ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE | 90-0607005 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
Large accelerated filer | ý | Accelerated filer | ¨ | ||||
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||
PART I – FINANCIAL INFORMATION | Page | ||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II – OTHER INFORMATION | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | |||
Three Months Ended March 31 | ||||||||
(in millions, except per share amounts) | 2016 | 2015 | ||||||
Sales and service revenues | ||||||||
Product sales | $ | 1,429 | $ | 1,250 | ||||
Service revenues | 334 | 320 | ||||||
Total sales and service revenues | 1,763 | 1,570 | ||||||
Cost of sales and service revenues | ||||||||
Cost of product sales | 1,139 | 985 | ||||||
Cost of service revenues | 289 | 280 | ||||||
Income (loss) from operating investments, net | — | 1 | ||||||
General and administrative expenses | 137 | 150 | ||||||
Operating income (loss) | 198 | 156 | ||||||
Other income (expense) | ||||||||
Interest expense | (19 | ) | (23 | ) | ||||
Other, net | (2 | ) | — | |||||
Earnings (loss) before income taxes | 177 | 133 | ||||||
Federal income taxes | 41 | 46 | ||||||
Net earnings (loss) | $ | 136 | $ | 87 | ||||
Basic earnings (loss) per share | $ | 2.89 | $ | 1.80 | ||||
Weighted-average common shares outstanding | 47.0 | 48.4 | ||||||
Diluted earnings (loss) per share | $ | 2.87 | $ | 1.79 | ||||
Weighted-average diluted shares outstanding | 47.4 | 48.7 | ||||||
Dividends declared per share | $ | 0.50 | $ | 0.40 | ||||
Net earnings (loss) from above | $ | 136 | $ | 87 | ||||
Other comprehensive income (loss) | ||||||||
Change in unamortized benefit plan costs | 20 | 22 | ||||||
Other | — | (2 | ) | |||||
Tax benefit (expense) for items of other comprehensive income | (8 | ) | (7 | ) | ||||
Other comprehensive income (loss), net of tax | 12 | 13 | ||||||
Comprehensive income (loss) | $ | 148 | $ | 100 | ||||
($ in millions) | March 31 2016 | December 31 2015 | ||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 793 | $ | 894 | ||||
Accounts receivable, net | 1,086 | 1,074 | ||||||
Inventoried costs, net | 283 | 285 | ||||||
Prepaid expenses and other current assets | 41 | 31 | ||||||
Total current assets | 2,203 | 2,284 | ||||||
Property, plant, and equipment, net of accumulated depreciation of $1,519 million as of 2016 and $1,489 million as of 2015 | 1,809 | 1,827 | ||||||
Goodwill | 956 | 956 | ||||||
Other intangible assets, net of accumulated amortization of $470 million as of 2016 and $465 million as of 2015 | 490 | 495 | ||||||
Deferred tax assets | 313 | 336 | ||||||
Miscellaneous other assets | 125 | 126 | ||||||
Total assets | $ | 5,896 | $ | 6,024 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Trade accounts payable | $ | 252 | $ | 317 | ||||
Accrued employees’ compensation | 186 | 215 | ||||||
Current portion of postretirement plan liabilities | 143 | 143 | ||||||
Current portion of workers’ compensation liabilities | 228 | 227 | ||||||
Advance payments and billings in excess of revenues | 72 | 125 | ||||||
Other current liabilities | 274 | 247 | ||||||
Total current liabilities | 1,155 | 1,274 | ||||||
Long-term debt | 1,275 | 1,273 | ||||||
Pension plan liabilities | 960 | 1,001 | ||||||
Other postretirement plan liabilities | 423 | 423 | ||||||
Workers’ compensation liabilities | 462 | 460 | ||||||
Other long-term liabilities | 100 | 103 | ||||||
Total liabilities | 4,375 | 4,534 | ||||||
Commitments and Contingencies (Note 14) | — | — | ||||||
Stockholders’ Equity | ||||||||
Common stock, $0.01 par value; 150 million shares authorized; 52.6 million issued and 47.1 million outstanding as of March 31, 2016, and 52.0 million issued and 46.9 million outstanding as of December 31, 2015 | 1 | 1 | ||||||
Additional paid-in capital | 1,933 | 1,978 | ||||||
Retained earnings (deficit) | 960 | 848 | ||||||
Treasury stock | (540 | ) | (492 | ) | ||||
Accumulated other comprehensive income (loss) | (833 | ) | (845 | ) | ||||
Total stockholders’ equity | 1,521 | 1,490 | ||||||
Total liabilities and stockholders’ equity | $ | 5,896 | $ | 6,024 | ||||
Three Months Ended March 31 | ||||||||
($ in millions) | 2016 | 2015 | ||||||
Operating Activities | ||||||||
Net earnings (loss) | $ | 136 | $ | 87 | ||||
Adjustments to reconcile to net cash provided by (used in) operating activities | ||||||||
Depreciation | 41 | 39 | ||||||
Amortization of purchased intangibles | 5 | 7 | ||||||
Amortization of debt issuance costs | 2 | 3 | ||||||
Stock-based compensation | 5 | 4 | ||||||
Deferred income taxes | 15 | (1 | ) | |||||
Change in | ||||||||
Accounts receivable | (12 | ) | (189 | ) | ||||
Inventoried costs | 2 | 3 | ||||||
Prepaid expenses and other assets | (9 | ) | (11 | ) | ||||
Accounts payable and accruals | (112 | ) | 39 | |||||
Retiree benefits | (21 | ) | 30 | |||||
Other non-cash transactions, net | 2 | (1 | ) | |||||
Net cash provided by (used in) operating activities | 54 | 10 | ||||||
Investing Activities | ||||||||
Additions to property, plant, and equipment | (37 | ) | (20 | ) | ||||
Acquisitions of businesses, net of cash received | — | (6 | ) | |||||
Proceeds from disposition of assets | — | 32 | ||||||
Net cash provided by (used in) investing activities | (37 | ) | 6 | |||||
Financing Activities | ||||||||
Dividends paid | (24 | ) | (19 | ) | ||||
Repurchases of common stock | (44 | ) | (29 | ) | ||||
Employee taxes on certain share-based payment arrangements | (50 | ) | (54 | ) | ||||
Net cash provided by (used in) financing activities | (118 | ) | (102 | ) | ||||
Change in cash and cash equivalents | (101 | ) | (86 | ) | ||||
Cash and cash equivalents, beginning of period | 894 | 990 | ||||||
Cash and cash equivalents, end of period | $ | 793 | $ | 904 | ||||
Supplemental Cash Flow Disclosure | ||||||||
Cash paid for income taxes | $ | 39 | $ | 26 | ||||
Cash paid for interest | $ | 1 | $ | 23 | ||||
Non-Cash Investing and Financing Activities | ||||||||
Capital expenditures accrued in accounts payable | $ | 4 | $ | 3 | ||||
Three Months Ended March 31, 2016 and 2015 ($ in millions) | Common Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||
Balance as of December 31, 2014 | $ | 1 | $ | 1,959 | $ | 525 | $ | (258 | ) | $ | (862 | ) | $ | 1,365 | ||||||||||
Net earnings (loss) | — | — | 87 | — | — | 87 | ||||||||||||||||||
Dividends declared ($0.40 per share) | — | — | (19 | ) | — | — | (19 | ) | ||||||||||||||||
Additional paid-in capital | — | (37 | ) | — | — | — | (37 | ) | ||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | 13 | 13 | ||||||||||||||||||
Treasury stock activity | — | — | — | (29 | ) | — | (29 | ) | ||||||||||||||||
Balance as of March 31, 2015 | $ | 1 | $ | 1,922 | $ | 593 | $ | (287 | ) | $ | (849 | ) | $ | 1,380 | ||||||||||
Balance as of December 31, 2015 | $ | 1 | $ | 1,978 | $ | 848 | $ | (492 | ) | $ | (845 | ) | $ | 1,490 | ||||||||||
Net earnings (loss) | — | — | 136 | — | — | 136 | ||||||||||||||||||
Dividends declared ($0.50 per share) | — | — | (24 | ) | — | — | (24 | ) | ||||||||||||||||
Additional paid-in capital | — | (45 | ) | — | — | — | (45 | ) | ||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | — | — | 12 | 12 | ||||||||||||||||||
Treasury stock activity | — | — | — | (48 | ) | — | (48 | ) | ||||||||||||||||
Balance as of March 31, 2016 | $ | 1 | $ | 1,933 | $ | 960 | $ | (540 | ) | $ | (833 | ) | $ | 1,521 | ||||||||||
($ in millions) | Benefit Plans | Other | Total | |||||||||
Balance as of December 31, 2014 | $ | (864 | ) | $ | 2 | $ | (862 | ) | ||||
Other comprehensive income (loss) before reclassifications | — | (2 | ) | (2 | ) | |||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ||||||||||||
Amortization of net actuarial loss (gain)1 | 22 | — | 22 | |||||||||
Tax benefit (expense) for items of other comprehensive income | (8 | ) | 1 | (7 | ) | |||||||
Net current period other comprehensive income (loss) | 14 | (1 | ) | 13 | ||||||||
Balance as of March 31, 2015 | (850 | ) | 1 | (849 | ) | |||||||
Balance as of December 31, 2015 | (843 | ) | (2 | ) | (845 | ) | ||||||
Other comprehensive income (loss) before reclassifications | — | — | — | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ||||||||||||
Amortization of net actuarial loss (gain)1 | 20 | — | 20 | |||||||||
Tax benefit (expense) for items of other comprehensive income | (8 | ) | — | (8 | ) | |||||||
Net current period other comprehensive income (loss) | 12 | — | 12 | |||||||||
Balance as of March 31, 2016 | $ | (831 | ) | $ | (2 | ) | $ | (833 | ) | |||
Three Months Ended March 31 | ||||||||
(in millions, except per share amounts) | 2016 | 2015 | ||||||
Net earnings (loss) | $ | 136 | $ | 87 | ||||
Weighted-average common shares outstanding | 47.0 | 48.4 | ||||||
Net dilutive effect of stock options and awards | 0.4 | 0.3 | ||||||
Dilutive weighted-average common shares outstanding | 47.4 | 48.7 | ||||||
Earnings (loss) per share - basic | $ | 2.89 | $ | 1.80 | ||||
Earnings (loss) per share - diluted | $ | 2.87 | $ | 1.79 | ||||
Three Months Ended March 31 | ||||||||
($ in millions) | 2016 | 2015 | ||||||
Sales and Service Revenues | ||||||||
Ingalls | $ | 586 | $ | 469 | ||||
Newport News | 1,153 | 1,061 | ||||||
Other | 24 | 40 | ||||||
Total sales and service revenues | $ | 1,763 | $ | 1,570 | ||||
Operating Income (Loss) | ||||||||
Ingalls | $ | 82 | $ | 45 | ||||
Newport News | 89 | 93 | ||||||
Other | (5 | ) | (10 | ) | ||||
Total segment operating income (loss) | 166 | 128 | ||||||
Non-segment factors affecting operating income (loss) | ||||||||
FAS/CAS Adjustment | 35 | 27 | ||||||
Deferred state income taxes | (3 | ) | 1 | |||||
Total operating income (loss) | $ | 198 | $ | 156 | ||||
($ in millions) | March 31 2016 | December 31 2015 | ||||||
Assets | ||||||||
Ingalls | $ | 1,302 | $ | 1,324 | ||||
Newport News | 3,306 | 3,286 | ||||||
Other | 75 | 78 | ||||||
Corporate | 1,213 | 1,336 | ||||||
Total assets | $ | 5,896 | $ | 6,024 | ||||
($ in millions) | March 31 2016 | December 31 2015 | ||||||
Production costs of contracts in process | $ | 189 | $ | 193 | ||||
Raw material inventory | 94 | 92 | ||||||
Total inventoried costs, net | $ | 283 | $ | 285 | ||||
($ in millions) | March 31 2016 | December 31 2015 | ||||||
Senior notes due December 15, 2021, 5.000% | $ | 600 | $ | 600 | ||||
Senior notes due November 15, 2025, 5.000% | 600 | 600 | ||||||
Mississippi economic development revenue bonds due May 1, 2024, 7.81% | 84 | 84 | ||||||
Gulf opportunity zone industrial development revenue bonds due December 1, 2028, 4.55% | 21 | 21 | ||||||
Less unamortized debt issuance costs | (30 | ) | (32 | ) | ||||
Total long-term debt | $ | 1,275 | $ | 1,273 | ||||
Three Months Ended March 31 | ||||||||||||||||
Pension Benefits | Other Benefits | |||||||||||||||
($ in millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Components of Net Periodic Benefit Cost | ||||||||||||||||
Service cost | $ | 33 | $ | 37 | $ | 3 | $ | 3 | ||||||||
Interest cost | 65 | 61 | 6 | 7 | ||||||||||||
Expected return on plan assets | (87 | ) | (88 | ) | — | — | ||||||||||
Amortization of prior service cost (credit) | 5 | 5 | (5 | ) | (5 | ) | ||||||||||
Amortization of net actuarial loss (gain) | 21 | 21 | (1 | ) | 1 | |||||||||||
Net periodic benefit cost | $ | 37 | $ | 36 | $ | 3 | $ | 6 | ||||||||
Three Months Ended March 31 | ||||||||
($ in millions) | 2016 | 2015 | ||||||
Pension plans | ||||||||
Qualified minimum | $ | — | $ | — | ||||
Discretionary | ||||||||
Qualified | 53 | 2 | ||||||
Non-qualified | 1 | 1 | ||||||
Other benefit plans | 8 | 8 | ||||||
Total contributions | $ | 62 | $ | 11 | ||||
Stock Awards (in thousands) | Weighted-Average Grant Date Fair Value | Weighted-Average Remaining Contractual Term (in years) | |||||||
Total stock awards | 603 | $ | 110.24 | 1.4 | |||||
Shares Under Option (in thousands) | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value ($ in millions) | ||||||||||
Outstanding and exercisable at March 31, 2016 | 262 | $ | 37.73 | 0.9 | $ | 26 | |||||||
• | Revenue recognition; |
• | Purchase accounting, goodwill, and intangible assets; |
• | Litigation, commitments and contingencies; |
• | Retirement related benefit plans; and |
• | Workers' compensation. |
• | Flexibly-Priced Contracts - Includes both cost-type and fixed-price incentive contracts. Cost-type contracts provide for reimbursement of the contractor's allowable costs plus a fee that represents profit. Cost-type contracts generally require that the contractor use its reasonable efforts to accomplish the scope of the work within some specified time and some stated dollar limitation. Fixed-price incentive contracts also provide for reimbursement of the contractor's allowable costs, but are subject to a cost-share limit that |
• | Firm Fixed-Price Contracts - A firm fixed-price contract is a contract in which the specified scope of work is agreed to for a price that is predetermined by bid or negotiation and is not generally subject to adjustment regardless of costs incurred by the contractor. Time and materials contracts, which specify a fixed hourly rate for each labor hour charged, are considered firm fixed-price contracts. Approximately 2% and 5% of our revenues for the three months ended March 31, 2016 and 2015, respectively, were generated from firm fixed-price arrangements. |
Three Months Ended | |||||||||||||||
March 31 | 2016 over 2015 | ||||||||||||||
($ in millions) | 2016 | 2015 | Dollars | Percent | |||||||||||
Sales and service revenues | $ | 1,763 | $ | 1,570 | $ | 193 | 12 | % | |||||||
Cost of product sales and service revenues | 1,428 | 1,265 | 163 | 13 | % | ||||||||||
Income (loss) from operating investments, net | — | 1 | (1 | ) | (100 | )% | |||||||||
General and administrative expenses | 137 | 150 | (13 | ) | (9 | )% | |||||||||
Operating income (loss) | 198 | 156 | 42 | 27 | % | ||||||||||
Interest expense | 19 | 23 | (4 | ) | (17 | )% | |||||||||
Other income (expense) | (2 | ) | — | (2 | ) | — | % | ||||||||
Federal income taxes | 41 | 46 | (5 | ) | (11 | )% | |||||||||
Net earnings (loss) | $ | 136 | $ | 87 | $ | 49 | 56 | % | |||||||
Three Months Ended | |||||||||||||||
March 31 | 2016 over 2015 | ||||||||||||||
($ in millions) | 2016 | 2015 | Dollars | Percent | |||||||||||
Product sales | $ | 1,429 | $ | 1,250 | $ | 179 | 14 | % | |||||||
Service revenues | 334 | 320 | 14 | 4 | % | ||||||||||
Sales and service revenues | $ | 1,763 | $ | 1,570 | $ | 193 | 12 | % | |||||||
Three Months Ended | |||||||||||||||
March 31 | 2016 over 2015 | ||||||||||||||
($ in millions) | 2016 | 2015 | Dollars | Percent | |||||||||||
Cost of product sales | $ | 1,139 | $ | 985 | $ | 154 | 16 | % | |||||||
% of product sales | 79.7 | % | 78.8 | % | |||||||||||
Cost of service revenues | 289 | 280 | 9 | 3 | % | ||||||||||
% of service revenues | 86.5 | % | 87.5 | % | |||||||||||
Income (loss) from operating investments, net | — | 1 | (1 | ) | (100 | )% | |||||||||
General and administrative expenses | 137 | 150 | (13 | ) | (9 | )% | |||||||||
% of total sales and service revenues | 7.8 | % | 9.6 | % | |||||||||||
Cost of sales and service revenues | $ | 1,565 | $ | 1,414 | $ | 151 | 11 | % | |||||||
Three Months Ended | |||||||||||||||
March 31 | 2016 over 2015 | ||||||||||||||
($ in millions) | 2016 | 2015 | Dollars | Percent | |||||||||||
Segment operating income (loss) | $ | 166 | $ | 128 | $ | 38 | 30 | % | |||||||
FAS/CAS Adjustment | 35 | 27 | 8 | 30 | % | ||||||||||
Deferred state income taxes | (3 | ) | 1 | (4 | ) | (400 | )% | ||||||||
Total operating income (loss) | $ | 198 | $ | 156 | $ | 42 | 27 | % | |||||||
Three Months Ended | |||||||||||||||
March 31 | 2016 over 2015 | ||||||||||||||
($ in millions) | 2016 | 2015 | Dollars | Percent | |||||||||||
FAS expense | $ | (40 | ) | $ | (42 | ) | $ | 2 | 5 | % | |||||
CAS cost | 75 | 69 | 6 | 9 | % | ||||||||||
FAS/CAS Adjustment | $ | 35 | $ | 27 | $ | 8 | 30 | % | |||||||
Three Months Ended | |||||||||||||||
March 31 | 2016 over 2015 | ||||||||||||||
($ in millions) | 2016 | 2015 | Dollars | Percent | |||||||||||
Sales and Service Revenues | |||||||||||||||
Ingalls | $ | 586 | $ | 469 | $ | 117 | 25 | % | |||||||
Newport News | 1,153 | 1,061 | 92 | 9 | % | ||||||||||
Other | 24 | 40 | (16 | ) | (40 | )% | |||||||||
Total sales and service revenues | $ | 1,763 | $ | 1,570 | $ | 193 | 12 | % | |||||||
Operating Income (Loss) | |||||||||||||||
Ingalls | $ | 82 | $ | 45 | $ | 37 | 82 | % | |||||||
