What changed in this filing

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Item 1A. Risk Factors

2023-02-09 compared with 2022-02-10 · 161 added, 150 removed, 282 unchanged (52% of the section changed)

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Coast Guard, as well as the refueling and overhaul and inactivation of nuclear-powered ships for the U.S.

We also provide fleet sustainment services to the U.S.

Navy, IT and mission-based solutions for the DoD and intelligence and federal civilian customers, and nuclear management and operations and environmental management services for the DoE and DoD.

We also provide high-end IT and mission based solutions for DoD, intelligence, and federal civilian customers;

life-cycle sustainment services to the U.S.

Navy fleet and other maritime customers;

unmanned, autonomous systems;

and nuclear management and operations and environmental management services for the DoE, DoD, state and local governments, and private sector companies.

Substantially all of our revenues in 2022 were derived from products and services sold to the U.S.

Government, and we expect this to continue in the foreseeable future.

In addition, substantially all of our backlog as of December 31, 2021, was U.S.

Government related.

Government contracts are subject to various risks, including customer political and budgetary constraints and processes, changes in customer short-term and long-term strategic plans, the timing of contract awards, significant changes in contract scheduling, intense contract award and funding competition, difficulty forecasting costs and schedules for bids on developmental and sophisticated technical work, and contractor suspension or debarment in the event of certain legal or regulatory violations.

Government, and we expect this to continue for the foreseeable future.

In addition, substantially all of our backlog as of December 31, 2022, was related to products and services deliverable to the U.S.

Government contracts are subject to various risks, including customer political and budgetary constraints and processes, changes in customer short-term and long-term strategic plans, the timing of contract awards, significant changes in contract scheduling, recessionary impacts on government spending, intense contract award and funding competition, challenges forecasting costs and schedules for bids on developmental and sophisticated technical work, and contractor suspension or debarment in the event of certain legal or regulatory violations.

Any of these factors could affect our business with the U.S.

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We are directly dependent upon Congressional funding of U.S.

Coast Guard, and other government agency programs.

Under the normal legislative process, Congress completes 12 annual appropriation bills each fiscal year to fund the activities of federal agencies.

When Congress is unable to pass these appropriation 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 appropriation level.

Coast Guard, and other federal agency programs.

Under the normal legislative process, Congress completes 12 annual appropriations bills each fiscal year to fund the activities of the federal agencies.

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.

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Government fails to enact annual appropriations or a continuing resolution, a full or partial federal government shutdown may occur.

A federal government shutdown could, in turn, result in the delay or cancellation of key 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.

For certain programs, Congress appropriates funds on an annual fiscal year basis even though the program performance period may extend over several years.

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.

Congress sometimes appropriates funds on an annual fiscal year basis for programs for which the performance period may extend over multiple years.

Such programs are funded initially on a partial basis, and additional funds are committed only as Congress makes further appropriations.

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We cannot predict the extent to which total funding or funding for individual programs will be included, increased, or reduced as part of the annual budget process or through continuing resolutions or individual supplemental appropriations.

The impact of Congressional actions to reduce the federal debt and resulting pressures on federal spending could adversely affect the total funding of individual contracts or funding for individual programs and delay purchasing or payment decisions by our customers.

Long-term uncertainty exists with respect to overall levels of defense spending across the future years' defense plan.

Congressional actions to reduce the federal debt and resulting pressures on federal spending could adversely affect the total funding of individual contracts or funding for individual programs and delay purchasing or payment decisions by our customers.

Considerable uncertainty exists regarding how future budget and program decisions will develop and the challenges budget changes will present for the defense industry.

It is likely that U.S.

Government discretionary spending levels, including defense spending, will continue to be subject to significant pressure.

Government discretionary spending levels, including defense spending, will continue to be subject to significant

For additional information relating to the U.S.

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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.

For the year ended December 31, 2021, our aircraft carrier programs accounted for approximately 32% of our consolidated revenue.

We cannot predict the impact of changes to customer priorities on existing, follow-on, replacement, or future programs.

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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.

Our unfunded backlog, in particular, contains management’s estimate of amounts expected to be realized on unfunded contracts that may never be realized as revenues.

Our unfunded backlog, in particular, contains management’s estimate of revenues expected to be realized on unfunded contracts that may never be realized.

Any termination could also result in the cancellation of future work on the related program.

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Changes to Department of Defense business practices could have a material effect on DoD's procurement process and adversely impact our current programs and potential new awards.

Our industry has experienced, and we expect will continue to experience, significant changes to business practices resulting from greater focus on affordability, efficiencies, business systems, recovery of costs, and a reprioritization of defense funds to key areas for future defense spending.

These initiatives and changes to procurement practices may change the way U.S.

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Government, including the terms and conditions under which we do so, which may have an adverse impact on our business, financial condition, results of operations, and cash flows.

Changes in procurement practices favoring incentive-based fee arrangements, different award fee criteria, non-traditional contract provisions, and government contract negotiation offers that mandate our costs may affect our profitability and the predictability of our profit rates.

Changes in procurement practices favoring incentive-based fee arrangements, different award fee criteria, non-traditional contract provisions, and cost mandates from the government may affect our profitability and the predictability of our profit rates.

Government is also pursuing alternatives to shift additional responsibility and performance risks to contractors.

For example, the DoD is increasingly pursuing accelerated development and acquisition of new technologies through rapid acquisition pathways and procedures, including through other transaction authority agreements (“OTAs”).

In recent years, the DoD has increased the frequency of use and size of OTAs, and we expect this trend to continue in the future.

For example, the DoD is accelerating development and acquisition of new technologies through rapid acquisition alternatives and procedures, including through other transaction authority agreements (“OTAs”).

In recent years, the DoD has increased the frequency and size of OTAs, and we expect this trend to continue in the future.

OTAs are exempt from many traditional procurement laws, including the FAR, and may be used, subject to certain conditions, for research, prototype development, and follow-on production for a successful prototype.

The conditions for OTA awards include, in certain instances, that a significant portion of the work under the OTA be performed by a non-traditional defense contractor or that a portion of the cost of the protoype project be funded by non-governmental sources.

