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Huntington Ingalls Industries

Huntington Ingalls IndustriesHIIEarnings & Financial Report

NYSE · Industrials · Aerospace & Defense

Huntington Ingalls Industries, Inc. (HII) is the largest military shipbuilding company in the United States as well as a provider of professional services to partners in government and industry. HII was formed on 31 March 2011, as a divestiture from Northrop Grumman.

What changed in Huntington Ingalls Industries's 10-K — 2024 vs 2025

Top changes in Huntington Ingalls Industries's 2025 10-K

426 paragraphs added · 451 removed · 360 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

65 edited+8 added−15 removed51 unchanged
In the event of noncompliance, these agencies may increase regulatory oversight, impose fines, or shut down our operations, depending on their assessment of the severity of the noncompliance. In addition, new or revised security and safety requirements imposed by the U.S. Navy, the DoE, and the Nuclear Regulatory Commission could necessitate substantial capital and other expenditures.
Nuclear Regulatory Commission. In the event of noncompliance, these agencies may increase regulatory oversight, impose fines, or shut down our operations, depending on their assessment of the severity of the noncompliance. In addition, new or revised security and safety requirements imposed by the U.S. Navy, the DoE, and the Nuclear Regulatory Commission could necessitate substantial capital and other expenditures.
Government agencies and subcontracts with other prime contractors, is subject to a variety of laws and regulations, including the FAR, the Defense Federal Acquisition Regulation Supplement ("DFARS"), the Truth in Negotiations Act, the Procurement Integrity Act, the False Claims Act, CAS, the International Traffic in Arms Regulations promulgated under the Arms Export Control Act, the Close the Contractor Fraud Loophole Act, and the Foreign Corrupt Practices Act.
Government agencies and subcontracts with other prime contractors, is subject to a variety of laws and regulations, including the FAR, the Defense Federal Acquisition Regulation Supplement, the Truth in Negotiations Act, the Procurement Integrity Act, the False Claims Act, CAS, the International Traffic in Arms Regulations promulgated under the Arms Export Control Act, the Close the Contractor Fraud Loophole Act, and the Foreign Corrupt Practices Act.
These strategies and objectives form the pillars of our human capital management framework and are advanced through the following programs, policies, and initiatives: Competitive Pay and Benefits - Our compensation programs are designed to ensure we have the ability to attract, retain, and motivate employees to achieve our objectives. • We provide employee base wages and salaries that are competitive and consistent with employee positions, skill levels, experience, knowledge, and geographic location. • We utilize nationally recognized surveys and outside compensation and benefits consulting firms to independently evaluate the effectiveness of our employee and executive compensation and benefit programs and to provide benchmarking against our peers within the industry. • The structure of our executive compensation programs balances incentive earnings for both short-term and long-term performance, and we align our executive long-term equity compensation metrics with long-term shareholder interests. • Employees are eligible for health insurance, paid and unpaid leaves, 401(k) plans, and life and disability/accident insurance coverage.
These strategies and objectives form the pillars of our human capital management framework and are advanced through the following programs, policies, and initiatives: Competitive Pay and Benefits - Our compensation programs are designed to ensure we have the ability to attract, retain, and motivate employees to achieve our objectives. • We provide employee base wages and salaries that are competitive and consistent with employee positions, skill levels, experience, knowledge, and geographic location. • We utilize nationally recognized surveys and outside compensation and benefits consulting firms to independently evaluate the effectiveness of our employee and executive compensation and benefit programs and to provide benchmarking against our peers within the industry. • The structure of our executive compensation programs balances incentive earnings for both short-term and long-term performance, and we align our executive long-term equity compensation metrics with long-term shareholder, customer, and other stakeholder interests. • Employees are eligible for health insurance, paid and unpaid leaves, 401(k) plans, and life and disability/accident insurance coverage.
Government for substantially all of our business • significant delays or reductions in appropriations for our programs and/or changes in 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, labor challenges, changes in trade policy, or other factors and our efforts to recover or offset such costs and/or changes in estimated contract costs, and perform our contracts effectively; • changes in business practices, procurement processes and government regulations and our ability to comply with such requirements; • adverse economic conditions in the United States and globally; • our level of indebtedness and ability to service our indebtedness; • our ability to deliver our products and services at an affordable life cycle cost and compete within our markets; • our ability to attract, retain, and train a qualified workforce; • subcontractor and supplier performance and the availability and pricing of raw materials and components; • our ability to execute our strategic plan, including with respect to share repurchases, dividends, capital expenditures, and strategic acquisitions; • investigations, claims, disputes, enforcement actions, litigation (including criminal, civil, and administrative), and/or other legal proceedings, and improper conduct of employees, agents, subcontractors, suppliers, business partners, or joint ventures in which we participate, including the impact on our reputation or ability to do business; • changes in key estimates and assumptions regarding our pension and retiree health care costs; • security threats, including cyber security threats, and related disruptions; • natural and environmental disasters and political instability; • health epidemics, pandemics and similar outbreaks; and • other risk factors discussed herein and in our other filings with the SEC.
Government for substantially all of our business; 9 Table of Contents • significant delays or reductions in appropriations for our programs and/or changes in customer priorities and requirements (including government budgetary constraints, government shutdowns, 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, labor challenges, changes in trade policy, or other factors and our efforts to recover or offset such costs and/or changes in estimated contract costs, and perform our contracts effectively; • changes in business practices, procurement processes and government regulations and our ability to comply with such requirements; • adverse economic conditions in the United States and globally; • our level of indebtedness and ability to service our indebtedness; • our ability to deliver our products and services at an affordable life cycle cost and compete within our markets; • our ability to attract, retain, and train a qualified workforce; • subcontractor and supplier performance and the availability and pricing of raw materials and components; • our ability to execute our strategic plan, including with respect to share repurchases, dividends, capital expenditures, and strategic acquisitions; • investigations, claims, disputes, enforcement actions, litigation (including criminal, civil, and administrative), and/or other legal proceedings, and improper conduct of employees, agents, subcontractors, suppliers, business partners, or joint ventures in which we participate, including the impact on our reputation or ability to do business; • changes in key estimates and assumptions regarding our pension and retiree health care costs; • security threats, including cybersecurity threats, and related disruptions; • natural and environmental disasters and political instability; • health epidemics, pandemics and similar outbreaks; and • other risk factors discussed herein and in our other filings with the SEC.
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.
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 War (the "Department"). 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.
Ingalls Through our Ingalls segment, we design and construct non-nuclear ships for the U.S. Navy and U.S. Coast Guard, including amphibious assault ships, expeditionary warfare ships, surface combatants, and national security cutters ("NSC"). We are the sole builder of amphibious assault ships and one of two builders of surface combatants for the U.S. Navy.
Ingalls Through our Ingalls segment, we design and construct non-nuclear ships for the U.S. Navy and U.S. Coast Guard, including amphibious assault ships, surface combatants, and national security cutters ("NSC"). We are the sole builder of amphibious assault ships and one of two builders of surface combatants for the U.S. Navy.
Since our founding in 2011, we have followed our succession plans over 80% of the time when replacing a vacancy in an existing vice president position, and we have filled approximately 80% 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 over 80% of the time when replacing a vacancy in an existing vice president position, 8 Table of Contents and we have filled approximately 80% of newly created vice president positions with internal hires. See Risk Factors in Item 1A for further information regarding our human capital resources.
See "Risk Factors" in Item 1A for further discussion regarding risks related to intellectual property. 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 Risk Factors in Item 1A for further discussion regarding risks related to intellectual property. 4 Table of Contents 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.
Government has the ability to decrease or withhold contract payments if it determines significant deficiencies exist in one or more of our business systems. 5 Table of Contents 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.
Government has the ability to decrease or withhold contract payments if it determines significant deficiencies exist in one or more of our business systems. 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.
We are also subject to evolving cyber security and data privacy and protection laws and regulations, which increase our costs and compliance risks and may affect our competitiveness, cause reputational harm, and expose us to damage claims, substantial fines, and other penalties.
We are also subject to evolving cybersecurity and data privacy and protection laws and regulations, which increase our costs and compliance risks and may affect our competitiveness, cause reputational harm, and expose us to damage claims, substantial fines, and other penalties.
In addition, we routinely post on the "Investors" page of our website (ir.hii.com) news releases, announcements, and other statements about our business and results of operations, some of which may contain information that may be deemed material to investors.
In addition, we routinely post on the "Investors" page of our website (ir.hii.com) news releases, announcements, and other statements about our business and results of operations, some of which may contain information that may be deemed material to investors. Therefore, we encourage investors to monitor the "Investors" page of our website and review the information we post on that page.
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. 8 Table of Contents Recruitment, Training, and Workforce Development - We are focused on attracting, retaining, and developing a skilled workforce, and in 2024, we hired approximately 10,000 new employees.
We also fund the operation of Family Health Centers near our two shipyards, which provide a full range of medical, lab, pharmacy, physical therapy, and vision services. Recruitment, Training, and Workforce Development - We are focused on attracting, retaining, and developing a skilled workforce, and in 2025, we hired approximately 8,000 new employees.
Kesselring Site, a research and development facility in New York that supports the U.S. Navy, which were completed in 2024. Mission Technologies Our Mission Technologies segment is organized into four groups, All-Domain Operations, Warfare Systems, Global Security, and Uncrewed Systems, and specializes in a wide range of services and products across our capabilities.
Kesselring Site, a research and development facility in New York that supports the U.S. Navy, which were completed in 2024. 3 Table of Contents Mission Technologies Our Mission Technologies segment is organized into four groups, All-Domain Operations, Warfare Systems, Global Security, and Unmanned Systems, and specializes in a wide range of services and products across our groups.
Our Mission Technologies segment provides a wide range of services and products, including command, control, computers, communications, cyber, intelligence, surveillance, and reconnaissance systems and operations; the application of artificial intelligence and machine learning to battlefield decisions; defense and offensive cyberspace strategies and electronic warfare; uncrewed autonomous systems; live, virtual, and constructive training solutions; fleet sustainment; 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; platform modernization; and critical nuclear operations.
Surface Combatants We are a design agent for, and one of only two companies that constructs, Arleigh Burke class guided missile destroyers ("DDG"), a class of surface combatant. We have delivered 35 Arleigh Burke class (DDG 51) destroyers to the U.S. Navy, including USS Jack H. Lucas (DDG 125) in 2023, USS Lenah H.
Surface Combatants We are a design agent for, and one of only two companies that constructs, Arleigh Burke class guided missile destroyers ("DDG"), a class of surface combatant. We have delivered 36 Arleigh Burke class (DDG 51) destroyers to the U.S. Navy, including USS Ted Stevens (DDG 128) in 2025 and USS Jack H. Lucas (DDG 125) in 2023.
Navy, and we are party to long-term teaming agreements with the other company for the production of both Virginia class (SSN 774) fast attack nuclear submarines and Columbia class (SSBN 826) ballistic missile submarines. We are one of only two companies that builds the U.S.
Navy, and we are party to a long-term teaming agreement with the other company for the production of Virginia class (SSN 774) fast attack nuclear submarines and act as a subcontractor for the production of Columbia class (SSBN 826) ballistic missile submarines. We are one of only two companies that builds the U.S.
Navy's Supervisor of Shipbuilding, the Defense Contract Audit Agency ("DCAA"), and the Defense Contract Management Agency ("DCMA"). These agencies evaluate our contract performance, cost structures, and compliance with applicable laws, regulations, and standards.
Government and its agencies, including the U.S. Navy's Supervisor of Shipbuilding, the Defense Contract Audit Agency ("DCAA"), and the Defense Contract Management Agency ("DCMA"). These agencies evaluate our contract performance, cost structures, and compliance with applicable laws, regulations, and standards.
McCool Jr . (LPD 29) in 2024. We are currently constructing Harrisburg (LPD 30), and Pittsburgh (LPD 31). In 2023, we were awarded a contract to construct Philadelphia (LPD 32). In 2024, we were awarded a multi-ship procurement contract for the construction of Travis Manion (LPD 33), LPD 34 (unnamed), and LPD 35 (unnamed).
We are currently constructing Harrisburg (LPD 30), Pittsburgh (LPD 31), and Philadelphia (LPD 32). In 2024, we were awarded a multi-ship procurement contract for the construction of Travis Manion (LPD 33), LPD 34 (unnamed), and LPD 35 (unnamed).
Government may use or authorize other parties to use the 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 adverse impact on our business.
The first submarine of the Block IV contract was delivered in 2020, and five more submarines have been delivered through 2024. The remaining four boats of the Block IV contract are in the final assembly and test phases of construction.
The first submarine of the Block IV contract was delivered in 2020, and seven more submarines have been delivered through 2025. The remaining two boats of the Block IV contract are in the final assembly and test phases of construction.
Navy, including LHAs and LPDs. We are also the sole builder of NSCs for the U.S. Coast Guard. We are one of only two companies currently capable of designing and building nuclear-powered submarines for the U.S.
For certain ships and nuclear-powered submarines, we currently are the only, or one of the only, companies capable of building such ships or submarines, including LHAs and LPDs for the U.S. Navy and NSCs for the U.S. Coast Guard. We are one of only two companies currently capable of designing and building nuclear-powered submarines for the U.S.
Government regulations determine contractor costs that are allowable and therefore recoverable from the government, and certain costs are not allowable and therefore not recoverable. The U.S. Government also regulates the methods by which allowable costs, including overhead, are allocated to government contracts. Costs we incur that are not allowable under the Federal Acquisition Regulation (the “FAR”) or U.S.
Government regulations determine contractor costs that are allowable and therefore recoverable from the government, and certain costs are not allowable and therefore not recoverable. The U.S. Government also regulates the methods by which allowable costs, including overhead, are allocated to government contracts.
In 2023, we were awarded a long-lead-time material contract for Helmand Province (LHA 10), and in 2024, we were awarded a contract modification for the detail design and construction of Helmand Province (LHA 10). The LPD program is a long-running production program of expeditionary warfare ships. We delivered USS Fort Lauderdale (LPD 28) in 2022 and Richard M.
In 2023, we were awarded a long-lead-time material contract for Helmand Province (LHA 10), and in 2024, we were awarded a contract modification for the detail design and construction of Helmand Province (LHA 10). The LPD program is a long-running production program of amphibious assault ships. We delivered USS Richard M. McCool Jr . (LPD 29) in 2024.
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 constructing Ted Stevens (DDG 128), Jeremiah Denton (DDG 129), George M. Neal (DDG 131), Sam Nunn (DDG 133), and Thad Cochran (DDG 135).
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 constructing Jeremiah Denton (DDG 129), George M.
Navy large deck amphibious assault ships ("LHA") and amphibious transport dock ships ("LPD"), respectively. The LHA is a key component of the Department of the Navy's requirement for Expeditionary Strike Groups/Amphibious Readiness Groups, and design, construction, and modernization of LHAs are core to our Ingalls operations.
The LHA is a key component of the Department of the Navy's requirement for Expeditionary Strike Groups/Amphibious Readiness Groups, and design, construction, and modernization of LHAs are core to our Ingalls operations.
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.
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.
See Note 6: Revenue under Item 8 and "Risk Factors" in Item 1A for further information regarding our contracts. Nuclear Our nuclear operations are subject to various safety related requirements imposed by the U.S. Navy, the DoE, and the U.S. Nuclear Regulatory Commission.
See Note 7: Revenue in Item 8, the Contracts section under Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7, and Risk Factors in Item 1A for further information regarding our contracts. Nuclear Our nuclear operations are subject to various safety related requirements imposed by the U.S. Navy, the DoE, and the U.S.
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 2023 and 2024, the team received contract awards for advance procurement of long-lead-time material in support of all ten Block VI boats.
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 2025, the team was awarded a contract modification for the construction of these two additional Block V boats.
These requirements increase our contract performance costs and compliance costs and risks. See "Risk Factors" in Item 1A for further discussion regarding risks related to regulatory matters. Government Contracting We are overseen and audited by the U.S. Government and its agencies, including the U.S.
Government contracts, as well as legal and regulatory requirements relating to, among others, cybersecurity, environmental protection, and our nuclear operations. These requirements increase our contract performance costs and compliance costs and risks. See Risk Factors in Item 1A for further discussion regarding risks related to regulatory matters. Government Contracting We are overseen and audited by the U.S.
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 $8.8 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 $8.8 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 $15.4 billion for detail design and construction of the Gerald R.
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.
Costs 5 Table of Contents we incur that are not allowable under the Federal Acquisition Regulation (“FAR”) or 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.
Virginia Class (SSN 774) Submarines We have a teaming agreement with Electric Boat Corporation ("Electric Boat"), a division of General Dynamics Corporation ("General Dynamics"), to build Virginia class (SSN 774) fast attack nuclear submarines.
Our nuclear submarine program includes construction, engineering, design, research, and integrated planning. Virginia Class (SSN 774) Submarines We have a teaming agreement with Electric Boat Corporation ("Electric Boat"), a division of General Dynamics Corporation ("General Dynamics"), to build Virginia class (SSN 774) fast attack nuclear submarines.
Therefore, we encourage investors to monitor the "Investors" page of our website and review the information we post on that page. 9 Table of Contents 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.
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. Accordingly, such information should not be considered part of this report.
Accordingly, such information should not be considered part of this report. The SEC also maintains a website at sec.gov that contains reports, proxy statements, and other information about SEC registrants, including us.
The SEC also maintains a website at sec.gov that contains reports, proxy statements, and other information about SEC registrants, including us.
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 1 Table of Contents Arleigh Burke class (DDG 51) destroyer.
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.