Newport News | 89 | 93 | (4 | ) | (4 | )% | |||||||||
Other | (5 | ) | (10 | ) | 5 | 50 | % | ||||||||
Total Segment Operating Income (Loss) | 166 | 128 | 38 | 30 | % | ||||||||||
Non-segment factors affecting operating income (loss) | |||||||||||||||
FAS/CAS Adjustment | 35 | 27 | 8 | 30 | % | ||||||||||
Deferred state income taxes | (3 | ) | 1 | (4 | ) | (400 | )% | ||||||||
Total operating income (loss) | $ | 198 | $ | 156 | $ | 42 | 27 | % | |||||||
Three Months Ended | ||||||||
March 31 | ||||||||
($ in millions) | 2016 | 2015 | ||||||
Gross favorable adjustments | $ | 76 | $ | 59 | ||||
Gross unfavorable adjustments | (7 | ) | (4 | ) | ||||
Net adjustments | $ | 69 | $ | 55 | ||||
Three Months Ended | |||||||||||||||
March 31 | 2016 over 2015 | ||||||||||||||
($ in millions) | 2016 | 2015 | Dollars | Percent | |||||||||||
Sales and service revenues | $ | 586 | $ | 469 | $ | 117 | 25 | % | |||||||
Segment operating income (loss) | 82 | 45 | 37 | 82 | % | ||||||||||
As a percentage of segment sales | 14.0 | % | 9.6 | % | |||||||||||
Three Months Ended | |||||||||||||||
March 31 | 2016 over 2015 | ||||||||||||||
($ in millions) | 2016 | 2015 | Dollars | Percent | |||||||||||
Sales and service revenues | $ | 1,153 | $ | 1,061 | $ | 92 | 9 | % | |||||||
Segment operating income (loss) | 89 | 93 | (4 | ) | (4 | )% | |||||||||
As a percentage of segment sales | 7.7 | % | 8.8 | % | |||||||||||
Three Months Ended | |||||||||||||||
March 31 | 2016 over 2015 | ||||||||||||||
($ in millions) | 2016 | 2015 | Dollars | Percent | |||||||||||
Sales and service revenues | $ | 24 | $ | 40 | $ | (16 | ) | (40 | )% | ||||||
Segment operating income (loss) | (5 | ) | (10 | ) | 5 | 50 | % | ||||||||
As a percentage of segment sales | (20.8 | )% | (25.0 | )% | |||||||||||
March 31, 2016 | December 31, 2015 | |||||||||||||||||||||||
Total | Total | |||||||||||||||||||||||
($ in millions) | Funded | Unfunded | Backlog | Funded | Unfunded | Backlog | ||||||||||||||||||
Ingalls | $ | 5,327 | $ | 720 | $ | 6,047 | $ | 5,153 | $ | 1,290 | $ | 6,443 | ||||||||||||
Newport News | 8,032 | 7,098 | 15,130 | 6,026 | 9,513 | 15,539 | ||||||||||||||||||
Other | 103 | — | 103 | 80 | — | 80 | ||||||||||||||||||
Total backlog | $ | 13,462 | $ | 7,818 | $ | 21,280 | $ | 11,259 | $ | 10,803 | $ | 22,062 | ||||||||||||
Three Months Ended | 2016 over | |||||||||||
March 31 | 2015 | |||||||||||
($ in millions) | 2016 | 2015 | Dollars | |||||||||
Net earnings (loss) | $ | 136 | $ | 87 | $ | 49 | ||||||
Depreciation and amortization | 48 | 49 | (1 | ) | ||||||||
Stock-based compensation | 5 | 4 | 1 | |||||||||
Deferred income taxes | 15 | (1 | ) | 16 | ||||||||
Retiree benefit funding less than (in excess of) expense | (21 | ) | 30 | (51 | ) | |||||||
Trade working capital decrease (increase) | (129 | ) | (159 | ) | 30 | |||||||
Net cash provided by (used in) operating activities | $ | 54 | $ | 10 | $ | 44 | ||||||
Three Months Ended | 2016 over | |||||||||||
March 31 | 2015 | |||||||||||
($ in millions) | 2016 | 2015 | Dollars | |||||||||
Net cash provided by (used in) operating activities | $ | 54 | $ | 10 | $ | 44 | ||||||
Less: | ||||||||||||
Capital expenditures | (37 | ) | (20 | ) | (17 | ) | ||||||
Free cash flow provided by (used in) operations | $ | 17 | $ | (10 | ) | $ | 27 | |||||
• | changes in government and customer priorities and requirements (including government budgetary constraints, shifts in defense spending, and changes in customer short-range and long-range plans); |
• | our ability to obtain new contracts, estimate our future contract costs and perform our contracts effectively; |
• | changes in procurement processes and government regulations and our ability to comply with such requirements; |
• | our ability to deliver our products and services at an affordable life cycle cost and compete within our markets; |
• | natural disasters; |
• | adverse economic conditions in the United States and globally; |
• | changes in key estimates and assumptions regarding our pension and retiree health care costs; |
• | security threats, including cyber security threats, and related disruptions; and |
• | other risk factors discussed herein and in our filings with the SEC. |
Program Name | Program Description | |
Carrier RCOH | Perform refueling and complex overhaul ("RCOH") of nuclear-powered aircraft carriers, which is required at the mid-point of their 50-year life cycle. CVN-72 USS Abraham Lincoln is currently undergoing RCOH and advance planning efforts for CVN-73 USS George Washington are in process in preparation for the expected start of its RCOH in 2017. | |
CVN-65 USS Enterprise | Defuel and inactivate the world's first nuclear-powered aircraft carrier, which began in 2013. | |
CVN-78 Gerald R. Ford-class aircraft carriers | Design and construction for the Ford-class program, which is the aircraft carrier replacement program for CVN-65 USS Enterprise and CVN-68 Nimitz-class aircraft carriers. CVN-78 Gerald R. Ford, the first ship of the Ford-class, is currently under construction. In June 2015, we were awarded a contract for the detail design and construction of CVN-79 John F. Kennedy, following several years of engineering, advance construction, and purchase of long-lead time components and material. This category also includes the class' non-recurring engineering. The class is expected to bring improved warfighting capability, quality of life improvements for sailors, and reduced life cycle costs. | |
DDG-51 Arleigh Burke-class destroyers | Build guided missile destroyers designed for conducting anti-air, anti-submarine, anti-surface and strike operations. The Aegis-equipped DDG-51 Arleigh Burke-class destroyers are the U.S. Navy's primary surface combatant, and have been constructed in variants, allowing technological advances during construction. DDG-113 John Finn and DDG-114 Ralph Johnson are currently under construction. In June 2013, we were awarded a multi-year contract for construction of five additional DDG-51 Arleigh Burke-class destroyers. The first three ships of that award, DDG-117 Paul Ignatius, DDG-119 Delbert D. Black, and DDG-121 Frank E. Petersen, Jr. are currently under construction. | |
Energy products and services | Leverage our core competencies in nuclear operations, program management and heavy manufacturing for U.S. Department of Energy ("DoE") and commercial nuclear programs. We also provide a range of services to the energy and oil and gas industries as well as government customers. | |
Fleet Support services | Fleet Support provides comprehensive life cycle services, including depot maintenance, modernization, repairs, logistics and technical support, and planning yard services for naval and commercial vessels. We have ship repair facilities in Newport News, Virginia, and San Diego, California, which are near the U.S. Navy's largest homeports of Norfolk, Virginia and San Diego, respectively. We also perform emergent repair for the U.S. Navy on all classes of ships. | |
Legend-class National Security Cutter | Design and build the U.S. Coast Guard's National Security Cutters, the largest and most technically advanced class of cutter in the U.S. Coast Guard. The NSC is equipped to carry out maritime homeland security, maritime safety, protection of natural resources, maritime mobility and national defense missions. The plan is for a total of eight ships, of which the first five ships have been delivered. NSC-6 Munro, NSC-7 Kimball and NSC-8 Midgett are currently under construction. | |
LHA-6 America-class amphibious assault ships | Design and build amphibious assault ships that provide forward presence and power projection as an integral part of joint, interagency and multinational maritime expeditionary forces. The LHA-6 America-class ships, together with the LHD-1 Wasp-class ships, are the successors to the decommissioned LHA-1 Tarawa-class ships. The LHA-6 America-class ships optimize aviation operations and support capabilities. LHA-7 Tripoli is currently under construction. | |
LPD-17 San Antonio-class amphibious transport dock ships | Design and build amphibious transport dock ships, which are warships that embark, transport and land elements of a landing force for a variety of expeditionary warfare missions, and also serve as the secondary aviation platform for Amphibious Readiness Groups. The LPD-17 San Antonio-class is the newest addition to the U.S. Navy's 21st century amphibious assault force, and these ships are a key element of the U.S. Navy's seabase transformation. We are currently constructing LPD-26 John P. Murtha and LPD-27 Portland. The LPD-17 San Antonio-class currently includes a total of 11 ships. | |
Savannah River Nuclear Solutions, LLC | Participate, as a minority member in a joint venture, in the management and operation of DoE nuclear sites, currently at the Savannah River Site near Aiken, South Carolina, and potentially at other DoE sites. Our joint venture partners at the Savannah River Site include Fluor Federal Services, Inc. and Honeywell International Inc. | |
SSBN(X) Ohio-class Submarine Replacement Program | Perform, through an agreement with Electric Boat, as design subcontractor for the SSBN(X) Ohio-class replacement boats. The U.S. Navy has committed to designing a replacement class for the SSBN Ohio-class ballistic missile submarines, which were first introduced into service in 1981. The SSBN Ohio-class includes 14 ballistic missile submarines and four nuclear cruise missile submarines. The Ohio Replacement Program currently anticipates 12 new ballistic missile submarines over a 15-year period at a cost of approximately $5 billion to $7 billion each. The U.S. Navy has initiated the design process for the new class of submarine, and we have begun design work as a subcontractor to Electric Boat. Congress has delayed the start of the first Ohio replacement submarine by two years and construction is now expected to begin in 2021, with procurement of long-lead-time materials in 2017 and delivery in 2030. The first Ohio-class ballistic missile submarine is expected to be retired in 2027 with an additional submarine being retired each year thereafter. By 2030 the Ohio-class ballistic missile submarine fleet is expected to be ten. The current fiscal environment and uncertainty in defense budgets may cause additional delay to the start of construction or result in a reduction in the number of ships being procured, but we believe the Ohio Replacement Program may represent an opportunity for us in the future. | |
SSN-774 Virginia-class fast attack submarines | Construct attack submarines as the principal subcontractor to Electric Boat. The SSN-774 Virginia-class is a post-Cold War design tailored to excel in a wide range of warfighting missions, including anti-submarine and surface ship warfare; special operation forces; strike; intelligence, surveillance, and reconnaissance; carrier and expeditionary strike group support; and mine warfare. | |
Period | Total Number of Shares Purchased1 | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)2 | ||||||||||
January 1, 2016 to January 31, 2016 | 117,622 | $ | 123.60 | 117,622 | $ | 693.7 | ||||||||
February 1, 2016 to February 29, 2016 | 55,504 | 125.94 | 55,504 | 686.7 | ||||||||||
March 1, 2016 to March 31, 2016 | 487,475 | 133.77 | 193,600 | 660.5 | ||||||||||
Total | 660,601 | $ | 131.30 | 366,726 | $ | 660.5 | ||||||||
3.1 | Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., filed March 30, 2011 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on April 4, 2011). | ||
3.2 | Certificate of Amendment to the Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., dated May 28, 2014 (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed on August 7, 2014). | ||
3.3 | Certificate of Amendment to the Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., dated May 21, 2015 (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q filed on August 6, 2015). | ||
3.4 | Restated Bylaws of Huntington Ingalls Industries, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on February 1, 2016). | ||
10.1 | Huntington Ingalls Industries, Inc. Annual Incentive Plan (as amended and restated). | ||
10.2 | First Amendment to the Huntington Ingalls Industries, Inc. Annual Incentive Plan (as amended and restated). | ||
11 | Computation of Per Share Earnings (provided in Note 7 "Earnings Per Share" of the Notes to the Unaudited Condensed Consolidated Financial Statements included in this Report). | ||
12.1 | Ratio of Earnings to Fixed Charges. | ||
31.1 | Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certificate of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2 | Certificate of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101 | The following financial information for the company, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Comprehensive Income, (ii) the Condensed Consolidated Statements of Financial Position, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Changes in Equity, and (v) the Notes to Condensed Consolidated Financial Statements. | ||
Date: | May 5, 2016 | Huntington Ingalls Industries, Inc. | |
(Registrant) | |||
By: | /s/ Nicolas Schuck | ||
Nicolas Schuck | |||
Corporate Vice President, Controller and Chief Accounting Officer | |||
1. | Appropriated Incentive Compensation— The amount appropriated to the Plan for a Performance Year by the Committee. |
2. | Code—The Internal Revenue Code of 1986, as amended from time to time. |
3. | Committee—The Compensation Committee of the Board of Directors of Huntington Ingalls Industries, Inc. |
4. | Company—Huntington Ingalls Industries, Inc. and such of its subsidiaries as are consolidated in its consolidated financial statements. |
5. | Director—A member of the Board of Directors of Huntington Ingalls Industries, Inc. |
6. | Incentive Compensation—Awards payable under this Plan. |
7. | Officer—A Participant who is an elected corporate officer of the rank of Vice President and above and the Presidents of those consolidated subsidiaries that the Committee determines to be significant in the overall corporate operations. |
8. | Participant—An employee of the Company granted or eligible to receive an Incentive Compensation award under this Plan. |
9. | Performance Criteria—The performance criteria is a weighted combination of various financial and non-financial factors approved by the Committee for the Performance Year. |
10. | Performance Year—The year with respect to which an award of Incentive Compensation is calculated and paid. |
11. | Plan—This Huntington Ingalls Industries, Inc. Annual Incentive Plan. |
12. | Plan Year—The fiscal year of Huntington Ingalls Industries, Inc. |
13. | Section 162(m) Officer— An employee who is a “covered employee” as defined in Section 162(m) of the Code with respect to an award of Incentive Compensation under the Plan for any Performance Year. |
14. | Section 162(m) Policy— The Performance-Based Compensation Policy of Huntington Ingalls Industries, Inc., as amended from time to time. |
1. | The persons eligible to receive Incentive Compensation awards under this Plan are Officers and appointed vice presidents, senior management, middle management and individual key contributors (employees normally in a position that customarily perform quasi-management or team leadership duties); provided that Incentive Compensation awards under this Plan to any Officers who are Section 162(m) Officers for a Performance Year shall be subject to the Section 162(m) Policy. In addition, employees may be eligible to receive Incentive Compensation awards under this Plan if they have specific individual goals that directly contribute to the attainment of their respective business unit’s operating goals or if employees are considered “high performing” and are in a position to make measurable and significant contributions to the success of the Company. |
2. | For Officers, at the beginning of, or prior to, a Performance Year, the Committee will determine the Officers granted or eligible to receive an Incentive Compensation award for such Performance Year. |
3. | For all other eligible employees who are not Officers, at the beginning of, or prior to, a Performance Year, the Company’s CEO will approve the number of employees eligible for participation in this Plan for such Performance Year. Participants are then selected by their management based on an assessment of their position relative to other candidates, their performance, and their potential impact on achievement of business unit and the Company goals. |
