Exhibit 99.1
| | |
 | | NEWS RELEASE |
| | 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
| | • | | Successfully spun off as independent company on March 31, 2011 |
| | • | | Sales were $1.68 billion for the first quarter 2011 |
| | • | | Diluted EPS for the quarter was $0.92 |
| | • | | Significant milestones achieved on major programs in each segment |
| | • | | Backlog steady at $17.4 billion |
NEWPORT NEWS, Va. (May 11, 2011) – Huntington Ingalls Industries, Inc. (HII) reported first quarter 2011 sales of $1.68 billion, down 1.6 percent from the same period last year, and operating margin of 5.0 percent, essentially flat year over year. First quarter earnings per share was $0.92, up from $0.85 in 2010. New business awards for the 2011 first quarter totaled $1.7 billion, bringing total backlog to $17.4 billion as of March 31, 2011.
“As a newly independent company, we are focused on providing high-quality products and services to our customers, the U.S. Navy and Coast Guard,” said Mike Petters, HII’s president and chief executive officer. “We remain committed to maintaining our strong performance in our Newport News business and continuing our actions at Ingalls Shipbuilding to improve profitability. During the first quarter we hit several major milestones on key programs, and we expect to maintain this momentum throughout the remainder of the year.”
First Quarter Highlights
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | | | | | |
| | | March 31, | | | | | | | |
(In millions, except per share amounts) | | 2011 | | | 2010 | | | $ Change | | | % Change | |
Sales | | $ | 1,684 | | | $ | 1,712 | | | $ | (28 | ) | | | (1.6 | )% |
Total segment operating income | | | 84 | | | | 99 | | | | (15 | ) | | | (15.2 | )% |
Total operating income | | | 85 | | | | 87 | | | | (2 | ) | | | (2.3 | )% |
Operating margin % | | | 5.0 | % | | | 5.1 | % | | | | | | | | |
Net income | | | 45 | | | | 41 | | | | 4 | | | | 9.8 | % |
Diluted EPS | | $ | 0.92 | | | $ | 0.85 | | | $ | 0.07 | | | | 8.2 | % |
Weighted average diluted shares outstanding | | | 49 | | | | 49 | | | | | | | | | |
Huntington Ingalls Industries
4101 Washington Avenue • Newport News, VA 23607
www.huntingtoningalls.com
First quarter consolidated sales decreased $28 million from the same period in 2010, driven by higher sales volume on the CVN-78Gerald R. Ford, CVN-71 USS Theodore Roosevelt, National Security Cutter (NSC) and SSN-774Virginia-class submarine construction programs, which were more than offset by lower sales volume on the LPD and DDG-51 programs and the completion of the CVN-65 USSEnterprisedrydocking and selected maintenance in 2010.
Segment operating income in the quarter was $84 million, down $15 million from the year earlier period. Total operating income was $85 million, down from $87 million last year. The results for the first quarter of 2010 include $17 million of business interruption insurance recovery related to Hurricane Ike, which was partially offset by unfavorable performance in the LPD program, and 2011 includes the impact of lower margins on CVN-78Gerald R. Ford.
Awards
The value of new contract awards during the three months ended March 31, 2011, was approximately $1.7 billion, for a total company backlog of $17.4 billion at the end of the quarter. New awards included $1.1 billion for construction of LPD-26, $206 million for continuation of advance planning efforts for the CVN-72 USSAbraham Lincoln Refueling and Complex Overhaul (RCOH), and $90 million for long-lead material procurement activities for the U.S. Coast Guard’s fifth National Security Cutter. The company also received a $25 million award for maintenance and repair work to be performed on submarine SSN-753 USSAlbany.