We are the sole builder of large multi-mission NSCs for the U.S. Coast Guard. Our Ingalls segment is located in Pascagoula, Mississippi on 800 acres along the Pascagoula River. Amphibious Assault Ships We construct amphibious assault ships and expeditionary warfare ships for the U.S. Navy, which include U.S.
Our Ingalls segment is located in Pascagoula, Mississippi on 800 acres along the Pascagoula River. Amphibious Assault Ships We construct amphibious assault ships for the U.S. Navy, which include U.S. Navy large deck amphibious assault ships ("LHA") and amphibious transport dock ships ("LPD").
Such laws and regulations impose liability upon a party for environmental cleanup and remediation costs and damage without regard to negligence or fault on the part of such party and could expose us to liability for the conduct of or conditions caused by third parties. 6 Table of Contents 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 by the U.S.
We also employ more than 6,500 veterans across the enterprise. 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.
In addition, over 1,350 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 3,850 apprentice school alumni at Newport News and Ingalls. Approximately 45% of our employees are covered by a total of 13 collective bargaining agreements.
Our workforce contains many third-, fourth-, and fifth-generation employees, and approximately 1,525 employees with more than 40 years of continuous service. Employees in our shipbuilding segments with more than 40 years of continuous service achieve the honor of “Master Shipbuilder.” As of December 31, 2024, we had 1,260 Master Shipbuilders at Newport News and 213 at Ingalls.
Employees in our shipbuilding segments with more than 40 years of continuous service achieve the honor of “Master Shipbuilder.” As of December 31, 2025, we had 1,096 Master Shipbuilders at Newport News and 212 at Ingalls. We also employ more than 6,900 veterans across the enterprise.
Approximately 45% of our employees are covered by a total of nine collective bargaining agreements. Newport News has three collective bargaining agreements covering represented employees, which expire in February 2027, December 2027 and April 2029. Ingalls has five collective bargaining agreements covering represented employees, all of which expire in March 2026.
Newport News has three collective bargaining agreements covering represented employees, which expire in February 2030, December 2030 and April 2031. Ingalls has five collective bargaining agreements covering represented employees, 7 Table of Contents all of which expire in March 2026.
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 64 submarines to the U.S.
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 65 submarines to the U.S. Navy since 1960, comprised of 51 fast attack and 14 ballistic missile submarines.
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.
We endeavor to mitigate supply chain risk through various measures, such as negotiating long-term agreements with certain raw material suppliers and through price escalation provisions in certain customer contracts. See "Risk Factors" in Item 1A for further discussion regarding risks related to raw materials.
We have experienced challenges with access to, and the pricing of, certain raw materials, components, and other supplies. We endeavor to mitigate supply chain risk through various measures, such as negotiating long-term agreements with certain suppliers and through price escalation provisions in certain customer contracts.
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.
As a subcontractor to Electric Boat, we leverage our Virginia class (SSN 774) experience to perform design work and build modules for the entire Columbia class (SSBN 826) submarine 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.
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.
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.
Neal (DDG 131), Sam Nunn (DDG 133), and Thad Cochran (DDG 135). 1 Table of Contents 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.
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.
In 2025, 2024, and 2023, approximately 81%, 80%, and 81%, respectively, of our revenues were generated from the U.S. Navy. Intellectual Property We develop new technologies, manufacturing processes, and systems-integration processes. In addition to owning our intellectual property, we license intellectual property rights to and from third parties. The U.S.
Regulatory Matters We operate in heavily regulated markets and must comply with a variety of laws and regulations, including those relating to the award, administration, and performance of U.S. Government contracts, as well as legal and regulatory requirements relating to, among others, cybersecurity, environmental protection, and our nuclear operations.
See Risk Factors in Item 1A for further discussion regarding risks related to raw materials and our suppliers. Regulatory Matters We operate in heavily regulated markets and must comply with a variety of laws and regulations, including those relating to the award, administration, and performance of U.S.
The nature of major defense programs, conducted under binding long-term contracts, enables companies that perform well to benefit from a level of program continuity not common in many industries. We believe we are well-positioned in our shipbuilding markets. Because we are the only company currently capable of building, refueling, and inactivating the U.S.
The nature of major defense programs, conducted under binding long-term contracts, enables companies that perform well to benefit from a level of program continuity not common in many industries. Our Mission Technologies segment competes domestically and internationally against midsized to large traditional aerospace and defense ("A&D") companies and non-traditional defense technology companies.
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. We also develop, test, and integrate leading-edge AI and machine learning algorithms to optimize and accelerate the nation’s mission-critical systems and platforms.
Warfare Systems 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.
Nuclear and Environmental Services Nuclear and Environmental Services support the Department of Energy’s ("DoE") national security mission through the management and operation of DoE sites, as well as the safe cleanup of legacy waste across the country.
We support the DoE’s national security mission through the management and operation of its sites, as well as the safe cleanup of legacy waste across the country . Unmanned Systems Creates advanced unmanned systems for defense, marine research, and commercial applications.
Intense competition related to programs, resources, funding, and long operating cycles are key characteristics of both our shipbuilding business and the shipbuilding defense industry in general. It is common industry practice to share work on major programs among a number of companies.
Our Newport News and Ingalls segments compete primarily with General Dynamics and, in the case of certain non-nuclear shipbuilding programs, smaller shipyards. Intense competition related to programs, resources, funding, and long operating cycles are key characteristics of both our shipbuilding business and the shipbuilding defense industry in general.
Navy's nuclear-powered aircraft carriers, we believe we are positioned well to be awarded future contracts to perform such activities. Even so, the government periodically revisits whether refueling of nuclear-powered aircraft carriers should be performed in private or public facilities. If a U.S.
Navy's current fleet of Arleigh Burke class (DDG 51) destroyers. We also are the only company currently capable of building, refueling, and inactivating the U.S. Navy's nuclear-powered aircraft carriers and, as a result, believe we are well positioned to be awarded future contracts to perform such activities. Even so, the U.S.
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 25 years at Newport News and more than 17 years at Ingalls.
Mission Technologies has a total of 80 employees covered by five collective bargaining agreements, which expire in September 2026, December 2027, September 2028, and two that expire in August 2027. We have not experienced a work stoppage in more than 26 years at Newport News and more than 18 years at Ingalls.
Human Capital Resources We recognize that our employees are our most important resources and serve as the foundation for our ability to achieve financial and strategic objectives. 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 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 44,000 employees. We are the largest industrial employer in Virginia and the largest private employer in Mississippi.
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. 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.
The flagship of this program is the Legend class NSC, a multi-mission platform we designed. 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. In 2025, we reached agreement with the U.S. Coast Guard to terminate production and delivery of the 11th and final ship.
Government generally receives non-exclusive 4 Table of Contents 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 generally receives license rights to certain intellectual property developed in the performance of U.S. Government contracts or with government funding and may use or authorize other parties to use such intellectual property.
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. Our success depends on investments in our people, technologies, and products to meet the evolving needs of our customers.
Key competitive factors in the Mission Technologies segment include differentiated technology and competitive rates. Our success depends on investments in our people, technologies, and products to meet the evolving needs of our customers. Human Capital Resources We recognize that our employees are our most important resources and serve as the foundation for our ability to achieve financial and strategic objectives.
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. 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.
See Note 2: Summary of Significant Accounting Policies and Note 7: Revenue in Item 8. Raw Materials We rely on third parties to provide raw materials and components. 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.
See "Risk Factors" in Item 1A and Note 15: Commitments and Contingencies under Item 8 for further information regarding environmental matters. Competitive Environment In our business of designing, building, overhauling, and repairing military ships, we primarily compete with General Dynamics and, in the case of certain non-nuclear shipbuilding programs, smaller shipyards. The smaller shipyards sometimes team with large defense contractors.
See Risk Factors in Item 1A and Note 16: Commitments and Contingencies in Item 8 for further information regarding environmental matters. 6 Table of Contents Competitive Environment We operate in a competitive environment and compete with defense companies and other companies serving the intelligence and federal civil markets.
We also provide undersea vehicle and specialized craft development and prototyping services. Uncrewed systems Develops advanced uncrewed 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 uncrewed systems, including uncrewed underwater vehicles and uncrewed surface vessels .
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 . Customers Our revenues are primarily derived from the U.S. Government, including the U.S. Navy, the U.S. Coast Guard, the Department, the DoE, and other federal agencies.
Live, virtual, and constructive solutions ("LVC") A trusted partner to our military customers, our capabilities include designing, developing, and operating the largest live, virtual, and constructive enterprise that prepares warfighters for cross-domain battle. Our training connects live environments with virtual platforms and simulated (constructive) threats to prepare trainees through integrated, real-world scenarios before they are in harm’s way.
Our training connects live environments with virtual platforms and simulated (constructive) threats to prepare trainees through integrated, real-world scenarios before they are in harm’s way. We maintain and modernize the vast majority of the U.S. Navy’s fleet, with a holistic approach to life cycle maritime defense systems, from small watercraft to submarines, surface combatants, and aircraft carriers.
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.
Government periodically revisits whether refueling of nuclear-powered aircraft carriers should be performed in private or public facilities. If a 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 adversely affected. It is common industry practice to share work on major programs among a number of companies.
In addition, we have received contract 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").
Navy to align schedules as a result of late material on Enterprise (CVN 80) and assess technical baseline changes and upgrades to increase carrier lethality for potential incorporation into Enterprise (CVN 80), Doris Miller (CVN 81), and William J. Clinton (CVN 82). We continue to be the exclusive prime contractor for nuclear aircraft carrier refueling and complex overhaul ("RCOH").
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 employ individuals specializing in 19 crafts and trades, with approximately 7,000 engineers and designers and approximately 4,600 employees with advanced degrees.
We employ individuals specializing in 19 crafts and trades, with approximately 7,000 engineers and designers and approximately 3,600 employees with advanced degrees. Our workforce contains many third-, fourth-, and fifth-generation employees, and approximately 1,350 employees with more than 40 years of continuous service.
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Navy since 1960, comprised 2 Table of Contents of 50 fast attack and 14 ballistic missile submarines. Our nuclear submarine program, located at our Newport News shipyard, includes construction, engineering, design, research, and integrated planning.
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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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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.
Added
Ford class (CVN 78) aircraft carriers, Enterprise (CVN 80) and Doris Miller (CVN 81). Enterprise (CVN 80) has received and loaded all major engine room components, allowing for engine room deck over and acceleration of ship erection, which reached 50% complete in 2025.
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Capabilities including command, control, computers, communications, cyber, intelligence, surveillance, and reconnaissance systems and operations; the application of artificial intelligence and machine learning to battlefield decisions; defense and offensive cyberspace strategies and electronic warfare; uncrewed autonomous systems; live, virtual, and constructive training solutions; fleet sustainment; and critical nuclear operations. 3 Table of Contents Command, control, computers, communications, cyber, intelligence, surveillance, and reconnaissance ("C5ISR") Designs, develops, integrates, and manages the sensors, systems, and other assets necessary to support integrated C5ISR operations and accelerated decision-making.
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Doris Miller (CVN 81) keel units are currently in fabrication and we continue to receive major material components. The fiscal year 2026 National Defense Authorization Act (“NDAA”) provides authorization for William J. Clinton (CVN 82) and George W. Bush (CVN 83), including incremental funding, advance construction, and advance procurement authorities. We are currently working with the U.S.
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These business activities provide data fusion and mission management capabilities for the DoD, the combatant commands, and the intelligence community. Cyber and electronic warfare ("CEW&S") Works within our nation’s intelligence and cyber operations communities to defend U.S. interests in cyberspace and anticipate emerging threats.
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Ford class (CVN 78) aircraft carriers, present 2 Table of Contents significant opportunities for inactivation contracts as they reach the end of their lifespans. We believe we are well positioned to be the U.S. Navy's shipyard of choice for these contract awards.
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This is a modern and distributed approach to U.S. military training . Fleet Sustainment Provides comprehensive life-cycle sustainment to the U.S. Navy fleet and other DoD and commercial maritime customers.
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In 2023, 2024 and 2025, the team received contract awards for advance procurement of long-lead-time material in support of all ten Block VI boats.
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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.
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All-Domain Operations Designs, develops, integrates, and manages the sensors, systems, and other assets necessary to support integrated C5ISR operations and accelerated decision-making. These business activities provide data fusion and mission management capabilities for the Department, the combatant commands, and the intelligence community.
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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.
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We also develop, test, and integrate leading-edge AI and machine learning algorithms to optimize and accelerate the nation’s mission-critical systems and platforms. Global Security A trusted partner to our military, U.S. Navy, and Department of Energy (“DoE”) customers, our capabilities include designing, developing, and operating the largest live, virtual, and constructive enterprise that prepares warfighters for cross-domain battle.
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Coast Guard, the DoD, the DoE, and other federal agencies. In 2024, 2023, and 2022, approximately 80%, 81%, and 82%, 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our procurement practices are intended to provide materials, components, parts, and services that meet contract specifications and to reduce the likelihood of our procurement of unauthorized, non-compliant, or deficient goods and services.
Our procurement practices are intended to provide materials, components, parts, and services that meet contract specifications and reduce the likelihood of our procurement of unauthorized, non-compliant, or deficient goods and services.
Our future success depends in part on our ability to increase our current and future shipbuilding capacity. If we are unable to do so, or to do so in a cost-effective manner, our business could be materially adversely affected. We expect that we will need to increase our shipbuilding capacity to meet current and future production demands.
Our success depends, in part, on our ability to increase our current and future shipbuilding capacity. If we are unable to do so, or to do so in a cost-effective manner, our business could be materially adversely affected. We expect that we will need to increase our shipbuilding capacity to meet current and future production demands.
Factors that have caused, and may in the future cause, contract cost growth include, but are not limited to, inflation, technical challenges, manufacturing difficulties, delays, workforce-related issues, including labor shortages and reduced productivity, changes in the nature and complexity of the work performed, the timeliness, availability and cost of materials or equipment, subcontractor performance or product quality issues, performance delays, availability and timing of customer funding, changes in trade policy, and natural disasters.
Factors that have caused, and may in the future cause, contract cost growth include, but are not limited to, inflation, changes in trade policy (including tariffs), technical challenges, manufacturing difficulties, delays, workforce-related issues, including labor shortages and reduced productivity, changes in the nature and complexity of the work performed, the timeliness, availability and cost of materials or equipment, subcontractor performance or product quality issues, performance delays, availability and timing of customer funding, changes in trade policy, and natural disasters.
Fixed-price contracts generally tend to have more financial risk than cost-type contracts, including as a result of inflationary pressures, wage pressures and labor shortages, and supplier challenges. These contracts increase the risk that we may not recover all of our costs or will generate less profit or a loss if our costs exceed initial estimates.
Fixed-price contracts generally tend to have more financial risk than cost-type contracts, including as a result of inflationary pressures, wage pressures and labor shortages, and supplier challenges. These contracts increase the risk that we may not recover our costs or will generate less profit or a loss if our costs exceed initial estimates.
Any of these factors could materially adversely affect our business with the U.S. Government and our financial position, results of operations, or cash flows. In addition, 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.
Any of these factors could materially adversely affect our business with the U.S. Government and our financial position, results of operations, or cash flows. 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.
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.
Although we undertake cooperative efforts with our customers, suppliers, subcontractors, and other business partners to facilitate their understanding of cybersecurity threats they face and potential cybersecurity 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.
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 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 customers, suppliers, subcontractors, and other business partners also face cyber and other security threats.
The adoption of new environmental or climate change laws and regulations, stricter enforcement of existing laws and regulations, imposition of new cleanup requirements, discovery of previously unknown or more extensive contamination, litigation involving environmental matters, our inability to recover related costs under our government contracts, or the financial insolvency of other responsible parties could cause us to incur costs that could have a material adverse effect on our financial position, results of operations, or cash flows.
The adoption of new environmental laws and regulations, stricter enforcement of existing laws and regulations, imposition of new cleanup requirements, discovery of previously unknown or more extensive contamination, litigation involving environmental matters, our inability to recover related costs under our government contracts, or the financial insolvency of other responsible parties could cause us to incur costs that could have a material adverse effect on our financial position, results of operations, or cash flows.
