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What changed in Huntington Ingalls Industries's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Huntington Ingalls Industries's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+387 added−489 removedSource: 10-K (2024-02-01) vs 10-K (2023-02-09)

Top changes in Huntington Ingalls Industries's 2023 10-K

387 paragraphs added · 489 removed · 303 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

66 edited+11 added−19 removed61 unchanged
Biggest changeWe currently sponsor 20 ERGs, which represent 10 distinct affinity groups, are employee-led and open to all employees, and include: African American Shipbuilders Association, Asian & Pacific Islander Shipbuilding Association, Hispanic Outreach & Leadership Alliance, Women in Shipbuilding Enterprise, Ingalls Shipbuilders Equality Alliance, Shipbuilders Together Realizing Inclusion, Diversity and Equality, Engaging Employees to Learn Improve Network and Knowledge Share, FitNNS, and the Veterans Employee Resource Groups. • We have established D&I Councils, which provide strategic direction, guidance, and advocacy for our D&I initiatives and advancements.
Biggest changeOur ERGs are employee-led and open to all employees. • We have established D&I Councils, which provide strategic direction, guidance, and advocacy for our D&I initiatives and advancements.
Aircraft carriers have a lifespan of approximately 50 years, and we believe the ten Nimitz class (CVN 68) carriers we delivered that are currently in active service, as well as Gerald R. Ford class (CVN 78) aircraft carriers, present significant opportunities for inactivation contracts as they reach the end of their lifespans.
Ford class (CVN 78) aircraft carriers. Aircraft carriers have a lifespan of approximately 50 years, and we believe the ten Nimitz class (CVN 68) carriers we delivered that are currently in active service, as well as Gerald R. Ford class (CVN 78) aircraft carriers, present significant opportunities for inactivation contracts as they reach the end of their lifespans.
In the event of termination of a contract for convenience, a contractor is normally able to recover costs already incurred on the contract and profit on incurred costs up to the amount authorized under the contract, but not the profit that would have been earned had the contract been 5 completed.
In the event of termination of a contract for convenience, a 5 contractor is normally able to recover costs already incurred on the contract and profit on incurred costs up to the amount authorized under the contract, but not the profit that would have been earned had the contract been completed.
To help us meet this large demand for talent, we have created, developed, and maintain multiple talent pipelines. One of the key components of our approach to workforce 8 development is to “grow our own.” We operate two apprentice schools, one at Ingalls and one at Newport News.
To help us meet this large demand for talent, we have 8 created, developed, and maintain multiple talent pipelines. One of the key components of our approach to workforce development is to “grow our own.” We operate two apprentice schools, one at Ingalls and one at Newport News.
We accrue estimated costs to perform environmental remediation when we determine it is probable we will incur expenses in the future, in amounts we can reasonably estimate, to address environmental conditions at currently or formerly owned or leased operating facilities, or at sites where we are named a Potentially Responsible Party ("PRP") by the U.S.
We accrue estimated costs to perform environmental remediation when we determine it is probable we will incur expenses in the future, in amounts we can reasonably estimate, to address environmental conditions at currently or formerly owned or leased operating facilities, or at sites where we are named a Potentially Responsible Party 6 ("PRP") by the U.S.
Since our founding in 2011, we have followed our succession plans 81% of the time when replacing a vacancy in an existing vice president position, and we have filled 82% of newly created vice president positions with internal hires. See "Risk Factors" in Item 1A for further information regarding our human capital resources.
Since our founding in 2011, we have followed our succession plans 82% of the time when replacing a vacancy in an existing vice president position, and we have filled 82% of newly created vice president positions with internal hires. See "Risk Factors" in Item 1A for further information regarding our human capital resources.
Environmental Protection Agency ("EPA") or similarly designated by another environmental agency. Uncertainties regarding the extent of required remediation, determination of legally responsible parties, and 6 the status of laws and regulations and their interpretations make future environmental remediation costs difficult to estimate and can cause our estimated remediation costs to change.
Environmental Protection Agency ("EPA") or similarly designated by another environmental agency. Uncertainties regarding the extent of required remediation, determination of legally responsible parties, and the status of laws and regulations and their interpretations make future environmental remediation costs difficult to estimate and can cause our estimated remediation costs to change.
We also believe D&I is vital to our ability to grow and innovate in an ever-changing, fast-paced environment. Our diverse and inclusive workplace encourages different perspectives and ideas, which we believe enables better business decisions.
We also believe D&I is vital to our ability to grow and innovate in 9 an ever-changing, fast-paced environment. Our diverse and inclusive workplace encourages different perspectives and ideas, which we believe enables better business decisions.
The Newport News Apprentice School was founded in 1919, and the Ingalls Apprentice School was founded in 1952. The two apprentice schools combined have graduated over 14,250 graduates since their inceptions. The schools are nationally renowned and are critical to training both our craft/trades and technical workforce, as well as developing the future leaders of our company.
The Newport News Apprentice School was founded in 1919, and the Ingalls Apprentice School was founded in 1952. The two apprentice schools combined have graduated over 14,400 graduates since their inceptions. The schools are nationally renowned and are critical to training both our craft/trades and technical workforce, as well as developing the future leaders of our company.
The four submarines of the first block, six submarines of the second block, and eight submarines of the third block of Virginia class (SSN 774) submarines have been delivered. In 2014, the team was awarded a construction contract for the fourth block of ten Virginia class (SSN 774) submarines, which requires production of two submarines per year.
The four submarines of the first block, six submarines of the second block, and eight submarines of the third block of Virginia class (SSN 774) submarines have been delivered. In 2014, the team was awarded a construction contract for the fourth block of ten Virginia class (SSN 774) submarines, which contemplated production of two submarines per year.
Government shipyard were to become capable and engaged in the refueling of nuclear-powered aircraft carriers, our market position could be significantly and adversely affected. While we have competed with another large defense contractor to build large deck amphibious ships, we are currently the only builder of large deck amphibious assault ships and expeditionary warfare ships for the U.S.
Government shipyard were to become capable and engaged in the refueling of nuclear-powered aircraft carriers, our market position would likely be significantly and adversely affected. While we have competed with another large defense contractor to build large deck amphibious ships, we are currently the only builder of large deck amphibious assault ships and expeditionary warfare ships for the U.S.
Cost Accounting Standards (“CAS”) or that are otherwise determined to be unallowable or improperly allocated to a specific contract are not recovered or must be refunded if already reimbursed. Our business, including contracts with U.S.
Cost Accounting Standards (“CAS”) or that are otherwise determined to be unallowable or improperly allocated to a specific contract are not recoverable or must be refunded if already reimbursed. Our business, including contracts with U.S.
In addition, over 1,000 apprentices are enrolled in more than 27 crafts and advanced programs at our two shipbuilding segments. From nuclear pipe welders to senior executives, we employ approximately 4,600 apprentice school alumni at Newport News and Ingalls. Approximately 45% of our employees are covered by a total of nine collective bargaining agreements and one site stabilization agreement.
In addition, over 1,400 apprentices are enrolled in more than 27 crafts and advanced programs at our two shipbuilding segments. From nuclear pipe welders to senior executives, we employ approximately 4,100 apprentice school alumni at Newport News and Ingalls. Approximately 45% of our employees are covered by a total of nine collective bargaining agreements and one site stabilization agreement.
We employ individuals specializing in 19 crafts and trades, with approximately 7,100 engineers and designers and approximately 3,600 employees with advanced degrees. Our workforce contains many third-, fourth-, and fifth-generation employees, and approximately 1,600 employees with more than 40 years of continuous service.
We employ individuals specializing in 19 crafts and trades, with approximately 7,000 engineers and designers and approximately 3,700 employees with advanced degrees. Our workforce contains many third-, fourth-, and fifth-generation employees, and approximately 1,600 employees with more than 40 years of continuous service.
Approximately 15 Mission Technologies employees in Klamath Falls, Oregon are covered by a collective bargaining agreement that expires in June 2025. We have not experienced a work stoppage in more than 23 years at Newport News and more than 15 years at Ingalls.
Approximately 15 Mission Technologies employees in Klamath Falls, Oregon are covered by a collective bargaining agreement that expires in June 2025. We have not experienced a work stoppage in more than 24 years at Newport News and more than 16 years at Ingalls.
Our employees are critical to driving operational execution, meeting customer expectations, delivering strong financial performance, advancing innovation, and maintaining a strong quality and compliance program. Our leaders believe each employee contributes to our success. We have approximately 43,000 employees. We are the largest industrial employer in Virginia and the largest private employer in Mississippi.
Our employees are critical to driving operational execution, meeting customer expectations, delivering strong financial performance, advancing innovation, and maintaining a strong quality and compliance program. Our leaders believe each employee contributes to our success. We have over 44,000 employees. We are the largest industrial employer in Virginia and the largest private employer in Mississippi.
We believe we are well positioned as the U.S. Navy's shipyard of choice for these contract awards. 2 Design and Construction of Nuclear-Powered Submarines We are one of only two companies in the United States capable of designing and building nuclear-powered submarines for the U.S. Navy. Newport News has delivered 63 submarines to the U.S.
We believe we are well positioned to be the U.S. Navy's shipyard of choice for these contract awards. Design and Construction of Nuclear-Powered Submarines We are one of only two companies in the United States currently capable of designing and building nuclear-powered submarines for the U.S. Navy. Newport News has delivered 63 submarines to the U.S.
Navy since 1960, comprised of 49 fast attack and 14 ballistic missile submarines. Of the 50 nuclear-powered fast attack submarines currently in active service, 25 were delivered by Newport News. Our nuclear submarine program, located at our Newport News shipyard, includes construction, engineering, design, research, and integrated planning.
Navy since 1960, comprised of 49 fast attack and 14 ballistic missile submarines. Of the 49 nuclear-powered fast attack submarines currently in 2 active service, 23 were delivered by Newport News. Our nuclear submarine program, located at our Newport News shipyard, includes construction, engineering, design, research, and integrated planning.
There are a number of important factors that could cause our actual results to differ materially from the results anticipated by our forward-looking statements, which include, but are not limited to: • 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 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 and environmental disasters and political instability; • Our ability to execute our strategic plan, including with respect to share repurchases, dividends, capital expenditures, and strategic acquisitions; • Adverse economic conditions in the United States and globally; • Health epidemics, pandemics and similar outbreaks, including the COVID-19 pandemic, and the impacts of vaccination mandates on our workforce; • Our ability to attract, retain, and train a qualified workforce; • Disruptions impacting global supply, including those attributable to the COVID-19 pandemic and those resulting from the ongoing conflict between Russia and Ukraine; • 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 other filings with the SEC.
There are a number of important factors that could cause our actual results to differ materially from the results anticipated by our forward-looking statements, which include, but are not limited to: • 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 estimate our future contract costs, including cost increases due to inflation, 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 and environmental disasters and political instability; 10 • our ability to execute our strategic plan, including with respect to share repurchases, dividends, capital expenditures, and strategic acquisitions; • adverse economic conditions in the United States and globally; • health epidemics, pandemics and similar outbreaks; • our ability to attract, retain, and train a qualified workforce; • disruptions impacting global supply, including those resulting from the ongoing conflict between Russia and Ukraine and in the Middle East; • 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 other filings with the SEC.
We believe our position as the exclusive designer and builder of nuclear-powered aircraft carriers, our RCOH performance on the first seven Nimitz class (CVN 68) carriers, our highly trained workforce, the capital-intensive nature of RCOH work, and high barriers to entry due to its nuclear component position us well for RCOH contract awards on the remaining Nimitz class (CVN 68) carriers, as well as future RCOH work on Gerald R.
We believe our current position as the exclusive designer and builder of nuclear-powered aircraft carriers, our RCOH performance on the first seven Nimitz class (CVN 68) carriers, our highly trained workforce, the capital-intensive nature of RCOH work, and high barriers to entry due to required nuclear expertise position us well for RCOH contract awards on the remaining Nimitz class (CVN 68) carriers, as well as future RCOH work on Gerald R.
We provide services including maintenance, modernization, and repair on all ship classes; naval architecture, marine engineering, and design; integrated logistics support; technical documentation development; warehousing, asset management, and material readiness; operational and maintenance training development and delivery; software design and development; IT infrastructure support and data delivery and management; and cyber security and information assurance.
Services include maintenance, modernization, and repair on all ship classes; naval architecture, marine engineering, and design; integrated logistics support; technical documentation development; warehousing, asset management, and material readiness; operational and maintenance training development and delivery; software design and development; IT infrastructure support and data delivery and management; and cyber security and information assurance.
We also fund the operation of Family Health Centers near our two shipyards, which provide a full range of medical, lab, pharmacy, dental, physical therapy, and vision services. Recruitment, Training, and Workforce Development - Our three segments hire thousands of employees each year. In 2022, we hired over 7,500 new employees.
We also fund the operation of Family Health Centers near our two shipyards, which provide a full range of medical, lab, pharmacy, dental, physical therapy, and vision services. Recruitment, Training, and Workforce Development - Our three segments hire thousands of employees each year. In 2023, we hired approximately 9,500 new employees.
Our Mission Technologies segment provides a wide range of services and products, including command, control, computers, communications, cyber, intelligence, surveillance, and reconnaissance ("C5ISR") systems and operations; the application of artificial intelligence and machine learning to battlefield decisions; defensive and offensive cyberspace strategies and electronic warfare ("CEWS"); unmanned autonomous systems; live, virtual, and constructive training solutions ("LVC"); platform modernization; and critical nuclear operations.
Our Mission Technologies segment provides a wide range of services and products, including command, control, computers, communications, cyber, intelligence, surveillance, and reconnaissance ("C5ISR") systems and operations; the application of Artificial Intelligence and machine learning to battlefield decisions; defense and offensive cyberspace strategies and electronic warfare; unmanned autonomous systems; live, virtual, and constructive training solutions; fleet sustainment; and critical nuclear operations.
One of the key metrics is Total Case Rate (“TCR”), which is the number of Occupational Safety and Health Administration ("OSHA") recordable injuries per 100 equivalent employees. The TCR for Newport News was 5.58 in 2022, 5.64 in 2021, and 4.77 in 2020, and the TCR at Ingalls was 5.67 in 2022, 6.26 in 2021, and 6.35 in 2020.
One of the key metrics is Total Case Rate (“TCR”), which is the number of Occupational Safety and Health Administration ("OSHA") recordable injuries per 100 equivalent employees. The TCR for Newport News was 5.15 in 2023, 5.58 in 2022, and 5.64 in 2021, and the TCR at Ingalls was 6.31 in 2023, 5.67 in 2022, and 6.26 in 2021.
In 2019, the team was awarded a construction contract for the fifth block of nine Virginia class (SSN 774) submarines, and, in 2021, an option for a 10th submarine was exercised, continuing the two submarines per year production rate.
In 2019, the team was awarded a construction contract for the fifth block of nine Virginia class (SSN 774) submarines, and, in 2021, an option for a 10th submarine was exercised, continuing the two submarines per year production rate. Ten of the Block V boats are in manufacturing and outfitting stages of construction.
DART at Newport News was 4.86 in 2022, 4.45 in 2021, and 3.41 in 2020. Ingalls tracks two other safety metrics: Lost Time Case Rate (“LTCR”), which is the number of employees that lost work time per 100 employees, and Lost Work Day Rate (“LWDR”), which is the number of lost workdays per 100 full-time employees.
DART at Newport News was 4.10 in 2023, 4.86 in 2022, and 4.45 in 2021. Before 2023, Ingalls tracked two other safety metrics: Lost Time Case Rate (“LTCR”), which is the number of employees that lost work time per 100 employees, and Lost Work Day Rate (“LWDR”), which is the number of lost workdays per 100 full-time employees.
Coast Guard's recapitalization program is replacing aging and operationally expansive ships and aircraft used to conduct missions in excess of 50 miles from the shoreline. The flagship of this program is the Legend class NSC, a multi-mission platform we designed and continue to build. We delivered USCGC Stone (NSC 9) to the U.S. Coast Guard in 2020.
National Security Cutters The U.S. Coast Guard's recapitalization program is replacing aging and operationally expansive ships and aircraft used to conduct missions in excess of 50 miles from the shoreline. The flagship of this program is the Legend class NSC, a multi-mission platform we designed and continue to build.
Employees in our shipbuilding segments with more than 40 years of continuous service achieve the honor of “Master Shipbuilder.” As of December 31, 2022, we had 1,305 Master Shipbuilders at Newport News and 242 at Ingalls. We also employ more than 7,400 veterans across the enterprise.
Employees in our shipbuilding segments with more than 40 years of continuous service achieve the honor of “Master Shipbuilder.” As of December 31, 2023, we had 1,322 Master Shipbuilders at Newport News and 227 at Ingalls. We also employ more than 6,700 veterans across the enterprise.
We maintain effective partnerships with colleges and universities, military bases for transitioning veterans, and regional community colleges to enable us to recruit and hire engineering, IT, and other technical talent.
In addition to operating our own apprentice schools, we maintain effective partnerships with colleges and universities, military bases for transitioning veterans, and regional community colleges to enable us to recruit and hire engineering, IT, and other technical talent.
Fleet Sustainment Our fleet support services provide comprehensive life-cycle sustainment services to the U.S. Navy fleet and other DoD and commercial maritime customers.
