8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 7, 2014

  _____________________________________

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)	(I.R.S. Employer Identification No.)
4101 Washington Avenue, Newport News, Virginia		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:

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

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

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

o 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 7, 2014, Huntington Ingalls Industries, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2014. 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 2014 earnings release conference call.

Item 9.01.	Financial Statements and Exhibits.
(d)	Exhibits.

Exhibit No.	Description
99.1	Press Release dated August 7, 2014.
99.2	Earnings Presentation dated August 7, 2014.

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 7, 2014	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

Dwayne Blake (Investors)

dwayne.blake@hii-co.com

757-380-2104

Huntington Ingalls Industries Reports Second Quarter Results

• Revenues were $1.72 billion for the second quarter of 2014

• Segment operating margin was 9.5 percent, a 140 bps improvement over Q2 2013

• Total operating margin was 10.5 percent, up from 6.9 percent in the same period last year

• Diluted earnings per share was $2.04 for the quarter

• Pension-adjusted diluted earnings per share was $1.75 for the quarter

• Cash and cash equivalents at the end of the quarter were $592 million

NEWPORT NEWS, Va. (August 7, 2014) - Huntington Ingalls Industries (NYSE:HII) reported second quarter 2014 revenues of $1.72 billion, up 2.1 percent compared to the same period last year. Second quarter diluted earnings per share was $2.04, compared to diluted earnings per share of $1.12 in the same period of 2013. Pension-adjusted diluted earnings per share for the quarter was $1.75, compared to $1.36 in the same period of 2013.

Segment operating income for the second quarter was $163 million, compared to $136 million in the same period last year. Total operating income for the quarter was $181 million, compared to $116 million in the same period last year. The increase in operating income was primarily attributable to risk retirement at Ingalls on the National Security Cutter (NSC) program and ships delivered under the LPD-17 San Antonio-class (LPD) program, a $6 million favorable overhead adjustment at Ingalls resulting from a change in non-income based tax liabilities, as well as the favorable FAS/CAS Adjustment.

New business awards for the quarter were approximately $7.0 billion, consisting primarily of the contract for Block IV of the SSN-774 Virginia-class submarine (VCS) program. Total backlog at the end of Q2 2014 was $24.2 billion, of which $14.4 billion was funded.

On May 30, 2014, HII completed the acquisition of UniversalPegasus International Holdings (UPI). HII reported the post-acquisition results of UPI as part of its newly created Other segment. Revenues of the Other segment were $20 million and Other operating income was less than $1 million for the quarter, primarily due to the acquisition of UPI.

"With the acquisition of UniversalPegasus, HII is leveraging its engineering and program management core competencies in the energy market, while remaining focused on our Navy program execution to reach 9-plus percent margins in 2015," said Mike Petters, HII's president and chief executive officer.

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Second Quarter 2014 Highlights

	Three Months Ended
	June 30
(In millions, except per share amounts)	2014			2013			$ Change			% Change
Revenues	$	1,719		$	1,683		$	36		2.1	%
Segment operating income1	163			136			27			19.9	%
Segment operating margin %1	9.5		%	8.1		%				140 bps
Total operating income	181			116			65			56.0	%
Total operating margin %	10.5		%	6.9		%				364 bps
Net earnings	100			57			43			75.4	%
Diluted earnings per share	$	2.04		$	1.12		$	0.92		82.1	%
Weighted-average diluted shares outstanding	49.1			50.7
Pension-adjusted Operating Highlights
Total operating income	181			116			65			56.0	%
FAS/CAS Adjustment	(21		)	18			(39		)	(216.7	)%
Pension-adjusted operating income2	160			134			26			19.4	%
Pension-adjusted operating margin %2	9.3		%	8.0		%				135 bps
Pension-adjusted Net Earnings
Net earnings	100			57			43			75.4	%
After-tax FAS/CAS Adjustment3	(14		)	12			(26		)	(216.7	)%
Pension-adjusted net earnings2	86			69			17			24.6	%
Weighted-average diluted shares outstanding	49.1			50.7
Pension-adjusted diluted earnings per share2	$	1.75		$	1.36		$	0.39		28.7	%
1 Non-GAAP metric that excludes non-segment factors affecting operating income. See Exhibit B for definition and reconciliation.
2 Non-GAAP metric - see Exhibit B for definition.
3 Tax effected at 35% federal statutory tax rate.