We are and may become subject to various legal proceedings across a broad array of matters, including but not limited to, administrative, civil, and criminal litigation, environmental claims, income tax proceedings, compliance proceedings, customer claims, enforcement actions, audits, investigations and other legal proceedings, which can divert financial and management resources and result in fines, penalties, compensatory, treble, or other damages, or nonmonetary sanctions.
We are and may become subject to various legal proceedings across a broad array of matters, including but not limited to, administrative, civil, and criminal litigation, class actions, environmental claims, income tax proceedings, antitrust claims, compliance proceedings, customer claims, enforcement actions, audits, investigations and other legal proceedings, which can divert financial and management resources and result in fines, penalties, compensatory, treble, or other damages, or nonmonetary sanctions.
If we are unable to continue to compete successfully, we may generate lower revenues and lose market share, which would negatively impact our financial condition, results of operations, and cash flows and our ability to compete for future defense contracts could be impacted. Although we are the only company currently capable of refueling nuclear-powered aircraft carriers, two existing U.S.
If we are unable to compete successfully, we may generate lower revenues and lose market share, which would negatively impact our financial condition, results of operations, and cash flows and our ability to compete for future defense contracts could be impacted. Although we are the only company currently capable of refueling nuclear-powered aircraft carriers, existing U.S.
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.
Business and Operational Risk Factors Cost growth on flexibly priced contracts that does not result in higher contract prices 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.
While we believe pension risk transfer transactions are beneficial, future transactions, depending on their size, could result in us making additional contributions to the pension trust and/or require us to recognize noncash settlement charges in earnings in the applicable reporting period. We could be negatively impacted by security threats, including cyber security threats, and related disruptions.
While we believe pension risk transfer transactions are beneficial, future transactions, depending on their size, could result in us making additional contributions to the pension trust and/or require us to recognize noncash settlement charges in earnings in the applicable reporting period. We could be negatively impacted by security threats, including cybersecurity threats, and related disruptions.
Demand for our products and services also can be affected by shifts in customer priorities resulting from changes in military strategy and planning. In response to the need for less expensive alternatives and the increasing proliferation of advanced weapons, future strategy reassessments by the DoD may result in decreased demand for our shipbuilding programs, including our aircraft carrier programs.
Demand for our products and services also can be affected by shifts in customer priorities resulting from changes in military strategy and planning. In response to the need for less expensive alternatives and the increasing proliferation of advanced weapons, future strategy reassessments by the Department may result in decreased demand for our shipbuilding programs, including our aircraft carrier programs.
Changes in environmental and climate-related laws or regulations, including regulations on greenhouse gas emissions, carbon pricing, energy taxes, product efficiency standards, mandatory disclosure obligations, and other requirements, could increase our operational and compliance expenditures and those of our suppliers, including increased energy and raw materials costs and costs associated with manufacturing changes.
Changes in environmental laws or regulations, including regulations on greenhouse gas emissions, carbon pricing, energy taxes, product efficiency standards, mandatory disclosure obligations, and other requirements, could increase our operational and compliance expenditures and those of our suppliers, including increased energy and raw materials costs and costs associated with manufacturing changes.
Government contracts often 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, challenging labor market conditions, unexpected rework, and cost overruns, have in the past resulted, and may in the future result, in contract prices becoming less favorable or even unprofitable to us over time.
Government contracts often 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, new or increased tariffs, supplier issues, including equipment delays, challenging labor market conditions, unexpected rework, and cost overruns, have in the past resulted, and may in the future result, in contract prices becoming less favorable or even unprofitable to us over time.
Our business could be negatively impacted if we are unsuccessful negotiating new collective bargaining agreements. Approximately 45% of our employees are covered by a total of nine collective bargaining agreements. Collective bargaining agreements generally expire after three to five years and are subject to renegotiation at that time.
Our business could be negatively impacted if we are unsuccessful negotiating new collective bargaining agreements. Approximately 45% of our employees are covered by a total of 13 collective bargaining agreements. Collective bargaining agreements generally expire after three to five years and are subject to renegotiation at that time.
We have recently experienced situations where our personnel have failed to achieve expected performance improvements on certain of our long-term contracts, which resulted in unexpected inefficiency, and in some cases, to rework, that negatively impacted our ability to achieve certain performance milestones under those contracts.
We have recently experienced situations where our personnel have failed to achieve expected performance improvements on certain of our long-term contracts, which resulted in unexpected inefficiency, and in some cases, required rework, which negatively impacted our ability to achieve certain performance milestones under those contracts.
The negative resolution of investigations, claims, litigation, disputes or other legal proceedings could have a material adverse effect on our financial position, results of operations, or cash flows. See Note 13: Investigations, Claims, and Litigation in Item 8. Environmental costs could have a material adverse effect on our financial position, results of operations, or cash flows.
The negative resolution of investigations, claims, litigation, disputes or other legal proceedings could have a material adverse effect on our financial position, results of operations, or cash flows. See Note 14: Investigations, Claims, and Litigation in Item 8. Environmental costs could have a material adverse effect on our financial position, results of operations, or cash flows.
In addition, pressures on, as well as laws and plans relating to, the federal budget, potential changes in the threat environment, priorities and defense spending, the timing and substance of the annual budget process, use of continuing resolutions, and the federal debt limit, have impacted and could continue to impact the amount and timing of funding for individual programs and delay purchasing or payments by our customers.
In addition, pressures on, as well as laws and plans relating to, the federal budget, potential changes in the threat environment, priorities and defense spending, government efficiency efforts, the timing and substance of the annual budget process, use of continuing resolutions, and the federal debt limit, have impacted and could continue to impact the amount and timing of funding for individual programs and delay purchasing or payments by our customers.
Changes in estimates used in contract accounting and contract cost growth have affected and could continue to affect our profitability and our overall financial position. Contract accounting requires risk-based judgments regarding estimated contract revenues and costs, and assumptions regarding schedule and technical matters.
Changes in estimates used in contract accounting and contract cost growth have affected and could continue to affect our profitability and our financial position. Contract accounting requires risk-based judgments regarding estimated contract revenues and costs, and assumptions regarding schedule, technical matters, and performance.
We may compete in the future with the same contractor and other shipyards to build new and different classes of ships, as well as ships for which we are currently the sole source, including expeditionary warfare and amphibious assault ships.
We may compete in the future with the same contractor and other shipyards to build new and different classes of ships, as well as ships for which we are currently the sole source, including amphibious assault ships.
Although we are relieved of all responsibility for the associated pension obligations under the GACs we have purchased to date, we may in the future purchase GACs whereby the insurance company reimburses the pension plans but we remain responsible for paying benefits under the plans to covered retirees and beneficiaries and are subject to the risk that the insurance company will default on its obligations to reimburse the pension trusts.
Although we are relieved of all responsibility for the associated pension obligations under the GACs we have purchased to date, we may in the future purchase GACs whereby the insurance company reimburses the pension 17 Table of Contents plans but we remain responsible for paying benefits under the plans to covered retirees and beneficiaries and are subject to the risk that the insurance company will default on its obligations to reimburse the pension trusts.
In addition, significant delays in deliveries of key raw materials, which may occur as a result of shortage or pricing, could have a material adverse effect on our financial position, results of operations, or cash flows. In some cases, only one supplier may exist for certain components and parts required to manufacture our products.
In addition, significant delays in deliveries of key raw materials, which may occur due to material shortage or pricing, could have a material adverse effect on our financial position, results of operations, or cash flows. In some cases, only one supplier may exist for certain components and parts required to manufacture our products.
As a result, investors have less insight into our classified business and our business overall. However, historically the business risks associated with our work on classified programs have not differed materially from those of our other government contracts.
As a result, investors have less insight into our classified business and our business overall. However, historically the business risks associated with our classified programs have not differed materially from those of our other government contracts.
Any such events could cause delays or disruption or otherwise impact our business, and or all of which may require us to incur greater costs for security or to shut down operations for a period of time.
Any such events could cause delays or disruption or otherwise impact our business, and may require us to incur greater costs for security or to shut down operations for a period of time.
Government-owned shipyard became capable of, and engaged, in the refueling of nuclear-powered aircraft carriers, our financial position, results of operations, or cash flows would likely be adversely affected. We also compete in the shipbuilding engineering, planning, and design market with companies that provide engineering support services.
Government-owned shipyard became capable of, and engaged in, the refueling of nuclear-powered aircraft carriers, our financial position, results of operations, or cash flows would likely be adversely affected. 13 Table of Contents We also compete in the shipbuilding engineering, planning, and design market with companies that provide engineering support services.
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, sanctions, compensatory, treble, or other damages. Allegations of impropriety can also cause significant reputational damage. The U.S.
If an audit uncovers improper or illegal activities, we may be subject to administrative, civil, or criminal 20 Table of Contents proceedings, which could result in fines, penalties, repayments, sanctions, compensatory, treble, or other damages. Allegations of impropriety can also cause significant reputational damage. The U.S.
These cyber security threats are continuously evolving and include security breaches (whether through 19 Table of Contents cyber attack, cyber intrusion, or insider threat) via the internet; malicious software, including ransomware; computer viruses; attachments to emails; persons inside our organization or with access to systems inside our organization; subcontractors or suppliers; or other significant disruptions of our information technology networks and related systems or those of our suppliers or subcontractors, including through the use of new and emerging technologies like artificial intelligence.
These cybersecurity threats are continuously evolving and include security breaches (whether through cyber attack, cyber intrusion, or insider threat) via the internet; malicious software, including ransomware; computer viruses; attachments to emails; persons inside our organization or with access to systems inside our organization; subcontractors or suppliers; or other significant disruptions of our information technology networks and related systems or those of our suppliers or subcontractors, including through the use of new and emerging technologies like artificial intelligence.
In addition, our ability to expand our shipbuilding capacity will also greatly depend on our ability to hire, train and retain an adequate number of personnel, in particular personnel with the appropriate level of knowledge, background and skills. Should we be unable to hire such personnel, our business and financial results would be negatively impacted.
In addition, our ability to expand our shipbuilding capacity will also depend greatly on our ability to hire, train, and retain an adequate number of personnel, in particular personnel with the appropriate level of knowledge, background and skills. If we are unable to hire such personnel, our business and financial results would be negatively impacted.
If we do not have sufficient rights to use the data or other material or content on which the AI 20 Table of Contents tools we use rely, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, data privacy, or other rights, or contracts to which we are a party.
If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, data privacy, or other rights, or contracts to which we are a party.
Our ability to satisfy our obligations on a timely basis are adversely affected if one or 17 Table of Contents 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.
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, materials, or services in a timely, compliant, and cost-effective manner, or they otherwise fail to satisfy contractual requirements.
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. We also rely upon proprietary technology, information, processes, and know-how that are not protected by patents.
Government is successful, the 23 Table of Contents intellectual property on which we depend and our access to and use of certain supplier intellectual property could be negatively affected. We also rely upon proprietary technology, information, processes, and know-how that are not protected by patents.
Our information technology infrastructure is critical to the efficient operation of our business and essential to our ability to perform day-to-day operations. We rely on this infrastructure to process, transmit, and store electronic information, including classified and other sensitive information of the U.S. Government. We face substantial cyber security threats, including threats to our and the U.S.
Our information technology infrastructure is critical to the efficient operation of our business and essential to our ability to perform day-to-day operations. We rely on this infrastructure to process, transmit, and store electronic information, including classified and other sensitive information of the U.S. Government. We face substantial cybersecurity threats, including threats to our and the U.S.
Government has, in certain instances, withheld 22 Table of Contents 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. In addition, the U.S.
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. In addition, the U.S.
Moreover, if we violate the Clean Air Act or the Clean 23 Table of Contents Water Act, the facility or facilities involved in the violation could be placed by the EPA on a list of facilities that generally cannot be used in performing on U.S. Government contracts until the violation is corrected.
Moreover, if we violate the Clean Air Act or the Clean Water Act, the facility or facilities involved in the violation could be placed by the EPA on a list of facilities that generally cannot be used in performing on U.S. Government contracts until the violation is corrected.
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 25 Table of Contents intellectual property.
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.
We also may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, employee retention, transaction-related or other litigation, and other liabilities. Any of the foregoing could adversely affect our business and results of operations. 27 Table of Contents Joint ventures and other non-controlling investments operate under shared control with other parties.
We also may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, employee retention, transaction-related or other litigation, and other liabilities. Any of the foregoing could adversely affect our business and results of operations. Joint ventures, partnerships, and other non-controlling investments operate under shared control with other parties.
Government spending levels for defense-related or other programs may not be sustained, and future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide products or services or are less likely to be awarded contracts.
Current U.S. Government spending levels for defense-related or other programs may not be sustained, and future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide products or services or are less likely to be awarded contracts.
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 Department'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 audits.
Disruptions and performance issues from our suppliers and subcontractors, unanticipated cost growth for the products and services they provide, or inconsistencies between our contractual obligations to our customers and our agreements with our subcontractors and suppliers, have adversely impacted and may continue to impact our ability to meet our commitments to customers.
Disruptions and performance issues from our suppliers and subcontractors, unanticipated cost growth for the products and services they provide, or inconsistencies between our contractual obligations to our customers and our agreements with our subcontractors and suppliers, have adversely impacted and may in the future impact our ability to meet our commitments to customers.
A federal government shutdown could, in turn, result in the delay or cancellation of government programs, or the delay of contract payments, which could have a negative effect on our cash flows and adversely affect our future results of operations.
A federal government shutdown could, in turn, result in the delay or cancellation of government programs, or the delay of payments by our customer, which could have a negative effect on our cash flows and adversely affect our future results of operations.
Our ability to estimate total revenues and costs at completion depends on many variables, including the size and nature of our contracts.
Our ability to estimate total revenues and costs at completion depends on many factors, including the size and nature of our contracts.
We are utilizing and may in the future utilize one or more strategies to increase such capacity including, among others, increasing investment in our current shipyards, identifying and retaining additional qualified personnel, utilizing third parties to support production needs and identifying efficiencies in our current production process to support increased production.
We are utilizing and may in the future utilize one or more strategies to increase such capacity including, among 16 Table of Contents others, increasing investment in our current shipyards, identifying and retaining additional qualified personnel, utilizing third parties to support production needs, and identifying efficiencies in our current production process to support increased production.
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.
A 14 Table of Contents 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.
Moreover, reductions in U.S. defense spending that reduce the demand for the types of ships we build and services we provide increase our exposure to market competition risk.
Moreover, changes in U.S. defense spending priorities that reduce the demand for the types of ships we build and services we provide increase our exposure to market competition risk.
Changes in procurement practices favoring incentive-based fee arrangements, different award fee criteria (such as the evaluation of environmental factors), non-traditional contract provisions, and cost mandates from the government may affect our profitability and the predictability of our profit rates. The U.S. Government also is pursuing alternatives to shift additional responsibility and performance risks to contractors.
Changes in procurement practices favoring incentive-based fee arrangements, different award criteria, non-traditional contract provisions, and cost mandates from the government may affect our profitability and the predictability of our profit rates. The U.S. Government also is pursuing alternatives to shift additional responsibility and performance risks to contractors.
We encourage you to consider carefully the risk factors described below when evaluating the information contained in this report as the outcome of one or more of these risks could have a material adverse effect on our financial position, results of operations and/or cash flows.
We encourage you to consider carefully the risk factors described below when evaluating the information contained in this report as the outcome of one or more of these risks could have a material adverse effect on our financial position, results of operations and/or cash flows. Industry and Economic Risk Factors We depend on the U.S.
A termination resulting from our default can expose us to various liabilities, including excess re-procurement costs, and could negatively affect our ability to compete for future contracts. Any contract termination could have a material adverse effect on our financial condition, results of operations, or cash flows.
