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Item 1. Financial Statements

2025-05-01 compared with 2024-10-31 · 188 added, 215 removed, 331 unchanged (55% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended September 30 Nine Months Ended September 30

Three Months Ended March 31

(in millions, except per share amounts) 2025 2024

7 unchanged sentences

Income from operating investments, net 13 12

Other income and gains (losses), net — ( 1 )

General and administrative expenses 246 232

21 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

($ in millions) September 30, 2024 December 31, 2023

($ in millions) March 31, 2025 December 31, 2024

Current Assets

Cash and cash equivalents $ 167 $ 831

Accounts receivable, net of allowance for expected credit losses of $ 2 million as of 2024 and $ 8 million as of 2023

Accounts receivable, net of allowance for expected credit losses of $ 2 million as of 2025 and 2024

Contract assets 2,017 1,683

14 unchanged sentences

Accrued employees’ compensation 327 392

Short-term debt and current portion of long-term debt 898 231

Current portion of long-term debt 503 503

Current portion of postretirement plan liabilities 124 124

25 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30

Three Months Ended March 31

($ in millions) 2025 2024

14 unchanged sentences

Retiree benefits ( 38 ) ( 27 )

Net cash provided by operating activities 2 408

Net cash used in operating activities ( 395 ) ( 202 )

Investing Activities:

2 unchanged sentences

Grant proceeds for capital expenditures — 3

Investment in affiliates — ( 24 )

Proceeds from equity method investments — 61

Acquisitions of businesses ( 133 ) —

Proceeds from disposition of assets 1 —

Other investing activities, net — 1

5 unchanged sentences

Net borrowings on commercial paper — 117

Debt issuance costs ( 7 ) —

Dividends paid ( 53 ) ( 51 )

7 unchanged sentences

Supplemental Cash Flow Disclosure

Cash paid for income taxes (net of refunds) $ 170 $ 227

Cash paid for interest $ 8 $ 10

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

Three Months Ended September 30, 2024 and 2023

($ in millions) Common Stock Additional Paid-in Capital Retained Earnings (Deficit) Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

Balance as of June 30, 2023 $ 1 $ 2,030 $ 4,434 $ ( 2,227 ) $ ( 592 ) $ 3,646

Net earnings — — 148 — — 148

Dividends declared ($ 1.24 per share)

— — ( 50 ) — — ( 50 )

Stock-based compensation — 8 — — — 8

Other comprehensive income, net of tax — — — — 2 2

Treasury stock activity — — — ( 21 ) — ( 21 )

Balance as of September 30, 2023 $ 1 $ 2,038 $ 4,532 $ ( 2,248 ) $ ( 590 ) $ 3,733

Balance as of June 30, 2024 $ 1 $ 2,029 $ 4,977 $ ( 2,414 ) $ ( 415 ) $ 4,178

Net earnings — — 101 — — 101

Dividends declared ($ 1.30 per share)

— — ( 52 ) — — ( 52 )

Stock-based compensation — 8 — — — 8

Other comprehensive income, net of tax — — — — 3 3

Treasury stock activity — — — ( 35 ) — ( 35 )

Balance as of September 30, 2024 $ 1 $ 2,037 $ 5,026 $ ( 2,449 ) $ ( 412 ) $ 4,203

Nine Months Ended September 30, 2024 and 2023

Three Months Ended March 31, 2025 and 2024

($ in millions) Common Stock Additional Paid-in Capital Retained Earnings (Deficit) Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

6 unchanged sentences

Treasury stock activity — — — ( 63 ) — ( 63 )

Balance as of September 30, 2023 $ 1 $ 2,038 $ 4,532 $ ( 2,248 ) $ ( 590 ) $ 3,733

Balance as of March 31, 2024 $ 1 $ 2,038 $ 4,855 $ ( 2,349 ) $ ( 419 ) $ 4,126

Balance as of December 31, 2024 $ 1 $ 2,045 $ 5,097 $ ( 2,449 ) $ ( 28 ) $ 4,666

4 unchanged sentences

Other comprehensive income, net of tax — — — — 1 1

Treasury stock activity — — — ( 163 ) — ( 163 )

Balance as of September 30, 2024 $ 1 $ 2,037 $ 5,026 $ ( 2,449 ) $ ( 412 ) $ 4,203

Balance as of March 31, 2025 $ 1 $ 2,057 $ 5,191 $ ( 2,449 ) $ ( 27 ) $ 4,773

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

24 unchanged sentences

The Company maintains multiple grantor trusts to fund certain non-qualified pension plans.

These trusts were valued at $ 235 million and $ 220 million as of September 30, 2024, and December 31, 2023, respectively, and are presented within miscellaneous other assets within the unaudited condensed consolidated statements of financial position.

These trusts were valued at $ 234 million and $ 233 million as of March 31, 2025, and December 31, 2024, respectively, and are presented within miscellaneous other assets on the unaudited condensed consolidated statements of financial position.

These trusts consist primarily of investments in marketable securities, which are held at fair value within Level 1 of the fair value hierarchy.

The estimated fair values of the Company's total long-term debt (including current portion), excluding finance lease liabilities, as of September 30, 2024, and December 31, 2023, were $ 2,146 million and $ 2,309 million, respectively.

The estimated fair values of the current portion of the Company's long-term debt, excluding finance lease liabilities, were $ 496 million and $ 229 million as of September 30, 2024, and December 31, 2023, respectively.

The estimated fair values of the Company's total long-term debt, including the current portion of long-term debt and excluding finance lease liabilities, as of March 31, 2025, and December 31, 2024, were $ 3,150 million and $ 3,110 million, respectively.