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 2 of 10

Operating Segment Results

Ingalls Shipbuilding

	Three Months Ended
	June 30
($ in millions)	2014			2013			$ Change			% Change
Revenues	$	572		$	592		$	(20	)	(3.4	)%
Operating income (loss)	59			31			28			90.3	%
Operating margin %	10.3		%	5.2		%				508 bps

Ingalls revenues for the second quarter decreased $20 million, or 3.4 percent, from the same period in 2013, driven by lower sales in amphibious assault ships, partially offset by higher sales in the NSC program and surface combatants. The decrease in amphibious assault ships revenues was due to lower volumes on LHA-6 America and LPD-25 USS Somerset, partially offset by higher volumes on LHA-7 Tripoli. Revenues on the NSC program were higher due to higher volumes on NSC-6 Munro, NSC-7 Kimball, NSC-5 James and NSC-4 Hamilton construction contracts. Surface combatants revenues were higher due to higher volumes on DDG-117 Paul Ignatius, DDG-119 (unnamed) and DDG-114 Ralph Johnson construction contracts, partially offset by lower volumes on the DDG-1000 Zumwalt-class program.

Ingalls operating income for the quarter was $59 million, an increase of $28 million over the same period in 2013. Ingalls operating margin was 10.3 percent for the quarter, compared to 5.2 percent in Q2 2013. These increases were primarily due to risk retirement on the NSC program and ships delivered under the LPD program, as well as a $6 million favorable overhead adjustment resulting from a change in non-income based tax liabilities.

Key Ingalls highlights for the quarter:

• Delivered LHA-6 America to the U.S. Navy

• Launched NSC-5 James

• Authenticated the keel for LHA-7 Tripoli

• Received a $76.5 million fixed-price contract to purchase long-lead materials for NSC-8 Midgett

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 3 of 10

Newport News Shipbuilding

	Three Months Ended
	June 30
($ in millions)	2014			2013			$ Change			% Change
Revenues	$	1,129		$	1,092		$	37		3.4	%
Operating income (loss)	104			105			(1		)	(1.0	)%
Operating margin %	9.2		%	9.6		%				-40 bps

Newport News revenues for the second quarter increased $37 million, or 3.4 percent, from the same period in 2013, primarily driven by the acquisition of The S.M. Stoller Corp., which was completed in January 2014, and higher revenues in submarines and energy, offset by lower revenues in fleet support services. Submarines revenues related to the SSN-774 Virginia-class submarine program were higher due to higher volumes on Block III construction and Block IV advance procurement contracts, partially offset by lower volumes on Block II boats following the delivery of SSN-783 USS Minnesota, the last ship of the block. Higher energy revenues were primarily driven by commercial volumes. Lower revenues in fleet support services were primarily due to the redelivery of SSN-765 USS Montpelier.

Newport News operating income for the quarter was $104 million, a $1 million decrease from the same period in 2013. Newport News operating margin was 9.2 percent for the quarter, down from 9.6 percent in Q2 2013. These decreases were mainly related to lower risk retirement on the VCS program and the execution contract for the CVN-71 USS Theodore Roosevelt refueling and complex overhaul (RCOH), partially offset by higher risk retirement on the construction contract for CVN-78 Gerald R. Ford.