4. | Directors, as such, shall not participate in this Plan, but the fact that an Officer is also a Director shall not prevent participation. |
5. | Eligibility for participation in this Plan does not guarantee that an eligible individual will actually be selected to participate. Participation in this Plan during any Performance Year does not imply nor guarantee participation in this Plan in future years. |
6. | A Participant may be eligible to receive a pro-rated Incentive Compensation award in the |
7. | Except as provided in Section III 6 (see above), in order to be eligible to receive a payment from this Plan, a Participant must be an active employee of the Company as of the last day of the Performance Year (and in no event will the Participant’s Incentive Compensation award with respect to that year be considered to have been earned prior to that time unless such condition is satisfied), unless an exception is approved in writing by the Committee (with respect to Officers) or the Company’s chief human resources and administrative officer (with respect to all non-Officer Participants). |
1. | Corporation Goals: |
2. | Financial Measures: |
a. | Financial measures are established by the Committee at its sole discretion. Measures may include, but are not limited to: cash management, cash flow, return on investment, debt reduction, revenue growth, net earnings, and return on equity. |
b. | The Committee approves a performance threshold, a target level and a maximum performance level for each of the financial measures for the Performance Year. |
3. | Supplemental Goals: |
4. | Individual Goals: |
1. | The amount appropriated for this Plan for a Performance Year is based on the Committee’s determination of the UPF and applied to the individual incentive targets of Participants. These performance-adjusted targets are aggregated into the “Appropriated Incentive Compensation” for the Performance Year. |
2. | In no event shall Incentive Compensation payable to Participants for a Performance Year exceed the Appropriated Incentive Compensation for this Plan as approved by the Committee. In no event shall Incentive Compensation payable to Participants who are Section 162(m) Officers for a Performance Year exceed the applicable limits set forth in the Section 162(m) Policy. |
3. | Any Appropriated Incentive Compensation for a Performance Year, which is not actually distributed to the Participants as awards for such year, shall be forfeited and cannot be transferred to the following Performance Year. |
1. | Individual Award Factors: |
a. | Target award percentage—Each Participant’s target award percentage is established annually and is a percentage of annual aggregate salary that reflects the varying |
b. | Individual performance—Unless otherwise determined by the Committee, each Participant will be evaluated in relation to the Participant’s achievement of predetermined individual goals and his/her relative contribution during the Performance Year compared to other Participants to the success or profit of the Company. This assessment of performance (the “individual performance factor” or “IPF”) is stated numerically and is a performance multiplier for individual incentive targets. The IPF may range from 0 to 1.5. Each Officer’s IPF will be determined by the Committee. For each other Participant, his/her IPF will be determined by the CEO or his delegate. |
c. | Both the IPF (if applicable) and the UPF are multipliers for the individual Participant’s target award percentage to determine that Participant’s Incentive Compensation award. |
2. | Awards: |
a. | For Officers, the Committee will make the final determination of each Officer’s Incentive Compensation award for the Performance Year. In making its determination, the Committee will consider the CEO’s recommendations with respect to all Officers other than himself. |
b. | For all other Participants who are not Officers, the CEO or his delegate will make the final determination of each such Participant’s Incentive Compensation award for the Performance Year. Prior to the payment of any such Incentive Compensation awards for a Performance Year, the CEO, or his delegate, may in his sole discretion, adjust or reduce to zero recommended amounts of Incentive Compensation awards to all or any of these Participants. The CEO or his delegate shall determine the amount of any adjustment in each of these Participant’s Incentive Compensation awards on the basis of such factors as he deems relevant, and shall not be required to establish any allocation or weighting component with respect to the factors he considers. |
1. | The Committee shall be responsible for the administration of this Plan for Officers and the CEO shall be responsible for the administration of this Plan for all other Participants who are not Officers. The Committee or CEO, as applicable: |
a. | Shall interpret this Plan, make any rules and regulations relating to the Plan, and determine factual questions arising in connection with the Plan, after such investigation or hearing (if any) as the applicable administrator may deem appropriate. |
b. | The Committee shall determine which consolidated subsidiaries are significant for the purpose of determining which Participants are Officers. |
c. | As soon as feasible after the close of each Performance Year and prior to the payment of any Incentive Compensation for such Performance Year, (i) the Committee shall review the performance of each Officer and determine the amount of each Officer’s individual Incentive Compensation award, if any, with respect to that Performance Year and (ii) the CEO shall review the recommended Incentive Compensation awards of selected Participants, as determined by the CEO, to determine if the award is appropriate with respect to that Performance Year, making any adjustments as he deems necessary, and approving each such Incentive Compensation award, if any, with respect to that Performance Year. |
d. | The Committee shall have sole discretion in determining Incentive Compensation awards for Officers, except that in making awards the Committee may, in its discretion, request and consider the recommendations of the CEO and others whom it may designate. |
e. | The Committee shall review the Incentive Compensation awards for the Section 162(m) Officers under the Section 162(m) Policy and shall make any adjustments to such awards necessary to ensure compliance with such policy. |
f. | The CEO shall review and approve the total non-Officer Incentive Compensation award expenditure of each division and the Company overall. |
g. | Any decisions made by the applicable administrator under the provisions of this SECTION VIII, as well as any interpretations of this Plan by the applicable administrator, shall be conclusive and binding on all parties concerned. |
1. | Payments |
a. | The amount of Incentive Compensation award determined for each Participant with respect to a given Performance Year shall be paid in cash or in common stock of Huntington Ingalls Industries, Inc. (“HII Common Stock”) or partly in cash and partly in HII Common Stock, as the Committee may determine. Subject to any applicable deferred compensation election to the contrary, payment of the Incentive Compensation award with respect to a given Performance Year shall be made in a lump sum payment between February 15 and March 15 of the year following such Performance Year. |
b. | The Committee may impose such conditions, including forfeitures and restrictions, as the Committee believes will best serve the interests of the Company and the purposes of this Plan. |
c. | In making awards of HII Common Stock, the Committee shall first determine all Incentive Compensation awards in terms of dollars. The total dollar amount of all Incentive Compensation awards for a particular Performance Year shall not exceed the Appropriated Incentive Compensation for that Performance Year under this Plan. After fixing the total amount of each Participant’s Incentive Compensation award in terms of dollars, then if some or all of the award is to be paid in HII Common Stock, the dollar amount of the Incentive Compensation award so to be paid shall be converted into shares of HII Common Stock by using the fair market value of such stock on the date such dollar amount was fixed. “Fair market value” shall be the closing price of such stock on the New York Stock Exchange on the applicable date, or, if no sales of such stock occurred on that date, then on the last preceding date on which such sales occurred. No fractional share shall be issued. |
d. | If an Incentive Compensation award is paid in HII Common Stock, the number of shares shall be appropriately adjusted for any stock splits, stock dividends, re-capitalization or other relevant changes in capitalization effective after the date the applicable number of shares is determined and prior to the date as of which the Participant becomes the record owner of the shares received in payment of the award. All such adjustments thereafter shall accrue to the Participant as the record owner of the shares. |
e. | HII Common Stock issued in payment of Incentive Compensation awards may, at the option of the Board of Directors of the Company, be either originally issued shares or treasury shares, and any such shares so issued shall count against the applicable limits of the Company’s 2012 Long-Term Incentive Stock Plan or any successor equity compensation plan of the Company, as the case may be. |
f. | Distribution of awards shall be governed by the terms and conditions applicable to such awards, as determined by the Committee or its delegate. An award, the payment of which is to be deferred pursuant to the terms of an employment agreement, shall be paid as provided by the terms of such agreement. Awards or portions thereof deferred pursuant to the Huntington Ingalls Industries Deferred Compensation Plan, the Huntington Ingalls Industries Savings Excess Plan, or any other deferred compensation plan or deferral arrangement shall be paid as provided in such plan or arrangement. |
g. | The Company shall have the right to deduct from all payments under this Plan any federal, state, or local taxes required by law to be withheld with respect to such payments. |
h. | No Participant or any other party claiming an interest in amounts earned under this Plan shall have any interest whatsoever in any specific asset of the Company. To the |
1. | Participation in this Plan shall not constitute an agreement of the Participant to remain in the employ of and to render his/her services to the Company, or of the Company to continue to employ such Participant, and the Company may terminate the employment of a Participant at any time with or without cause. |
2. | In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. |
3. | All costs of implementing and administering the Plan shall be borne by the Company. |
4. | All obligations of the Company under this Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. |
5. | This Plan and any agreements hereunder, shall be governed by and construed in accordance with the laws of the state of Delaware. |
6. | The rights of a Participant or any other person to any payment or other benefits under this Plan may not be assigned, transferred, pledged, or encumbered except by will or the laws of decent or distribution. |
7. | This Plan does not constitute a contract. This Plan does not confer upon any person any right to receive a bonus or any other payment or benefit. There is no commitment or obligation on the part of the Company (or any affiliate) to continue any bonus plan (similar to this Plan or otherwise) in any particular year. |
8. | This Plan and the Incentive Compensation awards under the Plan are intended to comply with (or be exempt from, as the case may be) Section 409A of the Code so as to avoid any tax, penalty or interest under Section 409A of the Code. This Plan shall be construed, operated and administered consistent with this intent. |
(a) | Target award percentage—Each Participant’s target award percentage is established annually and is a percentage of an amount (typically annual aggregate salary, or, for any Participant who does not receive an annual salary or who receives only a de minimis annual salary, such other amount as the Committee may determine) that reflects the varying impact of the Participant’s positions on business results. Generally Officers will have higher target award percentages than senior middle managers and so forth. |
Three Months Ended March 31 | Year Ended December 31 | |||||||||||||||||||||||
($ in millions) | 2016 | 2015(1) | 2014(2) | 2013 | 2012 | 2011(3) | ||||||||||||||||||
Earnings: | ||||||||||||||||||||||||
Earnings from continuing operations before income taxes | $ | 177 | $ | 632 | $ | 507 | $ | 394 | $ | 241 | $ | (4 | ) | |||||||||||
Amortization of Capitalized Interest | — | 2 | 1 | 2 | 2 | 3 | ||||||||||||||||||
Interest Capitalized | — | (2 | ) | (2 | ) | — | (2 | ) | (2 | ) | ||||||||||||||
Net adjustment for earnings from affiliates | — | — | (2 | ) | 2 | 2 | — | |||||||||||||||||
Fixed Charges: | ||||||||||||||||||||||||
Interest expensed and capitalized, including amortization of debt issuance | 19 | 139 | 151 | 118 | 119 | 106 | ||||||||||||||||||
Portion of rental expenses on operating leases deemed to be representative of the interest factor (4) | 3 | 21 | 18 | 15 | 15 | 15 | ||||||||||||||||||
Total Earnings | $ | 199 | $ | 792 | $ | 673 | $ | 531 | $ | 377 | $ | 118 | ||||||||||||
Fixed Charges: | $ | 22 | $ | 160 | $ | 169 | $ | 133 | $ | 134 | $ | 121 | ||||||||||||
Ratio of earnings to fixed charges | 9.0 | 5.0 | 4.0 | 4.0 | 2.8 | 1.0 | ||||||||||||||||||
1. | I have reviewed this Quarterly Report on Form 10-Q of Huntington Ingalls Industries, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ C. Michael Petters | |
C. Michael Petters | |
President and Chief Executive Officer | |
1. | I have reviewed this Quarterly Report on Form 10-Q of Huntington Ingalls Industries, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Christopher D. Kastner | |
Christopher D. Kastner | |
Corporate Vice President, Business Management and Chief Financial Officer | |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company. |
/s/ C. Michael Petters | |
C. Michael Petters | |
President and Chief Executive Officer | |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company. |
/s/ Christopher D. Kastner | |
Christopher D. Kastner | |
Corporate Vice President, Business Management and Chief Financial Officer | |
Document And Entity Information - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Apr. 29, 2016 |
|
| Document And Entity Information [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | Mar. 31, 2016 | |
| Document Fiscal Period Focus | Q1 | |
| Document Fiscal Year Focus | 2016 | |
| Entity Registrant Name | HUNTINGTON INGALLS INDUSTRIES, INC. | |
| Entity Central Index Key | 0001501585 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Common Stock, Shares Outstanding | 47,022,393 |
Condensed Consolidated Statements Of Financial Position (Unaudited) (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Accumulated depreciation | $ (1,519) | $ (1,489) |
| Accumulated amortization | $ 470 | $ 465 |
| Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized (in shares) | 150,000,000 | 150,000,000 |
| Common stock, shares issued (in shares) | 52,600,000 | 52,000,000 |
| Common stock, shares outstanding (in shares) | 47,100,000 | 46,900,000 |
Condensed Consolidated Statements Of Changes In Equity (Unaudited) - USD ($) $ in Millions |
Total |
Common Stock |
Additional Paid-in Capital |
Retained Earnings (Deficit) |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2014 | $ 1,365 | $ 1 | $ 1,959 | $ 525 | $ (258) | $ (862) |
| Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
| Net earnings (loss) | 87 | 87 | ||||
| Dividends declared | (19) | (19) | ||||
| Additional paid-in capital | (37) | (37) | ||||
| Other comprehensive income (loss), net of tax | 13 | 13 | ||||
| Treasury stock activity | (29) | (29) | ||||
| Balance at Mar. 31, 2015 | 1,380 | 1 | 1,922 | 593 | (287) | (849) |
| Balance at Dec. 31, 2015 | 1,490 | 1 | 1,978 | 848 | (492) | (845) |
| Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
| Net earnings (loss) | 136 | 136 | ||||
| Dividends declared | (24) | (24) | ||||