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, then we may lose new strategic business opportunities in high-growth areas and our future performance and results of operations could be adversely affected.

OTA awards include, in certain instances, that a significant portion of the work under the OTA be performed by a non-traditional defense contractor or that a portion of the cost of the prototype project be funded by non-governmental sources.

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.

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 of certain of these initiatives, we have experienced and may continue to experience a higher number of audits and/or lengthened periods of time required to close open audits.

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.

Moreover, the thresholds for certain allowable costs, including compensation costs, have been significantly reduced, and the allowability of other types of costs are being challenged, debated, and, in certain cases, modified.

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defense spending levels are uncertain and difficult to predict.

A longer term reduction in shipbuilding activity by the U.S.

Navy, evidenced by the reduction in fleet size from 566 ships in 1989 to 295 ships as of December 31, 2021, has resulted in workforce reductions but limited infrastructure consolidation.

A longer term trend in reduced U.S.

Navy shipbuilding activity, evidenced by the reduction in fleet size from 566 ships in 1989 to 293 ships as of December 31, 2022, has resulted in workforce reductions but limited infrastructure consolidation.

The general result has been fewer contracts awarded to the same fixed number of shipyards.

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Moreover, reductions in U.S.

defense spending that reduce the demand for the types of ships we build and services we provide increase our risk exposure to market competition.

If we are unable to continue to compete successfully against our current or future competitors, we may experience lower revenues and market share, which could negatively impact our financial condition, results of operations, or cash flows.

defense spending that reduce the demand for the types of ships we build and services we provide increase our exposure to market competition risk.

If we are unable to continue to compete successfully against our current or future competitors, we may generate lower revenues and lose market share, which would negatively impact our financial condition, results of operations, and cash flows and could impact our ability to compete for future defense contracts.

Although we are the only company currently capable of refueling nuclear-powered aircraft carriers, two existing U.S.

Government-owned shipyards may be able to refuel nuclear-powered aircraft carriers if substantial investments in facilities, personnel, and training were made.

Government shipyards may be able to refuel nuclear-powered aircraft carriers if they made substantial investments in facilities, personnel, and training.

Government-owned shipyards currently engage in the refueling, overhaul, and inactivation of Los Angeles class (SSN 688) submarines and are capable of repairing and overhauling non-nuclear ships.

Government-owned shipyard became capable and engaged in the refueling of nuclear-powered aircraft carriers, our financial position, results of operations, or cash flows could be adversely affected.

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 could be adversely affected.

We also compete in the shipbuilding engineering, planning, and design market with companies that provide engineering support services.

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Navy engineering proposals, including aircraft carrier research and development, submarine design, and surface combatant and amphibious assault ship program contracts.

Mission Technologies competes domestically and internationally against large A&D companies, primarily L3 Harris, Amentum, ManTech, Leidos, and, increasingly, small businesses serving the intelligence community.

To a lesser extent, our lines of business compete on certain contracts with major prime A&D contractors, including Lockheed Martin, General Dynamics, Northrop Grumman, Raytheon, and Boeing.

Our competitive environment is also affected by bid protests from unsuccessful bidders on new program awards.

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The size and nature of many of our contracts make the estimation of total revenues and costs at completion complicated and subject to many variables.

For new shipbuilding programs, we estimate, negotiate, and contract for construction of ships that are not completely designed, which subjects our risk assessments, revenue and cost estimates, and assumptions regarding schedule and technical issues to the variability of the final ship design and evolving scope of work.

Our judgment , estimation , and assumption processes are significant to our contract accounting, and materially different amounts can result if different assumptions are used or if actual events differ from our assumptions.

For new shipbuilding programs, we estimate, negotiate, and contract for construction of ships that are not completely designed, which subjects our risk assessments, revenue and cost estimates, and assumptions to the variability of the final ship design and an evolving scope of work.

Our judgment , estimation , and assumption processes significantly impact our contract accounting, and materially different amounts can result if different assumptions are used or if actual events differ from our assumptions.

Future changes in assumptions, circumstances, or estimates may have a material adverse effect on our future financial position, results of operations, or cash flows.

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Our debt exposes us to certain risks.

As of December 31, 2021, we had $2.6 billion of debt under our senior notes, $ 625 million of term loan debt, $105 million of revenue bonds, $ 1.5 billion of additional borrowing capacity under our revolving credit facility (the "Revolving Credit Facility"), and $ 1 billion of borrowing capacity under our commercial paper program.

Revolving Credit Facility also allows us to solicit lenders to provide incremental financing capacity in an aggregate amount not to exceed $1 billion, and the indentures governing our senior notes do not limit our incurrence of debt.

As of December 31, 2022, we had $2.6 billion of debt under our senior notes, $ 225 million of debt under our $ 650 million 3-year term loan (the “Term Loan”), $105 million of revenue bonds, $ 1.5 billion of additional borrowing capacity under our revolving credit facility (the "Revolving Credit Facility"), and $ 1 billion of borrowing capacity under our commercial paper program.

Our Revolving Credit Facility also allows us to solicit lenders to provide incremental financing capacity in an aggregate amount not to exceed $1 billion, and the indentures governing our senior notes do not limit our incurrence of debt.

Our ability to make payments on and to refinance our current or future indebtedness will depend on our ability to generate cash from operations, financings, or asset sales, which may be subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.

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In addition, our ability to withstand competitive pressures and to react to changes in the defense industry could be impaired.

In the event of a default on any of our indebtedness, the lenders who hold such debt could accelerate amounts due, which could potentially trigger a default or acceleration of any of our other debt.

In the event of a default on any of our indebtedness, the lenders who hold such debt could accelerate amounts due, which could potentially trigger a default or acceleration of our other indebtedness.

The interest rates on variable rate indebtedness under our Revolving Credit Facility and Term Loan are based upon the London Interbank Offered Rate (“LIBOR”).

LIBOR has been the subject of national, international, and other regulatory guidance and proposals for reform.

In March 2021, LIBOR’s regulator, the U.K.

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LIBOR maturities would cease immediately after December 31, 2021, with all other tenors ceasing immediately after June 30, 2023.