A termination resulting from our default can expose us to various liabilities, including excess re-procurement costs, and could negatively affect our ability to compete for future contracts. Any contract termination (including a termination of a prime contract for which we are a subcontractor) could have a material adverse effect on our financial condition, results of operations, or cash flows.
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.
These arrangements typically include many of the same risks and uncertainties, but may also expose us to additional risks not present if we retained full control.
If the AI tools that we use are deficient, inaccurate, or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other adverse impacts on our business and financial results.
If the AI tools that we use are deficient, incomplete, inaccurate, biased, controversial, or otherwise flawed, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other adverse impacts on our business and financial results.
Significant delays or reductions in appropriations for our programs and/or changes in customer priorities could have a material adverse effect on our financial position, results of operations, or cash flows. As a U.S. Government contractor, we depend on Congressional funding of our U.S. Navy, U.S. Coast Guard, and other federal programs. U.S.
Significant delays or reductions in appropriations for our programs and/or changes in customer priorities could have a material adverse effect on our financial position, results of operations, or cash flows. As a U.S. Government contractor, we depend on Congressional funding for our programs. U.S.
In the event of termination of a contract for the U.S. Government's 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 completed.
In the event of termination for convenience, a contractor generally is able to recover costs incurred and profit on costs up to the amount authorized under the contract, but not the profit that would have been earned had the contract been completed. However, the U.S.
While we implement robust countermeasures to mitigate the risks posed by cyber security threats, external and internal threat actors continuously seek to evade our cyber security countermeasures to gain unauthorized and unlawful access to our information technology infrastructure, assets, and data, both on premises and in the cloud.
While we use robust countermeasures to mitigate the risks posed by cybersecurity threats, external and internal threat actors continuously seek to evade our cybersecurity countermeasures to gain unauthorized and unlawful access to our information technology infrastructure, assets, and data, both on premises and in the cloud.
Unidentified or identified but un-indemnified or uninsured pre-closing liabilities could affect our future financial results, particularly through successor liability under procurement laws and regulations, such as the False Claims Act or Truth in Negotiations Act, anti-corruption, environmental, tax, import-export, and technology transfer laws, which provide for civil and criminal penalties and the potential for debarment.
Unidentified or identified but un-indemnified or uninsured pre-closing liabilities could affect our future financial results, particularly through successor liability under procurement laws and regulations, such as the False Claims Act or Truthful Cost or Pricing Data Act, anti-corruption, environmental, tax, import export, and technology transfer laws, which provide for civil and criminal penalties and the potential for debarment.
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.
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 Department cybersecurity requirements. For example, our U.S.
We cannot predict the impact of changes to 13 Table of Contents customer priorities on existing, follow-on, replacement, or future programs.
We cannot predict the impact of changes to customer priorities on existing, follow-on, replacement, or future programs.
We are also regularly under audit or examination by taxing authorities, including foreign tax authorities. The final determination of tax liabilities and any related litigation could similarly result in unanticipated increases in our tax expense and affect profitability and cash flows.
We are also regularly under audit or examination by taxing authorities, including foreign tax authorities. The final determination of tax liabilities and any related litigation could similarly result in unanticipated increases in our tax expense and affect profitability and cash flows. See Note 12: Income Taxes in Item 8.
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 impacted by the same cyber security threats we face. We also face increasing and evolving disclosure and reporting obligations related to cybersecurity events.
These organizations have varying levels of cybersecurity expertise and safeguards, and their relationships with U.S. Government contractors increases the likelihood that they are or will be impacted by the same cybersecurity threats we face. 18 Table of Contents We are also subject to disclosure and reporting obligations related to cybersecurity events.
If we fail to manage acquisitions, joint ventures, equity investments, and other transactions successfully or if acquired businesses or equity investments fail to perform as expected, our financial results, business, and future prospects could be harmed. As part of our business strategy, we identify and evaluate potential acquisitions, joint ventures, and investments.
If we fail to manage acquisitions, joint ventures, equity investments, and other transactions successfully or if acquired businesses or equity investments fail to perform as expected, our financial results, business, and future prospects could be harmed.
Such changes in spending authorizations and budgetary priorities may occur as a result of uncertainty surrounding the federal budget, increasing political pressure and legislation, shifts in spending priorities from defense-related or other programs as a result of competing demands for federal funds, the number and intensity of military conflicts or other factors.
Such changes in spending authorizations and budgetary priorities may occur as a result of uncertainty surrounding the federal budget, increasing political pressure and legislation, shifts in spending priorities from defense, federal civilian, or other programs as a result of competing demands for federal funds and government efficiency efforts, changes in the threat environment, including the number and intensity of military conflicts, or other factors.
Any improper actions by our employees, agents, business partners, those with whom we do business and others working on our behalf could subject us to administrative, civil, or criminal investigations and enforcement actions, 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 conduct by our employees, agents, or others with whom we do business or who are working on our behalf could subject us to administrative, civil, or criminal investigations and enforcement actions, monetary and non-monetary penalties, liabilities, and the loss of privileges or other sanctions including suspension or debarment, which could have a material adverse effect on our financial position, results of operations, or cash flows.
Government contracting requirements increase our contract performance costs and compliance costs and risks, and change on a routine basis. In addition, our nuclear operations are subject to an enhanced regulatory environment, which results in further performance and compliance requirements and higher costs.
Government contractor, we are subject to significant legal regulatory requirements, including specific regulations related to our nuclear operations. Government contracting requirements increase our contract performance costs and compliance costs and risks, and change on a routine basis. In addition, our nuclear operations are subject to an enhanced regulatory environment, which results in further performance and compliance requirements and higher costs.
Our bids for longer-term firm fixed-price contracts typically include assumptions for labor and other contract costs that historically have been sufficient to cover cost increases over the period of performance. If, however, recent inflationary conditions continue over the long-term, our cost assumptions may not be sufficient to cover potential contract cost growth.
Our bids for longer-term firm fixed-price contracts typically include assumptions for labor and other contract costs that historically have been sufficient to cover cost increases over the period of performance. However, our profitability may be adversely affected if these cost assumptions are not sufficient to cover potential contract cost growth.
As a result of the above factors, we have experienced, and expect to continue to experience, significant difficulties hiring and retaining personnel with relevant qualifications and experience, which has negatively impacted, and may continue to negatively impact, our results of operations, financial condition, and cash flow, and could impact our ability to perform under our contracts and compete for new contracts.
We have experienced, and expect to continue to experience, significant challenges hiring and retaining personnel with relevant qualifications and experience, which has negatively impacted, and may continue to negatively impact, our results of operations, financial condition, and cash flows, and could impact our ability to perform under our contracts and compete for new contracts.
New laws, regulations, or procurement requirements, or changes to existing ones (including, for example, regulations related to cybersecurity, information protection, environment, cost accounting, counterfeit parts, specialty metals, among others), can increase our performance costs and compliance costs and risks, and reduce our profitability.
New laws, regulations, or procurement requirements, or changes to existing ones (including, for example, regulations related to cybersecurity, information and data protection, environment, cost accounting, taxes, pensions, counterfeit parts, specialty metals, and use of certain non-U.S. equipment, among others), can increase our performance costs and compliance costs and risks, and reduce our profitability.
Government operates under a continuing resolution, limitations can be placed on production increases, multi-year procurements, and new program starts, which may result in delays or cancellation of new contract awards. When the U.S. Government fails to enact annual appropriations or a continuing resolution, a full or partial federal government shutdown may occur.
Government operates under a continuing resolution, limitations can be placed on production increases, multi-year procurements, and new program starts, which may result in delays or cancellation of new contract awards. When the U.S.
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.
Our business is subject to significant disruption from natural disasters, environmental disasters, and other events outside of our control that could have a material adverse effect on our financial position, results of operations, or cash flows.
In addition, the competition for certain of our products, such as aircraft carriers, submarines, amphibious assault ships, surface combatants, and other ships, is heightened due to changes in budgetary pressures and priorities, and our programs and products may compete with each other for available funding in addition to other defense products and services provided by our competitors.
In addition, the competition for certain of our products, such as aircraft carriers, submarines, amphibious assault ships, surface combatants, and other ships, is heightened due to changes in budgetary pressures and priorities, and our programs may compete with each other for available funding in addition to our competitors. We expect competition for future shipbuilding programs to continue to be intense.
If we cannot successfully adapt to the DoD’s accelerated acquisition processes or if the DoD significantly increases the use of OTAs with non-traditional defense contractors or increases cost sharing mandates, we may lose new strategic business opportunities in high-growth areas and our future performance and results of operations could be adversely affected.
If we cannot adapt successfully to changing acquisition processes or if the Department significantly favors privately funded, non-traditional defense contractors or increases cost sharing mandates, we may lose new business opportunities, including in high-growth or strategic areas, and our future performance and results of operations could be adversely affected.
We are subject to income and other taxes in the U.S. (federal and state) and foreign jurisdictions. Changes in applicable tax laws and regulations or their interpretation and application, including those with retroactive effect, have affected and could affect our tax expense and profitability and cash flows.
We are subject to income and other taxes in the U.S. (federal and state) and foreign jurisdictions. Changes in applicable tax laws and regulations or their interpretation and application, including those with retroactive effect, have affected and could affect our tax expense and profitability and cash flows. On July 4, 2025, Public Law 119-21 (the “Act”) was signed into law.
Changes in our assumptions, circumstances, or estimates and the inability to recover increased cost growth have in the past had, and may in the future have, a material adverse effect on our financial position, results of operations, or cash flows. See the Contracts section under Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7.
Changes in our assumptions, circumstances, or estimates, and the inability to recover increased cost growth have in the past had, and may in the future have, a material adverse effect on our financial position, results of operations, or cash flows.
Navy or other contractors or developed by us. Problems associated with development or implementation of these new technologies or design changes in the construction process can lead to delays in the design and construction schedule.
Navy or other contractors or developed by us. Problems associated with development or implementation of these new technologies or design changes in the construction process can lead to delays in the design and construction schedule. The risks associated with new technologies or design changes during construction can both increase the cost of a ship and delay delivery.
We expect competition for future shipbuilding programs to continue to be intense. We compete with another large defense contractor for contracts to build surface combatants , submarines, and large deck amphibious ships, and smaller shipyards have entered the market for surface combatants.
We compete with another large defense contractor for contracts to build surface combatants , submarines, and large deck amphibious ships, and smaller shipyards have entered the market for surface combatants.
Government programs are subject to annual congressional budget authorization and appropriation processes. When Congress is unable to pass appropriations bills before the beginning of a fiscal year, a continuing resolution can be enacted to provide stopgap funding for a specified period of time at a specified rate, often the prior year’s appropriations level. When the U.S.
If Congress is unable to pass appropriations bills before the beginning of a fiscal year, a continuing resolution can be enacted to provide stopgap funding for a specified period of time at a specified rate, often the prior year’s appropriations level. When the U.S.
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.
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 pension and other postretirement benefit obligations and related expenses.
These audits may result in costs being challenged, debated, and in certain cases, withheld or modified, and could adversely affect our financial position, results of operations, or cash flows. 14 Table of Contents Competition within our markets or an increase in bid protests may reduce our revenues and market share.
These audits may result in costs being challenged, debated, and in certain cases, withheld or modified, and could adversely affect our financial position, results of operations, or cash flows. Competition within our markets and bid protests may affect our ability to win new contracts and result in reduced revenues or market share.
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. 24 Table of Contents Our reputation and our ability to conduct business may be impacted by the improper conduct of employees, agents, suppliers, subcontractors or business partners.
Such insurance, 22 Table of Contents 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.
Government may use or, in some cases, authorize third parties to use such intellectual property. The U.S. 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 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.
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.
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.
The occurrence of any or all of these events may adversely affect our ability to fund our operations, meet contractual commitments, make future investments or desirable acquisitions, or respond to competitive challenges. Tightening capital markets could also adversely affect the ability of our suppliers and subcontractors to obtain financing.
The occurrence of any or all of these events may adversely affect our ability to fund our operations, meet contractual commitments, make future investments or desirable acquisitions, or respond to competitive challenges.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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The Cybersecurity Committee responsibilities include: • reviewing our enterprise cybersecurity strategy and framework, including our assessment of cybersecurity threats and risk, data security programs, and our management and mitigation of cybersecurity and information technology risks and potential breach incidents; • reviewing any significant cybersecurity incident that has occurred, reports to or from regulators with respect thereto, and steps that have been taken to mitigate against reoccurrence; • evaluating the effectiveness of our cyber risk management and data security programs measured against our cybersecurity threat landscape; • assessing the effectiveness of our data breach incident response plan; 28 Table of Contents • reviewing and assessing our information technology disaster recovery capabilities; and • reviewing our assessment of cybersecurity threats and risk associated with our supply chain and actions we are taking to address such threats and risks.
The Cybersecurity Committee responsibilities include: • reviewing our enterprise cybersecurity strategy and framework, including our assessment of cybersecurity threats and risk, data security programs, and our management and mitigation of cybersecurity and information technology risks and potential breach incidents; • reviewing any significant cybersecurity incident that has occurred, reports to or from regulators with respect thereto, and steps that have been taken to mitigate against reoccurrence; • evaluating the effectiveness of our cyber risk management and data security programs measured against our cybersecurity threat landscape; • assessing the effectiveness of our data breach incident response plan; • reviewing and assessing our information technology disaster recovery capabilities; and • reviewing our assessment of cybersecurity threats and risks associated with our supply chain and actions we are taking to address such threats and risks.
As of the date of this report, we are not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. However, as discussed under Item 1A.
As of the date of this report, we are not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. However, as discussed in Item 1A.
"Risk Factors," specifically the risks titled "We could be negatively impacted 29 Table of Contents by security threats, including cyber security threats, and related disruptions" and "Our earnings and profitability depend, in part, upon subcontractor performance and raw material and component availability and pricing," the sophistication of cyber threats continues to increase, and the preventative actions we take to reduce the risk of cyber incidents and protect our systems and information may be insufficient.
Risk Factors, specifically the risks titled "We could be negatively impacted by security threats, including cybersecurity threats, and related disruptions" and "Our earnings and profitability depend, in part, upon subcontractor performance and raw material and component availability and pricing," the sophistication of cyber threats continues to increase, and the preventative actions we take to reduce the risk of cyber incidents and protect our systems and information may be insufficient.
ITEM 1C. CYBERSECURITY Our cybersecurity program (the “Cybersecurity Program”) includes processes to identify, assess, and manage material risks from cybersecurity threats. The Cybersecurity Program processes utilize a risk-based approach and include written cybersecurity and information technology policies and procedures, including a cybersecurity incident response plan.
ITEM 1C. CYBERSECURITY Our cybersecurity program (the “Cybersecurity Program”) includes processes to identify, assess, and manage material risks from cybersecurity threats. The Cybersecurity Program processes utilize a risk-based approach and 25 Table of Contents include written cybersecurity and information technology policies and procedures, including a cybersecurity incident response plan.
He has specific experience in the following cybersecurity areas: Cyber & IT security policy & governance; information risk management; cybersecurity strategic planning and integration; enterprise infrastructure; cybersecurity engineering; incident response and remediation; supply chain cyber risk management; cybersecurity awareness training; M&A cyber risk management; cloud security; identity management; disaster recovery; cybersecurity regulation compliance; and cybersecurity damage assessment.
He has specific experience in the following cybersecurity areas: Cyber & IT security policy & governance; information risk management; cybersecurity strategic planning and integration; enterprise infrastructure; cybersecurity engineering; incident response and remediation; supply chain cyber risk 26 Table of Contents management; cybersecurity awareness training; M&A cyber risk management; identity and access management; disaster recovery; and cybersecurity regulation compliance.
Our CISO has 33 years of experience in cybersecurity and information technology, over 20 years working with NAVSEA 08Y, approval authority of HII’s unclassified Naval Nuclear Propulsion Information networks, and holds a Master’s degree in Cybersecurity.
Our CISO has more than 25 years of experience with HII and over 20 years of experience in cybersecurity and information technology.