| Additional paid-in capital | (45) | (45) | ||||
| Other comprehensive income (loss), net of tax | 12 | 12 | ||||
| Treasury stock activity | (48) | (48) | ||||
| Balance at Mar. 31, 2016 | $ 1,521 | $ 1 | $ 1,933 | $ 960 | $ (540) | $ (833) |
Condensed Consolidated Statements of Changes in Equity (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
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| Statement of Stockholders' Equity [Abstract] | ||
| Dividends declared per share | $ 0.50 | $ 0.40 |
Description of Business |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Description of Business | DESCRIPTION OF BUSINESS For more than a century, Huntington Ingalls Industries, Inc. ("HII" or the "Company") has been designing, building, overhauling, and repairing ships primarily for the U.S. Navy and the U.S. Coast Guard. The Company conducts business primarily with the U.S. Government, principally the Department of Defense ("DoD"). As prime contractor, principal subcontractor, team member, or partner, HII participates in many high-priority U.S. defense technology programs. HII is organized into three reportable segments: Ingalls, Newport News, and Other. Through its Ingalls segment, HII is a builder of amphibious assault and expeditionary ships for the U.S. Navy, the sole builder of National Security Cutters ("NSCs") for the U.S. Coast Guard, and one of only two companies that builds the Navy's current fleet of DDG-51 Arleigh Burke-class destroyers. Through its Newport News segment, HII is the nation's sole designer, builder, and refueler of nuclear-powered aircraft carriers, and one of only two companies currently designing and building nuclear-powered submarines for the U.S. Navy. The Other segment was established to account for certain of the Company's non-shipbuilding commercial activities. |
Basis of Presentation |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of Presentation | BASIS OF PRESENTATION Principles of Consolidation - The unaudited condensed consolidated financial statements of HII and its subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the instructions to Form 10-Q promulgated by the Securities and Exchange Commission ("SEC"). All intercompany transactions and balances are eliminated in consolidation. For classification of current assets and liabilities related to its long-term production contracts, the Company uses the duration of these contracts as its operating cycle, which is generally longer than one year. Additionally, certain prior year amounts have been reclassified to conform to the current year presentation. See Note 3: Accounting Standards Updates. These unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature considered necessary by management for a fair presentation of the unaudited condensed consolidated financial position, results of operations, and cash flows and should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. The quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is management's long-standing practice to establish interim closing dates using a "fiscal" calendar, which requires the businesses to close their books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. The effects of this practice only exist for interim periods within a reporting year. Accounting Estimates - The preparation of the Company's unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information, and actual results could differ materially from those estimates. The Bipartisan Budget Act of 2015 established budget top lines and provided sequestration relief for 2016 and 2017. Sequestration remains in effect for 2018 through 2021 and could result in significant decreases in DoD spending that could negatively impact the Company's revenues and its estimated recovery of goodwill and other long-lived assets. Revenue Recognition - The majority of the Company's business is derived from long-term contracts for the construction of naval vessels, production of goods, and provision of services to the federal government, principally the U.S. Navy. In accounting for these contracts, the Company extensively utilizes the cost-to-cost measure of the percentage-of-completion method of accounting, principally based upon total costs incurred. Under this method, sales, including estimated earned fees or profits, are recorded as costs are incurred, generally based on the percentage that total costs incurred bear to total estimated costs at completion. Certain contracts contain provisions for price redetermination or for cost and/or performance incentives. Such redetermined amounts or incentives are included in sales when the amounts can reasonably be determined and estimated. Amounts representing contract change orders, claims, requests for equitable adjustment, or limitations in funding are included in sales only when they can be reliably estimated and realization is probable. The Company estimates profit as the difference between total estimated revenues and total estimated cost of a contract and recognizes that profit over the life of the contract based on progress toward completion. If the Company estimates a contract will result in a loss, the full amount of the estimated loss is recognized against income in the period in which the loss is identified. The Company classifies contract revenues as product sales or service revenues depending upon the predominant attributes of the relevant underlying contracts. The Company recognizes changes in estimates of contract sales, costs, and profits using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes on current and prior periods. Accordingly, the effect of the changes on future periods of contract performance is recognized as if the revised estimate had been the original estimate. For the three months ended March 31, 2016 and 2015, net cumulative catch-up adjustments increased operating income by $69 million and $55 million, respectively, and increased diluted earnings per share by $0.95 and $0.73, respectively. Cumulative catch-up adjustments for the three months ended March 31, 2016, included a $22 million favorable adjustment on a contract at the Ingalls segment, which increased diluted earnings per share by $0.30. No individual adjustment was material to the Company's condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2015. The Company also enters into other types of contracts, including certain services or commercial arrangements. For such contracts not associated with the design, development, manufacture, or modification of complex equipment, revenues are recognized upon delivery or as services are rendered once persuasive evidence of an arrangement exists, the price is fixed or determinable, and collectibility is reasonably assured. Costs related to these contracts are expensed as incurred. Fair Value of Financial Instruments - Except for the Company's long-term debt, the carrying amounts of the Company's financial instruments recorded at historical cost approximate fair value due to the short-term nature of the instruments and low credit risk associated with the respective counterparties. The Company maintains multiple grantor trusts established to fund certain non-qualified pension plans. These trusts consist primarily of available-for-sale investments in marketable securities. The assets are held at fair value, a significant majority of investments held in the trusts are valued within Level 1 of the fair value hierarchy, and no material amounts are valued within Level 3 of the fair value hierarchy. These trusts were valued at $76 million and $74 million as of March 31, 2016, and December 31, 2015, respectively, and are presented within miscellaneous other assets within the unaudited condensed consolidated statements of financial position. Related Party Transactions - On March 29, 2011, HII entered into a Separation and Distribution Agreement (the "Separation Agreement") with its former parent company, Northrop Grumman Corporation ("Northrop Grumman"), and Northrop Grumman's subsidiaries (Northrop Grumman Shipbuilding, Inc. and Northrop Grumman Systems Corporation), pursuant to which HII was legally and structurally separated from Northrop Grumman. The spin-off from Northrop Grumman was a transaction under common control. As a result, no change in the historical basis of HII's assets or liabilities was recorded as part of the spin-off. In connection with the spin-off, HII entered into a Tax Matters Agreement with Northrop Grumman related to taxes prior to the spin-off. As of each of March 31, 2016 and December 31, 2015, the Company was due $31 million from Northrop Grumman under the Tax Matters Agreement. As of each of March 31, 2016 and December 31, 2015, the Company had $84 million outstanding under Industrial Revenue Bonds issued by the Mississippi Business Finance Corporation. Prior to the spin-off, repayment of principal and interest was guaranteed by Northrop Grumman Systems Corporation. The guaranty remains in effect, and the Company has agreed to indemnify Northrop Grumman Systems Corporation for any losses related to the guaranty. |
Accounting Standards Updates |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
| Accounting Standards Updates | ACCOUNTING STANDARDS UPDATES In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”, which establishes a right-of-use model that requires a lessee to record the right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations and comprehensive income. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those reporting periods. Early adoption is permitted and should be applied using a modified retrospective approach. The Company is in the process of evaluating the potential impacts of ASU 2016-02 on its consolidated financial statements and disclosures, contracting and accounting processes, internal controls, and information technology systems. In March 2016, the FASB issued ASU 2016-07, "Investments-Equity Method and Joint Ventures (Topic 323)”. The update simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. Consequently, when an investment qualifies for the equity method, the cost of acquiring the additional interest in the investee would be added to the current basis of the investor’s previously held interest, and the equity method would be applied subsequent to the date on which the investor obtains the ability to exercise influence over the investee. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those periods. The Company does not expect the adoption of ASU 2016-07 to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. In May 2014, the FASB issued the final standard on revenue from contracts with customers. The standard, issued as ASU 2014-09 (Topic 606), outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the standard is that "an entity shall recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services." The guidance permits the use of either a retrospective or cumulative effect transition method. In March 2016, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)", which clarifies the revenue recognition guidance on whether an entity is a principal or an agent in an arrangement, thus determining gross or net revenue presentation. The standard is effective for fiscal years beginning after December 15, 2017, but early adoption for annual reporting periods beginning after December 31, 2016, is permitted. The Company is currently evaluating the impact that will result from the implementation of ASU 2014-09 and ASU 2016-08 on its financial statements and disclosures, contracting and accounting processes, internal controls, and information technology systems. In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”, which changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, and classification in the statement of cash flows. Under the new guidance, income tax benefits and deficiencies of exercised or vested awards are to be recognized as income tax benefit or expense in the statement of operations and comprehensive income and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. Excess tax benefits should be classified along with other income tax cash flows as an operating activity within the consolidated statement of cash flows. The Company may make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The Company elected to early adopt ASU 2016-09, as of January 1, 2016. See Note 7: Earnings Per Share, Note 11: Income Taxes, and Note 17: Stock Compensation Plans. Other pronouncements issued but not effective until after December 31, 2016 are not expected to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. |
Avondale |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Restructuring and Related Activities [Abstract] | |
| Avondale | AVONDALE In 2010, plans were announced to consolidate the Company's Ingalls shipbuilding operations by winding down shipbuilding at the Avondale, Louisiana facility in 2013 after completion of LPD-class ships that were under construction at this facility. In October 2014, the Company ceased shipbuilding construction operations at the Avondale facility. The consolidation was intended to reduce costs, increase efficiency, and address shipbuilding overcapacity. In connection with and as a result of the decision to wind down shipbuilding at the Avondale facility, the Company began incurring and paying related costs, including, but not limited to, severance expense, relocation expense, and asset write-downs related to the Avondale facilities. The Company believes such costs should be recoverable under existing flexibly-priced contracts or future negotiated contracts in accordance with Federal Acquisition Regulation ("FAR") provisions for the treatment of restructuring and shutdown related costs. The Company has engaged in communications and negotiations with the U.S. Navy since 2010 regarding the amount and recovery of the Company's restructuring and shutdown costs. The Company submitted a revised proposal in March 2015 to address the concerns of the DCAA and to reflect an estimated total cost of $287 million. In July 2015, the Company received a letter from the Supervisor of Shipbuilding requesting that the Company either provide cost estimates to address the Company’s positions related to restructure or file a dispute. The Company responded in July 2015 by addressing the matters raised by the Supervisor of Shipbuilding and recommending the parties continue efforts to seek a mutual resolution. In August 2015, the Company received a letter from the Supervisor of Shipbuilding's Contracting Officer ("Contracting Officer"), with a preliminary determination that the Company’s method of allocating as indirect costs certain employee retention and incentive expenses, which could be up to $57 million, did not comply with cost accounting allocation regulations. The Company responded in September 2015 with its basis supporting its cost allocation positions and sought a determination that supports the Company’s method of cost allocation. Although the Company cannot predict what the Contracting Officer will determine, the Company anticipates a resolution that is substantially in accordance with management's cost recovery expectations. Accordingly, HII has treated these costs as allowable costs in determining the earnings performance on its contracts in process. The Contracting Officer may, however, disagree with the Company’s cost allocation method, and any subsequent inability to recover costs substantially in accordance with management’s cost recovery expectations could result in a material effect on the Company's consolidated financial position, results of operations, or cash flows. As of March 31, 2016, and December 31, 2015, the Company had incurred restructuring and shutdown related costs of $282 million and $281 million, respectively. As of March 31, 2016, and December 31, 2015, $156 million and $169 million, respectively, of these restructuring and shutdown related costs were capitalized in inventoried costs, and the remaining $126 million and $112 million, respectively, of these costs were included under our contracts in accounts receivable and advance payments and billings in excess of revenues. |
Gulfport |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Restructuring and Related Activities [Abstract] | |