Fleet Sustainment Fleet sustainment provides comprehensive life-cycle sustainment to the U.S. Navy fleet and other DoD and commercial maritime customers.
Government may use or authorize other parties to use the 4 intellectual property we license to the government. While our intellectual property rights are important to our operations, we do not believe that any existing patent, license, or other intellectual property right is of such importance that its loss or termination would have a material impact on our business.
While our intellectual property rights are important to our operations, we do not believe that any existing patent, license, or other intellectual property right is of such importance that its loss or termination would have a material impact on our business. Seasonality No material portion of our business is seasonal.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the Securities and Exchange Commission ("SEC") in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, such information should not be considered part of this report. We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the Securities and Exchange Commission ("SEC") in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act").
In 2007, we were awarded the construction contract for USS America (LHA 6), the first in a class of enhanced amphibious assault ships designed from the keel up to be an aviation optimized Marine assault platform. We delivered USS Tripoli (LHA 7) in 2020 and are currently constructing Bougainville (LHA 8).
In 2007, we were awarded the construction contract for USS America (LHA 6), the first in a class of enhanced amphibious assault ships designed from the keel up to be an aviation optimized Marine assault platform. We are currently constructing Bougainville (LHA 8) and Fallujah (LHA 9). In 2023, we were awarded a long-lead-time material contract for LHA 10 (unnamed).
In 2022, we were awarded the construction contract for Fallujah (LHA 9). The LPD program is a long-running production program of expeditionary warfare ships in which we have generated efficiencies through ship-over-ship learning. We delivered USS Fort Lauderdale (LPD 28) in 2022, and we are currently constructing Richard M. McCool Jr .
The LPD program is a long-running production program of expeditionary warfare ships in which we have generated efficiencies through ship-over-ship learning. We delivered USS Fort Lauderdale (LPD 28) in 2022, and we are currently constructing Richard M. McCool Jr . (LPD 29), Harrisburg (LPD 30), and Pittsburgh (LPD 31).
The SEC also maintains a website at www.sec.gov that contains reports, proxy statements, and other information about SEC registrants, including us. 10 Cautionary Statement Regarding Forward-Looking Statements Statements in this Annual Report on Form 10-K and in our other filings with the SEC, as well as other statements we may make from time to time, other than statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.
Cautionary Statement Regarding Forward-Looking Statements Statements in this Annual Report on Form 10-K and in our other filings with the SEC, as well as other statements we may make from time to time, other than statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.
Available Information We maintain a website at the following address: www.hii.com. References to our website in this report are provided as a convenience and do not constitute, and should not be viewed as, incorporation by reference of the information contained on, or available through, the website. Accordingly, such information should not be considered part of this report.
These events provide recruitment, recognition, and development opportunities for our diverse workforce. Available Information We maintain a website at the following address: www.hii.com. References to our websites in this report are provided as a matter of convenience and do not constitute, and should not be viewed as, incorporation by reference of the information contained on, or available through, the website.
For more than a century, our Ingalls Shipbuilding segment ("Ingalls") in Mississippi and Newport News Shipbuilding segment ("Newport News") in Virginia have built more ships in more ship classes than any other U.S. naval shipbuilder, making us America's largest shipbuilder.
For more than a century, our Ingalls Shipbuilding segment ("Ingalls") in Mississippi and Newport News Shipbuilding segment ("Newport News") in Virginia have built more ships in more ship classes than any other U.S. naval shipbuilder, making us America's largest shipbuilder. Our Mission Technologies segment develops integrated technology solutions and products that enable today's connected, all domain force.
Naval Nuclear Support Services Newport News provides additional services to and in support of the U.S. Navy, ranging from services supporting the Navy's carrier and submarine fleets to maintenance services at U.S. Navy training facilities. Fleet support services include design, construction, maintenance, and disposal activities for in-service U.S. Navy nuclear ships worldwide through mobile and in-house capabilities.
Navy, ranging from services supporting the Navy's carrier and submarine fleets to maintenance services at U.S. Navy training facilities. Fleet support services include design, construction, maintenance, and disposal activities for in-service U.S. Navy nuclear ships worldwide through mobile and in-house capabilities. We also provide maintenance services on nuclear reactor prototypes, such as those at the Kenneth A.
We delivered USS Gerald R. Ford (CVN 78), the first aircraft carrier of the Gerald R. Ford class to the U.S. Navy in 2017. Beginning in 2009, we received contract awards totaling $8.2 billion for construction preparation, detail design, and construction of the second Gerald R. Ford class (CVN 78) aircraft carrier, John F. Kennedy (CVN 79).
Beginning in 2009, we received contract awards totaling $8.7 billion for construction preparation, detail design, and construction of the second Gerald R. Ford class (CVN 78) aircraft carrier, John F. Kennedy (CVN 79). In addition, we have received contract awards valued at $15.3 billion for detail design and construction of the Gerald R.
In addition, a significant prolonged increase in inflation could negatively impact the cost of raw materials, components, and other supplies. We mitigate some supply risk by negotiating long-term agreements with certain raw material suppliers, and we mitigate inflation risk related to raw material to an extent through price escalation provisions in certain customer contracts.
We mitigate some supply risk by negotiating long-term agreements with certain raw material suppliers, and we mitigate inflation risk related to raw material to an extent through price escalation provisions in certain customer contracts.
Unmanned Systems Our unmanned systems products and services create advanced unmanned maritime solutions for defense, marine research, and commercial applications. Serving customers in more than 30 countries, our unmanned systems group provides design, autonomy, manufacturing, testing, operations, and sustainment of unmanned systems, including unmanned underwater vehicles and unmanned surface vessels.
We also provide undersea vehicle and specialized craft development and prototyping services. Unmanned Systems Unmanned Systems develops advanced unmanned systems for defense, marine research, and commercial applications. Serving customers in more than 30 countries, we provide design, autonomy, manufacturing, testing, operations, and sustainment of unmanned systems, including unmanned underwater vehicles and unmanned surface vessels.
Navy aircraft carrier fleet through both RCOH and fleet support across the globe. We are currently performing the RCOH of USS George Washington (CVN 73) and USS John C. Stennis (CVN 74).
Navy aircraft carrier fleet through both RCOH and fleet support services worldwide. USS George Washington (CVN 73) was redelivered to the U.S. Navy in 2023 after completion of its RCOH, and we are currently performing the RCOH of USS John C. Stennis (CVN 74).
As prime contractor, principal subcontractor, team member, or partner, we participate in many high-priority U.S. defense programs. Ingalls includes our non-nuclear ship design, construction, repair, and maintenance businesses. Newport News includes all of our nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses.
Headquartered in Newport News, Virginia, we employ over 44,000 people domestically and internationally. We conduct most of our business with the U.S. Government, primarily the Department of Defense ("DoD"). As prime contractor, principal subcontractor, team member, or partner, we participate in many high-priority U.S. defense programs. Ingalls includes our non-nuclear ship design, construction, repair, and maintenance businesses.
In addition to owning intellectual property, we license intellectual property rights to and from other parties. The U.S. Government generally receives non-exclusive licenses to certain intellectual property we develop in the performance of U.S. Government contracts and unlimited license rights in technical data developed under our U.S. Government contracts when such data is developed entirely at government expense. The U.S.
Government contracts and unlimited license rights in technical data developed under our U.S. Government contracts when such data is developed 4 entirely at government expense. The U.S. Government may use or authorize other parties to use the intellectual property we license to the government.
Seasonality No material portion of our business is seasonal. The timing of our revenue recognition is based on multiple factors, including the timing of contract awards, the incurrence of contract costs, contract cost estimation, and unit deliveries. See Note 2: Summary of Significant Accounting Policies in Item 8.
The timing of our revenue recognition is based on multiple factors, including the timing of contract awards, the incurrence of contract costs, contract cost estimation, and unit deliveries. See Note 2: Summary of Significant Accounting Policies in Item 8. Backlog As of December 31, 2023 and 2022, our total backlog was approximately $48.1 billion and $47.1 billion, respectively.
Our Newport News shipyard is located on approximately 550 acres near the mouth of the James River, which adjoins the Chesapeake Bay. Design, Construction, Refueling and Complex Overhaul, and Inactivation of Aircraft Carriers Engineering, design, and construction of U.S. Navy nuclear aircraft carriers ("CVN") are core to Newport News operations. Aircraft carriers are the largest ships in the U.S.
Newport News The core business of our Newport News segment is designing and constructing nuclear-powered aircraft carriers and submarines, and the refueling and overhaul and the inactivation of nuclear-powered aircraft carriers. Our Newport News shipyard is located on approximately 550 acres near the mouth of the James River, which adjoins the Chesapeake Bay.
The first submarine of the Block IV contract was delivered in 2020, two more submarines of the Block IV contract were delivered in 2022, and the remaining boats are in the manufacturing and outfitting phases of construction.
The first submarine of the Block IV contract was delivered in 2020, and three more submarines have been delivered through 2023. The remaining six boats of the Block IV contract are in the final assembly and test phases of construction.
Each RCOH takes nearly four years to complete, with the work accounting for approximately 35% of all maintenance and modernization during an aircraft carrier's 50 year service life.
Ford class (CVN 78) aircraft carriers Enterprise (CVN 80) and Doris Miller (CVN 81). We continue to be the exclusive prime contractor for nuclear aircraft carrier refueling and complex overhaul ("RCOH"). Each RCOH takes nearly four years to complete, with the work accounting for approximately 35% of all maintenance and modernization during an aircraft carrier's 50 year service life.
Customers Our revenues are primarily derived from the U.S. Government, including the U.S. Navy, the U.S. Coast Guard, the DoD, the DoE, and other federal agencies. In 2022, 2021, and 2020, approximately 82%, 90%, and 88%, respectively, of our revenues were generated from the U.S. Navy.
Coast Guard, the DoD, the DoE, and other federal agencies. In 2023, 2022, and 2021, approximately 81%, 82%, and 90%, respectively, of our revenues were generated from the U.S. Navy. Intellectual Property We develop new technologies that are incorporated into the products and services we provide to our customers.
We believe these single source suppliers, as well as our overall supplier base, are adequate to meet our foreseeable needs. Any inability to procure the necessary raw materials, components, and other supplies for our products on a timely basis could negatively affect our results of operations, financial condition, or cash flow.
Any inability to procure the necessary raw materials, components, and other supplies for our products on a timely basis could negatively affect our results of operations, financial condition, or cash flow. In addition, a significant prolonged increase in inflation could negatively impact the cost of raw materials, components, and other supplies.
For long-term contracts, we generally solicit price quotations for many of our material requirements from multiple suppliers to ensure competitive pricing. While we have not generally been dependent upon any one supply source, we currently have only one supplier for certain component parts as a result of consolidation in the defense industry.
While we have not generally been dependent upon any one supply source, we currently have only one supplier for certain component parts as a result of consolidation in the defense industry. We believe these single source suppliers, as well as our overall supplier base, are adequate to meet our foreseeable needs.
Navy's fleet, with a displacement of over 90,000 tons. Newport News has designed and built more than 31 aircraft carriers for the U.S. Navy since 1933, including all ten Nimitz class (CVN 68) aircraft carriers currently in active service, as well as the first ship of the next generation Gerald R. Ford class (CVN 78) aircraft carriers.
Navy since 1933, including all ten Nimitz class (CVN 68) aircraft carriers currently in active service, as well as the first ship of the next generation Gerald R. Ford class (CVN 78) aircraft carriers. We delivered USS Gerald R. Ford (CVN 78), the first aircraft carrier of the Gerald R. Ford class to the U.S. Navy in 2017.
(LPD 29), Harrisburg (LPD 30), and Pittsburgh (LPD 31). In 2022, we were awarded a long-lead time material contract for LPD 32 (unnamed). Surface Combatants We are a design agent for, and one of only two companies that constructs, Arleigh Burke class (DDG 51) guided missile destroyers, a class of surface combatant.
In 2023, we were awarded a contract to construct Philadelphia (LPD 32). Surface Combatants We are a design agent for, and one of only two companies that constructs, Arleigh Burke class (DDG 51) guided missile destroyers, a class of surface combatant. We have delivered 35 Arleigh Burke class (DDG 51) destroyers to the U.S. Navy, including USS Jack H.
As part of our nuclear and environmental services, we participate in joint ventures, including Newport News Nuclear BWXT Los Alamos, LLC ("N3B"), Mission Support and Test Services, LLC ("MSTS"), and Savannah River Nuclear Solutions, LLC ("SRNS").
Through participation in joint ventures, including Newport News Nuclear BWXT Los Alamos, LLC ("N3B"), Mission Support and Test Services, LLC ("MSTS"), and Savannah River Nuclear Solutions, LLC ("SRNS"), we meet customers’ toughest nuclear and environmental challenges. Customers Our revenues are primarily derived from the U.S. Government, including the U.S. Navy, the U.S.
Other materials we use in large quantities include paint, aluminum, pipe, electrical cable, and fittings. All of these materials are currently available in adequate supply. In connection with our U.S. Government contracts, we are required to procure certain materials and component parts from supply sources approved by the U.S. Government.
All of these materials are currently available in adequate supply. In connection with our U.S. Government contracts, we are required to procure certain materials and component parts from supply sources approved by the U.S. Government. For long-term contracts, we generally solicit price quotations for many of our material requirements from multiple suppliers to ensure competitive pricing.
To a lesser extent, our lines of business compete on certain contracts with major prime A&D contractors, including Lockheed Martin, General Dynamics, Northrop Grumman, Raytheon, and Boeing.
Our Mission Technologies segment competes domestically and internationally against large aerospace and defense ("A&D") companies, primarily L3 Harris, Amentum, ManTech, Leidos, and, increasingly, small businesses serving the intelligence community. To a lesser extent, our lines of business compete on certain contracts with major prime A&D contractors, including Lockheed Martin, General Dynamics, Northrop Grumman, Raytheon, and Boeing.
We were previously awarded contracts from Electric Boat to begin integrated product and process development and provide long-lead-time material and advance construction for the Columbia class (SSBN 826) program. Contract award for the first two Columbia class submarines (SSBN 826 and SSBN 827) and construction start of the first Columbia class (SSBN 826) submarine occurred in late 2020.
Contract award for the first two Columbia class submarines (SSBN 826 and SSBN 827) and construction start of the first Columbia class (SSBN 826) submarine occurred in late 2020.
Navy's current fleet of Arleigh Burke class (DDG 51) destroyers and are positioned well to be awarded future contracts for surface combatant ships as well. Our Mission Technologies segment delivers technology based products and solutions to government and commercial markets.
Navy's current fleet of Arleigh Burke class (DDG 51) destroyers and are positioned well to be awarded future contracts for surface combatant ships as well. Key competitive factors in the Mission Technologies segment include technology capabilities; innovative cyber advances and artificial intelligence; the ability to develop and implement complex, integrated solutions; the ability to meet delivery schedules; and cost effectiveness.
In 2020, we were awarded a contract to 1 construct an additional Arleigh Burke class (DDG 51) destroyer. We are currently constructing Ted Stevens (DDG128), Jeremiah Denton (DDG 129), George M. Neal (DDG 131), and Sam Nunn (DDG 133). National Security Cutters The U.S.
In 2023, we were awarded a multi-year contract for construction of six more Arleigh Burke class (DDG 51) destroyers, as well as the first option ship, for a total of seven ships. We are currently 1 constructing Ted Stevens (DDG128), Jeremiah Denton (DDG 129), George M. Neal (DDG 131), Sam Nunn (DDG 133), and Thad Cochran (DDG 135).
Intellectual Property We develop new technologies that are incorporated into the products we produce and services we provide for our customers. We also develop new manufacturing processes and systems-integration technologies and processes that we use to produce our products and to provide services to our customers.
We also develop new manufacturing processes and systems-integration technologies and processes that we use to produce our products and to provide services to our customers. In addition to owning intellectual property, we license intellectual property rights to and from other parties. The U.S. Government generally receives non-exclusive licenses to certain intellectual property we develop in the performance of U.S.
In 2018, we were awarded long-lead-time material and construction contracts for Calhoun (NSC 10) and Friedman (NSC 11), which are currently under construction. Newport News The core business of our Newport News segment is designing and constructing nuclear-powered aircraft carriers and submarines, and the refueling and overhaul and the inactivation of nuclear-powered aircraft carriers.
In 2018, we were awarded long-lead-time material and construction contracts for Calhoun (NSC 10), which was delivered to the U.S. Coast Guard in 2023, and Friedman (NSC 11), which is currently under construction.
We have delivered 34 Arleigh Burke class (DDG 51) destroyers to the U.S. Navy, including Lenah H. Sutcliffe Higbee (DDG 123) in 2022, USS Frank E. Petersen Jr. (DDG 121) in 2021, and USS Delbert D. Black (DDG 119) in 2020.
Lucas (DDG 125) in 2023, USS Lenah H. Sutcliffe Higbee (DDG 123) in 2022, and USS Frank E. Petersen Jr. (DDG 121) in 2021. In 2018, we were awarded a multi-year contract for construction of six Arleigh Burke class (DDG 51) destroyers and, in 2020,a contract to construct an additional Arleigh Burke class (DDG 51) destroyer.
Backlog As of December 31, 2022 and 2021, our total backlog was approximately $47.1 billion and $48.5 billion, respectively. We expect approximately 22% of backlog at December 31, 2022, to be converted into sales in 2023. Raw Materials The most significant material we use is steel.
