Huntington Ingalls Industries Reports First Quarter Results; Segment Operating Margin Continues to Improve

Huntington Ingalls Industries Reports First Quarter Results; Segment Operating
Margin Continues to Improve

  *Revenues were $1.56 billion for the first quarter of 2013
  *Segment operating margin was 7.7 percent, a 124 bps improvement over Q1
    2012
  *Total operating margin was 6.1 percent, up from 5.1 percent in the same
    period last year
  *Diluted earnings per share was $0.87 for the quarter
  *Cash and cash equivalents at the end of the quarter were $652 million

NEWPORT NEWS, Va., May 8, 2013 (GLOBE NEWSWIRE) -- Huntington Ingalls
Industries (NYSE:HII) reported first quarter 2013 revenues of $1.56 billion,
relatively flat compared to the same period last year. Segment operating
income for the first quarter was $120 million, compared to $101 million in the
same period last year. Total operating income for the quarter was $95 million,
compared to $80 million in the same period last year. Pension-adjusted
operating income for the first quarter was $118 million, or 7.6 percent of
revenue, compared to $97 million, or 6.2 percent of revenue, in the comparable
period of 2012. These increases were primarily attributable to additional risk
retirement at Newport News on the SSN-774 Virginia-class (VCS) program and the
absence of unfavorable cumulative adjustments on the LPD-17 San Antonio-class
(LPD) program at Ingalls.

First quarter diluted earnings per share was $0.87, compared to diluted
earnings per share of $0.67 in the same period of 2012. Pension-adjusted
diluted earnings per share for the quarter was $1.17, compared to $0.89 in the
comparable period of 2012.

New business awards for the quarter were approximately $3.2 billion,
consisting primarily of contracts for the CVN-72 USS Abraham Lincoln refueling
and complex overhaul (RCOH) and continued construction preparation for CVN-79
John F. Kennedy.

"HII continues to execute well on its programs at Ingalls Shipbuilding and
Newport News Shipbuilding," said Mike Petters, HII's president and chief
executive officer. "Even with the continued uncertainty surrounding the
defense budget, HII continues to garner support for its programs through
alignment with the Navy's priorities and is focused on driving performance to
our goal of 9-plus percent operating margin by 2015."

First Quarter 2013 Highlights
                                                                 
                                  Three Months Ended               
                                  March 31                         
(In millions, except per share     2013        2012       $ Change   % Change
amounts)
Revenues                           $1,562    $1,568   $(6)     (0.4)%
Segment operating income^1         120         101        19         18.8%
Segment operating margin %        7.7%        6.4%                 124 bps
Total operating income             95          80         15         18.8%
Total operating margin %          6.1%        5.1%                 98 bps
Net earnings                       44          33         11         33.3%
Diluted earnings per share         $0.87     $0.67    $0.20    29.9%
Weighted-average diluted shares    50.3        49.5                 
outstanding
                                                                 
Pension-adjusted Operating                                        
Highlights
Total operating income             95          80                   
FAS/CAS Adjustment                 23          17                   
Pension-adjusted operating         118         97         21         21.6%
income^2
Pension-adjusted operating margin 7.6%        6.2%                 137 bps
%^2
                                                                 
Pension-adjusted Net Earnings                                     
Net earnings                       44          33                   
After-tax FAS/CAS Adjustment^3     15          11                   
Pension-adjusted net earnings^2    59          44                   
Weighted-average diluted shares    50.3        49.5                 
outstanding
Pension-adjusted diluted earnings  $1.17     $0.89    $0.28    31.5%
per share^2
^1 Non-GAAP metric that excludes non-segment factors affecting operating
income. See Exhibit B for definition and reconciliation.
^2 Non-GAAP metric - see Exhibit B for definition.
^3 Tax effected at 35% federal statutory tax rate.


Operating Segment Results
                                                
Ingalls Shipbuilding
                       Three Months Ended         
                       March 31                   
(In millions)           2013      2012     $ Change % Change
Revenues                $631    $692   $(61)  (8.8)%
Operating income (loss) 26        20       6        30.0%
Operating margin %      4.1%      2.9%             123 bps

Ingalls revenues for the first quarter decreased $61 million, or 8.8 percent,
from the same period in 2012, driven by lower sales in amphibious assault
programs, partially offset by higher sales in the National Security Cutter
(NSC) program. The decrease in amphibious assault program revenues was due to
lower sales on LPD-23 USS Anchorage, LPD-24 USS Arlington, LPD-25 Somerset and
LHA-6 America, partially offset by higher sales on LPD-26 John P. Murtha,
LPD-27 Portland and LHA-7 Tripoli. Revenues on the NSC program were higher due
to higher sales on the construction contracts of NSC-4 Hamilton and NSC-5
James and the advance procurement contract on NSC-6 Munro. Surface combatants
revenues remained constant from the same period in 2012 as higher sales on
DDG-113 John Finn were offset by lower sales on DDG-114 Ralph Johnson.