Operating Segment Results
Ingalls Shipbuilding
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
March 31, | | | | | | | |
| ($ in millions) | | 2011 | | | 2010 | | | $ Change | | | % Change | |
Sales | | $ | 761 | | | $ | 827 | | | $ | (66 | ) | | | (8.0 | )% |
Operating income | | | 17 | | | | 24 | | | | (7 | ) | | | (29.2 | )% |
Operating margin % | | | 2.2 | % | | | 2.9 | % | | | | | | | | |
Ingalls revenues for the quarter decreased $66 million, or 8.0 percent, from the same period in 2010, primarily driven by lower volume on DDGs and the LPD program, partially offset by higher sales in the NSC program. The decrease in DDGs was primarily due to lower sales volume following delivery of DDG-107 in the third quarter of 2010 and DDG-110 in the first quarter of 2011. The increase in NSC volume was primarily due to NSC-4, awarded in the fourth quarter of 2010.
Operating income for the quarter was $17 million compared with $24 million in the same period in 2010. The results for the first quarter of 2010 include $17 million of business interruption insurance recovery related to Hurricane Ike, which was partially offset by unfavorable performance in the LPD program.
Huntington Ingalls Industries
4101 Washington Avenue • Newport News, VA 23607
www.huntingtoningalls.com
Key Ingalls program milestones for the quarter:
| | • | | Launched LPD-23Anchorage at the Avondale shipyard |
| | • | | Delivered DDG-110 USS William P. Lawrence, the latest ship in the DDG-51 destroyer class |
| | • | | Christened LPD-24Arlington at the Pascagoula shipyard |
| | • | | Awarded the contract for the construction of LPD-26John P. Murtha, worth approximately $1.5 billion, including $398 million of long-lead material previously awarded |
Newport News Shipbuilding
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| | | Three Months Ended
March 31, | | | | | | | |
| ($ in millions) | | 2011 | | | 2010 | | | $ Change | | | % Change | |
Sales | | $ | 940 | | | $ | 907 | | | $ | 33 | | | | 3.6 | % |
Operating income | | | 67 | | | | 75 | | | | (8 | ) | | | (10.7 | )% |
Operating margin % | | | 7.1 | % | | | 8.3 | % | | | | | | | | |
Newport News revenues for the three months ended March 31, 2011, increased $33 million, or 3.6 percent, from the same period in 2010, primarily driven by higher volume on aircraft carrier construction and RCOH programs and the SSN-774Virginia-class submarine construction program, offset by lower volume on CVN-65 USSEnterprise due to redelivery in 2010.
Newport News operating income for the quarter was $67 million compared with $75 million in the same period 2010. The decrease was primarily due to the impact of lower margins on CVN-78Gerald R. Ford.
Key Newport News program milestones for the quarter:
| | • | | Cut the first steel and began unit fabrication work on CVN-79, the second in theFord class of aircraft carriers |
| | • | | Along with Gamesa Technology Corp., a global leader in wind energy, launched the Offshore Wind Technology Center to jointly develop the next generation of offshore wind systems |
| | • | | Awarded a $25 million firm-fixed-price contract for submarine SSN-753 USSAlbany for maintenance, repair, alterations and testing |
Huntington Ingalls Industries
4101 Washington Avenue • Newport News, VA 23607
www.huntingtoningalls.com
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 visitwww.huntingtoningalls.com.
Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. EDT on May 11, 2011. A live audio broadcast of the conference call along with a supplemental presentation will be available on the investor relations page of the company’s website atwww.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 Gulf Coast facilities; natural disasters; adverse economic conditions in the United States and globally; and other risk factors discussed in our filings with the U.S. Securities and Exchange Commission. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business, and we undertake no obligations to update any forward-looking statements.