We expect approximately 22% of backlog at December 31, 2023, to be converted into sales in 2024. Raw Materials We rely on third parties to provide raw materials. The most significant material we use is steel. Other materials we use in large quantities include paint, aluminum, pipe, electrical cables, electronic components, fittings, custom machine items, and sensors.
To remain competitive, we must be able to identify emerging technology trends and consistently provide superior service, while understanding customer priorities and maintaining customer relationships. Our Mission Technologies segment competes domestically and internationally against large aerospace and defense ("A&D") companies, primarily L3 Harris, Amentum, ManTech, Leidos, and, increasingly, small businesses serving the intelligence community.
Our success depends on investments in our people, technologies, and products to meet the evolving needs of our customers. To remain competitive, we must be able to identify emerging technology trends and consistently provide superior service, while understanding customer priorities and maintaining customer relationships.
We also provide maintenance services on nuclear reactor prototypes, such as those at the Kenneth A. Kesselring Site, a research and development facility in New York that supports the U.S. Navy.
Kesselring Site, a research and development facility in New York that supports the U.S. Navy. Mission Technologies Our Mission Technologies segment develops integrated solutions that enable today’s connected, all-domain force.
The LTCR and LWDR at Ingalls were 2.55 and 73.06, respectively, in 2022, 2.75 and 76.32, respectively, in 2021, and 2.53 and 56.37, respectively, in 2020. 9 Corporate Values - We operate on a set of values that are shared with all employees: Integrity, Safety, Respect, Engagement, Responsibility, and Performance.
The LTCR and LWDR at Ingalls were 2.55 and 73.06 respectively, in 2022, and 2.75 and 76.32, respectively, in 2021. In 2023 Ingalls began to track DART, in lieu of LTCR and LWDR. DART at Ingalls was 3.34 in 2023.
Removed
Our Mission Technologies (formerly named Technical Solutions) segment delivers high-value engineering and technology solutions to enable multi-domain distributed operations in the government and commercial markets. Headquartered in Newport News, Virginia, we employ approximately 43,000 people domestically and internationally. We conduct most of our business with the U.S. Government, primarily the Department of Defense ("DoD").
Added
Newport News includes all of our nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses.
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In 2013, we were awarded a multi-year contract totaling $3.3 billion for construction of five Arleigh Burke class (DDG 51) destroyers, of which four have been delivered and Jack H. Lucas (DDG 125) is being constructed. In 2018, we were awarded a multi-year contract totaling $5.1 billion for construction of six additional Arleigh Burke class (DDG 51) destroyers.
Added
Design, Construction, Refueling and Complex Overhaul, and Inactivation of Aircraft Carriers Engineering, design, and construction of U.S. Navy nuclear aircraft carriers ("CVN") are core to Newport News operations. Aircraft carriers are the largest ships in the U.S. Navy's fleet, with a displacement of over 90,000 tons. Newport News has designed and built more than 31 aircraft carriers for the U.S.
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In addition, we have received awards valued at $15.3 billion for detail design and construction of the Gerald R. Ford class (CVN 78) aircraft carriers Enterprise (CVN 80) and Doris Miller (CVN 81). We continue to be the exclusive prime contractor for nuclear aircraft carrier refueling and complex overhaul ("RCOH").
Added
In 2023, the team was awarded a contract modification for advance procurement for long lead-time material in support of two additional Block V boats, bringing the total Block V boats to 12. In addition, the team received a contract award for advance procurement of long-lead-time material in support of the first two Block VI boats.
Removed
Ford class (CVN 78) aircraft carriers. We received a contract in 2013 to inactivate the decommissioned Enterprise (CVN 65), the world's first nuclear-powered aircraft carrier, which was built by us and commissioned in 1961. The decommissioned Enterprise (CVN 65) inactivation was completed in the second quarter of 2018.
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In 2023, we were awarded a contract modification for long-lead-time material and advance construction in support of five additional Columbia class (SSBN 826) boats, also referred to as Build II of the class. Naval Nuclear Support Services Newport News provides additional services to and in support of the U.S.
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Eight of the Block V boats are in manufacturing and outfitting stages and two of the Block V boats are in the advance procurement phases.
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Our capabilities include C5ISR systems and operations; the application of Artificial Intelligence ("AI") and machine learning to battlefield decisions; defensive and offensive cyberspace strategies and electronic warfare ("CEW&S"); live, virtual, constructive solutions ("LVC"); unmanned, autonomous systems; fleet sustainment; and critical nuclear operations.
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Mission Technologies The Mission Technologies segment includes business groups focused on high-end information technology (“IT”) and mission based solutions for DoD, intelligence, and federal civilian customers; life-cycle sustainment services to the U.S.
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Our domain expertise and advanced technologies support our mission partners across the globe. 3 C5ISR C5ISR designs, develops, integrates, and manages the sensors, systems and other assets necessary to support integrated ISR operations and accelerated decision-making. These business activities provide data fusion and mission management capabilities for the DoD, the combatant commands, and the intelligence community.
Removed
Navy fleet and other maritime customers; unmanned, autonomous systems; and nuclear management and operations and environmental management services for the Department of Energy ("DoE"), DoD, state and local governments, and private sector companies.
Added
CEW&S CEW&S works within our nation’s intelligence and cyber operations communities to defend U.S. interests in cyberspace and anticipate emerging threats. Our capabilities in cybersecurity, network architecture, reverse engineering, software, and hardware development uniquely enable our ability to support sensitive missions for the U.S. military and federal agency partners.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSee the Contracts section under Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 for descriptions of the types of contracts that comprise our business. 15 Approximately 50% of our revenues in 2022 were generated under fixed-price incentive contracts, approximately 44% were generated under cost-type contracts, approximately 3% were generated under time and material contracts, and approximately 3% were generated under firm fixed-price contracts.
Biggest changeGovernment customers depends upon the type of contract under which we are performing: firm fixed-price, fixed-price incentive, cost-type, or time and material. See the Contracts section under Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 for descriptions of the types of contracts that comprise our business.
Performance failures by our subcontractors or suppliers due to natural or environmental disasters may adversely affect our ability to perform our contracts, which could reduce our profitability in the event damages or other costs are not recoverable from the subcontractor or supplier, the customer, or insurers.
Performance failures by our subcontractors or suppliers due to natural or environmental disasters may adversely affect our ability to perform our contracts, which could reduce our profitability in the event damages or other costs are not recoverable from the subcontractor or supplier, our customer, or insurers.
Our Restated Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty 24 owed by any of our directors, officers, other employees, or stockholders to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery, (iv) any action asserting a claim arising pursuant to any provision of our Certificate of Incorporation or Restated Bylaws, (v) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the General Corporation Law of the State of Delaware, or (vi) any action governed by the internal affairs doctrine.
Our Restated Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, other employees, or stockholders to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery, (iv) any action asserting a claim arising pursuant to any provision of our Certificate of Incorporation or Restated Bylaws, (v) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the General Corporation 24 Law of the State of Delaware, or (vi) any action governed by the internal affairs doctrine.
In addition, in the event of litigation with an insurance carrier, an unfavorable outcome may have a material adverse effect on our financial position, results of operations, or cash flows.
In addition, an unfavorable outcome in the event of litigation with an insurance carrier may have a material adverse effect on our financial position, results of operations, or cash flows.
Breaches of our information technology can be expected to lead to the following types of adverse consequences: losses or misuse of sensitive information or capabilities; theft or corruption of data; harm to personnel, infrastructure or products; financial costs and liabilities; protracted interruptions in our operations and performance; significant recovery and restoration expenses, degraded performance on existing contracts, the misuse of our products; and exposure to reputational damage, potential liability, or the loss of current or future contracts, including work on sensitive or classified systems for the U.S.
Breaches of our information technology can be expected to lead to the following types of adverse consequences: losses or misuse of sensitive information or capabilities; theft or corruption of data; harm to personnel, infrastructure or products; financial costs and liabilities; protracted interruptions of our operations and performance; significant recovery and restoration expenses; degraded performance on existing contracts; the misuse of our products; and exposure to reputational damage, potential liability, or the loss of current or future contracts, including work on sensitive or classified systems for the U.S.
If an audit uncovers improper or illegal activities, we may be subject to administrative, civil, or criminal proceedings, which could result in fines, penalties, repayments, or compensatory, treble, or other damages. Certain U.S. Government findings against a contractor can also lead to suspension or debarment from future U.S. Government contracts or the loss of export privileges .
If an audit uncovers improper or illegal activities, we may be subject to administrative, civil, or criminal proceedings, which could result in fines, penalties, 20 repayments, or compensatory, treble, or other damages. Certain U.S. Government findings against a contractor can also lead to suspension or debarment from future U.S. Government contracts or the loss of export privileges .
To be successful, we conduct due diligence to identify valuation issues and potential loss contingencies; negotiate transaction terms; complete and close complex transactions; integrate acquired companies and employees; and realize anticipated operating synergies efficiently and effectively. Acquisition, joint venture, and investment transactions often require substantial management resources and have the potential to divert our attention from our existing business.
To be successful, we conduct due diligence to identify valuation issues and potential loss contingencies; negotiate transaction terms; 25 complete and close complex transactions; integrate acquired companies and employees; and realize anticipated operating synergies efficiently and effectively. Acquisition, joint venture, and investment transactions often require substantial management resources and have the potential to divert our attention from our existing business.
Fixed price contracts increase the risk that we may not recover all of our costs or will generate less profit or a loss. Under each type of contract, if we are unable to control costs, our operating results could be adversely affected, particularly if we are unable to negotiate an increase in contract price with our customers. U.S.
Fixed price contracts increase the risk that we may not recover all of our costs or will generate less profit or a loss. Under each type of contract, our 15 operating results could be adversely affected if we are unable to control costs, particularly if we are unable to negotiate an increase in contract price with our customers. U.S.
Even the most well-protected information, networks, systems, and facilities remain potentially vulnerable because attempted security breaches, particularly cyber attacks and cyber intrusions or disruptions, regularly occur and will continue to occur in the future, and because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target.
Even the most well-protected information, networks, systems, and facilities remain potentially vulnerable because attempted 19 security breaches, particularly cyber attacks and cyber intrusions or disruptions, regularly occur and will continue to occur in the future and the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target.
We could encounter threats to our physical security, including our facilities and personnel, and threats from workplace violence, civil unrest, acts of sabotage or terrorism, and other local security issues, any of which could disrupt our business. Such events may require us to incur greater costs for security or to shut down operations for a period of time.
We could also encounter threats to our physical security, including our facilities and personnel, and threats from workplace violence, civil unrest, acts of sabotage or terrorism, and other local security issues, any of which could disrupt our business. Such events may require us to incur greater costs for security or to shut down operations for a period of time.
From time to time, we may begin performance under an undefinitized contract action with a not-to-exceed price prior to completing contract negotiations in order to support U.S. government priorities. Uncertainties in final contract price, specifications and terms, or loss of negotiating leverage associated with contract definitization may negatively affect our profitability.
From time to time, we may begin performance under an undefinitized contract action with a not-to-exceed price prior to completing contract negotiations, in order to support U.S. government priorities. Uncertainties relating to final contract price, specifications and terms, or loss of negotiating leverage associated with contract definitization, may negatively affect our profitability.
We periodically experience quality issues with respect to products and services that we sell to our U.S. Government customers. These issues can and have required significant resources to determine the source of the deficiencies and implement corrective actions. We may discover quality issues in the future related to our products and services 17 that require analysis and corrective action.
We periodically experience quality issues with respect to products and services that we sell to our U.S. Government customers. These issues can and have required significant resources to determine the source of the deficiencies and implement corrective actions. We may discover quality issues in the future related to our products and services that require analysis and corrective action.
Although we undertake cooperative efforts with our customers, suppliers, subcontractors, and other business partners to facilitate their understanding of cyber security threats they face and potential cyber security countermeasures to mitigate potential cyber-attacks, other security threats, and business disruptions, we rely substantially on the safeguards implemented by these organizations, which affects the security of our information.
Although we undertake cooperative efforts with our customers, suppliers, subcontractors, and other business partners to facilitate their understanding of cyber security threats they face and potential cyber security countermeasures to mitigate potential cyber attacks and other security threats, we rely substantially on the safeguards implemented by these organizations, which affects the security of our information.
Notwithstanding our acquisition process and business integration efforts, actual operating results of businesses we acquire or in which we invest may vary significantly from expectations. In such events, we may be required to write down our carrying values of the related goodwill, purchased intangible assets, or investments.
Notwithstanding our acquisition process and business integration efforts, actual operating results of businesses we acquire or in which we invest may vary from expectations. In such events, we may be required to write down our carrying values of the related goodwill, purchased intangible assets, or investments.
Many of our contracts include performance obligations that incorporate innovative designs and state-of-the-art manufacturing expertise, include new technologies, or are dependent upon factors not wholly within our control, and failure to meet performance expectations could adversely affect our profitability and future prospects.
Many of our contracts include performance obligations that incorporate innovative designs, state-of-the-art manufacturing expertise, or new technologies, or otherwise are dependent upon factors not wholly within our control, and failure to meet performance expectations could adversely affect our profitability and future prospects.
In addition to future changes in tax laws, the amount of net deferred tax liabilities will change periodically as a result of a number of factors, including the measurement of our defined benefit pension plans, actual cash contributions to our defined benefit pension plans, changes in the timing of contract taxable income, and changes in the amount and timing of depreciation deductions.
In addition to future changes in tax laws, the amount of net deferred tax liabilities will change periodically as a result of a number of factors, including the measurement of our defined benefit pension plans, actual cash contributions to our defined benefit pension plans, changes in the timing of contract taxable income, and changes in the amount and timing of depreciation and amortization deductions.
In addition to the DoD's business practice initiatives, the DCMA and DCAA have implemented cost recovery/cost savings initiatives to prioritize cost recovery/savings. As a result, we have experienced and may continue to experience a higher number of audits and/or lengthened periods of time required to close open audits.
In addition to the DoD's business practice initiatives, the DCMA and DCAA have implemented cost recovery/cost savings initiatives to prioritize cost recovery/savings. As a result, we have experienced and may continue to 13 experience a higher number of audits and/or lengthened periods of time required to close open audits.
A number of factors could cause us to incur higher borrowing costs and experience greater difficulty accessing public and private markets for debt, including disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook, or credit ratings.
A number of factors could cause us to incur higher borrowing costs and experience greater difficulty accessing public and private debt markets, including disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook, or credit ratings.
Due to the specialized nature of our business, our performance is dependent upon our ability to identify, attract and retain a workforce with the requisite skills in multiple areas, including: engineering, nuclear, trades and crafts, manufacturing, information technology, and cybersecurity.
Due to the specialized nature of our business, our performance is dependent upon our ability to identify, attract, train, and retain a workforce with the requisite skills in multiple areas, including: engineering, nuclear, trades and crafts, manufacturing, information technology, and cybersecurity.
Our unfunded backlog, in particular, contains management’s estimate of revenues expected to be realized on unfunded contracts that may never be realized. Any termination could also result in the cancellation of future work on the related program.
Our unfunded backlog contains management’s estimate of revenues expected to be realized on unfunded contracts that may never be realized. Any termination could also result in the cancellation of future work on the related program.
Reasons may include labor shortages or reduced productivity, the nature and complexity of the work performed, the timeliness and availability of materials, subcontractor performance or product quality issues, performance delays, availability and timing of customer funding, and natural disasters.
Reasons may include labor shortages or reduced productivity, the nature and complexity of the work performed, the timeliness and availability of materials or equipment, subcontractor performance or product quality issues, performance delays, availability and timing of customer funding, and natural disasters.
In addition, some of our contracts have provisions relating to cost controls and audit rights, and, if we fail to meet the terms specified in those contracts, we may not realize their full benefits.
Some of our contracts have provisions relating to cost controls and audit rights, and, if we fail to meet the terms specified in those contracts, we may not realize their full benefits.
Such risks include disruptions or restrictions on our employees’ ability to work or work effectively, temporary closures of our facilities or the facilities of our customers or suppliers, delays in supplier deliveries, and delays in customer contract awards.
Such risks include disruptions or restrictions on our employees’ ability to work or work effectively, 18 temporary closures of our facilities or the facilities of our customers or suppliers, delays in supplier deliveries, and delays in customer contract awards.
Our compliance program includes detailed compliance plans and related compliance controls, policies, procedures, and training designed to prevent and detect misconduct by employees, agents, business partners, and others working on our behalf, including suppliers and subcontractors, that would violate the laws of the jurisdictions in which we operate, including laws governing payments to government officials, the protection of export controlled or classified information, cost accounting and billing, competition, and data privacy.
Our compliance program incorporates detailed compliance plans and related compliance controls, policies, procedures, and training designed to prevent and detect misconduct by employees, agents, business partners, and others working on our behalf, including suppliers and subcontractors, that would violate the laws of the jurisdictions in which we operate, including laws governing payments to government officials, the protection of export controlled or classified information, cost accounting and billing, competition, and data privacy.
If we are not able to repay or refinance our debt as it becomes due, we may be forced to sell assets or take other unfavorable actions, including reducing financing for working capital, capital expenditures, and general corporate purposes; reducing our cash dividend rate and/or share repurchases; or dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness.