Key Newport News highlights for the quarter:

• Reached pressure hull complete construction milestone on SSN-785 John Warner

• AMSEC received an indefinite-delivery/indefinite-quantity, cost-plus-fixed-fee contract to provide engineering, technical, repair and logistics support to the U.S. Navy's Carrier Engineering Maintenance Assist Team (CEMAT) and Surface Ship Engineering Maintenance Assist Team (SEMAT) programs. The cumulative value of the contract, if all options are exercised, is $187 million

• Placed the new upper-level structure on CVN-72 USS Abraham Lincoln's island

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 4 of 10

The Company

Huntington Ingalls Industries designs, builds and manages the life-cycle of the most complex nuclear and conventionally-powered ships for the U.S. Navy and Coast Guard. For more than a century, HII’s Newport News and Ingalls shipbuilding divisions in Virginia and Mississippi have built more ships in more ship classes than any other U.S. naval shipbuilder. HII also provides engineering and project management services expertise to the commercial energy industry, the Department of Energy and other government customers. Headquartered in Newport News, Virginia, HII employs more than 39,000 people operating both domestically and internationally. For more information, please visit: www.huntingtoningalls.com.

Huntington Ingalls Industries will webcast its earnings conference call at 9 a.m. ET on August 7. 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 future contract costs and perform our contracts effectively; changes in government regulations and procurement processes and our ability to comply with such requirements; our ability to realize the expected benefits from consolidation of our Ingalls facilities; natural disasters; adverse economic conditions in the United States and globally; risks related to our indebtedness and leverage; 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. You should not place undue reliance on any forward-looking statements that we may make. 

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 5 of 10

Exhibit A: Financial Statements

HUNTINGTON INGALLS INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended June 30						Six Months Ended June 30
(in millions, except per share amounts)	2014			2013			2014			2013
Sales and service revenues
Product sales	$	1,433		$	1,423		$	2,765		$	2,744
Service revenues	286			260			548			501
Total sales and service revenues	1,719			1,683			3,313			3,245
Cost of sales and service revenues
Cost of product sales	1,131			1,157			2,191			2,243
Cost of service revenues	238			227			465			440
Income (loss) from operating investments, net	1			2			3			4
General and administrative expenses	170			185			320			355
Operating income (loss)	181			116			340			211
Other income (expense)
Interest expense	(29		)	(29		)	(56		)	(59		)
Earnings (loss) before income taxes	152			87			284			152
Federal income taxes	52			30			94			51
Net earnings (loss)	$	100		$	57		$	190		$	101
Basic earnings (loss) per share	$	2.05		$	1.14		$	3.88		$	2.02
Weighted-average common shares outstanding	48.8			50.2			49.0			50.0
Diluted earnings (loss) per share	$	2.04		$	1.12		$	3.84		$	2.00
Weighted-average diluted shares outstanding	49.1			50.7			49.5			50.5
Dividends declared per share	$	0.20		$	0.10		$	0.40		$	0.20
Net earnings (loss) from above	$	100		$	57		$	190		$	101
Other comprehensive income (loss)
Change in unamortized benefit plan costs	8			210			16			215
Other	1			(1		)	2			1
Tax benefit (expense) for items of other comprehensive income	(3		)	(81		)	(6		)	(86		)
Other comprehensive income (loss), net of tax	6			128			12			130
Comprehensive income (loss)	$	106		$	185		$	202		$	231

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 6 of 10

HUNTINGTON INGALLS INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(UNAUDITED)

($ in millions)	June 30 2014			December 31 2013
Assets
Current Assets
Cash and cash equivalents	$	592		$	1,043
Accounts receivable, net	1,216			1,123
Inventoried costs, net	294			311
Deferred income taxes	179			170
Prepaid expenses and other current assets	46			29
Total current assets	2,327			2,676
Property, plant, and equipment, net of accumulated depreciation of $1,492 million as of 2014 and $1,404 million as of 2013	1,850			1,897
Goodwill	1,089			881
Other purchased intangibles, net	557			528
Pension plan assets	127			124
Miscellaneous other assets	130			119
Total assets	$	6,080		$	6,225
Liabilities and Stockholders' Equity
Current Liabilities
Trade accounts payable	$	297		$	337
Accrued employees’ compensation	210			230
Current portion of long-term debt	86			79
Current portion of postretirement plan liabilities	139			139
Current portion of workers’ compensation liabilities	233			230
Advance payments and billings in excess of revenues	58			115
Other current liabilities	244			262
Total current liabilities	1,267			1,392
Long-term debt	1,679			1,700
Pension plan liabilities	437			529
Other postretirement plan liabilities	482			477
Workers’ compensation liabilities	424			419
Deferred tax liabilities	112			83
Other long-term liabilities	110			104
Total liabilities	4,511			4,704
Commitments and Contingencies	—			—
Stockholders’ Equity
Common stock, $0.01 par value; 150 million shares authorized; 51.4 million issued and 48.6 million outstanding as of June 30, 2014, and 50.5 million issued and 48.7 million outstanding as of December 31, 2013	1			1
Additional paid-in capital	1,896			1,925
Retained earnings (deficit)	406			236
Treasury stock	(225		)	(120		)
Accumulated other comprehensive income (loss)	(509		)	(521		)
Total stockholders’ equity	1,569			1,521
Total liabilities and stockholders’ equity	$	6,080		$	6,225