Ingalls operating income for the quarter was $26 million, an increase of $6
million over the same period in 2012. The increase was primarily due to the
absence of unfavorable cumulative adjustments on the LPD program.

Key Ingalls program milestones for the quarter:

  *AMSEC LLC was awarded an indefinite delivery/indefinite quantity,
    firm-fixed-price contract to provide enterprise business process
    information systems that support the U.S. Navy
  *Main engine light off (MELO) and electric generator light off (EGLO)
    achieved on LPD-25 Somerset
  *AMSEC LLC was awarded an indefinite delivery/indefinite quantity contract
    to support the design, acquisition, production, integration, testing,
    installation and configuration management of certified C5ISR capabilities

Newport News Shipbuilding
                                                
                       Three Months Ended         
                       March 31                   
(In millions)           2013      2012     $ Change % Change
Revenues                $950    $895   $55    6.1%
Operating income (loss) 94        81       13       16.0%
Operating margin %      9.9%      9.1%             84 bps

Newport News revenues for the first quarter increased $55 million, or 6.1
percent, from the same period in 2012, primarily driven by higher sales in
submarines and fleet support services. Submarine revenues increased due to
higher sales on the VCS program, primarily driven by risk retirement and the
favorable resolution of outstanding contract changes. Higher revenues in fleet
support services were primarily the result of increased volumes associated
with repair work on SSN-765 USS Montpelier and the CVN-70 USS Carl Vinson
planned incremental availability. Aircraft carrier revenues remained stable
from the same period in 2012 as higher sales volumes on the construction
preparation contract for CVN-79 John F. Kennedy and the advance planning
contract for the CVN-72 USS Abraham Lincoln RCOH were offset by lower sales
volumes on the execution contract for the CVN-71 USS Theodore Roosevelt RCOH
and on an engineering contract on CVN-78 Gerald R. Ford.

Newport News operating income for the quarter was $94 million, a $13 million
increase over the same period in 2012. The increase was mainly related to the
VCS program, primarily driven by risk retirement and the favorable resolution
of outstanding contract changes.

Key Newport News program milestones for the quarter:

  *Awarded a $2.6 billion contract for the CVN-72 USS Abraham Lincoln RCOH
  *Awarded a $407 million extension to the construction preparation contract
    for CVN-79 John F. Kennedy
  *555-metric ton island lowered onto the flight deck of CVN-78 Gerald R.
    Ford

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 at
its Newport News Shipbuilding and Ingalls Shipbuilding divisions. Employing
about 37,000 in Virginia, Mississippi, Louisiana and California, HII also
provides a wide variety of products and services to the commercial energy
industry and other government customers, including the Department of Energy.
For more information, please visit www.huntingtoningalls.com.

Huntington Ingalls Industries will webcast its earnings conference call at 9
a.m. ET on May 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.

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 future contract costs and
perform our contracts effectively; changes in government regulations and
procurement processes and our ability to comply with such requirements; our
ability to realize the expected benefits from consolidation of our Ingalls
facilities; natural disasters; adverse economic conditions in the United
States and globally; risks related to our indebtedness and leverage; 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. You should not place undue reliance on any
forward-looking statements that we may make.

Exhibit A: Financial Statements
                                                                   
HUNTINGTON INGALLS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
                                                                   
                                                          Three Months Ended
                                                           March 31
(in millions, except per share amounts)                    2013      2012
Sales and service revenues                                          
Product sales                                              $1,321  $1,353
Service revenues                                           241       215
Total sales and service revenues                           1,562     1,568
Cost of sales and service revenues                                  
Cost of product sales                                      1,086     1,152
Cost of service revenues                                   213       189
Income (loss) from operating investments, net              2         3
General and administrative expenses                        170       150
Operating income (loss)                                    95        80
Other income (expense)                                              
Interest expense                                           (30)      (30)
Earnings (loss) before income taxes                        65        50
Federal income taxes                                       21        17
Net earnings (loss)                                        $44     $33
                                                                   
Basic earnings (loss) per share                            $0.88   $0.67
Weighted-average common shares outstanding                 49.8      49.0
                                                                   
Diluted earnings (loss) per share                          $0.87   $0.67
Weighted-average diluted shares outstanding                50.3      49.5
                                                                   
Net earnings (loss) from above                             $44     $33
Other comprehensive income (loss)                                   
Change in unamortized benefit plan costs                   5         24
Other                                                      2         —
Tax benefit (expense) for items of other comprehensive     (5)       (9)
income
Other comprehensive income (loss), net of tax              2         15
Comprehensive income (loss)                                $46     $48


