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
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 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.
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).
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