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 7 of 10

HUNTINGTON INGALLS INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30
($ in millions)	2014			2013
Operating Activities
Net earnings (loss)	$	190		$	101
Adjustments to reconcile to net cash provided by (used in) operating activities
Depreciation	97			82
Amortization of purchased intangibles	12			11
Amortization of debt issuance costs	5			4
Stock-based compensation	11			19
Excess tax benefit related to stock-based compensation	(15		)	(3		)
Deferred income taxes	(4		)	28
Change in
Accounts receivable	(38		)	(196		)
Inventoried costs	18			(25		)
Prepaid expenses and other assets	(14		)	(28		)
Accounts payable and accruals	(131		)	(146		)
Retiree benefits	(73		)	(184		)
Net cash provided by (used in) operating activities	58			(337		)
Investing Activities
Additions to property, plant, and equipment	(51		)	(55		)
Acquisitions of businesses, net of cash received	(273		)	—
Net cash provided by (used in) investing activities	(324		)	(55		)
Financing Activities
Repayment of long-term debt	(14		)	(13		)
Dividends paid	(20		)	(10		)
Repurchases of common stock	(104		)	(25		)
Employee taxes on certain share-based payment arrangements	(64		)	—
Proceeds from stock option exercises	2			3
Excess tax benefit related to stock-based compensation	15			3
Net cash provided by (used in) financing activities	(185		)	(42		)
Change in cash and cash equivalents	(451		)	(434		)
Cash and cash equivalents, beginning of period	1,043			1,057
Cash and cash equivalents, end of period	$	592		$	623
Supplemental Cash Flow Disclosure
Cash paid for income taxes	$	94		$	41
Cash paid for interest	$	52		$	55
Non-Cash Investing and Financing Activities
Capital expenditures accrued in accounts payable	$	3		$	3

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 8 of 10

Exhibit B: Reconciliations

We make reference to “segment operating income,” “segment operating margin,” “pension-adjusted operating income,” “pension-adjusted operating margin,” “pension-adjusted net earnings,” and “pension-adjusted diluted earnings per share.”

Segment operating income is total operating income before the FAS/CAS Adjustment and deferred state income taxes.

Segment operating margin is segment operating income as a percentage of total sales and service revenues.

Pension-adjusted operating income is total operating income adjusted for the FAS/CAS Adjustment.

Pension-adjusted operating margin is pension-adjusted operating income as a percentage of total sales and service revenues.

Pension-adjusted net earnings is net earnings adjusted for the tax effected FAS/CAS Adjustment.

Pension-adjusted diluted earnings per share is pension-adjusted net earnings divided by the weighted-average diluted common shares outstanding.

Segment operating income and segment operating margin are two of the key metrics we use to evaluate operating performance because they exclude items that do not affect segment performance. We believe pension-adjusted operating income, pension-adjusted operating margin, pension-adjusted net earnings and pension-adjusted diluted earnings per share are also useful metrics because they exclude non-operating 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.