If we are not able to repay or refinance our debt as it becomes due, we may be forced to sell assets or take other unfavorable actions, including reducing funding for working capital, capital expenditures, and general corporate purposes; reducing our cash dividend rate and/or share repurchases; or dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness.
In addition, cyber security and data privacy and protection laws and regulations are evolving and present increasing compliance challenges, which increase our costs and may affect our competitiveness, cause reputational harm, and expose us to damages claims, substantial fines, or other penalties. Environmental costs could have a material adverse effect on our financial position, results of operations, or cash flows.
In addition, cyber security and data privacy and protection laws and regulations are evolving and presenting increasing compliance challenges, which increase our costs and may affect our competitiveness, cause reputational harm, and expose us to damages claims, substantial fines, or other penalties. Environmental costs could have a material adverse effect on our financial position, results of operations, or cash flows.
Mission Technologies competes domestically and internationally against large A&D companies, primarily L3 Harris, Amentum, ManTech, Leidos, and, increasingly, small businesses serving the intelligence community. To a lesser extent, our lines of business compete on certain contracts with major prime A&D contractors, including Lockheed Martin, General Dynamics, Northrop Grumman, Raytheon, and Boeing.
Mission Technologies competes domestically and internationally, across our business capability, against large A&D companies, primarily L3 Harris, Amentum, ManTech, Leidos, and, increasingly, small businesses serving the intelligence community. To a lesser extent, our lines of business compete on certain contracts with major prime A&D contractors, including Lockheed Martin, General Dynamics, Northrop Grumman, Raytheon, and Boeing.
Business and Operational Risk Factors Cost growth on flexibly priced contracts that does not result in higher contract price due from customers reduces our profit and exposes us to the potential loss of future business. Our operating income is adversely affected when we incur certain contract costs or certain increases in contract costs that cannot be billed to customers.
Business and Operational Risk Factors Cost growth on flexibly priced contracts that does not result in higher contract prices due from customers reduces our profit and exposes us to the potential loss of future business. Our operating income is adversely affected when we incur certain contract costs or certain increases in contract costs that cannot be billed to customers.
We also could be adversely affected by, or liable for, actions taken by joint ventures that we do not control, including violations of anti-corruption, import and export, taxation, and anti-boycott laws. There can be no assurance we will continue to increase our dividends or to repurchase shares of our common stock at current levels.
We also could be adversely affected by, or liable for, actions taken by joint ventures that we do not control, including violations of anti-corruption, import and export, taxation, and anti-boycott laws. We can provide no assurance we will continue to increase our dividends or to repurchase shares of our common stock at current levels.
Any improper actions by our employees, agents, business partners, and others working on our behalf, including suppliers and subcontractors, could subject us to administrative, civil, or criminal investigations and monetary and non-monetary penalties, including suspension or debarment, which could have a material adverse effect on our financial position, results of operations, or cash flows.
Any improper actions by our employees, agents, business partners, and others working on our behalf could subject us to administrative, civil, or criminal investigations and monetary and non-monetary penalties, including suspension or debarment, which could have a material adverse effect on our financial position, results of operations, or cash flows.
We have experienced in the past work stoppages, strikes, and other labor disruptions associated with the collective bargaining of new labor agreements. If we experience such events in the future, we could incur additional expenses or work delays that could adversely affect programs served by employees who are covered by collective bargaining agreements.
We have experienced in the past work stoppages, strikes, and other labor disruptions associated with the collective bargaining of new labor agreements. If we experience such events in the future, we could incur additional costs or work delays that could adversely affect programs served by employees who are covered by collective bargaining agreements.
Our ability to satisfy our obligations on a timely basis are adversely affected if one or more of our suppliers or subcontractors are unable to provide agreed-upon products or materials or perform agreed-upon services in a timely, compliant, and cost-effective manner, or they otherwise fail to satisfy contractual requirements.
Our ability to satisfy our obligations on a timely basis are adversely affected if one or 16 more of our suppliers or subcontractors are unable to provide agreed-upon products, materials, or services in a timely, compliant, and cost-effective manner, or they otherwise fail to satisfy contractual requirements.
We rely on our subcontractors and suppliers to comply with applicable laws, regulations, and the obligations set forth in the HII Supplier Code of Conduct. We rely on representations and certifications from our subcontractors and suppliers regarding such compliance, and we conduct technical assessments, inspections, and audits, as necessary, with subcontractors and suppliers.
We rely on our subcontractors and suppliers to comply with applicable laws, regulations, and the obligations set forth in the HII Supplier Code of Conduct, through representations and certifications from our subcontractors and suppliers regarding such compliance. We also conduct technical assessments, inspections, and audits, as necessary, with subcontractors and suppliers.
Government has, in certain instances, withheld contract payments upon its assessment that deficiencies exist with one or more of our business systems, which can have a material impact on the timing of our cash receipts.
Government has, in certain instances, withheld contract payments upon its assessment that deficiencies exist with one or more of our business systems, which can have a material impact on the timing of our cash receipts. The U.S.
Government regulations also provide that certain allegations against a contractor may lead to suspension or debarment from government contracts or suspension of export privileges. Suspension or debarment would have a material adverse effect on us because of our reliance on government contracts and authorizations.
Government regulations also provide that certain allegations against a contractor may lead to suspension or debarment from government contracts or suspension of export privileges. Suspension or debarment would have a material adverse effect on our business because of our reliance on government contracts and authorizations.
Our business is subject to disruption caused by natural disasters, environmental disasters, and other events that could have a material adverse effect on our financial position, results of operations, or cash flows.
Our business is subject to disruptions caused by natural disasters, environmental disasters, and other events that could have a material adverse effect on our financial position, results of operations, or cash flows.
New laws, regulations, or procurement 20 requirements, or changes to existing ones (including, for example, regulations related to recovery of compensation costs, cyber security, counterfeit parts, specialty metals, and conflict minerals), can increase our performance costs and compliance costs and risks, and reduce our profitability. We are overseen and audited by the U.S.
New laws, regulations, or procurement requirements, or changes to existing ones (including, for example, regulations related to recovery of compensation costs, cyber security, counterfeit parts, specialty metals, conflict minerals, and climate-related disclosure), can increase our performance costs and compliance costs and risks, and reduce our profitability. We are overseen and audited by the U.S.
Our judgment , estimation , and assumption processes significantly impact our contract accounting, and materially different amounts can result if different assumptions are used or if actual events differ from our assumptions. Future changes in assumptions, circumstances, or estimates may have a material adverse effect on our future financial position, results of operations, or cash flows.
Our assessment , estimation , and assumption processes 14 significantly impact our contract accounting, and materially different amounts can result if different assumptions are used or if actual events differ from our assumptions. Future changes in assumptions, circumstances, or estimates may have a material adverse effect on our future financial position, results of operations, or cash flows.
To the extent we lose experienced personnel, it is critical that we develop other employees, hire new qualified personnel, and successfully manage the short and long-term transfer of critical knowledge and skills. Competition for talent is intense, and this may affect our ability to successfully attract or retain personnel with the requisite skills or clearances.
To the extent we lose experienced personnel, it is critical that we hire new qualified personnel, develop and train inexperienced employees, and successfully manage the short and long-term transfer of critical knowledge and skills. Competition for talent is intense, and this may affect our ability to successfully attract or retain personnel with the requisite skills or clearances.
Such events could also result in a termination of the prime contract and have an adverse effect on our ability to compete for future contracts. We face risks related to health epidemics, pandemics, and similar outbreaks. We face various risks related to health epidemics, pandemics, and similar outbreaks, including the global health crisis of COVID-19.
Such events could also result in a termination of the prime contract and have an adverse effect on our ability to compete for future contracts. We face risks related to health epidemics, pandemics, and similar outbreaks. We face various risks related to health epidemics, pandemics, and similar outbreaks, including global health crises like COVID-19.
Our shipyards also generate significant quantities of wastewater, which we treat before discharging in accordance with applicable permits. To manage these materials, our shipyards have an extensive network of above ground and underground storage tanks, some of which have 21 leaked and required remediation in the past.
Our shipyards also generate significant quantities of wastewater, which we treat before discharging in compliance with applicable permits. To manage these materials, our shipyards have an extensive network of above ground and underground storage tanks, some of which have leaked and required remediation in the past.
We design, develop, and manufacture products and provide services that often involve innovative designs, new technologies, and complex manufacturing processes. Problems and delays with product development, technology implementation, manufacturing, or subcontractor components or services can impact our contract performance. First-in-class ships, also known as lead ships, usually include new technologies supplied by the U.S.
We design, develop, and manufacture products and perform services that often involve innovative designs, new technologies, and complex manufacturing processes. Delays and issues with product development, technology implementation, manufacturing, or subcontractor components or services can impact our contract performance. First-in-class ships, also known as lead ships, usually include new technologies supplied by the U.S.
In addition, our handling of hazardous materials has sometimes resulted in spills in our shipyards and occasionally in adjacent rivers and waterways in which we operate. Various federal, state, and local environmental laws and regulations impose restrictions on the discharge of pollutants into the environment and establish standards for the transportation, storage, and disposal of toxic and hazardous wastes.
In addition, our use of hazardous materials has sometimes resulted in releases in our shipyards and occasionally in adjacent rivers and waterways in which we operate. Various federal, state, and local environmental laws and regulations impose restrictions on the discharge of pollutants into the environment and establish standards for the transportation, storage, and disposal of toxic and hazardous wastes.
Any of these factors could affect our business with the U.S. Government, which would have a material adverse effect on our financial position, results of operations, or cash flows.
Any of these factors could materially affect our business with the U.S. Government, which in turn would have a material adverse effect on our financial position, results of operations, or cash flows.
We could incur similar impacts in the future, in connection with 18 COVID-19 or other health epidemics, pandemics, or similar outbreaks, and related cost increases may not be fully recoverable under our contracts or adequately covered by insurance, which could impact our profitability.
We could incur similar impacts in the future, in connection with health epidemics, pandemics, or similar outbreaks, and related cost increases may not be fully recoverable under our contracts or adequately covered by insurance, which could impact our profitability.
These investments typically include many of the same risks and uncertainties as we do, but may also expose us to additional risks not present if we retained full control.
These investments typically include many of the same risks and uncertainties we incur, but may also expose us to additional risks not present if we retained full control.
Notwithstanding the actions we take to mitigate the risk of receiving non-compliant materials and services, subcontractors and suppliers sometimes provide us with unauthorized, non-compliant, or deficient materials and services. Such unauthorized, non-compliant or deficient materials or services can increase our contract costs and impact our ability to satisfy our contract obligations to our customers.
Notwithstanding the actions we take to mitigate the risk of receiving non-compliant materials, components, parts, and services, subcontractors and suppliers sometimes provide us with unauthorized, non-compliant, or deficient goods and services, which can increase our contract costs and impact our ability to satisfy our contract obligations to our customers.
In addition, declines in the trading price of our common stock or the market as a whole can result in goodwill and/or purchased intangible asset impairment charges associated with our existing businesses. As of December 31, 2022, goodwill and purchased intangible assets from prior business acquisitions accounted for approximately 24% and 9%, respectively, of our total assets.
In addition, declines in the trading price of our common stock or the market as a whole can result in goodwill and/or purchased intangible asset impairment charges associated with our existing businesses. As of December 31, 2023, goodwill and purchased intangible assets from prior business acquisitions accounted for approximately 23% and 8%, respectively, of our total assets.
We rely on third parties to provide raw materials , major components and sub-systems , hardware elements , and sub-assemblies for our products and to perform certain services we provide to our customers, and we rely on such third parties to comply with applicable laws and regulations, including various DoD cybersecurity requirements.
We rely on third parties to provide raw materials , major components and sub-systems , hardware elements , and sub-assemblies for our products and to perform certain services we provide to our customers, in compliance with applicable laws and regulations, including applicable DoD cybersecurity requirements.
Market volatility and adverse capital market conditions may affect our ability to access cost-effective sources of funding and may expose us to risks associated with the financial viability of suppliers and subcontractors. The financial markets have recently experienced high levels of volatility and disruption, reducing the availability of credit for certain issuers.
Market volatility and adverse capital market conditions may affect our ability to access cost-effective sources of funding and may expose us to risks associated with the financial viability of suppliers and subcontractors. The financial markets experience high levels of volatility and disruption from time to time, reducing the availability of credit for certain issuers.
We evaluate goodwill values for impairment annually, or when evidence of potential impairment exists. We also evaluate the values of purchased intangible assets when evidence of potential impairment exists. The impairment tests are based on several factors requiring judgments.
We evaluate goodwill values for impairment annually, or when evidence of potential impairment exists. We also evaluate the values of purchased intangible assets when evidence of potential impairment exists. The impairment tests are based on several factors involving judgment.
This change reduced our 2022 cash from operations by $102 million, and we estimate it will reduce our 2023 cash from operations by approximately $82 million. The actual impact on 2023 cash from operations will depend on whether and when these provisions are deferred, modified, or repealed by Congress, including any retroactive application to 2022, among other factors.
This change reduced our 2023 cash from operations by $68 million, and we estimate it will reduce our 2024 cash from operations by approximately $59 million. The actual impact on 2024 cash from operations will depend on whether and when these provisions are deferred, modified, or repealed by Congress, including any retroactive application, among other factors.
We are subject to claims and litigation that could ultimately be resolved against us, requiring future material cash payments and/or future material charges against our operating income, materially impairing our financial position or cash flows. The size, nature, and complexity of our business make it highly susceptible to claims and litigation.
We are subject to claims and litigation that could ultimately be resolved against us, requiring future material cash payments and/or future material charges against our operating income, which would materially impact our financial position, results of operations, or cash flows. The size, nature, and complexity of our business make us highly susceptible to claims and litigation.
Accordingly, we are not always able to anticipate these techniques or to implement adequate security barriers or other preventative measures. Our suppliers, subcontractors, and other business partners also face cyber security and other security threats.
As a result, we are not always able to anticipate techniques or to implement adequate security barriers or other preventative measures. Our suppliers, subcontractors, and other business partners also face cyber security and other security threats.
As of December 31, 2022, our total backlog was $47.1 billion, including $22.2 billion in funded backlog. The U.S. Government generally has the ability to terminate contracts, in whole or in part, with little or no prior notice, for convenience or for default based upon performance. In the event of termination of a contract for the U.S.
As of December 31, 2023, our total backlog was $48.1 billion, including $26.0 billion in funded backlog. The U.S. Government generally has the ability to terminate contracts, in whole or in part, with little or no prior notice, for convenience or for default based upon performance. In the event of termination of a contract for the U.S.
Any litigation, claim, audit, or investigation, even if fully indemnified or insured, could negatively impact our reputation among our customers and the public and make it more difficult for us to compete effectively or acquire adequate insurance in the future.
Any litigation, claim, audit, or investigation, even if fully indemnified or insured, could negatively impact our reputation among our customers and the public and make it more difficult for us to compete effectively or acquire adequate insurance in the future. See Note 14: Investigations, Claims, and Litigation in Item 8.
As part of our business strategy, we identify and evaluate potential acquisitions and investments. When evaluating such transactions, we make significant judgments regarding the values of business opportunities, technologies, and other assets, the risks and costs of potential liabilities, and the future prospects of strategic acquisitions. We often compete with other potential buyers for the same opportunities.
When evaluating such transactions, we make significant judgments regarding the values of business opportunities, technologies, and other assets, the risks and costs of potential liabilities, and the future prospects of strategic acquisitions. We often compete with other potential buyers for the same opportunities.
Our intellectual property is also subject to challenge, invalidation, misappropriation, or circumvention by third parties. In the event of infringement of our intellectual property rights, breach of a confidentiality agreement, or unauthorized disclosure of proprietary information, we may not have adequate legal remedies to protect our intellectual property.
In addition, trade secrets may be independently developed by competitors. Our intellectual property is also subject to challenge, invalidation, infringement, misappropriation, or circumvention by third parties. In the event of infringement, misappropriation, breach of a confidentiality agreement, or unauthorized disclosure of proprietary information, we may not have adequate legal remedies to protect our intellectual property.
If a nuclear accident were to occur, its severity could be significantly affected by the volume of the materials and the speed of remedial 22 actions taken by us and emergency response personnel, as well as other factors beyond our control, such as weather and wind conditions.
If a nuclear accident were to occur, its severity could be significantly affected by the volume of the materials and the speed of remedial actions taken by us and emergency response personnel, as well as other factors beyond our control, such as weather and wind conditions. Actions we might take in response to an accident could result in significant costs.
Government generally receives non-exclusive licenses to certain intellectual property we develop in the performance of U.S. Government contracts, and the U.S. Government may use or authorize others to use such intellectual property. The U.S.
Government generally receives non-exclusive 23 licenses to certain intellectual property we develop in the performance of U.S. Government contracts, and the U.S. Government may use or, in some cases, authorize third parties to use such intellectual property. The U.S.
Our nuclear shipbuilding operations are considered vitally important to the U.S. Navy. As a result, our Navy contracts include notice and approval rights for the Navy and conditions regarding the Navy's obligations to indemnify us for losses relating to our naval nuclear operations, in the event of a change of control of our nuclear shipbuilding operations.
As a result, our Navy contracts include notice and approval rights for the Navy and conditions regarding the Navy's obligations to indemnify us for losses relating to our naval nuclear operations, in the event of a change of control of our nuclear shipbuilding operations. Such provisions require us to provide the U.S.