| Gulfport | GULFPORT In September 2013, the Company announced the closure of its Gulfport Composite Center of Excellence in Gulfport, Mississippi, part of the Ingalls reportable segment, which it completed in August 2014. In connection with this closure, the Company incurred total costs of $54 million, consisting of $52 million in accelerated depreciation of fixed assets and $2 million in personnel, facility shutdown, and other related costs. In July 2014, the Company received a letter from the Supervisor of Shipbuilding taking exception to the Company's treatment of the Gulfport closure costs. In April 2015, the Company submitted recommended accounting alternatives, which the U.S. Government is currently evaluating. The Company anticipates a resolution that is substantially in accordance with management's cost recovery expectations. An inability, however, to recover Gulfport closure costs could result in a material effect on the Company's consolidated financial position, results of operations, or cash flows. In March 2015, the Company sold the Gulfport Composite Center of Excellence to the Mississippi State Port Authority for $32 million, resulting in a gain on disposition of $9 million, recorded as a reduction to contract costs in accordance with the terms of the Company’s contracts with the U.S. Government. |
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| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity [Text Block] | STOCKHOLDERS' EQUITY Treasury Stock - In October 2015, the Company's board of directors authorized an increase in the Company's stock repurchase program from $600 million to $1,200 million. Repurchases are made from time to time at management's discretion in accordance with applicable federal securities laws. For the three months ended March 31, 2016, the Company settled for cash $2 million of shares repurchased in the prior year. During the first quarter of 2016, the Company also repurchased 366,726 shares at a cost of $48 million, of which approximately $6 million was not yet settled for cash as of March 31, 2016. For the three months ended March 31, 2015, the Company repurchased 210,240 shares at a cost of $29 million. The cost of purchased shares is recorded as treasury stock in the unaudited condensed consolidated statements of financial position. Dividends - The Company declared cash dividends per share of $0.50 and $0.40 for the three months ended March 31, 2016 and 2015, respectively. The Company paid cash dividends totaling $24 million and $19 million for the three months ended March 31, 2016 and 2015, respectively. Accumulated Other Comprehensive Income - Other comprehensive income (loss) refers to gains and losses recorded as an element of stockholders' equity but excluded from net earnings (loss). The accumulated other comprehensive loss as of March 31, 2016 and December 31, 2015, was comprised of unamortized benefit plan costs of $831 million and $843 million, respectively, and other comprehensive income items of $2 million. The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2016 and 2015, were as follows:
1 These accumulated comprehensive income (loss) components are included in the computation of net periodic benefit cost. See Note 16: Employee Pension and Other Postretirement Benefits. The tax benefit associated with amounts reclassified from accumulated other comprehensive income (loss) for each of the three months ended March 31, 2016 and 2015, was $8 million |
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Earnings Per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share | EARNINGS PER SHARE Basic and diluted earnings per common share were calculated as follows:
The Company's calculation of diluted earnings per common share includes the dilutive effects of the assumed exercise of stock options and vesting of restricted stock based on the treasury stock method. As a result of the adoption of ASU 2016-09, the Company excluded excess tax benefits from the assumed proceeds for share repurchases under the treasury stock method beginning in 2016. The effect of adopting ASU 2016-09 on diluted shares outstanding was not material for the three months ended March 31, 2016. Under this method, the Company has excluded from the diluted share amounts presented above the effects of 0.1 million stock options and 0.5 million Restricted Performance Stock Rights ("RPSRs") for the three months ended March 31, 2016. The amounts presented above for the three months ended March 31, 2015, exclude the impact of 0.3 million stock options and 0.8 million RPSRs under the treasury stock method. |
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Segment Information |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Information | SEGMENT INFORMATION The Company is organized into three reportable segments: Ingalls, Newport News, and Other, consistent with how management makes operating decisions and assesses performance. The following table presents segment results for the three months ended March 31, 2016 and 2015:
FAS/CAS Adjustment - The FAS/CAS Adjustment reflects the difference between expenses for pension and other postretirement benefits determined in accordance with GAAP and the expenses for these items included in segment operating income in accordance with U.S. Cost Accounting Standards ("CAS"). The following table presents the Company's assets by segment.
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Inventoried Costs, Net |
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| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventoried Costs, Net | INVENTORIED COSTS, NET Inventoried costs were composed of the following:
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Goodwill and Other Intangible Assets |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| Goodwill and Other Intangible Assets | GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill HII performs impairment tests for goodwill as of November 30 of each year and between annual impairment tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company's reporting units below their carrying value. Accumulated goodwill impairment losses as of each of March 31, 2016, and December 31, 2015, were $2,877 million. The accumulated goodwill impairment losses for Ingalls as of each of March 31, 2016, and December 31, 2015, were $1,568 million. The accumulated goodwill impairment losses for Newport News as of each of March 31, 2016, and December 31, 2015, were $1,187 million. The accumulated goodwill impairment losses for the Other segment as of each of March 31, 2016, and December 31, 2015, were $122 million. Other Intangible Assets The Company's purchased intangible assets are being amortized on a straight-line basis or a method based on the pattern of benefits over their estimated useful lives. Net intangible assets consist principally of amounts pertaining to nuclear-powered aircraft carrier and submarine program intangible assets, with an aggregate weighted-average useful life of 40 years based on the long life cycle of the related programs. Aggregate amortization expense was $5 million and $7 million for the three months ended March 31, 2016 and 2015, respectively. The Company expects amortization expense for purchased intangible assets of approximately $21 million in each of 2016, 2017, and 2018, and $20 million in each of 2019 and 2020. |
Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | INCOME TAXES The Company's earnings are principally domestic and its effective tax rates on earnings from operations for the three months ended March 31, 2016 and 2015, were 23.2% and 34.6%, respectively. The lower effective tax rate for the three months ended March 31, 2016, was primarily attributable to the adoption of ASU 2016-09, which reduced income tax expense by the income tax benefits resulting from stock award settlement activity. For the three months ended March 31, 2016, the Company's effective tax rate differed from the federal statutory rate primarily as a result of the adoption of ASU 2016-09, which reduced income tax expense by the income tax benefits resulting from stock award settlement activity, and the domestic manufacturing deduction. Deferred state income taxes reflect the change in deferred state tax assets and liabilities in the relevant period. These amounts are recorded within operating income, while the current period state income tax expense is charged to contract costs and included in cost of sales and service revenues in segment operating income. |
Debt |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | DEBT Long-term debt consisted of the following:
Credit Facility - On July 13, 2015, the Company entered into a Second Amended and Restated Credit Agreement (the “Amended Credit Facility”) with third-party lenders. The Amended Credit Facility includes a revolving credit facility of $1,250 million, which may be drawn upon during a period of five years from July 13, 2015. The revolving credit facility includes a letter of credit subfacility of $500 million. The revolving credit facility has a variable interest rate on outstanding borrowings based on the London Interbank Offered Rate ("LIBOR") plus a spread based upon the Company's leverage ratio, which may vary between 1.25% and 2.0%. The revolving credit facility also has a commitment fee rate on the unutilized balance based on the Company’s leverage ratio. The commitment fee rate as of March 31, 2016, was 0.25% and may vary between 0.25% and 0.35%. The Amended Credit Facility contains customary affirmative and negative covenants, as well as a financial covenant based on a maximum total leverage ratio. The terms of the Amended Credit Facility also limit the Company's ability to pay dividends. Each of the Company's existing and future material wholly owned domestic subsidiaries, except those that are specifically designated as unrestricted subsidiaries, are and will be guarantors under the Amended Credit Facility. Substantially all tangible and intangible material assets of the Company and domestic subsidiaries are pledged as collateral under the Amended Credit Facility. As of March 31, 2016, approximately $25 million in letters of credit were issued but undrawn, and the remaining $1,225 million of the revolving credit facility was unutilized. The Company had unamortized debt issuance costs associated with the Amended Credit Facility of $9 million and $10 million as of March 31, 2016 and December 31, 2015, respectively. Senior Notes - In December 2014, the Company issued $600 million aggregate principal amount of unregistered 5.000% senior notes due December 15, 2021. In November 2015, the Company issued $600 million aggregate principal amount of unregistered 5.000% senior notes due November 15, 2025, the net proceeds of which were used to repurchase the Company's 7.125% senior notes due March 15, 2021. Interest on the Company's senior notes is payable semi-annually. The terms of the 5.000% senior notes limit the Company’s ability and the ability of certain of its subsidiaries to create liens, enter into sale and leaseback transactions, sell assets, and effect consolidations or mergers. The Company had unamortized debt issuance costs associated with the senior notes of $21 million and $22 million as of March 31, 2016 and December 31, 2015, respectively. Mississippi Economic Development Revenue Bonds - As of each of March 31, 2016, and December 31, 2015, the Company had $84 million outstanding under Industrial Revenue Bonds issued by the Mississippi Business Finance Corporation. These bonds accrue interest at a fixed rate of 7.81% per annum (payable semi-annually) and mature in 2024. Gulf Opportunity Zone Industrial Development Revenue Bonds - As of each of March 31, 2016, and December 31, 2015, the Company had $21 million outstanding under Gulf Opportunity Zone Industrial Development Revenue Bonds issued by the Mississippi Business Finance Corporation. These bonds accrue interest at a fixed rate of 4.55% per annum (payable semi-annually) and mature in 2028. The Company's debt arrangements contain customary affirmative and negative covenants, including a maximum leverage ratio. The Company was in compliance with all debt covenants during the three months ended March 31, 2016. The estimated fair values of the Company's total long-term debt as of March 31, 2016, and December 31, 2015, were $1,383 million and $1,343 million, respectively. The fair values of the Company's long-term debt were calculated based on either recent trades of the Company's debt instruments in inactive markets or yields available on debt with substantially similar risks, terms and maturities, which fall within Level 2 under the fair value hierarchy. The Company does not have any principal payments due on long-term debt within the next five years. |
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Investigations, Claims, and Litigation |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Investigations, Claims, And Litigation [Abstract] | |
| Investigations, Claims, And Litigation | INVESTIGATIONS, CLAIMS, AND LITIGATION The Company is involved in legal proceedings before various courts and administrative agencies, and is periodically subject to government examinations, inquiries and investigations. Pursuant to FASB Accounting Standards Codification 450 Contingencies, the Company has accrued for losses associated with investigations, claims, and litigation when, and to the extent that, loss amounts related to the investigations, claims, and litigation are probable and can be reasonably estimated. The actual losses that might be incurred to resolve such investigations, claims, and litigation may be higher or lower than the amounts accrued. For matters where a material loss is probable or reasonably possible and the amount of loss cannot be reasonably estimated, but the Company is able to reasonably estimate a range of possible losses, the Company will disclose such estimated range in these notes. This estimated range is based on information currently available to the Company and involves elements of judgment and significant uncertainties. Any estimated range of possible loss does not represent the Company's maximum possible loss exposure. For matters as to which the Company is not able to reasonably estimate a possible loss or range of loss, the Company will indicate the reasons why it is unable to estimate the possible loss or range of loss. For matters not specifically described in these notes, the Company does not believe, based on information currently available to it, that it is reasonably possible that the liabilities, if any, arising from such investigations, claims, and litigation will have a material effect on its consolidated financial position, results of operations, or cash flows. The Company has, in certain cases, provided disclosure regarding certain matters for which the Company believes at this time that the likelihood of material loss is remote. False Claims Act Complaint - In January 2011, the U.S. Department of Justice ("DoJ") first informed the Company through Northrop Grumman of a False Claims Act complaint (the "Complaint") that was filed under seal in the U.S. District Court for the District of Columbia. The redacted copy of the Complaint the Company received alleges that, through largely unspecified fraudulent means, the Company and Northrop Grumman obtained federal funds that were restricted by law for the consequences of Hurricane Katrina, and used those funds to cover costs under certain shipbuilding contracts that were unrelated to Katrina and for which Northrop Grumman and the Company were not entitled to recovery under the contracts. The Complaint seeks monetary damages of at least $835 million, plus penalties, attorneys' fees, and other costs of suit. Damages under the False Claims Act may be trebled upon a finding of liability. In July 2012, the District Court entered an order permitting the Company to disclose certain information not included in the redacted copy of the Complaint received by the Company, including the date the Complaint was filed, the decision of the DoJ to decline intervention in the case, and the principal parties involved in the case. The Complaint was filed on June 2, 2010, by relators Gerald M. Fisher and Donald C. Holmes. In December 2011, the DoJ filed a Notice of Election to Decline Intervention in the case. As of August 29, 2012, Gerald M. Fisher was no longer a relator in or party to this case. In February 2013, the U.S. District Court for the District of Columbia granted the defendants' motion to transfer venue, and the case was transferred to the U.S. District Court for the