SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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Delaware						90-0607005
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

4101 Washington Avenue Newport News, Virginia 23607

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Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	HII	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October~~July 29, ~~2021, 40,060,998~~2022, 39,947,745 shares of the registrant's common stock were outstanding.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended
September 30 Nine Months Ended
September 30
(in millions, except per share amounts) 2021 2020 2021 2020
Sales and service revenues
Product sales $ 1,701 $ 1,699 $ 5,185 $ 4,743
Service revenues 637 615 1,662 1,861
Sales and service revenues 2,338 2,314 6,847 6,604
Cost of sales and service revenues
Cost of product sales 1,453 1,388 4,402 3,931
Cost of service revenues 554 490 1,450 1,550
Income from operating investments, net 11 6 31 19
Other income and gains 2 — 3 —
General and administrative expenses 226 220 636 648
Operating income 118 222 393 494
Other income (expense)
Interest expense (24) (27) (63) (68)
Non-operating retirement benefit 45 29 135 89
Other, net 2 2 10 (8)
Earnings before income taxes 141 226 475 507
Federal and foreign income tax expense (benefit) (6) 4 51 60
Net earnings $ 147 $ 222 $ 424 $ 447
Basic earnings per share $ 3.65 $ 5.47 $ 10.52 $ 11.01
Weighted-average common shares outstanding 40.3 40.6 40.3 40.6
Diluted earnings per share $ 3.65 $ 5.45 $ 10.52 $ 10.98
Weighted-average diluted shares outstanding 40.3 40.7 40.3 40.7
Dividends declared per share $ 1.14 $ 1.03 $ 3.42 $ 3.09
Net earnings from above $ 147 $ 222 $ 424 $ 447
Other comprehensive income
Change in unamortized benefit plan costs 43 24 102 70
Other (1) 1 1 —
Tax expense for items of other comprehensive income (11) (6) (26) (18)
Other comprehensive income, net of tax 31 19 77 52
Comprehensive income $ 178 $ 241 $ 501 $ 499


	Three Months Ended June 30				Six Months Ended June 30
(in millions, except per share amounts)	2022		2021		2022		2021
Sales and service revenues
Product sales	$	1,829	$	1,763	$	3,553	$	3,484
Service revenues	833		468		1,685		1,025
Sales and service revenues	2,662		2,231		5,238		4,509
Cost of sales and service revenues
Cost of product sales	1,526		1,495		2,994		2,949
Cost of service revenues	746		414		1,505		896
Income from operating investments, net	27		12		34		20
Other income and gains (losses), net	1		(2)		—		1
General and administrative expenses	227		204		444		410

Operating income	191		128		329		275
Other income (expense)
Interest expense	(26)		(18)		(52)		(39)
Non-operating retirement benefit	67		44		138		90
Other, net	(10)		7		(17)		8
Earnings before income taxes	222		161		398		334
Federal and foreign income tax expense	44		32		80		57
Net earnings	$	178	$	129	$	318	$	277

Basic earnings per share	$	4.44	$	3.20	$	7.93	$	6.87
Weighted-average common shares outstanding	40.1		40.3		40.1		40.3

Diluted earnings per share	$	4.44	$	3.20	$	7.93	$	6.87
Weighted-average diluted shares outstanding	40.1		40.3		40.1		40.3

Dividends declared per share	$	1.18	$	1.14	$	2.36	$	2.28

Net earnings from above	$	178	$	129	$	318	$	277
Other comprehensive income (loss)
Change in unamortized benefit plan costs	13		30		(73)		59

Other	(1)		—		(1)		2
Tax benefit (expense) for items of other comprehensive income	(3)		(8)		19		(15)
Other comprehensive income (loss), net of tax	9		22		(55)		46
Comprehensive income	$	187	$	151	$	263	$	323

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

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)


($ in millions)	($ in millions)	September 30, 2021		December 31, 2020		($ in millions)	June 30, 2022		December 31, 2021
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	555	$	512	Cash and cash equivalents	$	375	$	627
Accounts receivable, net of allowance for doubtful accounts of $2 million as of 2021 and 2020		446		397
Accounts receivable, net of allowance for doubtful accounts of $2 million as of 2022 and $9 million as of 2021						Accounts receivable, net of allowance for doubtful accounts of $2 million as of 2022 and $9 million as of 2021	681		433
Contract assets	Contract assets	1,363		1,049		Contract assets	1,366		1,310
Inventoried costs, net		143		137
Inventoried costs						Inventoried costs	196		161
Income taxes receivable	Income taxes receivable	221		171		Income taxes receivable	128		209
Assets held for sale		—		133

Prepaid expenses and other current assets	Prepaid expenses and other current assets	66		45		Prepaid expenses and other current assets	74		50
Total current assets	Total current assets	2,794		2,444		Total current assets	2,820		2,790
Property, plant, and equipment, net of accumulated depreciation of $2,105 million as of 2021 and $2,024 million as of 2020		3,043		2,978
Property, plant, and equipment, net of accumulated depreciation of $2,234 million as of 2022 and $2,149 million as of 2021						Property, plant, and equipment, net of accumulated depreciation of $2,234 million as of 2022 and $2,149 million as of 2021	3,102		3,107
Operating lease assets	Operating lease assets	246		192		Operating lease assets	226		241
Goodwill	Goodwill	2,684		1,617		Goodwill	2,634		2,628
Other intangible assets, net of accumulated amortization of $702 million as of 2021 and $655 million as of 2020		1,187		512
Other intangible assets, net of accumulated amortization of $811 million as of 2022 and $741 million as of 2021						Other intangible assets, net of accumulated amortization of $811 million as of 2022 and $741 million as of 2021	1,089		1,159
Pension plan assets						Pension plan assets	314		281

Deferred tax assets		10		133
Miscellaneous other assets	Miscellaneous other assets	436		281		Miscellaneous other assets	401		421
Total assets	Total assets	$	10,400	$	8,157	Total assets	$	10,586	$	10,627
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current Liabilities	Current Liabilities					Current Liabilities
Trade accounts payable	Trade accounts payable	$	508	$	460	Trade accounts payable	$	528	$	603
Accrued employees’ compensation	Accrued employees’ compensation	367		293		Accrued employees’ compensation	339		361

Current portion of postretirement plan liabilities	Current portion of postretirement plan liabilities	131		133		Current portion of postretirement plan liabilities	137		137
Current portion of workers’ compensation liabilities	Current portion of workers’ compensation liabilities	231		225		Current portion of workers’ compensation liabilities	255		252
Contract liabilities	Contract liabilities	674		585		Contract liabilities	757		651
Liabilities held for sale		—		68

Other current liabilities	Other current liabilities	533		462		Other current liabilities	431		423
Total current liabilities	Total current liabilities	2,444		2,226		Total current liabilities	2,447		2,427
Long-term debt	Long-term debt	3,321		1,686		Long-term debt	3,102		3,298
Pension plan liabilities	Pension plan liabilities	833		960		Pension plan liabilities	396		351
Other postretirement plan liabilities	Other postretirement plan liabilities	379		401		Other postretirement plan liabilities	363		368
Workers’ compensation liabilities	Workers’ compensation liabilities	522		511		Workers’ compensation liabilities	496		506
Long-term operating lease liabilities	Long-term operating lease liabilities	198		157		Long-term operating lease liabilities	181		194
Deferred tax liabilities	Deferred tax liabilities	154		—		Deferred tax liabilities	293		313
Other long-term liabilities	Other long-term liabilities	360		315		Other long-term liabilities	356		362
Total liabilities	Total liabilities	8,211		6,256		Total liabilities	7,634		7,819
Commitments and Contingencies (Note 14)		0		0
Commitments and Contingencies (Note 11)						Commitments and Contingencies (Note 11)	0		0
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Common stock, $0.01 par value; 150 million shares authorized; 53.4 million shares issued and 40.1 million shares outstanding as of September 30, 2021, and 53.3 million shares issued and 40.5 million shares outstanding as of December 31, 2020		1		1
Common stock, $0.01 par value; 150 million shares authorized; 53.5 million shares issued and 40.0 million shares outstanding as of June 30, 2022, and 53.4 million shares issued and 40.0 million shares outstanding as of December 31, 2021						Common stock, $0.01 par value; 150 million shares authorized; 53.5 million shares issued and 40.0 million shares outstanding as of June 30, 2022, and 53.4 million shares issued and 40.0 million shares outstanding as of December 31, 2021	1		1
Additional paid-in capital	Additional paid-in capital	1,984		1,972		Additional paid-in capital	2,002		1,998
Retained earnings	Retained earnings	3,819		3,533		Retained earnings	4,113		3,891
Treasury stock	Treasury stock	(2,145)		(2,058)		Treasury stock	(2,186)		(2,159)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,470)		(1,547)		Accumulated other comprehensive loss	(978)		(923)
Total stockholders’ equity	Total stockholders’ equity	2,189		1,901		Total stockholders’ equity	2,952		2,808
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	10,400	$	8,157	Total liabilities and stockholders’ equity	$	10,586	$	10,627

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


		Nine Months Ended September 30					Six Months Ended June 30
($ in millions)	($ in millions)	2021		2020		($ in millions)	2022		2021
Operating Activities	Operating Activities					Operating Activities
Net earnings	Net earnings	$	424	$	447	Net earnings	$	318	$	277
Adjustments to reconcile to net cash provided by (used in) operating activities	Adjustments to reconcile to net cash provided by (used in) operating activities					Adjustments to reconcile to net cash provided by (used in) operating activities
Depreciation	Depreciation	154		136		Depreciation	104		102
Amortization of purchased intangibles	Amortization of purchased intangibles	48		41		Amortization of purchased intangibles	70		26
Amortization of debt issuance costs	Amortization of debt issuance costs	6		5		Amortization of debt issuance costs	4		3
Provision for doubtful accounts	Provision for doubtful accounts	—		(2)		Provision for doubtful accounts	(7)		—
Stock-based compensation	Stock-based compensation	19		16		Stock-based compensation	16		12
Deferred income taxes	Deferred income taxes	74		(7)		Deferred income taxes	(1)		31

Loss (gain) on investments in marketable securities	Loss (gain) on investments in marketable securities	(12)		(3)		Loss (gain) on investments in marketable securities	26		(12)
Asset impairments		—		13

Change in	Change in					Change in
Accounts receivable	Accounts receivable	52		(164)		Accounts receivable	(241)		(45)
Contract assets	Contract assets	(179)		(63)		Contract assets	(56)		(127)
Inventoried costs	Inventoried costs	(7)		(5)		Inventoried costs	(35)		(3)
Prepaid expenses and other assets	Prepaid expenses and other assets	(116)		(60)		Prepaid expenses and other assets	47		(29)
Accounts payable and accruals	Accounts payable and accruals	93		315		Accounts payable and accruals	8		(32)
Retiree benefits	Retiree benefits	(73)		(183)		Retiree benefits	(65)		(70)
Other non-cash transactions, net	Other non-cash transactions, net	6		5		Other non-cash transactions, net	(4)		6
Net cash provided by operating activities	Net cash provided by operating activities	489		491		Net cash provided by operating activities	184		139
Investing Activities	Investing Activities					Investing Activities
Capital expenditures	Capital expenditures					Capital expenditures
Capital expenditure additions	Capital expenditure additions	(216)		(220)		Capital expenditure additions	(102)		(134)
Grant proceeds for capital expenditures	Grant proceeds for capital expenditures	11		17		Grant proceeds for capital expenditures	—		2
Acquisitions of businesses, net of cash received		(1,636)		(377)

Investment in affiliates	Investment in affiliates	(22)		—		Investment in affiliates	(5)		(22)
Proceeds from disposition of business	Proceeds from disposition of business	20		—		Proceeds from disposition of business	—		20

Other investing activities, net	Other investing activities, net	1		(6)		Other investing activities, net	6		—
Net cash used in investing activities	Net cash used in investing activities	(1,842)		(586)		Net cash used in investing activities	(101)		(134)
Financing Activities	Financing Activities					Financing Activities
Proceeds from issuance of long-term debt		1,650		1,000

Proceeds from revolving credit facility borrowings		—		385
Repayment of revolving credit facility borrowings		—		(385)
Repayment of long-term debt						Repayment of long-term debt	(200)		—

Debt issuance costs		(22)		(13)

Dividends paid	Dividends paid	(138)		(126)		Dividends paid	(94)		(92)
Repurchases of common stock	Repurchases of common stock	(87)		(84)		Repurchases of common stock	(27)		(70)
Employee taxes on certain share-based payment arrangements	Employee taxes on certain share-based payment arrangements	(7)		(13)		Employee taxes on certain share-based payment arrangements	(14)		(7)

Net cash provided by financing activities		1,396		764
Net cash used in financing activities						Net cash used in financing activities	(335)		(169)
Change in cash and cash equivalents	Change in cash and cash equivalents	43		669		Change in cash and cash equivalents	(252)		(164)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	512		75		Cash and cash equivalents, beginning of period	627		512
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	555	$	744	Cash and cash equivalents, end of period	$	375	$	348
Supplemental Cash Flow Disclosure	Supplemental Cash Flow Disclosure					Supplemental Cash Flow Disclosure
Cash paid for income taxes (net of refunds)	Cash paid for income taxes (net of refunds)	$	31	$	106	Cash paid for income taxes (net of refunds)	$	15	$	21
Cash paid for interest	Cash paid for interest	$	39	$	33	Cash paid for interest	$	49	$	37
Non-Cash Investing and Financing Activities	Non-Cash Investing and Financing Activities					Non-Cash Investing and Financing Activities
Capital expenditures accrued in accounts payable	Capital expenditures accrued in accounts payable	$	4	$	8	Capital expenditures accrued in accounts payable	$	6	$	5

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

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)


Three Months Ended September 30, 2021 and 2020 ($ 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, 2020		$	1	$	1,961	$	3,150	$	(2,058)	$	(1,376)	$	1,678
Net earnings		—		—		222		—		—		222
Dividends declared ($1.03 per share)		—		—		(42)		—		—		(42)
Stock compensation		—		3		—		—		—		3
Other comprehensive income, net of tax		—		—		—		—		19		19

Balance as of September 30, 2020		$	1	$	1,964	$	3,330	$	(2,058)	$	(1,357)	$	1,880

Balance as of June 30, 2021		$	1	$	1,977	$	3,718	$	(2,128)	$	(1,501)	$	2,067
Three Months Ended June 30, 2022 and 2021 ($ in millions)														Three Months Ended June 30, 2022 and 2021 ($ in millions)	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
Balance as of March 31, 2021														Balance as of March 31, 2021	$	1	$	1,974	$	3,635	$	(2,108)	$	(1,523)	$	1,979
Net earnings	Net earnings	—		—		147		—		—		147		Net earnings	—		—		129		—		—		129
Dividends declared ($1.14 per share)	Dividends declared ($1.14 per share)	—		—		(46)		—		—		(46)		Dividends declared ($1.14 per share)	—		—		(46)		—		—		(46)
Stock compensation		—		7		—		—		—		7
Stock-based compensation														Stock-based compensation	—		3		—		—		—		3
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—		—		—		31		31		Other comprehensive income, net of tax	—		—		—		—		22		22

Treasury stock activity	Treasury stock activity	—		—		—		(17)		—		(17)		Treasury stock activity	—		—		—		(20)		—		(20)
Balance as of September 30, 2021		$	1	$	1,984	$	3,819	$	(2,145)	$	(1,470)	$	2,189
Balance as of June 30, 2021														Balance as of June 30, 2021	$	1	$	1,977	$	3,718	$	(2,128)	$	(1,501)	$	2,067

Balance as of March 31, 2022														Balance as of March 31, 2022	$	1	$	1,995	$	3,982	$	(2,169)	$	(987)	$	2,822
Net earnings														Net earnings	—		—		178		—		—		178
Dividends declared ($1.18 per share)														Dividends declared ($1.18 per share)	—		—		(47)		—		—		(47)
Stock-based compensation														Stock-based compensation	—		7		—		—		—		7
Other comprehensive loss, net of tax														Other comprehensive loss, net of tax	—		—		—		—		9		9

Treasury stock activity														Treasury stock activity	—		—		—		(17)		—		(17)
Balance as of June 30, 2022														Balance as of June 30, 2022	$	1	$	2,002	$	4,113	$	(2,186)	$	(978)	$	2,952

Nine Months Ended September 30, 2021 and 2020
($ 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, 2019 $ 1 $ 1,961 $ 3,009 $ (1,974) $ (1,409) $ 1,588
Net earnings — — 447 — — 447
Dividends declared ($3.09 per share) — — (126) — — (126)
Stock compensation — 3 — — — 3
Other comprehensive income, net of tax — — — — 52 52
Treasury stock activity — — — (84) — (84)
Balance as of September 30, 2020 $ 1 $ 1,964 $ 3,330 $ (2,058) $ (1,357) $ 1,880
Balance as of December 31, 2020 $ 1 $ 1,972 $ 3,533 $ (2,058) $ (1,547) $ 1,901
Net earnings — — 424 — — 424
Dividends declared ($3.42 per share) — — (138) — — (138)
Stock compensation — 12 — — — 12
Other comprehensive income, net of tax — — — — 77 77
Treasury stock activity — — — (87) — (87)
Balance as of September 30, 2021 $ 1 $ 1,984 $ 3,819 $ (2,145) $ (1,470) $ 2,189


Six Months Ended June 30, 2022 and 2021 ($ 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, 2020	$	1	$	1,972	$	3,533	$	(2,058)	$	(1,547)	$	1,901
Net earnings	—		—		277		—		—		277
Dividends declared ($2.28 per share)	—		—		(92)		—		—		(92)
Stock-based compensation	—		5		—		—		—		5
Other comprehensive income, net of tax	—		—		—		—		46		46

Treasury stock activity	—		—		—		(70)		—		(70)
Balance as of June 30, 2021	$	1	$	1,977	$	3,718	$	(2,128)	$	(1,501)	$	2,067

Balance as of December 31, 2021	$	1	$	1,998	$	3,891	$	(2,159)	$	(923)	$	2,808
Net earnings	—		—		318		—		—		318
Dividends declared ($2.36 per share)	—		—		(94)		—		—		(94)
Stock-based compensation	—		4		(2)		—		—		2
Other comprehensive loss, net of tax	—		—		—		—		(55)		(55)

Treasury stock activity	—		—		—		(27)		—		(27)
Balance as of June 30, 2022	$	1	$	2,002	$	4,113	$	(2,186)	$	(978)	$	2,952

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

HII conducts most of its business with the U.S. Government, primarily the Department of Defense ("DoD"). As prime contractor, principal subcontractor, team member, or partner, the Company participates in many high-priority U.S. defense programs. Through its Ingalls segment, HII is a builder of amphibious assault and expeditionary warfare ships for the U.S. Navy, the sole builder of National Security Cutters for the U.S. Coast Guard, and one of only two companies that builds the Navy's current fleet of Arleigh Burke class (DDG 51) destroyers. Through its Newport News segment, HII is the nation's sole designer, builder, and refueler of nuclear-powered aircraft carriers, and one of only two companies currently designing and building nuclear-powered submarines for the U.S. Navy. The ~~Technical Solutions~~Mission Technologies segment provides a wide range of ~~professional~~ services and products, including ~~defense~~C5ISR systems and ~~federal solutions ("DFS"),~~operations; the application of Artificial Intelligence and machine learning to battlefield decisions; defensive and offensive cyberspace strategies and electronic warfare; unmanned autonomous systems; live, virtual, and constructive solutions; platform modernization; and critical nuclear ~~and environmental services, and unmanned systems.~~operations.

Principles of Consolidation - The unaudited condensed consolidated financial statements of HII and its subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the instructions to Form 10-Q promulgated by the Securities and Exchange Commission ("SEC"). All intercompany transactions and balances are eliminated in consolidation. 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.

Accounting Estimates - The preparation of the Company's unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information, and actual results could differ materially from those estimates.

~~Government Grants -~~ The Company recognizes incentive grants, inclusive of transfers of depreciable assets, from federal, state, and local governments at fair value upon compliance with the conditions of their receipt and reasonable assurance that the grants will be received or the depreciable assets will be transferred. Grants in recognition of specific expenses are recognized in the same period as an offset to those related expenses. Grants related to depreciable assets are recognized over the periods and in the proportions in which depreciation expense on those assets is recognized.