Item 2. Properties

Properties — owned and leased real estate

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It also has a variety of other facilities, including an 18-acre all-weather steel fabrication shop, accessible by both rail and transporter, module outfitting facilities that enable us to assemble a ship's basic structural modules indoors and on land, machine shops totaling 300,000 square feet, and an apprentice school, which provides a four-year accredited apprenticeship program to train shipbuilders.
It also has a variety of other facilities, including an 18-acre all-weather steel fabrication shop, accessible by both rail and transporter, module outfitting facilities that enable us to assemble a ship's basic structural modules indoors and on land, machine shops totaling 27 Table of Contents 300,000 square feet, and an apprentice school, which provides a four-year accredited apprenticeship program to train shipbuilders.
We anticipate continued use of this facility for the remaining 42 years of the lease and beyond. 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 41 years of the lease and beyond. Newport News - The primary properties comprising our Newport News operating segment are located in Newport News, Virginia.
In January 2025, the Company acquired substantially all of the assets of W International SC, LLC and Vivid Empire SC, LLC (collectively “W International”), a South Carolina-based complex metal fabricator specializing in the manufacture of shipbuilding structures, modules, and assemblies. The acquired manufacturing facility operates within the Newport News segment as Newport News Shipbuilding – Charleston Operations.
In January 2025, the Company acquired substantially all of the assets of W International SC, LLC and Vivid Empire SC, LLC (collectively “W International”), a South Carolina-based complex metal fabricator specializing in the manufacture of shipbuilding structures, modules, and assemblies.
We also have employees working at customer sites throughout the United States and in other countries. As of December 31, 2024, we had major operations in Honolulu, Hawaii; Odon, Indiana; Annapolis Junction and Hanover, Maryland; Syracuse, New York; Beavercreek and Dayton, Ohio; Alexandria, Suffolk, and Virginia Beach, Virginia; Pocasset, Massachusetts; and Panama City Beach, Florida.
As of December 31, 2025, we had major operations in Honolulu, Hawaii; Odon, Indiana; Annapolis Junction and Hanover, Maryland; Syracuse, New York; Beavercreek and Dayton, Ohio; Alexandria, Suffolk, and Virginia Beach, Virginia; Pocasset, Massachusetts; and Orlando, Florida.
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 in Fairfax and McLean, Virginia. We lease and own properties related to our operations in approximately 53 cities, consisting of both corporate support locations and contract performance locations.
We lease and own properties related to our operations in approximately 52 cities, consisting of both corporate support locations and contract performance locations. We also have employees working at customer sites throughout the United States and in other countries.
Added
The acquired assets include advanced production facilities with state-of-the-art equipment, tooling, and infrastructure used to fabricate complex metal modules and structures, and are located on a leased 45-acre site with more than 480,000 square feet of manufacturing space.
Added
The site has barge and rail access, and is strategically located near Charleston, in a region with a rapidly growing shipbuilding ecosystem and highly skilled trades workforce. 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 in Fairfax and McLean, Virginia.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS For information regarding legal proceedings, see Note 13: Investigations, Claims, and Litigation in Item 8. Consistent with the requirements of Securities and Exchange Commission Regulation S-K, Item 103, our threshold for disclosing any environmental legal proceeding involving a governmental authority is potential monetary sanctions that our management believes will exceed $1 million. 30 Table of Contents
ITEM 3. LEGAL PROCEEDINGS For information regarding legal proceedings, see Note 14: Investigations, Claims, and Litigation in Item 8. Consistent with the requirements of SEC Regulation S-K, Item 103, our threshold for disclosing any environmental legal proceeding involving a governmental authority is potential monetary sanctions that our management believes will exceed $1 million.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Period 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, 2024 to October 31, 2024 — $ — — $ 1,352.3 November 1, 2024 to November 30, 2024 — — — 1,352.3 December 1, 2024 to December 31, 2024 — — — 1,352.3 Total — $ — — $ 1,352.3 1 From the stock repurchase program's inception through December 31, 2024, we have purchased 14,584,709 shares at an average price of $167.82 per share for a total of $2.4 billion. 2 In November 2012, we announced the establishment of our stock repurchase program.
Period 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, 2025 to October 31, 2025 — $ — — $ 1,352.3 November 1, 2025 to November 30, 2025 — — — 1,352.3 December 1, 2025 to December 31, 2025 — — — 1,352.3 Total — $ — — $ 1,352.3 (1) From the stock repurchase program's inception through December 31, 2025, we have purchased 14,584,709 shares at an average price of $167.82 per share for a total of $2.4 billion.
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.
While we expect 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 and regulations.
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 11,921 as of January 31, 2025.
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 11,239 as of January 30, 2026.
Annual Meeting of Stockholders Our Annual Meeting of Stockholders is currently scheduled to be held on April 30, 2025. Dividend For the years ended December 31, 2024 and 2023, we declared dividends on common stock totaling $5.25 and $5.02 per share, respectively.
Annual Meeting of Stockholders Our Annual Meeting of Stockholders is currently scheduled to be held on April 29, 2026. Dividend For the years ended December 31, 2025 and 2024, we declared dividends on common stock totaling $5.43 and $5.25 per share, respectively.
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]
(2) In November 2012, we announced the establishment of our stock repurchase program. 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]
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, 2024.
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, 2025.
Stock Performance Graph The following graph compares the total return on a cumulative basis of $100 invested in our common stock on December 31, 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 32 Table of Contents Incorporated, among other companies.
Stock Performance Graph The following graph compares the total return on a cumulative basis of $100 invested in our common stock on December 31, 2020, 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. 29 Table of Contents 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.
Removed
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. All repurchases of HII common stock have been recorded as treasury stock.

Item 6. [Reserved]

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

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Item 6. [RESERVED] 33 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 33 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 54 Item 8.
Item 6. [RESERVED] 30 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 30 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 51 Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 56 REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 56 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
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 52 REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 52 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME 55 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 56 CONSOLIDATED STATEMENTS OF CASH FLOWS 58 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 60

