Huntington Ingalls reports 3rd-quarter net loss of $248M

NEWPORT NEWS

Huntington Ingalls Industries Inc. on Thursday reported a third-quarter 2011 loss of $248 million, after charging off $300 million of goodwill related to its Ingalls Shipbuilding division in Mississippi.

The goodwill charge is essentially an accounting requirement that is triggered when a company's market capitalization - the value of its outstanding stock - falls below the book value reflected on its balance sheets.

As a result of the charge, Newport News-based Huntington Ingalls lost $5.07 a share for the quarter ended Sept. 30.

Without the charge, however, earnings per share were $1.05 for the quarter, up from 86 cents in the same quarter of 2010. The company's operating margin, its operating income as a percent of revenue, was 6.9 percent, up from 4.6 percent a year earlier.

The average earnings-per-share estimate of 12 analysts surveyed by Thomson Financial Network was 85 cents.

After the earnings announcement, Huntington Ingalls' stock rose $1.83 a share on Thursday, closing at $31 each on the New York Stock Exchange.

"The third quarter was a very successful quarter for the company," Mike Petters, Huntington Ingalls' president and chief executive officer, told Wall Street analysts during a teleconference on Thursday. "For the company as a whole, our long-term outlook remains unchanged and we are on track to achieve the targets we've discussed since the spin-off. All of our programs continue to perform in line with expectations."

Huntington Ingalls was created at the end of March when Northrop Grumman Corp. spun off its shipbuilding business to its shareholders.

The nation's largest military shipbuilder reported third-quarter sales of $1.59 billion, down 4.3 percent from the same period last year. Its Newport News Shipbuilding unit is the nation's only builder of aircraft carriers and one of only two submarine builders. Its Ingalls division makes surface combatants such as destroyers and amphibious warships.

During the quarter, the company was awarded $2.1 billion in new business, bringing its backlog to $17.3 billion as of Sept. 30, the company said in a statement.

"Substantially all of the upside was due to a better than expected operating margin at Newport News (10.7 percent vs. 8.6 percent) related to improved performance on the Virginia-class submarine program," wrote Sam J. Pearlstein, an analyst with Wells Fargo Securities, in a note published Thursday.

The goodwill charge probably surprised people, Pearlstein said in an interview after the teleconference. "The reality is the real improvement that's going to come from this business remains in 2013 and beyond."

Robert McCabe, (757) 446-2327, robert.mccabe@pilotonline.com