In the U.S., the Alternative Reference Rate Committee has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative upon termination of LIBOR, although other alternatives, including Bloomberg’s Short-Term Bank Yield, are available.

In anticipation of the cessation of LIBOR as a benchmark interest rate, our Revolving Credit Facility and Term Loan mandate the use of the Secured Overnight Financing Rate (“SOFR”) or, if unavailable, other alternative benchmarks upon termination of LIBOR.

We cannot predict the consequences of the benchmark transition from LIBOR to SOFR or another benchmark, but the transition may potentially increase the cost of our variable rate indebtedness.

Business and Operational Risk Factors

Cost growth on flexibly priced contracts that does not result in higher contract value due from customers reduces our profit and exposes us to the potential loss of future business.

Cost growth on flexibly priced contracts that does not result in higher contract price due from customers reduces our profit and exposes us to the potential loss of future business.

Our operating income is adversely affected when we incur certain contract costs or certain increases in contract costs that cannot be billed to customers.

Cost growth can occur if expenses to complete a contract increase due to technical challenges, manufacturing difficulties, delays, workforce-related issues, or inaccurate initial contract cost estimates.

Reasons may include labor unavailability or reduced productivity, the nature and complexity of the work performed, the timeliness and availability of materials, major subcontractor performance or product quality issues, performance delays, availability and timing of funding from the customer, and natural disasters.

The process of estimating contract costs requires significant judgment and expertise.

Cost growth can occur if expenses to complete a contract increase due to inflation, technical challenges, manufacturing difficulties, delays, workforce-related issues, or inaccurate initial contract cost estimates.

Reasons may include labor shortages or reduced productivity, the nature and complexity of the work performed, the timeliness and availability of materials, subcontractor performance or product quality issues, performance delays, availability and timing of customer funding, and natural disasters.

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.

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Government customers depends upon the type of contract under which we are performing.

Government business is currently performed under firm fixed-price, fixed-price incentive, cost-type, and time and material contracts.

Government contracts include firm fixed-price, fixed-price incentive, cost-type, and time and material contracts.

Under firm fixed-price contracts, we agree to perform the specified work for a pre-determined price.

To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit or could incur a loss.

To the extent our actual costs vary from the estimates upon which the price was negotiated, including due to greater than anticipated or a sustained period of higher inflation or unexpected delays, we will generate more or less profit or could incur a loss.

Some firm fixed-price contracts have a performance-based component under which we may earn incentive payments or incur financial penalties based upon our performance.

Fixed-price incentive contracts provide for reimbursement of the contractor’s allowable costs incurred in performance of the contract, subject to a cost-share limit that impacts the profit on the contract.

Cost-type contracts provide for the payment of allowable costs incurred during performance of the contract plus a fee up to a ceiling based on the amount that has been funded.

Fixed-price incentive contracts provide for reimbursement of the contractor’s allowable costs, subject to a cost-share limit that impacts the profit on the contract.

Cost-type contracts provide for the payment of allowable costs plus a fee up to a ceiling based on the amount that has been funded.

Under time and material contracts, we are paid for direct labor hours incurred at specified hourly rates plus material costs.

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Approximately 50% of our revenues in 2022 were generated under fixed-price incentive contracts, approximately 44% were generated under cost-type contracts, approximately 3% were generated under time and material contracts, and approximately 3% were generated under firm fixed-price contracts.

Our failure to perform to customer expectations and contract requirements may result in reduced fees or losses and affect our financial performance.

Under each type of contract, if we are unable to control costs, our operating results could be adversely affected, particularly if we are unable to negotiate an increase in contract value to our customers.

Fixed price contracts increase the risk that we may not recover all of our costs or will generate less profit or a loss.

Government contracts can extend for years, and unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, a significant increase in or sustained period of higher inflation, problems with our suppliers, labor market conditions, and cost overruns, can result in the contract price becoming less favorable or even unprofitable to us over time.

Higher interest rates resulting from inflationary pressures can also impact the fair value of these contracts.

Furthermore, if we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages, or suffer major losses if the customer exercises its right to terminate.

In addition, some of our contracts have provisions relating to cost controls and audit rights, and, if we fail to meet the terms specified in those contracts, we may not realize their full benefits.

Cost overruns would adversely impact our results of operations, which are dependent on our ability to maximize our earnings from our contracts, and the potential risk would be greater if our contracts shifted toward a greater percentage of fixed-price contracts, particularly firm fixed-price contracts.

Cost overruns or the failure to perform on existing programs also may adversely affect our ability to retain existing programs and win future contract awards.

In addition, changes in contract financing policy for fixed-price contracts, such as changes in performance and progress payments policies, including a reversal or modification of the DoD’s March 2020 increase to the applicable progress payment rate from 80% to 90%, could significantly affect the timing of our cash flows.

From time to time, we may begin performance under an undefinitized contract action with a not-to-exceed price prior to completing contract negotiations in order to support U.S.

government priorities.

Uncertainties in final contract price, specifications and terms, or loss of negotiating leverage associated with particularly long delays in contract definitization may negatively affect our profitability.

Cost overruns or the failure to perform on existing programs also may adversely affect our ability to retain existing programs and win future contract awards.

To the extent our mix of contract types changes in the future, our ability to recover our costs and realize profits on our contracts could be negatively affected.

Our earnings and profitability depend upon our ability to perform our contracts.

When agreeing to contract terms, we make assumptions and projections about future conditions and events, many of which extend over long periods.

Our assumptions and projections are based upon our assessments of the productivity and availability of labor, the complexity of the work to be performed, the cost and availability of materials, the impact of delayed performance, the timing of product deliveries, and other matters.

We may experience significant variances from our assumptions and projections, contract performance schedule delays, and variances in the timing of our product deliveries.

If our actual experience differs significantly from our assumptions or projections or we incur unanticipated contract costs, the profitability of the related contracts may be adversely affected.

Uncertainties in final contract price, specifications and terms, or loss of negotiating leverage associated with contract definitization may negatively affect our profitability.

Our earnings and profitability depend, in part, upon subcontractor performance and raw material and component availability and pricing.