Fair Value of Financial Instruments - Except for the Company's long-term debt, the carrying amounts of the Company's financial instruments are recorded at historical cost approximate fair value due to the short-term nature of the instruments and low credit risk associated with the respective counterparties.

~~Other Current Liabilities~~Debt Prepayment - ~~Other current liabilities were $533~~As of June 30, 2022, $225 million as of ~~September 30, 2021, and $462 million as~~the Company's Term Loan due August 19, 2024 has been prepaid, with a remaining balance of December 31, 2020. Payroll taxes payable, which is a component of other current liabilities, was $132 million as of September 30, 2021, and $125 million as of December 31, 2020. No other component of other current liabilities was more than 5% of total current liabilities.$425 million.

~~Acquisition of Alion~~

On August 19, 2021, the Company acquired all of the outstanding common stock of Alion Holding Corp., the parent company of Alion Science and Technology Corporation (“Alion”), a technology-driven solutions provider. The Company accounted for the transaction as a business combination using the acquisition method of accounting in accordance with ~~ASC~~Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805 ~~– “Business Combinations.”~~Business Combinations. The preliminary purchase price was ~~$1.78~~$1.79 billion, including $148 million of cash received in the acquisition. In connection with the acquisition, the Company originally recorded $1,024 million of goodwill, which included the value of Alion's workforce, and $720 million of intangible assets related to customer relationships and existing contract backlog. The ~~purchase price~~goodwill is attributable to operational synergies and growth opportunities and was ~~paid in cash and funded through~~allocated to the ~~net proceeds~~Company's Mission Technologies segment. For the six months ended June 30, 2022, the Company recorded an increase to goodwill of $6 million, resulting from an adjustment to contingent liabilities for potential information reporting penalties. None of the Company’s issuance of $400 million aggregate principal amount of 0.670% Senior Notes due 2023 and $600 million aggregate principal amount of 2.043% Senior Notes due 2028, together with the proceeds of a $650 million term loan. See Note 12: Debt. ~~The preliminary purchase price~~goodwill resulting from this acquisition is ~~subject~~expected to ~~customary adjustments as provided in the purchase agreement.~~be amortizable for tax purposes.


~~($ in millions)~~	~~Preliminary 8/19/2021~~
~~Cash and cash equivalents~~	$	~~148~~
~~Accounts receivable~~	~~228~~
~~Operating lease assets~~	46
~~Intangible assets~~	~~710~~
~~Other identifiable assets acquired~~	21
~~Total identifiable assets acquired~~	~~1,153~~

~~Trade accounts payable~~	95
~~Accrued employees' compensation~~	60
~~Deferred tax liabilities - noncurrent~~	~~177~~
~~Operating lease liabilities~~	49
~~Other identifiable liabilities assumed~~	68
~~Total identifiable liabilities assumed~~	~~449~~

~~Net identifiable assets acquired~~	~~704~~
~~Transaction price~~	~~1,784~~
~~Goodwill~~	$	~~1,080~~

~~Total revenue and operating income for Alion for the period from August 19, 2021 through September 30, 2021 were as follows:~~


~~($ in millions)~~	~~Period from 8/19/2021-9/30/2021~~
~~Sales and service revenues~~	$	~~163~~
~~Operating income~~	$	4

Pro Forma Financial Information

The following unaudited consolidated pro forma summary has been prepared by adjusting the Company's historical data to give effect to the acquisition of Alion as if it had occurred on January 1, ~~2020.~~2021.

~~Other Acquisitions~~

Treasury Stock - In November 2019, the Company's board of directors authorized an increase in the Company's stock repurchase program from $2.2 billion to $3.2 billion and an extension of the term of the program to October 31, 2024. Repurchases are made from time to time at management's discretion in accordance with applicable federal securities laws. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company repurchased ~~469,436~~131,006 shares at an aggregate cost of ~~$87~~$27 million. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company repurchased ~~390,904~~386,463 shares at an aggregate cost of ~~$84~~$70 million. The cost of purchased shares is recorded as treasury stock in the unaudited condensed consolidated statements of financial position.

Dividends - The Company declared cash dividends per share of $1.14 and $1.03 for the three months ended September 30, 2021 and 2020, respectively. The Company declared cash dividends per share of $3.42 and $3.09 for the nine months ended September 30, 2021 and 2020, respectively. The Company paid cash dividends totaling ~~$138~~$94 million and ~~$126~~$92 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, 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 as of ~~September~~June 30, ~~2021,~~2022, was comprised of unamortized benefit plan costs of ~~$1,470~~$977 million and other comprehensive loss of $1 million. The accumulated other comprehensive loss as of December 31, ~~2020,~~2021, was comprised of unamortized benefit plan costs of ~~$1,546 million and other comprehensive loss items of $1~~$923 million.

The changes in accumulated other comprehensive income (loss) by component for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, were as follows:

($ in millions) Benefit Plans Other Total
Balance as of June 30, 2020 $ (1,373) $ (3) $ (1,376)
Other comprehensive income before reclassifications — 1 1
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service credit1
(2) — (2)
Amortization of net actuarial loss1
26 — 26
Tax expense for items of other comprehensive income (6) — (6)
Net current period other comprehensive income 18 1 19
Balance as of September 30, 2020 $ (1,355) $ (2) $ (1,357)
Balance as of June 30, 2021 $ (1,502) $ 1 $ (1,501)
Other comprehensive income before reclassifications 14 (1) 13
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1
2 — 2
Amortization of net actuarial loss1
27 — 27
Tax expense for items of other comprehensive income (11) — (11)
Net current period other comprehensive income 32 (1) 31
Balance as of September 30, 2021 $ (1,470) $ — $ (1,470)
($ in millions) Benefit Plans Other Total
Balance as of December 31, 2019 $ (1,407) $ (2) $ (1,409)
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service credit1
(7) — (7)
Amortization of net actuarial loss1
77 — 77
Tax expense for items of other comprehensive income (18) — (18)
Net current period other comprehensive income (loss) 52 — 52
Balance as of September 30, 2020 $ (1,355) $ (2) $ (1,357)
Balance as of December 31, 2020 $ (1,546) $ (1) $ (1,547)
Other comprehensive income before reclassifications 14 1 15
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1
8 — 8
Amortization of net actuarial loss1
80 — 80
Tax expense for items of other comprehensive income (26) — (26)
Net current period other comprehensive income 76 1 77
Balance as of September 30, 2021 $ (1,470) $ — $ (1,470)


($ in millions)	Benefit Plans		Other		Total
Balance as of March 31, 2021	$	(1,524)	$	1	$	(1,523)
Other comprehensive income before reclassifications	—		—		—
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1	3		—		3
Amortization of net actuarial loss1	27		—		27


Tax expense for items of other comprehensive income	(8)		—		(8)
Net current period other comprehensive income	22		—		22
Balance as of June 30, 2021	$	(1,502)	$	1	$	(1,501)

Balance as of March 31, 2022	$	(987)	$	—	$	(987)
Other comprehensive loss before reclassifications	—		(1)		(1)
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1	5		—		5
Amortization of net actuarial loss1	8		—		8


Tax benefit for items of other comprehensive (loss) income	(3)		—		(3)
Net current period other comprehensive loss	10		(1)		9
Balance as of June 30, 2022	$	(977)	$	(1)	$	(978)


($ in millions)	Benefit Plans		Other		Total
Balance as of December 31, 2020	$	(1,546)	$	(1)	$	(1,547)
Other comprehensive income before reclassifications	—		2		2
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1	6		—		6
Amortization of net actuarial loss1	53		—		53


Tax expense for items of other comprehensive income	(15)		—		(15)
Net current period other comprehensive income	44		2		46
Balance as of June 30, 2021	$	(1,502)	$	1	$	(1,501)

Balance as of December 31, 2021	$	(923)	$	—	$	(923)
Other comprehensive income before reclassifications	(97)		(1)		(98)
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1	8		—		8
Amortization of net actuarial loss1	16		—		16


Tax expense for items of other comprehensive income	19		—		19
Net current period other comprehensive income	(54)		(1)		(55)
Balance as of June 30, 2022	$	(977)	$	(1)	$	(978)

1 These accumulated comprehensive loss components are included in the computation of net periodic benefit cost. See Note ~~15:~~12: Employee Pension and Other Postretirement Benefits. The tax benefit associated with amounts reclassified from accumulated other comprehensive loss for the three months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ was $8$3 million and $6$8 million, respectively. The tax benefit associated with amounts reclassified from accumulated other comprehensive loss for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ was ~~$23~~$6 million and ~~$18~~$15 million, respectively.

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


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended June 30				Six Months Ended June 30
(in millions, except per share amounts)	(in millions, except per share amounts)	2021		2020		2021		2020		(in millions, except per share amounts)	2022		2021		2022		2021
Net earnings	Net earnings	$	147	$	222	$	424	$	447	Net earnings	$	178	$	129	$	318	$	277

Weighted-average common shares outstanding	Weighted-average common shares outstanding	40.3		40.6		40.3		40.6		Weighted-average common shares outstanding	40.1		40.3		40.1		40.3
Net dilutive effect of stock awards	Net dilutive effect of stock awards	—		0.1		—		0.1		Net dilutive effect of stock awards	—		—		—		—

Dilutive weighted-average common shares outstanding	Dilutive weighted-average common shares outstanding	40.3		40.7		40.3		40.7		Dilutive weighted-average common shares outstanding	40.1		40.3		40.1		40.3

Earnings per share - basic	Earnings per share - basic	$	3.65	$	5.47	$	10.52	$	11.01	Earnings per share - basic	$	4.44	$	3.20	$	7.93	$	6.87
Earnings per share - diluted	Earnings per share - diluted	$	3.65	$	5.45	$	10.52	$	10.98	Earnings per share - diluted	$	4.44	$	3.20	$	7.93	$	6.87

Under the treasury stock method, the Company has excluded from the diluted share amounts presented above the effects of 0.4 million ~~and 0.3 million~~ Restricted Performance Stock Rights ("RPSRs") for each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, respectively.~~2021.

~~U.S. Government Contracts~~

~~Shipbuilding~~ - For most of the Company's shipbuilding contracts, the customer contracts with the Company to provide a comprehensive service of designing, procuring long-lead-time materials, manufacturing, and integrating complex equipment and technologies into a single ship or project, often resulting in a single performance obligation. Contract modifications to account for changes in specifications and requirements are recognized when approved by the customer. In the majority of circumstances, modifications do not result in additional performance obligations that are distinct from the existing performance obligations in the contract, and the effects of the modifications are recognized as an adjustment to revenue on a cumulative catch-up basis. Alternatively, in instances where the performance obligations in the modifications are deemed distinct, contract modifications are accounted for prospectively.

~~Services~~ - The Technical Solutions segment generates revenue primarily under U.S. Government contracts. Contracts generally are structured using either an Indefinite Delivery/Indefinite Quantity ("IDIQ") vehicle, under

~~Non-U.S. Government Contracts~~

•Firm Fixed-Price Contracts - A firm fixed-price contract is a contract in which the specified scope of work is agreed to for a price that is predetermined by bid or negotiation and not generally subject to adjustment regardless of costs incurred by the contractor.

•Fixed-Price Incentive Contracts - Fixed-price incentive contracts provide for reimbursement of the contractor's allowable costs, but are subject to a cost-share limit that affects profitability. Fixed-price incentive contracts effectively become firm fixed-price contracts once the cost-share limit is reached.

•Cost-Type Contracts - Cost-type contracts provide for reimbursement of the contractor's allowable costs plus a fee that represents profit. Cost-type contracts generally require that the contractor use its reasonable efforts to accomplish the scope of the work within some specified time and some stated dollar limitation.

•Time and Materials - Time and materials contracts specify a fixed hourly billing rate for each direct labor hour expended and reimbursement for allowable material costs and expenses.


	Three Months Ended June 30, 2022
($ in millions)	Ingalls		Newport News		Mission Technologies		Intersegment Eliminations		Total
Revenue Type
Product sales	$	611	$	1,190	$	28	$	—	$	1,829
Service revenues	45		242		546		—		833
Intersegment	2		1		26		(29)		—
Sales and service revenues	$	658	$	1,433	$	600	$	(29)	$	2,662
Customer Type
Federal	$	656	$	1,432	$	564	$	—	$	2,652
Commercial	—		—		10		—		10

Intersegment	2		1		26		(29)		—
Sales and service revenues	$	658	$	1,433	$	600	$	(29)	$	2,662
Contract Type
Firm fixed-price	$	4	$	3	$	69	$	—	$	76
Fixed-price incentive	609		754		—		—		1,363
Cost-type	43		675		437		—		1,155
Time and materials	—		—		68		—		68
Intersegment	2		1		26		(29)		—
Sales and service revenues	$	658	$	1,433	$	600	$	(29)	$	2,662

Nine Months Ended September 30, 2020
($ in millions) Ingalls Newport News Technical Solutions Intersegment Eliminations Total
Revenue Type
Product sales $ 1,765 $ 2,926 $ 52 $ — $ 4,743
Service revenues 159 888 814 — 1,861
Intersegment 2 7 91 (100) —
Sales and service revenues $ 1,926 $ 3,821 $ 957 $ (100) $ 6,604
Customer Type
Federal $ 1,924 $ 3,813 $ 669 $ — $ 6,406
Commercial — 1 196 — 197
State and local government agencies — — 1 — 1
Intersegment 2 7 91 (100) —
Sales and service revenues $ 1,926 $ 3,821 $ 957 $ (100) $ 6,604
Contract Type
Firm fixed-price $ 40 $ 8 $ 179 $ — $ 227
Fixed-price incentive 1,664 1,813 — — 3,477
Cost-type 220 1,993 367 — 2,580
Time and materials — — 320 — 320
Intersegment 2 7 91 (100) —
Sales and service revenues $ 1,926 $ 3,821 $ 957 $ (100) $ 6,604

As of ~~September~~June 30, ~~2021,~~2022, the Company had ~~$50.1~~$47.2 billion of remaining performance obligations. The Company expects to recognize approximately ~~25%~~30% of its remaining performance obligations as revenue through ~~2022,~~2023, an additional 30% through ~~2024,~~2025, and the balance thereafter.

Cumulative Catch-up Adjustments

on a contract at the Company's Ingalls segment, which increased diluted earnings per share by $0.28.

~~Cumulative catch-up adjustments for the nine months ended September 30, 2020, included unfavorable adjustments of $134 million relating to Block IV of the~~ ~~Virginia~~ class (SSN 774) submarine program at the Company's Newport News segment, which decreased diluted earnings per share by $2.60. While other unfavorable cumulative catch-up adjustments for the nine months ended September 30, 2020, were not individually material, cost estimates for discrete delay and disruption from COVID-19 Events drove $61 million of unfavorable cumulative catch-up adjustments across our contracts, including $16 million relating to Block IV of the ~~Virginia~~ ~~class (SSN 774) submarine program, which is included in the $134 million unfavorable adjustments discussed above. For the nine months ended September 30, 2020,~~2021, no individual ~~favorable cumulative catch-up~~unfavorable adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income.

~~Contract balances include accounts receivable, contract assets, and contract liabilities associated with customer~~

contracts. Accounts receivable represent an unconditional right to consideration and include amounts billed and currently due from customers. Contract assets primarily relate to the Company's rights to consideration for work completed but not billed as of the reporting date when the right to payment is not just subject to the passage of time. Fixed-price contracts are generally billed to the customer using either progress payments, whereby amounts are billed monthly as costs are incurred or work is completed, or performance based payments, which are based upon the achievement of specific, measurable events or accomplishments defined and valued at contract inception. Cost-type contracts are typically billed to the customer on a monthly or semi-monthly basis. Contract liabilities relate to advance payments, billings in excess of revenues, and deferred revenue amounts.

The Company reports contract balances in a net contract asset or contract liability position on a contract-by-contract basis at the end of each reporting period. The Company’s net contract assets ~~increased $225~~decreased $50 million from December 31, ~~2020,~~2021, to ~~September~~June 30, ~~2021,~~2022, primarily resulting from ~~an increase in contract assets related to revenue~~advance billings on certain U.S. Navy ~~contracts and the acquisition of Alion.~~contracts. For the three and six months ended ~~September~~June 30, ~~2021, the Company did not recognize revenue related to its contract liabilities as of December 31, 2020. For the nine months ended September 30, 2021,~~2022, the Company recognized revenue of ~~$447 million related to its contract liabilities as of December 31, 2020. For the three and nine months ended September 30, 2020, the Company recognized revenue of $9~~$152 million and ~~$265~~$531 million, respectively, related to its contract liabilities as of December 31, ~~2019.~~2021. For the three and six months ended June 30, 2021, the Company recognized revenue of $56 million and $453 million, respectively, related to its contract liabilities as of December 31, 2020.

The following table presents segment results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended June 30				Six Months Ended June 30
($ in millions)	($ in millions)	2021		2020		2021		2020		($ in millions)	2022		2021		2022		2021
Sales and Service Revenues	Sales and Service Revenues									Sales and Service Revenues
Ingalls	Ingalls	$	628	$	675	$	1,947	$	1,926	Ingalls	$	658	$	670	$	1,289	$	1,319
Newport News	Newport News	1,354		1,358		4,124		3,821		Newport News	1,433		1,363		2,823		2,770
Technical Solutions		394		320		890		957
Mission Technologies										Mission Technologies	600		237		1,190		496
Intersegment eliminations	Intersegment eliminations	(38)		(39)		(114)		(100)		Intersegment eliminations	(29)		(39)		(64)		(76)
Sales and service revenues	Sales and service revenues	$	2,338	$	2,314	$	6,847	$	6,604	Sales and service revenues	$	2,662	$	2,231	$	5,238	$	4,509
Operating Income	Operating Income									Operating Income
Ingalls	Ingalls	$	62	$	62	$	233	$	185	Ingalls	$	106	$	80	$	192	$	171
Newport News	Newport News	88		79		257		105		Newport News	94		76		175		169
Technical Solutions		13		21		33		23
Mission Technologies										Mission Technologies	25		13		34		20
Segment operating income	Segment operating income	163		162		523		313		Segment operating income	225		169		401		360
Non-segment factors affecting operating income	Non-segment factors affecting operating income									Non-segment factors affecting operating income
Operating FAS/CAS Adjustment	Operating FAS/CAS Adjustment	(41)		60		(118)		186		Operating FAS/CAS Adjustment	(35)		(37)		(72)		(77)
Non-current state income taxes	Non-current state income taxes	(4)		—		(12)		(5)		Non-current state income taxes	1		(4)		—		(8)
Operating income	Operating income	$	118	$	222	$	393	$	494	Operating income	$	191	$	128	$	329	$	275

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 GAAP ("FAS") and our pension and other postretirement expense under CAS.

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


($ in millions)	($ in millions)	September 30, 2021		December 31, 2020		($ in millions)	June 30, 2022		December 31, 2021
Assets	Assets					Assets
Ingalls	Ingalls	$	1,691	$	1,612	Ingalls	$	1,701	$	1,659
Newport News	Newport News	4,189		4,124		Newport News	4,418		4,179
Technical Solutions		3,590		1,379
Mission Technologies						Mission Technologies	3,430		3,553
Corporate	Corporate	930		1,042		Corporate	1,037		1,236
Total assets	Total assets	$	10,400	$	8,157	Total assets	$	10,586	$	10,627

~~Inventoried costs were comprised of the following:~~
($ in millions) September 30, 2021 December 31, 2020
Production costs of contracts in process1
$ 21 $ 17
Raw material inventory 122 120
Total inventoried costs, net $ 143 $ 137

1 ~~Includes amounts capitalized pursuant to applicable provisions of the FAR and CAS.~~

~~For the nine months ended September 30, 2021, the carrying amounts of goodwill changed as follows:~~
($ in millions) Ingalls Newport News Technical Solutions Total
Balance as of December 31, 2020 $ 175 $ 721 $ 721 $ 1,617
Acquisitions — — 1,080 1,080
Adjustments — — (13) (13)
Balance as of September 30, 2021 $ 175 $ 721 $ 1,788 $ 2,684

For ~~each of~~ the three ~~and nine~~ months ended ~~September~~June 30, ~~2021~~2022, the Company’s effective tax rate differed from the federal statutory corporate income tax rate primarily as a result of research and ~~2020,~~development tax credits. For the six months ended June 30, 2022, the Company’s effective tax rate did not differ materially from the federal statutory corporate income tax rate of 21%. For the three months ended June 30, 2021, the Company’s effective tax rate differed from the federal statutory tax rate primarily as a result of ~~the~~ research and development tax ~~credits for prior periods.~~credits. For the six months ended June 30, 2021, the Company’s effective tax rate differed from the federal statutory tax rate primarily as a result of a tax loss associated with the sale of its oil and gas business.