Government contracts can extend for years, and unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, a significant increase in or sustained period of higher inflation, problems with our suppliers, labor market conditions, and cost overruns, can result in the contract price becoming less favorable or even unprofitable to us over time.
Government contracts can extend for years, and unforeseen events, such as technology difficulties, fluctuations in the price of raw materials, a significant increase in or sustained period of higher inflation, supplier issues, including equipment delays, labor market conditions, and cost overruns, can result in the contract price becoming less favorable or even unprofitable to us over time.
Changes in key estimates and assumptions associated with postretirement benefit plans, such as discount rates and assumed long-term returns on assets, actual investment returns on our pension plan assets, and legislative and regulatory actions could significantly affect our financial position, results of operations, and cash flows.
Such issues and our responses and corrective actions could have a material adverse effect on our financial position, results of operations, or cash flows. 17 Changes in key estimates and assumptions associated with postretirement benefit plans, such as discount rates and assumed long-term returns on assets, actual investment returns on our pension plan assets, and legislative and regulatory actions could significantly affect our financial position, results of operations, and cash flows.
Our operating performance is also dependent upon personnel who hold security clearances and receive substantial training to work on certain programs or tasks and can be difficult to replace on a timely basis if we experience unplanned attrition.
Our operating performance is also dependent upon personnel who hold security clearances and receive substantial training to work on certain programs or tasks and can be difficult to replace on a timely basis if we experience unplanned attrition. A growing portion of our current workforce is nearing or eligible for retirement.
Government is taking increasingly aggressive positions both as to the intellectual property to which they believe government use rights apply and to the acquisition of broad license rights. If the U.S. Government is successful in these efforts, our intellectual property on which we depend and our access to and use of certain supplier intellectual property could be negatively affected.
Government can take aggressive positions both as to the intellectual property to which they believe government use rights apply and to the acquisition of broad license rights. To the extent the U.S. Government is successful, the intellectual property on which we depend and our access to and use of certain supplier intellectual property could be negatively affected.
Higher interest rates resulting from inflationary pressures can also impact the fair value of these contracts. Furthermore, if we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages, or suffer major losses if the customer exercises its right to terminate.
Higher interest rates resulting from inflationary pressures can also impact the fair values of our contracts. Moreover, if we fail to meet contract deadlines or specifications, we may be required to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages, or suffer major losses if the customer exercises its right to terminate.
A longer term trend in reduced U.S. Navy shipbuilding activity, evidenced by the reduction in fleet size from 566 ships in 1989 to 293 ships as of December 31, 2022, has resulted in workforce reductions but limited infrastructure consolidation. The general result has been fewer contracts awarded to the same fixed number of shipyards.
Navy shipbuilding activity, evidenced by the reduction in fleet size from 566 ships in 1989 to 291 ships as of December 31, 2023, has resulted in workforce reductions but limited infrastructure consolidation. The general result has been fewer contracts awarded to the same fixed number of shipyards.
A significant increase in contract costs from our original cost estimates on one or more contracts could have a material adverse effect on our financial position, results of operations, or cash flows. Our ability to recover costs and realize profits on contracts with our U.S. Government customers depends upon the type of contract under which we are performing. Our U.S.
A significant increase in contract costs from our original cost estimates on one or more contracts could have a material adverse effect on our financial position, results of operations, or cash flows. Our ability to recover costs and realize profits on contracts with our U.S.
Such insurance, however, may not be sufficient to cover our costs in the event of an accident or business interruption relating to our commercial nuclear operations, which could have a material adverse effect on our financial position, results of operations, or cash flows.
Such insurance, however, may not be sufficient to cover our costs in the event of an accident or business interruption relating to our commercial nuclear operations, which could have a material adverse effect on our financial position, results of operations, or cash flows. 22 Our reputation and our ability to conduct business may be impacted by the improper conduct of employees, agents, or business partners.
See Note 14: Investigations, Claims, and Litigation in Item 8. 23 We may be unable to adequately protect our intellectual property rights, which could affect our ability to compete. We own patents, trademarks, copyrights, and other forms of intellectual property related to our business, and we license intellectual property rights to and from third parties. The U.S.
We may be unable to adequately protect our intellectual property rights, which could affect our ability to compete. We own patents, trademarks, copyrights, and other forms of intellectual property related to our business, and we license intellectual property rights to and from third parties. The U.S.
Contract accounting requires judgments relative to assessing risks, estimating contract revenues and costs, and making assumptions regarding schedule and technical issues. The size and nature of many of our contracts make the estimation of total revenues and costs at completion complicated and subject to many variables.
Contract accounting requires judgments relative to risk assessments, contract revenue and cost estimates, and assumptions regarding schedule and technical issues. The size and nature of many of our contracts make the estimation of total revenues and costs at completion complicated and subject to many variables.
These failures could result in loss of life or property and could negatively affect our results of operations by causing unanticipated expenses not covered by insurance or customer indemnification, diversion of management attention, loss of follow-on work, and, in the case of certain contracts, reimbursement to the customer of contract costs and fee payments previously received.
These failures could result in loss of life or property and could negatively affect our results of operations as a result of unanticipated expenses that we don't recover, diversion of management attention, loss of follow-on work, and, in the case of certain contracts, reimbursement to the customer of contract costs and fee payments previously received.
Additionally, pension cost recoveries under CAS for our U.S.
In addition, pension cost recoveries under CAS for our U.S.
The U.S. Government has, from time to time, recommended that certain of our contract prices be reduced, or that certain costs allocated to our contracts be disallowed, which sometimes involve substantial dollar amounts. In response to U.S.
Government has from time to time recommended that certain of our contract prices be reduced, or that certain costs allocated to our contracts be disallowed, which sometimes involve substantial dollar amounts. In response to U.S. Government audits, investigations, and inquiries, we have also made adjustments from time to time to our contract prices and costs allocated to our government contracts.
Government could have a material adverse effect on our financial position, results of operations, or cash flows. A substantial majority of our business consists of the design, construction, repair, and maintenance of nuclear-powered ships and non-nuclear ships for the U.S. Navy and coastal defense surface ships for the U.S.
Government for substantially all of our business, and risks that arise from conducting business with the U.S. Government could have a material adverse effect on our financial position, results of operations, or cash flows. A substantial majority of our business consists of the design, construction, repair, and maintenance of nuclear-powered ships and non-nuclear ships for the U.S.
We also compete in the shipbuilding engineering, planning, and design market with companies that provide engineering support services. Such competition increases the risk we may not be the successful bidder on future U.S. Navy engineering proposals, including aircraft carrier research and development, submarine design, and surface combatant and amphibious assault ship program contracts.
Such competition increases the risk we may not be the successful bidder on future U.S. Navy engineering proposals, including aircraft carrier research and development, submarine design, and surface combatant and amphibious assault ship program contracts.
To mitigate risks related to our commercial nuclear operations, we rely primarily on insurance carried by nuclear facility operators and our own limited insurance for losses in excess of the coverage of facility operators.
We may not, however, be indemnified for all liabilities we may incur in connection with our nuclear operations. To mitigate risks related to our commercial nuclear operations, we rely primarily on insurance carried by nuclear facility operators and our own limited insurance for losses in excess of the coverage of facility operators.
Such provisions require us to provide the U.S. Navy with notice of any potential change of control of our nuclear shipbuilding operations and receive the Navy's consent for transferring certain related licenses to facilitate the Navy's ability to ensure that a potential buyer would continue to conduct our operations in a satisfactory manner.
Navy with notice of any potential change of control of our nuclear shipbuilding operations and receive the Navy's consent to transfer certain related licenses to facilitate the Navy's ability to confirm that a potential buyer would continue to conduct our operations in a satisfactory manner.
Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results. Changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, could result in increases in our tax expense and affect profitability and cash flows.
(federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, could result in increases in our tax expense and affect profitability and cash flows.
These organizations have varying levels of cyber security expertise and safeguards, and their relationships with U.S. Government contractors increases the likelihood that they are or will be targeted by the same cyber security threats we face. Our business and financial performance may be adversely affected by threats to our physical security and other events outside our control.
These organizations have varying levels of cyber security expertise and safeguards, and their relationships with U.S. Government contractors increases the likelihood that they are or will be targeted by the same cyber security threats we face.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our principal properties are located in Pascagoula, Mississippi; Fairfax, Hampton, McLean, Newport News, Suffolk, and Virginia Beach, Virginia; and Washington, D.C. Ingalls - The primary properties comprising our Ingalls operating segment are located in Pascagoula, Mississippi.
Biggest changeITEM 2. PROPERTIES Our principal properties are located in Pascagoula, Mississippi; Fairfax, McLean, and Newport News, Virginia; and Washington, D.C. Ingalls - The primary properties comprising our Ingalls operating segment are located in Pascagoula, Mississippi. Our Pascagoula shipyard facilities are located on approximately 800 acres on the banks of the Pascagoula River where it flows into the Mississippi Sound.
We have undertaken substantial capital expenditure programs at our Ingalls and Newport News segments intended to increase our competitiveness and enable us to meet future obligations under our growing shipbuilding program backlog.
We have undertaken substantial capital expenditure programs at our Ingalls and Newport News segments intended to increase our competitiveness and enable us to meet future obligations under our growing shipbuilding program backlog. 28
Unmanned Solutions had operations in Pocasset, Massachusetts and Hampton, Virginia, and Nuclear and Environmental had operations in Los Alamos, New Mexico; Aiken, South Carolina; and Newport News, Virginia. We maintain a robust capital sustainment and maintenance program and believe our physical facilities and equipment are generally well maintained, in good operating condition, and satisfactory for our current needs.
Unmanned Systems had operations in Pocasset, Massachusetts and Hampton, Virginia, and Nuclear and Environmental Services had operations in Los Alamos, New Mexico; Aiken, South Carolina; and Newport News, Virginia. We maintain a robust capital sustainment and maintenance program and believe our physical facilities and equipment are generally well maintained, in good operating condition, and satisfactory for our current needs.
Mission Technologies - The properties comprising our Mission Technologies operating segment are located throughout the United States, United Kingdom, and Australia. Our Mission Technologies headquarters are located in Fairfax and McLean, Virginia, and Mission Technologies leases properties related to its operations in approximately 51 locations, consisting of both corporate support locations and contract performance locations.
Mission Technologies - The properties comprising our Mission Technologies operating segment are located throughout the United States, United Kingdom, and Australia. Our Mission Technologies headquarters are located in Fairfax and McLean, Virginia. Mission Technologies leases and owns properties related to its operations in approximately 52 cities, consisting of both corporate support locations and contract performance locations.
We anticipate continued use of this facility for the remaining 44 years of the lease and beyond. 26 Newport News - The primary properties comprising our Newport News operating segment are located in Newport News, Virginia.
We anticipate continued use of this facility for the remaining 43 years of the lease and beyond. Newport News - The primary properties comprising our Newport News operating segment are located in Newport News, Virginia.
Mission Technologies also has employees working at customer sites throughout the United States and in other countries. As of December 31, 2022, Mission Based Solutions had major operations in Annapolis and Hanover, Maryland; Syracuse, New York; Beavercreek and Dayton, Ohio; and Alexandria, Virginia. Fleet Sustainment had operations in Portsmouth, New Hampshire; Philadelphia, Pennsylvania; and Suffolk and Virginia Beach, Virginia.
Mission Technologies also has employees working at customer sites throughout the United States and in other countries. As of December 31, 2023, C5ISR, CEW&S, and LVC had major operations in Annapolis and Hanover, Maryland; Syracuse, New York; Beavercreek and Dayton, Ohio; and Alexandria, Virginia. Fleet sustainment had operations in Portsmouth, New Hampshire; Philadelphia, Pennsylvania; and Suffolk and Virginia Beach, Virginia.
We lease the west bank of our Pascagoula shipyard from the State of Mississippi pursuant to a 99-year lease, consisting of a 40-year base term plus six optional terms.
This shipyard offers a collection of manufacturing capabilities, including a 660-ton gantry crane and a Land Based Test Facility. We lease the west bank of our Pascagoula shipyard from the State of Mississippi pursuant to a 99-year lease, consisting of a 40-year base term plus six optional terms.
Removed
Our Pascagoula shipyard facilities are located on approximately 800 acres on the banks of the Pascagoula River where it flows into the Mississippi Sound. This shipyard offers a collection of manufacturing capabilities, including a 660-ton gantry crane and a Land Based Test Facility.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares Purchased 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) 1,2 October 1, 2022 to October 31, 2022 7,631 $ 230.49 7,631 $ 997.8 November 1, 2022 to November 30, 2022 24,320 228.46 24,320 992.3 December 1, 2022 to December 31, 2022 15,760 230.57 15,760 988.6 Total 47,711 $ 229.48 47,711 $ 988.6 1 From the stock repurchase program's inception through December 31, 2022, we have purchased 13,639,861 shares at an average price of $162.13 per share for a total of $2.2 billion. 2 In October 2012, we commenced our stock repurchase program.
Biggest changePeriod Total Number of Shares Purchased 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) 1,2 October 1, 2023 to October 31, 2023 65,076 $ 214.52 65,076 $ 937.4 November 1, 2023 to November 30, 2023 48,276 231.48 48,276 926.2 December 1, 2023 to December 31, 2023 48,100 241.27 48,100 914.6 Total 161,452 $ 227.56 161,452 $ 914.6 1 From the stock repurchase program's inception through December 31, 2023, we have purchased 13,976,868 shares at an average price of $163.51 per share for a total of $2.3 billion. 2 In November 2012, we announced the establishment of our stock repurchase program.
All repurchases of HII common stock have been recorded as treasury stock. The following table summarizes information relating to purchases made by or on behalf of the Company of shares of the Company's common stock during the quarter ended December 31, 2022.
All repurchases of HII common stock have been recorded as treasury stock. The following table summarizes information relating to purchases made by or on behalf of the Company of shares of the Company's common stock during the quarter ended December 31, 2023.
Stock Performance Graph The following graph compares the total return on a cumulative basis of $100 invested in our common stock on January 1, 2018, to the Standard & Poor's ("S&P") 500 Index and the S&P Aerospace and Defense Select Index. ◦ The cumulative total return assumes reinvestment of dividends. ◦ The S&P Aerospace & Defense Select Index is comprised of The Boeing Company, General Dynamics Corporation, Huntington Ingalls Industries, Inc., L3 Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Technologies Corporation, Textron, Inc., and TransDigm Group Incorporated, among other companies. 28 Purchases of Equity Securities by the Issuer and Affiliated Purchasers Repurchases under our stock repurchase program are made from time to time at management's discretion in accordance with applicable federal securities laws.
Stock Performance Graph The following graph compares the total return on a cumulative basis of $100 invested in our common stock on January 1, 2019, to the Standard & Poor's ("S&P") 500 Index and the S&P Aerospace and Defense Select Index. ◦ The cumulative total return assumes reinvestment of dividends. ◦ The S&P Aerospace & Defense Select Index is comprised of The Boeing Company, General Dynamics Corporation, Huntington Ingalls Industries, Inc., L3 Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, RTX Corporation, Textron, Inc., and TransDigm Group Incorporated, among other companies. 30 Purchases of Equity Securities by the Issuer and Affiliated Purchasers Repurchases under our stock repurchase program are made from time to time at management's discretion in accordance with applicable federal securities laws.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the New York Stock Exchange under the symbol "HII". Stockholders The approximate number of our common stockholders was 13,278 as of February 3, 2023.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the New York Stock Exchange under the symbol "HII". Stockholders The approximate number of our common stockholders was 12,644 as of January 26, 2024.
In November 2019, we announced an increase in the stock repurchase program to $3.2 billion and an extension of the term to October 31, 2024. ITEM 6. [RESERVED]
In January 2024, our board of directors authorized an increase in the stock repurchase program to $3.8 billion and an extension of the term to December 31, 2028. ITEM 6. [RESERVED]
Removed
Annual Meeting of Stockholders Our Annual Meeting of Stockholders is currently scheduled to be held on May 2, 2023, through a virtual format.
Added
Annual Meeting of Stockholders Our Annual Meeting of Stockholders is currently scheduled to be held on May 1, 2024. Dividend For the years ended December 31, 2023 and 2022, we declared dividends on common stock totaling $5.02 and $4.78 per share, respectively.
Added
While we intend to continue paying dividends, the declaration of cash dividends is at the discretion of our board of directors, considered in the context of the current conditions, including our earnings, other operating results, capital requirements, and applicable laws.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 55 REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 55 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME 59 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 60 CONSOLIDATED STATEMENTS OF CASH FLOWS 62 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 64
Biggest changeFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 54 REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 54 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME 58 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 59 CONSOLIDATED STATEMENTS OF CASH FLOWS 61 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 62 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 63
Item 6. [RESERVED] 29 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 29 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 54 Item 8.
Item 6. [RESERVED] 31 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 31 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 52 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIngalls Year Ended December 31 2022 over 2021 2021 over 2020 ($ in millions) 2022 2021 2020 Dollars Percent Dollars Percent Sales and service revenues $ 2,570 $ 2,528 $ 2,678 $ 42 2 % $ (150) (6) % Segment operating income 292 281 281 11 4 % — — % As a percentage of segment sales 11.4 % 11.1 % 10.5 % Sales and Service Revenues 2022 - Ingalls revenues, including intersegment sales, increased $42 million, or 2%, in 2022 compared to 2021, primarily driven by higher revenues in amphibious assault ships and surface combatants, partially offset by lower revenues in the Legend class NSC program.