We rely on third parties to provide raw materials , major components and sub-systems , hardware elements , and sub-assemblies for our products and perform certain services we provide to our customers, and to do so in compliance with applicable laws and regulations, including various DoD cybersecurity requirements.

Disruptions and performance problems caused by our suppliers and subcontractors, or misalignments between our contractual obligations to our customers and our agreements with our subcontractors and suppliers, could have an adverse effect on our ability to meet our commitments to customers.

Our ability to satisfy our obligations on a timely basis could be adversely affected if one or more of our suppliers or subcontractors are unable to provide agreed-upon products or materials or perform agreed-upon services in a timely, compliant, and cost-effective manner or they otherwise fail to satisfy contractual requirements.

The inability of our suppliers or subcontractors to meet expectations could also result in the need for us to transition to alternate parties, which could result in significant incremental cost and delay, or the need for us to provide other supplemental support to our existing suppliers and subcontractors.

Our costs to manufacture our products can increase over the terms of our contracts, including as a result of increases in material costs.

We rely on third parties to provide raw materials , major components and sub-systems , hardware elements , and sub-assemblies for our products and to perform certain services we provide to our customers, and we rely on such third parties to comply with applicable laws and regulations, including various DoD cybersecurity requirements.

Disruptions and performance problems from our suppliers and subcontractors, or inconsistencies between our contractual obligations to our customers and our agreements with our subcontractors and suppliers, could have an adverse effect on our ability to meet our commitments to customers.

Our ability to satisfy our obligations on a timely basis are adversely affected if one or more of our suppliers or subcontractors are unable to provide agreed-upon products or materials or perform agreed-upon services in a timely, compliant, and cost-effective manner, or they otherwise fail to satisfy contractual requirements.

The inability of our suppliers or subcontractors to meet expectations could also result in our need to transition to alternate parties, which could result in significant incremental cost and delay, or the need for us to provide other supplemental support to our existing suppliers and subcontractors.

Our costs to manufacture our products can increase over the terms of our contracts, including as a result of increases in material costs and wages.

Although we may be protected from increases in material costs through cost escalation provisions, the difference in basis between our actual material costs and industry indices may expose us to cost recovery risk.

Significant increases in inflation, particularly those related to wages and increases in the cost of raw materials, may increase our cost recovery risk.

In addition, significant delays in deliveries of key raw materials, which may occur as a result of availability or pricing, could have a material adverse effect on our financial position, results of operations, or cash flows.

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.

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.

The inability of a sole source supplier to provide a necessary component or part on a timely, compliant, and cost-effective basis could increase our contract cost and affect our ability to perform our contract.

Our procurement practices are intended to provide quality materials and services to support our programs and to reduce the likelihood of our procurement of unauthorized, non-compliant, or deficient materials and services.

We rely on our subcontractors and suppliers to comply with applicable laws, regulations, and the expectations set forth in the HII Supplier Code of Conduct.

In some circumstances, we rely on representations and certifications from our subcontractors and suppliers regarding their compliance.

We also conduct technical assessments, inspections, and audits, as necessary, with subcontractors and suppliers.

Notwithstanding the actions we take to mitigate the risk of receiving materials and services that fail to meet specifications or requirements, subcontractors and suppliers sometimes provide us with unauthorized, non-compliant, or deficient materials and services.

Our inability to procure, or a significant delay in acquiring, necessary raw materials, components, or parts, the failure of our subcontractors or suppliers to comply with applicable laws and regulations, or noncompliant materials, components, or parts from our subcontractors and suppliers could have a material adverse effect on our financial position, results of operations, or cash flows.

Our future success depends, in part, on our ability to deliver our products and services at an affordable life cycle cost, requiring us to develop and maintain technologies, facilities, equipment, and a qualified workforce to meet the needs of current and future customers.

Shipbuilding is a long cycle business, and our success depends on quality, cost, and schedule performance on our contracts.

In turn, our performance depends upon our ability to develop and maintain the workforce, technologies, facilities, equipment, and financial capacity to deliver our products and services at an affordable life cycle cost.

If we fail to maintain our competitive position in these areas, we could lose future contracts to our competitors, which could have a material adverse effect on our financial position, results of operations, or cash flows.

Our operating results are heavily dependent upon our ability to attract and retain at competitive costs a sufficient number of engineers and other employees with the necessary skills and security clearances.

At the same time, future revenues and costs impact our ability to maintain a qualified workforce.

Development and maintenance of the necessary nuclear related and other specialized skills and the challenges of hiring and training a qualified workforce can be a limitation on our business.

Shortages of qualified personnel can increase our recruiting, training, and overall labor costs, and a failure to attract and retain qualified personnel can impact our contract performance and ability to compete for new contracts.

Our procurement practices are intended to provide materials and services that meet contract specifications and to reduce the likelihood of our procurement of unauthorized, non-compliant, or deficient materials and services.

We rely on our subcontractors and suppliers to comply with applicable laws, regulations, and the obligations set forth in the HII Supplier Code of Conduct.

We rely on representations and certifications from our subcontractors and suppliers regarding such compliance, and we conduct technical assessments, inspections, and audits, as necessary, with subcontractors and suppliers.

Notwithstanding the actions we take to mitigate the risk of receiving non-compliant materials and services, subcontractors and suppliers sometimes provide us with unauthorized, non-compliant, or deficient materials and services.

Such unauthorized, non-compliant or deficient materials or services can increase our contract costs and impact our ability to satisfy our contract obligations to our customers.

We depend on the recruitment and retention of qualified personnel, and our failure to attract, train and retain such personnel could seriously harm our business.

Due to the specialized nature of our business, our performance is dependent upon our ability to identify, attract and retain a workforce with the requisite skills in multiple areas, including:

engineering, nuclear, trades and crafts, manufacturing, information technology, and cybersecurity.

Our operating performance is also dependent upon personnel who hold security clearances and receive substantial training to work on certain programs or tasks and can be difficult to replace on a timely basis if we experience unplanned attrition.

To the extent we lose experienced personnel, it is critical that we develop other employees, hire new qualified personnel, and successfully manage the short and long-term transfer of critical knowledge and skills.