The Company's unrecognized tax benefits increased by ~~$32~~$3 million and $5 million during the three and six months ended ~~September~~June 30, ~~2021.~~2022, respectively. As of ~~September~~June 30, ~~2021,~~2022, the estimated amounts of the Company's unrecognized tax benefits, excluding interest and penalties, were liabilities of ~~$84~~$86 million. Assuming a sustainment of these tax positions, ~~the~~a reversal of ~~$68~~$65 million of the accrued amounts would favorably affect the Company's effective federal income tax rate in future periods.

~~Long-term debt consisted of the following:~~
($ in millions) September 30, 2021 December 31, 2020
Senior notes due December 1, 2027, 3.483% $ 600 $ 600
Senior notes due May 1, 2025, 3.844% 500 500
Senior notes due May 1, 2030, 4.200% 500 500
Senior notes due August 16, 2023, 0.670% 400 —
Senior notes due August 16, 2028, 2.043% 600 —
Term loan due August 19, 2024 650 —
Mississippi economic development revenue bonds due May 1, 2024, 7.81% 84 84
Gulf opportunity zone industrial development revenue bonds due December 1, 2028, 4.55% 21 21
Less unamortized debt issuance costs (34) (19)
Total long-term debt $ 3,321 $ 1,686

~~Credit Facility~~ - In August 2021, the Company amended and restated its existing $1.25 billion credit facility, increasing the capacity thereunder to $1.5 billion and extending the maturity date to five years from signing (the "Revolving Credit Facility"). The Revolving Credit Facility has a variable interest rate on outstanding borrowings based on London Interbank Offered Rate ("LIBOR"), plus a spread based upon the Company's credit rating, which may vary between 1.125% and 2.000%. As of September 30, 2021, the interest rate spread on drawn amounts was 1.375% based on the Company's current credit rating. The Revolving Credit Facility also has a commitment fee rate on unutilized amounts, currently 0.200%, and includes a letter of credit subfacility of $300 million.

~~Term Loan -~~ In August 2021, the Company entered into a $650 million 3-year delayed draw term loan (the “Term Loan”) to finance a portion of the purchase price for Alion. The Term Loan must be repaid prior to or at maturity, which is 36 months from the date of the initial draw. The Term Loan has a variable interest rate on outstanding borrowings based on LIBOR, plus a spread based upon the Company's credit rating, which may vary between 1.125% and 2.000%. As of September 30, 2021, the annual interest rate spread was 1.375% based on the Company's current credit rating.

~~Senior Notes -~~ In August 2021, the Company issued $400 million aggregate principal amount of callable unregistered 0.670% senior notes due 2023 and $600 million aggregate principal amount of unregistered 2.043% senior notes due 2028, both with registration rights. The net proceeds were used to fund a portion of the purchase price for the acquisition of Alion. Interest on these senior notes is payable semiannually.

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~~ASC 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. For matters where a material loss is probable or reasonably possible and the amount of loss cannot be reasonably estimated, but the Company is able to reasonably estimate a range of possible losses, the Company will disclose such estimated range in these notes. This estimated range is based on information currently available to the Company and involves elements of judgment and significant uncertainties. Any estimated range of possible loss does not represent the Company's maximum possible loss exposure. For matters as to which the Company is not able to reasonably estimate a possible loss or range of loss, the Company will indicate the reasons why it is unable to estimate the possible loss or range of loss. For matters not specifically described in these notes, the Company does not believe, based on information currently available to it, that it is reasonably possible that the liabilities, if any, arising from such investigations, claims, and litigation will have a material effect on its consolidated financial position, results of operations, or cash flows. The Company has, in certain cases, provided disclosure regarding certain matters for which the Company believes at this time that the likelihood of material loss is remote.

False Claims Act Complaint - In 2016, the Company was made aware that it is a defendant in a qui tam False Claims Act lawsuit pending in the U.S. District Court for the Middle District of Florida related to the Company’s purchases of allegedly non-conforming parts from a supplier for use in connection with U.S. Government contracts. In August 2019, the Department of Justice (“DoJ”) declined to intervene in the lawsuit, and the lawsuit was unsealed. The court dismissed the complaint in September 2021, and the plaintiff has appealed the dismissal to the United States Court of Appeals for the 11th Circuit.

Insurance Claims - 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. ~~A total of 32 reinsurers are named as defendants in the complaint.~~ The Company also ~~has~~ initiated arbitration proceedings against 6 other reinsurers seeking similar relief. Prior to filing the complaint and initiating the arbitration proceedings, the Company provided a notice of loss to the reinsurers, but, to date, none of the reinsurers have acknowledged coverage. The full extent of the Company's losses resulting from COVID-19 have not yet been determined. In July 2021, the Vermont court granted the reinsurers’ motion for judgment on the pleadings, ~~finding that, because~~and the Company continued to operate through the pandemic, the Company’s reduction of business not accompanied by a complete loss of use fell short of the required “direct physical loss or damage to property.” The Company has appealed the decision to the Vermont Supreme Court. Although the Company still believes its position is well-founded, no assurances can be provided regarding the ultimate resolution of this matter.

U.S. Government Investigations and Claims - Departments and agencies of the U.S. Government have the authority to investigate various transactions and operations of the Company, and the results of such investigations may lead to administrative, civil, or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments

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. The cases allege various injuries, including those associated with pleural plaque disease, asbestosis, cancer, mesothelioma, and other alleged asbestos related conditions. In some cases, several of HII's former executive officers are also named as defendants. In some instances, partial or full insurance coverage is available tofor the ~~Company for its liability and that of its former executive officers.~~Company's liabilities. The costs to resolve cases during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, were immaterial individually and in the aggregate. The Company’s estimate of asbestos-related liabilities is subject to uncertainty because liabilities are influenced by ~~numerous~~many variables that are inherently difficult to predict. Key variables include the number and type of new claims, the litigation process from jurisdiction to jurisdiction and from case to case, reforms made by state and federal courts, and the passage of state or federal tort reform legislation. Although the Company believes the ultimate resolution of current cases will not have a material effect on its consolidated financial position, results of operations, orand 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.

Other Litigation - ~~In March 2019, a new dry dock being transported for delivery to Ingalls by a heavy lift ship struck an Ingalls work barge, which in turn was pushed into USS~~ ~~Delbert D. Black~~ ~~(DDG 119) causing damage to USS~~ ~~Delbert D. Black~~ ~~(DDG 119), the work barge, and the new dry dock. At the time of the incident, responsibility for the new dry dock remained with the builder and the transport company. Repair work on USS~~ ~~Delbert D. Black~~ (DDG 119) was completed at U.S. Navy direction. In April 2019, the Company filed suit in the U.S. District Court for the Southern District of Mississippi seeking, among other relief, damages from negligent third parties. In July 2021, an agreement was reached with the defendants to resolve the Company’s remaining claims, and the agreement was funded in September 2021, ending the Company's involvement in the litigation.

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

~~Guarantees of Performance Obligations -~~ From time to time in the ordinary course of business, HII enters into joint ventures, teaming agreements, and other business arrangements in connection with the Company's products and services or to pursue strategic objectives. The Company attempts to limit its exposure under these arrangements to its investment or the extent of obligations under the applicable contract. In some cases, however, HII may be required to guarantee performance of the arrangement's obligations and, in such cases, generally obtains cross-indemnification from the other members of the arrangement.

Environmental Matters - The estimated cost to complete environmental remediation has been 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 ~~("PRP")~~ 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. To assess the potential impact on the Company's consolidated financial statements, management estimates the range of reasonably possible remediation costs that could be incurred by the Company, taking into account currently available facts on each site, as well as the current state of technology and prior experience remediating contaminated sites. These estimates are reviewed periodically and adjusted to reflect changes in facts and technical and legal circumstances. Management estimates that as of ~~September~~June 30, ~~2021,~~2022, the probable estimable future cost for environmental remediation was immaterial. Factors that could result in changes to the Company's estimates include: modification of planned remedial actions, increases or decreases in the estimated time required to remediate, changes to the determination of legally responsible parties, discovery of more extensive contamination than anticipated, changes in laws and regulations affecting remediation requirements, and improvements in remediation technology. Should other PRPs not pay their allocable share of remediation costs, the Company may incur costs exceeding those already estimated and accrued. In addition, there are certain potential remediation sites where the costs of remediation cannot be reasonably estimated. 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, orand 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~~June 30, ~~2021,~~2022, the Company had ~~$16~~$15 million in issued but undrawn letters of credit ~~as indicated in Note 12: Debt,~~ and $276 million of surety bonds outstanding.

U.S. Government Claims - From time to time, the U.S. Government communicates to the Company potential claims, disallowed costs, and penalties concerning prior costs incurred by the Company with which the U.S. Government disagrees. When such preliminary findings are presented, the Company and U.S. Government representatives engage in discussions, from which the Company evaluates the merits of the claims and assesses the amounts being questioned. 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, orand cash flows, it cannot predict the ultimate outcome of these matters.

Other Matters - In 1985, the Company and the U.S. Navy entered into a settlement agreement to resolve disputes associated with billing and allocating to contracts the cost of workers’ compensation self-insurance, among other matters. ~~In 2016, the Defense Contract Audit Agency ("DCAA") opined that~~Consistent with the 1985 settlement agreement, ~~did~~the Company has not ~~comply with certain~~recovered cumulative billable costs resulting from the different treatment of workers' compensation costs between CAS ~~standards~~ and ~~referred~~U.S. GAAP Financial Accounting Standards ("FAS"). Under the ~~matter to~~1985 settlement agreement, these costs would be recovered in future periods. In December 2020, a U.S. Navy ~~Contracting Officer. In December 2020, the~~ Contracting Officer issued a determination that the 1985 settlement agreement did not comply with CAS and directed the Company to develop and implement a different process to bill and allocate the cost of workers’ compensation self-insurance. ~~Under~~In July 2022, the Contracting Officer reiterated its direction that the Company submit a cost accounting practice change from the 1985 settlement agreement ~~the Company has not recognized as allowable cumulative billable costs of approximately $120 million due to the difference between CAS~~for Government review and U.S. GAAP Financial Accounting Standards ("FAS") treatment of workers’ compensation cost. Under the 1985 settlement agreement, these costs would be recognized as allowable billable costs in future periods. Thoughconcurrence. Although the Company believes the

Collective Bargaining Agreements- Of the Company's approximately 44,000 employees, approximately 45% are covered by a total of 9collective bargaining agreements and ~~one~~1 site stabilization agreement. Newport News has 3 collective bargaining agreements covering represented employees, including 1 with United Steelworkers Local 8888 (Newport News) (the “USWs”), which ~~expire in November 2021, December 2022, and April 2024. The collective bargaining agreement that expires in November 2021~~ covers approximately 50% of Newport News employees. Newport News craft workers employed at the Kesselring Site near Saratoga Springs, New York are represented under an indefinite Department of Energy ("DoE") site agreement. Ingalls has 5 collective bargaining agreements covering represented employees, all of which expire in March 2022. Approximately 15 Technical Solutions employees in Klamath Falls, Oregon are covered by aThe collective bargaining agreement ~~that expires~~with the USWs expired in ~~June 2025.~~November 2021, and the Company reached a tentative agreement with representatives of the USWs in February 2022. The members of the USWs bargaining unit ratified the contract in March 2022. The Company believes its relationship with its employees is satisfactory.

~~Collective bargaining agreements generally expire after~~ ~~three~~ to five years and are subject to renegotiation at that time. The Company does not expect the results of these negotiations, either individually or in the aggregate, to have a material effect on the Company's consolidated results of operations.

~~Purchase Obligations -~~ Periodically the Company enters into agreements to purchase goods or services that are enforceable and legally binding on the Company and specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. These obligations are primarily comprised of open purchase order commitments to vendors and subcontractors pertaining to funded contracts.

~~15.~~

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12. EMPLOYEE PENSION AND OTHER POSTRETIREMENT BENEFITS

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

The costs of the Company's defined benefit pension plans and other postretirement benefit plans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, were as follows:


		Three Months Ended September 30								Nine Months Ended September 30									Three Months Ended June 30								Six Months Ended June 30
		Pension Benefits				Other Benefits				Pension Benefits				Other Benefits					Pension Benefits				Other Benefits				Pension Benefits				Other Benefits
($ in millions)	($ in millions)	2021		2020		2021		2020		2021		2020		2021		2020		($ in millions)	2022		2021		2022		2021		2022		2021		2022		2021
Components of Net Periodic Benefit Cost	Components of Net Periodic Benefit Cost																	Components of Net Periodic Benefit Cost
Service cost	Service cost	$	50	$	45	$	2	$	2	$	149	$	135	$	7	$	7	Service cost	$	45	$	49	$	3	$	2	$	90	$	99	$	5	$	5
Interest cost	Interest cost	60		64		4		4		180		193		11		12		Interest cost	65		60		3		4		129		120		7		7
Expected return on plan assets	Expected return on plan assets	(138)		(122)		—		—		(414)		(365)		—		—		Expected return on plan assets	(148)		(138)		—		—		(298)		(276)		—		—
Amortization of prior service cost (credit)	Amortization of prior service cost (credit)	3		3		(1)		(5)		11		9		(3)		(16)		Amortization of prior service cost (credit)	6		4		(1)		(1)		10		8		(2)		(2)
Amortization of net actuarial loss (gain)	Amortization of net actuarial loss (gain)	28		28		(1)		(2)		82		82		(2)		(5)		Amortization of net actuarial loss (gain)	9		27		(1)		—		18		54		(2)		(1)
Net periodic benefit cost		$	3	$	18	$	4	$	(1)	$	8	$	54	$	13	$	(2)
Net periodic benefit (income) cost																		Net periodic benefit (income) cost	$	(23)	$	2	$	4	$	5	$	(51)	$	5	$	8	$	9

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The Company made the following contributions to its defined benefit pension plans and other postretirement benefit plans for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Nine Months Ended September 30					Six Months Ended June 30
($ in millions)	($ in millions)	2021		2020		($ in millions)	2022		2021
Pension plans	Pension plans					Pension plans

Discretionary	Discretionary					Discretionary
Qualified	Qualified	$	60	$	205	Qualified	$	—	$	60
Non-qualified	Non-qualified	6		6		Non-qualified	5		4
Other benefit plans	Other benefit plans	28		25		Other benefit plans	16		20
Total contributions	Total contributions	$	94	$	236	Total contributions	$	21	$	84

As of ~~September~~June 30, ~~2021,~~2022, the Company anticipates no further significant cash contributions to its qualified defined benefit pension plans in ~~2021.~~2022.

In ~~August 2021,~~March 2022, the Company ~~amended~~concluded negotiations on one of its ~~postretirement benefit plan for represented post-65 participants,~~collective bargaining agreements, which ~~replaced a Company-sponsored indemnity plan with coverage offered through a third-party vendor.~~required an amendment to one of the Company's pension plans. As a result of the amendment, the remeasurement of the plan ~~decreased~~increased the ~~postretirement~~pension liability and pre-tax accumulated other comprehensive loss by approximately ~~$14~~$97 million.

~~16.~~13. STOCK COMPENSATION PLANS

During the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the Company issued new stock awards as follows:

Restricted Performance Stock Rights - For the ~~nine~~six months ended ~~September~~June 30, 2022, the Company granted approximately 0.1 million RPSRs at a weighted average share price of $204.10. These rights are subject to cliff vesting on December 31, 2024. For the six months ended June 30, 2021, the Company granted approximately 0.2 million RPSRs at a weighted average share price of ~~$180.05.~~$179.21. These rights are subject to cliff vesting on December 31, 2023. For the nine months ended September 30, 2020, the Company granted approximately 0.1 million RPSRs at a weighted average share price of $230.10. These rights are subject to cliff vesting on December 31, 2022. 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.

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For ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, awards of approximately 0.2 million and ~~2020, approximately~~ 0.1 million shares of stock ~~awards~~ vested, respectively, of which less than 0.1 million each period were transferred to the Company from employees in satisfaction of minimum tax withholding obligations.

The following table summarizes the status of the Company's outstanding stock awards as of ~~September~~June 30, ~~2021:~~2022:
Stock Awards
(in thousands) Weighted-Average
Grant Date Fair
Value Weighted-Average Remaining Contractual Term
(in years)
Total stock awards 486 $ 191.23 1.2


	Stock Awards (in thousands)	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Term (in years)
Total stock awards	511	$	189.61	1.4

Compensation Expense

The Company recorded stock-based compensation for the value of awards granted to Company employees and non-employee members of the board of directors ~~for the three months ended September 30, 2021 and 2020,~~ of $7 million and $3 million for the three months ended June 30, 2022 and 2021, respectively. The Company recorded stock-based compensation for the value of awards granted to Company employees and non-employee members of the board of directors of $16 million and $12 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, of $19 million and $16 million,~~2021, respectively.

The Company recorded tax benefits related to stock awards of $1 million and less than $1 million for ~~each of~~ the three months ended ~~September~~June 30, 2022 and 2021, ~~and 2020.~~respectively. The Company recorded tax benefits related to stock awards of $3$2 million for each of the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021. The Company recognized tax benefits associated with the issuance of stock in settlement of stock awards of less than $1 million for each of the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021. The Company recognized tax benefits associated with the issuance of stock in

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settlement of stock awards of $2$4 million and $3$2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Unrecognized Compensation Expense

As of ~~September~~June 30, ~~2021,~~2022, the Company had $4$3 million of unrecognized compensation expense associated with Restricted Stock Rights granted in 2022 and 2021, which will be recognized over a weighted average period of 1.2 years, and $44 million of unrecognized compensation expense associated with RPSRs granted in 2022, 2021, and 2020, which will be recognized over a weighted average period of ~~1.8 years, and $35 million of unrecognized compensation expense associated with RPSRs granted in 2021, 2020, and 2019, which will be recognized over a weighted average period of 1.4~~1.6 years.

~~17. SUBSIDIARY GUARANTORS~~

As described in Note 12: Debt, the Company issued senior notes through the consolidating parent company, HII. Performance of the Company's obligations under its senior notes outstanding as of September 30, 2021, and December 31, 2020, including any repurchase obligations resulting from a change of control, is fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of HII's existing and future material domestic subsidiaries ("Subsidiary Guarantors"). The Subsidiary Guarantors are 100% owned by HII. Under SEC Regulation S-X Rule 3-10, each HII subsidiary that did not provide a guarantee ("Non-Guarantors") is minor and HII, as the parent company issuer, did not have independent assets or operations. There are no significant restrictions on the ability of the parent company and the Subsidiary Guarantors to obtain funds from their respective subsidiaries by dividend or loan, except those imposed by applicable law.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Our Business

Huntington Ingalls Industries, Inc. ("HII", "we", "us", or "our") is an all-domain defense and technologies partner, recognized worldwide as America’s largest ~~military shipbuilding company and a provider of professional services to partners in government and industry.~~shipbuilder. For more than a century, our Ingalls segment in Mississippi and Newport News segment in Virginia have built more ships in more ship classes than any other U.S. naval shipbuilder. Our Mission Technologies (formerly named Technical ~~Solutions~~Solutions) segment provides a range of services and products to government and commercial customers. Headquartered in Newport News, Virginia, HII employs approximately 44,000 people ~~both~~ domestically and internationally.