The estimated fair values of the current portion of the Company's long-term debt, excluding finance lease liabilities, were $ 500 million and $ 497 million as of March 31, 2025, and December 31, 2024, respectively.

The fair values of the Company's long-term debt were calculated based on recent trades of the Company's debt instruments in inactive markets, which fall within Level 2 of the fair value hierarchy.

Debt – In September 2024, the Company amended and restated its existing $ 1.5 billion credit facility, increasing the capacity thereunder to $ 1.7 billion and extending the maturity date for five years from signing (the “ Second Amended and Restated Revolving Credit Facility ”).

The Second Amended and Restated Revolving Credit Facility has a variable interest rate on outstanding borrowings based on the Secured Overnight Financing Rate (“SOFR”) plus an interest spread based upon the Company’s credit rating, which may vary between 1.225 % and 2.100 % .

The Second Amended and Restated Revolving Credit Facility also has a commitment fee on unutilized amounts based on the Company’s credit rating, which may vary between 0.125 % and 0.300 % .

The Second Amended and Restated Revolving Credit Facility includes a letter of credit sub-facility of $ 300 million .

As of September 30, 2024 , the Company had not drawn on the Second Amended and Restated Revolving Credit Facility.

Based on the Company’s current credit rating, the interest rate spread on drawn amounts would be 1.475 % and the commitment fee would be 0.200 % .

The Second Amended and Restated Revolving Credit Facility contains customary affirmative and negative covenants and events of default, as well as a financial covenant based on a maximum total leverage ratio.

Each of the Company's existing and future material wholly owned domestic subsidiaries, except those that are specifically designated as unrestricted subsidiaries, are and will be guarantors under the Second Amended and Restated Revolving Credit Facility.

Additionally, in September 2024, the Company's borrowing capacity under its commercial paper program increased from $ 1 billion to $ 1.7 billion.

Debt - On May 1, 2025, the Company is repaying $ 500 million aggregate principal amount of its 3.844 % senior notes upon their maturity.

The repayment is funded using a combination of cash on hand and proceeds from the Company’s commercial paper program.

As of March 31, 2025, the Company had $ 1,688 million unutilized under its Second Amended and Restated Revolving Credit Facility ("Credit Facility").

The Credit Facility contains customary affirmative and negative covenants and events of default, as well as a financial covenant based on a maximum total leverage ratio.

The maximum total leverage ratio covenant limited the Company's borrowing capacity under the Credit Facility to $ 1,364 million as of March 31, 2025.

Subsequent to the repayment of the 3.844 % senior notes on May 1, 2025, the Company's borrowing capacity under the Credit Facility is no longer limited by the maximum total leverage ratio covenant.

ACCOUNTING STANDARDS UPDATES

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

The new guidance requires, among other things, segment disclosures of significant expenses that are regularly reported to the chief operating decision maker and the nature of segment expense information used to manage operations.

The new guidance is effective on a retrospective basis for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company does not expect the new guidance to have a material impact on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The new guidance requires disaggregated information about the effective tax rate reconciliation and additional information on taxes paid that meet a quantitative threshold.

The new guidance is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted.

The Company plans to early adopt the new guidance on a retrospective basis for the annual reporting period ending December 31, 2024, and does not expect the new guidance to have a material impact on its consolidated financial statements.

Recently Adopted Guidance

There were no new Accounting Standard Updates (“ASU”) adopted during the three months ended March 31, 2025 that had a material impact on the Company’s consolidated financial statements.

Accounting Guidance Issued But Not Adopted as of March 31, 2025

In November 2024, the Financial Accounting Standards Board ("FASB") issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The new guidance requires, among other things, tabular and qualitative disclosure of disaggregated expense information that is included in certain expense line items presented on the consolidated statement of operations.

The new guidance also requires that the total amount and definition of selling expenses be disclosed.

The new guidance is effective on a prospective basis for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption and retrospective application permitted.

The Company is currently evaluating the impacts of the new guidance on its consolidated financial statements.

Other accounting pronouncements issued but not effective until after December 31, 2025, are not expected to have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

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, for a purchase price of $ 133 million, subject to customary purchase price adjustments.

The acquired manufacturing facility expands the Company’s shipbuilding capacity and operates within the Newport News segment.

The transaction closed using cash on hand and qualifies as a business combination under FASB Accounting Standards Codification (“ASC”) 805 – "Business Combinations."

The Company recognized $ 33 million of goodwill, which includes expected synergies and the value of W International’s acquired workforce, all of which was allocated to the Newport News segment and is tax deductible.

There have been no other changes to the Company’s goodwill since December 31, 2024.

The Company is in the process of completing its acquisition accounting, including its fair value estimates for certain assets and liabilities.

The assets, liabilities, and results of operations of W International are not material to the Company’s consolidated financial position, results of operations, or cash flows.

STOCKHOLDERS' EQUITY

1 unchanged sentence

Repurchases are made from time to time at management's discretion in accordance with applicable federal securities laws.

For the nine months ended September 30, 2024, the Company repurchased 607,841 shares at an aggregate cost of $ 163 million, including $ 1 million of accrued excise tax.

For the nine months ended September 30, 2023, the Company repurchased 175,555 shares at an aggregate cost of $ 37 million.

For the three months ended March 31, 2025, the Company did not repurchase any shares.

For the three months ended March 31, 2024, the Company repurchased 223,329 shares at an aggregate cost of $ 63

million, including $ 1 million of accrued excise tax.