Competition for talent is intense, and this may affect our ability to successfully attract or retain personnel with the requisite skills or clearances.

We increasingly compete with commercial technology companies outside of the shipbuilding and defense industry for qualified technical positions.

To the extent that these companies grow at a faster rate or face fewer cost and product pricing constraints, they may be able to offer more attractive compensation and other benefits to candidates, including in the recruitment of our existing employees.

In cases where the demand for skilled personnel exceeds supply, we could experience higher labor, recruiting, or training costs to attract and retain such employees.

We could experience difficulty performing our contracts and executing on new or growing programs if we have a shortage of skilled employees or we experience recruiting challenges.

We also must manage leadership development and succession planning throughout our business.

While we have processes in place for management transition and the transfer of knowledge and skills, the loss of key personnel, coupled with an inability to adequately train other personnel, hire new personnel, or transfer knowledge and skills, could significantly impact our ability to perform under our contracts and compete for new contracts.

Many of our contracts include performance obligations that incorporate innovative designs and state-of-the-art manufacturing expertise, include new technologies, or are dependent upon factors not wholly within our control, and failure to meet performance expectations could adversely affect our profitability and future prospects.

We design, develop, and manufacture products and provide services that often involve innovative designs, new technologies, and complex manufacturing processes.

Problems and delays with product development, technology implementation, manufacturing, or subcontractor components or services as a result of issues with design, technology, licensing and intellectual property rights, labor, learning curve assumptions, or materials and parts could prevent us from satisfying contractual requirements.

Problems and delays with product development, technology implementation, manufacturing, or subcontractor components or services can impact our contract performance.

First-in-class ships, also known as lead ships, usually include new technologies supplied by the U.S.

Navy or other contractors or developed by us.

Problems developing or implementing these new technologies or design changes in the construction process can lead to delays in the design and construction schedule.

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.

Delays in receipt of necessary customer information can also cause inefficiencies in the construction process, increase costs, and put the delivery schedule at risk, which can adversely affect our profitability and future prospects.

Our products cannot always be tested and proven and are otherwise subject to unforeseen problems, including premature failure of elements that cannot be accessed for repair or replacement, substandard quality or workmanship, and unexpected degradation of product performance.

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These issues can and have required significant resources to determine the source of the deficiencies and implement corrective actions.

We may discover quality issues in the future related to our products and services that require analysis and corrective action.

We may discover quality issues in the future related to our products and services

that require analysis and corrective action.

Such issues and our responses and corrective actions could have a material adverse effect on our financial position, results of operations, or cash flows.

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Our suppliers and subcontractors are also subject to natural and environmental disasters that could affect their ability to deliver products or services or otherwise perform their contracts.

Performance failures by our subcontractors due to natural or environmental disasters may adversely affect our ability to perform our contracts, which could reduce our profitability in the event damages or other costs are not recoverable from the subcontractor, the customer, or insurers.

Performance failures by our subcontractors or suppliers due to natural or environmental disasters may adversely affect our ability to perform our contracts, which could reduce our profitability in the event damages or other costs are not recoverable from the subcontractor or supplier, the customer, or insurers.

Such events could also result in a termination of the prime contract and have an adverse effect on our ability to compete for future contracts.

We face risks related to health epidemics, pandemics, and similar outbreaks, and our business has been and will continue to be adversely affected by the COVID-19 pandemic.

We face various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19.

Such risks include disruptions or restrictions on our employees’ ability to work or work effectively, temporary closures of our facilities or the facilities of our customers or suppliers, and delays in supplier deliveries.

We have experienced higher employee absentee rates as a result of COVID-19, which has impacted our operations and financial results.

Higher absentee rates attributable to COVID-19, including because of illness, quarantines, government actions, facility closures, or other restrictions resulting from COVID-19, have impacted and may continue to impact performance on our contracts and have increased and may continue to increase our costs.

These impacts may continue, and the cost increases may not be fully recoverable under our contracts or adequately covered by insurance, which could impact our profitability.

COVID-19 has also caused disruption in our supply chain, caused delays in, and limited the ability of, the U.S.

Government and other customers to perform, which have included delays in contract award decisions, and caused other unpredictable events.

Some or all of these impacts might continue into the future.

In September 2021, President Biden issued an executive order requiring certain employers with U.S.

Government contracts to ensure that their U.S.-based employees, contractors, and subcontractors that work on or in support of U.S.

Government contracts are fully vaccinated in accordance with the guidelines of the Safer Federal Workforce Task Force.

In November 2021, OSHA issued an Emergency Temporary Standard (“ETS”) requiring that all employers with 100 or more employees mandate vaccines for covered employees or, in the alternative, weekly testing and masks.

federal contractor mandate was preliminarily enjoined by several U.S.

federal district courts, the U.S.

Supreme Court preliminarily stayed the OSHA ETS in January 2022, and OSHA subsequently withdrew the ETS.

While we are not currently subject to any vaccine mandate, it continues to be our policy to encourage each of our employees to be fully vaccinated against COVID-19.

We face risks related to health epidemics, pandemics, and similar outbreaks.

We face various risks related to health epidemics, pandemics, and similar outbreaks, including the global health crisis of COVID-19.

We experienced higher employee absentee rates as a result of COVID-19, which increased our costs and generated delay and disruption, impacted our performance on our contracts, and degraded our financial performance.

We could incur similar impacts in the future, in connection with

COVID-19 or other health epidemics, pandemics, or similar outbreaks, and related cost increases may not be fully recoverable under our contracts or adequately covered by insurance, which could impact our profitability.

The COVID-19 health crisis also created challenges for our suppliers relative to their workforces, access to necessary components, materials, and other supplies at reasonable prices, and access to support services, such as shipping and transportation.

These challenges have impacted the ability of suppliers to provide agreed-upon goods and services in a timely, compliant, and cost-effective manner.

We may in the future incur additional costs and performance challenges, including as a result of higher prices, schedule delays, or the need to identify and develop alternative suppliers.

While we are not currently subject to any vaccine mandate, we continue to encourage each of our employees to be fully vaccinated against COVID-19.