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 9 of 10

Reconciliation of Segment Operating Income and Segment Operating Margin

	Three Months Ended
	June 30
($ in millions)	2014			2013
Sales and Service Revenues
Ingalls	$	572		$	592
Newport News	1,129			1,092
Other	20			—
Intersegment eliminations	(2		)	(1		)
Total Sales and Service Revenues	1,719			1,683
Segment Operating Income
Ingalls	59			31
As a percentage of revenues	10.3		%	5.2		%
Newport News	104			105
As a percentage of revenues	9.2		%	9.6		%
Total Segment Operating Income	163			136
As a percentage of revenues	9.5		%	8.1		%
Non-segment factors affecting operating income
FAS/CAS Adjustment	21			(18		)
Deferred state income taxes	(3		)	(2		)
Total Operating Income	181			116
Interest expense	(29		)	(29		)
Federal income taxes	(52		)	(30		)
Net Earnings	$	100		$	57

Huntington Ingalls Industries

4101 Washington Ave. • Newport News, VA 23607

www.huntingtoningalls.com

Page 10 of 10

EX-99.2

Q2 2014 Earnings Presentation August 7, 2014 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 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 government regulations and procurement processes and our ability to comply with such requirements; our ability to realize the expected benefits from consolidation of our Ingalls facilities; natural disasters; adverse economic conditions in the United States and globally; risks related to our indebtedness and leverage; 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 obligation to update any forward-looking statements. You should not place undue reliance on any forward-looking statements that we may make. This presentation also contains non-GAAP financial measures and includes a GAAP reconciliation of these financial measures. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures.

Highlights from the Second Quarter 2014 3  Revenues were $1.7 billion  Diluted EPS was $2.04, up $0.92 over Q2 2013  Pension-adjusted Diluted EPS* was $1.75, compared to $1.36 in Q2 2013  Total operating margin was 10.5%, compared to 6.9% in same period prior year driven by a favorable FAS/CAS Adjustment and strong operating income growth at the Ingalls segment  Ingalls operating margin was 10.3%, up 508 bps from Q2 2013  Newport News operating margin was 9.2%, compared to 9.6% in Q2 2013  Free cash flow was $245 million for the quarter, up from $0 in Q2 2013  Acquired UniversalPegasus International Holdings (UPI); closed on May 30, 2014  Operating results are reported in “Other” segment  Announced $7.0 billion of new contract awards with a $24.2 billion backlog  Mainly driven by Block IV Virginia-class submarine construction award  $14.4 billion of total backlog is funded * Non-GAAP metric that excludes the tax effected FAS/CAS Adjustment. See appendix for reconciliation.

Second Quarter 2014 Consolidated Results 4 * Non-GAAP metric that excludes the FAS/CAS Adjustment. See appendix for reconciliation. ** Non-GAAP metric that excludes the tax effected FAS/CAS Adjustment. See appendix for reconciliation. $1,683 $1,719 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 Q2 2013 Q2 2014 ($ in m illio ns) Consolidated Revenues $116 $181 $134 $160 $- $50 $100 $150 $200 Q2 2013 Q2 2014 ($ in m illio ns) Operating Income GAAP Pension Adjusted* 6.9% 10.5% 8.0% 9.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Q2 2013 Q2 2014 Operating Margin GAAP Pension Adjusted* $1.12 $2.04 $1.36 $1.75 $- $0.50 $1.00 $1.50 $2.00 $2.50 Q2 2013 Q2 2014 Diluted EPS GAAP Pension Adjusted**

$31 $59 $- $10 $20 $30 $40 $50 $60 $70 Q2 2013 Q2 2014 ($ in mi llio ns ) Operating Income $592 $ 572 $300 $350 $400 $450 $500 $550 $600 $650 Q2 2013 Q2 2014 ($ in mi llio ns ) Segment Revenues Ingalls Shipbuilding 5  Ingalls revenues were down slightly YoY due to lower volume on LHA-6 and LPD- 25  Segment operating income and margin were up YoY due to risk retirement on the NSC and LPD programs as well as a $6 million favorable overhead adjustment resulting from a change in non-income based tax liabilities 5.2% 10.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Q2 2013 Q2 2014 Operating Margin

