8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (date of earliest event reported)

August 11, 2011

Huntington Ingalls Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware	1-34910	90-0607005
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
4101 Washington Avenue, Newport News, VA		23607
(Address of principal executive offices)		(Zip Code)

(757) 380-2000

Registrant’s telephone number, including area code

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On August 11, 2011, Huntington Ingalls Industries, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2011. A copy of the press release is furnished as Exhibit 99.1 hereto. Also furnished as Exhibit 99.2 is the Corporation’s earnings presentation for its second quarter earnings conference call.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	Press Release dated August 11, 2011.
99.2	Earnings Presentation dated August 11, 2011.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	HUNTINGTON INGALLS INDUSTRIES, INC.
Date: August 11, 2011	By:	/s/ Barbara A. Niland
		Barbara A. Niland
		Corporate Vice President, Business Management and Chief Financial Officer

EX-99.1

Exhibit 99.1

	NEWS RELEASE
	Contacts: Jerri Fuller Dickseski (Media) jerri.dickseski@hii-co.com 757-380-2341 Andy Green (Investors) andy.green@hii-co.com 757-688-5572

Huntington Ingalls Industries Reports Second Quarter Results

• Sales were $1.56 billion for the second quarter 2011

• Segment operating margin was 6.3 percent

• Total operating margin was 5.8 percent

• Diluted EPS for the quarter was $0.80

• Cash provided by operating activities was $186 million

• Cash balance at quarter-end was $381 million

NEWPORT NEWS, Va. (Aug. 11, 2011) – Huntington Ingalls Industries, Inc. (NYSE: HII) reported second quarter 2011 sales of $1.56 billion, down 2.9 percent from the same period last year, and operating margin of 5.8 percent, up from negative 1.2 percent last year. Second quarter diluted earnings per share was $0.80, up from a loss of $0.23 in 2010. Cash provided by operating activities in the second quarter of 2011 was $186 million, up $91 million, or 96 percent, over the same period last year. New business awards for the 2011 second quarter were approximately $1.0 billion, bringing total backlog to $16.8 billion as of June 30.

“These strong results for our first full quarter as an independent company reflect the commitment and focus of our entire team of 38,000 employees,” said Mike Petters, HII’s president and chief executive officer. “During the second quarter we achieved several major milestones, including the ramping up of the Virginia-class submarine program to two submarines per year; conducting highly successful sea trials on SSN-781 California and builder’s trials on the latest National Security Cutter, WMSL-752 Stratton; and receiving the award of the construction contract for DDG-113, the first ship in the DDG-51 restart. We expect this momentum to continue through the remainder of the year and into 2012.”

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Second Quarter Highlights

	Three Months Ended June 30,
(In millions, except per share amounts)	2011			2010			$ Change			% Change
Sales	$	1,563		$	1,610		$	(47	)		-2.9	%
Total segment operating income1		98			(10	)		108
Segment operating margin %1		6.3	%		-0.6	%
Total operating income		91			(20	)		111
Operating margin %		5.8	%		-1.2	%
Net income		40			(11	)		51
Diluted earnings per share	$	0.80		$	(0.23	)	$	1.03
Weighted average diluted shares outstanding		49.6			48.8

¹  Non-GAAP metric. See Exhibit B for reconciliation.

Second quarter consolidated sales decreased $47 million from the same period in 2010, driven by lower sales volumes on the DDG-51 program and the CVN-65 USS Enterprise Extended Dry-docking Selected Restricted Availability (EDSRA). These decreases were partially offset by higher sales on the LHA program, the National Security Cutter program and the advanced planning contract for the CVN-72 USS Abraham Lincoln Refueling and Complex Overhaul (RCOH). Additionally, during the second quarter of 2010 the LPD program was impacted by the decision to wind down shipbuilding operations at the Avondale, La., facility in 2013, which resulted in a reduction to revenues of $115 million in 2010 to reflect revised estimates to complete LPD-23 Anchorage and LPD-25 Somerset.