Item 7. Management's Discussion & Analysis

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

111 edited+33 added−32 removed71 unchanged
Cost of Sales and Service Revenues Cost of sales for both product sales and service revenues consists of materials, labor, and subcontracting costs, as well as an allocation of indirect costs for overhead. We manage the type and amount of costs at the contract level, which is the basis for estimating our total costs at completion of our contracts.
Cost of Product Sales and Service Revenues Cost of sales for both product sales and service revenues consists of materials, labor, and subcontracting costs, as well as an allocation of indirect costs for overhead. We manage the type and amount of costs at the contract level, which is the basis for estimating our total costs at completion of our contracts.
Segment Operating Income Mission Technologies segment operating income for the year ended December 31, 2024, was $116 million, compared to segment operating income of $101 million in 2023.
Mission Technologies segment operating income for the year ended December 31, 2024, was $116 million, compared to segment operating income of $101 million in 2023.
Challenges in the labor market are addressed through targeted talent acquisition, partnerships with community colleges, apprentice school sourcing and recruiting, workforce succession planning, and initiatives to retain current employees. Labor shortages and retention also are impacting our supply chain, resulting in longer lead times for materials, parts, and other supplies.
Challenges in the labor market are addressed through targeted talent acquisition, partnerships with community colleges, apprentice school sourcing and recruiting, workforce succession planning, and initiatives to retain employees. Labor shortages and retention are also impacting our supply chain, resulting in longer lead times for materials, parts, and other supplies.
See Note 6: Revenue in Item 8. • Firm Fixed-Price Contracts - A firm fixed-price contract is a contract in which the specified scope of work is agreed to for a price that is predetermined by bid or negotiation and not generally subject to adjustment regardless of costs incurred by the contractor. • Fixed-Price Incentive Contracts - Fixed-price incentive contracts provide for reimbursement of the contractor's allowable costs, but are subject to a cost-share limit that affects profitability.
See Note 7: Revenue in Item 8. • Firm Fixed-Price Contracts - A firm fixed-price contract is a contract in which the specified scope of work is agreed to for a price that is predetermined by bid or negotiation and not generally subject to adjustment regardless of costs incurred by the contractor. • Fixed-Price Incentive Contracts - Fixed-price incentive contracts provide for reimbursement of the contractor's allowable costs, but are subject to a cost-share limit that affects profitability.
Additionally, the U.S. Navy must compete with other national priorities, including other defense activities, non-defense discretionary spending, and entitlement programs, for a share of federal budget funding. While the impact to our business resulting from these developments remains uncertain, they could have a material impact on current programs, as well as new business opportunities with the DoD.
Additionally, the U.S. Navy must compete with other national priorities, including other defense activities, non-defense discretionary spending, and entitlement programs, for a share of federal budget funding. While the impact to our business resulting from these developments remains uncertain, they could have a material impact on current programs, as well as new business opportunities with the Department.
Navy, a large single customer with many needs and requirements, dominates the industry's customer base and is served by a fragile supplier base that has trended toward exclusive providers. The DoD continues to adjust its procurement practices and streamline acquisition organizations and processes in an ongoing effort to reduce costs, gain efficiencies, and enhance program management and control.
Navy, a large single customer with many needs and requirements, dominates the industry's customer base and is served by a fragile supplier base that has trended toward exclusive providers. The Department continues to adjust its procurement practices and streamline acquisition organizations and processes in an ongoing effort to reduce costs, gain efficiencies, and enhance program management and control.
Cost-type contracts generally require that the contractor use its reasonable efforts to accomplish the scope of the work within some specified time and some stated dollar limitation. 35 Table of Contents • Time and Materials - Time and materials contracts specify a fixed hourly billing rate for each direct labor hour expended and reimbursement for allowable material costs and expenses.
Cost-type contracts generally require that the contractor use its reasonable efforts to accomplish the scope of the work within some specified time and some stated dollar limitation. 32 Table of Contents • Time and Materials Contracts - Time and materials contracts specify a fixed hourly billing rate for each direct labor hour expended and reimbursement for allowable material costs and expenses.
The change in unrecognized prior service costs (credits) in 2024 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 2025 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.
As of December 31, 2024 and 2023, these plans were sufficiently funded on an ERISA basis so as not to be subject to benefit payment restrictions. The funded percentages under ERISA and FAS vary due to inherent differences in the assumptions and methodologies used to calculate the respective obligations.
As of December 31, 2025 and 2024, these plans were sufficiently funded on an ERISA basis so as not to be subject to benefit payment restrictions. The funded percentages under ERISA and FAS vary due to inherent differences in the assumptions and methodologies used to calculate the respective obligations.
USS Gerald R. 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.
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.
CRITICAL ACCOUNTING POLICIES, ESTIMATES, AND JUDGMENTS Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.
CRITICAL ACCOUNTING POLICIES, ESTIMATES, AND JUDGMENTS Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.
In September 2024, our borrowing capacity under our unsecured commercial paper note program increased from $1 billion to $1.7 billion. As of December 31, 2024, the Company had no outstanding debt under the commercial paper program. Contractual Obligations - Our future contractual obligations are related to debt, leases, pension liabilities, unrecognized tax benefits, workers compensation, and purchase obligations.
In September 2024, our borrowing capacity under our unsecured commercial paper note program increased from $1 billion to $1.7 billion. As of December 31, 2025, the Company had no outstanding debt under the commercial paper program. Contractual Obligations - Our future contractual obligations are related to debt, leases, pension liabilities, unrecognized tax benefits, workers' compensation, and purchase obligations.
We believe segment operating income reflects an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our business. We believe the measure is used by investors and is a useful indicator to measure our performance.
We believe segment operating income reflects an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our business. We 38 Table of Contents believe the measure is used by investors and is a useful indicator to measure our performance.
Historical plan asset performance alone has inherent limitations in predicting future returns. While studies are helpful in understanding past and current trends and performance, the rate of return assumption is based more on long-term prospective views to avoid short-term market influences.
Historical plan asset performance alone has inherent limitations in predicting future returns. While studies are helpful in understanding past and current trends and performance, the rate of return assumption is based more on long-term prospective 34 Table of Contents views to avoid short-term market influences.
As a result, while both CAS and FAS use 36 Table of Contents assumptions in their calculation methodologies, each method results in different calculated amounts of retirement related benefit plan costs. We recover our CAS costs through the pricing of products and services on U.S.
As a result, while both CAS and FAS use assumptions in their calculation methodologies, each method results in different calculated amounts of retirement related benefit plan costs. We recover our CAS costs through the pricing of products and services on U.S.
Unusual fluctuations in operating performance driven by changes in a specific cost element across multiple contracts are described in our analysis. 40 Table of Contents Refer to "Segment Operating Results" and "Product and Service Revenues and Cost Analysis" in this section for details related to cost of sales for both product sales and service revenues.
Unusual fluctuations in operating performance driven by changes in a specific cost element across multiple contracts are described in our analysis. Refer to Segment Operating Results and Product and Service Revenues and Cost Analysis in this section for details related to cost of sales for both product sales and service revenues.
Free Cash Flow Free cash flow represents cash provided by (used in) operating activities less capital expenditures net of related grant proceeds. Free cash flow is not a measure recognized under GAAP.
Free Cash Flow Free cash flow represents cash provided by operating activities less capital expenditures net of related grant proceeds. Free cash flow is not a measure recognized under GAAP.
If a plan becomes or ceases to be fully funded due to our asset or liability experience, our CAS cost will change accordingly. Retirement Plan Assets - Retirement plan assets are stated at fair value. Investments in equity securities (common and preferred) are valued at the last reported sales price when an active market exists.
If a plan becomes or ceases to be fully funded due to our asset or liability experience, our CAS cost will change accordingly. 35 Table of Contents Retirement Plan Assets - Retirement plan assets are stated at fair value. Investments in equity securities (common and preferred) are valued at the last reported sales price when an active market exists.
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.
Segment Operating Income We internally manage our operations by reference to "segment operating income," which is a non-GAAP measure and is defined as operating income before the Operating FAS/CAS Adjustment and non-current state income taxes, neither of which affects contract performance.
In September 2024, we amended and restated our existing $1.5 billion credit facility, increasing the capacity thereunder to $1.7 billion and extending the maturity date to September 2029 (the "Second Amended and Restated Revolving Credit Facility"). The Second Amended and Restated Revolving Credit Facility includes a letter of credit sub-facility of $300 million.
In September 2024, we amended and restated our existing $1.5 billion credit facility, increasing the capacity thereunder to $1.7 billion and extending the maturity date to September 2029 (the "Second Amended and Restated 48 Table of Contents Revolving Credit Facility"). The Second Amended and Restated Revolving Credit Facility includes a letter of credit sub-facility of $300 million.
For the impacts of changes in estimates on our consolidated statements of operations and comprehensive income, see Note 6: Revenue in Item 8.
For the impacts of changes in estimates on our consolidated statements of operations and comprehensive income, see Note 7: Revenue in Item 8.
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.
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.
In 2023, we received an award modification for long-lead-time material and advance construction for the next five boats. 53 Table of Contents USS Gerald R. Ford class (CVN 78) aircraft carriers Design and construction for the Ford class program, which is the aircraft carrier replacement program for the decommissioned Enterprise (CVN 65) and Nimitz class (CVN 68) aircraft carriers.
In 2023, we received an award modification for long-lead-time material and advance construction for the next five boats. Gerald R. Ford class (CVN 78) aircraft carriers Design and construction for the Ford class program, which is the aircraft carrier replacement program for the decommissioned Enterprise (CVN 65) and Nimitz class (CVN 68) aircraft carriers. USS Gerald R.
Our supply chain has been impacted further by delivery delays, raw material shortages and price increases caused by continued inflationary pressures. The shipbuilding defense industry is unique in many ways. It is heavily capital and skilled labor intensive. The U.S.
Our supply chain has been impacted further by delivery delays, raw materials shortages, and price increases caused by continued inflationary pressures. The shipbuilding defense industry is unique in many ways. It is both capital- and skilled labor-intensive. The U.S.
We expect 2025 contributions to our other postretirement benefit plans to be approximately $34 million, which are exclusive of CAS cost recoveries under our contracts. Contributions for other postretirement benefit plans are not required to be funded in advance and are paid on an as-incurred basis.
We expect 2026 contributions to our other postretirement benefit plans to be approximately $35 million, which are exclusive of CAS cost recoveries under our contracts. Contributions for other postretirement benefit plans are not required to be funded in advance and are paid on an as-incurred basis.
Unless plan assets and benefit obligations are subject to re- 37 Table of Contents measurement during the year, the expected return on pension assets is based on the fair value of plan assets at the beginning of the year.
Unless plan assets and benefit obligations are subject to re-measurement during the year, the expected return on pension assets is based on the fair value of plan assets at the beginning of the year.
As of December 31, 2024, we had no other significant off-balance sheet arrangements. 52 Table of Contents 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, 2025, we had no other significant off-balance sheet arrangements. 49 Table of Contents GLOSSARY OF PROGRAMS Included below are brief descriptions of some of the programs discussed in this Annual Report on Form 10-K.
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).
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 were awarded a long-lead-time material contract for Philadelphia (LPD 32).
Net pre-tax unrecognized prior service costs (credits) as of December 31, 2024 and 2023 were $111 million and $125 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, 2025 and 2024 were $98 million and $111 million, respectively. These net deferred costs (credits) primarily originated from plan amendments, including those resulting from collective bargaining agreements.
As of December 31, 2024, future scheduled periodic interest payments on our outstanding long-term debt, including commitment fees that we are obligated to pay on our existing $1.7 billion Second Amended and Restated Revolving Credit Facility, were approximately $687 million, with approximately $105 million expected to be paid in 2025 and $582 million thereafter.
As of December 31, 2025, future scheduled periodic interest payments on our outstanding long-term debt, including commitment fees that we are obligated to pay on our existing $1.7 billion Second Amended and Restated Revolving Credit Facility, were approximately $582 million, with approximately $114 million expected to be paid in 2026 and $468 million thereafter.
Other Sources and Uses of Capital Stockholder Distributions - In November 2024, our board of directors authorized an increase in our quarterly cash dividend to $1.35 per share. The board previously increased the quarterly cash dividend to $1.30 per share in November 2023 and $1.24 per share in November 2022.
Other Sources and Uses of Capital Stockholder Distributions - In November 2025, our board of directors authorized an increase in our quarterly cash dividend to $1.38 per share. The board previously increased the quarterly cash dividend to $1.35 per share in November 2024 and $1.30 per share in November 2023.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion should be read along with the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K along with the other sections of this Form 10-K, including Item 1A.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion should be read along with the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K along with the other sections of this Form 10-K, including Item 1A. Risk Factors, as well as Part II, Item 7.
Arleigh Burke class (DDG 51) destroyers Build guided missile destroyers designed for conducting anti-air, anti-submarine, anti-surface, and strike operations. The Aegis-equipped Arleigh Burke class (DDG 51) destroyers are the U.S. Navy's primary surface combatant, and have been constructed in variants, allowing technological advances during construction. We delivered USS Frank E. Petersen Jr. (DDG 121), USS Lenah H.
Arleigh Burke class (DDG 51) destroyers Build guided missile destroyers designed for conducting anti-air, anti-submarine, anti-surface, and strike operations. The Aegis-equipped Arleigh Burke class (DDG 51) destroyers are the U.S. Navy's primary surface combatant, and have been constructed in variants, allowing technological advances during construction. We delivered USS Jack H.
We expect our 2025 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 in 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 2026 cash contributions to our qualified defined benefit pension plans to be approximately $2 million, all of which we anticipate will be discretionary and which are exclusive of CAS cost recoveries in our contracts. Due to the differences in calculation methodologies, our FAS expense is not necessarily representative of our funding requirements or CAS cost recoveries.
Investments in fixed-income 38 Table of Contents securities are generally valued based on market transactions for comparable securities and various relationships between securities that are generally recognized by institutional traders.
Investments in fixed-income securities are generally valued based on market transactions for comparable securities and various relationships between securities that are generally recognized by institutional traders.
See Note 16: Employee Pension and Other Postretirement Benefits in Item 8.
See Note 17: Employee Pension and Other Postretirement Benefits in Item 8.
Services include maintenance services on nuclear reactor prototypes. 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.
The change in cash provided by financing activities was primarily due to $1 billion in proceeds from the issuance of long term debt and lower repayment of long term debt in the current year, which was partially offset by increased repurchases of common stock.
The change in cash provided by financing activities was primarily due to proceeds from the issuance of long term debt in the prior year and higher repayment of long term debt in the current year, partially offset by lower repurchases of common stock.
The net proceeds from these senior notes were expected to be used for general corporate purposes, including debt repayment (which may include repayment of our 3.844% senior notes due 2025 and commercial paper borrowings) and working capital.
The net proceeds from these senior notes were used for general corporate purposes, including debt repayment (which included repayment of our 3.844% senior notes due 2025 and commercial paper borrowings) and working capital.
When analyzing our operating performance, investors should use segment operating income in addition to, and not as an alternative for, operating income or any other performance measure presented in accordance with GAAP. It is a measure we use to evaluate our core operating performance.
Segment operating income is a measure we use to evaluate our core operating performance as it reflects the aggregate performance results of contracts within a segment. When analyzing our operating performance, investors should use segment operating income in addition to, and not as an alternative for, operating income or any other performance measure presented in accordance with GAAP.
Our ability to increase throughput and meet production schedules is directly impacted by labor availability and performance. We monitor labor market conditions and trends and work to mitigate the effects of labor challenges through a variety of measures.
The labor market continues to present challenges for our company, our industry, and the supply chain. Our ability to increase throughput and meet production schedules is directly impacted by labor availability and performance. We monitor labor market conditions and trends and work to mitigate the effects of labor challenges through a variety of measures.
As of December 31, 2024, $11 million in letters of credit were issued but undrawn and $360 million of surety bonds were outstanding.
As of December 31, 2025, $11 million in letters of credit were issued but undrawn and $368 million of surety bonds were outstanding.
We vary our leverage both to optimize our equity return and to pursue acquisitions. We expect to meet our current debt obligations as they come due through internally generated funds from current levels of operations, existing borrowing facilities, and/or through refinancing in the debt markets prior to the maturity dates of our debt.
We expect to meet our current debt obligations as they come due through internally generated funds from current levels of operations, existing borrowing facilities, and/or through refinancing in the debt markets prior to the maturity dates of our debt.
An increase or decrease of 25 basis points in the discount rate and the expected long-term rate of return assumptions would have had the following approximate impacts on pension expense and obligations: ($ in millions) Increase (Decrease) in 2025 Expense Increase (Decrease) in December 31, 2024 Obligations 25 basis point decrease in discount rate $ 3 $ 163 25 basis point increase in discount rate — (156) 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 $2 million, depending on the timing of the contribution.
An increase or decrease of 25 basis points in the discount rate and the expected long-term rate of return assumptions would have had the following approximate impacts on pension expense and obligations: ($ in millions) Increase (Decrease) in 2026 Expense Increase (Decrease) in December 31, 2025 Obligations 25 basis point decrease in discount rate $ (1) $ 177 25 basis point increase in discount rate 1 (168) 25 basis point decrease in expected return on assets 18 25 basis point increase in expected return on assets (18) Assuming a 7.90% 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.
For further information on workers’ compensation, see Environmental, Health & Safety in Item 1 and Note 16: Commitments and Contingencies in Item 8.