We conduct most of our business with the U.S. Government, primarily the Department of Defense ("DoD"). As prime contractor, principal subcontractor, team member, or partner, we participate in many high-priority U.S. defense programs. Ingalls includes our non-nuclear ship design, construction, repair, and maintenance businesses. Newport News includes all of our nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses. Our ~~Technical Solutions~~Mission Technologies segment provides a wide range of ~~professional~~ services and products, including C5ISR systems and operations; the application of Artificial Intelligence and machine learning to battlefield decisions; defense and ~~federal solutions ("DFS"),~~offensive cyberspace strategies and electronic warfare; unmanned autonomous systems; live, virtual, and constructive solutions; platform modernization; and critical nuclear ~~and environmental services, and unmanned systems.~~operations.

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The following discussion should be read along with the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Business Environment

We continue to see uncertainty in the economy, our industry, and our company, with challenges for customers and suppliers, labor shortages, supply chain challenges, and increasing inflation, among other impacts.

~~COVID-19 Pandemic~~

U.S. Government Contracts - Long-term uncertainty exists with respect to overall levels of defense spending across the future years' defense plan, and it is likely that U.S. Government discretionary spending levels will continue to be subject to significant pressure.

Congressional consideration of the fiscal year 2023 President’s Budget Request began following its release in March 2022 and is ongoing. The ~~COVID-19~~House Appropriations Committee voted out a defense appropriations measure that broadly supports our shipbuilding and unmanned programs and awaits floor consideration. The Senate Appropriations Committee has yet to conduct markups, and the timing of committee action remains uncertain. The House and Senate Armed Services Committees have each acted on their respective National Defense Authorization bills for fiscal year 2023, both of which broadly support our shipbuilding programs, including increased funding authority for Arleigh Burke class destroyers (DDG-51) and LHA and LPD Flight II amphibious ships. The full House has approved its authorization bill and awaits Senate floor consideration of its version before the two bills can be reconciled to produce a final measure. We cannot predict the outcome of the fiscal year 2023 budget process or whether short-term funding will be required in the event annual appropriations measures are not finalized by the start of the October 1 fiscal year.

Long-term funding for certain programs in which we participate may be reduced, delayed, or canceled. In addition, spending cuts and/or reprioritization of defense investment could adversely affect the viability of our suppliers, subcontractors, and employee base. Our contracts or subcontracts under programs in which we participate may be terminated or adjusted by the U.S. Government or the prime contractor due to lack of government funding or reductions or delays in government funding. Significant reductions in the number of ships procured by the U.S. Navy or significant delays in funding our ship programs would have a material effect on our financial position, results of operations, and cash flows.

The federal budget environment remains a significant long-term risk. Considerable uncertainty exists regarding how future budget and program decisions will develop and what challenges budget changes will present for the defense industry. We believe continued budget pressures could have serious implications for defense discretionary spending, the defense industrial base, including HII, and the customers, employees, suppliers, subcontractors, investors, and communities that rely on companies in the defense industrial base. Although it is difficult to determine specific impacts, we expect that over the longer term, the budget environment may result in fewer contract awards and lower revenues, profits, and cash flows from our U.S. Government contracts. It is likely budget and program decisions made in this environment will have long-term impacts on HII and the entire defense industry.

Political and Economic Environment – The global ~~pandemic has had wide ranging effects on~~geopolitical and economic environment continues to be impacted by uncertainty, heightened tensions, and instability. Geopolitical relationships have changed, and are continuing to change, and the U.S. and its allies face a global security environment that includes threats from state and non-state actors, including major global powers, as well as terrorist organizations, emerging nuclear tensions, diverse regional security concerns, and political instability. These global threats persist across all domains, from undersea to space to cyber, and the global ~~health~~market for defense products, services, and solutions is driven by these complex and evolving security challenges. Our current operating environment exists in the broader context of political and ~~disrupted~~socioeconomic priorities and reflects, among other things, the continued impact of and uncertainty surrounding geopolitical tensions, financial market volatility, inflation, and the COVID-19 pandemic.

In February 2022, Russian forces invaded Ukraine. In response, the United States and other countries imposed economic and trade sanctions, export controls, and other restrictions. The conflict and these sanctions have caused disruptions to global economies and global business, including heightened cybersecurity risks, supply chain challenges, increased energy costs, and an exacerbation of existing inflationary pressures. Additionally, and more broadly, economic tensions with China and changes in international trade policies, including higher tariffs on imported goods and materials and renegotiation of free trade agreements, could impact the global market for defense products, services, and U.S. economies and financial markets, including impacts to our employees, customers, suppliers, and communities (collectively, “COVID-19 Events”). COVID-19 Events have also impacted our operations, and the extent of future impacts are uncertain. The most significant areas of impact have been the disruption of our employees’ ability to work effectively, disruption in our supply chain, disruption of the U.S. Government's and our other customers' abilities to perform their obligations, and impact on pension assets and other investment performance. On September 9, 2021, President Biden issued an executive order requiring all employers with U.S. Government contracts to ensure that their U.S.-based employees, contractors, and subcontractors that work on or in support of U.S. Government contracts are fully vaccinated by December 8, 2021.solutions.

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~~The executive order includes on-site~~

In addition to price surges in energy, food, and ~~remote U.S.-based employees, contractors,~~aluminum as a result of the Russian invasion of Ukraine, rising inflation has led to higher costs of various commodities and ~~subcontractors,~~supplier products. Inflation has also increased interest rates, raising the cost of borrowing for the federal government, which could impact other spending priorities. In an era of unanticipated cost increases, the inclusion of mitigation mechanisms, such as Economic Price Adjustment clauses, in our contracts help reduce risks from negative price adjustments. Our bids for longer-term firm fixed-price contracts typically include assumptions for labor and other contract costs that historically have been sufficient to cover cost increases over the period of performance. If, however, recent inflationary conditions continue over the long-term, our cost assumptions may not be sufficient to cover potential contract cost growth or may impact the availability of resources to execute the respective contracts. Management is closely monitoring possible cost impacts with ~~limited exceptions for medical and religious reasons.~~our customers.

~~It is currently~~COVID-19 Pandemic - The COVID-19 pandemic has dramatically impacted the global economic environment, including labor shortages and supply chain challenges. The COVID-19 crisis initially had a significant impact on the U.S. labor market, and the resulting challenges and uncertainty have exacerbated already existing workforce trends. Talent attraction and retention and the ability to maintain a qualified workforce affects not ~~possible~~only industry prime contractors but suppliers as well. Challenges incurred by our suppliers relative to ~~predict with any certainty the~~their workforces, access to necessary components, materials, and other supplies at reasonable prices, and access to support services, such as shipping and transportation, may impact the ~~executive order will have on our workforce. As~~ability of suppliers to provide agreed-upon goods and services in a ~~U.S. Government contractor, we are currently requiring all U.S.-based employees, contractors,~~timely, compliant, and ~~subcontractors that service~~cost-effective manner. We may in the future incur additional costs and performance challenges, including as a result of higher prices, schedule delays, or ~~support our U.S. Government contracts~~the need to be fully vaccinated in accordance with the guidelines of the Safer Federal Workforce Task Force. Our implementation of these requirements will result in employee attrition to some extent, including attrition of critical skilled labor,identify and ~~difficulty meeting future labor requirements.~~

See Item 1A. Risk Factors in this Form 10-Q for a discussion of COVID-19-related risks, including risks associated with the potential adverse effects on our workforce of the U.S. Government vaccine mandate for employees, contractors, and subcontractors that service federal contracts.develop alternative suppliers.

~~We have aggressively managed our response to the uncertainties regarding~~The COVID-19 Events, and we have incurred costs to respond to COVID-19 Events, including paid leave, quarantining employees, vaccinations, and recurring facility cleaning. Our shipyards and other facilities have remained open and productive, but we continue to experience decreases in workforce attendance and challenges meeting our hiring requirements, whichpandemic has impacted our ~~operations due to delay~~employees, customers, suppliers, and ~~disruption from a shortage of critical skills and out-of-sequence work.~~

Under Section 3610 of the CARES Act, contractors may submit claims for employee paid time off caused by restrictions from COVID-19 Events in circumstances where the employee could not work remotely. Such instances may include paid time off for employees to allow for plant decontamination, idle time due to social distancing restrictions, paid time off to take care of dependents impacted by government ordered school or day care closures, paid time for employee vaccinations or responding to side effects from vaccination, and employee quarantines due to travel restrictions or coming into contact, being diagnosed, or taking care of someone diagnosed with COVID-19. We have taken steps to preserve our rights to pursue such claims for HII and our subcontractors, and we submitted an initial Section 3610 Reimbursement Request to the DoD for Ingalls and Newport News Shipbuilding. Section 3610 under the CARES Act was not extended past September 30, 2021. We anticipate submitting supplemental requests for Section 3610 reimbursement for HII and our subcontractors into 2022. Reimbursements of our requests are contingent upon contracting officers making funding available, and most DoD contracting officers are awaiting supplemental appropriations from Congress before approving such reimbursement requests. We have no assurance that Congress will appropriate sufficient funds to cover the reimbursement of costs contemplated by the CARES Act.

communities (collectively, “COVID-19 Events”). While costs related to COVID-19 Events are allowable under U.S. Government contracts, our contract estimates reflect profit margin impact uncertainty, because such costs may not result in equitable adjustments, particularly on firm ~~fixed price~~fixed-price and ~~fixed price~~fixed-price incentive contracts, or may not be adequately covered by insurance. ~~Our reinsurers~~Reinsurers under our property insurance have failed to acknowledge coverage for various losses related to COVID-19, and we filed a complaint in state court in Vermont seeking a judgment declaring that our business interruption and other losses associated with COVID-19 are covered by our property insurance program. We also initiated arbitration proceedings against other reinsurers seeking similar relief. The Vermont court dismissed our complaint in response to a motion of the reinsurers for judgment on the pleadings, and we have appealed the decision. Although we continue to believe that our position is well-founded, no assurance can be provided regarding the ultimate resolution of this matter. See Note ~~13:~~10: Investigations, Claims, and Litigation.

We have also focused on actively supporting our customers, suppliers, and communities. We have been proactive in engaging with our U.S. Government customers regarding future contract adjustments. While there has been no change in contract terms or substantial degradation in timely payments from customers, we have experienced delays in decisions on certain contract awards. We are unable to predict how our customers will allocate resources in the future as they react to the evolving demands of the COVID-19 response. We also accelerated payments to small business suppliers in an effort to minimize supply chain disruption.

We temporarily halted stock repurchases in the first quarter of 2020, but we resumed share repurchases during the first quarter of 2021. We also deferred certain payroll taxes in 2020 pursuant to the CARES Act, which increased our cash from operations in 2020, but will reduce cash from operations in 2021 and 2022.

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~~U.S. Government Contracts~~ - Long-term uncertainty exists with respect to overall levels of defense spending across the future years' defense plan, and it is likely that U.S. Government discretionary spending levels will continue to be subject to significant pressure.

The Congressional budget markup process for fiscal year 2022 is ongoing, following a late release of the President’s Budget Request in May 2021. Consequently, the U.S. Government is currently operating under a Continuing Resolution which funds government operations through December 3, 2021. It remains uncertain at this point whether fiscal year 2022 government operations will require additional short-term funding or if annual appropriations measures will be finalized by December 3. The House of Representatives and the Senate Armed Services Committee have each acted on respective National Defense Authorization bills for fiscal year 2022, but the Congress has yet to reconcile those bills and produce a final measure. Additionally, while the House Appropriations Committee voted out a defense appropriations measure earlier this year, the Senate Appropriations Committee has released the text of its defense appropriations measure, but a traditional markup process remains uncertain. Appropriations measures must be passed by Congress and enacted by the President, and we cannot predict the outcome of the fiscal year 2022 budget process.

Long-term funding for certain programs in which we participate may be reduced, delayed, or canceled. In addition, spending cuts and/or reprioritization of defense investment could adversely affect the viability of our suppliers, subcontractors, and employee base. Our contracts or subcontracts under programs in which we participate may be terminated or adjusted by the U.S. Government or the prime contractor as a result of lack of government funding or reductions or delays in government funding. Significant reductions in the number of ships procured by the U.S. Navy or significant delays in funding our ship programs would have a material effect on our financial position, results of operations, or cash flows.

The federal budget environment remains a significant long-term risk. Considerable uncertainty exists regarding how future budget and program decisions will develop and what challenges budget changes will present for the defense industry. We believe continued budget pressures will have serious implications for defense discretionary spending, the defense industrial base, including HII, and the customers, employees, suppliers, subcontractors, investors, and communities that rely on companies in the defense industrial base. Although it is difficult to determine specific impacts, we expect that over the longer term, the budget environment may result in fewer contract awards and lower revenues, profits, and cash flows from our U.S. Government contracts. It is likely budget and program decisions made in this environment will have long-term impacts on HII and the entire defense industry.

Critical Accounting Policies, Estimates, and Judgments

As discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, we consider our policies relating to the following matters to be critical accounting ~~policies:~~policies and estimates:

•Revenue recognition;

•Purchase accounting, goodwill, and intangible assets;

•Litigation, commitments, and contingencies;

•Retirement related benefit plans; and

•Workers' compensation.

As of ~~September~~June 30, ~~2021,~~2022, there had been no material changes to the foregoing critical accounting policies, estimates, and judgments since December 31, ~~2020.~~2021.

We have incorporated realized and estimated future effects of COVID-19 Events, based upon current conditions and our judgment of the future impacts of COVID-19 Events, with respect to contract costs and revenue recognition, effective income tax rates, and the fair values of our long-lived assets, financial instruments, intangible assets, and goodwill recorded at our reporting units.

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Contracts

We generate most of our revenues from ~~long-term~~multi-year contracts with the U.S. Government ~~contracts~~ for design, production, and support activities. Due to the size, duration, and nature of many of our multi-year contracts, the estimation of sales and services revenues and costs through completion is complicated and subject to many variables. Sales and service revenue estimates are based on negotiated contract prices, modified by our assumptions regarding contract options, change orders, incentive and award provisions associated with schedule, technical performance, and price adjustment clauses (such as inflation or index-based clauses). These multi-year contracts generally have a transaction price that is based on estimated cost to produce the product or service plus margin. Product and service cost estimates are based on negotiated or estimated contract terms, historical performance trends, and other economic projections. Government contracts typically include the following cost elements: direct material, labor and subcontracting costs, and certain indirect costs, including allowable general and administrative expenses. Factors that influence our cost estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, COVID-19 disruptions, and capital costs.

Unless otherwise specified in a contract, costs billed to contracts with the U.S. Government are treated as allowable and allocable costs under the ~~Federal Acquisition Regulation ("FAR")~~FAR and ~~the U.S. Cost Accounting Standards ("CAS")~~CAS regulations. Examples of costs incurred by us that are not allowable under the FAR and CAS regulations include certain legal costs, lobbying costs, charitable donations, interest expense, organizational costs, including ~~most~~certain merger and acquisition costs, and advertising costs.

We monitor our policies and procedures with respect to our contracts on a regular basis to ensure consistent application under similar terms and conditions, as well as compliance with all applicable government regulations. In addition, the Defense Contract Audit Agency routinely audits the costs we incur that are allocated to U.S. Government contracts.

~~Our contracts typically fall into one of four categories: firm fixed-price, fixed-price incentive, cost-type, and time and materials. See Note 7: Revenue.~~

•~~Firm Fixed-Price Contracts~~ - A firm fixed-price contract is a contract in which the specified scope of work is agreed to for a price that is predetermined by bid or negotiation and not generally subject to adjustment regardless of costs incurred by the contractor.

•~~Fixed-Price Incentive Contracts~~ - Fixed-price incentive contracts provide for reimbursement of the contractor's allowable costs, but are subject to a cost-share limit that affects profitability. Fixed-price incentive contracts effectively become firm fixed-price contracts once the cost-share limit is reached.

•~~Cost-Type Contracts~~ - Cost-type contracts provide for reimbursement of the contractor's allowable costs plus a fee that represents profit. Cost-type contracts generally require that the contractor use its reasonable efforts to accomplish the scope of the work within some specified time and some stated dollar limitation.

•~~Time and Materials~~ ~~- Time and materials contracts specify a fixed hourly billing rate for each direct labor hour expended and reimbursement for allowable material costs and expenses.~~

Contract Fees - Negotiated contract fee structures include: fixed fee amounts, cost sharing arrangements to reward or penalize contractors for ~~under~~under- or ~~over cost~~over-cost target performance, respectively, positive award fees, and negative penalty arrangements. Profit margins may vary materially depending on the negotiated contract fee arrangements, percentage-of-completion of the contract, the achievement of performance objectives, and the stage of performance at which the right to receive fees, particularly under incentive and award fee contracts, is finally determined.

Award Fees - Certain contracts contain award fees based on performance criteria such as cost, schedule, quality, and technical performance. Award fees are determined and earned based on an evaluation by the customer of our performance against such negotiated criteria. We consider award fees to be variable consideration and generally include these fees in the transaction price using a most likely amount approach. Award fees are limited to the extent of funding allotted by the customer and available for performance and those amounts for which a significant reversal of revenue is not probable.

Program Descriptions

For convenience, a brief description of certain programs discussed in this Quarterly Report on Form 10-Q is included in the "Glossary of Programs" in this section.

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CONSOLIDATED OPERATING RESULTS

The following table presents selected financial highlights:


		Three Months Ended September 30												Nine Months Ended September 30													Three Months Ended June 30												Six Months Ended June 30
							2021 over 2020												2021 over 2020													2022 vs. 2021												2022 vs. 2021
($ in millions)	($ in millions)			2021			2020			Dollars			Percent			2021			2020			Dollars			Percent	($ in millions)			2022			2021			Dollars			Percent			2022			2021			Dollars			Percent
Sales and service revenues	Sales and service revenues	$	2,338		$	2,314		$	24		1	%		$	6,847		$	6,604		$	243		4	%	Sales and service revenues		$	2,662		$	2,231		$	431		19	%		$	5,238		$	4,509		$	729		16	%
Cost of product sales and service revenues	Cost of product sales and service revenues	2,007			1,878			129			7	%		5,852			5,481			371			7	%	Cost of product sales and service revenues		2,272			1,909			363			19	%		4,499			3,845			654			17	%
Income from operating investments, net	Income from operating investments, net	11			6			5			83	%		31			19			12			63	%	Income from operating investments, net		27			12			15			125	%		34			20			14			70	%
Other income and gains		2			—			2			—	%		3			—			3			—	%
Other income and gains (losses), net																									Other income and gains (losses), net		1			(2)			3			150	%		—			1			(1)			(100)	%
General and administrative expenses	General and administrative expenses	226			220			6			3	%		636			648			(12)			(2)	%	General and administrative expenses		227			204			23			11	%		444			410			34			8	%

Operating income	Operating income	118			222			(104)			(47)	%		393			494			(101)			(20)	%	Operating income		191			128			63			49	%		329			275			54			20	%
Other income (expense)	Other income (expense)																								Other income (expense)
Interest expense	Interest expense	(24)			(27)			3			11	%		(63)			(68)			5			7	%	Interest expense		(26)			(18)			(8)			(44)	%		(52)			(39)			(13)			(33)	%
Non-operating retirement benefit	Non-operating retirement benefit	45			29			16			55	%		135			89			46			52	%	Non-operating retirement benefit		67			44			23			52	%		138			90			48			53	%
Other, net	Other, net	2			2			—			—	%		10			(8)			18			225	%	Other, net		(10)			7			(17)			(243)	%		(17)			8			(25)			(313)	%
Federal and foreign income taxes	Federal and foreign income taxes	(6)			4			(10)			(250)	%		51			60			(9)			(15)	%	Federal and foreign income taxes		44			32			12			38	%		80			57			23			40	%
Net earnings	Net earnings	$	147		$	222		$	(75)		(34)	%		$	424		$	447		$	(23)		(5)	%	Net earnings		$	178		$	129		$	49		38	%		$	318		$	277		$	41		15	%

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Operating Performance Assessment and Reporting

We manage and assess the performance of our business based on our performance on individual contracts and programs using the financial measures referred to below, with consideration given to the Critical Accounting Policies, Estimates, and Judgments referred to in this section. Our portfolio of long-term contracts is largely flexibly-priced. Therefore, sales tend to fluctuate in concert with costs across our large portfolio of active contracts, with operating income being a critical measure of operating performance. Under FAR rules that govern our business with the U.S. Government, most types of costs are allowable, and we do not focus on individual cost groupings, such as cost of sales or general and administrative expenses, as much as we do on total contract costs, which are a key factor in determining contract operating income. As a result, in evaluating our operating performance, we look primarily at changes in sales and service revenues, as well as operating income, including the effects of significant changes in operating income as a result of changes in contract estimates and the use of the cumulative catch-up method of accounting in accordance with GAAP. This approach is consistent with the long-term life cycle of our contracts, as management assesses the bidding of each contract by focusing on net sales and operating profit and monitors performance in a similar manner through contract completion. Consequently, our discussion of business segment performance focuses on net sales and operating profit, consistent with our approach for managing our business.