The cost of purchased shares is recorded as treasury stock in the unaudited condensed consolidated statements of financial position.

Dividends - The Company paid cash dividends totaling $ 154 million and $ 149 million for the nine months ended September 30, 2024 and 2023, respectively.

Dividends - The Company paid cash dividends totaling $ 53 million and $ 51 million for the three months ended March 31, 2025 and 2024, respectively.

Accumulated Other Comprehensive Loss - Other comprehensive income (loss) refers to gains and losses recorded as an element of stockholders' equity but excluded from net earnings.

The accumulated other comprehensive loss was comprised of unamortized benefit plan costs of $ 412 million and $ 422 million as of September 30, 2024, and December 31, 2023, respectively.

The changes in accumulated other comprehensive loss by component for the three and nine months ended September 30, 2024 and 2023, were as follows:

($ in millions) Benefit Plans Other Total

Balance as of June 30, 2023 $ ( 592 ) $ — $ ( 592 )

Amounts reclassified from accumulated other comprehensive loss

Amortization of prior service cost 1

Amortization of net actuarial loss 1

Tax expense for items of other comprehensive income ( 2 ) — ( 2 )

Net current period other comprehensive income 2 — 2

Balance as of September 30, 2023 $ ( 590 ) $ — $ ( 590 )

Balance as of June 30, 2024 $ ( 415 ) $ — $ ( 415 )

Amounts reclassified from accumulated other comprehensive loss

Amortization of prior service cost 1

Amortization of net actuarial loss 1

Tax expense for items of other comprehensive income ( 2 ) — ( 2 )

Net current period other comprehensive income 3 — 3

Balance as of September 30, 2024 $ ( 412 ) $ — $ ( 412 )

($ in millions) Benefit Plans Other Total

The accumulated other comprehensive loss was comprised of unamortized benefit plan costs of $ 27 million and $ 28 million as of March 31, 2025, and December 31, 2024, respectively.

The changes in accumulated other comprehensive loss by component for the three months ended March 31, 2025 and 2024, were as follows:

($ in millions) Benefit Plans Total

Balance as of December 31, 2023 $ ( 422 ) $ ( 422 )

4 unchanged sentences

Net current period other comprehensive income 3 3

Balance as of September 30, 2023 $ ( 590 ) $ — $ ( 590 )

Balance as of March 31, 2024 $ ( 419 ) $ ( 419 )

Balance as of December 31, 2024 $ ( 28 ) $ ( 28 )

2 unchanged sentences

Amortization of net actuarial loss 1

Tax expense for items of other comprehensive income ( 4 ) — ( 4 )

Net current period other comprehensive income 1 1

Balance as of September 30, 2024 $ ( 412 ) $ — $ ( 412 )

Balance as of March 31, 2025 $ ( 27 ) $ ( 27 )

1 These accumulated comprehensive loss components are included in the computation of net periodic benefit cost.

Employee Pension and Other Postretirement Benefits.

The tax expense recorded in stockholders' equity for the amounts reclassified from accumulated other comprehensive loss for each of the three months ended September 30, 2024 and 2023, was $ 2 million.

The tax expense recorded in stockholders' equity for the amounts reclassified from accumulated other comprehensive loss for each of the nine months ended September 30, 2024 and 2023, was $ 4 million.

The tax expense recorded in stockholders' equity for the amounts reclassified from accumulated other comprehensive loss for the three months ended March 31, 2025 and 2024, was less than $ 1 million and $ 2 million, respectively.

EARNINGS PER SHARE

Basic and diluted earnings per common share were calculated as follows:

Three Months Ended September 30 Nine Months Ended September 30

Three Months Ended March 31

(in millions, except per share amounts) 2025 2024

5 unchanged sentences

Earnings per share - diluted $ 3.79 $ 3.87

Under the treasury stock method, the Company has excluded from the diluted share amounts presented above the effects of 0.4 million Restricted Performance Stock Rights ("RPSRs") and 0.1 million Restricted Stock Rights ("RSRs") for each of the three and nine months ended September 30, 2024, and 0.4 million RPSRs for each of the three and nine months ended September 30, 2023.

2025 and 2024, and 0.2 million and 0.1 million Restricted Stock Rights ("RSRs") for the three months ended March 31, 2025 and 2024, respectively.

Disaggregation of Revenue

The following tables present revenues on a disaggregated basis, in a manner that reconciles with the Company's reportable segment disclosures, for the following categories:

product versus service type, customer type, contract type, and major program.

The Company believes that this level of disaggregation provides investors with information to evaluate the Company’s financial performance and provides the Company with information to make capital allocation decisions in the most appropriate manner.

For more information on the Company's contracts, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's 2023 Annual Report on Form 10-K.

The following tables present revenues on a disaggregated basis:

Three Months Ended September 30, 2024

($ in millions) Ingalls Newport News Mission Technologies Intersegment Eliminations Total

Product sales $ 569 $ 1,163 $ 29 $ — $ 1,761

Service revenues 93 249 646 — 988

Intersegment 2 — 34 ( 36 ) —

Sales and service revenues $ 664 $ 1,412 $ 709 $ ( 36 ) $ 2,749

Customer Type

Federal $ 662 $ 1,412 $ 673 $ — $ 2,747

Commercial — — 2 — 2

Intersegment 2 — 34 ( 36 ) —

Sales and service revenues $ 664 $ 1,412 $ 709 $ ( 36 ) $ 2,749

Contract Type

Firm fixed-price $ — $ 1 $ 83 $ — $ 84

Fixed-price incentive 568 753 3 — 1,324

Cost-type 94 658 543 — 1,295

Time and materials — — 46 — 46

Intersegment 2 — 34 ( 36 ) —

Sales and service revenues $ 664 $ 1,412 $ 709 $ ( 36 ) $ 2,749

Three Months Ended September 30, 2023

($ in millions) Ingalls Newport News Mission Technologies Intersegment Eliminations Total