Southern District of Mississippi. The Company filed a motion to dismiss the case and a motion to disqualify relator Holmes, and all other matters were stayed pending resolution of those motions. In June 2015, the District Court granted the Company’s motion to disqualify Holmes as relator, dismissed the case as to Holmes, and entered final judgment in favor of the Company. Holmes appealed the District Court's decision to the U.S. Court of Appeals for the Fifth Circuit, and, in March 2016, the Court of Appeals affirmed the District Court's decision. Based upon a review to date of the information available to the Company, the Company believes that it has substantive defenses to the allegations in the Complaint, that the claims as set forth in the Complaint evidence a fundamental lack of understanding of the terms and conditions in the Company's shipbuilding contracts, including the post-Katrina modifications to those contracts, and the manner in which the parties performed in connection with the contracts, and that the claims as set forth in the Complaint lack merit. The Company, therefore, believes that the claims as set forth in the Complaint will not result in a material effect on its consolidated financial position, results of operations, or cash flows. The Company intends to defend the matter vigorously, but the Company cannot predict what new or revised claims might be asserted or what information might come to light and can, therefore, give no assurances regarding the ultimate outcome. U.S. Government Investigations and Claims - Departments and agencies of the U.S. Government have the authority to investigate various transactions and operations of the Company, and the results of such investigations may lead to administrative, civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or compensatory, treble, or other damages. U.S. Government regulations provide that certain findings against a contractor may also lead to suspension or debarment from future U.S. Government contracts or the loss of export privileges. Any suspension or debarment would have a material effect on the Company because of its reliance on government contracts. In January 2013, the Company disclosed to the DoD, including the U.S. Navy, and the U.S. Department of Homeland Security, including the U.S. Coast Guard, pursuant to the FAR, that it had initiated an internal investigation regarding whether certain employees at Ingalls mischarged time or misstated progress on Navy and Coast Guard contracts. The Company conducted an internal investigation, led by external counsel, and has taken remedial actions, including the termination of employees in instances where the Company believed grounds for termination existed. The Company provided information regarding its investigation to the relevant government agencies. The Company agreed with the U.S. Navy and U.S. Coast Guard that they would initially withhold $24 million in payments on existing contracts pending receipt of additional information from the Company's internal investigation. The U.S. Navy has reduced its portion of the withhold from $18.2 million to $4.7 million, while expressing its view that the gross amount of potential mischarging incurred by the Navy will likely not exceed $3.1 million. The U.S. Coast Guard informed the Company in June 2014 that it was provisionally reducing its withhold from $5.8 million to $3.6 million. Based on the results of its internal investigation, the Company estimates that the maximum amount of U.S. Navy and Coast Guard mischarging is approximately $4 million. The Company is continuing discussions with its U.S. Government customers regarding the potential release of an additional portion of the withheld funds, but the Company cannot predict whether or when these customers will agree to any additional release of the withhold amounts. In June 2015, the DoJ informed the Company that it is investigating the matters disclosed by the Company to the DoD in January 2013. In July 2015, the DoJ requested information from the Company, and the Company is cooperating with the DoJ’s requests and has provided certain information to the DoJ. Depending upon the outcome of this matter, which could result in litigation by the DoJ against the Company, the Company could be subject to civil penalties, damages, and/or suspension or debarment from future U.S. Government contracts, which could have a material effect on its consolidated financial position, results of operations, or cash flows. Given the current stage of the Company’s discussions with the DoJ, the Company is currently unable to estimate the ultimate outcome of this matter. In 2015, the Company received a Civil Investigative Demand from the DoJ relating to an investigation of certain allegedly non-conforming parts the Company purchased from one of its suppliers for use in connection with U.S. Government contracts. The Company has cooperated with the DoJ in connection with its investigation. In 2016, the Company was made aware that it is a defendant in a False Claims Act lawsuit filed under seal in the U.S. District Court for the Middle District of Florida related to the Company’s purchases of the allegedly non-conforming parts from the supplier. Depending upon the outcome of this matter, the Company could be subject to civil penalties, damages, and/or suspension or debarment from future U.S. Government contracts, which could have a material effect on its consolidated financial position, results of operations, or cash flows. The matter remains sealed and given the current posture of the matter, the Company is unable to estimate an amount or range of reasonably possible loss or to express an opinion regarding the ultimate outcome. Asbestos Related Claims - HII and its predecessors-in-interest are defendants in a longstanding series of cases that have been and continue to be filed in various jurisdictions around the country, wherein former and current employees and various third parties allege exposure to asbestos containing materials while on or associated with HII premises or while working on vessels constructed or repaired by HII. The cases allege various injuries, including those associated with pleural plaque disease, asbestosis, cancer, mesothelioma, and other alleged asbestos related conditions. In some cases, several of HII's former executive officers are also named as defendants. In some instances, partial or full insurance coverage is available to the Company for its liability and that of its former executive officers. The average cost per case to resolve cases during the three months ended March 31, 2016 and 2015, was immaterial individually and in the aggregate. The Company’s estimate of asbestos-related liabilities is subject to uncertainty because liabilities are influenced by numerous variables that are inherently difficult to predict. Key variables include the number and type of new claims, the litigation process from jurisdiction to jurisdiction and from case to case, reforms made by state and federal courts, and the passage of state or federal tort reform legislation. Although the Company believes the ultimate resolution of current cases will not have a material effect on its consolidated financial position, results of operations, or cash flows, it cannot predict what new or revised claims or litigation might be asserted or what information might come to light and can, therefore, give no assurances regarding the ultimate outcome of asbestos related litigation. Other Litigation - The Company and its predecessor-in-interest have been in litigation with the Bolivarian Republic of Venezuela (the “Republic”) since 2002 over a contract for the repair, refurbishment, and modernization at Ingalls of two foreign-built frigates. The case proceeded towards arbitration, then appeared to settle favorably, but the settlement was overturned in court and the matter returned to litigation. In March 2014, the Company filed an arbitral statement of claim asserting breaches of the contract and $173 million in damages plus substantial interest and litigation expenses. In July 2014, the Republic filed in the arbitration a statement of defense denying all the Company’s allegations and a counterclaim alleging late redelivery of the frigates, unfinished work and breach of warranty and asserting damages of $61 million plus interest. An arbitration hearing was held in January 2015, and the Company cannot predict when the arbitration panel will render a decision. No assurances can be provided regarding the ultimate outcome of this matter. The Company is party to various claims and legal proceedings that arise in the ordinary course of business. Although the Company believes that the resolution of any of these various claims and legal proceedings will not have a material effect on its consolidated financial position, results of operations, or cash flows, it cannot predict what new or revised claims or litigation might be asserted or what information might come to light and can, therefore, give no assurances regarding the ultimate outcome of these matters. |
Commitments and Contingencies |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Contract Performance Contingencies - Contract profit margins may include estimates of revenues for matters on which the customer and the Company have not reached agreement, such as settlements in the process of negotiation, contract changes, claims, and requests for equitable adjustment for previously unanticipated contract costs. These estimates are based upon management's best assessment of the underlying causal events and circumstances, and are included in determining contract profit margins to the extent of expected recovery based on contractual entitlements and the probability of successful negotiation with the customer. As of March 31, 2016, the recognized amounts related to claims and requests for equitable adjustment were not material individually or in aggregate. Guarantees of Performance Obligations - From time to time in the ordinary course of business, HII may enter into joint ventures, teaming, and other business arrangements to support the Company's products and services. The Company generally strives to limit its exposure under these arrangements to its investment in the arrangement, or to the extent of obligations under the applicable contract. In some cases, however, HII may be required to guarantee performance of the arrangement's obligations and, in such cases, generally obtains cross-indemnification from the other members of the arrangement. In the ordinary course of business, the Company may guarantee obligations of its subsidiaries under certain contracts. Generally, the Company is liable under such an arrangement only if its subsidiary is unable to perform under its contract. Historically, the Company has not incurred any substantial liabilities resulting from these guarantees. As of March 31, 2016, the Company was not aware of any existing event of default that would require it to satisfy any of these guarantees. Environmental Matters -The estimated cost to complete environmental remediation has been accrued where it is probable that the Company will incur such costs in the future to address environmental conditions at currently or formerly owned or leased operating facilities, or at sites where it has been named a Potentially Responsible Party ("PRP") by the Environmental Protection Agency or similarly designated by another environmental agency, and the related costs can be estimated by management. These accruals do not include any litigation costs related to environmental matters, nor do they include amounts recorded as asset retirement obligations. To assess the potential impact on the Company's consolidated financial statements, management estimates the range of reasonably possible remediation costs that could be incurred by the Company, taking into account currently available facts on each site, as well as the current state of technology and prior experience in remediating contaminated sites. These estimates are reviewed periodically and adjusted to reflect changes in facts and technical and legal circumstances. Management estimates that as of March 31, 2016, the probable future cost for environmental remediation was $1 million, which is accrued in other current liabilities. Factors that could result in changes to the Company's estimates include: modification of planned remedial actions, increases or decreases in the estimated time required to remediate, changes to the determination of legally responsible parties, discovery of more extensive contamination than anticipated, changes in laws and regulations affecting remediation requirements, and improvements in remediation technology. Should other PRPs not pay their allocable share of remediation costs, the Company may incur costs exceeding those already estimated and accrued. In addition, there are certain potential remediation sites where the costs of remediation cannot be reasonably estimated. Although management cannot predict whether new information gained as projects progress will materially affect the estimated liability accrued, management does not believe that future remediation expenditures will have a material effect on the Company's consolidated financial position, results of operations, or cash flows. Financial Arrangements - In the ordinary course of business, HII uses standby letters of credit issued by commercial banks and surety bonds issued by insurance companies principally to support the Company's self-insured workers' compensation plans. As of March 31, 2016, the Company had $25 million in standby letters of credit issued but undrawn, as indicated in Note 12: Debt, and $356 million of surety bonds outstanding. U.S. Government Claims - From time to time, the U.S. Government advises the Company of claims and penalties concerning certain potential disallowed costs. When such findings are presented, the Company and U.S. Government representatives engage in discussions to enable HII to evaluate the merits of these claims, as well as to assess the amounts being claimed. The Company does not believe that the outcome of any such matters will have a material effect on its consolidated financial position, results of operations, or cash flows. |
Impacts From Hurricanes |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Extraordinary and Unusual Items [Abstract] | |
| Impacts From Hurricanes | IMPACTS FROM HURRICANES In August 2005, the Company's Ingalls operations were significantly impacted by Hurricane Katrina, and the Company's shipyards in Louisiana and Mississippi sustained significant windstorm damage from the hurricane. As a result of the storm, the Company incurred costs to replace or repair destroyed or damaged assets, suffered losses under its contracts, and incurred substantial costs to clean up and recover its operations. At the time of the storm, the Company had an insurance program that provided coverage for, among other things, property damage, business interruption impact on net profitability, and costs associated with clean-up and recovery. The Company recovered $677.5 million of its Hurricane Katrina claim from participating program insurers, which included $180 million from Factory Mutual Insurance Company (“FM Global”) in settlement of litigation arising from a disagreement concerning the coverage of certain losses related to Hurricane Katrina. In January 2011, the Company, through a predecessor-in-interest, filed suit in Superior Court in California against Aon Risk Insurance Services West, Inc. ("Aon"), which acted as broker to the predecessor-in-interest in connection with the policy with FM Global, seeking damages for breach of contract, professional negligence and negligent misrepresentation, as well as declaratory relief. Those included damages unrecovered from FM Global plus costs, legal fees, and expenses incurred in the lawsuit against FM Global, as well as interest. In January 2014, the Company amended its complaint to allege fraud and seek punitive damages. In May 2015, the Company and Aon entered into a settlement agreement, pursuant to which Aon made a cash payment of $150 million to the Company and the Company released its claims against Aon. In the second quarter of 2015, the $150 million settlement was recorded as a gain in operating income and the Company recorded a credit to the U.S. Government, which resulted in a reduction in operating income of $14 million. Should the U.S. Government disagree with the Company’s allocation of proceeds, the Company may be required to allocate additional amounts to the U.S. Government. The $150 million gain and allowable cost credit resulted in a net favorable impact to operating income for the second quarter of 2015 of $136 million. |
