Revenue Flat, Operating Margin Up for Huntington Ingalls

Despite a slight drop in fourth-quarter and full-year sales, the shipbuilder 'is on track to deliver our long-term financial performance goals,' CEO Mike Petters said.

Huntington Ingalls Industries Inc. reported flat revenue and an uptick in operating margin for fourth-quarter and full-year 2011.

The Newport News, Va.-based military shipbuilder, which spun off from Northrop Grumman Corp. (IW 500/33) in March 2011, reported fourth-quarter sales of $1.74 billion, virtually unchanged year-over-year.

Factoring in a $10 million non-cash goodwill impairment finalization adjustment, fourth-quarter net earnings were $69 million and diluted earnings per share were $1.39 on a GAAP basis, up from $63 million and $1.29 per share in fourth-quarter 2010.

Excluding the goodwill impairment adjustment, fourth-quarter net earnings were $59 million and diluted earnings per share were $1.19.

Fourth-quarter adjusted operating margin was 6.6%, up from 6% in 2010. Full-year adjusted operating margin was 6.1%, up from 3.7% in 2010.

"Our overall performance was very strong for the quarter, and we remain on track to deliver our long-term financial performance goals," said Mike Petters, Huntington Ingalls president and CEO.

"In addition, the delivery of the amphibious ship LPD-22 San Diego in December marked a major milestone toward completing the turnaround at our Ingalls Shipbuilding segment. Despite the uncertainty around the defense budget, our focus remains on continuing to deliver high-quality ships that are valued by our customers, the U.S. Navy and Coast Guard."

The company reported full-year sales of $6.58 billion, down 2.2% from 2010.

Excluding the impact of a $290 million non-cash goodwill impairment charge, diluted earnings per share were $3.97 for 2011, up 43% from 2010.

Factoring in the goodwill impairment charge, Huntington Ingalls had a full-year net loss of $94 million and a $1.93 loss per share on a GAAP basis.

The charge initially was record in third-quarter 2011, "due to adverse equity-market conditions that began in the second quarter of 2011 and the resultant decline in industry market multiples and the company's market capitalization," according to the company.

Huntington Ingalls finalized the charge in the fourth quarter, decreasing it to $290 million from its original $300 million.

The companys fourth-quarter sales and earnings results exceeded some analysts estimates, boosting the stock price by 6.75% in Wednesdays trading. The stock closed at $40.46 per share, up $2.56 on the day.


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