To the extent we become subject to a vaccine mandate in the future, our implementation of the mandate could result in employee attrition, including attrition of critical skilled labor, and difficulty meeting future labor requirements.

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In addition, our subcontractors and suppliers who become subject to a vaccine mandate could be impacted by an inability to comply or loss of personnel, which could disrupt subcontractor or supplier performance or deliveries, and negatively impact our business.

COVID-19 has already impacted our business and results of operations, and the ultimate impact of COVID-19 on our operations and financial performance in future periods, including our ability to execute our programs on the expected schedule, remains uncertain and will depend on future COVID-19 related developments, including the duration of the pandemic, potential subsequent waves of COVID-19 infection or potential new variants, the effectiveness of COVID-19 vaccines and the impacts of implementation of vaccine mandates, and related government actions to prevent and manage disease spread, all of which continue to be uncertain and cannot be predicted.

As a result, we cannot predict the full impact of COVID-19, but it could materially affect our business, financial position, results of operations, and/or cash flows in the future.

Our business could suffer if we are unsuccessful in negotiating new collective bargaining agreements.

Approximately 45 % of our employees are covered by a total of nine collective bargaining agreements and one site stabilization agreement.

Newport News has two collective bargaining agreements covering represented employees, which expire in December 2022 and April 2024, and one that expired in November 2021, which covers approximately 50% of Newport News employees.

Newport News has three collective bargaining agreements covering represented employees, which expire in April 2024, February 2027, and December 2027.

Newport News craft workers employed at the Kesselring Site near Saratoga Springs, New York are represented under an indefinite DoE site agreement.

Ingalls has five collective bargaining agreements covering represented employees, all of which expire in March 2026.

Approximately 15 Technical Solutions employees in Klamath Falls, Oregon are covered by a collective bargaining agreement that expires in June 2025.

We reached a tentative agreement with representatives of United Steelworkers (“USW”) Local 8888 (Newport News) members on a new labor agreement in November 2021, but the members of the bargaining unit declined to ratify the contract.

The Newport News and USW negotiation teams continued negotiations and reached a tentative agreement on another labor agreement in January 2022.

We expect the members of the bargaining unit to vote on the new agreement in the near future.

The USW Local 8888 members are continuing to work under the terms and conditions of the expired collective bargaining agreement, but the members may call for a strike, or we may declare a lock-out, upon 48 hours notice.

We cannot give any assurances that the tentative labor agreement will be ratified by the local bargaining unit or that a strike or lock-out will not occur.

Approximately 15 Mission Technologies employees in Klamath Falls, Oregon are covered by a collective bargaining agreement that expires in June 2025.

Collective bargaining agreements generally expire after three to five years and are subject to renegotiation at that time.

While we believe we maintain good relationships with our represented workers, it is possible we may experience difficulties renegotiating expiring collective bargaining agreements.

While we believe we maintain satisfactory relationships with our represented workers, it is possible we may experience difficulties renegotiating expiring collective bargaining agreements.

We have experienced in the past work stoppages, strikes, and other labor disruptions associated with the collective bargaining of new labor agreements.

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Government's proprietary and classified information from advanced nation state threat actors, sophisticated cybercrime syndicates, hacktivists, and insiders.

While we implement countermeasures to address the risks posed by these 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.

Such cyber security threats 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.

Our information technology infrastructure is critical to the efficient operation of our business and essential to our ability to perform day-to-day operations.

Breaches of our information technology or physical facilities could cause us to incur significant recovery and restoration expenses, degrade performance on existing contracts, and expose us to reputational damage, potential liability, or the loss of current or future contracts, including work on sensitive or classified systems for the U.S.

Breaches of our information technology can be expected to lead to the following types of adverse consequences:

losses or misuse of sensitive information or capabilities;

theft or corruption of data;

harm to personnel, infrastructure or products;

financial costs and liabilities;

protracted interruptions in our operations and performance;

significant recovery and restoration expenses, degraded performance on existing contracts, the misuse of our products;

and exposure to reputational damage, potential liability, or the loss of current or future contracts, including work on sensitive or classified systems for the U.S.

Government, any of which could have a material adverse effect on our operations, financial position, results of operations, or cash flows.

While we implement countermeasures to address 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.

Even the most well-protected information, networks, systems, and facilities remain potentially vulnerable because attempted security breaches, particularly cyber attacks and cyber intrusions or disruptions, regularly occur and will continue to occur in the future, and because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target.

Accordingly, we are not always able to anticipate these techniques or to implement adequate security barriers or other preventative measures.

Our suppliers, subcontractors, and other business partners also face cyber security and other security threats.

Although we undertake cooperative efforts with our customers, suppliers, subcontractors, and other business partners to facilitate their understanding of cyber security threats they face and potential cyber security countermeasures to mitigate potential cyber-attacks, other security threats, and business disruptions, we rely substantially on the safeguards implemented by these organizations, which may affect the security of our information.

These organizations have varying levels of cyber security expertise and safeguards, and their relationships with U.S.

Government contractors may increase the likelihood that they are targeted by the same cyber security threats we face.

In addition to cyber threats, operation of our facilities may be disrupted by civil unrest, acts of sabotage or terrorism, and other local security issues.

Government contractors increases the likelihood that they are or will be targeted by the same cyber security threats we face.

Our business and financial performance may be adversely affected by threats to our physical security and other events outside our control.

We could encounter threats to our physical security, including our facilities and personnel, and threats from workplace violence, civil unrest, acts of sabotage or terrorism, and other local security issues, any of which could disrupt our business.

Such events may require us to incur greater costs for security or to shut down operations for a period of time.

Changes in future business conditions could cause business investments, recorded goodwill, and/or purchased intangible assets to become impaired, resulting in losses and write-downs that would reduce our operating income.

As part of our business strategy, we acquire non-controlling and controlling interests in businesses.

We make acquisitions and investments following careful analysis and due diligence to achieve a desired return or strategic objective.

Business acquisitions involve estimates, assumptions, and judgments to arrive at acquisition prices, which are allocated among acquired assets, including goodwill, based upon fair market values.

Notwithstanding our acquisition and business integration efforts, actual operating results of acquired businesses may vary significantly from expectations.