Segment operating income in the quarter was $98 million, up $108 million from the year earlier period. Total operating income was $91 million, up from negative $20 million last year. Total operating margin was 5.8 percent for the quarter, compared with negative 1.2 percent in 2010. The results for the second quarter of 2010 included a $113 million pre-tax charge resulting from the decision to wind down shipbuilding operations at the facility in Avondale. Excluding the non-recurring items related to Avondale, total operating margin was 5.4 percent² in the second quarter of 2010.

Awards

The value of new contract awards during the three months ended June 30, 2011 was approximately $1 billion. Significant new awards during this period include the construction contract for DDG-113 and additional contract work for the CVN-71 USS Theodore Roosevelt RCOH.

²  Non-GAAP metric. See Exhibit B for reconciliation.

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Page 2 of 10

Operating Segment Results

Ingalls Shipbuilding

	Three Months Ended June 30,
($ in millions)	2011			2010			$ Change			% Change
Sales	$	708		$	714		$	(6	)		-0.8	%
Operating income		19			(94	)		113
Operating margin %		2.7	%		-13.2	%

Ingalls revenues for the three months ending June 30, 2011 decreased $6 million from the same period in 2010, primarily driven by lower sales in the DDG-51 program, partially offset by higher sales in the LHA program. The decrease in the DDG-51 program was primarily due to the deliveries of DDG-107 USS Gravely in the third quarter of 2010 and DDG-110 USS William P. Lawrence in the first quarter of 2011. Additionally, during the second quarter of 2010 the LPD program was impacted by the decision to wind down shipbuilding operations at the Avondale facility in 2013, which resulted in a $115 million reduction to revenues to reflect revised estimates to complete LPD-23 and LPD-25.

Ingalls operating income for the three months ending June 30, 2011 was $19 million compared with an operating loss of $94 million in the same period in 2010. Ingalls operating margin was 2.7 percent for the quarter, compared with negative 13.2 percent for the same period last year. The three months ended June 30, 2011 included negative cumulative margin corrections of $19 million on the LPD-22 through LPD-25 contract, partially offset by performance improvements on other programs. The results for the second quarter of 2010 included a $113 million pre-tax charge resulting from the Avondale decision. Excluding the non-recurring items related to Avondale, Ingalls operating margin was 2.3 percent³ in the second quarter of 2010, compared with 2.7 percent this quarter.

Key Ingalls program milestones for the quarter:

• Awarded construction contract for DDG-113, the first destroyer in the restart of the DDG-51 program

• Began fabrication of LPD-26 John P. Murtha, the latest in the San Antonio-class of amphibious transport docks

• Christened amphibious transport dock LPD-23 Anchorage

• Conducted builder’s trials for the latest National Security Cutter, WMSL-752 Stratton

³ Non-GAAP metric. See Exhibit B for reconciliation.

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Page 3 of 10

Newport News Shipbuilding

	Three Months Ended
	June 30,
($ in millions)	2011			2010			$ Change			% Change
Sales	$	872		$	913		$	(41	)		-4.5	%
Operating income		79			84			(5	)		-6.0	%
Operating margin %		9.1	%		9.2	%

Newport News revenues for the three months ended June 30, 2011 decreased $41 million, or 4.5 percent, from the same period in 2010, primarily driven by lower sales volume on the CVN-71 USS Theodore Roosevelt RCOH and CVN-78 Gerald R. Ford, partially offset by higher sales volume on the advanced planning contract for the CVN-72 USS Abraham Lincoln RCOH. The year over year decrease was also driven by performance improvements realized on the Virginia-class submarine program in the second quarter of 2010, which was not recurring in the same period in 2011.

Newport News operating income for the three months ended June 30, 2011 was $79 million compared with $84 million in the same period 2010. The decrease was primarily due to the lower sales volume described above and the impact of performance improvements realized on the Virginia-class submarine program in the second quarter of 2010, which were not recurring in the same period in 2011. Newport News operating margin was 9.1 percent for the quarter, relatively flat compared with 2010.