Huntington Ingalls Industries
4101 Washington Avenue • Newport News, VA 23607
www.huntingtoningalls.com
Exhibit A: Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
| | | | | | | | |
| | | Three Months Ended March 31 | |
$ in millions, except per share amounts | | 2011 | | | 2010 | |
Sales and Service Revenues | | | | | | | | |
Product sales | | $ | 1,466 | | | $ | 1,454 | |
Service revenues | | | 218 | | | | 258 | |
| | | | | | | | |
Total sales and service revenues | | | 1,684 | | | | 1,712 | |
| | | | | | | | |
Cost of Sales and Service Revenues | | | | | | | | |
Cost of product sales | | | 1,253 | | | | 1,251 | |
Cost of service revenues | | | 197 | | | | 220 | |
General and administrative expenses | | | 149 | | | | 154 | |
| | | | | | | | |
Operating income | | | 85 | | | | 87 | |
Interest expense | | | (15 | ) | | | (10 | ) |
| | | | | | | | |
Earnings before income taxes | | | 70 | | | | 77 | |
Federal income taxes | | | 25 | | | | 36 | |
| | | | | | | | |
Net earnings | | $ | 45 | | | $ | 41 | |
| | | | | | | | |
| | |
Basic earnings per share | | $ | 0.92 | | | $ | 0.85 | |
Weighted-average common shares outstanding, in millions | | | 48.8 | | | | 48.8 | |
| | | | | | | | |
Diluted earnings per share | | $ | 0.92 | | | $ | 0.85 | |
Weighted-average diluted shares outstanding, in millions | | | 48.8 | | | | 48.8 | |
| | | | | | | | |
| | |
Net earnings from above | | $ | 45 | | | $ | 41 | |
Other comprehensive income | | | | | | | | |
Change in unamortized benefit plan costs | | | 28 | | | | 12 | |
Tax (expense) benefit on change in unamortized benefit plan costs | | | (11 | ) | | | 1 | |
| | | | | | | | |
Other comprehensive income, net of tax | | | 17 | | | | 13 | |
| | | | | | | | |
Comprehensive income | | $ | 62 | | | $ | 54 | |
| | | | | | | | |
Huntington Ingalls Industries
4101 Washington Avenue • Newport News, VA 23607
www.huntingtoningalls.com
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
| | | | | | | | |
| | | March 31 | | | December 31 | |
$ in millions | | 2011 | | | 2010 | |
Assets | | | | | | | | |
Current Assets | | | | | | | | |
Cash and cash equivalents | | $ | 225 | | | $ | — | |
Accounts receivable, net | | | 896 | | | | 728 | |
Inventoried costs, net | | | 372 | | | | 293 | |
Deferred income taxes | | | 293 | | | | 284 | |
Prepaid expenses and other current assets | | | 46 | | | | 8 | |
| | | | | | | | |
Total current assets | | | 1,832 | | | | 1,313 | |
| | | | | | | | |
Property, plant, and equipment, net | | | 2,006 | | | | 1,997 | |
| | | | | | | | |
Other Assets | | | | | | | | |
Goodwill | | | 1,134 | | | | 1,134 | |
Other purchased intangibles, net of accumulated amortization of $357 in 2011 and $352 in 2010 | | | 582 | | | | 587 | |
Pension plan asset | | | 144 | | | | 131 | |
Debt issuance costs | | | 54 | | | | — | |
Miscellaneous other assets | | | 53 | | | | 41 | |
| | | | | | | | |
Total other assets | | | 1,967 | | | | 1,893 | |
| | | | | | | | |
Total assets | | $ | 5,805 | | | $ | 5,203 | |
| | | | | | | | |
| | |
Liabilities and Equity | | | | | | | | |
Current Liabilities | | | | | | | | |
Notes payable to former parent | | $ | — | | | $ | 715 | |
Trade accounts payable | | | 252 | | | | 274 | |
Current portion of long-term debt | | | 29 | | | | — | |
Current portion of workers’ compensation liabilities | | | 198 | | | | 197 | |
Accrued interest on notes payable to former parent | | | — | | | | 239 | |
Current portion of post-retirement plan liabilities | | | 145 | | | | 146 | |
Accrued employees’ compensation | | | 166 | | | | 203 | |
Advance payments and billings in excess of costs incurred | | | 62 | | | | 107 | |
