Sales were$1.57 billion for the first quarter 2012 Segment operating margin improved to 6.4 percent from 5.0 percent in Q1 2011 Total operating margin was 5.1 percent, up from 5.0 percent in the same period last year Diluted earnings per share was$0.67 Cash and cash equivalents at the end of the quarter was$551 million
"The end of the first quarter marked our one-year anniversary as an independent, publicly-traded company, and we are on track to deliver the performance targets we laid out at the time of the spin," said
First Quarter Highlights
Three Months Ended
March 31,
(In millions, except per share amounts) 2012 2011 $ Change % Change
Sales $ 1,568 $ 1,684 $ (116) (6.9)%
Total segment operating income1 101 84 17 20.2%
Segment operating margin %1 6.4% 5.0% 145 bps
Total operating income 80 85 (5) (5.9)%
Operating margin % 5.1% 5.0% 5 bps
Net earnings 33 45 (12) (26.7)%
Diluted earnings per share $ 0.67 $ 0.92 $ (0.25) (27.1)%
Weighted average diluted shares outstanding 49.5 48.8
1Non-GAAP metric. See Exhibit B for reconciliation.
First quarter consolidated sales decreased
Segment operating income in the quarter was
Awards
The value of new contract awards during the three months ended
Operating Segment Results
Ingalls Shipbuilding
Three Months Ended
March 31,
($ in millions) 2012 2011 $ Change % Change
Sales $ 692 $ 761 $ (69) (9.1)%
Operating income 20 17 3 17.6%
Operating margin % 2.9% 2.2% 66 bps
Ingalls revenues for the first quarter decreased
Ingalls operating income for the first quarter was
Key Ingalls program milestones for the quarter:
LPD-22San Diego sailed away from Pascagoula en route to her commissioning site inSan Diego Awarded$70 million additional advance procurement work for LPD-27 (unnamed) Awarded$76 million advance procurement contract for NSC-6 (unnamed)
Newport News Shipbuilding
Three Months Ended
March 31,
($ in millions) 2012 2011 $ Change % Change
Sales $ 895 $ 940 $ (45) (4.8)%
Operating income 81 67 14 20.9%
Operating margin % 9.1% 7.1% 192 bps
Key
Reached 75 percent structural completion of CVN-78Gerald R. Ford Awarded$383 million of planning work for the CVN-72 USS Abraham Lincoln RCOH Assumed maintenance responsibilities atKesselring , theNavy's nuclear propulsion facility in upstateNew York
The Company
The
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
Exhibit A: Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (Unaudited)
Three Months Ended
March 31
(in millions, except per share amounts) 2012 2011
Sales and service revenues
Product sales $ 1,353 $ 1,466
Service revenues 215 218
Total sales and service revenues 1,568 1,684
Cost of sales and service revenues
Cost of product sales 1,152 1,253
Cost of service revenues 186 197
General and administrative expenses 150 149
Operating income (loss) 80 85
Other income (expense)
Interest expense (30) (15)
Earnings (loss) before income taxes 50 70
Federal income taxes 17 25
Net earnings (loss) $ 33 $ 45
Basic earnings (loss) per share $ 0.67 $ 0.92
Weighted-average common shares outstanding 49.0 48.8
Diluted earnings (loss) per share $ 0.67 $ 0.92
Weighted-average diluted shares outstanding 49.5 48.8
Net earnings (loss) from above $ 33 $ 45
Other comprehensive income (loss)
Change in unamortized benefit plan costs 24 28
Tax benefit (expense) on change in unamortized benefit plan costs (9) (11)
Other comprehensive income (loss), net of tax 15 17
Comprehensive income (loss) $ 48 $ 62
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
March 31 December 31
($ in millions) 2012 2011
Assets
Current Assets
Cash and cash equivalents $ 551 $ 915
Accounts receivable, net 954 711
Inventoried costs, net 384 380
Deferred income taxes 235 232
Prepaid expenses and other current assets 32 30
Total current assets 2,156 2,268
Property, plant, and equipment, net 2,005 2,033
Other Assets
Goodwill 844 844
Other purchased intangibles, net of accumulated amortization of $377 in 2012 and $372 in 2011 562 567
Pension plan assets 64 64
Debt issuance costs, net 46 48
Long-term deferred tax asset 99 128
Miscellaneous other assets 48 49
Total other assets 1,663 1,700
Total assets $ 5,824 $ 6,001
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited) – CONTINUED