Key Newport News program milestones for the quarter:

• Began ramp up of Virginia-class production to two submarines per year

• Completed dry dock work for CVN-71 USS Theodore Roosevelt RCOH

• Conducted sea trials for SSN-781 California

• Held keel-laying ceremony for SSN-783 Minnesota

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Page 4 of 10

The Company

Huntington Ingalls Industries (HII) designs, builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard and provides after-market services for military ships around the globe. For more than a century, HII has built more ships in more ship classes than any other U.S. naval shipbuilder. Employing nearly 38,000 in Virginia, Mississippi, Louisiana and California, its primary business divisions are Newport News Shipbuilding and Ingalls Shipbuilding. For more information, please visit www.huntingtoningalls.com.

Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. EDT on August 11. A live audio broadcast of the conference call and supplemental presentation will be available on the investor relations page of the company’s website: www.huntingtoningalls.com.

Statements in this release, other than statements of historical fact, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Factors that may cause such differences include: 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 costs and perform effectively; risks related to our spin-off from Northrop Grumman (including our increased costs and leverage); our ability to realize the expected benefits from consolidation of our Gulf Coast facilities; natural disasters; adverse economic conditions in the United States and globally; and other risk factors discussed in our filings with the U.S. Securities and Exchange Commission. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business, and we undertake no obligations to update any forward-looking statements.

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Page 5 of 10

Exhibit A: Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended June 30						Six Months Ended June 30
$ in millions, except per share amounts	2011			2010			2011			2010
Sales and Service Revenues
Product sales	$	1,351		$	1,432		$	2,817		$	2,886
Service revenues		212			178			430			436
Total sales and service revenues		1,563			1,610			3,247			3,322
Cost of Sales and Service Revenues
Cost of product sales		1,124			1,321			2,377			2,572
Cost of service revenues		179			148			376			368
General and administrative expenses		169			161			318			315
Operating income (loss)		91			(20	)		176			67
Interest expense		(30	)		(10	)		(45	)		(20	)
Earnings (loss) before income taxes		61			(30	)		131			47
Federal income taxes (benefit)		21			(19	)		46			17
Net earnings (loss)	$	40		$	(11	)	$	85		$	30
Basic earnings (loss) per share	$	0.81		$	(0.23	)	$	1.73		$	0.61
Weighted-average common shares outstanding, in millions		48.8			48.8			48.8			48.8
Diluted earnings (loss) per share	$	0.80		$	(0.23	)	$	1.72		$	0.61
Weighted-average diluted shares outstanding, in millions		49.6			48.8			49.2			48.8
Net earnings (loss) from above	$	40		$	(11	)	$	85		$	30
Other comprehensive income
Change in unamortized benefit plan costs		11			12			39			24
Tax (expense) benefit on change in unamortized benefit plan costs		(4	)		1			(15	)		2
Other comprehensive income, net of tax		7			13			24			26
Comprehensive income	$	47		$	2		$	109		$	56

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Page 6 of 10

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

	June 30			December 31
$ in millions	2011			2010
Assets
Current Assets
Cash and cash equivalents	$	381		$	—
Accounts receivable, net		898			728
Inventoried costs, net		389			293
Deferred income taxes		286			284
Prepaid expenses and other current assets		40			8
Total current assets		1,994			1,313
Property, plant, and equipment, net		1,985			1,997
Other Assets
Goodwill		1,134			1,134
Other purchased intangibles, net of accumulated amortization of $362 in 2011 and $352 in 2010		577			587
Pension plan asset		144			131
Debt issuance costs, net		52			—
Miscellaneous other assets		51			41
Total other assets		1,958			1,893
Total assets	$	5,937		$	5,203
Liabilities and Equity
Current Liabilities
Notes payable to former parent	$	—		$	715
Trade accounts payable		255			274
Current portion of long-term debt		29			—
Current portion of workers’ compensation liabilities		197			197
Accrued interest on notes payable to former parent		—			239
Current portion of post-retirement plan liabilities		145			146
Accrued employees’ compensation		186			203
Advance payments and billings in excess of costs incurred		83			107
Provision for contract losses		52			80
Other current liabilities		237			265
Total current liabilities		1,184			2,226
Long-term debt		1,844			105
Other post-retirement plan liabilities		573			567
Pension plan liabilities		407			381
Workers’ compensation liabilities		351			351
Deferred tax liabilities		113			99
Other long-term liabilities		54			56
Total liabilities		4,526			3,785
Commitments and Contingencies (Note 12)
Shareholders’ Equity
Common stock, $0.01 par value; 150,000,000 shares authorized; issued and outstanding as of June 30, 2011: 48,799,261		—			—
Additional paid-in capital		1,864			—
Former parent’s equity in unit		—			1,933
Retained earnings		38			—
Accumulated other comprehensive loss		(491	)		(515	)
Total shareholders’ equity		1,411			1,418
Total liabilities and shareholders’ equity	$	5,937		$	5,203