Cost of sales for both product sales and service revenues consists of materials, labor, and subcontracting costs, as well as an allocation of indirect costs for overhead. We manage the type and amount of costs at the contract level, which is the basis for estimating our total costs at completion of our contracts. Unusual fluctuations in operating performance driven by changes in a specific cost element across multiple contracts are described in our analysis.

Sales and Service Revenues

Sales and service revenues were comprised as follows:


		Three Months Ended September 30												Nine Months Ended September 30													Three Months Ended June 30												Six Months Ended June 30
							2021 over 2020												2021 over 2020													2022 vs. 2021												2022 vs. 2021
($ in millions)	($ in millions)			2021			2020			Dollars			Percent			2021			2020			Dollars			Percent	($ in millions)			2022			2021			Dollars			Percent			2022			2021			Dollars			Percent
Product sales	Product sales	$	1,701		$	1,699		$	2		—	%		$	5,185		$	4,743		$	442		9	%	Product sales		$	1,829		$	1,763		$	66		4	%		$	3,553		$	3,484		$	69		2	%
Service revenues	Service revenues	637			615			22			4	%		1,662			1,861			(199)			(11)	%	Service revenues		833			468			365			78	%		1,685			1,025			660			64	%
Sales and service revenues	Sales and service revenues	$	2,338		$	2,314		$	24		1	%		$	6,847		$	6,604		$	243		4	%	Sales and service revenues		$	2,662		$	2,231		$	431		19	%		$	5,238		$	4,509		$	729		16	%

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Product sales for the three months ended ~~September~~June 30, ~~2021,~~2022, increased $2$66 million, or 4%, from the same period in ~~2020.~~2021. Product sales for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, increased ~~$442~~$69 million, or 9%2%, ~~compared with~~from the same period in ~~2020.~~2021. Ingalls product sales decreased ~~$37~~$13 million and $39 million for the three and six months ended ~~September~~June 30, ~~2021,~~2022, respectively, primarily as a result of lower volumes in ~~the~~ ~~Legend~~ ~~class NSC program and amphibious assault ships,~~surface combatants, partially offset by higher volumes ~~on surface combatants. Ingalls~~in amphibious assault ships. Newport News product sales increased ~~$49~~$79 million for the ~~nine~~three months ended ~~September~~June 30, ~~2021,~~2022, primarily as a result of higher volumes in ~~surface combatants and amphibious assault ships,~~aircraft carriers, partially offset by lower volumes in ~~the~~ ~~Legend~~ ~~class NSC program.~~submarines. Newport News product sales increased ~~$34 million and $374~~$99 million for the ~~three and nine~~six months ended ~~September~~June 30, ~~2021, respectively,~~2022, primarily as a result of higher volumes in ~~submarines and~~ aircraft carriers. ~~Technical Solutions~~Mission Technologies product sales ~~increased $5 million~~were flat for the three months ended ~~September~~June 30, ~~2021,~~2022. Mission Technologies product sales increased $9 million for the six months ended June 30, 2022, primarily as a result of higher volumes in DFS due to the acquisition of Alion, partially offset by lower volumes in unmanned systems. Technical Solutions product sales increased $19 million for the nine months ended September 30, 2021, primarily as a result of higher volumes in DFSdefense and ~~unmanned systems.~~federal solutions ("DFS").

Service revenues for the three months ended ~~September~~June 30, ~~2021,~~2022, increased ~~$22~~$365 million, or 4%78%, compared with the same period in ~~2020.~~2021. Service revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2021, decreased $199~~2022, increased $660 million, or ~~11%~~64%, compared with the same period in ~~2020.~~2021. Ingalls service revenues increased $4 million and $12 million for the three and six months ended ~~September~~June 30, ~~2021, decreased $14 million,~~2022, respectively, primarily as a result of higher volumes in amphibious assault ship services, partially offset by lower volumes in surface combatant services. ~~Ingalls service revenues for the nine months ended September 30, 2021, decreased $38 million, primarily as a result of lower volumes in surface combatant and amphibious assault ship services.~~ Newport News service revenues decreased ~~$38~~$6 million for the three months ended ~~September~~June 30, ~~2021,~~2022, primarily as a result of lower volumes in naval nuclear support services and aircraft carrier services, partially offset by higher volumes in submarine services. Newport News service revenues decreased ~~$73~~$43 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily as a result of lower volumes in aircraft carrier services and naval nuclear support ~~services, partially offset by higher volumes in aircraft carrier and submarine~~ services. ~~Technical Solutions~~Mission Technologies service revenues increased ~~$74~~$367 million and $691 million for the three and six months ended ~~September~~June 30, ~~2021,~~2022, respectively, primarily as a result of higher volumes in DFS services due to the acquisition of Alion, partially offset by the divestiture of our oil and gas business. Technical Solutions service revenues decreased $88 million for the nine months ended September 30, 2021, primarily as a result of the divestiture of our oil and gas business and contribution of our San Diego Shipyard to a joint venture, partially offset by higher volumes in DFS services due to the acquisition of Alion.services.

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Cost of Sales and Service Revenues

Cost of product sales, cost of service revenues, income from operating investments, net, and general and administrative expenses were as follows:


		Three Months Ended September 30														Nine Months Ended September 30															Three Months Ended June 30														Six Months Ended June 30
									2021 over 2020														2021 over 2020															2022 vs. 2021														2022 vs. 2021
($ in millions)	($ in millions)				2021				2020			Dollars			Percent				2021				2020			Dollars			Percent	($ in millions)				2022				2021			Dollars			Percent				2022				2021			Dollars			Percent
Cost of product sales	Cost of product sales	$	1,453			$	1,388			$	65		5	%		$	4,402			$	3,931			$	471		12	%	Cost of product sales		$	1,526			$	1,495			$	31		2	%		$	2,994			$	2,949			$	45		2	%
% of product sales	% of product sales	85.4		%		81.7		%								84.9		%		82.9		%							% of product sales		83.4		%		84.8		%								84.3		%		84.6		%
Cost of service revenues	Cost of service revenues	554				490				64			13	%		1,450				1,550				(100)			(6)	%	Cost of service revenues		746				414				332			80	%		1,505				896				609			68	%
% of service revenues	% of service revenues	87.0		%		79.7		%								87.2		%		83.3		%							% of service revenues		89.6		%		88.5		%								89.3		%		87.4		%
Income from operating investments, net	Income from operating investments, net	11				6				5			83	%		31				19				12			63	%	Income from operating investments, net		27				12				15			125	%		34				20				14			70	%
Other income and gains		2				—				2			—	%		3				—				3			—	%
Other income and gains (losses), net																													Other income and gains (losses), net		1				(2)				3			150	%		—				1				(1)			(100)	%
General and administrative expenses	General and administrative expenses	226				220				6			3	%		636				648				(12)			(2)	%	General and administrative expenses		227				204				23			11	%		444				410				34			8	%
% of sales and service revenues	% of sales and service revenues	9.7		%		9.5		%								9.3		%		9.8		%							% of sales and service revenues		8.5		%		9.1		%								8.5		%		9.1		%

Cost of sales and service revenues	Cost of sales and service revenues	$	2,220			$	2,092			$	128		6	%		$	6,454			$	6,110			$	344		6	%	Cost of sales and service revenues		$	2,471			$	2,103			$	368		17	%		$	4,909			$	4,234			$	675		16	%

Cost of Product Sales

Cost of product sales for the three months ended ~~September~~June 30, ~~2021,~~2022, increased ~~$65~~$31 million, or 5%2%, compared with the same period in ~~2020.~~2021. Cost of product sales for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, increased ~~$471~~$45 million, or ~~12%~~2%, compared with the same period in ~~2020.~~2021. Ingalls cost of product sales decreased ~~$30~~$28 million and $38 million for the three and six months ended ~~September~~June 30, ~~2021,~~2022, respectively, primarily as a result of volume decreases ~~described above. Ingalls cost of~~

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~~product sales for the nine months ended September 30, 2021, were flat primarily as a result of volume increases~~ described above, partially offset by higher risk retirement on ~~Bougainville~~ Harrisburg~~(LHA 8)~~ (LPD 30). Newport News cost of product sales increased ~~$14~~$56 million and ~~$207~~$76 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, primarily as a result of volume increases described above. ~~Technical Solutions~~Mission Technologies cost of product sales ~~decreased $2~~increased $5 million for the three months ended ~~September~~June 30, ~~2021,~~2022, driven by ~~improved performance~~year-to-year variances in ~~DFS services, partially offset by volume increases described above. Technical Solutions~~contract mix. Mission Technologies cost of product sales increased ~~$15~~$11 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021, primarily as a result of the~~2022, driven by volume increases described above. Cost of product sales related to the Operating FAS/CAS Adjustment ~~increased $83~~decreased $2 million and ~~$249~~$4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, as described below.

Cost of product sales as a percentage of product sales ~~increased~~decreased from ~~81.7%~~84.8% for the three months ended ~~September~~June 30, ~~2020,~~2021, to ~~85.4%~~83.4% for the three months ended ~~September~~June 30, ~~2021.~~2022. The ~~increase~~decrease was primarily due to ~~an unfavorable~~favorable changes in contract estimates from facilities capital and price adjustment clauses and higher risk retirement on Harrisburg (LPD 30), as well as a favorable change in the Operating FAS/CAS Adjustment, partially offset by lower ~~performance~~risk retirement on the Virginia class (SSN 774) submarine program and receipt of a contract incentive on USS Jack H. Lucas (DDG 125) in ~~unmanned systems,~~2021. Cost of product sales as a percentage of product sales decreased from 84.6% for the six months ended June 30, 2021, to 84.3% for the six months ended June 30, 2022. The decrease was primarily due to favorable changes in contract estimates from facilities capital and price adjustment clauses and higher risk retirement on Harrisburg (LPD 30), USS Gerald R. Ford (CVN 78), Fort Lauderdale (LPD 28) following its delivery,and Frank E. Petersen Jr. (DDG 121), as well as a favorable change in the Operating FAS/CAS Adjustment, partially offset by lower risk retirement on the Virginia class (SSN 774) submarine program, receipt of a contract incentive on USS Jack H. Lucas (DDG 125) in 2021, and lower risk retirement on Bougainville (LHA 8)~~, partially offset by higher risk retirements on the RCOH of USS~~ ~~George Washington~~ ~~(CVN 73), Block IV boats of the~~ ~~Virginia~~ ~~class (SSN 774) submarine program, and USS~~ ~~Frank E. Peterson Jr.~~ (DDG 121). Cost of product sales as a percentage of product sales increased from 82.9% for the nine months ended September 30, 2020, to 84.9% for the nine months ended September 30, 2021. The increase was due to an unfavorable change in the Operating FAS/CAS Adjustment, partially offset by impacts related to performance on Block IV boats of the ~~Virginia~~ ~~class (SSN 774) submarine program and delay and disruption from discrete COVID-19 Events in 2020, a contract incentive on~~ ~~Jack H. Lucas~~ ~~(DDG 125), and higher risk retirement on~~ ~~Bougainville~~ ~~(LHA 8) and~~ ~~Fort Lauderdale~~ ~~(LPD 28)~~.

Cost of Service Revenues

Cost of service revenues for the three months ended ~~September~~June 30, ~~2021,~~2022, increased ~~$64~~$332 million, or ~~13%~~80%, compared with the same period in ~~2020.~~2021. Cost of service revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2021, decreased $100~~2022, increased $609 million, or 6%68%, compared with the same period in ~~2020.~~2021. Ingalls cost of service revenues increased $5 million and $12 million for the three and six months ended June 30, 2022, respectively, primarily as a result of higher volumes described above. Newport News cost of service revenues decreased $15 million and ~~$34~~$50 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, primarily as a result of lower volumes described above. ~~Newport News~~Mission Technologies cost of service revenues ~~decreased $19~~increased $342 million and ~~$29~~$648 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, ~~primarily as a result of lower volumes described above. Technical Solutions cost of service revenues increased $80 million for the three months ended September 30, 2021,~~ primarily as a result of higher volumes described above. ~~Technical Solutions cost of service revenues decreased $92 million for the nine months ended September 30, 2021, primarily as a result of lower volumes described above.~~ Cost of service revenues

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related to the Operating FAS/CAS Adjustment ~~increased $18 million~~was flat for the three months ended June 30, 2022 and ~~$55~~decreased $1 million for the ~~three and nine~~six months ended ~~September~~June 30, ~~2021, respectively,~~2022, as described below.

Cost of service revenues as a percentage of service revenues increased from ~~79.7%~~88.5% for the three months ended ~~September~~June 30, ~~2020,~~2021, to ~~87.0%~~89.6% for the three months ended ~~September~~June 30, ~~2021,~~2022, primarily driven by ~~an unfavorable~~higher amortization of purchased intangible assets and year-to-year variances in contract mix, partially offset by improved performance in DFS services due to the acquisition of Alion in the third quarter of 2021. and a favorable change in the Operating FAS/CAS ~~Adjustment, lower risk retirement on submarine support services, lower performance in DFS services, and year-to-year variances in contract mix.~~Adjustment. Cost of service revenues as a percentage of service revenues increased from ~~83.3%~~87.4% for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, to ~~87.2%~~89.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily driven by ~~an unfavorable~~higher amortization of purchased intangible assets and year-to-year variances in contract mix, partially offset by improved performance in DFS services due to the acquisition of Alion in the third quarter of 2021, as well as a favorable change in the Operating FAS/CAS ~~Adjustment, lower risk retirement on submarine support services, and year-to-year variances in contract mix.~~Adjustment.

Income (Loss) from Operating Investments, Net

The activities of our operating investments are closely aligned with the operations of the segments holding the investments. We therefore record income related to earnings from equity method investments in our operating income.

Income from operating investments, net for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, increased $5$15 million and ~~$12~~$14 million, respectively, from the same periods in ~~2020,~~2021, primarily due to higher equity income from our ~~nuclear and environmental joint ventures and~~investment in an unconsolidated ship repair and specialty fabrication joint ~~venture.~~venture, partially offset by lower equity income from our nuclear and environmental joint ventures.

Other Income and Gains (Losses), Net

~~For~~Other income and gains (losses), net was a net gain of $1 million and a net loss of $2 million for the three months ended ~~September~~June 30, 2022 and 2021, ~~we recognized a gain~~respectively. The favorable change of $2$3 million was primarily due to a ~~favorable claim resolution. For~~loss recognized in the ~~nine months ended September 30,~~second quarter of 2021 ~~we recognized~~as a result of the final purchase price adjustment to a gain ~~of $3 million, primarily due a favorable claim resolution and~~on the sale of our oil and gas business.

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Other income and gains (losses), net were flat for the six months ended June 30, 2022, compared to the same period in 2021.

General and Administrative Expenses

In accordance with industry practice and the regulations that govern the cost accounting requirements for government contracts, most general and administrative expenses are considered allowable and allocable costs on government contracts. These costs are allocated to contracts in progress on a systematic basis, and contract performance factors include this cost component as an element of cost.

General and administrative expenses for the three and six months ended ~~September~~June 30, ~~2021,~~2022, increased $6$23 million and $34 million, respectively, from the same ~~period~~periods in ~~2020,~~2021, primarily due to higher overhead costs ~~partially offset by favorable changes~~as a result of the acquisition of Alion in ~~current state income tax expense. General~~the third quarter of 2021 and ~~administrative expenses for the nine months ended September 30, 2021, decreased $12 million from the same period in 2020, primarily driven by favorable changes in~~ current state income tax expense, partially offset by ~~higher overhead costs.~~favorable changes in non-current state income taxes.

Operating Income

We consider operating income to be an important measure for evaluating our operating performance, and, consistent with industry practice, we define operating income as revenues less the related costs of producing the revenues and general and administrative expenses.

We internally manage our operations by reference to "segment operating income," which is defined as operating income before the Operating FAS/CAS Adjustment and non-current state income taxes, neither of which affects segment performance. Segment operating income is not a recognized measure under GAAP. When analyzing our operating performance, investors should use segment operating income in addition to, and not as an alternative for, operating income or any other performance measure presented in accordance with GAAP. It is a measure we use to evaluate our core operating performance. We believe segment operating income reflects an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our business. We believe the measure is used by investors and is a

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useful indicator to measure our performance. Because not all companies use identical calculations, our presentation of segment operating income may not be comparable to similarly titled measures of other companies.

The following table reconciles operating income to segment operating income:
Three Months Ended
September 30 Nine Months Ended
September 30
2021 over 2020 2021 over 2020
($ in millions) 2021 2020 Dollars Percent 2021 2020 Dollars Percent
Operating income $ 118 $ 222 $ (104) (47) % $ 393 $ 494 $ (101) (20) %
Operating FAS/CAS Adjustment 41 (60) 101 168 % 118 (186) 304 163 %
Non-current state income taxes 4 — 4 — % 12 5 7 140 %
Segment operating income $ 163 $ 162 $ 1 1 % $ 523 $ 313 $ 210 67 %

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	Three Months Ended June 30								Six Months Ended June 30
					2022 vs. 2021								2022 vs. 2021
($ in millions)	2022		2021		Dollars		Percent		2022		2021		Dollars		Percent
Operating income	$	191	$	128	$	63	49	%	$	329	$	275	$	54	20	%
Operating FAS/CAS Adjustment	35		37		(2)		(5)	%	72		77		(5)		(6)	%
Non-current state income taxes	(1)		4		(5)		(125)	%	—		8		(8)		(100)	%
Segment operating income	$	225	$	169	$	56	33	%	$	401	$	360	$	41	11	%

Segment Operating Income

Segment operating income for the three months ended ~~September~~June 30, ~~2021,~~2022, was ~~$163~~$225 million, compared with segment operating income of ~~$162~~$169 million for the same period in ~~2020.~~2021. The increase was primarily due to favorable changes in contract estimates from facilities capital and price adjustment clauses and higher risk retirement on ~~the RCOH of USS~~ ~~George Washington~~Harrisburg (~~CVN 73)~~LPD 30), as well as improved performance in DFS services and ~~Block IV boats of~~higher equity income, partially offset by lower risk retirement on the Virginia class (SSN 774) submarine program and equity income in nuclear and environmental joint ventures and our ship repair and specialty fabrication joint venture, partially offset by lower performance in unmanned systems. Segment operating income for the nine months ended September 30, 2021, was $523 million, compared with segment operating incomereceipt of ~~$313 million for the same period in 2020. The increase was primarily due to impacts related to performance on Block IV boats of the~~ ~~Virginia~~ ~~class (SSN 774) submarine program and delay and disruption from discrete COVID-19 Events in 2020,~~ a contract incentive on USS Jack H. Lucas (DDG 125), in 2021, as well as higher amortization of purchased intangible assets.

Segment operating income for the six months ended June 30, 2022, was $401 million, compared with segment operating income of $360 million for the same period in 2021. The increase was primarily due to favorable changes in contract estimates from facilities capital and price adjustment clauses and higher risk retirement on Harrisburg (LPD 30), USS Gerald R. Ford (CVN 78), Fort Lauderdale (LPD 28) following its delivery, and Frank E. Petersen Jr. (DDG 121), as well as improved performance in DFS services and higher equity income, partially offset by lower risk retirement on the Virginia class (SSN 774) submarine program, receipt of a contract incentive on USS Jack H. Lucas (DDG 125) in 2021, and lower risk retirement on Bougainville (LHA 8) ~~and~~ ~~Fort Lauderdale~~ ~~(LPD 28)~~, ~~partially offset by lower risk retirement on USS~~ ~~Delbert D. Black~~ ~~(DDG 119) following its delivery.~~as well as higher amortization of purchased intangible assets.