Employee Pension And Other Postretirement Benefits |
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| Compensation and Retirement Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Employee Pension and Other Postretirement Benefits | EMPLOYEE PENSION AND OTHER POSTRETIREMENT BENEFITS The Company provides defined benefit pension plans and postretirement benefit plans, and defined contribution pension plans to eligible employees. The costs of the Company's defined benefit pension plans and other postretirement plans for the three months ended March 31, 2016 and 2015, were as follows:
The Company made the following contributions to its pension and other postretirement plans for the three months ended March 31, 2016 and 2015:
For the year ending December 31, 2016, the Company expects cash contributions to its qualified defined benefit pension plans to be $167 million, all of which will be discretionary. |
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Stock Compensation Plans |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Compensation Plans | STOCK COMPENSATION PLANS The Company elected to early adopt ASU 2016-09, as of January 1, 2016. Accordingly, income tax benefits of $18 million resulting from stock award settlement activity during the three months ended March 31, 2016, were recognized as income tax benefits in the unaudited condensed consolidated statement of operations and comprehensive income. These tax benefits were reported as operating activities in the unaudited condensed consolidated statements of cash flows. Prior year tax benefits for the three months ended March 31, 2015, of $13 million were retrospectively adjusted in the unaudited condensed consolidated statements of cash flows to conform to the current year presentation. In accordance with the new standard, the Company will continue to present all cash payments made to taxing authorities on behalf of the employees for withheld shares as financing activities in the unaudited condensed consolidated statements of cash flows. The Company has maintained its standing forfeiture accounting policy and continues to estimate the number of awards expected to vest in the future. During the three months ended March 31, 2016 and 2015, the Company issued new stock awards as follows: Restricted Performance Stock Rights - For the three months ended March 31, 2016, the Company granted approximately 0.2 million RPSRs at a weighted average share price of $132.81. These rights are subject to cliff vesting on December 31, 2018. For the three months ended March 31, 2015, the Company granted approximately 0.1 million RPSRs at a weighted average share price of $142.41. These rights are subject to cliff vesting on December 31, 2017. The RPSRs are subject to the achievement of performance-based targets at the end of the respective vesting periods. Based upon the Company's results measured against such targets, between 0% and 200% of the original stated grants are expected to ultimately vest. For each of the three months ended March 31, 2016 and 2015, 0.8 million stock awards vested, of which approximately 0.3 million were transferred to the Company from employees in satisfaction of minimum tax withholding obligations. The following table summarizes the status of the Company's outstanding stock awards as of March 31, 2016:
Stock Options - The following table summarizes the status of the Company's stock option awards as of March 31, 2016:
Compensation Expense The Company recorded stock-based compensation for the value of awards granted to Company employees and non-employee members of the board of directors for the three months ended March 31, 2016 and 2015, of $5 million and $4 million, respectively. The Company recognized tax benefits for stock-based compensation in the unaudited condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2016 and 2015, of $20 million and $1 million, respectively. Unrecognized Compensation Expense As of March 31, 2016, the Company had less than $1 million of unrecognized compensation expense associated with Restricted Stock Rights ("RSRs") granted in 2014, which will be recognized over a weighted average period of 1.2 years, and $40 million of unrecognized expense associated with RPSRs granted in 2016, 2015, and 2014, which will be recognized over a weighted average period of 1.6 years. |
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Basis of Presentation (Policies) |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Principles of Consolidation | Principles of Consolidation - The unaudited condensed consolidated financial statements of HII and its subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the instructions to Form 10-Q promulgated by the Securities and Exchange Commission ("SEC"). All intercompany transactions and balances are eliminated in consolidation. For classification of current assets and liabilities related to its long-term production contracts, the Company uses the duration of these contracts as its operating cycle, which is generally longer than one year. Additionally, certain prior year amounts have been reclassified to conform to the current year presentation. See Note 3: Accounting Standards Updates. These unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature considered necessary by management for a fair presentation of the unaudited condensed consolidated financial position, results of operations, and cash flows and should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. |
| Fiscal Period Policy | The quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is management's long-standing practice to establish interim closing dates using a "fiscal" calendar, which requires the businesses to close their books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. The effects of this practice only exist for interim periods within a reporting year. |
| Accounting Estimates | Accounting Estimates - The preparation of the Company's unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information, and actual results could differ materially from those estimates. The Bipartisan Budget Act of 2015 established budget top lines and provided sequestration relief for 2016 and 2017. Sequestration remains in effect for 2018 through 2021 and could result in significant decreases in DoD spending that could negatively impact the Company's revenues and its estimated recovery of goodwill and other long-lived assets. |
| Revenue Recognition Policy | Revenue Recognition - The majority of the Company's business is derived from long-term contracts for the construction of naval vessels, production of goods, and provision of services to the federal government, principally the U.S. Navy. In accounting for these contracts, the Company extensively utilizes the cost-to-cost measure of the percentage-of-completion method of accounting, principally based upon total costs incurred. Under this method, sales, including estimated earned fees or profits, are recorded as costs are incurred, generally based on the percentage that total costs incurred bear to total estimated costs at completion. Certain contracts contain provisions for price redetermination or for cost and/or performance incentives. Such redetermined amounts or incentives are included in sales when the amounts can reasonably be determined and estimated. Amounts representing contract change orders, claims, requests for equitable adjustment, or limitations in funding are included in sales only when they can be reliably estimated and realization is probable. The Company estimates profit as the difference between total estimated revenues and total estimated cost of a contract and recognizes that profit over the life of the contract based on progress toward completion. If the Company estimates a contract will result in a loss, the full amount of the estimated loss is recognized against income in the period in which the loss is identified. The Company classifies contract revenues as product sales or service revenues depending upon the predominant attributes of the relevant underlying contracts. The Company recognizes changes in estimates of contract sales, costs, and profits using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes on current and prior periods. Accordingly, the effect of the changes on future periods of contract performance is recognized as if the revised estimate had been the original estimate. For the three months ended March 31, 2016 and 2015, net cumulative catch-up adjustments increased operating income by $69 million and $55 million, respectively, and increased diluted earnings per share by $0.95 and $0.73, respectively. Cumulative catch-up adjustments for the three months ended March 31, 2016, included a $22 million favorable adjustment on a contract at the Ingalls segment, which increased diluted earnings per share by $0.30. No individual adjustment was material to the Company's condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2015. The Company also enters into other types of contracts, including certain services or commercial arrangements. For such contracts not associated with the design, development, manufacture, or modification of complex equipment, revenues are recognized upon delivery or as services are rendered once persuasive evidence of an arrangement exists, the price is fixed or determinable, and collectibility is reasonably assured. Costs related to these contracts are expensed as incurred. |
| Fair Value of Financial Instruments | Fair Value of Financial Instruments - Except for the Company's long-term debt, the carrying amounts of the Company's financial instruments recorded at historical cost approximate fair value due to the short-term nature of the instruments and low credit risk associated with the respective counterparties. The Company maintains multiple grantor trusts established to fund certain non-qualified pension plans. These trusts consist primarily of available-for-sale investments in marketable securities. The assets are held at fair value, a significant majority of investments held in the trusts are valued within Level 1 of the fair value hierarchy, and no material amounts are valued within Level 3 of the fair value hierarchy. These trusts were valued at $76 million and $74 million as of March 31, 2016, and December 31, 2015, respectively, and are presented within miscellaneous other assets within the unaudited condensed consolidated statements of financial position. |
| Transactions With Former Parent Policy | Related Party Transactions - On March 29, 2011, HII entered into a Separation and Distribution Agreement (the "Separation Agreement") with its former parent company, Northrop Grumman Corporation ("Northrop Grumman"), and Northrop Grumman's subsidiaries (Northrop Grumman Shipbuilding, Inc. and Northrop Grumman Systems Corporation), pursuant to which HII was legally and structurally separated from Northrop Grumman. The spin-off from Northrop Grumman was a transaction under common control. As a result, no change in the historical basis of HII's assets or liabilities was recorded as part of the spin-off. In connection with the spin-off, HII entered into a Tax Matters Agreement with Northrop Grumman related to taxes prior to the spin-off. As of each of March 31, 2016 and December 31, 2015, the Company was due $31 million from Northrop Grumman under the Tax Matters Agreement. As of each of March 31, 2016 and December 31, 2015, the Company had $84 million outstanding under Industrial Revenue Bonds issued by the Mississippi Business Finance Corporation. Prior to the spin-off, repayment of principal and interest was guaranteed by Northrop Grumman Systems Corporation. The guaranty remains in effect, and the Company has agreed to indemnify Northrop Grumman Systems Corporation for any losses related to the guaranty. |
Stockholders' Equity (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accumulated Other Comprehensive Income (Loss) | The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2016 and 2015, were as follows:
1 These accumulated comprehensive income (loss) components are included in the computation of net periodic benefit cost. See Note 16: Employee Pension and Other Postretirement Benefits. The tax benefit associated with amounts reclassified from accumulated other comprehensive income (loss) for each of the three months ended March 31, 2016 and 2015, was $8 million. |
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Calculation of Basic and Diluted Earnings Per Share | Basic and diluted earnings per common share were calculated as follows:
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Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment operating results | The following table presents segment results for the three months ended March 31, 2016 and 2015:
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| Segment assets | The following table presents the Company's assets by segment.
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Inventoried Costs, Net (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventoried costs, net | Inventoried costs were composed of the following:
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Debt (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Long-term Debt | Long-term debt consisted of the following:
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Employee Pension and Other Postretirement Benefits (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Net Benefit Costs | The costs of the Company's defined benefit pension plans and other postretirement plans for the three months ended March 31, 2016 and 2015, were as follows:
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| Schedule of Defined Benefit Plans Disclosures, Cash Contributions | The Company made the following contributions to its pension and other postretirement plans for the three months ended March 31, 2016 and 2015:
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Stock Compensation Plans (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Status of Stock Awards | The following table summarizes the status of the Company's outstanding stock awards as of March 31, 2016:
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| Schedule of Status of Stock Option Awards | The following table summarizes the status of the Company's stock option awards as of March 31, 2016:
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Description of Business (Narrative) (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2016
segments
| |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Number of operating segments | 3 |
Change in Accounting Estimate (Narrative) (Details) - Contracts Accounted for under Percentage of Completion - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Change in Accounting Estimate | ||
| Increase (decrease) in operating income due to net cumulative catch-up adjustments | $ 69 | $ 55 |
| Increase (decrease) in diluted earnings per share due to net cumulative catch-up adjustments | $ 0.95 | $ 0.73 |
| Ingalls contract [Member] | ||
| Change in Accounting Estimate | ||
| Increase (decrease) in operating income due to net cumulative catch-up adjustments | $ 22 | |
| Increase (decrease) in diluted earnings per share due to net cumulative catch-up adjustments | $ 0.30 | |
Basis of Presentation (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Assets held in rabbi trusts | $ 76 | $ 74 |
| Related Party Transaction [Line Items] | ||
| Long-term Debt | 1,275 | 1,273 |
| Mississippi Economic Development Revenue Bonds Due May 1, 2024, 7.81% | Bonds | ||
| Related Party Transaction [Line Items] | ||
| Long-term Debt | 84 | 84 |
| Tax Matter Agreement [Member] | Former Parent [Member] | ||
| Related Party Transaction [Line Items] | ||
| Related Party Tax Expense, Due from Affiliates, Deferred | $ 31 | $ 31 |
Avondale (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
| Restructuring Cost and Reserve | ||
| Amount in Question by DCAA | $ 57 | |
| Facility closing | Avondale Wind Down | ||
| Restructuring Cost and Reserve | ||
| Estimated total restructuring costs | 287 | |
