Huntington Ingalls Industries (HII) Q4 2014 earnings summary

Executive summary

• FY14 sales and service revenue rose 2% YoY to $6.957B; operating income increased 28% to $655M and net earnings rose 30% to $338M.

• Q4 revenue was $1.927B vs. $1.938B YoY; operating income was $144M vs. $174M and net earnings were $52M vs. $91M.

Financial highlights

• Product sales fell 2% to $5.712B in FY14; service revenue increased 22% to $1.245B, including acquired SN3 and UPI activity.

• Cost of product sales declined to 78.6% of product sales from 80.9%, reflecting LPD-17 performance improvement and Legend-class NSC risk retirement.

• FY14 included a $47M goodwill impairment and $37M loss on early debt extinguishment; interest expense rose 26% to $149M.

Outlook and guidance

• Backlog was $21.430B at year-end, up from $18.038B; ~28% was expected to convert to sales in 2015. FY14 awards totaled ~$10.1B.

• 2015 maintenance and sustainment capex, excluding discretionary projects, was expected at ~2% of annual revenue; operating cash and available credit were expected to cover obligations and capex for at least 12 months.

• Expected 2015 FAS/CAS adjustment was a net benefit of ~$111M; projected qualified pension contributions were $99M and other postretirement contributions ~$36M.