Provision for contract losses | | | 61 | | | | 80 | |
Other current liabilities | | | 211 | | | | 265 | |
| | | | | | | | |
Total current liabilities | | | 1,124 | | | | 2,226 | |
| | | | | | | | |
Long-term debt | | | 1,851 | | | | 105 | |
Other post-retirement plan liabilities | | | 571 | | | | 567 | |
Pension plan liabilities | | | 393 | | | | 381 | |
Workers’ compensation liabilities | | | 351 | | | | 351 | |
Deferred tax liabilities | | | 102 | | | | 99 | |
Other long-term liabilities | | | 51 | | | | 56 | |
| | | | | | | | |
Total liabilities | | | 4,443 | | | | 3,785 | |
| | | | | | | | |
Commitments and Contingencies (Note 12) | | | | | | | | |
Shareholders’ Equity | | | | | | | | |
Common stock, $0.01 par value; 150,000,000 shares authorized; issued and outstanding as of March 31, 2011: 48,765,841 | | | — | | | | — | |
Additional paid-in capital | | | 1,862 | | | | — | |
Former parent’s equity in unit | | | — | | | | 1,933 | |
Accumulated deficit | | | (2 | ) | | | — | |
Accumulated other comprehensive loss | | | (498 | ) | | | (515 | ) |
| | | | | | | | |
Total shareholders’ equity | | | 1,362 | | | | 1,418 | |
| | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 5,805 | | | $ | 5,203 | |
| | | | | | | | |
Huntington Ingalls Industries
4101 Washington Avenue • Newport News, VA 23607
www.huntingtoningalls.com
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| | | | | | | | |
| | | Three Months Ended March 31 | |
$ in millions | | 2011 | | | 2010 | |
Operating Activities | | | | | | | | |
Net Earnings | | $ | 45 | | | $ | 41 | |
Adjustments to reconcile to net cash used in operating activities | | | | | | | | |
Depreciation | | | 40 | | | | 41 | |
Amortization of purchased intangibles | | | 5 | | | | 9 | |
Increase in | | | | | | | | |
Accounts receivable | | | (168 | ) | | | (82 | ) |
Inventoried costs | | | (110 | ) | | | (36 | ) |
Prepaid expenses and other current assets | | | (38 | ) | | | (4 | ) |
Increase (decrease) in | | | | | | | | |
Accounts payable and accruals | | | (127 | ) | | | (90 | ) |
Deferred income taxes | | | (33 | ) | | | (26 | ) |
Retiree benefits | | | 31 | | | | 35 | |
Other non-cash transactions, net | | | (9 | ) | | | (5 | ) |
| | | | | | | | |
Net cash used in operating activities | | | (364 | ) | | | (117 | ) |
| | | | | | | | |
Investing Activities | | | | | | | | |
Additions to property, plant, and equipment | | | (63 | ) | | | (32 | ) |
| | | | | | | | |
Net cash used in investing activities | | | (63 | ) | | | (32 | ) |
| | | | | | | | |
Financing Activities | | | | | | | | |
Proceeds from issuance of long-term debt | | | 1,775 | | | | — | |
Debt issuance costs | | | (50 | ) | | | — | |
Repayment of notes payable to former parent and accrued interest | | | (954 | ) | | | — | |
Dividend to former parent in connection with spin-off | | | (1,429 | ) | | | — | |
Net transfers from former parent | | | 1,310 | | | | 149 | |
| | | | | | | | |
Net cash provided by financing activities | | | 652 | | | | 149 | |
| | | | | | | | |
Increase in cash and cash equivalents | | | 225 | | | | — | |
Cash and cash equivalents, beginning of period | | | — | | | | — | |
| | | | | | | | |
Cash and cash equivalents, end of period | | $ | 225 | | | $ | — | |
| | | | | | | | |
| | |
Supplemental Cash Flow Disclosure | | | | | | | | |
Cash paid for interest | | $ | — | | | $ | — | |
| | | | | | | | |
Non-Cash Investing and Financing Activities | | | | | | | | |
Capital expenditures accrued in accounts payable | | $ | 1 | | | $ | 1 | |
| | | | | | | | |
Huntington Ingalls Industries
4101 Washington Avenue • Newport News, VA 23607
www.huntingtoningalls.com