In such events, we may be required to write down our carrying value of the related goodwill and/or purchased intangible assets.

Our business strategy includes strategic business acquisitions and non-controlling investments in businesses.

We make acquisitions and investments following careful analysis and due diligence to achieve a desired strategic objective or acquire a desired capability or technology.

Acquisitions involve estimates, assumptions, and judgments to arrive at acquisition prices, which are allocated among acquired assets, including goodwill, based upon fair market values.

Notwithstanding our acquisition process and business integration efforts, actual operating results of businesses we acquire or in which we invest may vary significantly from expectations.

In such events, we may be required to write down our carrying values of the related goodwill, purchased intangible assets, or investments.

In addition, declines in the trading price of our common stock or the market as a whole can result in goodwill and/or purchased intangible asset impairment charges associated with our existing businesses.

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In addition, our nuclear operations are subject to an enhanced regulatory environment, which results in further performance and compliance requirements and higher costs.

New laws, regulations, or procurement requirements, or changes to existing ones (including, for example, regulations related to recovery of compensation costs, cyber security, counterfeit parts, specialty metals, and conflict minerals), 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 recovery of compensation costs, cyber security, counterfeit parts, specialty metals, and conflict minerals), can increase our performance costs and compliance costs and risks, and reduce our profitability.

We are overseen and audited by the U.S.

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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.

For example, in January 2022, the Navy Contracting Officer issued a written determination that the Ingalls Shipbuilding Material Management and Accounting System has three significant deficiencies, resulting in a 5% withhold of payments on certain invoices issued under one contract.

Ingalls Shipbuilding will submit a corrective action plan, and the withhold will be reduced to 2% if the Contracting Officer determines the corrective action plan has been implemented and is effective.

The withhold will terminate and withheld funds returned to the Company when the Contracting Officer determines that the significant deficiencies have been corrected.

For example, in August 2022, a Navy Contracting Officer issued a written determination that the Ingalls Shipbuilding Property Management System had a significant deficiency, resulting in a 2% withhold of payments on certain invoices issued under one contract.

The withhold will terminate and withheld funds paid to us when the Contracting Officer determines that the significant deficiency has been corrected.

Government has, from time to time, recommended that certain of our contract prices be reduced, or that certain costs allocated to our contracts be disallowed, which sometimes involve substantial dollar amounts.

In response to U.S.

Government audits, investigations, and inquiries, we have also in the past made adjustments to our contract prices and costs allocated to our government contracts.

Government audits, investigations, and inquiries, we have also made adjustments from time to time to our contract prices and costs allocated to our government contracts.

Such audits, investigations, and inquiries may result in future reductions of our contract prices.

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Our operations are subject to and affected by federal, state, and local environmental laws and regulations relating to the discharge, storage, treatment, handling, disposal, and remediation of certain materials, substances, and wastes used in our operations.

In addition, we could be affected by future environmental laws or regulations.

Future environmental laws or regulations could also impact us.

Increased public awareness and concern regarding global climate change may result in more federal, regional, and/or international requirements to reduce or mitigate global warming, and legislation, international protocols or treaties, or regulation could mandate stricter limits on greenhouse gas emissions.

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Our shipyards also generate significant quantities of wastewater, which we treat before discharging in accordance with applicable permits.

To manage these materials, our shipyards have an extensive network of above ground and underground storage tanks, some of which have leaked and required remediation in the past.

To manage these materials, our shipyards have an extensive network of above ground and underground storage tanks, some of which have

leaked and required remediation in the past.

In addition, our handling of hazardous materials has sometimes resulted in spills in our shipyards and occasionally in adjacent rivers and waterways in which we operate.

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Our compliance program includes detailed compliance plans and related compliance controls, policies, procedures, and training designed to prevent and detect misconduct by employees, agents, business partners, and others working on our behalf, including suppliers and subcontractors, that would violate the laws of the jurisdictions in which we operate, including laws governing payments to government officials, the protection of export controlled or classified information, cost accounting and billing, competition, and data privacy.

We have been impacted in the past by the misconduct of employees and business partners, and we may not prevent all such misconduct in the future by our employees, agents, business partners, and others working on our behalf, including suppliers and subcontractors.

From time to time we are impacted by the misconduct of employees and business partners, and we may be impacted in the future by the misconduct of our employees, agents, business partners, and others working on our behalf, including suppliers and subcontractors.

Moreover, the risk of improper conduct may be expected to increase as we expand our operations into foreign jurisdictions.

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Failure to properly store, handle, and dispose of nuclear materials could pose a health risk to humans and wildlife and could cause personal injury and property damage, including environmental contamination.

If a nuclear accident were to occur, its severity could be significantly affected by the volume of the materials and the speed of remedial actions taken by us and emergency response personnel, as well as other factors beyond our control, such as weather and wind conditions.

If a nuclear accident were to occur, its severity could be significantly affected by the volume of the materials and the speed of remedial

actions taken by us and emergency response personnel, as well as other factors beyond our control, such as weather and wind conditions.

Actions we might take in response to an accident could result in significant costs.

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(federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, could result in increases in our tax expense and affect profitability and cash flows.

For example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to capitalize and amortize such expenditures over five years.

If these provisions are not deferred, modified, or repealed by Congress with retroactive effect to January 1, 2022, they will decrease our cash from operations beginning in 2022.

We currently estimate an approximately $100 million impact to 2022 cash from operations based on the provisions currently in effect.

The actual impact on 2022 cash from operations will depend on whether and when these provisions are deferred, modified, or repealed by Congress, including any retroactive application, and the amount of research and development expenses paid or incurred in 2022, among other factors.

In addition, recent proposals to increase the U.S.

corporate income tax rate would require us to increase our net deferred tax liabilities upon enactment of new tax legislation, with a corresponding material, one-time, noncash increase in deferred income tax expense.

Our current income tax expense and payments would likely materially increase in periods subsequent to the income tax rate change.

For example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to capitalize and amortize such expenditures over five years.

This change reduced our 2022 cash from operations by $102 million, and we estimate it will reduce our 2023 cash from operations by approximately $82 million.