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Page 7 of 10

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months Ended June 30
$ in millions	2011			2010
Operating Activities
Net Earnings	$	85		$	30
Adjustments to reconcile to net cash used in operating activities
Depreciation		81			82
Amortization of purchased intangibles		10			14
Amortization of debt issuance cost		2			—
Stock based compensation		13			—
Decrease (increase) in
Accounts receivable		(171	)		(175	)
Inventoried costs		(114	)		5
Prepaid expenses and other assets		(40	)		(14	)
Increase (decrease) in
Accounts payable and accruals		(77	)		(17	)
Deferred income taxes		(19	)		(13	)
Retiree benefits		59			70
Other non-cash transactions, net		(7	)		(4	)
Net cash used in operating activities		(178	)		(22	)
Investing Activities
Additions to property, plant, and equipment		(83	)		(60	)
Net cash used in investing activities		(83	)		(60	)
Financing Activities
Proceeds from issuance of long-term debt		1,775			—
Repayment of long-term debt		(7	)		—
Debt issuance costs		(54	)		—
Repayment of notes payable to former parent and accrued interest		(954	)		—
Dividend to former parent in connection with spin-off		(1,429	)		—
Proceeds from stock option exercises and issuance of common stock		1			—
Net transfers from former parent		1,310			82
Net cash provided by financing activities		642			82
Increase in cash and cash equivalents		381			—
Cash and cash equivalents, beginning of period		—			—
Cash and cash equivalents, end of period	$	381		$	—
Supplemental Cash Flow Disclosure
Cash paid for income taxes	$	11		$	—
Cash paid for interest	$	8		$	8
Non-Cash Investing and Financing Activities
Capital expenditures accrued in accounts payable	$	1		$	27

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Page 8 of 10

Exhibit B: Reconciliations

We make reference to “segment operating income,” “adjusted segment operating income,” “adjusted operating income” and “adjusted sales and service revenues.” Segment operating income is defined as operating income before net pension and post-retirement benefits adjustment and deferred state income taxes. Adjusted segment operating income is defined as segment operating income as adjusted for the impact of the Avondale wind down. Adjusted operating income is defined as operating income adjusted for the impact of the Avondale wind down. Adjusted sales and service revenues is defined as sales and service revenues adjusted for the impact of the Avondale wind down.

Segment operating income is one of the key metrics we use to evaluate operating performance because it excludes items which do not affect segment performance. We believe adjusted segment operating income, adjust operating income and adjusted sales and service revenues are useful because they exclude certain non-recurring items that we do not consider indicative of our core operating performance. Therefore, we believe it is appropriate to disclose these measures to help investors analyze our operating performance. However, these measures are not measures of financial performance under GAAP and may not be defined or calculated by other companies in the same manner.