Activity within each segment is discussed in Segment Operating Results below.

FAS/CAS Adjustment and Operating FAS/CAS Adjustment

The FAS/CAS Adjustment reflects the difference between expenses for pension and other postretirement benefits determined in accordance with GAAP ("FAS") and the expenses for these items included in segment operating income in accordance with U.S. Cost Accounting Standards ("CAS"). The Operating FAS/CAS Adjustment excludes the following components of net periodic benefit costs: interest cost, expected return on plan assets, amortization of prior service cost (credit) and actuarial loss (gain), and settlement and curtailment effects.

Effective January 1, 2021, we adopted the Safe Harbor methodology for determining CAS pension costs. Under the new methodology, the interest rates used to calculate pension liabilities under CAS are consistent with

~~those used in the determination of minimum funding requirements under the Employee Retirement Income Security Act of 1974 ("ERISA").~~

The components of the Operating FAS/CAS Adjustment were as follows:


		Three Months Ended September 30												Nine Months Ended September 30													Three Months Ended June 30												Six Months Ended June 30
							2021 over 2020												2021 over 2020													2022 vs. 2021												2022 vs. 2021
($ in millions)	($ in millions)			2021			2020			Dollars			Percent			2021			2020			Dollars			Percent	($ in millions)			2022			2021			Dollars			Percent			2022			2021			Dollars			Percent
FAS expense		$	(7)		$	(18)		$	11		61	%		$	(21)		$	(53)		$	32		60	%
FAS benefit (expense)																									FAS benefit (expense)		$	19		$	(7)		$	26		371	%		$	43		$	(14)		$	57		407	%
CAS cost	CAS cost	11			107			(96)			(90)	%		38			328			(290)			(88)	%	CAS cost		13			14			(1)			(7)	%		23			27			(4)			(15)	%
FAS/CAS Adjustment	FAS/CAS Adjustment	4			89			(85)			(96)	%		17			275			(258)			(94)	%	FAS/CAS Adjustment		32			7			25			357	%		66			13			53			408	%
Non-operating retirement benefit	Non-operating retirement benefit	(45)			(29)			(16)			(55)	%		(135)			(89)			(46)			(52)	%	Non-operating retirement benefit		(67)			(44)			(23)			(52)	%		(138)			(90)			(48)			(53)	%
Operating FAS/CAS Adjustment	Operating FAS/CAS Adjustment	$	(41)		$	60		$	(101)		(168)	%		$	(118)		$	186		$	(304)		(163)	%	Operating FAS/CAS Adjustment		$	(35)		$	(37)		$	2		5	%		$	(72)		$	(77)		$	5		6	%

The Operating FAS/CAS Adjustment was a net expense of ~~$41~~$35 million and ~~a net benefit of $60~~$37 million for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The Operating FAS/CAS Adjustment was a net expense of ~~$118~~$72 million and ~~a net benefit of $186~~$77 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~unfavorable~~favorable changes in the Operating FAS/CAS Adjustment of ~~$101~~$2 million and ~~$304~~$5 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, were primarily driven by the more immediate recognition of higher interest rates under ~~CAS.~~FAS.

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Non-current State Income Taxes

Non-current state income taxes include deferred state income taxes, which reflect the change in deferred state tax assets and liabilities, and the tax expense or benefit associated with changes in state unrecognized tax benefits in the relevant period. These amounts are recorded within operating income. Current period state income tax expense is charged to contract costs and included in cost of sales and service revenues in segment operating income.

Non-current state income tax ~~expense~~benefit for the three months ended ~~September~~June 30, ~~2021,~~2022, was $4$1 million, compared to non-current state income tax expense of ~~less than $1~~$4 million for the same period in ~~2020.~~2021. The ~~unfavorable~~favorable change in non-current state income taxes was driven by ~~an increase~~a decrease in deferred state income tax expense, primarily

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attributable to ~~a reduction~~an increase in ~~the~~expenses that are not currently deductible for income tax ~~basis of fixed assets resulting from increased tax depreciation.~~purposes. Non-current state income tax ~~expense~~benefit for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was ~~$12~~less than $1 million, compared to non-current state income tax expense of $5$8 million for the same period in ~~2020.~~2021. The ~~unfavorable~~favorable change in non-current state income taxes was driven by ~~an increase~~a decrease in deferred state income tax expense, primarily attributable to ~~a decrease~~an increase in expenses that are not currently deductible for income tax purposes.

Interest Expense

Interest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, decreased $3~~2022, increased $8 million and $5$13 million, respectively, compared with the same periods in ~~2020,~~2021, primarily due to ~~the early redemption of our senior notes in the fourth quarter of 2020, partially offset by~~ the issuance of senior notes and borrowing under the Term Loan in ~~August~~the third quarter of 2021.

Non-Operating Retirement Benefit

The non-operating retirement benefit includes the following components of net periodic benefit costs: interest cost, expected return on plan assets, amortization of prior service cost (credit) and actuarial loss (gain), and settlement and curtailment effects. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the favorable ~~changes~~change in the non-operating retirement benefit of ~~$16~~$23 million and ~~$46~~$48 million ~~respectively, were~~was primarily driven by higher ~~2020~~2021 returns on plan assets.

Other, Net

Other, net ~~income~~expense increased $17 million and $25 million for the three and six months ended ~~September~~June 30, ~~2021, was flat with the same period in 2020. Other, net income increased $18 million for the nine months ended September 30, 2021,~~2022, respectively, compared with the same ~~period~~periods in ~~2020,~~2021, primarily driven by ~~an impairment of a loan receivable in 2020 and net gains~~losses on investments in marketable securities.

Federal and Foreign Income Taxes

Our effective income tax rates on earnings from operations for the three months ended ~~September~~June 30, 2022 and 2021, were 19.8% and ~~2020, were (4.3)% and 1.8%~~19.9%, respectively. Our effective income tax rates on earnings from operations for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, were 20.1% and ~~2020, were 10.7% and 11.8%~~17.1%, respectively. The ~~lower~~ effective tax rate for the three months ended ~~September~~June 30, ~~2021,~~2022, was ~~primarily attributable~~generally flat compared to ~~research and development tax credits for~~the prior ~~periods.~~year. The ~~lower~~higher effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was primarily attributable to ~~an increase in research and development tax credits for prior periods and~~ a tax loss associated with the sale of our oil and gas business ~~partially offset by an increase~~recorded in ~~unrecognized tax benefits.~~2021.

For ~~each of~~ the three ~~and nine~~ months ended ~~September~~June 30, ~~2021 and 2020,~~2022, our effective tax ~~rates~~rate differed from the federal statutory corporate income tax rate primarily as a result of research and development tax credits. For the six months ended June 30, 2022, our effective tax rate did not differ materially from the federal statutory corporate income tax rate of 21%. For the three months ended June 30, 2021, our effective tax rate differed from the federal statutory tax rate primarily as a result of ~~the~~ research and development tax ~~credits for prior periods.~~credits. For the six months ended June 30, 2021, our effective tax rate differed from the federal statutory tax rate primarily as a result of a tax loss associated with the sale of our oil and gas business. See Note ~~11:~~9: Income Taxes.

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SEGMENT OPERATING RESULTS

Basis of Presentation

We are aligned into three reportable segments: Ingalls, Newport News, and ~~Technical Solutions.~~Mission Technologies.

The following table presents segment operating results:


		Three Months Ended September 30												Nine Months Ended September 30													Three Months Ended June 30												Six Months Ended June 30
							2021 over 2020												2021 over 2020													2022 vs. 2021												2022 vs. 2021
($ in millions)	($ in millions)			2021			2020			Dollars			Percent			2021			2020			Dollars			Percent	($ in millions)			2022			2021			Dollars			Percent			2022			2021			Dollars			Percent
Sales and Service Revenues	Sales and Service Revenues																								Sales and Service Revenues
Ingalls	Ingalls	$	628		$	675		$	(47)		(7)	%		$	1,947		$	1,926		$	21		1	%	Ingalls		$	658		$	670		$	(12)		(2)	%		$	1,289		$	1,319		$	(30)		(2)	%
Newport News	Newport News	1,354			1,358			(4)			—	%		4,124			3,821			303			8	%	Newport News		1,433			1,363			70			5	%		2,823			2,770			53			2	%
Technical Solutions		394			320			74			23	%		890			957			(67)			(7)	%
Mission Technologies																									Mission Technologies		600			237			363			153	%		1,190			496			694			140	%
Intersegment eliminations	Intersegment eliminations	(38)			(39)			1			3	%		(114)			(100)			(14)			(14)	%	Intersegment eliminations		(29)			(39)			10			26	%		(64)			(76)			12			16	%
Sales and service revenues	Sales and service revenues	$	2,338		$	2,314		$	24		1	%		$	6,847		$	6,604		$	243		4	%	Sales and service revenues		$	2,662		$	2,231		$	431		19	%		$	5,238		$	4,509		$	729		16	%
Operating Income	Operating Income																								Operating Income
Ingalls	Ingalls	$	62		$	62		$	—		—	%		$	233		$	185		$	48		26	%	Ingalls		$	106		$	80		$	26		33	%		$	192		$	171		$	21		12	%
Newport News	Newport News	88			79			9			11	%		257			105			152			145	%	Newport News		94			76			18			24	%		175			169			6			4	%
Technical Solutions		13			21			(8)			(38)	%		33			23			10			43	%
Segment operating income (loss)		163			162			1			1	%		523			313			210			67	%
Non-segment factors affecting operating income (loss)
Mission Technologies																									Mission Technologies		25			13			12			92	%		34			20			14			70	%
Segment operating income																									Segment operating income		225			169			56			33	%		401			360			41			11	%
Non-segment factors affecting operating income																									Non-segment factors affecting operating income
Operating FAS/CAS Adjustment	Operating FAS/CAS Adjustment	(41)			60			(101)			(168)	%		(118)			186			(304)			(163)	%	Operating FAS/CAS Adjustment		(35)			(37)			2			5	%		(72)			(77)			5			6	%
Non-current state income taxes	Non-current state income taxes	(4)			—			(4)			—	%		(12)			(5)			(7)			(140)	%	Non-current state income taxes		1			(4)			5			125	%		—			(8)			8			100	%
Operating income	Operating income	$	118		$	222		$	(104)		(47)	%		$	393		$	494		$	(101)		(20)	%	Operating income		$	191		$	128		$	63		49	%		$	329		$	275		$	54		20	%

KEY SEGMENT FINANCIAL MEASURES

Sales and Service Revenues

Period-to-period revenues reflect performance under new and ongoing contracts. Changes in sales and service revenues are typically expressed in terms of volume. Unless otherwise described, volume generally refers to increases (or decreases) in reported revenues due to varying production activity levels, delivery rates, or service levels on individual contracts. Volume changes will typically carry a corresponding income change based on the margin rate for a particular contract.

Segment Operating Income ~~(Loss)~~

Segment operating income reflects the aggregate performance results of contracts within a segment. Excluded from this measure are certain costs not directly associated with contract performance, such as the Operating FAS/CAS Adjustment and non-current state income taxes. Changes in segment operating income are typically expressed in terms of volume, as discussed above, or performance. Performance refers to changes in contract margin rates. These changes typically relate to profit recognition associated with revisions to estimated costs at completion ("EAC") that reflect improved or deteriorated operating performance on that contract. Operating income changes are accounted for on a cumulative to date basis at the time an EAC change is recorded. Segment operating income may also be affected by, among other things, contract performance, the effects of workforce stoppages, the effects of natural disasters such as hurricanes, resolution of disputed items with the customer, recovery of insurance proceeds, and other discrete events. At the completion of a long-term contract, any originally estimated costs not incurred or reserves not fully utilized, such as warranty reserves, could also impact contract earnings. Where such items have occurred and the effects are material, a separate description is provided.

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Cumulative Adjustments

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, favorable and unfavorable cumulative catch-up margin adjustments were as follows:


		Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended June 30						Six Months Ended June 30

($ in millions)	($ in millions)			2021			2020					2021		2020		($ in millions)			2022			2021			2022	2021
Gross favorable adjustments	Gross favorable adjustments	$	51		$	40		$	199	$	157		Gross favorable adjustments	$	106		$	62		$	213		$	148
Gross unfavorable adjustments	Gross unfavorable adjustments	(30)			(36)			(93)		(232)			Gross unfavorable adjustments	(38)			(27)			(100)			(63)
Net adjustments	Net adjustments	$	21		$	4		$	106	$	(75)		Net adjustments	$	68		$	35		$	113		$	85

For the three months ended ~~September~~June 30, ~~2021, no~~2022, favorable orcumulative catch-up margin adjustments were related to risk retirement on Harrisburg (LPD 30). During the same period, none of the unfavorable cumulative catch-up margin adjustments were individually significant.

For the ~~nine~~six months ended ~~September~~June 30, 2022, favorable cumulative catch-up margin adjustments were related to risk retirement on Harrisburg (LPD 30) and Fort Lauderdale (LPD 28) following its delivery. During the same period, none of the unfavorable cumulative catch-up margin adjustments were individually significant.

For the three months ended June 30, 2021, favorable cumulative margin catch-up adjustments included a contract incentive on Jack H. Lucas (DDG 125) and risk retirement on Richard M. McCool Jr. (LPD 29) and Fort Lauderdale (LPD 28). During the same period, none of the unfavorable cumulative catch-up margin adjustments were individually significant.

For the six months ended June 30, 2021, favorable cumulative margin catch-up adjustments included risk retirement on Bougainville (LHA 8), a contract incentive on Jack H. Lucas (DDG 125), and risk retirement on Block IV of the Virginiaclass (SSN 774) submarine program and Fort Lauderdale (LPD 28). During the same period, nonone of the unfavorable cumulative catch-up margin adjustments were individually significant.

~~For the three months ended September 30, 2020, no favorable cumulative catch-up margin adjustments were individually significant.~~

~~For the nine months ended September 30, 2020, favorable cumulative catch-up margin adjustments included risk retirement on USS~~ ~~Delbert D. Black~~ ~~(DDG 119) in connection with its delivery and a capital expenditure contract incentive, and other individually insignificant adjustments.~~

~~During the same period, unfavorable cumulative catch-up margin adjustments were primarily driven by $111 million in the second quarter of 2020 on the Block IV boats of the~~ ~~Virginia~~ class (SSN 774) submarine program, including $95 million for cost and schedule performance and updates to our assumptions for future program efficiencies and performance as a result of cost and schedule trends. Our risk retirement assumptions on Block IV boats anticipated boat-to-boat cost and schedule improvements working down the learning curve, but performance trends, exacerbated by the COVID-19 Events, made those improvements less likely to occur. Unfavorable cumulative catch-up adjustments on the Block IV boats of the Virginia class (SSN 774) submarine program also included $16 million from delay and disruption directly attributable to COVID-19 Events due to lower employee attendance, a shortage of critical skills, and out-of-sequence work. Unfavorable cumulative catch-up margin adjustments across all programs resulting from delay and disruption cost estimates for discrete COVID-19 Events were $61 million, including $16 million in relation to the Block IV boats of the ~~Virginia~~ ~~class (SSN 774) submarine program, discussed above.~~

Ingalls


		Three Months Ended September 30														Nine Months Ended September 30															Three Months Ended June 30														Six Months Ended June 30
									2021 over 2020														2021 over 2020															2022 vs. 2021														2022 vs. 2021
($ in millions)	($ in millions)				2021				2020			Dollars			Percent				2021				2020			Dollars			Percent	($ in millions)				2022				2021			Dollars			Percent				2022				2021			Dollars			Percent
Sales and service revenues	Sales and service revenues	$	628			$	675			$	(47)		(7)	%		$	1,947			$	1,926			$	21		1	%	Sales and service revenues		$	658			$	670			$	(12)		(2)	%		$	1,289			$	1,319			$	(30)		(2)	%
Segment operating income	Segment operating income	62				62				—			—	%		233				185				48			26	%	Segment operating income		106				80				26			33	%		192				171				21			12	%
As a percentage of segment sales	As a percentage of segment sales	9.9		%		9.2		%								12.0		%		9.6		%							As a percentage of segment sales		16.1		%		11.9		%								14.9		%		13.0		%

Sales and Service Revenues

Ingalls revenues for the three months ended ~~September~~June 30, ~~2021,~~2022, decreased ~~$47~~$12 million, or 7%2%, from the same period in ~~2020,~~2021, primarily driven by lower revenues in ~~the~~ ~~Legend~~ ~~class NSC program,~~ surface combatants, ~~and~~partially offset by higher revenues in amphibious assault ships. ~~Revenues on the NSC program decreased due to lower volumes on~~ ~~Stone~~ ~~(NSC 9) following its delivery.~~ Revenues on surface combatants decreased due to lower volumes on ~~Ted Stevens (~~Jeremiah Denton (DDG ~~128)~~129) and USS ~~Delbert D. Black~~Jack H Lucas ~~(DDG 119) following its delivery, partially offset by higher volumes on USS~~ ~~Jack H.~~

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~~Lucas~~ ~~(DDG~~(DDG 125)~~. Revenues on amphibious assault ships decreased due to lower volumes on~~ ~~Bougainville~~ ~~(LHA 8)~~, partially offset by higher volumes on Thad Cochran (DDG 135). Revenues on amphibious assault ships increased due to higher volumes on Pittsburgh (LPD 31), Harrisburg (LPD 30), LHA 9 (unnamed), and L-Class planning yard services contract, partially offset by lower volumes on Fort Lauderdale (LPD 28).

Ingalls revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2021, increased $21~~2022, decreased $30 million, or 1%2%, from the same period in ~~2020,~~2021, primarily driven by lower revenues in surface combatants, partially offset by higher revenues in amphibious assault ships. Revenues on surface combatants ~~and amphibious assault ships, partially offset by lower revenues in the~~ ~~Legend~~ ~~class NSC program. Surface combatant revenues increased~~decreased due to ~~higher~~lower volumes onJeremiah Denton (DDG 129), USS Jack H. Lucas (DDG 125), ~~USS~~and ~~Jeremiah Denton~~Frank E. Petersen Jr. (DDG ~~129), USS~~ ~~George M. Neal~~ ~~(DDG 131), and USS~~ ~~Sam Nunn~~ ~~(DDG 133)~~121), partially offset by ~~lower~~higher volumes on ~~USS~~ ~~Delbert D. Black~~Thad Cochran (DDG ~~119) following its delivery and USS~~ ~~Fitzgerald~~ ~~(DDG 62) following its redelivery. Amphibious~~135). Revenues on amphibious assault ~~ship revenues~~ships increased due to higher volumes on LHA 9 (unnamed), Pittsburgh (LPD 31), ~~LHA 9 (unnamed)~~ and L-Class planning yard services contract and higher volumes on ~~Bougainville~~Harrisburg ~~(LHA 8)~~(LPD 30), partially offset by lower volumes on Fort Lauderdale (LPD 28), and ~~Richard M. McCool Jr.~~ Bougainville~~(LPD 29) and USS~~ ~~Tripoli~~ ~~(LHA 7). Revenues on the~~ ~~Legend~~ ~~class NSC program decreased due to lower volumes on~~ ~~Stone (NSC 9) following its delivery, partially offset by higher volumes on~~ ~~Friedman~~ ~~(NSC 11)~~ (LHA 8).

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Segment Operating Income

~~Ingalls segment operating income for the three months ended September 30, 2021, was flat with the same period in 2020.~~

Ingalls segment operating income for the ~~nine~~three months ended ~~September~~June 30, ~~2021,~~2022, was ~~$233~~$106 million, compared with ~~$185~~segment operating income of $80 million for the same period in ~~2020.~~2021. The increase was primarily driven by favorable changes in contract estimates from facilities capital and price adjustment clauses and higher risk retirement on Harrisburg (LPD 30), partially offset by receipt of a contract incentive on USS Jack H. Lucas (DDG 125) in 2021.