Biggest changeWhere such items have occurred and the effects are material, a separate description is provided. 41 Net Cumulative Catch-up Revenue Adjustments For the years ended December 31, 2023, 2022, and 2021, favorable and unfavorable cumulative catch-up revenue adjustments were as follows: Year Ended December 31 ($ in millions) 2023 2022 2021 Gross favorable adjustments $ 309 $ 325 $ 244 Gross unfavorable adjustments (191) (212) (129) Net adjustments $ 118 $ 113 $ 115 For the years ended December 31, 2023, 2022, and 2021, net cumulative catch-up revenue adjustments by segment were as follows: Year Ended December 31 ($ in millions) 2023 2022 2021 Ingalls $ 91 $ 109 $ 103 Newport News 9 (13) 6 Mission Technologies 18 17 6 Net adjustments $ 118 $ 113 $ 115 Ingalls Year Ended December 31 2023 over 2022 2022 over 2021 ($ in millions) 2023 2022 2021 Dollars Percent Dollars Percent Sales and service revenues $ 2,752 $ 2,570 $ 2,528 $ 182 7 % $ 42 2 % Segment operating income 362 292 281 70 24 % 11 4 % As a percentage of segment sales 13.2 % 11.4 % 11.1 % Sales and Service Revenues Ingalls sales and service revenues, including intersegment sales, increased $182 million, or 7%, in 2023 compared to 2022, primarily driven by higher volumes in surface combatants and amphibious assault ships, partially offset by lower volumes in the NSC program.
We monitor our policies and procedures with respect to our contracts on a regular basis to ensure consistent application under similar terms and conditions, as well as compliance with all applicable government regulations. In addition, the DCAA routinely audits the costs we incur that are allocated to U.S. Government contracts.
We monitor our policies and procedures with respect to our contracts on a regular basis to ensure consistent application under similar terms and conditions, as well as compliance with all applicable government regulations. In addition, the DCAA routinely audits the costs we incur that are allocated to U.S.
Pension funding requirements under ERISA are subject to pension relief for plan sponsors in the form of higher interest rate assumptions introduced by the Moving Ahead for Progress in the 21st Century Act and subsequently extended by the American Rescue Plan Act of 2021.
Pension funding requirements for plan sponsors under ERISA are subject to pension relief in the form of higher interest rate assumptions introduced by the Moving Ahead for Progress in the 21st Century Act and subsequently extended by the American Rescue Plan Act of 2021.
Reinsurers under our property insurance have failed to acknowledge coverage for various losses related to COVID-19, and we filed a complaint in state court in Vermont seeking a judgment declaring that our business interruption and other losses associated with COVID-19 are covered by our property insurance program. We also initiated arbitration proceedings against other reinsurers seeking similar relief.
Reinsurers under our property insurance failed to acknowledge coverage for various losses related to COVID-19, and we filed a complaint in state court in Vermont seeking a judgment declaring that our business interruption and other losses associated with COVID-19 are covered by our property insurance program. We also initiated arbitration proceedings against other reinsurers seeking similar relief.
Performance refers to changes in contract profit margin rates. These changes typically relate to profit recognition associated with revisions to estimated costs at completion ("EAC") that reflect improved or deteriorated operating performance on that contract. Operating income changes are accounted for on a cumulative to date basis at the time an EAC change is recorded.
Performance refers to changes in contract profit margin rates. These changes typically relate to profit recognition associated with revisions to estimated costs at completion ("EAC"), which reflect improved or deteriorated operating performance on that contract. Operating income changes are accounted for on a cumulative to date basis at the time an EAC change is recorded.
Due to the differences in requirements and calculation methodologies between FAS and CAS, our FAS pension expense is not necessarily indicative of the funding requirements under PPA or the amounts we recover from the U.S. Government under CAS. 35 Assumption s - We account for our retirement related benefit plans on the accrual basis under FAS.
Due to the differences in requirements and calculation methodologies between FAS and CAS, our FAS pension expense is not necessarily indicative of the funding requirements under the PPA or the amounts we recover from the U.S. Government under CAS. Assumption s - We account for our retirement related benefit plans on the accrual basis under FAS.
We internally manage our operations by reference to "segment operating income," which is defined as operating income before the Operating FAS/CAS Adjustment and non-current state income taxes, neither of which affects segment performance. Segment operating income is not a recognized measure under GAAP.
We internally manage our operations by reference to "segment operating income," which is defined as operating income before the Operating FAS/CAS Adjustment and non-current state income taxes, neither of which affects contract performance. Segment operating income is not a recognized measure under GAAP.
Fixed-price incentive contracts effectively become firm fixed-price contracts once the cost-share limit is reached. 32 • Cost-Type Contracts - Cost-type contracts provide for reimbursement of the contractor's allowable costs plus a fee that represents profit.
Fixed-price incentive contracts effectively become firm fixed-price contracts once the cost-share limit is reached. • Cost-Type Contracts - Cost-type contracts provide for reimbursement of the contractor's allowable costs plus a fee that represents profit.
We expect our 2023 cash contributions to our qualified defined benefit pension plans to be less than $1 million, all of which we anticipate will be discretionary and which are exclusive of CAS cost recoveries under our contracts. Due to the differences in calculation methodologies, our FAS expense is not necessarily representative of our funding requirements or CAS cost recoveries.
We expect our 2024 cash contributions to our qualified defined benefit pension plans to be less than $1 million, all of which we anticipate will be discretionary and which are exclusive of CAS cost recoveries under our contracts. Due to the differences in calculation methodologies, our FAS expense is not necessarily representative of our funding requirements or CAS cost recoveries.
In funding our plans, we consider various factors, including the minimum funding requirements, the funded status needed to avoid potential benefit restrictions and other adverse consequences, minimum CAS funding requirements, and the current and anticipated funding levels of each plan. Effective January 1, 2021, we adopted the Safe Harbor methodology used in determining CAS pension costs.
In funding our plans, we consider various factors, including the minimum funding requirements, the funded status needed to avoid potential benefit restrictions and other adverse consequences, minimum CAS funding requirements, and the current and anticipated funding levels of each plan. Effective January 1, 2021, we adopted the Safe Harbor methodology for determining CAS pension costs.
The Vermont court dismissed our complaint, and we appealed the decision to the Vermont Supreme Court, which reversed and remanded the lower court’s decision in September 2022, allowing our claim to proceed. No assurance can be provided regarding the ultimate resolution of this matter. See Note 14: Investigations, Claims, and Litigation.
The Vermont court dismissed our complaint, and we appealed the decision to the Vermont Supreme Court, which reversed and remanded the lower court’s decision in September 2022, allowing our claim to proceed. No assurance can be provided regarding the ultimate resolution of this matter. See Note 14: Investigations, Claims, and Litigation. U.S.
The change in unrecognized prior service costs (credits) in 2022 resulted from plan amendments and the amortization of previously accumulated prior service costs (credits). Workers' Compensation Our operations are subject to federal and state workers' compensation laws. We maintain self-insured workers' compensation plans and participate in federally administered second injury workers' compensation funds.
The change in unrecognized prior service costs (credits) in 2023 resulted from plan amendments and the amortization of previously accumulated prior service costs (credits). Workers' Compensation Our operations are subject to federal and state workers' compensation laws. We maintain self-insured workers' compensation plans and participate in federally administered second injury workers' compensation funds.
Our contracts typically fall into one of four categories: firm fixed-price, fixed-price incentive, cost-type, and time and materials.
Government contracts. 33 Our contracts typically fall into one of four categories: firm fixed-price, fixed-price incentive, cost-type, and time and materials.
Net pre-tax unrecognized prior service costs (credits) as of December 31, 2022 and 2021 were $140 million and $60 million, respectively. These net deferred costs (credits) primarily originated from plan amendments, including those resulting from collective bargaining agreements.
Net pre-tax unrecognized prior service costs (credits) as of December 31, 2023 and 2022 were $125 million and $140 million, respectively. These net deferred costs (credits) primarily originated from plan amendments, including those resulting from collective bargaining agreements.
The San Antonio class (LPD 17) 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. In 2022, we delivered USS Fort Lauderdale (LPD 28), and we were awarded a long-lead-time material contract for LPD 32 (unnamed). We are currently constructing Richard M.
The San Antonio class (LPD 17) 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. In 2022, we delivered USS Fort Lauderdale (LPD 28), and we were awarded a long-lead-time material contract for Philadelphia (LPD 32).
Cash Flows We discuss below our significant operating, investing, and financing activities affecting cash flows for each of the three years in the period ended December 31, 2022, as classified in our consolidated statements of cash flows. 48 Operating Activities 2022 - Cash provided by operating activities was $766 million in 2022, compared to $760 million in 2021.
Cash Flows We discuss below our significant operating, investing, and financing activities affecting cash flows for each of the three years in the period ended December 31, 2023, as classified in our consolidated statements of cash flows. Operating Activities Cash provided by operating activities in 2023 was $970 million, compared to $766 million provided by operating activities in 2022.
As of December 31, 2022, $14 million in letters of credit were issued but undrawn and $360 million of surety bonds were outstanding. As of December 31, 2022, we had no other significant off-balance sheet arrangements. 51 GLOSSARY OF PROGRAMS Included below are brief descriptions of some of the programs discussed in this Annual Report on Form 10-K.
As of December 31, 2023, $12 million in letters of credit were issued but undrawn and $360 million of surety bonds were outstanding. As of December 31, 2023, we had no other significant off-balance sheet arrangements. 50 GLOSSARY OF PROGRAMS Included below are brief descriptions of some of the programs discussed in this Annual Report on Form 10-K.
The interest rates used to calculate pension liabilities under CAS are consistent with those used in the determination of minimum funding requirements under ERISA.
As a result, the interest rates used to calculate pension liabilities under CAS are consistent with those used in the determination of minimum funding requirements under ERISA.
Government contracts, our contract financial estimates reflect profit margin impact uncertainty, because such costs may not result in equitable adjustments, particularly on firm fixed-price and fixed-price incentive contracts, or may not be adequately covered by insurance.
Government contracts, our contract financial estimates reflect cost recovery uncertainty, because such costs may not result in equitable adjustments, particularly on firm fixed-price and fixed-price incentive contracts, or may not be adequately covered by insurance.
MSTS was awarded a contract for site management and operations at the Nevada National Security Site. SRNS provides site management and operations at the DoE’s Savannah River Site near Aiken, South Carolina.
MSTS was awarded a contract for site management and operations at the Nevada National Security Site. SRNS provides site management and operations at the DoE’s Savannah River Site near Aiken, South Carolina. Triad provides site management and operations at the DoE’s Los Alamos National Laboratory.
As disclosed in Note 17: Employee Pension and Other Postretirement Benefits in Item 8, net pre-tax unrecognized actuarial losses as of December 31, 2022 and 2021 were $678 million and $1,194 million, respectively.
As disclosed in Note 17: Employee Pension and Other Postretirement Benefits in Item 8, net pre-tax unrecognized actuarial losses as of December 31, 2023 and 2022 were $455 million and $678 million, respectively.
We use various financial measures to assist in capital deployment decision making, including net cash provided by operating activities and free cash flow. We believe these measures are useful to investors in assessing our financial performance.
We use various financial measures to inform our capital deployment strategy, including net cash provided by operating activities and free cash flow. We believe these measures are useful to investors in assessing our financial performance.
The discount rate assumption is determined for each plan by constructing a hypothetical portfolio of high-quality bonds with cash flows that match the estimated outflows for future benefit payments to determine a single equivalent discount rate.
Consequently, the discount rate can be volatile from year to year. The discount rate assumption is determined for each plan by constructing a hypothetical portfolio of high-quality bonds with cash flows that match the estimated outflows for future benefit payments to determine a single equivalent discount rate.
The contributions to our qualified defined benefit pension plans are affected by a number of factors, including published IRS interest rates, the actual return on plan assets, actuarial assumptions, and demographic experience. These factors and our resulting contributions also impact the funded status of the plans.
The contributions to our qualified defined benefit pension plans are affected by a number of factors, including published IRS interest rates, the actual return on plan assets, actuarial assumptions, and demographic experience.
In November 2019, our board of directors authorized an increase to our stock repurchase program from $2.2 billion to $3.2 billion and an extension of the term of the program to October 31, 2024. Repurchases are made from time to time at management's discretion in accordance with applicable federal securities laws.
In January 2024, our board of directors authorized an increase to our stock repurchase program from $3.2 billion to $3.8 billion and an extension of the term of the program to December 31, 2028. Repurchases are made from time to time at management's discretion in accordance with applicable federal securities laws.
Segment Operating Income 2022 - Mission Technologies segment operating income for the year ended December 31, 2022, was $63 million, compared to segment operating income of $50 million in 2021.
Segment Operating Income Mission Technologies segment operating income for the year ended December 31, 2023, was $101 million, compared to segment operating income of $63 million in 2022.
Virginia class (SSN 774) fast attack submarines Construct attack submarines as the principal subcontractor to Electric Boat. The Virginia class (SSN 774) 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.
The Virginia class (SSN 774) 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.
Program Name Program Description America class (LHA 6) amphibious assault ships Design and build large deck amphibious assault ships that provide forward presence and power projection as an integral part of joint, interagency and multinational maritime expeditionary forces.
Navy in May 2023. America class (LHA 6) amphibious assault ships Design and build large deck amphibious assault ships that provide forward presence and power projection as an integral part of joint, interagency and multinational maritime expeditionary forces.
We have been awarded contracts from Electric Boat for integrated product and process development, providing long–lead–time material and advance construction, and construction of the first two boats of the Columbia class (SSBN 826) submarine program. Construction of the first Columbia class (SSBN 826) submarine began in 2020. Fleet sustainment Maintains and modernizes a significant majority of the U.S.
We have been awarded contracts from Electric Boat for integrated product and process development, providing long–lead–time material and advance construction, and construction of the first two boats of the Columbia class (SSBN 826) submarine program. Construction of the first Columbia class (SSBN 826) submarine began in 2020.
We expect cash generated from operations in 2023, in combination with our current cash and cash equivalents, as well as existing borrowing facilities, to be sufficient to service debt and retiree benefit plans, meet contractual obligations, and fund capital expenditures for at least the next 12 calendar months beginning January 1, 2023 and beyond such 12-month period based on our current business plans. 2021 - Cash provided by operating activities was $760 million in 2021, compared to $1,093 million in 2020.
We expect cash generated from operations in 2024, in combination with our current cash and cash equivalents, as well as existing borrowing facilities, to be sufficient to service debt and retiree benefit plans, meet contractual obligations, and fund capital expenditures for at least the next 12 calendar months beginning January 1, 2024 and beyond such 12-month period based on our current business plans.
For further 37 information on workers’ compensation, see Environmental, Health & Safety in Item 1 and Note 16: Commitments and Contingencies in Item 8. Accounting Standards Updates See Note 3: Accounting Standards Updates in Item 8 for further information.
For further information on workers’ compensation, see Environmental, Health & Safety in Item 1 and Note 16: Commitments and Contingencies in Item 8.
In response, the United States and other countries imposed economic and trade sanctions, export controls, and other restrictions. This conflict and the associated sanctions have disrupted the global economy, causing heightened cybersecurity risks, supply chain challenges, higher energy costs, and an exacerbation of existing inflationary pressures.
In response, the U.S. and other countries imposed economic and trade sanctions, export controls, and other restrictions on Russia. This conflict and the associated sanctions have impacted the global economy, causing heightened cybersecurity risks and an exacerbation of supply chain challenges, higher energy costs, and inflationary pressures.
Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021. Business Environment We continue to see uncertainty in the economy, our industry, and our company, with challenges for customers and suppliers, labor shortages, supply chain challenges, and inflation, among other impacts. U.S.
Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022. Business Environment We continue to see uncertainty, both domestically and globally, with challenges for customers and suppliers, labor shortages, supply chain challenges, and inflation, among other impacts.
Total backlog includes both funded backlog (firm orders for which funding is contractually obligated by the customer) and unfunded backlog (firm orders for which funding is not currently contractually obligated by the customer). Backlog excludes unexercised contract options and unfunded Indefinite Delivery/Indefinite Quantity orders.
Total backlog includes both funded backlog (firm orders for which funding is contractually obligated by the customer) and unfunded backlog (firm orders for which funding is not currently contractually obligated by the customer). Backlog excludes unexercised contract options and unfunded Indefinite Delivery/Indefinite Quantity orders. For contracts having no stated contract values, backlog includes only the amounts committed by the customer.
For the year ended December 31, 2022, we repurchased 244,561 shares at an aggregate cost of $52 million. For the years ended December 31, 2021 and 2020, we repurchased 544,440 and 390,904 shares, respectively, at aggregate costs of $101 million and $84 million, respectively.
For the year ended December 31, 2023, we repurchased 337,007 shares at an aggregate cost of $75 million. For the years ended December 31, 2022 and 2021, we repurchased 244,561 and 544,440 shares, respectively, at aggregate costs of $52 million and $101 million, respectively.