Reconciliation of Segment Operating Income

	Three Months Ended June 30
$ in millions	2011			2010
Sales and Service Revenues
Ingalls	$	708		$	714
Newport News		872		$	913
Intersegment eliminations		(17	)		(17	)
Total sales and service revenues	$	1,563		$	1,610
Operating Income (Loss)
Ingalls	$	19		$	(94	)
As a percentage of sales		2.7	%		-13.2	%
Newport News		79			84
As a percentage of sales		9.1	%		9.2	%
Total Segment Operating Income (Loss)		98			(10	)
As a percentage of sales		6.3	%		-0.6	%
Non-segment factors affecting operating income
Net pension and post-retirement benefits adjustment		(4	)		(14	)
Deferred state income taxes		(3	)		4
Total operating income (loss)	$	91		$	(20	)

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Page 9 of 10

Reconciliation of Adjusted Operating Income, Adjusted Segment Operating Income, and Adjusted Sales and Service Revenues

	Three Months Ended June 30
$ in millions	2011			2010
Adjusted Sales and Service Revenues
Ingalls	$	708		$	714
Adjustment for Avondale wind down		—			115
Adjusted Ingalls		708			829
Newport News		872		$	913
Intersegment eliminations		(17	)		(17	)
Total adjusted sales and service revenues	$	1,563		$	1,725
Adjusted Operating Income (Loss)
Ingalls	$	19		$	(94	)
Adjustment for Avondale wind down		—			113
Adjusted Ingalls		19			19
As a % of sales		2.7	%		2.3	%
Newport News		79			84
Total Adjusted Segment Operating Income (Loss)		98			103
As a % of sales		6.3	%		6.0	%
Non-segment factors affecting adjusted operating income
Net pension and post-retirement benefits adjustment		(4	)		(14	)
Deferred state income taxes		(3	)		4
Total adjusted operating income (loss)	$	91		$	93
As a % of sales		5.8	%		5.4	%

Huntington Ingalls Industries

4101 Washington Avenue • Newport News, VA 23607

www.huntingtoningalls.com

Page 10 of 10

EX-99.2

Q2 2011 Earnings Presentation

August 11, 2011

Mike Petters

President and Chief Executive Officer

Barb Niland

Corporate Vice President, Business Management

& Chief Financial Officer

Exhibit 99.2

Safe Harbor

2

Statements in this presentation, other than statements of historical fact, constitute

“forward-looking statements”

within the meaning of the Private Securities Litigation

Reform Act of 1995. Forward-looking statements involve risks and uncertainties that

could cause our actual results to differ materially from those expressed in these

statements. Factors that may cause such differences include: changes in government

and customer priorities and requirements (including government budgetary restraints,

shifts in defense spending, and changes in customer short-range and long-range

plans); our ability to obtain new contracts, estimate our costs and perform

effectively; risks related to our spin-off from Northrop Grumman (including our

increased costs and debt); our ability to realize the expected benefits from the

consolidation of our Ingalls facilities; natural disasters; adverse economic conditions

in the United States and globally; and other risk factors discussed in our filings with

the Securities and Exchange Commission. There may be other risks

and uncertainties

that we are unable to predict at this time or that we currently do not expect to have

a material adverse effect on our business, and we undertake no obligations to update

any forward-looking statements. Our registration statement on Form 10 and other

filings

with

the

Securities

and

Exchange

Commission

contain

more

information

on

the

types of risks and other factors that could adversely affect these statements.

Highlights from the Quarter

3

Total operating margin improved to 5.8% from 5.4% last year (after adjusting for the

Avondale charge)* and up sequentially from 5.0%

Newport News operating margin 9.1%, consistent with last year and up sequentially

from 7.1%

Ingalls operating margin improved to 2.7%, up year-over-year from 2.3% (after

adjusting for the Avondale charge)* and sequentially from 2.2%

Operating cash flow was $186 million for the quarter

Strong

liquidity

of

$910

billion,

including

cash

of

$381

million

and

$529

million

under

revolver

Announced contract for DDG-113, first ship in the DDG-51 restart

Delivered SSN-781 California on Aug 7

th

, over eight months ahead of schedule

Completed highly successful Builder’s Trials on NSC-3 Stratton

* See Appendix for reconciliation to the operating margin determined under GAAP

Second Quarter 2011 Consolidated Results

4

Impact of

Avondale

charge*

Impact of

Avondale charge

($113M)*

Impact of

Avondale charge

($115M)*

* See Appendix for reconciliation to the operating margin determined under GAAP

Ingalls Shipbuilding

5

Ingalls sales down due to lower volumes

on DDG-51 program, partially offset by

higher volume on LHA program

Segment operating income increase due

to $113 million charge last year related

to Avondale.