Product sales $ 637 $ 1,170 $ 28 $ — $ 1,835

Service revenues 73 281 627 — 981

Intersegment 1 2 30 ( 33 ) —

Sales and service revenues $ 711 $ 1,453 $ 685 $ ( 33 ) $ 2,816

Customer Type

Federal $ 710 $ 1,451 $ 647 $ — $ 2,808

Commercial — — 7 — 7

State and local government agencies — — 1 — 1

Intersegment 1 2 30 ( 33 ) —

Sales and service revenues $ 711 $ 1,453 $ 685 $ ( 33 ) $ 2,816

Contract Type

Firm fixed-price $ — $ 1 $ 77 $ — $ 78

Fixed-price incentive 637 779 3 — 1,419

Cost-type 73 671 521 — 1,265

Time and materials — — 54 — 54

Intersegment 1 2 30 ( 33 ) —

Sales and service revenues $ 711 $ 1,453 $ 685 $ ( 33 ) $ 2,816

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

($ in millions) Ingalls Newport News Mission Technologies Intersegment Eliminations Total

6 unchanged sentences

Commercial — — 4 — 4

State and local government agencies — — 1 — 1

Intersegment 4 — 30 ( 34 ) —

7 unchanged sentences

Sales and service revenues $ 637 $ 1,396 $ 735 $ ( 34 ) $ 2,734

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

($ in millions) Ingalls Newport News Mission Technologies Intersegment Eliminations Total

6 unchanged sentences

Commercial — — 2 — 2

State and local government agencies — — 1 — 1

Intersegment 2 1 31 ( 34 ) —

7 unchanged sentences

Sales and service revenues $ 655 $ 1,434 $ 750 $ ( 34 ) $ 2,805

Three Months Ended September 30 Nine Months Ended September 30

Three Months Ended March 31

($ in millions) 2025 2024

2 unchanged sentences

Surface combatants and coast guard cutters 299 300

Other 2 2 7 6

Total Ingalls 637 655

3 unchanged sentences

Total Newport News 1,396 1,434

C5ISR, CEW&S, LVC 593 567 1,857 1,609

cyber, electronic warfare & space;

live, virtual, and constructive training solutions 628 626

Other 107 124

2 unchanged sentences

Sales and service revenues $ 2,734 $ 2,805

As of September 30, 2024, the Company had $ 49.4 billion of remaining performance obligations.

As of March 31, 2025, the Company had $ 48.0 billion of remaining performance obligations.

The Company expects to recognize approximately 40 % of its remaining performance obligations as revenue through 2026, an additional 30 % through 2028, and the balance thereafter.

1 unchanged sentence

The following table presents the effect of net cumulative catch-up revenue adjustments on operating income and diluted earnings per share:

Three Months Ended September 30 Nine Months Ended September 30

Three Months Ended March 31

($ in millions, except per share amounts) 2025 2024

1 unchanged sentence

Effect on diluted earnings per share $ — $ 0.03

The Company’s multi-year shipbuilding contracts with the U.S.

Government are routinely modified as the result of unpriced change orders arising in the ordinary course of business.

These anticipated changes are accounted for as contract modifications when the scope of the work has been approved and it is probable that the price will be approved.

The Company recognizes variable consideration included in the transaction price for a modified contract to the extent the Company believes a significant reversal of revenue is not probable.

For the three and nine months ended September 30, 2024, no individual favorable cumulative catch-up revenue adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income.

For the three months ended September 30, 2024, cumulative catch-up revenue adjustments included unfavorable adjustments of $ 34 million on Block IV of the Virginia class (SSN 774) submarine program, $ 14 million on the refueling and complex overhaul ("RCOH") of USS John C.

Stennis (CVN 74), and $ 16 million on the construction of Enterprise (CVN 80) and Doris Miller (CVN 81) at the Company's Newport News segment.

For the nine months ended September 30, 2024, no individual unfavorable cumulative catch-up revenue adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income.

For the three and nine months ended September 30, 2023, no individual favorable cumulative catch-up revenue adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income.

For the three and nine months ended September 30, 2023, no individual unfavorable cumulative catch-up revenue adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income.

For the three months ended March 31, 2025, cumulative catch-up revenue adjustments netted to zero, and did not have an effect on operating income or diluted earnings per share.

The Company’s Newport News segment continues to experience performance challenges in the construction of aircraft carriers and Virginia class (SSN 774) submarines.

For the three months ended March 31, 2025, cumulative catch-up revenue adjustments included significant unfavorable performance adjustments on the Enterprise (CVN 80) and Doris Miller (CVN 81) construction contract and the Virginia class (SSN 774) submarine program, which were offset by contract incentives.

For the three months ended March 31, 2024, no individual favorable or unfavorable cumulative catch-up revenue adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income.

Contract Balances

1 unchanged sentence

Net contract assets were comprised as follows:

($ in millions) September 30, 2024 December 31, 2023

($ in millions) March 31, 2025 December 31, 2024

Contract assets $ 2,017 $ 1,683

1 unchanged sentence

Net contract assets $ 1,370 $ 909

The Company’s net contract assets increased $ 497 million from December 31, 2023, to September 30, 2024, primarily as a result of the timing of billings across programs on certain U.S.

The Company’s net contract assets increased $ 461 million from December 31, 2024 to March 31, 2025, primarily as a result of the timing of billings across programs on certain U.S.

Navy contracts.

For the three and nine months ended September 30, 2024, the Company recognized revenue of $ 6 million and $ 930 million, respectively, related to its contract liabilities as of December 31, 2023.

For the three and nine months ended September 30, 2023, the Company recognized revenue of $ 5 million and $ 678 million, respectively, related to its contract liabilities as of December 31, 2022.

The Company recognized revenue related to its prior year-end contract liabilities of $ 552 million and $ 641 million for the three months ended March 31, 2025 and 2024, respectively.

SEGMENT INFORMATION

The following table presents segment results for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30 Nine Months Ended September 30

($ in millions) 2024 2023 2024 2023

The following tables present the Company's operating results by segment:

Three Months Ended March 31, 2025

($ in millions) Ingalls Newport News Mission Technologies Intersegment Eliminations Total

Sales and Service Revenues

Ingalls $ 664 $ 711 $ 2,031 $ 1,952

Newport News 1,412 1,453 4,381 4,468

Mission Technologies 709 685 2,224 1,954

Intersegment eliminations ( 36 ) ( 33 ) ( 105 ) ( 97 )

Product sales $ 526 $ 1,160 $ 27 $ — $ 1,713

Service Revenues 107 236 678 — $ 1,021

Intersegment 4 — 30 ( 34 ) $ —

Total sales and service revenues 637 1,396 735 ( 34 ) 2,734

Segment Operating Income

Income from operating investments, net — — 13 — 13

Cost of sales and service revenues

Product 452 971 20 — 1,443

Service 90 193 604 — 887

Intersegment 4 — 30 ( 34 ) —

Other segment items 45 147 54 — 246

Total segment operating income $ 46 $ 85 $ 40 $ — 171

Non-segment factors affecting operating income

Operating FAS/CAS Adjustment ( 10 )

Non-current state income taxes —

Total operating income $ 161

Three Months Ended March 31, 2024

($ in millions) Ingalls Newport News Mission Technologies Intersegment Eliminations Total

Sales and Service Revenues

Operating Income

Ingalls $ 49 $ 73 $ 165 $ 193

Newport News 15 90 208 269

Mission Technologies 33 24 97 50

Product sales $ 586 $ 1,176 $ 25 $ — $ 1,787

Service Revenues 67 257 694 — $ 1,018

Intersegment 2 1 31 ( 34 ) $ —

Total sales and service revenues 655 1,434 750 ( 34 ) 2,805

Segment Operating Income

Income from operating investments, net — — 12 — 12

Cost of sales and service revenues

Product 491 1,001 31 — 1,523

Service 58 212 620 — 890

Intersegment 2 1 31 ( 34 ) —

Other segment items 44 138 52 — 234

Total segment operating income $ 60 $ 82 $ 28 $ — 170

Non-segment factors affecting operating income

1 unchanged sentence

Non-current state income taxes 1

Operating income $ 82 $ 172 $ 425 $ 469

Operating FAS/CAS Adjustment - The Operating FAS/CAS Adjustment represents the difference between the service cost component of our pension and other postretirement benefit plan expense determined in accordance with U.S.

GAAP Financial Accounting Standards ("FAS") and our pension and other postretirement expense under U.S.

Government Cost Accounting Standards ("CAS").

The following table presents the Company's assets by segment:

($ in millions) September 30, 2024 December 31, 2023

Total operating income $ 154

Sales transactions between segments are generally recorded at cost.

Other segment items consists of general and administrative expenses and other income and gains (losses), net.

Other Financial Information

The following tables present the Company's capital expenditures, as presented to the chief operating decision maker, and depreciation and amortization by segment:

Three Months Ended March 31

($ in millions) 2025 2024

Capital Expenditures 1

Ingalls $ 14 $ 11

1 unchanged sentence

Mission Technologies 1 2

Total segment capital expenditures 64 69

Corporate 3 3

Total assets $ 11,082 $ 11,215

The Company's earnings are primarily domestic, and its effective income tax rates on earnings from operations for the three months ended September 30, 2024 and 2023, were 9.8 % and 21.7 %, respectively.

For the nine months ended September 30, 2024 and 2023, the Company's effective income tax rates on earnings from operations were 16.6 % and 21.9 %, respectively.

The lower effective tax rate for the three months ended September 30, 2024, was primarily attributable to current and prior period research and development tax credits recorded in the current period.

The lower effective tax rate for the nine months ended September 30, 2024, was primarily attributable to current and prior period research and development tax credits recorded in the current period and to a taxable gain associated with the sale of the Company’s interest in an unconsolidated ship repair and specialty fabrication joint venture recorded in 2023.

For each of the three and nine months ended September 30, 2024, the Company’s 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.

The Company's unrecognized tax benefits increased by $ 5 million and $ 9 million during the three and nine months ended September 30, 2024, respectively.

As of September 30, 2024, the estimated amounts of the Company's unrecognized tax benefits, excluding interest and penalties, were liabilities of $ 107 million.

Total capital expenditures $ 67 $ 72

1 Net of grant proceeds for capital expenditures

Three Months Ended March 31

($ in millions) 2025 2024

Depreciation and Amortization

Ingalls $ 20 $ 19

Newport News 33 34

Mission Technologies 25 27

Total segment depreciation and amortization 78 80

Corporate 1 —

Total depreciation and amortization $ 79 $ 80

Asset information by segment is not disclosed because it is not a key measure of performance used by the chief operating decision maker.

The Company's earnings are primarily domestic, and its effective income tax rates on earnings from operations for the three months ended March 31, 2025 and 2024, were 20.3 % and 16.8 %, respectively.

The higher effective tax rate for the three months ended March 31, 2025, was primarily attributable to excess tax benefits recognized on stock-based compensation recorded in the prior period.

For the three months ended March 31, 2025, the Company’s 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 period.

The Company's unrecognized tax benefits increased by $ 3 million during the three months ended March 31, 2025.

As of March 31, 2025, the estimated amounts of the Company's unrecognized tax benefits, excluding interest and penalties, were liabilities of $ 113 million.

Assuming a sustainment of these tax positions, a reversal of $ 92 million of the accrued amounts would favorably affect the Company's effective federal income tax rate in future periods.

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense.

For the three and nine months ended September 30, 2024, interest resulting from the unrecognized tax benefits noted above increased income tax expense by $ 1 million and $ 4 million, respectively.

Non-current state income taxes include deferred state income taxes, which reflect the change in deferred state tax assets and liabilities and the tax expense or benefit associated with changes in unrecognized state tax benefits in the relevant period.

For the three months ended March 31, 2025, interest and penalties resulting from the unrecognized tax benefits noted above increased income tax expense by $ 2 million.

IRS Audits – In February 2025, the IRS notified the Company that its 2018 research and development tax credit refund claim would be processed and assigned to IRS exam for audit.

Income Taxes of the Company’s 2024 Annual Report on Form 10-K for additional information.

Non-current state income taxes include deferred state income taxes, which reflect the change in deferred state tax assets and liabilities and the tax expense or benefit associated with changes in state unrecognized tax benefits in the relevant period.

These amounts are recorded within operating income.

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The Company is involved in legal proceedings before various courts and administrative agencies, and is periodically subject to government examinations, inquiries and investigations.

Pursuant to FASB Accounting Standards Codification 450 - "Contingencies," the Company has accrued for losses associated with investigations, claims, and litigation when, and to the extent that, loss amounts related to the investigations, claims, and litigation are probable and can be reasonably estimated.

The actual losses that might be incurred to resolve such investigations, claims, and litigation may be higher or lower than the amounts accrued.

The Company has also provided footnote disclosure for matters for which a material loss is reasonably possible but a reserve has not been accrued because the likelihood of a material loss is not probable.

The Company accrues for losses associated with legal proceedings when, and to the extent that, loss amounts related to the legal proceedings are probable and can be reasonably estimated.

The actual losses that might be incurred to resolve such legal proceedings may be higher or lower than the amounts accrued.

The Company also provides footnote disclosure for matters for which a material loss is reasonably possible but a reserve has not been accrued because the likelihood of a material loss is not probable.

Antitrust Complaint - In October 2023, a class action antitrust lawsuit was filed against the Company and other defendants in the U.S.

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The complaint seeks class certification, treble damages, and any other relief to which the plaintiffs are entitled.

The District Court dismissed the lawsuit against all defendants in April 2024, and the plaintiffs have appealed the District Court dismissal to the Fourth Circuit Court of Appeals.

COVID Insurance Claim - In September 2020, the Company filed a complaint against 32 reinsurers in the Superior Court, State of Vermont, Franklin Unit, seeking a judgment declaring that the Company's business interruption and other losses associated with COVID-19 are covered by the Company's property insurance program.

The District Court dismissed the lawsuit against all defendants in April 2024, and the plaintiffs have

appealed the District Court dismissal to the Fourth Circuit Court of Appeals.

The Company cannot at this time predict or reasonably estimate the outcome of this matter.

Insurance Claim - In September 2020, the Company filed a complaint against 32 reinsurers in the Superior Court, State of Vermont, Franklin Unit, seeking a judgment declaring that the Company's business interruption and other losses associated with COVID-19 are covered by the Company's property insurance program.

The Company also initiated arbitration proceedings against six other reinsurers seeking similar relief.

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Any suspension or debarment would have a material effect on the Company because of its reliance on government contracts.

During the third quarter, the Company identified certain quality issues involving noncompliance with welding procedures at Newport News.

The Company has commenced an investigation and disclosed the matter to the U.S.

The Company is working with its U.S.

Navy customer to evaluate the full extent of the matter and its potential impact on operations.

Based upon the early stage of the Company’s investigation, the Company cannot at this time predict or reasonably estimate the outcome of this matter, including its financial impact.

employees and various third parties allege exposure to asbestos containing materials while on or associated with HII premises or while working on vessels constructed or repaired by HII.

During the third quarter of 2024, the Company identified certain quality issues involving noncompliance with welding procedures at Newport News.

The Company commenced an investigation and disclosed the matter to the U.S.

The Company continues to work with its U.S.

Navy customer to evaluate the full extent of the matter and cannot at this time predict or reasonably estimate the ultimate outcome of this matter.

Asbestos Related Claims - HII and its predecessors-in-interest are defendants in a longstanding series of cases that have been and continue to be filed in various jurisdictions around the country, wherein former and current employees and various third parties allege exposure to asbestos containing materials while on or associated with HII premises or while working on vessels constructed or repaired by HII.

In some instances, partial or full insurance coverage is available for the Company's liabilities.

The costs to resolve these cases during the nine months ended September 30, 2024 and 2023, were not material individually or in the aggregate.

The costs to resolve cases during the three months ended March 31, 2025 and 2024, were not material individually or in the aggregate.

The Company’s estimate of asbestos-related liabilities is subject to uncertainty because such liabilities are influenced by many variables that are inherently difficult to predict.

Although the Company believes the ultimate resolution of current cases will not have a material effect on its condensed consolidated financial position, results of operations, or cash flows, it cannot predict what new or revised claims or litigation might be asserted or what information might come to light and can, therefore, give no assurances regarding the ultimate outcome of asbestos related litigation.

The Company is party to various other claims, legal proceedings, and investigations that arise in the ordinary course of business, including U.S.

Government investigations that could result in administrative, civil, or criminal proceedings involving the Company.

The Company is party to various other claims, arbitrations, investigations, and other legal proceedings that arise in the ordinary course of business, including U.S.

Government investigations and claims that could result in administrative, civil, or criminal proceedings involving the Company.

The Company is a contractor with the U.S.

Government, and such proceedings can therefore include False Claims Act allegations against the Company.

Although the Company believes that the resolution of these other claims, legal proceedings, and investigations will not have a material effect on its condensed consolidated financial position, results of operations, or cash flows, the Company cannot predict what new or revised claims or litigation might be asserted or what information might come to light and can, therefore, give no assurances regarding the ultimate outcome of these matters.

Although, based on the information available to the Company to date, the Company believes that the resolution of these other claims, legal proceedings, and investigations will not have a material effect on its condensed consolidated financial position, results of operations, or cash flows, the Company cannot predict what new or revised claims or litigation might be asserted or what information might come to light and can, therefore, give no assurances regarding the ultimate outcome of these matters.

COMMITMENTS AND CONTINGENCIES

Contract Performance Contingencies - Contract profit margins may include estimates of revenues for matters on which the customer and the Company have not reached agreement, such as settlements and contract modifications in the process of negotiation, claims, and requests for equitable adjustment for unanticipated contract costs.

Contract Performance Contingencies - Contract profit margins may include estimates of revenues for matters on which the customer and the Company have not reached agreement, such as settlements in the process of negotiation, contract changes, claims, and requests for equitable adjustment for unanticipated contract costs.

These estimates are based upon management's best assessment of the underlying causal events and circumstances and recognized to the extent of expected recovery based upon contractual entitlements and the probability of successful negotiation with the customer.

The Company believes its outstanding customer settlements, claims, and requests for equitable adjustment will be resolved without material negative impact to its financial position, results of operations, or cash flows.

Environmental Matters - The estimated cost to complete environmental remediation is accrued when it is probable that the Company will incur such costs in the future to address environmental conditions at currently or formerly owned or leased operating facilities, or at sites where it has been named a Potentially Responsible Party by the Environmental Protection Agency or similarly designated by another environmental agency, and the related costs can be estimated by management.

These accruals do not include any litigation costs related to environmental matters, nor do they include amounts recorded as asset retirement obligations.

Management estimates that as of September 30, 2024, the probable estimable future cost for environmental remediation was not material.

The Company believes its outstanding customer settlements will be resolved without material impact to its financial position, results of operations, or cash flows.

Environmental Matters - The estimated costs to complete environmental remediation are accrued when it is probable that the Company will incur such costs in the future to address environmental conditions at currently or

formerly owned or leased operating facilities, or at sites where it has been named a Potentially Responsible Party by the Environmental Protection Agency or similarly designated by another environmental agency, and the related costs can be reasonably estimated by management.

When only a range of costs is established and no amount within the range is more probable than another, the minimum amount in the range is accrued.

Environmental liabilities are recorded on an undiscounted basis and are expensed or capitalized as appropriate.

Capitalized expenditures, if any, relate to long-lived improvements in currently operating facilities.

The Company does not record insurance recoveries before collection is probable.

As of March 31, 2025 and December 31, 2024, the Company did not have any accrued receivables related to insurance reimbursements or recoveries for environmental matters.

The Company’s environmental liability accruals do not include any litigation costs related to environmental matters, nor do they include amounts recorded as asset retirement obligations.

Management estimates that as of March 31, 2025, the probable estimable future cost for environmental remediation is not material.

Although management cannot predict whether new information gained as remediation progresses or the Company incurs additional remediation obligations will materially affect the estimated liability accrued, management does not believe that future remediation expenditures will have a material effect on the Company's consolidated financial position, results of operations, or cash flows.

Financial Arrangements - In the ordinary course of business, HII uses letters of credit issued by commercial banks to support certain leases, insurance policies, and contractual performance obligations, as well as surety bonds issued by insurance companies principally to support the Company's self-insured workers' compensation plans.

As of September 30, 2024, the Company had $ 11 million in issued but undrawn letters of credit and $ 360 million of surety bonds outstanding.

As of March 31, 2025, the Company had $ 12 million in issued but undrawn letters of credit and $ 389 million of surety bonds outstanding.

Government Claims - From time to time, the U.S.

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Although the Company believes that the resolution of any of these matters will not have a material effect on its consolidated financial position, results of operations, or cash flows, it cannot predict the ultimate outcome of these matters.

Other Matters - The Company began negotiations with a Mission Technologies customer in January 2023 to address issues related to a manufacturing contract, and the parties settled the matter in May 2024.

has recorded losses relating to the contract that were not material to the Company's consolidated financial position, results of operations, or cash flows.

The Company previously disclosed an issue regarding the degree of corrosion of certain steel plates used to fabricate Friedman (NSC 11).

Other Matters - The Company previously disclosed an issue regarding the degree of corrosion of certain steel plates used to fabricate Friedman (NSC 11).