We perform design work as a subcontractor to Electric Boat, and we have entered into a teaming agreement with Electric Boat to build modules for the entire Columbia class (SSBN 826) submarine program that leverages our Virginia class (SSN 774) experience.
We have a teaming agreement with Electric Boat to build modules for the entire Columbia class (SSBN 826) submarine program that leverages our Virginia class (SSN 774) experience.
We may in the future incur additional costs and performance challenges, including as a result of higher prices, schedule delays, or the need to identify and develop alternative suppliers. 30 The COVID-19 pandemic has impacted our employees, customers, suppliers, and communities (collectively, “COVID-19 Events”). While costs related to COVID-19 Events are allowable under U.S.
We may in the future incur additional costs and performance challenges, including as a result of higher prices, schedule delays, or the need to identify and develop alternative suppliers. While costs related to COVID-19 events are allowable under U.S.
Other FAS and CAS Pension Considerations - A key driver of the difference between FAS expense and CAS cost (and consequently the FAS/CAS Adjustment) is the pattern of earnings and expense recognition for actuarial gains and losses that arise when our asset and liability experiences differ from our assumptions under each set of requirements.
A plan’s CAS pension cost can only be allocated until the plan is fully funded as defined under the CAS requirements. 36 Other FAS and CAS Pension Considerations - A key driver of the difference between FAS expense and CAS cost (and consequently the FAS/CAS Adjustment) is the pattern of earnings and expense recognition for actuarial gains and losses that arise when our asset and liability experiences differ from our assumptions under each set of requirements.
An increase or decrease of 25 basis points in the discount rate and the expected long-term rate of return assumptions would have had the following approximate impacts on pension expense and obligations: ($ in millions) Increase (Decrease) in 2023 Expense Increase (Decrease) in December 31, 2022 Obligations 25 basis point decrease in discount rate $ 16 $ 197 25 basis point increase in discount rate (6) (188) 25 basis point decrease in expected return on assets 17 25 basis point increase in expected return on assets (17) Assuming an 8.00% expected return on assets assumption, a $50 million pension plan contribution is generally expected to favorably impact the current year expected return on assets by approximately $2 million, depending on the timing of the contribution. 36 Sensitivities to assumptions are not necessarily linear and are specific to the time periods noted.
An increase or decrease of 25 basis points in the discount rate and the expected long-term rate of return assumptions would have had the following approximate impacts on pension expense and obligations: ($ in millions) Increase (Decrease) in 2024 Expense Increase (Decrease) in December 31, 2023 Obligations 25 basis point decrease in discount rate $ 7 $ 193 25 basis point increase in discount rate (6) (184) 25 basis point decrease in expected return on assets 17 25 basis point increase in expected return on assets (17) Assuming an 8.00% expected return on assets assumption, a $50 million pension plan contribution is generally expected to favorably impact the current year expected return on assets by approximately $2 million, depending on the timing of the contribution.
As of December 31, 2022, future scheduled periodic interest payments on our outstanding long-term debt, including commitment fees that we are obligated to pay on our Revolving Credit Facility, were approximately $437 million, with approximately $101 million expected to be paid in 2023 and $336 million thereafter.
As of December 31, 2023, future scheduled periodic interest payments on our outstanding long-term debt, including commitment fees that we are obligated to pay on our existing $1.5 billion Revolving Credit Facility, were approximately $333 million, with approximately $87 million expected to be paid in 2024 and $246 million thereafter.
The America class (LHA 6) ships, together with the Wasp class (LHD 1) ships, are the successors to the decommissioned Tarawa class (LHA 1) ships. The America class (LHA 6) ships optimize aviation operations and support capabilities.
The America class (LHA 6) ships, together with the Wasp class (LHD 1) ships, are the successors to the decommissioned Tarawa class (LHA 1) ships. The America class (LHA 6) ships optimize aviation operations and support capabilities. We are currently constructing Bougainville (LHA 8) and Fallujah (LHA 9).
Triad provides site management and operations at the DoE’s Los Alamos National Laboratory. 53 San Antonio class (LPD 17) 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.
San Antonio class (LPD 17) 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.
Geopolitical relationships have changed, and are continuing to change, and the U.S. and its allies face a global security environment that includes threats from state and non-state actors, including major global powers, as well as terrorist organizations, emerging nuclear tensions, diverse regional security concerns, and political instability.
Geopolitical relationships continue to change, and the U.S. and its allies face a global security environment that includes threats from state and non-state actors, including major global powers, as well as terrorist organizations, emerging nuclear tensions, diverse regional security concerns, and political instability. In February 2022, Russian forces invaded Ukraine, and the conflict is continuing.
The minimum funding requirements for our qualified pension plans are determined under the Employee Retirement Income Security Act of 1974 ("ERISA"), which is primarily based on the year's expected service cost and amortization of other previously unfunded liabilities. Effective January 1, 2011, we were subject to the funding requirements under the Pension Protection Act of 2006 ("PPA"), which amended ERISA.
The minimum funding requirements for our qualified pension plans are determined under the Employee Retirement Income Security Act of 1974 ("ERISA"), which is primarily based on the year's expected service cost and amortization of other previously unfunded liabilities.
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. USS George Washington (CVN 73) arrived at Newport News for the start of its RCOH in August 2017, and USS John C.
Program Name Program Description Aircraft 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. USS John C. Stennis (CVN 74) arrived at Newport News for the start of its RCOH in May 2021, and USS George Washington (CVN 73) was redelivered to the U.S.
These amounts are recorded within operating income. Current period state income tax expense is charged to contract costs and included in cost of sales and service revenues in segment operating income. 2022 - Non-current state income tax expense in 2022 was $2 million, compared to $13 million in 2021.
Current period state income tax expense is charged to contract costs and included in cost of sales and service revenues in segment operating income. Non-current state income tax benefit in 2023 was $11 million, compared to non-current state income tax expense of $2 million in 2022.
CONSOLIDATED OPERATING RESULTS The following table presents selected financial highlights: Year Ended December 31 2022 over 2021 2021 over 2020 ($ in millions) 2022 2021 2020 Dollars Percent Dollars Percent Sales and service revenues $ 10,676 $ 9,524 $ 9,361 $ 1,152 12 % $ 163 2 % Cost of product sales and service revenues 9,236 8,156 7,691 1,080 13 % 465 6 % Income from operating investments, net 48 41 32 7 17 % 9 28 % Other income and gains, net 1 2 1 (1) (50) % 1 100 % General and administrative expenses 924 898 904 26 3 % (6) (1) % Operating income 565 513 799 52 10 % (286) (36) % Interest expense (102) (89) (114) (13) (15) % 25 22 % Non-operating retirement benefit 276 181 119 95 52 % 62 52 % Other, net (20) 17 6 (37) (218) % 11 183 % Federal and foreign income taxes 140 78 114 62 79 % (36) (32) % Net earnings $ 579 $ 544 $ 696 $ 35 6 % $ (152) (22) % Operating Performance Assessment and Reporting We manage and assess the performance of our business based on our performance on individual contracts and programs using the financial measures referred to below, with consideration given to the Critical Accounting Policies, Estimates, and Judgments referred to in this section.
Accounting Standards Updates See Note 3: Accounting Standards Updates in Item 8 for further information. 37 CONSOLIDATED OPERATING RESULTS The following table presents selected financial highlights: Year Ended December 31 2023 over 2022 2022 over 2021 ($ in millions) 2023 2022 2021 Dollars Percent Dollars Percent Sales and service revenues $ 11,454 $ 10,676 $ 9,524 $ 778 7 % $ 1,152 12 % Cost of product sales and service revenues 9,808 9,236 8,156 572 6 % 1,080 13 % Income from operating investments, net 37 48 41 (11) (23) % 7 17 % Other income and gains, net 120 1 2 119 11,900 % (1) (50) % General and administrative expenses 1,022 924 898 98 11 % 26 3 % Operating income 781 565 513 216 38 % 52 10 % Interest expense (95) (102) (89) 7 7 % (13) (15) % Non-operating retirement benefit 148 276 181 (128) (46) % 95 52 % Other, net 19 (20) 17 39 195 % (37) (218) % Federal and foreign income taxes 172 140 78 32 23 % 62 79 % Net earnings $ 681 $ 579 $ 544 $ 102 18 % $ 35 6 % Operating Performance Assessment and Reporting We manage and assess the performance of our business based on our performance on individual contracts and programs using the financial measures referred to below, with consideration given to the Critical Accounting Policies, Estimates, and Judgments referred to in this section.
The Operating FAS/CAS Adjustment excludes the following components of net periodic benefit costs: interest cost, expected return on plan assets, amortization of prior service cost (credit) and actuarial loss (gain), and settlement and curtailment effects. Effective January 1, 2021, we adopted the Safe Harbor methodology for determining CAS pension costs.
The Operating FAS/CAS Adjustment excludes the following components of net periodic benefit costs: interest cost, expected return on plan assets, amortization of prior service cost (credit) and actuarial loss (gain), and settlement and curtailment effects.
The differences in asset returns resulted in an actuarial loss of $1,943 million, and the differences in discount rates resulted in an actuarial gain of $2,605 million for the year ended December 31, 2022.
The differences in asset returns resulted in an actuarial gain of $263 million, and the differences in discount rates resulted in an actuarial loss of $144 million for the year ended December 31, 2023.
We also use free cash flow as a key operating metric in assessing the performance of our business and as a key performance measure in evaluating management performance and determining incentive compensation.
We also use free cash flow as a key operating metric in assessing the performance of our business and as a key performance measure in evaluating management performance and determining incentive compensation. Free cash flow may not be comparable to similarly titled measures of other companies.
We expect the Operating FAS/CAS Adjustment in 2023 to be a net expense of approximately $68 million ($118 million FAS and $50 million CAS), primarily driven by the more immediate recognition of higher interest rates under FAS.
We expect the Operating FAS/CAS Adjustment in 2024 to be a net expense of approximately $63 million ($113 million FAS and $50 million CAS), primarily driven by lower interest rates under FAS.
The following table presents segment operating results: Year Ended December 31 2022 over 2021 2021 over 2020 ($ in millions) 2022 2021 2020 Dollars Percent Dollars Percent Sales and Service Revenues Ingalls $ 2,570 $ 2,528 $ 2,678 $ 42 2 % $ (150) (6) % Newport News 5,852 5,663 5,571 189 3 % 92 2 % Mission Technologies 2,387 1,476 1,268 911 62 % 208 16 % Intersegment eliminations (133) (143) (156) 10 7 % 13 8 % Sales and service revenues $ 10,676 $ 9,524 $ 9,361 $ 1,152 12 % $ 163 2 % Operating Income Ingalls $ 292 $ 281 $ 281 $ 11 4 % $ — — % Newport News 357 352 233 5 1 % 119 51 % Mission Technologies 63 50 41 13 26 % 9 22 % Segment operating income 712 683 555 29 4 % 128 23 % Non-segment factors affecting operating income Operating FAS/CAS Adjustment (145) (157) 248 12 8 % (405) (163) % Non-current state income taxes (2) (13) (4) 11 85 % (9) (225) % Operating income $ 565 $ 513 $ 799 $ 52 10 % $ (286) (36) % KEY SEGMENT FINANCIAL MEASURES Sales and Service Revenues Period-to-period revenues reflect performance under new and ongoing contracts.
The following table presents segment operating results: Year Ended December 31 2023 over 2022 2022 over 2021 ($ in millions) 2023 2022 2021 Dollars Percent Dollars Percent Sales and Service Revenues Ingalls $ 2,752 $ 2,570 $ 2,528 $ 182 7 % $ 42 2 % Newport News 6,133 5,852 5,663 281 5 % 189 3 % Mission Technologies 2,699 2,387 1,476 312 13 % 911 62 % Intersegment eliminations (130) (133) (143) 3 2 % 10 7 % Sales and service revenues $ 11,454 $ 10,676 $ 9,524 $ 778 7 % $ 1,152 12 % Operating Income Ingalls $ 362 $ 292 $ 281 $ 70 24 % $ 11 4 % Newport News 379 357 352 22 6 % 5 1 % Mission Technologies 101 63 50 38 60 % 13 26 % Segment operating income 842 712 683 130 18 % 29 4 % Non-segment factors affecting operating income Operating FAS/CAS Adjustment (72) (145) (157) 73 50 % 12 8 % Non-current state income taxes 11 (2) (13) 13 650 % 11 85 % Operating income $ 781 $ 565 $ 513 $ 216 38 % $ 52 10 % KEY SEGMENT FINANCIAL MEASURES Sales and Service Revenues Period-to-period revenues reflect performance under new and ongoing contracts.
We expect the FAS/CAS Adjustment in 2023 to be a net benefit of approximately $81 million (($31) million FAS and $50 million CAS), primarily driven by higher interest rates offset by 2022 asset returns.
The favorable change was primarily driven by higher interest rates under FAS. We expect the FAS/CAS Adjustment in 2024 to be a net benefit of approximately $115 million (($65) million FAS and $50 million CAS), primarily driven by the more immediate recognition of the 2023 asset returns, offset by lower interest rates under FAS.
The components of the Operating FAS/CAS Adjustment were as follows: Year Ended December 31 2022 over 2021 2021 over 2020 ($ in millions) 2022 2021 2020 Dollars Percent Dollars Percent FAS benefit (expense) $ 86 $ (28) $ (70) $ 114 407 % $ 42 60 % CAS cost 45 52 437 (7) (13) % (385) (88) % FAS/CAS Adjustment 131 24 367 107 446 % (343) (93) % Non-operating retirement benefit (276) (181) (119) (95) (52) % (62) (52) % Operating FAS/CAS Adjustment (expense) benefit $ (145) $ (157) $ 248 $ 12 8 % $ (405) (163) % 2022 - The Operating FAS/CAS Adjustment in 2022 was a net expense of $145 million, compared to a net expense of $157 million in 2021.
The components of the Operating FAS/CAS Adjustment were as follows: Year Ended December 31 2023 over 2022 2022 over 2021 ($ in millions) 2023 2022 2021 Dollars Percent Dollars Percent FAS benefit (expense) $ 30 $ 86 $ (28) $ (56) (65) % $ 114 407 % CAS cost 46 45 52 1 2 % (7) (13) % FAS/CAS Adjustment 76 131 24 (55) (42) % 107 446 % Non-operating retirement benefit (148) (276) (181) 128 46 % (95) (52) % Operating FAS/CAS Adjustment (expense) benefit $ (72) $ (145) $ (157) $ 73 50 % $ 12 8 % The Operating FAS/CAS Adjustment in 2023 was a net expense of $72 million, compared to a net expense of $145 million in 2022.
The following table summarizes key components of cash flow provided by operating activities: Year Ended December 31 2022 over 2021 2021 over 2020 ($ in millions) 2022 2021 2020 Dollars Percent Dollars Percent Net earnings $ 579 $ 544 $ 696 $ 35 6 % $ (152) (22) % Depreciation and amortization 366 301 254 65 22 % 47 19 % Provision for doubtful accounts (7) 7 (1) (14) (200) % 8 800 % Stock-based compensation 36 33 23 3 9 % 10 43 % Deferred income taxes 2 98 23 (96) (98) % 75 326 % Loss (gain) on investments in marketable securities 25 (19) (17) 44 232 % (2) (12) % Asset impairments — — 13 — — % (13) (100) % Retiree benefits (127) (78) (176) (49) (63) % 98 56 % Loss on early extinguishment of debt — — 21 — — % (21) (100) % Trade working capital decrease (increase) (108) (126) 257 18 14 % (383) (149) % Net cash provided by operating activities $ 766 $ 760 $ 1,093 $ 6 1 % $ (333) (30) % We have historically maintained a capital structure comprised of a mix of equity and debt financing.
The following table summarizes key components of cash flow provided by operating activities: Year Ended December 31 2023 over 2022 2022 over 2021 ($ in millions) 2023 2022 2021 Dollars Percent Dollars Percent Net earnings $ 681 $ 579 $ 544 $ 102 18 % $ 35 6 % Depreciation and amortization 355 366 301 (11) (3) % 65 22 % Provision for expected credit losses 6 (7) 7 13 186 % (14) (200) % Stock-based compensation 34 36 33 (2) (6) % 3 9 % Deferred income taxes (113) 2 98 (115) (5,750) % (96) (98) % Loss (gain) on investments in marketable securities (23) 25 (19) (48) (192) % 44 232 % Retiree benefits (75) (127) (78) 52 41 % (49) (63) % Trade working capital decrease (increase) 105 (108) (126) 213 197 % 18 14 % Net cash provided by operating activities $ 970 $ 766 $ 760 $ 204 27 % $ 6 1 % We have historically maintained a capital structure comprised of a mix of equity and debt financing.
Non-Operating Retirement Benefit The non-operating retirement benefit includes the following components of net periodic benefit costs: interest cost, expected return on plan assets, amortization of prior service cost (credit) and actuarial loss (gain), and settlement and curtailment effects. 2022 - A favorable change in the non-operating retirement benefit of $95 million from 2021 to 2022 was primarily driven by higher 2021 returns on plan assets. 2021 - A favorable change in the non-operating retirement benefit of $62 million from 2020 to 2021 was primarily driven by higher 2020 returns on plan assets.