March 31 December 31
($ in millions, except share amounts) 2012 2011
Liabilities and Stockholders' Equity
Current Liabilities
Trade accounts payable 293 380
Current portion of long-term debt 29 29
Current portion of workers' compensation liabilities 201 201
Current portion of postretirement plan liabilities 172 172
Accrued employees' compensation 189 221
Advance payments and billings in excess of costs incurred 118 101
Provision for contract losses 12 19
Other current liabilities 238 249
Total current liabilities 1,252 1,372
Long-term debt 1,822 1,830
Other postretirement plan liabilities 586 581
Pension plan liabilities 833 936
Workers' compensation liabilities 362 361
Other long-term liabilities 51 49
Total liabilities 4,906 5,129
Commitments and Contingencies -- --
Stockholders' Equity
Common stock, $.01 par value; 150,000,000 shares authorized; 49,445,957 issued and outstanding as of March 31, 2012 ; 48,821,563 issued and outstanding as of December 31, 2011 0 0
Additional paid-in capital 1,860 1,862
Retained earnings (deficit) (108) (141)
Accumulated other comprehensive income (loss) (834) (849)
Total stockholders' equity 918 872
Total liabilities and stockholders' equity $ 5,824 $ 6,001
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
March 31
($ in millions) 2012 2011
Operating Activities
Net earnings (loss) $ 33 $ 45
Adjustments to reconcile to net cash provided by (used in) operating activities
Depreciation 42 40
Amortization of purchased intangibles 5 5
Amortization of debt issuance costs 2 0
Stock-based compensation 8 4
Change in
Accounts receivable (243) (168)
Inventoried costs 5 (110)
Prepaid expenses and other assets 2 (38)
Accounts payable and accruals (125) (131)
Deferred income taxes 17 (33)
Retiree benefits (75) 31
Other non-cash transactions, net 0 (9)
Net cash provided by (used in) operating activities (329) (364)
Investing Activities
Additions to property, plant, and equipment (27) (63)
Net cash provided by (used in) investing activities (27) (63)
Financing Activities
Proceeds from issuance of long-term debt 0 1,775
Repayment of long-term debt (8) 0
Debt issuance costs 0 (50)
Repayment of notes payable to former parent and accrued interest 0 (954)
Dividend to former parent in connection with spin-off 0 (1,429)
Net transfers from (to) former parent 0 1,310
Net cash provided by (used in) financing activities (8) 652
Change in cash and cash equivalents (364) 225
Cash and cash equivalents, beginning of period 915 0
Cash and cash equivalents, end of period $ 551 $ 225
Supplemental Cash Flow Disclosure
Cash paid for income taxes $ 4 $ 0
Cash paid for interest $ 47 $ 0
Exhibit B: Reconciliations
We make reference to "segment operating income." Segment operating income is defined as operating income before FAS/CAS adjustment and deferred state income taxes.
Segment operating income is one of the key metrics we use to evaluate operating performance because it excludes items that do not affect segment performance. Therefore, we believe it is appropriate to disclose these measures to help investors analyze our operating performance. However, these measures are not measures of financial performance under GAAP and may not be defined or calculated by other companies in the same manner.
Reconciliation of Segment Operating Income
Three Months Ended
March 31,
$ in millions 2012 2011
Sales and Service Revenues
Ingalls $ 692 $ 761
Newport News 895 $ 940
Intersegment eliminations (19) (17)
Total sales and service revenues $ 1,568 $ 1,684
Operating Income (Loss)
Ingalls $ 20 $ 17
As a percentage of sales 2.9% 2.2%
Newport News 81 67
As a percentage of sales 9.1% 7.1%
Total Segment Operating Income (Loss) 101 84
As a percentage of sales 6.4% 5.0%
Non-segment factors affecting operating income
Net pension and post-retirement benefits adjustment (17) (4)
Deferred state income taxes (4) 5
Total operating income (loss) $ 80 $ 85
Interest expense (30) (15)
Federal income taxes (17) (25)
Total net earnings (loss) $ 33 $ 45
CONTACT:Jerri Fuller Dickseski (Media) jerri.dickseski@hii-co.com 757-380-2341Andy Green (Investors) andy.green@hii-co.com 757-688-5572
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Huntington Ingalls Industries, Inc.