For further information on workers’ compensation, see Note 16: Commitments and Contingencies in Item 8.
The U.S. and its allies face a global security environment that is impacted by 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.
Government contracts through the pricing of products and services. FAS prescribes the methodology used to determine retirement related benefit plan expense or income, as well as the liability, for financial reporting purposes. The CAS requirements for these costs and their calculation methodologies differ from FAS.
FAS prescribes the methodology used to determine retirement related benefit plan expense or income, as well as the 33 Table of Contents liability, for financial reporting purposes. The CAS requirements for these costs and their calculation methodologies differ from FAS.
SSBNs are the most secure and survivable of our nation’s nuclear deterrent triad. Columbia class SSBNs will carry approximately 70 percent of the nation’s nuclear arsenal. The Columbia class (SSBN 826) program plan of record is to construct 12 new SSBNs to replace the current aging Ohio class.
Columbia class SSBNs will carry approximately 70 percent of the nation’s nuclear arsenal. The Columbia class (SSBN 826) program plan of record is to construct 12 new SSBNs to replace the current aging Ohio class.
See Note 16: Employee Pension and Other Postretirement Benefits in Item 8. We calculate our retirement related benefit plan costs under both CAS and U.S. GAAP Financial Accounting Standards ("FAS"). The calculations under CAS and FAS require significant judgment. CAS prescribes the determination, allocation, and recovery of retirement related benefit plan costs on U.S.
See Note 17: Employee Pension and Other Postretirement Benefits in Item 8. We calculate our retirement related benefit plan costs under both CAS and GAAP ("FAS"). The calculations under CAS and FAS require significant judgment. CAS prescribes the determination, allocation, and recovery of retirement related benefit plan costs on U.S. Government contracts through the pricing of products and services.
We paid cash dividends totaling $206 million ($5.25 per share), $200 million ($5.02 per share), and $192 million ($4.78 per share) in the years ended December 31, 2024, 2023, and 2022, respectively.
We paid cash dividends totaling $213 million ($5.43 per share), $206 million ($5.25 per share), and $200 million ($5.02 per share) in the years ended December 31, 2025, 2024, and 2023, respectively.
In 2024, the actual return on assets was approximately 7.7%, which was less than the expected return assumption of 8.00%. For the year ended December 31, 2024, the weighted average discount rates for our pension and other postretirement benefit plans increased by 70 and 44 basis points, respectively.
In 2025, the actual return on assets was approximately 10.7%, which was more than the expected return assumption of 8.00%. For the year ended December 31, 2025, the weighted average discount rates for our pension and other postretirement benefit plans decreased by 26 and 37 basis points, respectively.
Dollars, are rated Aa or better by nationally recognized statistical rating agencies, have a minimum outstanding issue of $50 million as of the measurement date, and are not convertible or index-linked.
We use only bonds that are denominated in U.S. dollars, are rated Aa or better by nationally recognized statistical rating agencies, have a minimum outstanding issue of $50 million as of the measurement date, and are not convertible or index-linked.
As disclosed in Note 16: Employee Pension and Other Postretirement Benefits in Item 8, net pre-tax unrecognized actuarial gains as of December 31, 2024 were $59 million and unrecognized actuarial losses as of December 31, 2023 were $455 million.
As disclosed in Note 17: Employee Pension and Other Postretirement Benefits in Item 8, net pre-tax unrecognized actuarial gains as of December 31, 2025 and 2024 were $13 million and $59 million, respectively.
Current period state income taxes are charged to contract costs and included in cost of sales and service revenues in segment operating income. Non-current state income tax benefit in 2024 was $24 million, compared to non-current state income tax benefit of $11 million in 2023.
These amounts are recorded within operating income. Current period state income taxes are charged to contract costs and included in cost of sales and service revenues in segment operating income. Non-current state income tax expense in 2025 was $25 million, compared to non-current state income tax benefit of $24 million in 2024.
Accounting Standards Updates See Note 3: Accounting Standards Updates in Item 8 for further information. 39 Table of Contents CONSOLIDATED OPERATING RESULTS The following table presents selected financial highlights: Year Ended December 31 2024 over 2023 2023 over 2022 ($ in millions) 2024 2023 2022 Dollars Percent Dollars Percent Sales and service revenues $ 11,535 $ 11,454 $ 10,676 $ 81 1 % $ 778 7 % Cost of product sales and service revenues 10,085 9,808 9,236 277 3 % 572 6 % Income from operating investments, net 49 37 48 12 32 % (11) (23) % Other income and gains, net 9 120 1 (111) (93) % 119 11,900 % General and administrative expenses 973 1,022 924 (49) (5) % 98 11 % Operating income 535 781 565 (246) (31) % 216 38 % Interest expense (95) (95) (102) — — % 7 7 % Non-operating retirement benefit 179 148 276 31 21 % (128) (46) % Other, net 24 19 (20) 5 26 % 39 195 % Federal and foreign income taxes 93 172 140 (79) (46) % 32 23 % Net earnings $ 550 $ 681 $ 579 $ (131) (19) % $ 102 18 % 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. 36 Table of Contents CONSOLIDATED OPERATING RESULTS The following table presents selected financial highlights: Year Ended December 31 2025 over 2024 2024 over 2023 ($ in millions) 2025 2024 2023 Dollars Percent Dollars Percent Sales and service revenues $ 12,484 $ 11,535 $ 11,454 $ 949 8 % $ 81 1 % Cost of product sales and service revenues 10,899 10,085 9,808 814 8 % 277 3 % Income from operating investments, net 46 49 37 (3) (6) % 12 32 % Other income and gains, net 3 9 120 (6) (67) % (111) (93) % General and administrative expenses 977 973 1,022 4 — % (49) (5) % Operating income 657 535 781 122 23 % (246) (31) % Interest expense (105) (95) (95) (10) (11) % — — % Non-operating retirement benefit 190 179 148 11 6 % 31 21 % Other, net 35 24 19 11 46 % 5 26 % Federal and foreign income taxes 172 93 172 79 85 % (79) (46) % Net earnings $ 605 $ 550 $ 681 $ 55 10 % $ (131) (19) % 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.
For the year ended December 31, 2024, our effective tax rate differed from the federal statutory corporate income tax rate of 21% primarily due to research and development tax credits for the current and prior periods.
For the year ended December 31, 2025, our effective tax rate differed from the federal statutory corporate income tax rate of 21% primarily due to a reduction in the estimated research and development tax credits for the prior period recorded in the current period.
Revenue Recognition Most of our revenues are derived from long-term contracts for the production of goods and services provided to the U.S. Government, which are generally accounted for by recognizing revenues over time using a cost-to-cost measure of progress.
See Note 2: Summary of Significant Accounting Policies in Item 8 for further information. Revenue Recognition Most of our revenues are derived from long-term contracts for the production of goods and services provided to the U.S. Government, which are generally accounted for by recognizing revenues over time using a cost-to-cost measure of progress.
Benefit payments are not only contingent on the terms of a plan but also on the underlying participant demographics, including current age and assumed mortality. We use only bonds that are denominated in U.S.
Benefit payments are not only contingent on the terms of a plan but also on the underlying participant demographics, including current age and assumed mortality.
See Note 12: Debt, Note 14: Leases, 51 Table of Contents Note 16: Employee Pension and Other Postretirement Benefits, Note 11: Income Taxes, and Note 2: Summary of Significant Accounting Policies in Item 8 for information about those obligations.
See Note 13: Debt, Note 15: Leases, Note 17: Employee Pension and Other Postretirement Benefits, Note 12: Income Taxes, Note 2: Summary of Significant Accounting Policies, and Note 16: Commitments and Contingencies in Item 8 for information about those obligations.
The decrease in our effective tax rate for 2024 was primarily attributable to current and prior period research and development tax credits recorded in 2024.
The increase in our effective tax rate for 2025 was primarily attributable to a reduction in the estimated research and development tax credits for the prior period recorded in the current period.
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.
The contributions to our qualified defined benefit pension plans are affected by a number of factors, including published Internal Revenue Service 47 Table of Contents ("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 following table reconciles net cash provided by operating activities to free cash flow: Year Ended December 31 ($ in millions) 2024 2023 2022 Net cash provided by operating activities $ 393 $ 970 $ 766 Less capital expenditures: Capital expenditure additions (367) (292) (284) Grant proceeds for capital expenditures 14 14 12 Free cash flow $ 40 $ 692 $ 494 Free cash flow in 2024 decreased $652 million from 2023, primarily due to an unfavorable change in trade working capital driven by the timing of billings across programs, lower earnings, and higher capital expenditures, which was partially offset by lower payments for income taxes.
The following table reconciles net cash provided by operating activities to free cash flow: Year Ended December 31 ($ in millions) 2025 2024 2023 Net cash provided by operating activities $ 1,196 $ 393 $ 970 Less capital expenditures: Capital expenditure additions (402) (367) (292) Grant proceeds for capital expenditures 6 14 14 Free cash flow $ 800 $ 40 $ 692 Free cash flow in 2025 increased $760 million from 2024, primarily due to a favorable change in trade working capital driven by the timing of billings across programs, lower cash paid for income taxes, and higher earnings, partially offset by higher capital expenditures.
These factors and our resulting contributions also impact the funded status of the plans. 50 Table of Contents We made the following minimum and discretionary contributions to our pension and other postretirement benefit plans in the years ended December 31, 2024, 2023, and 2022: Year Ended December 31 ($ in millions) 2024 2023 2022 Pension plans Discretionary Qualified $ — $ — $ — Non-qualified 11 12 10 Other benefit plans 36 32 31 Total contributions $ 47 $ 44 $ 41 As of December 31, 2024 and 2023, our qualified pension plans were funded 125% and 114%, respectively on a FAS basis.
We made the following minimum and discretionary contributions to our pension and other postretirement benefit plans in the years ended December 31, 2025, 2024, and 2023: Year Ended December 31 ($ in millions) 2025 2024 2023 Pension plans Discretionary Qualified $ — $ — $ — Non-qualified 14 11 12 Other benefit plans 40 36 32 Total contributions $ 54 $ 47 $ 44 As of December 31, 2025 and 2024, our qualified pension plans were funded 126% and 125%, respectively on a FAS basis.
We are currently constructing Harrisburg (LPD 30), Pittsburgh (LPD 31), and Philadelphia (LPD 32). Virginia class (SSN 774) fast attack submarines Construct attack submarines as the principal subcontractor to Electric Boat.
We are currently constructing Harrisburg (LPD 30), Pittsburgh (LPD 31), and Philadelphia (LPD 32). Virginia class (SSN 774) fast attack submarines Construct attack submarines as part of a teaming agreement with Electric Boat.
The favorable change was primarily driven by higher interest rates under FAS. We expect the FAS/CAS Adjustment in 2025 to be a net benefit of approximately $148 million (($100) million FAS and $48 million CAS), primarily driven by higher discount rates under FAS.
The favorable change was primarily driven by higher interest rates under FAS. We expect the FAS/CAS Adjustment in 2026 to be a net benefit of approximately $169 million (($123) million FAS and $46 million CAS), primarily driven by higher 2025 returns on plan assets.
The components of the Operating FAS/CAS Adjustment were as follows: Year Ended December 31 2024 over 2023 2023 over 2022 ($ in millions) 2024 2023 2022 Dollars Percent Dollars Percent FAS benefit (expense) $ 64 $ 30 $ 86 $ 34 113 % $ (56) (65) % CAS cost 53 46 45 7 15 % 1 2 % FAS/CAS Adjustment 117 76 131 41 54 % (55) (42) % Non-operating retirement benefit (179) (148) (276) (31) (21) % 128 46 % Operating FAS/CAS Adjustment (expense) benefit $ (62) $ (72) $ (145) $ 10 14 % $ 73 50 % The Operating FAS/CAS Adjustment in 2024 was a net expense of $62 million, compared to a net expense of $72 million in 2023.
The components of the Operating FAS/CAS Adjustment were as follows: Year Ended December 31 2025 over 2024 2024 over 2023 ($ in millions) 2025 2024 2023 Dollars Percent Dollars Percent FAS benefit $ 100 $ 64 $ 30 $ 36 56 % $ 34 113 % CAS cost 55 53 46 2 4 % 7 15 % FAS/CAS Adjustment 155 117 76 38 32 % 41 54 % Non-operating retirement benefit (190) (179) (148) (11) (6) % (31) (21) % Operating FAS/CAS Adjustment expense $ (35) $ (62) $ (72) $ 27 44 % $ 10 14 % The Operating FAS/CAS Adjustment in 2025 was a net expense of $35 million, compared to a net expense of $62 million in 2024.
The increase in actuarial gains in 2024 was primarily driven by higher discount rates used to determine benefit obligations of $500 million and amortization of previously unrecognized actuarial losses of $5 million, which were offset by lower than expected asset returns of $24 million.
The decrease in actuarial gains in 2025 was primarily driven by lower discount rates used to determine benefit obligations of $181 million, amortization of previously unrecognized actuarial losses of $11 million, offset by higher than expected asset returns of $187 million.
The following table reconciles operating income to segment operating income: Year Ended December 31 2024 over 2023 2023 over 2022 ($ in millions) 2024 2023 2022 Dollars Percent Dollars Percent Operating income $ 535 $ 781 $ 565 $ (246) (31) % $ 216 38 % Operating FAS/CAS Adjustment 62 72 145 (10) (14) % (73) (50) % Non-current state income taxes (24) (11) 2 (13) (118) % (13) (650) % Segment operating income $ 573 $ 842 $ 712 $ (269) (32) % $ 130 18 % 41 Table of Contents FAS/CAS Adjustment and Operating FAS/CAS Adjustment The FAS/CAS Adjustment reflects the difference between expenses for pension and other postretirement benefits determined in accordance with GAAP and the expenses for these items included in segment operating income in accordance with CAS.
The following table reconciles operating income to segment operating income: Year Ended December 31 2025 over 2024 2024 over 2023 ($ in millions) 2025 2024 2023 Dollars Percent Dollars Percent Operating income $ 657 $ 535 $ 781 $ 122 23 % $ (246) (31) % Operating FAS/CAS Adjustment 35 62 72 (27) (44) % (10) (14) % Non-current state income taxes 25 (24) (11) 49 204 % (13) (118) % Segment operating income $ 717 $ 573 $ 842 $ 144 25 % $ (269) (32) % FAS/CAS Adjustment and Operating FAS/CAS Adjustment The FAS/CAS Adjustment reflects the difference between expenses for pension and other postretirement benefits determined in accordance with FAS and the expenses for these items included in segment operating income in accordance with CAS.
The following table summarizes key components of cash flow provided by operating activities: Year Ended December 31 2024 over 2023 2023 over 2022 ($ in millions) 2024 2023 2022 Dollars Percent Dollars Percent Net earnings $ 550 $ 681 $ 579 $ (131) (19) % $ 102 18 % Depreciation and amortization of purchased intangible assets 326 347 358 (21) (6) % (11) (3) % Other non-cash transactions, net 10 29 15 (19) (66) % 14 93 % Stock-based compensation 23 34 36 (11) (32) % (2) (6) % Deferred income taxes (122) (113) 2 (9) (8) % (115) (5,750) % Loss (gain) on investments in marketable securities (22) (23) 25 1 4 % (48) (192) % Retiree benefits (112) (75) (127) (37) (49) % 52 41 % Trade working capital decrease (increase) (260) 90 (122) (350) (389) % 212 174 % Net cash provided by operating activities $ 393 $ 970 $ 766 $ (577) (59) % $ 204 27 % We have historically maintained a capital structure comprised of a mix of equity and debt financing.
The following table summarizes key components of net cash provided by operating activities: Year Ended December 31 2025 over 2024 2024 over 2023 ($ in millions) 2025 2024 2023 Dollars Percent Dollars Percent Net earnings $ 605 $ 550 $ 681 $ 55 10 % $ (131) (19) % Depreciation and amortization of purchased intangibles 329 326 347 3 1 % (21) (6) % Stock-based compensation 54 23 34 31 135 % (11) (32) % Deferred income taxes 203 (122) (113) 325 266 % (9) (8) % Gain on investments in marketable securities (34) (22) (23) (12) (55) % 1 4 % Other non-cash transactions, net 23 10 29 13 130 % (19) (66) % Retiree benefits (154) (112) (75) (42) (38) % (37) (49) % Trade working capital decrease (increase) 170 (260) 90 430 165 % (350) (389) % Net cash provided by operating activities $ 1,196 $ 393 $ 970 $ 803 204 % $ (577) (59) % We have historically maintained a capital structure comprised of a mix of equity and debt financing.
We expect the Operating FAS/CAS Adjustment in 2025 to be a net expense of approximately $43 million ($91 million FAS and $48 million CAS), primarily driven by higher interest rates under FAS.
We expect the Operating FAS/CAS Adjustment in 2026 to be a net expense of approximately $44 million ($90 million FAS and $46 million CAS), primarily driven by lower interest rates.
Sutcliffe Higbee (DDG 123), and USS Jack H. Lucas (DDG 125) in 2021, 2022, and 2023, respectively. We have contracts to construct the following Arleigh Burke class (DDG 51) destroyers: Ted Stevens (DDG 128), Jeremiah Denton (DDG 129), George M. Neal (DDG 131), Sam Nunn (DDG 133), Thad Cochran (DDG 135), John F.
Lucas (DDG 125) and USS Ted Stevens (DDG 128) in 2023 and 2025, respectively. We have contracts to construct the following Arleigh Burke class (DDG 51) destroyers: Jeremiah Denton (DDG 129), George M. Neal (DDG 131), Sam Nunn (DDG 133), Thad Cochran (DDG 135), John F. Lehman (DDG 137), Telesforo Trinidad (DDG 139), Ernest E. Evans (DDG 141), Charles J.
The favorable change in non-current state income taxes was driven by a decrease in deferred state income tax expense, primarily attributable to the reduction in the blended state income tax rate applied to our deferred tax balances.
The unfavorable change in non-current state income taxes was driven by an increase in deferred state income tax expense, primarily attributable to a change in net capitalized research and development expenditures and an increase in the blended state income tax rate applied to our deferred tax balances.
SEGMENT OPERATING RESULTS Basis of Presentation Our discussion of business segment performance focuses on sales and service revenues and operating income, consistent with our approach for managing our business.
SEGMENT OPERATING RESULTS Basis of Presentation Our discussion of business segment performance focuses on sales and service revenues and operating income, consistent with our approach for managing our business. We are aligned into three reportable segments: Ingalls, Newport News, and Mission Technologies.
Our purchase obligations as of December 31, 2024, were approximately $5,794 million, with approximately $2,708 million expected to be paid in 2025 and $3,086 million thereafter.
Our purchase obligations as of December 31, 2025, were approximately $7,063 million, with approximately $3,442 million expected to be paid in 2026 and $3,621 million thereafter.
For the year ended December 31, 2024, we repurchased 607,841 shares at an aggregate cost of $163 million, including $1 million of accrued excise tax. For the years ended December 31, 2023 and 2022, we repurchased 337,007 and 244,561 shares, respectively, at aggregate costs of $75 million and $52 million, respectively.
For the year ended December 31, 2025, the Company did not repurchase any shares. For the year ended December 31, 2024, the Company repurchased 607,841 shares at an aggregate cost of $163 million, including $1 million of accrued excise tax. For the year ended December 31, 2023, the Company repurchased 337,007 shares at an aggregate cost of $75 million.
We expect cash generated from operations in 2025, 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, 2025 and beyond such 12-month period based on our current business plans.
The favorable change in operating cash flow was primarily due to a favorable change in trade working capital driven by the timing of billings across programs, lower cash paid for income taxes, and higher earnings. 46 Table of Contents We expect cash generated from operations in 2026, 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, 2026 and beyond such 12-month period based on our current business plans.
Service Revenues and Segment Cost of Service Revenues Service revenues in 2024 increased $281 million, or 7%, from 2023, primarily as a result of higher volumes at Mission Technologies in CEW&S and C5ISR. Cost of service revenues in 2024 increased $245 million, or 7%, compared to 2023, consistent with the higher service volumes described above.
Cost of service revenues in 2025 increased $237 million, or 7%, compared to 2024, primarily due to the changes in service volumes described above. Service revenues in 2024 increased $281 million, or 7%, from 2023, primarily as a result of higher volumes at Mission Technologies in All-Domain Operations and Warfare Systems.
Coast Guard's National Security Cutters ("NSCs"), the largest and most technically advanced class of cutter in the U.S. Coast Guard. The NSC is equipped to carry out maritime homeland security, maritime safety, protection of natural resources, maritime mobility, and national defense missions. There were 11 ships planned for this program, of which the first ten ships have been delivered.
The NSC is equipped to carry out maritime homeland security, maritime safety, protection of natural resources, maritime mobility, and national defense missions. There were initially 11 ships for this program, of which the first ten ships have been delivered. In 2025, we reached agreement with the U.S. Coast Guard to terminate production and delivery of the 11th and final ship.
The differences in asset returns resulted in an actuarial loss of $24 million, and the differences in discount rates resulted in an actuarial gain of $500 million for the year ended December 31, 2024.
The difference in asset returns resulted in an actuarial gain of $187 million, and the discount rate changes resulted in an actuarial loss of $181 million for the year ended December 31, 2025.
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.
As a subcontractor to Electric Boat, we leverage our Virginia class (SSN 774) experience to perform design work and build modules for the entire Columbia class (SSBN 826) submarine program.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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 $1.7 billion credit facility and a $1.7 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 $1.7 billion revolving credit facility and a $1.7 billion commercial paper program.