The change was driven by an increase in capitalized interest costs on construction in progress. 45 Non-Operating Retirement Benefit The non-operating retirement benefit includes the following components of net periodic benefit costs: interest cost, expected return on plan assets, amortization of prior service cost (credit) and actuarial loss (gain), and settlement and curtailment effects.
In 2022, the actual return on assets was approximately (16.1)%, which was less than the expected return assumption of 7.25%. For the year ended December 31, 2022, the weighted average discount rates for our pension and other postretirement benefit plans increased by 247 and 256 basis points, respectively.
In 2023, the actual return on assets was approximately 12.3%, which was greater than the expected return assumption of 8.00%. For the year ended December 31, 2023, the weighted average discount rates for our pension and other postretirement benefit plans decreased by 19 and 15 basis points, respectively.
Our purchase obligations as of December 31, 2022, were approximately $4,525 million, with approximately $2,451 million expected to be paid in 2023 and $2,074 million thereafter.
Our purchase obligations as of December 31, 2023, were approximately $5,122 million, with approximately $2,702 million expected to be paid in 49 2024 and $2,420 million thereafter.
Newport News Year Ended December 31 2022 over 2021 2021 over 2020 ($ in millions) 2022 2021 2020 Dollars Percent Dollars Percent Sales and service revenues $ 5,852 $ 5,663 $ 5,571 $ 189 3 % $ 92 2 % Segment operating income 357 352 233 5 1 % 119 51 % As a percentage of segment sales 6.1 % 6.2 % 4.2 % Sales and Service Revenues 2022 - Newport News revenues, including intersegment sales, increased $189 million, or 3%, in 2022 compared to 2021, primarily driven by higher revenues in aircraft carriers and submarines, partially offset by lower revenues in naval nuclear support services.
Newport News Year Ended December 31 2023 over 2022 2022 over 2021 ($ in millions) 2023 2022 2021 Dollars Percent Dollars Percent Sales and service revenues $ 6,133 $ 5,852 $ 5,663 $ 281 5 % $ 189 3 % Segment operating income 379 357 352 22 6 % 5 1 % As a percentage of segment sales 6.2 % 6.1 % 6.2 % Sales and Service Revenues Newport News sales and service revenues, including intersegment sales, increased $281 million, or 5%, in 2023 compared to 2022, primarily driven by higher volumes in aircraft carrier construction and engineering, the Columbia 42 class (SSBN 826) submarine program, submarine services, and the Virginia class (SSN 774) submarine program, partially offset by lower volumes in aircraft carrier RCOH and naval nuclear support services.
In estimating contract costs, we utilize a profit-booking rate based upon performance expectations that incorporate a number of assumptions and estimates regarding risks related to technical requirements, feasibility, schedule, and contract costs. Management performs periodic reviews of the contracts to evaluate the underlying risks, which may increase the profit-booking rate as we are able to mitigate and retire such risks.
In estimating contract costs, we utilize a profit-booking rate based upon performance expectations that incorporate a number of assumptions and estimates regarding risks related to technical requirements, feasibility, schedule, and contract costs.
The decrease in actuarial losses in 2022 was primarily driven by lower benefit obligations of $2,605 million resulting from higher discount rates used to determine benefit obligations and amortization of previously unrecognized actuarial losses of $32 million, partially offset by asset returns less than expected returns of $1,943 million.
The decrease in actuarial losses in 2023 was primarily driven by asset returns greater than expected returns of $263 million, updated mortality assumptions of $118 million, and amortization of previously unrecognized actuarial losses of $2 million, offset by lower discount rates used to determine benefit obligations of $144 million.
This category also includes the class' non-recurring engineering. The class is expected to bring improved warfighting capability, quality of life improvements for sailors, and reduced life cycle costs. Legend class National Security Cutter Design and build the U.S. Coast Guard's National Security Cutters ("NSCs"), the largest and most technically advanced class of cutter in the U.S. Coast Guard.
In addition, we have received awards for detail design and construction of Enterprise (CVN 80) and Doris Miller (CVN 81). This category also includes the class' non-recurring engineering. The class is expected to bring improved warfighting capability, quality of life improvements for sailors, and reduced life cycle costs. 51 Legend class National Security Cutter Design and build the U.S.
For contracts having no stated contract values, backlog includes only the amounts committed by the customer. 47 The following table presents funded and unfunded backlog by segment as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Total Total ($ in millions) Funded Unfunded Backlog Funded Unfunded Backlog Ingalls $ 9,231 $ 3,546 $ 12,777 $ 10,216 $ 792 $ 11,008 Newport News 11,665 17,742 29,407 11,121 21,198 32,319 Mission Technologies 1,317 3,622 4,939 1,334 3,789 5,123 Total backlog $ 22,213 $ 24,910 $ 47,123 $ 22,671 $ 25,779 $ 48,450 We expect approximately 22% of the $47.1 billion total backlog as of December 31, 2022, to be converted into sales in 2023.
The following table presents funded and unfunded backlog by segment as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Total Total ($ in millions) Funded Unfunded Backlog Funded Unfunded Backlog Ingalls $ 12,546 $ 3,201 $ 15,747 $ 9,231 $ 3,546 $ 12,777 Newport News 11,890 15,349 27,239 11,665 17,742 29,407 Mission Technologies 1,545 3,590 5,135 1,317 3,622 4,939 Total backlog $ 25,981 $ 22,140 $ 48,121 $ 22,213 $ 24,910 $ 47,123 We expect approximately 22% of the $48.1 billion total backlog as of December 31, 2023, to be converted into sales in 2024.
General and Administrative Expenses In accordance with industry practice and the regulations that govern the cost accounting requirements for government contracts, most general and administrative expenses are considered allowable and allocable costs on government contracts.
General and Administrative Expenses In accordance with industry practice and the regulations that govern the cost accounting requirements for government contracts, most general and administrative expenses are considered allowable and allocable costs on government contracts. These costs are allocated to contracts in progress on a systematic basis, and contract performance factors include this cost component as an element of cost.
Product sales at our Ingalls segment increased $15 million in 2022, primarily as a result of higher volumes in amphibious assault ships and surface combatants, partially offset by lower volumes in the Legend class NSC program. Newport News product sales increased $278 million in 2022, primarily as a result of higher volumes in aircraft carriers and submarines.
Product Sales and Segment Cost of Product Sales Product sales in 2023 increased $381 million, or 5%, from 2022, primarily as a result of higher volumes at Newport News in aircraft carrier construction, the Columbia class (SSBN 826) submarine program, and the Virginia class (SSN 774) submarine program, and higher volumes at Ingalls in surface combatants and amphibious assault ships, partially offset by lower volumes at Newport News in aircraft carrier RCOH and lower volumes at Ingalls in the NSC program.
Political and Economic Environment – The global geopolitical and economic environment continues to be impacted by uncertainty, heightened tensions, and instability.
Global Geopolitical Environment – Our current operating environment exists in the broader context of political and socioeconomic priorities and continues to be impacted by uncertainty, heightened geopolitical tensions, and instability.
The board previously increased the quarterly cash dividend to $1.18 per share in November 2021 and $1.14 per share in November 2020. We paid cash dividends totaling $192 million ($4.78 per share), $186 million ($4.60 per share), and $172 million ($4.23 per share) in the years ended December 31, 2022, 2021, and 2020, respectively.
We paid cash dividends totaling $200 million ($5.02 per share), $192 million ($4.78 per share), and $186 million ($4.60 per share) in the years ended December 31, 2023, 2022, and 2021, respectively.
Naval nuclear support services Provide services to and in support of the U.S. Navy, ranging from services supporting the Navy's carrier and submarine fleets to maintenance services at U.S. Navy training facilities. Naval nuclear support services include design, construction, maintenance, and disposal activities for in-service U.S. Navy nuclear ships worldwide through mobile and in-house capabilities.
Naval nuclear support services include design, construction, maintenance, and disposal activities for in-service U.S. Navy nuclear ships worldwide through mobile and in-house capabilities. Services include maintenance services on nuclear reactor prototypes.
In June 2015, we were awarded a contract for the detail design and construction of John F. Kennedy (CVN 79), following several years of engineering, advance construction, and purchase of long-lead-time components and material. In addition, we have received awards for detail design and construction of Enterprise (CVN 80) and Doris Miller (CVN 81).
Ford (CVN 78), the first ship of the Ford class, was delivered to the U.S. Navy in the second quarter of 2017. In June 2015, we were awarded a contract for the detail design and construction of John F. Kennedy (CVN 79), following several years of engineering, advance construction, and purchase of long-lead-time components and material.
While we base estimates and assumptions on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions.
While we base estimates and assumptions on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. We consider our policies relating to the following matters to involve our most critical accounting policies and estimates: • Revenue recognition; • Retirement related benefit plans; and • Workers' compensation.
Stennis (CVN 74), construction of a 10th boat of the Virginia class (SSN 774) submarine program, and construction of John F. Lehma n (DDG 137). LIQUIDITY AND CAPITAL RESOURCES We seek to efficiently convert operating results into cash for deployment in operating our businesses, implementing our business strategy, and maximizing stockholder value.
Kennedy (CVN 79), and an award modification for long-lead-time material for additional Block V boats of the Virginia class (SSN 774) submarine program. LIQUIDITY AND CAPITAL RESOURCES We seek to efficiently convert operating results into cash for deployment in operating our businesses, implementing our business strategy, and maximizing stockholder value.
Mission Technologies Year Ended December 31 2022 over 2021 2021 over 2020 ($ in millions) 2022 2021 2020 Dollars Percent Dollars Percent Sales and service revenues $ 2,387 $ 1,476 $ 1,268 $ 911 62 % $ 208 16 % Segment operating income (loss) 63 50 41 13 26 % 9 22 % As a percentage of segment sales 2.6 % 3.4 % 3.2 % Sales and Service Revenues 2022 - Mission Technologies revenues, including intersegment sales, for the year ended December 31, 2022, increased $911 million, or 62%, compared to 2021, primarily due to higher volumes in mission based solutions attributable to the acquisition of Alion in 2021. 2021 - Mission Technologies revenues, including intersegment sales, for the year ended December 31, 2021, increased $208 million, or 16%, compared to 2020, primarily due to higher volumes in mission based solutions from the acquisition of Alion, partially offset by the divestiture of our oil and gas business and contribution of our San Diego Shipyard to a joint venture.
Mission Technologies Year Ended December 31 2023 over 2022 2022 over 2021 ($ in millions) 2023 2022 2021 Dollars Percent Dollars Percent Sales and service revenues $ 2,699 $ 2,387 $ 1,476 $ 312 13 % $ 911 62 % Segment operating income 101 63 50 38 60 % 13 26 % As a percentage of segment sales 3.7 % 2.6 % 3.4 % Sales and Service Revenues Mission Technologies sales and service revenues, including intersegment sales, for the year ended December 31, 2023, increased $312 million, or 13%, compared to 2022, primarily due to higher volumes in C5ISR and CEW&S contracts.
The expected FAS/CAS Adjustment is subject to change during 2023, when we remeasure our actuarial estimate of the unfunded benefit obligation for CAS with updated census data and other items later in the year. 42 Non-current State Income Taxes Non-current state income taxes include deferred state income taxes, which reflect the change in deferred state tax assets and liabilities, and the tax expense or benefit associated with changes in state unrecognized tax benefits in the relevant period.
The expected FAS/CAS Adjustment is subject to change during 2024, when we remeasure our actuarial estimate of the unfunded benefit obligation with updated census data and other items later in the year.
Discount Rate - The assumed discount rate under FAS is used to determine the retirement related benefit plan obligations and expense, and represents the hypothetical rate at which plan benefit obligations could be effectively settled at the measurement date. Consequently, the discount rate can be volatile from year to year.
The key assumptions in these measurements are the interest rate used to discount future benefit payments and the expected long-term rate of return on plan assets. 35 Discount Rate - The assumed discount rate under FAS is used to determine the retirement related benefit plan obligations and expense, and represents the hypothetical rate at which plan benefit obligations could be effectively settled at the measurement date.
We made the following minimum and discretionary contributions to our pension and other postretirement benefit plans in the years ended December 31, 2022, 2021, and 2020: Year Ended December 31 ($ in millions) 2022 2021 2020 Pension plans Discretionary Qualified $ — $ 60 $ 205 Non-qualified 10 9 8 Other benefit plans 31 37 33 Total contributions $ 41 $ 106 $ 246 We made discretionary contributions to our qualified defined benefit pension plans totaling less than $1 million, $60 million, and $205 million in the years ended December 31, 2022, 2021, and 2020, respectively.
These factors and our resulting contributions also impact the funded status of the plans. 48 We made the following minimum and discretionary contributions to our pension and other postretirement benefit plans in the years ended December 31, 2023, 2022, and 2021: Year Ended December 31 ($ in millions) 2023 2022 2021 Pension plans Discretionary Qualified $ — $ — $ 60 Non-qualified 12 10 9 Other benefit plans 32 31 37 Total contributions $ 44 $ 41 $ 106 As of December 31, 2023 and 2022, our qualified pension plans were funded 114% and 109%, respectively.
Under the PPA, we are required to fully fund our pension plans over a rolling seven-year period as determined annually based upon the funded status at the beginning of each year. PPA also introduced a variety of benefit restrictions that apply if a plan falls below certain funded percentages, as defined by the Internal Revenue Code.
Under the PPA and the American Rescue Plan Act of 2021, we are required to fully fund our pension plans over a rolling 15-year period as determined annually based upon the funded status at the beginning of each year.
Services include maintenance services on nuclear reactor prototypes. Nuclear and environmental services Supports the national security mission of the Department of Energy ("DoE") through the management and operation of DoE sites, as well as the safe cleanup of legacy waste across the country.
Nuclear and environmental services Supports the national security mission of the Department of Energy ("DoE") through the management and operation of DoE sites, as well as the safe cleanup of legacy waste across the country. We meet our clients' toughest nuclear and environmental challenges and are positioned to serve the growing commercial nuclear power plant decommissioning market.
The increase was primarily due to favorable changes in contract estimates from facilities 46 capital and price adjustment clauses and contract incentives on the Columbia class (SSBN 826) submarine program, partially offset by lower risk retirement on the Virginia class (SSN 774) submarine program and the RCOH of USS George Washington (CVN 73). 2021 - Newport News segment operating income in 2021 was $352 million, compared to segment operating income of $233 million in 2020.
Segment Operating Income Newport News segment operating income in 2023 was $379 million, compared to segment operating income of $357 million in 2022. The increase was due to higher volumes described above and revenue adjustment on the RCOH of USS George Washington (CVN 73), partially offset by contract incentives on the Columbia class (SSBN 826) submarine program in 2022.
CAS Cost - In addition to providing the methodology for calculating retirement related benefit plan costs, CAS also prescribes the method for assigning those costs to specific periods. While the ultimate liability for such costs under FAS and CAS is similar, the pattern of cost recognition is different.
Sensitivities to assumptions are not necessarily linear and are specific to the time periods noted. CAS Cost - In addition to providing the methodology for calculating retirement related benefit plan costs, CAS also prescribes the method for assigning those costs to specific periods.
The favorable change in non-current state income taxes was primarily driven by a decrease in deferred state income tax expense, largely attributable to research and development expenses that are capitalized and amortized for tax purposes. 2021 - Non-current state income tax expense in 2021 was $13 million, compared to $4 million in 2020.
The favorable change in non-current state income taxes was primarily driven by a decrease in deferred state income tax expense, primarily attributable to the timing of long-term contract income for tax purposes.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on the amounts outstanding under our Term Loan as of December 31, 2022, an increase of 1% in interest rates would increase the interest expense on our debt by approximately $2 million on an annual basis. Inflation - Macroeconomic factors have contributed, and we expect will continue to contribute, to increasing cost inflation for raw materials, components, and supplies.
Biggest changeBased on the amounts outstanding under our Term Loan as of December 31, 2023, an 52 increase of 1% in interest rates would increase the interest expense on our debt by approximately $1 million on an annual basis. In January 2024, we paid the remaining $145 million balance of the Term Loan.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks, including those relating to interest rates and inflation. Interest Rates - Our floating rate financial instruments subject to interest rate risk include a $650 million Term Loan, a $1.5 billion Revolving Credit Facility, and a $1 billion commercial paper program.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks, including those relating to interest rates and inflation. Interest Rates - Our floating rate financial instruments subject to interest rate risk include a Term Loan, a $1.5 billion Revolving Credit Facility, and a $1 billion commercial paper program.
Persistent cost inflation over the long-term may have an adverse impact on our financial position, results of operations, or cash flows. 54
Persistent cost inflation over the long-term may have an adverse impact on our financial position, results of operations, or cash flows. 53
As of December 31, 2022, we had $225 million outstanding on the Term Loan and no indebtedness outstanding under our Revolving Credit Facility or our commercial paper program.
As of December 31, 2023, we had $145 million outstanding on the Term Loan and no indebtedness outstanding under our Revolving Credit Facility or our commercial paper program.
We mitigate some cost inflation risk by negotiating long-term agreements with certain raw material suppliers and incorporating price escalation provisions in customer contracts to the extent possible.
Inflation - Macroeconomic factors have contributed, and we expect will continue to contribute, to increasing cost inflation for raw materials, components, and supplies. We mitigate some cost inflation risk by negotiating long-term agreements with certain raw material suppliers and incorporating price escalation provisions in customer contracts to the extent possible.

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