| Total costs incurred relating to restructuring and shutdown | 282 | $ 281 |
| Restructuring costs capitalized in inventory | 156 | 169 |
| Accounts receivable and advance payments and billings in excess of revenues related to restructuring costs | $ 126 | $ 112 |
Gulfport (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Restructuring Cost and Reserve | ||
| Proceeds from disposition of assets | $ 32 | |
| Gain on Disposition | $ 9 | |
| Facility closing | Gulfport | ||
| Restructuring Cost and Reserve | ||
| Total costs incurred relating to restructuring and shutdown | $ 54 | |
| Accelerated depreciation cost | 52 | |
| Other restructuring cost | $ 2 | |
Stockholders' Equity (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | ||||
|---|---|---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Dec. 31, 2014 |
|
| Stockholders' Equity [Line Items] | |||||
| Amount authorized for stock repurchase program | $ 1,200 | $ 600 | |||
| Treasury Stock Value Previously Acquired Settled for Cash | $ 2 | ||||
| Repurchased shares of treasury stock | 366,726 | 210,240 | |||
| Treasury stock activity | $ 48 | $ 29 | |||
| Treasury Stock, Value Acquired, Not Yet Settled for Cash | $ 6 | ||||
| Dividends declared per share | $ 0.50 | $ 0.40 | |||
| Dividends paid | $ 24 | $ 19 | |||
| Accumulated other comprehensive income (loss) | (833) | (849) | $ (845) | $ (862) | |
| Benefit Plans | |||||
| Stockholders' Equity [Line Items] | |||||
| Accumulated other comprehensive income (loss) | (831) | (850) | (843) | (864) | |
| Other | |||||
| Stockholders' Equity [Line Items] | |||||
| Accumulated other comprehensive income (loss) | $ (2) | $ 1 | $ (2) | $ 2 | |
Basic and Diluted Earnings Per Share (Table) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Earnings Per Share, Basic and Diluted [Abstract] | ||
| Net earnings (loss) | $ 136 | $ 87 |
| Weighted-average common shares outstanding (in shares) | 47.0 | 48.4 |
| Net dilutive effect of stock options and awards (in shares) | 0.4 | 0.3 |
| Dilutive weighted-average common shares outstanding (in shares) | 47.4 | 48.7 |
| Earnings (loss) per share - basic (in dollars per share) | $ 2.89 | $ 1.80 |
| Earnings (loss) per share - diluted (in dollars per share) | $ 2.87 | $ 1.79 |
Earnings Per Share (Narrative) (Details) - shares shares in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Stock options | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
| Number of shares from stock awards excluded from computation of earnings per share | 0.1 | 0.3 |
| Restricted performance stock rights | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
| Number of shares from stock awards excluded from computation of earnings per share | 0.5 | 0.8 |
Segment Information (Narrative) (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2016
segments
| |
| Segment Reporting [Abstract] | |
| Number of reportable segments | 3 |
Segment Operating Results (Table) (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Sales and Service Revenues | ||
| Sales and service revenue | $ 1,763 | $ 1,570 |
| Operating Income (Loss) | ||
| Operating income (loss) | 198 | 156 |
| Operating Segments | ||
| Operating Income (Loss) | ||
| Operating income (loss) | 166 | 128 |
| Ingalls | ||
| Sales and Service Revenues | ||
| Sales and service revenue | 586 | 469 |
| Operating Income (Loss) | ||
| Operating income (loss) | 82 | 45 |
| Newport News | ||
| Sales and Service Revenues | ||
| Sales and service revenue | 1,153 | 1,061 |
| Operating Income (Loss) | ||
| Operating income (loss) | 89 | 93 |
| Other segment | ||
| Sales and Service Revenues | ||
| Sales and service revenue | 24 | 40 |
| Operating Income (Loss) | ||
| Operating income (loss) | (5) | (10) |
| Non-segment factors affecting operating income (loss) | ||
| Non-segment factors affecting operating income (loss) | ||
| FAS/CAS Adjustment | 35 | 27 |
| Deferred state income taxes | $ (3) | $ 1 |
Segment Assets (Table) (Details) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Segment Reporting Information | ||
| Assets | $ 5,896 | $ 6,024 |
| Ingalls | ||
| Segment Reporting Information | ||
| Assets | 1,302 | 1,324 |
| Newport News | ||
| Segment Reporting Information | ||
| Assets | 3,306 | 3,286 |
| Other segment | ||
| Segment Reporting Information | ||
| Assets | 75 | 78 |
| Corporate | ||
| Segment Reporting Information | ||
| Assets | $ 1,213 | $ 1,336 |
Inventoried Costs, Net (Table) (Details) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Production costs of contracts in process | $ 189 | $ 193 |
| Raw material inventory | 94 | 92 |
| Total inventoried costs, net | $ 283 | $ 285 |
Goodwill (Narrative) (Details) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Goodwill | ||
| Accumulated goodwill impairment losses | $ 2,877 | $ 2,877 |
| Ingalls | ||
| Goodwill | ||
| Accumulated goodwill impairment losses | 1,568 | 1,568 |
| Newport News | ||
| Goodwill | ||
| Accumulated goodwill impairment losses | 1,187 | 1,187 |
| Other segment | ||
| Goodwill | ||
| Accumulated goodwill impairment losses | $ 122 | $ 122 |
Other Intangible Assets (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 40 years | |
| Amortization of purchased intangibles | $ 5 | $ 7 |
| Expected amortization for purchased intangible assets: | ||
| Expected amortization, 2016 | 21 | |
| Expected amortization, 2017 | 21 | |
| Expected amortization, 2018 | 21 | |
| Expected amortization, 2019 | 20 | |
| Expected amortization, 2020 | $ 20 | |
Income Taxes (Narrative) (Details) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Income Tax Disclosure [Abstract] | ||
| Effective income tax rate | 23.20% | 34.60% |
Schedule of Long-term debt (Table) (Details) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Long-term debt | $ 1,275 | $ 1,273 |
| Less unamortized debt issuance costs | $ (30) | (32) |
| Senior Notes | ||
| Debt Instrument [Line Items] | ||
| Debt Instrument, Interest Rate, Stated Percentage | 5.00% | |
| Less unamortized debt issuance costs | $ 21 | $ 22 |
| Senior Notes | Senior notes due December 15, 2021, 5.000% | ||
| Debt Instrument [Line Items] | ||
| Debt Instrument, Interest Rate, Stated Percentage | 5.00% | 5.00% |
| Long-term debt | $ 600 | $ 600 |
| Senior Notes | Senior Notes Due November 15, 2025, 5.000% | ||
| Debt Instrument [Line Items] | ||
| Debt Instrument, Interest Rate, Stated Percentage | 5.00% | 5.00% |
| Long-term debt | $ 600 | $ 600 |
| Bonds | Mississippi Economic Development Revenue Bonds Due May 1, 2024, 7.81% | ||
| Debt Instrument [Line Items] | ||
| Debt Instrument, Interest Rate, Stated Percentage | 7.81% | 7.81% |
| Long-term debt | $ 84 | $ 84 |
| Bonds | Gulf Opportunity Zone Industrial Development Revenue Bonds Due December 1, 2028, 4.55% | ||
| Debt Instrument [Line Items] | ||
| Debt Instrument, Interest Rate, Stated Percentage | 4.55% | 4.55% |
| Long-term debt | $ 21 | $ 21 |
Credit Facility (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
| Credit Facility | ||
| Unamortized Debt Issuance Expense | $ (30) | $ (32) |
| HII Credit Facility | Revolving Credit Facility | ||
| Credit Facility | ||
| Credit facility revolver | 1,250 | |
| Remaining unutilized amount | 1,225 | |
| Unamortized Debt Issuance Expense | $ 9 | $ 10 |
| Debt Instrument, Contractual Term | 5 years | |
| Debt Instrument, Description of Variable Rate Basis | LIBOR | |
| HII Credit Facility | Revolving Credit Facility | London Interbank Offered Rate (LIBOR) [Member] | Minimum | ||
| Credit Facility | ||
| Spread on variable rate | 1.25% | |
| HII Credit Facility | Revolving Credit Facility | London Interbank Offered Rate (LIBOR) [Member] | Maximum | ||
| Credit Facility | ||
| Spread on variable rate | 2.00% | |
| HII Credit Facility | Revolving Credit Facility | Base Rate [Member] | ||
| Credit Facility | ||
| Commitment fee, based on unused capacity | 0.25% | |
| HII Credit Facility | Revolving Credit Facility | Base Rate [Member] | Minimum | ||
| Credit Facility | ||
| Spread on variable rate | 0.25% | |
| HII Credit Facility | Revolving Credit Facility | Base Rate [Member] | Maximum | ||
| Credit Facility | ||
| Spread on variable rate | 0.35% | |
| HII Credit Facility | Letter of Credit | ||
| Credit Facility | ||
| Credit facility revolver | $ 500 | |
| HII Credit Facility | Standby Letters of Credit | ||
| Credit Facility | ||
| Letters of credit issued but undrawn | $ 25 |
Debt Senior Note (Narrative) (Details) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Unamortized Debt Issuance Expense | $ (30) | $ (32) |
| Senior Notes | ||
| Debt Instrument [Line Items] | ||
| Debt Instrument, Interest Rate, Stated Percentage | 5.00% | |
| Unamortized Debt Issuance Expense | $ 21 | $ 22 |
| Senior Notes | Senior Notes Due November 15, 2025, 5.000% | ||
| Debt Instrument [Line Items] | ||
| Debt instrument, face amount | $ 600 | |
| Debt Instrument, Interest Rate, Stated Percentage | 5.00% | 5.00% |
| Senior Notes | Senior Notes Due March 15, 2021, 7.125% | ||
| Debt Instrument [Line Items] | ||
| Debt Instrument, Interest Rate, Stated Percentage | 7.125% | |
| Senior Notes | Senior notes due December 15, 2021, 5.000% | ||
| Debt Instrument [Line Items] | ||
| Debt instrument, face amount | $ 600 | |
| Debt Instrument, Interest Rate, Stated Percentage | 5.00% | 5.00% |
Debt Revenue Bonds (Narrative) (Details) - Bonds - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Mississippi Economic Development Revenue Bonds Due May 1, 2024, 7.81% | ||
| Debt Instrument [Line Items] | ||
| Debt instrument, face amount | $ 84 | $ 84 |
| Debt Instrument, Interest Rate, Stated Percentage | 7.81% | 7.81% |
| Gulf Opportunity Zone Industrial Development Revenue Bonds Due December 1, 2028, 4.55% | ||
| Debt Instrument [Line Items] | ||
| Debt instrument, face amount | $ 21 | $ 21 |
| Debt Instrument, Interest Rate, Stated Percentage | 4.55% | 4.55% |
Fair Value of Long Term Debt (Narrative) (Details) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Long-term Debt, Other Disclosures [Abstract] | ||
| Fair value of long term debt | $ 1,383 | $ 1,343 |
Investigations, Claims, and Litigation (Narrative) (Details) $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 31, 2016
USD ($)
| |
| False Claims Act | Minimum | |
| Loss Contingencies | |
| Monetary damages sought | $ 835.0 |
| Bolivarian Republic of Venezuela | |
| Loss Contingencies | |
| Monetary damages sought | 61.0 |
| Arbitral statement claim | 173.0 |
| Ingalls Timecharging Investigation | |
| Loss Contingencies | |
| Contract receivable retainage initially withheld | 24.0 |
| Estimate of misallocated costs and overstated progress | 4.0 |
| United States Navy | Ingalls Timecharging Investigation | |
| Loss Contingencies | |
| Contract receivable retainage initially withheld | 18.2 |
| Contract receivable retainage | 4.7 |
| Customer estimate of misallocated costs and overstated progress | 3.1 |
| United States Coast Guard | Ingalls Timecharging Investigation | |
| Loss Contingencies | |
| Contract receivable retainage initially withheld | 5.8 |
| Contract receivable retainage | $ 3.6 |
Commitments and Contingencies (Narrative) (Details) $ in Millions |
Mar. 31, 2016
USD ($)
|
|---|---|
| Commitments and Contingencies | |
| Probable future cost for envionmental remediation | $ 1 |
| Surety Bonds Outstanding | |
| Commitments and Contingencies | |
| Surety bonds outstanding | 356 |
| HII Credit Facility | Letters of Credit | |
| Commitments and Contingencies | |
| Letters of credit issued but undrawn | $ 25 |
Impacts from Hurricanes (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
| Business Interruption Loss | ||
| Insurance recoveries | $ 677.5 | |
| Gain (Loss) Related to Litigation Settlement | $ 150.0 | |
| Insurance Settlement Related Matters, Gain (Loss) Related to Contracts | (14.0) | |
| Insurance Settlement Related Matters Effect on Operating Income | 136.0 | |
| Factory Mutual Insurance Company | ||
| Business Interruption Loss | ||
| Insurance recoveries | $ 180.0 |
Employee Pension and Other Postretirement Benefits Net Benefit Costs (Table) (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Pension Benefits | ||
| Defined Benefit Plan Disclosure | ||
| Service cost | $ 33 | $ 37 |
| Interest cost | 65 | 61 |
| Expected return on plan assets | (87) | (88) |
| Amortization of prior service cost (credit) | 5 | 5 |
| Amortization of net actuarial loss (gain) | 21 | 21 |
| Net periodic benefit cost | 37 | 36 |
| Other Benefits | ||
| Defined Benefit Plan Disclosure | ||
| Service cost | 3 | 3 |
| Interest cost | 6 | 7 |
| Amortization of prior service cost (credit) | (5) | (5) |
| Amortization of net actuarial loss (gain) | (1) | 1 |
| Net periodic benefit cost | $ 3 | $ 6 |
Employee Pension and Other Postretirement Benefits Cash Contributions (Table) (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Defined Benefit Plan Disclosure | ||
| Other benefit plans | $ 8 | $ 8 |
| Total contributions | 62 | 11 |
| Discretionary Contribution | Qualified | ||
| Defined Benefit Plan Disclosure | ||
| Pension contributions | 53 | 2 |
| Discretionary Contribution | Non-qualified | ||
| Defined Benefit Plan Disclosure | ||
| Pension contributions | $ 1 | $ 1 |
Employee Pension and Other Postretirement Benefits Employee Pension and Other Postretirement Benefits (Narrative) (Details) $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 31, 2016
USD ($)
| |
| Compensation and Retirement Disclosure [Abstract] | |
| Defined Benefit Plans, Estimated Total Employer Contributions in Current Fiscal Year | $ 167 |
Stock Compensation Plans (Narrative) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Share-based Compensation Arrangement by Share-based Payment Award | ||
| Net earnings (loss) | $ 136 | $ 87 |
| Net cash provided by (used in) operating activities | 54 | 10 |
| Net cash provided by (used in) financing activities | $ (118) | $ (102) |
| Stock awards | ||
| Stock rights, weighted-average grant date fair value | $ 110.24 | |
| Stock awards, vested in the period | 0.8 | 0.8 |
| Stock awards, transferred for employee withholding taxes | 0.3 | 0.3 |
| Restricted performance stock rights | ||
| Stock awards | ||
| Stock rights, granted | 0.2 | 0.1 |
| Stock rights, weighted-average grant date fair value | $ 132.81 | $ 142.41 |
| Restricted performance stock rights | Minimum | ||
| Stock awards | ||
| Restricted performance stock rights ultimate vesting percentage | 0.00% | |
| Restricted performance stock rights | Maximum | ||
| Stock awards | ||
| Restricted performance stock rights ultimate vesting percentage | 200.00% | |
| New Accounting Pronouncement, Early Adoption, Effect | ||
| Share-based Compensation Arrangement by Share-based Payment Award | ||
| Net earnings (loss) | $ 18 | |
| Net cash provided by (used in) operating activities | $ 13 | |
| Net cash provided by (used in) financing activities | $ 13 | |
Schedule of Status of Stock Awards (Table) (Details) shares in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2016
$ / shares
shares
| |
| Stock awards | |
| Stock awards, outstanding | shares | 603 |
| Stock awards, weighted-average grant date fair value | $ / shares | $ 110.24 |
| Stock awards, weighted-average remaining contractual term | 1 year 5 months |
Schedule of Status of Stock Options Awards (Table) (Details) $ / shares in Units, shares in Thousands, $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 31, 2016
USD ($)
$ / shares
shares
| |
| Stock Options [Abstract] | |
| Shares under option | shares | 262 |
| Stock options, weighted-average exercise price | $ / shares | $ 37.73 |
| Stock options, weighted-average remaining contractual term | 11 months |
| Stock options, aggregate intrinsic value | $ | $ 26 |
Stock Compensation Plans Compensation and Unrecognized Compensation Expense (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Compensation Expense [Abstract] | ||
| Allocated Share-based Compensation Expense | $ 5 | $ 4 |
| Tax benefits for stock-based compensation | 20 | $ 1 |
| Restricted Stock [Member] | ||
| Unrecognized Compensation Expense [Abstract] | ||
| Unrecognized compensation expense | $ 1 | |
| Unrecognized compensation expense, period for recognition | 1 year 2 months | |
| Restricted performance stock rights | ||
| Unrecognized Compensation Expense [Abstract] | ||
| Unrecognized compensation expense | $ 40 | |
| Unrecognized compensation expense, period for recognition | 1 year 7 months | |
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