Segment operating margin increased

even after adjusting for charge last year

Impact of

Avondale charge

($115M)*

Impact of

Avondale

charge*

Impact of

Avondale charge

($113M)*

* See Appendix for reconciliation to the operating margin determined under GAAP

Newport News Shipbuilding

6

Newport News sales down YoY due to

lower volumes on Ford

& Roosevelt

RCOH, partially offset by Lincoln RCOH

planning effort

Segment operating income down due to

volume

Operating margin consistent with last year

Capital Structure & Liquidity

7

Cash

on

hand

was

$381

million,

plus

$529

million

available

under

revolving

credit

facility, for $910 million total liquidity

Total debt was $1.87 billion at quarter-end

Interest expense was $30 million, up sequentially due to new capital structure

2011 capital expenditures expected to be slightly over 3% of sales

As of

($ in millions)

June 30, 2011

Cash

381

$   

Revolving credit facility*

-

$    

Term loan due March 2016

568

Senior Notes due March 2018

600

Senior Notes due March 2021

600

Other debt

105

Total debt

1,873

$

* $650 million facility, $529 million available after standby

letters of credit of $121 million

Appendix

Reconciliations

9

We make reference to “segment operating income,”

“adjusted segment operating

income,”

“adjusted operating income”

and “adjusted sales and service revenues.”

Segment operating income is defined as operating income before net pension and

post-retirement benefits adjustment and deferred state income taxes. Adjusted

segment operating income is defined as segment operating income as adjusted for

the impact of the Avondale wind down. Adjusted operating income is defined as

operating income adjusted for the impact of the Avondale wind down. Adjusted sales

and service revenues is defined as sales and service revenues adjusted for the impact

of the Avondale wind down.

Segment operating income is one of the key metrics we use to evaluate operating

performance because it excludes items which do not affect segment performance. We

believe adjusted segment operating income, adjust operating income and adjusted

sales and service revenues are useful because they exclude certain non-recurring

items that we do not consider indicative of our core operating performance.

Therefore, we believe it is appropriate to disclose these measures to help investors

analyze our operating performance. However, these measures are not measures of

financial performance under GAAP and may not be defined or calculated by other

companies in the same manner. 

Reconciliation of Non-GAAP Measure –

Segment Operating Income

10

Three Months Ended

June 30

$ in millions

2011

2010

Sales and Service Revenues

Ingalls

708

$    

714

$     

Newport News

872

913

$     

Intersegment eliminations

(17)

(17)

Total sales and service revenues

1,563

$ 

1,610

$  

Operating Income (Loss)

Ingalls

19

$      

(94)

$      

Newport News

79

84

Total Segment Operating Income (Loss)

98

(10)

As a percentage of sales

6.3%

-0.6%

Non-segment factors affecting operating income

Net pension and post-retirement benefits adjustment

(4)

(14)

Deferred state income taxes

(3)

4

Total operating income (loss)

91

$      

(20)

$      

Reconciliation of Non-GAAP Measure –

Adjusted Operating Margin

11

Three Months Ended

June 30

$ in millions

2011

2010

Adjusted Sales and Service Revenues

Ingalls

708

$    

714

$     

Adjustment for Avondale wind down

-

115

Adjusted Ingalls

708

829

Newport News

872

913

$     

Intersegment eliminations

(17)

(17)

Total adjusted sales and service revenues

1,563

$ 

1,725

$  

Adjusted Operating Income (Loss)

Ingalls

19

$      

(94)

$      

Adjustment for Avondale wind down

-

113

Adjusted Ingalls

19

19

As a % of sales

2.7%

2.3%

Newport News

79

84

Total Adjusted Segment Operating Income (Loss)

98

103

As a % of sales

6.3%

6.0%

Non-segment factors affecting adjusted operating income

Net pension and post-retirement benefits adjustment

(4)

(14)

Deferred state income taxes

(3)

4

Total adjusted operating income (loss)

91

$      

93

$       

As a % of sales

5.8%

5.4%