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18 Feb 16. Huntington Ingalls Industries Reports Fourth Quarter and Full Year 2015 Results. Huntington Ingalls Industries (HII) reported fourth quarter 2015 revenues of $1.9bn, down 1.1 percent from the same period last year. Total operating income in the quarter of $144 m and total operating margin of 7.6 percent were in line with total operating income and margin in fourth quarter 2014.
Diluted earnings per share in the quarter was $1.06, compared to $1.05 in the same period last year. Diluted earnings per share in the fourth quarters of 2015 and 2014 included the impacts of non-cash goodwill impairment charges, one-time expenses related to the early extinguishment of debt and favorable FAS/CAS Adjustments. Diluted earnings per share in fourth quarter 2015 also included the impact of a non-cash intangible asset impairment charge. Excluding these items, diluted earnings per share in the quarter was $1.95, compared to $2.19 in the same period last year.
For the full year, revenues of $7.0bn increased 0.9 percent over 2014. Total operating income was $769m and total operating margin was 11.0 percent for the full year, compared to $655 m and 9.4 percent, respectively, in 2014.
Diluted earnings per share for the year was $8.36, compared to $6.86 in 2014. Diluted earnings per share in 2015 and 2014 included the impacts of non-cash goodwill impairment charges, one-time expenses related to the early extinguishment of debt and favorable FAS/CAS Adjustments. Diluted earnings per share in 2015 also included the impacts of a favorable insurance litigation settlement and a non-cash intangible asset impairment charge. Excluding these items, diluted earnings per share in 2015 was $7.33, compared to $7.14 in 2014.
New business awards for 2015 were approximately $7.6bn, of which $0.7 bn was awarded in the fourth quarter, bringing total backlog to $22.0bn as of Dec. 31, 2015.
“2015 was a pivotal year for HII as we achieved the 9-plus percent segment operating margin goal we established when we stood up the company back in 2011,” said Mike Petters, HII’s President and CEO. “I am very pleased with the operational improvements accomplished by the team since we spun and the resulting financial performance.”
Fourth Quarter 2015 Significant Events
Goodwill Impairment Charge
During fourth quarter 2015, the company recorded a non-cash goodwill impairment charge of $16m related to its Other segment. The impairment was a result of the continued deterioration of market fundamentals in the oil and gas services industry, driven by further declines in oil prices, numerous industry-wide project deferrals and customers’ capital spending cuts.
Purchased Intangible Assets Impairment Charge
During fourth quarter 2015, the company recorded a non-cash intangible asset impairment charge of $27 m related to its Other segment. The purchased intangible assets consisted primarily of customer relationships and, to a lesser extent, trade names and developed technology. Considering current oil and gas market conditions and expectations, the company performed an impairment test in December and determined that the carrying value of the oil and gas asset group was greater than the sum of the asset group undiscounted pre-tax cash flows generated over the useful life of the primary asset, resulting in the impairment.
Results of Operations
Segment Operating Results
Ingalls revenues for the fourth quarter decreased $28m, or 4.6 percent, from the same period in 2014 due to lower revenues in the Legend-class National Security Cutter (NSC) program and Amphibious Assault Ships, partially offset by higher revenues in Surface Combatants. Lower NSC program revenues were primarily due to the deliveries of NSC-5 USCGC J