The actual impact on 2023 cash from operations will depend on whether and when these provisions are deferred, modified, or repealed by Congress, including any retroactive application to 2022, among other factors.

In addition to future changes in tax laws, the amount of net deferred tax liabilities will change periodically as a result of a number of factors, including the measurement of our defined benefit pension plans, actual cash contributions to our defined benefit pension plans, changes in the timing of contract taxable income, and changes in the amount and timing of depreciation deductions.

We are also regularly under audit or examination by taxing authorities, including

foreign tax authorities.

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.

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Government regulations also provide that certain allegations against a contractor may lead to suspension or debarment from government contracts or suspension of export privileges.

Suspension or debarment could have a material adverse effect on us because of our reliance on government contracts and authorizations.

Suspension or debarment would have a material adverse effect on us because of our reliance on government contracts and authorizations.

Litigation, claims, or investigations, if ultimately resolved against us, could have a material adverse effect on our financial position, results of operations, or cash flows.

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For example, our Restated Certificate of Incorporation and Restated Bylaws currently require advance notice for stockholder proposals and director nominations, and authorize our board of directors to issue one or more series of preferred stock.

These provisions may discourage acquisition proposals or delay or prevent a change in control, which could reduce our stock price.

Delaware law also imposes restrictions on mergers and other business combinations between any holder of 15% or more of our outstanding common stock and us.

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Provisions of our Restated Certificate of Incorporation and our Restated Bylaws and our existing contracts with the U.S.

Navy may have the effect of discouraging, delaying, or preventing a change of control of our company that may be beneficial to our stockholders.

Navy may have the effect of discouraging, delaying, or preventing a change of control of our company that may be beneficial to our stockholders and could have a negative impact on our stock price.

Our Restated Bylaws include an exclusive forum requirement for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for such disputes with us or our directors, officers, or employees.

Our Restated Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty

owed by any of our directors, officers, other employees, or stockholders to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery, (iv) any action asserting a claim arising pursuant to any provision of our Certificate of Incorporation or Restated Bylaws, (v) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the General Corporation Law of the State of Delaware, or (vi) any action governed by the internal affairs doctrine.

This exclusive forum provision would not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act, which provides for exclusive jurisdiction of the federal courts.

The exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.

Alternatively, if a court were to find the exclusive forum provision contained in our Restated Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs and liabilities associated with resolving such action in other jurisdictions.

General Risk Factors

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Limitations on the availability of insurance coverage may result in substantial uninsured losses, which could have a material adverse effect on our financial position, results of operations, or cash flows.

Even in cases for which we have insurance coverage, disputes with insurance carriers over coverage may affect the timing of cash flows, and, in the event of litigation with an insurance carrier, an unfavorable outcome may have a material adverse effect on our financial position, results of operations, or cash flows.

Even in cases for which we have insurance coverage, disputes with insurance carriers over coverage may affect the timing of cash flows and cause us to incur significant expense to pursue insurance claims.

In addition, in the event of litigation with an insurance carrier, an unfavorable outcome may have a material adverse effect on our financial position, results of operations, or cash flows.

Market volatility and adverse capital market conditions may affect our ability to access cost-effective sources of funding and may expose us to risks associated with the financial viability of suppliers and subcontractors.

The financial markets can experience high levels of volatility and disruption, reducing the availability of credit for certain issuers.

We access these markets from time to time to support certain business activities, including funding acquisitions and capital expansion projects and refinancing existing indebtedness.

The financial markets have recently experienced high levels of volatility and disruption, reducing the availability of credit for certain issuers.

We access these markets from time to time to support certain business activities, including funding acquisitions and capital projects and refinancing existing indebtedness.

We may also access these markets to acquire credit support for our workers' compensation self-insurance program and letters of credit.

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Tightening capital markets could also adversely affect the ability of our suppliers and subcontractors to obtain financing.

Delays in the ability of our suppliers or subcontractors to obtain financing, or the unavailability of financing, could negatively affect their ability to perform their contracts with us and, as a result, our ability to perform our contracts.

The inability of our suppliers and subcontractors to obtain financing could also result in the need for us to transition to alternate suppliers and subcontractors, which could result in us incurring significant incremental costs and delays.

If we fail to manage acquisitions, divestitures, equity investments, and other transactions, including our acquisition of Alion, successfully or if acquired entities or equity investments fail to perform as expected, our financial results, business, and future prospects could be harmed.

If we fail to manage acquisitions, 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 and investments.

When evaluating such transactions, we make significant judgments regarding the values of business opportunities, technologies, and other assets, the risks and costs of potential liabilities, and the future prospects of strategic acquisitions.

compete with other potential buyers for the same opportunities.

To be successful, we must conduct due diligence to identify valuation issues and potential loss contingencies;

We often compete with other potential buyers for the same opportunities.

To be successful, we conduct due diligence to identify valuation issues and potential loss contingencies;

negotiate transaction terms;

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and realize anticipated operating synergies efficiently and effectively.

Acquisition, divestiture, joint venture, and investment transactions often require substantial management resources and have the potential to divert our attention from our existing business.

Unidentified or identified but un-indemnified 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.

Acquisition, joint venture, and investment transactions often require substantial management resources and have the potential to divert our attention from our existing business.

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.

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.

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Joint ventures and other non-controlling investments operate under shared control with other parties.

These investments typically face many of the same risks and uncertainties as we do, but may also expose us to additional risks not present if we retained full control.

These investments typically include many of the same risks and uncertainties as we do, but may also expose us to additional risks not present if we retained full control.

A joint venture partner may have economic or other business interests that are inconsistent with our interests, and we may be unable to prevent strategic decisions that may adversely affect our business, financial condition, and results of operations.

We also could be adversely affected by, or liable for, actions taken by these joint ventures that we do not control, including violations of anti-corruption, import and export, taxation, and anti-boycott laws.

We also could be adversely affected by, or liable for, actions taken by joint ventures that we do not control, including violations of anti-corruption, import and export, taxation, and anti-boycott laws.

There can be no assurance we will continue to increase our dividends or to repurchase shares of our common stock at current levels.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors