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Item 1. Financial Statements

2025-07-31 compared with 2025-05-01 · 210 added, 96 removed, 423 unchanged (42% of the section changed)

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended March 31

Three Months Ended June 30 Six Months Ended June 30

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

7 unchanged sentences

Income from operating investments, net 8 11 21 23

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

Other income and gains, net 1 1 1 —

General and administrative expenses 241 255 487 487

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

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

($ in millions) June 30, 2025 December 31, 2024

Current Assets

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31

Six Months Ended June 30

($ in millions) 2025 2024

1 unchanged sentence

Net earnings $ 301 $ 326

Adjustments to reconcile net cash provided by operating activities:

Adjustments to reconcile net cash provided by (used in) operating activities:

Depreciation 110 106

Amortization of purchased intangibles 52 54

Other non-cash transactions, net 3 2

Stock-based compensation 33 7

1 unchanged sentence

Gain on investments in marketable securities ( 10 ) ( 11 )

Other non-cash transactions, net 9 2

Accounts receivable ( 165 ) ( 239 )

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Retiree benefits ( 77 ) ( 57 )

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

Net cash provided by (used in) operating activities 428 ( 211 )

Investing Activities:

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Acquisitions of businesses ( 133 ) —

Proceeds from disposition of assets 1 —

Other investing activities, net 2 —

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Supplemental Cash Flow Disclosure

Cash paid for income taxes (net of refunds) $ 55 $ 157

Cash paid for interest $ 42 $ 51

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

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

Balance as of December 31, 2023 $ 1 $ 2,045 $ 4,755 $ ( 2,286 ) $ ( 422 ) $ 4,093

Three Months Ended June 30, 2025 and 2024

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

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

Net earnings — — 173 — — 173

4 unchanged sentences

Treasury stock activity — — — ( 65 ) — ( 65 )

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

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

Net earnings — — 152 — — 152

Dividends declared ($ 1.35 per share)

— — ( 53 ) — — ( 53 )

Stock-based compensation — 9 — — — 9

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

Balance as of June 30, 2025 $ 1 $ 2,066 $ 5,290 $ ( 2,449 ) $ ( 26 ) $ 4,882

Six Months Ended June 30, 2025 and 2024

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

Balance as of December 31, 2023 $ 1 $ 2,045 $ 4,755 $ ( 2,286 ) $ ( 422 ) $ 4,093

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Other comprehensive income, net of tax — — — — 7 7

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

Treasury stock activity — — — ( 128 ) — ( 128 )

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

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

Net earnings — — 301 — — 301

Dividends declared ($ 2.70 per share)

— — ( 106 ) — — ( 106 )

Stock-based compensation — 21 ( 2 ) — — 19

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

Balance as of June 30, 2025 $ 1 $ 2,066 $ 5,290 $ ( 2,449 ) $ ( 26 ) $ 4,882

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

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naval shipbuilder, making HII America's largest shipbuilder.

The Mission Technologies segment develops integrated solutions that enable today's connected, all-domain force.

The Mission Technologies segment develops integrated technology solutions and products that enable today's connected, all-domain force.

BASIS OF PRESENTATION

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For classification of current assets and liabilities related to its long-term production contracts, the Company uses the duration of these contracts as its operating cycle, which is generally longer than one year.

Additionally, certain prior year amounts have been reclassified to conform to the current year presentation.

These unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature considered necessary by management for a fair presentation of the unaudited condensed consolidated financial position, results of operations, and cash flows and should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Annual Report on Form 10-K").

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

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 were valued at $ 237 million and $ 233 million as of June 30, 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 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 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 June 30, 2025, and December 31, 2024, were $ 2,690 million and $ 3,110 million, respectively.

There was no current portion of long-term debt, excluding finance lease liabilities, as of June 30, 2025.

The estimated fair value of the current portion of the Company's long-term debt, excluding finance lease liabilities, was $ 497 million as of December 31, 2024.

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 - 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.

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

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

ACCOUNTING STANDARDS UPDATES

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

There were no new Accounting Standard Updates (“ASU”) adopted during the six months ended June 30, 2025 that had a material impact on the Company’s consolidated financial statements.

Accounting Guidance Issued But Not Adopted as of June 30, 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):

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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 transaction closed using cash on hand and qualifies as a business combination under FASB Accounting Standards Codification Topic 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 Company is in the process of completing its accounting for working capital and the income tax effects of the acquisition.

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.

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

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.

For the six months ended June 30, 2025, the Company did not repurchase any shares.

For the six months ended June 30, 2024, the Company repurchased 473,438 shares at an aggregate cost of $ 128 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 $ 53 million and $ 51 million for the three months ended March 31, 2025 and 2024, respectively.

Dividends - The Company paid cash dividends totaling $ 106 million and $ 102 million for the six months ended June 30, 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 $ 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:

The accumulated other comprehensive loss

was comprised of unamortized benefit plan costs of $ 26 million and $ 28 million as of June 30, 2025, and December 31, 2024, respectively.

The changes in accumulated other comprehensive loss by component for the three and six months ended June 30, 2025 and 2024, were as follows:

($ in millions) Benefit Plans Total

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

Amounts reclassified from accumulated other comprehensive loss

Amortization of prior service cost 1

Net current period other comprehensive income 4 4

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

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

Amounts reclassified from accumulated other comprehensive loss

Amortization of prior service cost 1

Amortization of net actuarial loss 1

Net current period other comprehensive income 1 1

Balance as of June 30, 2025 $ ( 26 ) $ ( 26 )

($ in millions) Benefit Plans Total

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

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Net current period other comprehensive income 7 7

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

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

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

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Net current period other comprehensive income 2 2

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

Balance as of June 30, 2025 $ ( 26 ) $ ( 26 )

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 the three months ended March 31, 2025 and 2024, was less than $ 1 million and $ 2 million, respectively.

The tax expense recorded in stockholders' equity for the amounts reclassified from accumulated other comprehensive loss for each of the three months ended June 30, 2025 and 2024, was less than $ 1 million.

The tax expense recorded in stockholders' equity for the amounts reclassified from accumulated other comprehensive loss for the six months ended June 30, 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 March 31

Three Months Ended June 30 Six Months Ended June 30

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

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Earnings per share - diluted $ 3.86 $ 4.38 $ 7.66 $ 8.25

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.

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") for each of the three and six months ended June 30, 2025 and 2024, 0.1 million and 0.2 million Restricted Stock Rights ("RSRs") for the three and six months ended June 30, 2025, respectively, and 0.1 million RSRs for each of the three and six months ended June 30, 2024.

Disaggregation of Revenue

The following tables present revenues on a disaggregated basis:

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

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

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Commercial — 1 2 — 3

State and local government agencies — — 1 — 1

Intersegment 3 1 32 ( 36 ) —

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Sales and service revenues $ 724 $ 1,603 $ 791 $ ( 36 ) $ 3,082

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

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

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Commercial — 1 1 — 2

State and local government agencies — — 1 — 1

Intersegment 1 1 33 ( 35 ) —

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Sales and service revenues $ 712 $ 1,535 $ 765 $ ( 35 ) $ 2,977

Three Months Ended March 31

Six Months Ended June 30, 2025

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

Product sales $ 1,136 $ 2,479 $ 55 $ — $ 3,670

Service revenues 218 519 1,409 — 2,146

Intersegment 7 1 62 ( 70 ) —

Sales and service revenues $ 1,361 $ 2,999 $ 1,526 $ ( 70 ) $ 5,816

Customer Type

Federal $ 1,354 $ 2,997 $ 1,457 $ — $ 5,808

Commercial — 1 6 — 7

State and local government agencies — — 1 — 1

Intersegment 7 1 62 ( 70 ) —

Sales and service revenues $ 1,361 $ 2,999 $ 1,526 $ ( 70 ) $ 5,816

Contract Type

Firm fixed-price $ 5 $ 4 $ 201 $ — $ 210

Fixed-price incentive 1,131 1,574 3 — 2,708

Cost-type 218 1,419 1,188 — 2,825

Time and materials — 1 72 — 73

Intersegment 7 1 62 ( 70 ) —

Sales and service revenues $ 1,361 $ 2,999 $ 1,526 $ ( 70 ) $ 5,816

Six Months Ended June 30, 2024

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

Product sales $ 1,217 $ 2,439 $ 57 $ — $ 3,713

Service revenues 147 528 1,394 — 2,069

Intersegment 3 2 64 ( 69 ) —

Sales and service revenues $ 1,367 $ 2,969 $ 1,515 $ ( 69 ) $ 5,782

Customer Type

Federal $ 1,364 $ 2,966 $ 1,447 $ — $ 5,777

Commercial — 1 3 — 4

State and local government agencies — — 1 — 1

Intersegment 3 2 64 ( 69 ) —

Sales and service revenues $ 1,367 $ 2,969 $ 1,515 $ ( 69 ) $ 5,782

Contract Type

Firm fixed-price $ 2 $ 4 $ 167 $ — $ 173

Fixed-price incentive 1,216 1,600 5 — 2,821

Cost-type 146 1,363 1,192 — 2,701

Time and materials — — 87 — 87

Intersegment 3 2 64 ( 69 ) —

Sales and service revenues $ 1,367 $ 2,969 $ 1,515 $ ( 69 ) $ 5,782

Three Months Ended June 30 Six Months Ended June 30

($ in millions) 2025 2024 2025 2024

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Surface combatants and coast guard cutters 397 297 696 597

Other 3 2 9 5

Total Ingalls 724 712 1,361 1,367

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Sales and service revenues $ 3,082 $ 2,977 $ 5,816 $ 5,782

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

As of June 30, 2025, the Company had $ 56.9 billion of remaining performance obligations.

The Company expects to recognize approximately 35 % of its remaining performance obligations as revenue through 2026, an additional 30 % through 2028, and the balance thereafter.

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

Three Months Ended March 31

Three Months Ended June 30 Six Months Ended June 30

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

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Effect on diluted earnings per share $ ( 0.20 ) $ 0.48 $ ( 0.20 ) $ 0.51

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.

For the three months ended June 30, 2025, cumulative catch-up revenue adjustments included a favorable adjustment of $ 32 million on the Arleigh Burke class (DDG 51) multi-year construction contract awarded in 2018 at the Company's Ingalls segment.

For the three months ended June 30, 2025, cumulative catch-up revenue adjustments included unfavorable adjustments of $ 42 million on the Enterprise (CVN 80) and Doris Miller (CVN 81) construction contract at the Company's Newport News segment and $ 20 million on the Bougainville (LHA 8) construction contract at the Company's Ingalls segment.

For the six months ended June 30, 2025, cumulative catch-up revenue adjustments included a favorable adjustment of $ 33 million on the Arleigh Burke class (DDG 51) multi-year construction contract awarded in 2018 at the Company's Ingalls segment.

For the six months ended June 30, 2025, cumulative catch-up revenue adjustments included an unfavorable adjustment of $ 43 million on the Enterprise (CVN 80) and Doris Miller (CVN 81) construction contract at the Company's Newport News segment.

For the three months ended June 30, 2024, cumulative catch-up revenue adjustments included a favorable adjustment of $ 28 million for contract adjustments and incentives on the refueling and complex overhaul ("RCOH") of USS John C.

Stennis (CVN 74) at the Company's Newport News segment.

For the six months ended June 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 and six months ended June 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.

Contract Balances

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Net contract assets were comprised as follows:

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

($ in millions) June 30, 2025 December 31, 2024

Contract assets $ 1,811 $ 1,683

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Net contract assets $ 842 $ 909

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.

The Company’s net contract assets decreased $ 67 million from December 31, 2024 to June 30, 2025, primarily as a result of the timing of billings across programs on certain U.S.

Navy contracts.

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.

For the three and six months ended June 30, 2025, the Company recognized revenue of $ 52 million and $ 604 million, respectively, related to its contract liabilities as of December 31, 2024.

For the three and six months ended June 30, 2024, the Company recognized revenue of $ 283 million and $ 924 million, respectively, related to its contract liabilities as of December 31, 2023.

SEGMENT INFORMATION

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

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

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

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Total operating income $ 163

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

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

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Total operating income $ 189

Six Months Ended June 30, 2025

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

Sales and Service Revenues

Product sales $ 1,136 $ 2,479 $ 55 $ — $ 3,670

Service Revenues 218 519 1,409 — $ 2,146

Intersegment 7 1 62 ( 70 ) $ —

Total sales and service revenues 1,361 2,999 1,526 ( 70 ) 5,816

Segment Operating Income

Income from operating investments, net — — 21 — 21

Cost of sales and service revenues

Product 978 2,116 40 — 3,134

Service 190 427 1,260 — 1,877

Intersegment 7 1 62 ( 70 ) —

Other segment items 86 288 109 — 483

Total segment operating income $ 100 $ 167 $ 76 $ — 343

Non-segment factors affecting operating income

Operating FAS/CAS Adjustment ( 16 )

Non-current state income taxes ( 3 )

Total operating income $ 324

Six Months Ended June 30, 2024

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

Sales and Service Revenues

Product sales $ 1,217 $ 2,439 $ 57 $ — $ 3,713

Service Revenues 147 528 1,394 — $ 2,069

Intersegment 3 2 64 ( 69 ) $ —

Total sales and service revenues 1,367 2,969 1,515 ( 69 ) 5,782

Segment Operating Income

Income from operating investments, net — — 23 — 23

Cost of sales and service revenues

Product 1,024 2,055 58 — 3,137

Service 125 437 1,244 — 1,806

Intersegment 3 2 64 ( 69 ) —

Other segment items 99 282 108 — 489

Total segment operating income $ 116 $ 193 $ 64 $ — 373

Non-segment factors affecting operating income

Operating FAS/CAS Adjustment ( 32 )

Non-current state income taxes 2

Total operating income $ 343

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 segment items consists of general and administrative expenses and other income and gains, net.

The Operating FAS/CAS Adjustment represents the difference between the service cost component of the Company's pension and other postretirement benefit plan expense determined in accordance with GAAP ("FAS") and the Company's pension and other postretirement expense under U.S.

Cost Accounting Standards ("CAS").

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

Three Months Ended June 30 Six Months Ended June 30

($ in millions) 2025 2024 2025 2024

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1 Net of grant proceeds for capital expenditures

Three Months Ended March 31

Three Months Ended June 30 Six Months Ended June 30

($ in millions) 2025 2024 2025 2024

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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.

The Company's earnings are primarily domestic, and its effective income tax rates on earnings from operations for the three months ended June 30, 2025 and 2024, were comparable at 19.1 % and 19.9 %, respectively.

For the six months ended June 30, 2025 and 2024, the Company's effective income tax rates on earnings from operations were 19.7 % and 18.5 %, respectively.

The higher effective tax rate for the six months ended June 30, 2025, was primarily attributable to excess tax benefits recognized on stock-based compensation recorded in the prior period.

For the three and six months ended June 30, 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 periods.

The Company's unrecognized tax benefits increased by $ 3 million and $ 6 million during the three and six months ended June 30, 2025, respectively.

As of June 30, 2025, the estimated amounts of the Company's unrecognized tax benefits, excluding interest and penalties, were liabilities of $ 116 million.

Assuming a sustainment of these tax positions, a reversal of $ 93 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 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.

For the three and six months ended June 30, 2025, interest and penalties resulting from the unrecognized tax benefits noted above increased income tax expense by $ 1 million and $ 3 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 state unrecognized tax benefits in the relevant period.

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Current period state income tax expense is charged to contract costs and included in cost of sales and service revenues in segment operating income.

On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was signed into law.

The Act provides for significant changes to the U.S.

Internal Revenue Code of 1986, as amended, that impact corporations, including making certain business deductions permanent, such as bonus depreciation and immediate expensing of domestic research and development expenditures.

In addition, the Act allows an acceleration of the deduction for the remaining unamortized domestic research and development expenditures capitalized during the 2022 through 2024 tax years.

These unamortized expenditures can be deducted over one or two years .

The Company expects the immediate expensing of domestic research expenditures retroactive to January 1, 2025, coupled with increased bonus depreciation and the acceleration of the deduction for previously capitalized domestic research expenditures, to decrease 2025 federal cash tax payments by $ 147 million.

While the Company does not anticipate any material impacts to total tax expense or the effective tax rate, the Company is still evaluating provisions of the Act to determine the full effect on its financial position, results of operations, and cash flows.

INVESTIGATIONS, CLAIMS, AND LITIGATION

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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.

The District Court dismissed the lawsuit against all defendants in April 2024.

The Fourth Circuit Court of Appeals reversed the dismissal and remanded the case to the District Court for further proceedings.

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

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

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

The costs to resolve cases during the six months ended June 30, 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, arbitrations, investigations, and other legal proceedings that arise in the ordinary course of business, including U.S.

Other - 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.

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

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.

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.

2 unchanged sentences

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.

As of June 30, 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.

Management estimates that as of June 30, 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 March 31, 2025, the Company had $ 12 million in issued but undrawn letters of credit and $ 389 million of surety bonds outstanding.

As of June 30, 2025, the Company had $ 11 million in issued but undrawn letters of credit and $ 380 million of surety bonds outstanding.

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

5 unchanged sentences

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.

Those estimates include management's best assessment of the underlying causal events, contractual entitlements, and the probability of successful resolution with the customer.

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 over 44,000 employees, approximately 45 % are covered by a total of nine collective bargaining agreements.

During the second quarter of 2025, the Company reached an agreement with the customer to resolve the matter.

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

Collective Bargaining Agreements - Of the Company's approximately 44,000 employees, 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 2030, December 2030 and April 2031.

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Approximately 15 Mission Technologies employees in Klamath Falls, Oregon are covered by one collective bargaining agreement that expires in June 2029.

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

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

The Company believes its relationship with its employees is satisfactory.

1 unchanged sentence

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 months ended March 31, 2025 and 2024, were as follows:

Three Months Ended March 31

Pension Benefits Other Benefits

The costs of the Company's defined benefit pension plans and other postretirement benefit plans for the three and six months ended June 30, 2025 and 2024, were as follows:

Three Months Ended June 30 Six Months Ended June 30

Pension Benefits Other Benefits Pension Benefits Other Benefits

($ in millions) 2025 2024 2025 2024 2025 2024 2025 2024

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Net periodic benefit (income) cost $ ( 28 ) $ ( 19 ) $ 3 $ 2 $ ( 55 ) $ ( 37 ) $ 5 $ 4

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

The Company made the following contributions to its defined benefit pension plans and other postretirement benefit plans for the six months ended June 30, 2025 and 2024:

Six Months Ended June 30

($ in millions) 2025 2024

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Total contributions $ 28 $ 24

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

As of June 30, 2025, the Company anticipates no further significant cash contributions to its qualified defined benefit pension plans in 2025.

STOCK COMPENSATION PLANS

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 .

During the six months ended June 30, 2025 and 2024, the Company issued new stock awards as follows:

Restricted Performance Stock Rights - For the six months ended June 30, 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 three months ended March 31, 2024, the Company granted approximately 0.1 million RPSRs at a weighted average share price of $ 288.33 .

For the six months ended June 30, 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 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 .

Compensation Restricted Stock Rights - For the six months ended June 30, 2025, the Company granted approximately 0.1 million compensation RSRs at a weighted average share price of $ 168.92 .

For the six months ended June 30, 2024, the Company granted approximately 0.1 million compensation RSRs at a weighted average share price of $ 288.26 .

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

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

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.

For the six months ended June 30, 2025, the Company granted approximately 1,300 retention RSRs at a weighted average share price of $ 189.38 , with cliff vesting one to two years from the grant date.

For the six months ended June 30, 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.

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

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 six months ended June 30, 2025, and 2024, was as follows:

(in thousands) Weighted-Average

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Forfeited ( 6 ) 213.31

Outstanding at March 31, 2024 545 $ 221.58 1.4 years

Outstanding at June 30, 2024 550 $ 221.69 1.2 years

Outstanding at December 31, 2024 550 $ 221.59 1.0 year

3 unchanged sentences

Forfeited ( 24 ) 224.25

Outstanding at March 31, 2025 672 $ 199.42 1.6 years

Outstanding at June 30, 2025 657 $ 198.68 1.3 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