Newport News, Virginia Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial position of Huntington Ingalls Industries, Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2024, the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").
Newport News, Virginia Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial position of Huntington Ingalls Industries, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2025, the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").
Procedures performed included: ◦ Read the relevant portions of contracts including any recent contract modifications to understand contract terms, including incentives, fee arrangement, scope of work, and other unusual contract terms. ◦ Evaluated the estimates of total costs and profit for the performance obligation by performing some combination of the following: ◦ Performed inquiries with the business managers and corroborated the information gained from these inquiries with other parties who have detailed knowledge of the contract’s progress, issues being encountered, and overall production status. ◦ Evaluated the appropriateness and consistency of management’s material and labor estimates against historical performance, underlying performance metrics, and metrics of similar performance obligations. ◦ Evaluated the range and probabilities of reasonably possible outcomes and where management set its point estimate within the range and tested the accuracy and completeness of the key data used in developing estimates. ◦ Performed retrospective reviews when evaluating the thoroughness and precision of management’s estimation process by comparing costs incurred to date to previous estimates. ◦ Tested the appropriateness of the timing and accuracy of changes in estimates, including inspection of underlying source documentation, and consideration of any contradictory information. ◦ Evaluated the necessity and appropriateness of any constraints applied against any variable consideration. /s/ Deloitte & Touche LLP Richmond, Virginia February 6, 2025 We have served as the Company’s auditor since 2011. 57 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Huntington Ingalls Industries, Inc.
Procedures performed included: ◦ Read the relevant portions of contracts including any recent contract modifications to understand contract terms, including incentives, fee arrangement, scope of work, and other unusual contract terms. ◦ Evaluated the estimates of total costs and profit for the performance obligation by performing some combination of the following: ◦ Performed inquiries with the business managers and corroborated the information gained from these inquiries with other parties who have detailed knowledge of the contract’s progress, issues being encountered, and overall production status. ◦ Evaluated the appropriateness and consistency of management’s material and labor estimates against historical performance, underlying performance metrics, and metrics of similar performance obligations. ◦ Evaluated the range and probabilities of reasonably possible outcomes and where management set its point estimate within the range and tested the accuracy and completeness of the key data used in developing estimates. ◦ Performed retrospective reviews when evaluating the thoroughness and precision of management’s estimation process by comparing costs incurred to date to previous estimates. ◦ Tested the appropriateness of the timing and accuracy of changes in estimates, including inspection of underlying source documentation, and consideration of any contradictory information. ◦ Evaluated the necessity and appropriateness of any constraints applied against any variable consideration. /s/ Deloitte & Touche LLP Richmond, Virginia February 5, 2026 We have served as the Company’s auditor since 2011. 53 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Huntington Ingalls Industries, Inc.
Persistent cost inflation over the long-term may have an adverse impact on our financial position, results of operations, or cash flows. 55 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Huntington Ingalls Industries, Inc.
Persistent cost inflation over the long-term may have an adverse impact on our financial position, results of operations, or cash flows. 51 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Huntington Ingalls Industries, Inc.
The accounting for these contracts involves judgment, particularly as it relates to the process of 56 Table of Contents estimating total material costs, labor costs, and profit for the performance obligation. Cost of sales is recognized as incurred, and revenues are determined by adding a proportionate amount of the estimated profit to the amount reported as cost of sales.
The accounting for these contracts involves judgment, particularly as it relates to the process of 52 Table of Contents estimating total material costs, labor costs, and profit for the performance obligation. Cost of sales is recognized as incurred, and revenues are determined by adding a proportionate amount of the estimated profit to the amount reported as cost of sales.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with the accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Revenue – Shipbuilding Contracts — Refer to Notes 2 and 6 to the financial statements Critical Audit Matter Description The Company recognizes revenue on shipbuilding contracts with U.S. Government customers over time as the construction of the ship progresses because transfer of control to the customer is continuous.
Revenue – Shipbuilding Contracts — Refer to Notes 2 and 7 to the financial statements Critical Audit Matter Description The Company recognizes revenue on shipbuilding contracts with U.S. Government customers over time as the construction of the ship progresses because transfer of control to the customer is continuous.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 6, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 5, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.
We include assumptions of anticipated cost growth in the development of our cost of 54 Table of Contents completion estimates, but if inflationary conditions continue over the long-term, our cost assumptions may not be sufficient to cover all cost escalation or may impact the availability of resources to execute the respective contracts.
We include assumptions of anticipated cost growth in the development of our cost of completion estimates, but if inflationary conditions continue over the long-term, our cost assumptions may not be sufficient to cover all cost escalation or may impact the availability of resources to execute the respective contracts.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 6, 2025, expressed an unqualified opinion on those financial statements.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2025, of the Company and our report dated February 5, 2026, expressed an unqualified opinion on those financial statements.
Newport News, Virginia Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Huntington Ingalls Industries, Inc. and subsidiaries (the "Company") as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Newport News, Virginia Opinion on Internal Control over Financial Reporting W e have audited the internal control over financial reporting of Huntington Ingalls Industries, Inc. and subsidiaries (the "Company") as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Richmond, Virginia February 6, 2025 58 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Richmond, Virginia February 5, 2026 54 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
We compared those estimates to revenue recognized by the Company. • We obtained the population of contracts during 2024 and assessed the financial and performance risk of the contracts based on our knowledge gained through prior-year audits of the Company, industry experience, and ongoing conversations with members of program management regarding the contract performance to identify contracts that we believe were riskier.
We compared those estimates to revenue recognized by the Company. • We obtained the population of contracts during 2025 and assessed the financial and performance risk of the contracts based on our knowledge gained through prior-year audits of the Company, industry experience, and ongoing conversations with members of program management regarding the contract performance to identify contracts that we believe have an increased level of risk.
CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31 ($ in millions) 2024 2023 2022 Operating Activities Net earnings $ 550 $ 681 $ 579 Adjustments to reconcile to net cash provided by operating activities Depreciation 217 219 218 Amortization of purchased intangibles 109 128 140 Other non-cash transactions, net 10 29 15 Stock-based compensation 23 34 36 Deferred income taxes (122) (113) 2 Loss (gain) on investments in marketable securities (22) (23) 25 Change in Accounts receivable 256 168 (196) Contract assets (146) (297) 70 Inventoried costs (22) (3) (22) Prepaid expenses and other current assets (33) (42) 20 Accounts payable and accruals (315) 264 6 Retiree benefits (112) (75) (127) Net cash provided by operating activities 393 970 766 Investing Activities Capital expenditures Capital expenditure additions (367) (292) (284) Grant proceeds for capital expenditures 14 14 12 Investment in affiliates — (24) (5) Proceeds from equity method investment — 63 6 Other investing activities, net 5 3 3 Net cash used in investing activities (348) (236) (268) Financing Activities Proceeds from issuance of long-term debt 1,000 — — Repayment of long-term debt (229) (480) (400) Proceeds from line of credit borrowings 42 — 24 Repayment of line of credit borrowings (42) — (24) Debt issuance costs (17) — — Dividends paid (206) (200) (192) Repurchases of common stock (162) (75) (52) Employee taxes on certain share-based payment arrangements (25) (13) (14) Other financing activities, net (5) (3) — Net cash provided by (used in) financing activities 356 (771) (658) Change in cash and cash equivalents 401 (37) (160) Cash and cash equivalents, beginning of period 430 467 627 Cash and cash equivalents, end of period $ 831 $ 430 $ 467 Supplemental Cash Flow Disclosure Cash paid for interest $ 101 $ 101 $ 100 Non-Cash Investing and Financing Activities Capital expenditures accrued in accounts payable $ 23 $ 29 $ 12 The accompanying notes are an integral part of these consolidated financial statements. 62 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31 ($ in millions) 2025 2024 2023 Operating Activities Net earnings $ 605 $ 550 $ 681 Adjustments to reconcile to net cash provided by operating activities Depreciation 225 217 219 Amortization of purchased intangibles 104 109 128 Stock-based compensation 54 23 34 Deferred income taxes 203 (122) (113) Gain on investments in marketable securities (34) (22) (23) Other non-cash transactions, net 23 10 29 Change in Accounts receivable (127) 256 168 Contract assets (75) (146) (297) Inventoried costs (11) (22) (3) Prepaid expenses and other assets (66) (33) (42) Accounts payable and accruals 449 (315) 264 Retiree benefits (154) (112) (75) Net cash provided by operating activities 1,196 393 970 Investing Activities Capital expenditures Capital expenditure additions (402) (367) (292) Grant proceeds for capital expenditures 6 14 14 Acquisitions of businesses (132) — — Investment in affiliates — — (24) Proceeds from equity method investment — — 63 Proceeds from sale of investments 5 — — Other investing activities, net 2 5 3 Net cash used in investing activities (521) (348) (236) Financing Activities Proceeds from issuance of long-term debt — 1,000 — Repayment of long-term debt (500) (229) (480) Proceeds from line of credit borrowings — 42 — Repayment of line of credit borrowings — (42) — Debt issuance costs — (17) — Dividends paid (213) (206) (200) Repurchases of common stock — (162) (75) Employee taxes on certain share-based payment arrangements (14) (25) (13) Other financing activities, net (5) (5) (3) Net cash provided by (used in) financing activities (732) 356 (771) Change in cash and cash equivalents (57) 401 (37) Cash and cash equivalents, beginning of period 831 430 467 Cash and cash equivalents, end of period $ 774 $ 831 $ 430 Supplemental Cash Flow Disclosure Cash paid for interest $ 108 $ 101 $ 101 Non-Cash Investing and Financing Activities Capital expenditures accrued in accounts payable $ 23 $ 23 $ 29 The accompanying notes are an integral part of these consolidated financial statements. 58 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ($ in millions) Common Stock Additional Paid-in Capital Retained Earnings (Deficit) Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity Balance as of December 31, 2021 $ 1 $ 1,998 $ 3,891 $ (2,159) $ (923) $ 2,808 Net earnings — — 579 — — 579 Dividends declared ($4.78 per share) — — (192) — — (192) Stock compensation — 24 (2) — — 22 Other comprehensive income, net of tax — — — — 324 324 Treasury stock activity — — — (52) — (52) Balance as of December 31, 2022 1 2,022 4,276 (2,211) (599) 3,489 Net earnings — — 681 — — 681 Dividends declared ($5.02 per share) — — (200) — — (200) Stock compensation — 23 (2) — — 21 Other comprehensive income, net of tax — — — — 177 177 Treasury stock activity — — — (75) — (75) Balance as of December 31, 2023 1 2,045 4,755 (2,286) (422) 4,093 Net earnings — — 550 — — 550 Dividends declared ($5.25 per share) — — (206) — — (206) Stock compensation — — (2) — — (2) Other comprehensive income, net of tax — — — — 394 394 Treasury stock activity — — — (163) — (163) Balance as of December 31, 2024 $ 1 $ 2,045 $ 5,097 $ (2,449) $ (28) $ 4,666 The accompanying notes are an integral part of these consolidated financial statements. 63 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ($ in millions) Common Stock Additional Paid-in Capital Retained Earnings (Deficit) Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity Balance as of December 31, 2022 $ 1 $ 2,022 $ 4,276 $ (2,211) $ (599) $ 3,489 Net earnings — — 681 — — 681 Dividends declared ($5.02 per share) — — (200) — — (200) Stock compensation — 23 (2) — — 21 Other comprehensive income, net of tax — — — — 177 177 Treasury stock activity — — — (75) — (75) Balance as of December 31, 2023 1 2,045 4,755 (2,286) (422) 4,093 Net earnings — — 550 — — 550 Dividends declared ($5.25 per share) — — (206) — — (206) Stock compensation — — (2) — — (2) Other comprehensive income, net of tax — — — — 394 394 Treasury stock activity — — — (163) — (163) Balance as of December 31, 2024 1 2,045 5,097 (2,449) (28) 4,666 Net earnings — — 605 — — 605 Dividends declared ($5.43 per share) — — (213) — — (213) Stock compensation — 42 (2) — — 40 Other comprehensive loss, net of tax — — — — (25) (25) Balance as of December 31, 2025 $ 1 $ 2,087 $ 5,487 $ (2,449) $ (53) $ 5,073 The accompanying notes are an integral part of these consolidated financial statements. 59 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
As of December 31, 2024, we had no indebtedness outstanding under our credit facility or our commercial paper program. Inflation - Macroeconomic factors have contributed, and we expect will continue to contribute, to increasing cost inflation for raw materials, components, and supplies.
As of December 31, 2025, we had no indebtedness outstanding under our revolving credit facility or our commercial paper program, and therefore had no interest rate risk with respect to these instruments. Inflation - Macroeconomic factors have contributed, and we expect will continue to contribute, to increasing cost inflation for raw materials, components, and supplies.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Year Ended December 31 (in millions, except per share amounts) 2024 2023 2022 Sales and service revenues Product sales $ 7,464 $ 7,664 $ 7,283 Service revenues 4,071 3,790 3,393 Sales and service revenues 11,535 11,454 10,676 Cost of sales and service revenues Cost of product sales 6,500 6,467 6,225 Cost of service revenues 3,585 3,341 3,011 Income from operating investments, net 49 37 48 Other income and gains, net 9 120 1 General and administrative expenses 973 1,022 924 Operating income 535 781 565 Other income (expense) Interest expense (95) (95) (102) Non-operating retirement benefit 179 148 276 Other, net 24 19 (20) Earnings before income taxes 643 853 719 Federal and foreign income taxes 93 172 140 Net earnings $ 550 $ 681 $ 579 Basic earnings per share $ 13.96 $ 17.07 $ 14.44 Weighted-average common shares outstanding 39.4 39.9 40.1 Diluted earnings per share $ 13.96 $ 17.07 $ 14.44 Weighted-average diluted shares outstanding 39.4 39.9 40.1 Net earnings from above $ 550 $ 681 $ 579 Other comprehensive income Change in unamortized benefit plan costs 528 238 436 Tax expense for items of other comprehensive income (134) (61) (112) Other comprehensive income, net of tax 394 177 324 Comprehensive income $ 944 $ 858 $ 903 The accompanying notes are an integral part of these consolidated financial statements. 59 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Year Ended December 31 (in millions, except per share amounts) 2025 2024 2023 Sales and service revenues Product sales $ 8,133 $ 7,464 $ 7,664 Service revenues 4,351 4,071 3,790 Sales and service revenues 12,484 11,535 11,454 Cost of sales and service revenues Cost of product sales 7,081 6,500 6,467 Cost of service revenues 3,818 3,585 3,341 Income from operating investments, net 46 49 37 Other income and gains, net 3 9 120 General and administrative expenses 977 973 1,022 Operating income 657 535 781 Other income (expense) Interest expense (105) (95) (95) Non-operating retirement benefit 190 179 148 Other, net 35 24 19 Earnings before income taxes 777 643 853 Federal and foreign income taxes 172 93 172 Net earnings $ 605 $ 550 $ 681 Basic earnings per share $ 15.39 $ 13.96 $ 17.07 Weighted-average common shares outstanding 39.3 39.4 39.9 Diluted earnings per share $ 15.39 $ 13.96 $ 17.07 Weighted-average diluted shares outstanding 39.3 39.4 39.9 Net earnings from above $ 605 $ 550 $ 681 Other comprehensive income Change in unamortized benefit plan costs (33) 528 238 Tax benefit (expense) for items of other comprehensive income 8 (134) (61) Other comprehensive income (loss), net of tax (25) 394 177 Comprehensive income $ 580 $ 944 $ 858 The accompanying notes are an integral part of these consolidated financial statements. 55 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - CONTINUED December 31 ($ in millions) 2024 2023 Liabilities and Stockholders' Equity Current Liabilities Trade accounts payable $ 598 $ 554 Accrued employees’ compensation 392 382 Current portion of long-term debt 503 231 Current portion of postretirement plan liabilities 124 129 Current portion of workers’ compensation liabilities 201 224 Contract liabilities 774 1,063 Other current liabilities 399 449 Total current liabilities 2,991 3,032 Long-term debt 2,700 2,214 Pension plan liabilities 142 212 Other postretirement plan liabilities 209 241 Workers’ compensation liabilities 443 449 Long-term operating lease liabilities 205 228 Deferred tax liabilities 378 367 Other long-term liabilities 407 379 Total liabilities 7,475 7,122 Commitments and Contingencies (Note 15) Stockholders’ Equity Common stock, $0.01 par value; 150,000,000 shares authorized; 53,714,128 issued and 39,129,419 outstanding as of 2024, and 53,595,748 issued and 39,618,880 outstanding as of 2023 1 1 Additional paid-in capital 2,045 2,045 Retained earnings 5,097 4,755 Treasury stock (2,449) (2,286) Accumulated other comprehensive loss (28) (422) Total stockholders’ equity 4,666 4,093 Total liabilities and stockholders’ equity $ 12,141 $ 11,215 The accompanying notes are an integral part of these consolidated financial statements. 61 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - CONTINUED December 31 ($ in millions) 2025 2024 Liabilities and Stockholders' Equity Current Liabilities Trade accounts payable $ 556 $ 598 Accrued employees’ compensation 443 392 Current portion of long-term debt — 503 Current portion of postretirement plan liabilities 119 124 Current portion of workers’ compensation liabilities 217 201 Contract liabilities 1,220 774 Other current liabilities 490 399 Total current liabilities 3,045 2,991 Long-term debt 2,700 2,700 Pension plan liabilities 155 142 Other postretirement plan liabilities 200 209 Workers’ compensation liabilities 442 443 Long-term operating lease liabilities 223 205 Deferred tax liabilities 572 378 Other long-term liabilities 339 407 Total liabilities 7,676 7,475 Commitments and Contingencies (Note 16) Stockholders’ Equity Common stock, $0.01 par value; 150,000,000 shares authorized; 53,826,236 issued and 39,241,527 outstanding as of 2025, and 53,714,128 issued and 39,129,419 outstanding as of 2024 1 1 Additional paid-in capital 2,087 2,045 Retained earnings 5,487 5,097 Treasury stock (2,449) (2,449) Accumulated other comprehensive loss (53) (28) Total stockholders’ equity 5,073 4,666 Total liabilities and stockholders’ equity $ 12,749 $ 12,141 The accompanying notes are an integral part of these consolidated financial statements. 57 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION December 31 ($ in millions) 2024 2023 Assets Current Assets Cash and cash equivalents $ 831 $ 430 Accounts receivable, net 212 461 Contract assets 1,683 1,537 Inventoried costs, net 208 186 Income taxes receivable 204 183 Prepaid expenses and other current assets 90 83 Total current assets 3,228 2,880 Property, Plant, and Equipment Land and land improvements 377 351 Buildings and leasehold improvements 3,182 2,954 Machinery and other equipment 2,267 2,197 Capitalized software costs 207 261 6,033 5,763 Accumulated depreciation and amortization (2,583) (2,467) Property, plant, and equipment, net 3,450 3,296 Other Assets Operating lease assets 239 262 Goodwill 2,618 2,618 Other intangible assets, net of accumulated amortization of $1,118 million as of 2024 and $1,009 million as of 2023 782 891 Pension plan assets 1,422 888 Miscellaneous other assets 402 380 Total other assets 5,463 5,039 Total assets $ 12,141 $ 11,215 The accompanying notes are an integral part of these consolidated financial statements. 60 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION December 31 ($ in millions) 2025 2024 Assets Current Assets Cash and cash equivalents $ 774 $ 831 Accounts receivable, net 339 212 Contract assets 1,758 1,683 Inventoried costs 219 208 Income taxes receivable 284 204 Prepaid expenses and other current assets 77 90 Total current assets 3,451 3,228 Property, Plant, and Equipment Land and land improvements 400 377 Buildings and leasehold improvements 3,483 3,182 Machinery and other equipment 2,402 2,267 Capitalized software costs 195 207 6,480 6,033 Accumulated depreciation and amortization (2,754) (2,583) Property, plant, and equipment, net 3,726 3,450 Other Assets Operating lease assets 267 239 Goodwill 2,650 2,618 Other intangible assets, net of accumulated amortization of $1,222 million as of 2025 and $1,118 million as of 2024 694 782 Pension plan assets 1,544 1,422 Miscellaneous other assets 417 402 Total other assets 5,572 5,463 Total assets $ 12,749 $ 12,141 The accompanying notes are an integral part of these consolidated financial statements. 56 Table of Contents HUNTINGTON INGALLS INDUSTRIES, INC.

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