http://www.morningstar.com/earnings/49112862-huntington-ingalls-industries-inc-hii-q4-2012.aspx

Huntington Ingalls Industries Inc HII
Q4 2012 Earnings Call Transcript

Transcript Call Date 02/27/2013

Operator: Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Huntington Ingalls Industries Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session.

I would now like to turn the presentation over to Mr. Dwayne Blake, Vice President of Investor Relations. Please proceed.

Dwayne Blake - VP, IR: Thank you, Stephanie. Good morning and welcome to the Huntington Ingalls Industries fourth quarter 2012 earnings conference call. With us today are Mike Petters, President and Chief Executive Officer; and Barb Niland, Corporate Vice President, Business Management and Chief Financial Officer.

As a reminder, statements made in today's call that are not historical fact are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of Federal Securities Law. Actual results may differ. Please refer to our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results.

Also in the remarks today, Mike and Barb will refer to certain non-GAAP measures, including certain segment and adjusted financial measures. Reconciliations of these metrics to the comparable GAAP measures are included in the appendix of our earnings presentation that is posted on our website.

We plan to address the posted presentation slides during the call to supplement our comments. Please access our website at www.huntingtoningalls.com and click the Investor Relations link to view the presentation as well as our earnings release.

With that, I'll turn the call over to Mike. Mike?

C. Michael Petters - President and CEO: Thanks, Dwayne. Good morning, everyone, and thanks for joining us on today's call. I am pleased to report Huntington Ingalls Industries results for the fourth quarter of 2012. Today we reported sales of $1.8 billion for the quarter and full year sales of $6.7 billion, both up slightly from last year. Diluted earnings per share was $0.98 for the quarter and $2.91 for the full year. Pension adjusted EPS was $1.30 for the quarter compared to $1.25 last year and for the year $3.95 compared to $4.15 in 2011; all 2011 comparative earnings and margin results, excluding non-cash goodwill impairment adjustment of $10 million in the fourth quarter and $290 million charge for the full year.

Segment operating performance was very strong. Fourth quarter adjusted segment operating margin was 7.7%, up 94 basis points from last year and for the year 6.8%, up 55 basis points from last year. The margin expansion was primarily driven by improved operating performance at Ingalls. Including $236 million of increased pension contributions in 2012, free cash flow for the year was $170 million compared to $331 million in 2011 and we ended the year with over $1 billion of cash on hand. We received $6 billion in new awards during 2012, including the detailed design and construction of LHA-7 Tripoli and LPD-27, contributing to a healthy backlog that was $15.5 billion at the end of the year.

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