HUNTINGTON INGALLS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
                                                                 
                                                         March31 December31
($ in millions)                                          2013     2012
Assets                                                            
Current Assets                                                    
Cash and cash equivalents                                 $652   $1,057
Accounts receivable, net                                  1,199    905
Inventoried costs, net                                    310      288
Deferred income taxes                                     209      213
Prepaid expenses and other current assets                 21       21
Total current assets                                      2,391    2,484
Property, plant, and equipment, net                       2,004    2,034
Goodwill                                                  881      881
Other purchased intangibles, net                          542      548
Long-term deferred tax asset                              317      329
Miscellaneous other assets                                116      116
Total assets                                              $6,251 $6,392
Liabilities and Stockholders' Equity                              
Current Liabilities                                               
Trade accounts payable                                    $247   $377
Accrued employees' compensation                           199      235
Current portion of long-term debt                         38       51
Current portion of postretirement plan liabilities        166      166
Current portion of workers' compensation liabilities      222      216
Advance payments and billings in excess of revenues       114      134
Other current liabilities                                 191      205
Total current liabilities                                 1,177    1,384
Long-term debt                                            1,779    1,779
Pension plan liabilities                                  1,316    1,301
Other postretirement plan liabilities                     807      799
Workers' compensation liabilities                         404      403
Other long-term liabilities                               61       59
Total liabilities                                         5,544    5,725
Commitments and Contingencies                             —        —
Stockholders' Equity                                              
Common stock, $0.01 par value; 150 million shares
authorized; 50.2 million and 49.6 million issued and      1        —
outstanding as of March 31, 2013 and December 31, 2012,
respectively
Additional paid-in capital                                1,892    1,894
Retained earnings (deficit)                               39       —
Treasury stock                                            (1)      (1)
Accumulated other comprehensive income (loss)             (1,224)  (1,226)
Total stockholders' equity                                707      667
Total liabilities and stockholders' equity                $6,251 $6,392


HUNTINGTON INGALLS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                                                    
                                                           Three Months Ended
                                                            March 31
($ in millions)                                             2013      2012
Operating Activities                                                 
Net earnings (loss)                                         $44     $33
Adjustments to reconcile to net cash provided by (used in)           
operating activities
Depreciation                                                43        42
Amortization of purchased intangibles                       6         5
Amortization of debt issuance costs                         2         2
Stock-based compensation                                    9         8
Excess tax benefit related to stock-based compensation      (3)       —
Deferred income taxes                                       14        17
Change in                                                            
Accounts receivable                                         (294)     (243)
Inventoried costs                                           (17)      5
Prepaid expenses and other assets                           —         2
Accounts payable and accruals                               (194)     (125)
Retiree benefits                                            28        (75)
Net cash provided by (used in) operating activities         (362)     (329)
Investing Activities                                                 
Additions to property, plant, and equipment                 (30)      (27)
Net cash provided by (used in) investing activities         (30)      (27)
Financing Activities                                                 
Repayment of long-term debt                                 (13)      (8)
Dividends paid                                              (5)       —
Proceeds from stock option exercises                        2         —
Excess tax benefit related to stock-based compensation      3         —
Net cash provided by (used in) financing activities         (13)      (8)
Change in cash and cash equivalents                         (405)     (364)
Cash and cash equivalents, beginning of period              1,057     915
Cash and cash equivalents, end of period                    $652    $551
Supplemental Cash Flow Disclosure                                    
Cash paid for income taxes                                  $13     $4
Cash paid for interest                                      $46     $47
Non-Cash Investing and Financing Activities                          
Capital expenditures accrued in accounts payable            $2      $3

Exhibit B: Reconciliations

We make reference to "segment operating income," "segment operating margin,"
"pension-adjusted operating income," "pension-adjusted operating margin,"
"pension-adjusted net earnings," and "pension-adjusted diluted earnings per
share."

Segment operating income is 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.

Pension-adjusted operating income is total operating income adjusted for the
FAS/CAS Adjustment.

Pension-adjusted operating margin is pension-adjusted operating income as a
percentage of total sales and service revenues.

Pension-adjusted net earnings is net income adjusted for the tax adjusted
FAS/CAS Adjustment.

Pension-adjusted diluted earnings per share is pension-adjusted net earnings
divided by the 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 pension-adjusted operating
income, pension-adjusted operating margin, pension-adjusted net earnings and
pension-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
                                                March 31
$ in millions                                    2013        2012
Sales and Service Revenues                                  
Ingalls                                          $631      $692
Newport News                                     950         895
Intersegment eliminations                        (19)        (19)
Total Sales and Service Revenues                 1,562       1,568
Operating Income                                            
Ingalls                                          26          20
As a percentage of revenues                      4.1%        2.9%
Newport News                                     94          81
As a percentage of revenues                      9.9%        9.1%
Segment Operating Income                         120         101
As a percentage of revenues                     7.7%        6.4%
Non-segment factors affecting operating income              
FAS/CAS Adjustment                               (23)        (17)
Deferred state income taxes                      (2)         (4)
Total Operating Income                           95          80
Interest expense                                 (30)        (30)
Federal income taxes                             (21)        (17)
Total Net Earnings                               $ 44        $ 33

CONTACT: Jerri Fuller Dickseski (Media)
         jerri.dickseski@hii-co.com
         757-380-2341
        
         Dwayne Blake (Investors)
         dwayne.blake@hii-co.com
         757-380-2104

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