The Company’s expectation regarding the resolution of the matter with the customer is included in contract cost and profit estimates.

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The Company does not expect the final resolution of the matter to have a material impact to the Company's consolidated financial position, results of operations, or cash flows.

Collective Bargaining Agreements - Of the Company's more than 44,000 employees, approximately 45 % are covered by a total of nine collective bargaining agreements and one site stabilization agreement.

Collective Bargaining Agreements - Of the Company's over 44,000 employees, approximately 45 % 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.

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

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

The Company believes its relationship with its employees is satisfactory.

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The Company provides eligible employees defined benefit pension plans, defined contribution benefit plans, and other postretirement benefit plans.

The costs of the Company's defined benefit pension plans and other postretirement benefit plans for the three and nine months ended September 30, 2024 and 2023, were as follows:

Three Months Ended September 30 Nine Months Ended September 30

Pension Benefits Other Benefits Pension Benefits Other Benefits

The costs of the Company's defined benefit pension plans and other postretirement benefit plans for the three months ended March 31, 2025 and 2024, were as follows:

Three Months Ended March 31

Pension Benefits Other Benefits

($ in millions) 2025 2024 2025 2024

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Net periodic benefit (income) cost $ ( 27 ) $ ( 18 ) $ 2 $ 2

The Company made the following contributions to its defined benefit pension plans and other postretirement benefit plans for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30

The Company made the following contributions to its defined benefit pension plans and other postretirement benefit plans for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31

($ in millions) 2025 2024

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Total contributions $ 13 $ 10

As of September 30, 2024, the Company anticipates no further significant cash contributions to its qualified defined benefit pension plans in 2024.

As of March 31, 2025, the Company anticipates no further significant cash contributions to its qualified defined benefit pension plans in 2025.

STOCK COMPENSATION PLANS

During the nine months ended September 30, 2024 and 2023, the Company issued new stock awards as follows:

Restricted Performance Stock Rights - For the nine months ended September 30, 2024, the Company granted approximately 0.1 million RPSRs at a weighted average share price of $ 288.26 .

During the three months ended March 31, 2025 and 2024, the Company issued new stock awards as follows:

Restricted Performance Stock Rights - For the three months ended March 31, 2025, the Company granted approximately 0.2 million RPSRs at a weighted average share price of $ 168.81 .

These rights are subject to cliff vesting on December 31, 2027.

For the nine months ended September 30, 2023, the Company granted approximately 0.2 million RPSRs at a weighted average share price of $ 215.13 .

For the three months ended March 31, 2024, the Company granted approximately 0.1 million RPSRs at a weighted average share price of $ 288.33 .

These rights are subject to cliff vesting on December 31, 2026.

All of the RPSRs are subject to the achievement of performance-based targets at the end of the respective vesting periods and will ultimately vest between 0 % and 200 % of grant date value.

Compensation Restricted Stock Rights - For the nine months ended September 30, 2024, the Company granted approximately 0.1 million compensation RSRs at a weighted average share price of $ 287.91 .

Compensation Restricted Stock Rights - For the three months ended March 31, 2025, the Company granted approximately 0.1 million compensation RSRs at a weighted average share price of $ 168.81 .

For the three months ended March 31, 2024, the Company granted approximately 0.1 million compensation RSRs at a weighted average share price of $ 288.33 .

These rights vest 33 1/3% upon each of the first, second, and third anniversaries of the grant date.

No compensation RSRs were granted for the nine months ended September 30, 2023.

Retention Restricted Stock Rights - Retention stock awards are granted to key employees primarily to incentivize continued employment with the Company.

For the nine months ended September 30, 2024, the Company granted approximately 2,200 retention RSRs at a weighted average share price of $ 281.01 , with cliff vesting one to two years from the grant date.

For the nine months ended September 30, 2023, the Company granted approximately 9,400 retention RSRs at a weighted average share price of $ 213.37 , with cliff vesting two to three years from the grant date.

For the three months ended March 31, 2025, the Company granted approximately 1,300 retention RSRs at a weighted average share price of $ 189.40 , with cliff vesting one to two years from the grant date.

For the three months ended March 31, 2024, the Company granted approximately 1,200 retention RSRs at a weighted average share price of $ 288.53 , with cliff vesting one to two years from the grant date.

The Company also received transfers of stock awards from employees in satisfaction of tax withholding obligations associated with the vesting of stock awards during the period.

Because the stock awards are surrendered in lieu of payments of cash to settle tax obligations and the stock is not issued, the Company does not account for these transfers as treasury stock.

The following table summarizes the status of the Company's outstanding stock awards as of September 30, 2024:

Because the stock awards are surrendered in lieu of

payments of cash to settle tax obligations and the stock is not issued, the Company does not account for these transfers as treasury stock.

Stock award activity for the three months ended March 31, 2025, and 2024, was as follows:

(in thousands) Weighted-Average

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Value Weighted-Average Remaining Contractual Term

Total stock awards 546 $ 221.91 1.0

Outstanding at December 31, 2023 535 $ 189.98 1.0 year

Granted 163 288.03

Adjusted due to performance 54 288.03

Vested ( 200 ) 180.62

Forfeited ( 7 ) 209.51

Outstanding at March 31, 2024 545 $ 221.58 1.4 years

Outstanding at December 31, 2024 550 $ 221.59 1.0 year

Granted 301 169.05

Adjusted due to performance 16 169.05

Vested ( 191 ) 215.19

Forfeited ( 4 ) 288.33

Outstanding at March 31, 2025 672 $ 199.42 1.6 years

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-Q

Item 1. Financial Statements