Ingalls segment operating income for the six months ended June 30, 2022, was $192 million, compared with segment operating income of $171 million for the same period in 2021. The increase was primarily driven by favorable changes in contract estimates from facilities capital and price adjustment clauses and higher risk retirement on Harrisburg (LPD 30), Fort Lauderdale (LPD 28) following its delivery, and Frank E. Petersen Jr. (DDG 121), partially offset by receipt of a contract incentive on USS Jack H. Lucas (DDG 125) in 2021 and lower risk retirement on Bougainville (LHA 8) ~~and~~ ~~Fort Lauderdale~~ ~~(LPD 28), partially offset by lower risk retirement on USS~~ ~~Delbert D. Black~~ ~~(DDG 119) following its delivery.~~.

Newport News


		Three Months Ended September 30														Nine Months Ended September 30															Three Months Ended June 30														Six Months Ended June 30
									2021 over 2020														2021 over 2020															2022 vs. 2021														2022 vs. 2021
($ in millions)	($ in millions)				2021				2020			Dollars			Percent				2021				2020			Dollars			Percent	($ in millions)				2022				2021			Dollars			Percent				2022				2021			Dollars			Percent
Sales and service revenues	Sales and service revenues	$	1,354			$	1,358			$	(4)		—	%		$	4,124			$	3,821			$	303		8	%	Sales and service revenues		$	1,433			$	1,363			$	70		5	%		$	2,823			$	2,770			$	53		2	%
Segment operating income (loss)		88				79				9			11	%		257				105				152			145	%
Segment operating income																													Segment operating income		94				76				18			24	%		175				169				6			4	%
As a percentage of segment sales	As a percentage of segment sales	6.5		%		5.8		%								6.2		%		2.7		%							As a percentage of segment sales		6.6		%		5.6		%								6.2		%		6.1		%

Sales and Service Revenues

Newport News revenues for the three months ended ~~September~~June 30, ~~2021, decreased $4~~2022, increased $70 million, or 5%, from the same period in ~~2020,~~2021, primarily driven ~~by lower revenues in naval nuclear support services, partially offset~~ by higher revenues in ~~submarines and~~ aircraft ~~carriers. Naval nuclear support services revenues decreased primarily as a result of~~carriers, partially offset by lower volumes in ~~submarine fleet support services and facility maintenance services, partially offset by higher volumes in carrier fleet~~naval nuclear support services. Aircraft carrier revenues increased primarily as a result of higher volumes on the RCOH of USS John C. Stennis (CVN 74), the construction of Doris Miller ~~(CVN 81), and the construction of~~ ~~Enterprise~~ ~~(CVN 80), partially offset by lower volumes on the RCOH of USS~~ ~~George Washington~~ (CVN ~~73) and~~81), the construction of John F. Kennedy (CVN 79)~~. Submarine revenues increased due to higher volumes on Block V boats of the~~, and ~~Virginia~~ ~~class (SSN 774) submarine program, submarine support services and the~~ ~~Columbia~~ ~~class (SSBN 826) submarine program, partially offset by lower volumes on Block IV boats of the~~ ~~Virginia~~ ~~class (SSN 774) submarine program.~~

Newport News revenues for the nine months ended September 30, 2021, increased $303 million, or 8%, from the same period in 2020, primarily driven by higher revenues in submarines and aircraft carriers, partially offset by lower revenues in naval nuclear support services. Submarine revenues increased primarily as a result of higher volumes on Block V boats of the ~~Virginia~~ ~~class (SSN 774) submarine program and the~~ ~~Columbia~~ ~~class (SSBN 826) submarine program. Aircraft carrier revenues increased primarily as a result of higher volumes on the construction of~~ Enterprise ~~(CVN 80), the RCOH of USS~~ ~~John C. Stennis~~ (CVN ~~74), and the construction of~~ ~~Doris Miller~~ ~~(CVN 81)~~80), partially offset by lower volumes on ~~the construction of~~ ~~John F. Kennedy~~ ~~(CVN 79) and~~ the RCOH of USS George Washington (CVN 73). Naval nuclear support services revenues decreased primarily as a result of lower volumes in submarine fleet support services and facility maintenance services, partially offset by higher volumes in carrier fleet support services.

~~Table~~Newport News revenues for the six months ended June 30, 2022, increased $53 million, or 2%, from the same period in 2021, primarily driven by higher revenues in aircraft carriers and submarines, partially offset by lower revenues in naval nuclear support services. Aircraft carrier revenues increased primarily as a result of ~~Contents~~higher volumes on the RCOH of USS John C. Stennis (CVN 74), partially offset by lower volumes on the RCOH of USS George Washington (CVN 73). Submarine revenues increased due to higher volumes on Block V boats of the Virginia class (SSN 774) submarine program and the Columbia class (SSBN 826) program, partially offset by lower volumes on Block IV boats of the Virginia class (SSN 774) submarine program. Naval nuclear support services revenues decreased primarily as a result of lower volumes in submarine fleet support services and facility maintenance services, partially offset by higher volumes in carrier fleet support services.

Segment Operating Income

Newport News segment operating income for the three months ended ~~September~~June 30, ~~2021,~~2022, was ~~$88~~$94 million, compared with segment operating income of ~~$79~~$76 million for the same period in ~~2020.~~2021. The increase was primarily due to ~~higher~~favorable changes in contract estimates from facilities capital and price adjustment clauses, partially offset by lower risk retirement on ~~the RCOH of USS~~ ~~George Washington~~ ~~(CVN 73) and Block IV boats of~~ the Virginia class (SSN 774) submarine ~~program, partially offset by lower risk retirement on naval nuclear support services.~~program.

Newport News segment operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was ~~$257~~$175 million, compared with segment operating income of ~~$105~~$169 million for the same period in ~~2020.~~2021. The increase was primarily due to ~~impacts related to performance~~favorable changes in contract estimates from facilities capital and price adjustment clauses and higher risk retirement on ~~Block IV boats of~~USS Gerald R. Ford (CVN 78), partially offset by lower risk retirement on the Virginia class (SSN 774) submarine ~~program and delay and disruption from discrete COVID-19 Events in 2020.~~program.

Table of Contents

~~Technical Solutions~~Mission Technologies


		Three Months Ended September 30														Nine Months Ended September 30															Three Months Ended June 30														Six Months Ended June 30
									2021 over 2020														2021 over 2020															2022 vs. 2021														2022 vs. 2021
($ in millions)	($ in millions)				2021				2020			Dollars			Percent				2021				2020			Dollars			Percent	($ in millions)				2022				2021			Dollars			Percent				2022				2021			Dollars			Percent
Sales and service revenues	Sales and service revenues	$	394			$	320			$	74		23	%		$	890			$	957			$	(67)		(7)	%	Sales and service revenues		$	600			$	237			$	363		153	%		$	1,190			$	496			$	694		140	%
Segment operating income	Segment operating income	13				21				(8)			(38)	%		33				23				10			43	%	Segment operating income		25				13				12			92	%		34				20				14			70	%
As a percentage of segment sales	As a percentage of segment sales	3.3		%		6.6		%								3.7		%		2.4		%							As a percentage of segment sales		4.2		%		5.5		%								2.9		%		4.0		%

Sales and Service Revenues

~~Technical Solutions~~Mission Technologies revenues for the three months ended ~~September~~June 30, ~~2021,~~2022, increased ~~$74~~$363 million, or ~~23%~~153%, from the same period in ~~2020,~~2021, primarily due to higher volumes in DFS ~~due~~attributable to the acquisition of Alion ~~offset by the divestiture of our oil and gas business and contribution of our San Diego Shipyard to a joint venture~~ in the ~~first~~third quarter of 2021.

~~Technical Solutions~~Mission Technologies revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2021, decreased $67~~2022, increased $694 million, or 7%140%, from the same period in ~~2020,~~2021, primarily due to ~~the divestiture of our oil and gas business and contribution of our San Diego Shipyard to a joint venture, partially offset by~~ higher volumes in DFS ~~due~~attributable to the acquisition of ~~Alion.~~Alion in the third quarter of 2021.

Segment Operating Income

~~Technical Solutions~~Mission Technologies segment operating income for the three months ended ~~September~~June 30, ~~2021,~~2022, was ~~$13~~$25 million, compared with segment operating income of ~~$21~~$13 million for the same period in ~~2020.~~2021. The ~~decrease~~increase was primarily driven by the ~~amortization~~acquisition of Alion ~~purchased intangible assets, lower performance~~ in ~~DFS,~~ the ~~divestiture~~third quarter of ~~our oil~~2021 and ~~gas business, and a contribution of our San Diego Shipyard to a joint venture,~~higher equity income, partially offset by ~~the acquisition~~higher amortization of ~~Alion.~~purchased intangible assets.

~~Technical Solutions~~Mission Technologies segment operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was ~~$33~~$34 million, compared with segment operating income of ~~$23~~$20 million for the same period in ~~2020.~~2021. The increase was primarily driven by ~~equity income in nuclear and environmental joint ventures and our ship repair and specialty fabrication joint venture and~~ the acquisition of Alion in the third quarter of 2021 and higher equity income, partially offset by ~~lower performance in unmanned systems and the~~higher amortization of ~~Alion~~ purchased intangible assets.

BACKLOG

Total backlog as of ~~September~~June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, was approximately ~~$50.1~~$47.2 billion and ~~$46.0~~$48.5 billion, respectively. Total backlog includes both funded backlog (firm orders for which funding is contractually obligated by the customer) and unfunded backlog (firm orders for which funding is not currently contractually obligated by the customer). Backlog excludes unexercised contract options and unfunded ~~IDIQ~~Indefinite Delivery/Indefinite Quantity orders. For contracts having no stated contract values, backlog includes only the amounts committed by the customer.

~~Table of Contents~~

The following table presents funded and unfunded backlog by segment as of ~~September~~June 30, ~~2021,~~2022, and December 31, ~~2020:~~2021:


		September 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
						Total						Total							Total						Total
($ in millions)	($ in millions)	Funded		Unfunded		Backlog		Funded		Unfunded		Backlog		($ in millions)	Funded		Unfunded		Backlog		Funded		Unfunded		Backlog
Ingalls	Ingalls	$	10,561	$	661	$	11,222	$	10,443	$	1,758	$	12,201	Ingalls	$	10,208	$	940	$	11,148	$	10,216	$	792	$	11,008
Newport News	Newport News	11,715		21,741		33,456		9,536		23,132		32,668		Newport News	13,025		18,386		31,411		11,121		21,198		32,319
Technical Solutions		1,499		3,967		5,466		502		646		1,148
Mission Technologies														Mission Technologies	1,361		3,289		4,650		1,334		3,789		5,123
Total backlog	Total backlog	$	23,775	$	26,369	$	50,144	$	20,481	$	25,536	$	46,017	Total backlog	$	24,594	$	22,615	$	47,209	$	22,671	$	25,779	$	48,450

Approximately ~~15%~~18% of the ~~$46.0~~$48.5 billion total backlog as of December 31, ~~2020,~~2021, is expected to be converted into sales in ~~2021.~~2022. U.S. Government orders comprised substantially all of the backlog as of ~~September~~June 30, ~~2021,~~2022, and December 31, ~~2020.~~2021.

Table of Contents

Awards

The value of new contract awards during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was approximately ~~$7.1~~$4 billion, ~~comprised primarily of awards~~including an award for the ~~RCOH of the USS~~ ~~John C. Stennis~~ ~~(CVN 74),~~ construction of ~~a 10th boat of the~~ ~~Virginia~~ ~~class (SSN 774) submarine program, and construction of~~ ~~John F. Lehman (DDG 137)~~DDG 139 (unnamed).

LIQUIDITY AND CAPITAL RESOURCES

We seek to efficiently convert operating results into cash for deployment in operating our businesses, implementing our business strategy, and maximizing stockholder value. We use various financial measures to assist in capital deployment decision making, including net cash provided by operating activities and free cash flow. We believe these measures are useful to investors in assessing our financial performance.

The following table summarizes key components of cash flow provided by operating activities:


		Nine Months Ended September 30					2021 over 2020					Six Months Ended June 30				2022 vs. 2021

($ in millions)	($ in millions)					2021			2020		Dollars				($ in millions)	2022		2021	Dollars
Net earnings	Net earnings	$	424	$	447		$	(23)		Net earnings		$	318	$	277	$	41
Depreciation and amortization	Depreciation and amortization	208		182			26			Depreciation and amortization		178		131		47
Provision for doubtful accounts	Provision for doubtful accounts	—		(2)			2			Provision for doubtful accounts		(7)		—		(7)
Stock-based compensation	Stock-based compensation	19		16			3			Stock-based compensation		16		12		4

Deferred income taxes	Deferred income taxes	74		(7)			81			Deferred income taxes		(1)		31		(32)

Loss (gain) on investments in marketable securities	Loss (gain) on investments in marketable securities	(12)		(3)			(9)			Loss (gain) on investments in marketable securities		26		(12)		38
Asset impairments		—		13			(13)
Retiree benefit funding less than (in excess of) expense		(73)		(183)			110

Trade working capital decrease (increase)		(151)		28			(179)
Retiree benefits										Retiree benefits		(65)		(70)		5

Trade working capital increase										Trade working capital increase		(281)		(230)		(51)
Net cash provided by operating activities	Net cash provided by operating activities	$	489	$	491		$	(2)		Net cash provided by operating activities		$	184	$	139	$	45

We have historically maintained a capital structure comprising a mix of equity and debt financing. We vary our

Operating Activities

Investing Activities

Financing Activities

The following table reconciles net cash provided by operating activities to free cash flow:


		Nine Months Ended September 30					2021 over 2020			Six Months Ended June 30						2022 vs. 2021

($ in millions)	($ in millions)					2021			2020		Dollars	($ in millions)			2022			2021	Dollars
Net cash provided by operating activities	Net cash provided by operating activities	$	489	$	491		$	(2)	Net cash provided by operating activities	$	184		$	139		$	45
Less capital expenditures:	Less capital expenditures:								Less capital expenditures:
Capital expenditure additions	Capital expenditure additions	(216)		(220)			4		Capital expenditure additions	(102)			(134)			32
Grant proceeds for capital expenditures	Grant proceeds for capital expenditures	11		17			(6)		Grant proceeds for capital expenditures	—			2			(2)
Free cash flow	Free cash flow	$	284	$	288		$	(4)	Free cash flow	$	82		$	7		$	75

In August 2021, we issued $400 million aggregate principal amount of callable unregistered 0.670% senior notes due 2023 and $600 million aggregate principal amount of unregistered 2.043% senior notes due 2028, both with registration rights. The net proceeds were used to fund a portion of the purchase price for the acquisition of Alion. Interest on these senior notes is payable semiannually.

•Changes in government and customer priorities and requirements (including government budgetary constraints, shifts in defense spending, and changes in customer short-range and long-range plans);

•Our ability to estimate our future contract costs, including cost increases due to inflation, and perform our contracts effectively;

•Changes in procurement processes and government regulations and our ability to comply with such requirements;

•Our ability to deliver our products and services at an affordable life cycle cost and compete within our markets;

•Natural and environmental disasters and political instability;

•Our ability to execute our strategic plan, including with respect to share repurchases, dividends, capital expenditures, and strategic acquisitions;

•Adverse economic conditions in the United States and globally;

•Health epidemics, pandemics and similar outbreaks, including the COVID-19 pandemic, and the impacts of vaccination mandates on our workforce;

•Our ability to effectively integrate the operations of Alion into our business;

•Disruptions impacting global supply, including those attributable to the ongoing COVID-19 pandemic and those resulting from the ongoing conflict between Russia and Ukraine;

•Changes in key estimates and assumptions regarding our pension and retiree health care costs;

•Security threats, including cyber security threats, and related disruptions; and

•Other risk factors discussed herein and in our other filings with the SEC.

Included below are brief descriptions of some of the programs discussed in this Quarterly Report on Form 10-Q.


Program Name						Program Description

America class (LHA 6) amphibious assault ships						Design and build large deck amphibious assault ships that provide forward presence and power projection as an integral part of joint, interagency and multinational maritime expeditionary forces. The America class (LHA 6) ships, together with the Wasp class (LHD 1) ships, are the successors to the decommissioned Tarawa class (LHA 1) ships. The America class (LHA 6) ships optimize aviation operations and support capabilities. WeIn 2020, we delivered USS Tripoli (LHA 7) ~~in February 2020,~~, and we were awarded a long-lead-time material and construction contract for LHA 9 (unnamed). We are currently constructing Bougainville (LHA 8).

Arleigh Burke class (DDG 51) destroyers						Build guided missile destroyers designed for conducting anti-air, anti-submarine, anti-surface, and strike operations. The Aegis-equipped Arleigh Burke class (DDG 51) destroyers are the U.S. Navy's primary surface combatant, and have been constructed in variants, allowing technological advances during construction. ~~In 2019 we~~We delivered USS Paul Ignatius (DDG 117), ~~and in 2020 we delivered~~ USS Delbert D. Black (DDG 119)., and Frank E. Petersen Jr. (DDG121) in 2019, 2020, and 2021, respectively. We have contracts to construct the following Arleigh Burke class (DDG 51) destroyers:~~Frank E. Petersen Jr.~~ ~~(DDG 121),~~ Lenah H. Sutcliffe Higbee (DDG 123), Jack H. Lucas (DDG 125), Ted Stevens (DDG 128), Jeremiah Denton (DDG 129), George M. Neal (DDG 131), Sam Nunn (DDG 133), Thad Cochran (DDG 135), ~~and~~ John F. Lehman (DDG 137), and DDG 139 (unnamed).

Carrier RCOH						Perform refueling and complex overhaul ("RCOH") of nuclear-powered aircraft carriers, which is required at the mid-point of their 50-year life cycle. USS George Washington (CVN 73) arrived at Newport News for the start of its RCOH in August 2017, and USS John C. Stennis (CVN 74) arrived at Newport News for the start of its RCOH in May 2021.

Columbia class (SSBN 826) submarines						Newport News is participating in designing the Columbia class submarine as a replacement for the current aging Ohio class nuclear ballistic missile submarines, which were first introduced into service in 1981. The Ohio class SSBN includes 14 nuclear ballistic missile submarines and four nuclear cruise missile submarines. The Columbia class program plan of record is to construct 12 new ballistic missile submarines. The U.S. Navy has initiated the design process for the new class of submarines, and, in early 2017, the DoD signed the acquisition decision memorandum approving the Columbia class program’s Milestone B, which formally authorizes the program’s entry into the engineering and manufacturing development phase. We perform design work as a subcontractor to Electric Boat, and we have entered into a teaming agreement with Electric Boat to build modules for the entire Columbia class (SSBN 826) submarine program that leverages our Virginia class (SSN 774) experience. We have been awarded contracts from Electric Boat for integrated product and process development, providing long–lead–time material and advance construction, and construction of the first two boats of the Columbia class (SSBN 826) program. Construction of the first Columbia class (SSBN 826) submarine began in 2020.

Defense and federal solutions ("DFS")						~~DFS is focused on solving tough national security challenges for~~Develops integrated solutions that enable today's connected, all–domain force. Capabilities include: C5ISR systems and operations; the ~~DoD, the~~application of artificial intelligence ~~community,~~("AI") and ~~federal civilian agencies around the globe. The group provides a wide range of professional services~~machine learning to battlefield decisions; defensive and ~~products including fleet sustainment, cyber~~offensive cyberspace strategies and electronic warfare ~~intelligence, surveillance, and reconnaissance,~~("EW"); and live, virtual, and constructive ("LVC") solutions.


Fleet sustainment						Maintains and modernizes a significant majority of the U.S. Navy fleet, from small watercraft to submarines, combatants, and aircraft carriers, our systems and maintenance experts help the Navy maintain a high state of readiness. Ensures effective system operation and sustainment by actively supporting design and decision–making processes through studies, analyses, and reviews of program documents, and provides a wide range of logistics products.