$105 $104 $- $20 $40 $60 $80 $100 $120 Q2 2013 Q2 2014 ($ in mi llio ns ) Operating Income $1,092 $ 1,129 $50 $600 $700 $800 $900 $1,000 $1,100 $1,200 Q2 2013 Q2 2014 ($ in mi llio ns ) Segment Revenues Newport News Shipbuilding 6  Newport News revenues were up as compared to Q2 2013 due to higher revenues from the acquisition of The S.M. Stoller Corp. and higher submarine and energy volume  Segment operating income and margin decreased for the quarter mainly due to lower risk retirement on the VCS program and the Roosevelt RCOH, offset by higher risk retirement on Ford 9.6% 9.2% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5% 10.0% Q2 2013 Q2 2014 Operating Margin

U n sa ve d Docum e n t / 1 2 /2 9 /1 0 / 1 0 :0 2 Appendix

Reconciliations 8 We make reference to “segment operating income,” “segment operating margin,” “pension-adjusted operating income,” “pension-adjusted operating margin,” “pension-adjusted net earnings,” and “pension-adjusted diluted earnings per share.” Segment operating income is total operating income before the FAS/CAS Adjustment and deferred state income taxes. Segment operating margin is segment operating income as a percentage of total sales and service revenues. Pension-adjusted operating income is total operating income adjusted for the FAS/CAS Adjustment. Pension-adjusted operating margin is pension-adjusted operating income as a percentage of total sales and service revenues. Pension-adjusted net earnings is net earnings adjusted for the tax effected FAS/CAS Adjustment. Pension-adjusted diluted earnings per share is pension-adjusted net earnings divided by the weighted-average diluted common shares outstanding. Segment operating income and segment operating margin are two of the key metrics we use to evaluate operating performance because they exclude items that do not affect segment performance. We believe pension-adjusted operating income, pension-adjusted operating margin, pension-adjusted net earnings and pension-adjusted diluted earnings per share are also useful metrics because they exclude non-operating 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 Measures – Segment Operating Income and Segment Operating Margin 9 ($ in millions) 2014 2013 Sales and Service Revenues Ingalls 572$ 592$ Newport News 1,129 1,092 Other 20 — Intersegment eliminations (2) (1) Total Sales and Service Revenues 1,719 1,683 Segment Operating Income Ingalls 59 31 As a percentage of revenues 10.3 % 5.2 % Newport News 104 105 As a percentage of revenues 9.2 % 9.6 % Total Segment Operating Income 163 136 As a percentage of revenues 9.5 % 8.1 % Non-segment factors affecting operating income FAS/CAS Adjustment 21 (18) Deferred state income taxes (3) (2) Total Operating Income 181 116 Interest expense (29) (29) Federal income taxes (52) (30) Net Earnings 100$ 57$ Three Months Ended June 30

Reconciliation of Non-GAAP Measures – Pension- adjusted Figures 10 (In millions, except per share amounts) 2014 2013 $ Change % Change Revenues 1,719$ 1,683$ 36$ 2.1 % Total segment operating income1 163 136 27 19.9 % Total segment operating margin % 1 9.5 % 8.1 % 140 bps Total operating income 181 116 65 56.0 % Total operating margin % 10.5 % 6.9 % 364 bps Net earnings 100 57 43 75.4 % Diluted earnings per share 2.04$ 1.12$ 0.92$ 82.1 % Weighted-average diluted shares outstanding 49.1 50.7 Pension-adjusted Operating Highlights Total operating income 181 116 65 56.0 % FAS/CAS Adjustment (21) 18 (39) (216.7)% Pension-adjusted operating income2 160 134 26 19.4 % Pension-adjusted operating margin % 2 9.3 % 8.0 % 135 bps Pension-adjusted Net Earnings Net earnings 100 57 43 75.4 % After-tax FAS/CAS Adjustment3 (14) 12 (26) (216.7)% Pension-adjusted net earnings2 86 69 17 24.6 % Weighted-average diluted shares outstanding 49.1 50.7 Pension-adjusted diluted earnings per share2 1.75$ 1.36$ 0.39$ 28.7 % 2 Non-GAAP metric - see Ex hibit B for definition. 3 Tax effected at 35% federal statutory tax rate. Three Months Ended June 30 1 Non-GAAP metric that ex cludes non-segment factors affecting operating income. See Ex hibit B for definition and reconciliation.