1,593
Operating Income (Loss)                                 
Ingalls                                        $1      $(281)
As a percentage of sales                       0.1%     (38.0%)
Newport News                                   88       94
As a percentage of sales                      9.3%     10.7%
Total Segment Operating Income (Loss)          89       (187)
As a percentage of sales                       5.6%     (11.7%)
Non-segment factors affecting operating income          
FAS/CAS Adjustment                             (19)     (1)
Deferred state income taxes                    (4)      (2)
Total operating income (loss)                  $66     $(190)
As a percentage of sales                       4.1%     (11.9%)
Interest expense                               (29)     (30)
Federal income taxes                           (24)     (28)
Total net earnings (loss)                      $13     $(248)

Reconciliation of Adjusted Segment Operating Income, Adjusted Segment
Operating Margin, Adjusted Operating Income and Adjusted Operating Margin

                                                       Three Months Ended
                                                       September 30
$ in millions                                           2012     2011
Adjusted Operating Income (Loss)                                
Operating Income (Loss)                                 $66    $(190)
As a percentage of sales                                4.1%    (11.9%)
Non-segment factors affecting adjusted operating income         
FAS/CAS Adjustment                                      19      1
Deferred state income taxes                             4       2
Total Segment Operating Income (loss)                   $89    $(187)
As a percentage of sales                                5.6%    (11.7%)
                                                               
Ingalls                                                 $1     $(281)
Adjustment for non-cash workers' compensation charge    9       --
Adjustment for non-cash goodwill impairment             --      300
Adjusted Ingalls                                        10      19
As a percentage of sales                                1.5%    2.6%
Newport News                                            88      94
Adjustment for non-cash workers' compensation charge    15      --
Adjusted Newport News                                   103     94
As a percentage of sales                                10.9%   10.7%
Total Adjusted Segment Operating Income (Loss)          $113   $113
As a percentage of sales                                7.1%    7.1%
                                                               
Total Adjusted Operating Income (Loss)                          
Operating Income (Loss)                                 $66    $(190)
As a percentage of sales                                4.1%    (11.9%)
Adjustment for non-cash workers' compensation charge    24      --
Adjustment for non-cash goodwill impairment             --     300
Total Adjusted Operating Income (Loss)                  $90    $110
As a percentage of sales                                5.6%    6.9%

Reconciliation of Adjusted Net Earnings and Adjusted Diluted Earnings per
Share

                                             Three Months Ended
                                             September 30
$ in millions                                 2012           2011
Adjusted Net Earnings (Loss)                                
Net Earnings (Loss)                           $13          $(248)
Adjustment for non-cash workers' compensation 16            --
charge^(1)
Adjustment for non-cash goodwill impairment   --           300
Adjustment for non-cash tax expense           8             --
Adjusted Net Earnings (Loss)                  37            52
                                                           
Per Share Amounts                                           
Weighted-Average Diluted Shares Outstanding   50.3           48.9
Dilutive impact excluded due to net loss      --           0.6
position
Adjusted Weighted-Average Diluted Shares      50.3           49.5
Outstanding^(2)
                                                           
Adjusted Diluted EPS                                        
Diluted earnings (loss) per share             $0.26          ($5.07)
After-tax non-cash workers' compensation      $0.32          --
charge per share
Non-cash tax expense per share                $0.16          --
Non-cash goodwill impairment per share        --           $6.13
Impact of Adjusted Weighted-Average Diluted   --           ($0.01)
Shares Outstanding
Adjusted Diluted EPS                          $0.74          $1.05
                                                           
(1) Tax effected at 35% federal statutory tax rate.
(2) Adjusted diluted average common shares outstanding is a non-GAAP
measuredefined 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 2012.

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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