USS Gerald R. Ford class (CVN 78) aircraft carriers						Design and construction for the Ford class program, which is the aircraft carrier replacement program for the decommissioned Enterprise (CVN 65) and Nimitz class (CVN 68) aircraft carriers. USS Gerald R. Ford (CVN 78), the first ship of the Ford class, was delivered to the U.S. Navy in the second quarter of 2017. In June 2015, we were awarded a contract for the detail design and construction of John F. Kennedy (CVN 79), following several years of engineering, advance construction, and purchase of ~~long-lead time~~long-lead-time components and material. In addition, we have received awards for detail design and construction of Enterprise (CVN 80) and Doris Miller (CVN 81). This category also includes the class' non-recurring engineering. The class is expected to bring improved warfighting capability, quality of life improvements for sailors, and reduced life cycle costs.

Legend class National Security Cutter						Design and build the U.S. Coast Guard's National Security Cutters ("NSCs"), the largest and most technically advanced class of cutter in the U.S. Coast Guard. The NSC is equipped to carry out maritime homeland security, maritime safety, protection of natural resources, maritime mobility, and national defense missions. The plan is for a total of 11 ships, of which the first nine ships have been delivered. Calhoun (NSC 10) and Friedman (NSC 11) are currently under construction.

Naval nuclear support services						Provide services to and in support of the U.S. Navy, ranging from services supporting the Navy's carrier and submarine fleets to maintenance services at U.S. Navy training facilities. Naval nuclear support services include design, construction, maintenance, and disposal activities for ~~in service~~in-service U.S. Navy nuclear ships worldwide through mobile and in-house capabilities. Services include maintenance services on nuclear reactor prototypes.

Nuclear and environmental services						~~Provide services in nuclear~~Supports the national security mission of the Department of Energy ("DoE") through the management and ~~operations, including site management,~~operation of its sites, as well as the safe cleanup of legacy waste across the country. We meet our clients' toughest nuclear and ~~industrial facilities operations~~environmental challenges and ~~maintenance, decontamination and~~are positioned to serve the growing commercial nuclear power plant decommissioning ~~radiological and hazardous waste management services, and technical engineering services.~~market. We participate in several joint ventures, including Newport News Nuclear BWXT Los Alamos, LLC (" N3B"), Mission Support and Test Services, LLC ("MSTS"), and Savannah River Nuclear Solutions, LLC ("SRNS"), and we are an integrated subcontractor to Triad National Security. N3B was awarded the Los Alamos Legacy Cleanup Contract at the DoE/National Nuclear Security Administration’s Los Alamos National Laboratory. MSTS was awarded a contract for site management and operations at the Nevada National Security Site. SRNS provides site management and operations at the DoE’s Savannah River Site near Aiken, South Carolina. Triad provides site management and operations at the DoE’s Los Alamos National Laboratory.


San Antonio class (LPD 17) amphibious transport dock ships						Design and build amphibious transport dock ships, which are warships that embark, transport, and land elements of a landing force for a variety of expeditionary warfare missions, and also serve as the secondary aviation platform for Amphibious Readiness Groups. The San Antonio class (LPD 17) is the newest addition to the U.S. Navy's 21st century amphibious assault force, and these ships are a key element of the U.S. Navy's seabase transformation. ~~We are currently constructing~~In 2022, we delivered Fort Lauderdale (LPD 28),. We are currently constructing Richard M. McCool Jr. (LPD 29), and Harrisburg (LPD 30). In 2020, we were awarded a contract to construct Pittsburgh (LPD 31).

Unmanned systems						~~Our unmanned systems products and services create~~Creates advanced unmanned maritime solutions for defense, marine research, and commercial applications. Serving customers in more than 30 countries, unmanned systems provides design, autonomy, manufacturing, testing, operations, and sustainment of unmanned systems, including unmanned underwater vehicles and unmanned surface vessels.

Virginia class (SSN 774) fast attack submarines

Construct attack submarines as the principal subcontractor to Electric Boat. The Virginia class (SSN 774) is a post-Cold War design tailored to excel in a wide range of warfighting missions, including anti-submarine and surface ship warfare; special operation forces; strike; intelligence, surveillance, and reconnaissance; carrier and expeditionary strike group support; and mine warfare.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rates - Our floating rate financial instruments subject to interest rate risk include a $650 million Term Loan, a $1.5 billion Revolving Credit Facility, and a $1 billion commercial paper program. As of ~~September~~June 30, ~~2021,~~2022, we had ~~$650~~$425 million outstanding on the Term Loan and no indebtedness outstanding under our Revolving Credit Facility or our commercial paper program. Based on the amounts outstanding under our Term Loan as of ~~September~~June 30, ~~2021,~~2022, an increase of 1% in interest rates would increase the interest expense on our debt by approximately $7$4 million on an annual basis.

~~Foreign Currency~~ - We currently have, and in the future may enter into, foreign currency forward contracts to manage foreign currency exchange rate risk related to payments to suppliers denominated in foreign currencies. As of September 30, 2021, the fair values of our outstanding foreign currency forward contracts were not significant.

Item 1. Legal Proceedings

In addition to the other information set forth in this Quarterly Report on Form 10–Q, ~~including the risk factor set forth below,~~ you should carefully consider the factors discussed in Part I, Item 1A Risk Factors in the ~~2020~~2021 Form 10–K, which could materially affect our business, financial condition, or future results.

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

Repurchases under our stock repurchase program are made from time to time at management's discretion in accordance with applicable federal securities laws. All repurchases of HII common stock have been recorded as treasury stock. The following table summarizes information relating to purchases made by or on behalf of the Company of shares of the Company's common stock during the quarter ended ~~September~~June 30, ~~2021.~~2022.
Period
Total Number of Shares Purchased1
Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)2, 3
July 1, 2021 to July 31, 2021 25,234 $ 203.47 25,234 $ 1,067.0
August 1, 2021 to August 31, 2021 23,245 205.51 22,749 1,062.3
September 1, 2021 to September 30, 2021 34,990 198.20 34,990 1,055.4
Total 83,469 $ 201.83 82,973 $ 1,055.4


Period	Total Number of Shares Purchased1	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)2, 3
April 1, 2022 to April 30, 2022	9,754	$	208.87	9,050	$	1,029.2
May 1, 2022 to May 31, 2022	14,084	205.83		14,084	1,026.3
June 1, 2022 to June 30, 2022	57,558	211.96		57,323	1,014.2
Total	81,396	$	210.53	80,457	$	1,014.2

1We purchased an aggregate of ~~82,973~~80,457 shares of our common stock in the open market pursuant to our repurchase program and ~~496~~939 shares were transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted performance stock rights during the period.

2 From the stock repurchase program's inception through ~~September~~June 30, ~~2021,~~2022, we have purchased ~~13,320,296~~13,526,306 shares at an average price of ~~$161.00~~$161.60 per share for a total of ~~$2.1~~$2.2 billion.

3 In October 2012, we commenced our stock repurchase program. In November 2019, we announced an increase in the stock repurchase program to $3.2 billion and an extension of the term to October 31, 2024.

Item 3. Defaults Upon Senior Securities

Item 4. Mine Safety Disclosures

Item 5. Other Information


101		The following financial information for the Company, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Comprehensive Income, (ii) the Condensed Consolidated Statements of Financial Position, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Changes in Equity, and (v) the Notes to Condensed Consolidated Financial Statements.

104		The cover page from the Company’s Quarterly Report on Form 10-Q, formatted in Inline XBRL and contained in Exhibit 101.

	*	All exhibits and schedules to the Stock Purchase Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S–K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date:	~~November~~August 4, ~~2021~~2022	Huntington Ingalls Industries, Inc.
		(Registrant)

		By:	/s/ Nicolas Schuck
			Nicolas Schuck
			Corporate Vice President, Controller and Chief Accounting Officer
			(Duly Authorized Officer and Principal Accounting Officer)


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	PART I – FINANCIAL INFORMATION	Page

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations and Comprehensive Income	1
	Condensed Consolidated Statements of Financial Position	2
	Condensed Consolidated Statements of Cash Flows	3
	Condensed Consolidated Statements of Changes in Equity	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2517
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4636
Item 4.	Controls and Procedures	4636

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	4737
Item 1A.	Risk Factors	4737
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4837
Item 3.	Defaults Upon Senior Securities	4837
Item 4.	Mine Safety Disclosures	4837
Item 5.	Other Information	4837
Item 6.	Exhibits	4938

Signatures		5139


		Pro Forma (Unaudited)
		Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended June 30						Six Months Ended June 30

($ in millions, except per share amounts)	($ in millions, except per share amounts)			2021			2020					2021		2020		($ in millions, except per share amounts)			2022			Pro Forma 2021			2022	Pro Forma 2021
Sales and service revenues	Sales and service revenues	$	2,532		$	2,628		$	7,687	$	7,416		Sales and service revenues	$	2,662		$	2,562		$	5,238		$	5,155
Net earnings	Net earnings	$	142		$	217		$	416	$	409		Net earnings	$	178		$	121		$	318		$	265
Basic earnings per share	Basic earnings per share	$	3.52		$	5.34		$	10.32	$	10.07		Basic earnings per share	$	4.44		$	3.00		$	7.93		$	6.58
Diluted earnings per share	Diluted earnings per share	$	3.52		$	5.33		$	10.32	$	10.05		Diluted earnings per share	$	4.44		$	3.00		$	7.93		$	6.58


		Three Months Ended September 30, 2021											Three Months Ended June 30, 2021
($ in millions)	($ in millions)	Ingalls		Newport News		Technical Solutions		Intersegment Eliminations		Total		($ in millions)	Ingalls		Newport News		Mission Technologies		Intersegment Eliminations		Total
Revenue Type	Revenue Type											Revenue Type
Product sales	Product sales	$	586	$	1,088	$	27	$	—	$	1,701	Product sales	$	624	$	1,111	$	28	$	—	$	1,763
Service revenues	Service revenues	38		263		336		—		637		Service revenues	41		248		179		—		468
Intersegment	Intersegment	4		3		31		(38)		—		Intersegment	5		4		30		(39)		—
Sales and service revenues	Sales and service revenues	$	628	$	1,354	$	394	$	(38)	$	2,338	Sales and service revenues	$	670	$	1,363	$	237	$	(39)	$	2,231
Customer Type	Customer Type											Customer Type
Federal	Federal	$	624	$	1,351	$	354	$	—	$	2,329	Federal	$	665	$	1,359	$	200	$	—	$	2,224
Commercial	Commercial	—		—		9		—		9		Commercial	—		—		7		—		7

Intersegment	Intersegment	4		3		31		(38)		—		Intersegment	5		4		30		(39)		—
Sales and service revenues	Sales and service revenues	$	628	$	1,354	$	394	$	(38)	$	2,338	Sales and service revenues	$	670	$	1,363	$	237	$	(39)	$	2,231
Contract Type	Contract Type											Contract Type
Firm fixed-price	Firm fixed-price	$	5	$	15	$	52	$	—	$	72	Firm fixed-price	$	13	$	7	$	41	$	—	$	61
Fixed-price incentive	Fixed-price incentive	585		686		—		—		1,271		Fixed-price incentive	610		713		—		—		1,323
Cost-type	Cost-type	34		650		261		—		945		Cost-type	42		639		111		—		792
Time and materials	Time and materials	—		—		50		—		50		Time and materials	—		—		55		—		55
Intersegment	Intersegment	4		3		31		(38)		—		Intersegment	5		4		30		(39)		—
Sales and service revenues	Sales and service revenues	$	628	$	1,354	$	394	$	(38)	$	2,338	Sales and service revenues	$	670	$	1,363	$	237	$	(39)	$	2,231


		Three Months Ended September 30, 2020											Six Months Ended June 30, 2022
($ in millions)	($ in millions)	Ingalls		Newport News		Technical Solutions		Intersegment Eliminations		Total		($ in millions)	Ingalls		Newport News		Mission Technologies		Intersegment Eliminations		Total
Revenue Type	Revenue Type											Revenue Type
Product sales	Product sales	$	623	$	1,054	$	22	$	—	$	1,699	Product sales	$	1,189	$	2,311	$	53	$	—	$	3,553
Service revenues	Service revenues	52		301		262		—		615		Service revenues	95		509		1,081		—		1,685
Intersegment	Intersegment	—		3		36		(39)		—		Intersegment	5		3		56		(64)		—
Sales and service revenues	Sales and service revenues	$	675	$	1,358	$	320	$	(39)	$	2,314	Sales and service revenues	$	1,289	$	2,823	$	1,190	$	(64)	$	5,238
Customer Type	Customer Type											Customer Type
Federal	Federal	$	675	$	1,355	$	218	$	—	$	2,248	Federal	$	1,284	$	2,820	$	1,111	$	—	$	5,215
Commercial	Commercial	—		—		66		—		66		Commercial	—				23		—		23

Intersegment	Intersegment	—		3		36		(39)		—		Intersegment	5		3		56		(64)		—
Sales and service revenues	Sales and service revenues	$	675	$	1,358	$	320	$	(39)	$	2,314	Sales and service revenues	$	1,289	$	2,823	$	1,190	$	(64)	$	5,238
Contract Type	Contract Type											Contract Type
Firm fixed-price	Firm fixed-price	$	9	$	5	$	58	$	—	$	72	Firm fixed-price	$	6	$	11	$	133	$	—	$	150
Fixed-price incentive	Fixed-price incentive	606		682		—		—		1,288		Fixed-price incentive	1,185		1,457		—		—		2,642
Cost-type	Cost-type	60		668		121		—		849		Cost-type	93		1,352		862		—		2,307
Time and materials	Time and materials	—		—		105		��		105		Time and materials	—		—		139		—		139
Intersegment	Intersegment	—		3		36		(39)		—		Intersegment	5		3		56		(64)		—
Sales and service revenues	Sales and service revenues	$	675	$	1,358	$	320	$	(39)	$	2,314	Sales and service revenues	$	1,289	$	2,823	$	1,190	$	(64)	$	5,238


		Nine Months Ended September 30, 2021											Six Months Ended June 30, 2021
($ in millions)	($ in millions)	Ingalls		Newport News		Technical Solutions		Intersegment Eliminations		Total		($ in millions)	Ingalls		Newport News		Mission Technologies		Intersegment Eliminations		Total
Revenue Type	Revenue Type											Revenue Type
Product sales	Product sales	$	1,814	$	3,300	$	71	$	—	$	5,185	Product sales	$	1,228	$	2,212	$	44	$	—	$	3,484
Service revenues	Service revenues	121		815		726		—		1,662		Service revenues	83		552		390		—		1,025
Intersegment	Intersegment	12		9		93		(114)		—		Intersegment	8		6		62		(76)		—
Sales and service revenues	Sales and service revenues	$	1,947	$	4,124	$	890	$	(114)	$	6,847	Sales and service revenues	$	1,319	$	2,770	$	496	$	(76)	$	4,509
Customer Type	Customer Type											Customer Type
Federal	Federal	$	1,935	$	4,115	$	760	$	—	$	6,810	Federal	$	1,311	$	2,764	$	406	$	—	$	4,481
Commercial	Commercial	—		—		37		—		37		Commercial	—		—		28		—		28

Intersegment	Intersegment	12		9		93		(114)		—		Intersegment	8		6		62		(76)		—
Sales and service revenues	Sales and service revenues	$	1,947	$	4,124	$	890	$	(114)	$	6,847	Sales and service revenues	$	1,319	$	2,770	$	496	$	(76)	$	4,509
Contract Type	Contract Type											Contract Type
Firm fixed-price	Firm fixed-price	$	29	$	30	$	132	$	—	$	191	Firm fixed-price	$	24	$	15	$	80	$	—	$	119
Fixed-price incentive	Fixed-price incentive	1,790		2,121		3		—		3,914		Fixed-price incentive	1,205		1,435		3		—		2,643
Cost-type	Cost-type	116		1,964		492		—		2,572		Cost-type	82		1,314		231		—		1,627
Time and materials	Time and materials	—		—		170		—		170		Time and materials	—		—		120		—		120
Intersegment	Intersegment	12		9		93		(114)		—		Intersegment	8		6		62		(76)		—
Sales and service revenues	Sales and service revenues	$	1,947	$	4,124	$	890	$	(114)	$	6,847	Sales and service revenues	$	1,319	$	2,770	$	496	$	(76)	$	4,509


	Nine Months Ended September 30, 2020
($ in millions)	Ingalls		Newport News		Technical Solutions		Intersegment Eliminations		Total
Revenue Type
Product sales	$	1,765	$	2,926	$	52	$	—	$	4,743
Service revenues	159		888		814		—		1,861
Intersegment	2		7		91		(100)		—
Sales and service revenues	$	1,926	$	3,821	$	957	$	(100)	$	6,604
Customer Type
Federal	$	1,924	$	3,813	$	669	$	—	$	6,406
Commercial	—		1		196		—		197
State and local government agencies	—		—		1		—		1
Intersegment	2		7		91		(100)		—
Sales and service revenues	$	1,926	$	3,821	$	957	$	(100)	$	6,604
Contract Type
Firm fixed-price	$	40	$	8	$	179	$	—	$	227
Fixed-price incentive	1,664		1,813		—		—		3,477
Cost-type	220		1,993		367		—		2,580
Time and materials	—		—		320		—		320
Intersegment	2		7		91		(100)		—
Sales and service revenues	$	1,926	$	3,821	$	957	$	(100)	$	6,604


~~2.1~~						Stock Purchase Agreement by and among Alion Holdings LLC, Alion Holding Corp. and Huntington Ingalls Industries, Inc. dated July 4, 2021* (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8–K filed on July 9, 2021).

3.1						Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., filed March 30, 2011 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on April 4, 2011).

3.2						Certificate of Amendment to the Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., dated May 28, 2014 (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed on August 7, 2014).

3.3						Certificate of Amendment to the Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., dated May 21, 2015 (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q filed on August 6, 2015).

3.4						Certificate of Amendment to the Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., dated May 12, 2021 (incorporated by reference to Annex B to the Proxy Statement filed on March 19, 2021).

3.5						Restated Bylaws of Huntington Ingalls Industries, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on March 30, 2021).

~~4.1~~						Indenture, dated as of August 16, 2021, by and among the Company, certain subsidiaries of the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8–K filed on August 16, 2021).

~~4.2~~						~~Form of 0.670% Senior Note due 2023 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on August 16, 2021).~~

~~4.3~~						~~Form of 2.043% Senior Note due 2028 (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on August 16, 2021).~~

~~4.4~~						Registration Rights Agreement, dated as of August 16, 2021, by and among the Company, certain subsidiaries of the Company and J.P. Morgan Securities LLC, BofA Securities, Inc., Mizuho Securities USA LLC, MUFG Securities Americas Inc., Scotia Capital (USA) Inc. and U.S. Bancorp Investments, Inc., as representatives of the initial purchasers (incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on August 16, 2021).

10.1						~~Amended and Restated Revolving Credit Agreement, dated as of August 2, 2021, among~~ Huntington Ingalls Industries, Inc., 2022 Long-Term Incentive Stock Plan (incorporated herein by reference to Annex B to the ~~lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent and an Issuing Bank~~ Company's definitive p roxy s tatement filed on March 21, 2022).

10.2						~~Credit Agreement, dated as of August 2, 2021, among Huntington Ingalls Industries, Inc.,~~Terms and Conditions Applicable to Restricted Performance Stock Rights Granted Under the ~~lenders party thereto~~2022 Long-Term Incentive Stock Plan.

10.3						Terms and ~~JPMorgan Chase Bank, N.A., as Administrative Agent.~~Conditions Applicable to Restricted Stock Rights (1-year vesting) Granted Under the 2022 Long-Term Incentive Stock Plan.

10.4						Terms and Conditions Applicable to Restricted Stock Rights (2-year vesting) Granted Under the 2022 Long-Term Incentive Stock Plan.

10.5						Terms and Conditions Applicable to Restricted Stock Rights (3-year vesting) Granted Under the 2022 Long-Term Incentive Stock Plan.

10.6						Terms and Conditions Applicable to Non-Employee Director Stock Grants Under the 2022 Long-Term Incentive Stock Plan.

31.1						Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certificate of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certificate of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.