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 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) segment provides a range of services and products to government and commercial customers. Headquartered in Newport News, Virginia, HII employs approximately 44,000 people domestically and internationally.

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

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, 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.

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 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 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 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 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 solutions.

In addition to price surges in energy, food, and aluminum as a result of the Russian invasion of Ukraine, rising inflation has led to higher costs of various commodities and 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 our customers.

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 only industry prime contractors but suppliers as well. Challenges incurred by our suppliers relative to their workforces, access to necessary components, materials, and other supplies at reasonable prices, and access to support services, such as shipping and transportation, may impact the ability of suppliers to provide agreed-upon goods and services in a timely, compliant, and cost-effective manner. We may in the future incur additional costs and performance challenges, including as a result of higher prices, schedule delays, or the need to identify and develop alternative suppliers.

The COVID-19 pandemic has impacted our employees, customers, suppliers, and 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 and fixed-price incentive contracts, or may not be adequately covered by insurance. 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 10: Investigations, Claims, and Litigation.

Critical Accounting Policies, Estimates, and Judgments

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

• Revenue recognition;

• Purchase accounting, goodwill, and intangible assets;

• Litigation, commitments, and contingencies;

• Retirement related benefit plans; and

• Workers' compensation.

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

Contracts

We generate most of our revenues from multi-year contracts with the U.S. Government 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 FAR and 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 certain merger and acquisition costs, and advertising costs.

Contract Fees - Negotiated contract fee structures include: fixed fee amounts, cost sharing arrangements to reward or penalize contractors for under- or 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.

CONSOLIDATED OPERATING RESULTS

The following table presents selected financial highlights:

						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
Sales and service revenues						$	2,662					$	2,231					$	431					19		%				$	5,238					$	4,509					$	729					16		%
Cost of product sales and service revenues						2,272						1,909						363						19		%				4,499						3,845						654						17		%
Income from operating investments, net						27						12						15						125		%				34						20						14						70		%
Other income and gains (losses), net						1						(2)						3						150		%				—						1						(1)						(100)		%
General and administrative expenses						227						204						23						11		%				444						410						34						8		%
Operating income						191						128						63						49		%				329						275						54						20		%
Other income (expense)
Interest expense						(26)						(18)						(8)						(44)		%				(52)						(39)						(13)						(33)		%
Non-operating retirement benefit						67						44						23						52		%				138						90						48						53		%
Other, net						(10)						7						(17)						(243)		%				(17)						8						(25)						(313)		%
Federal and foreign income taxes						44						32						12						38		%				80						57						23						40		%
Net earnings						$	178					$	129					$	49					38		%				$	318					$	277					$	41					15		%

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 June 30																								Six Months Ended June 30
									2022 vs. 2021															2022 vs. 2021
($ in millions)						2022						2021						Dollars						Percent						2022						2021						Dollars						Percent
Product sales						$	1,829					$	1,763					$	66					4		%				$	3,553					$	3,484					$	69					2		%
Service revenues						833						468						365						78		%				1,685						1,025						660						64		%
Sales and service revenues						$	2,662					$	2,231					$	431					19		%				$	5,238					$	4,509					$	729					16		%

Product sales for the three months ended June 30, 2022, increased $66 million, or 4%, from the same period in 2021. Product sales for the six months ended June 30, 2022, increased $69 million, or 2%, from the same period in 2021. Ingalls product sales decreased $13 million and $39 million for the three and six months ended June 30, 2022, respectively, primarily as a result of lower volumes in surface combatants, partially offset by higher volumes in amphibious assault ships. Newport News product sales increased $79 million for the three months ended June 30, 2022, primarily as a result of higher volumes in aircraft carriers, partially offset by lower volumes in submarines. Newport News product sales increased $99 million for the six months ended June 30, 2022, primarily as a result of higher volumes in aircraft carriers. Mission Technologies product sales were flat for the three months ended June 30, 2022. Mission Technologies product sales increased $9 million for the six months ended June 30, 2022, primarily as a result of higher volumes in defense and federal solutions ("DFS").

Service revenues for the three months ended June 30, 2022, increased $365 million, or 78%, compared with the same period in 2021. Service revenues for the six months ended June 30, 2022, increased $660 million, or 64%, compared with the same period in 2021. Ingalls service revenues increased $4 million and $12 million for the three and six months ended June 30, 2022, respectively, primarily as a result of higher volumes in amphibious assault ship services, partially offset by lower volumes in surface combatant services. Newport News service revenues decreased $6 million for the three months ended June 30, 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 $43 million for the six months ended June 30, 2022, primarily as a result of lower volumes in aircraft carrier services and naval nuclear support services. Mission Technologies service revenues increased $367 million and $691 million for the three and six months ended June 30, 2022, respectively, primarily as a result of higher volumes in DFS services.

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 June 30																								Six Months Ended June 30
									2022 vs. 2021															2022 vs. 2021
($ in millions)						2022						2021						Dollars						Percent						2022						2021						Dollars						Percent
Cost of product sales						$	1,526					$	1,495					$	31					2		%				$	2,994					$	2,949					$	45					2		%
% of product sales						83.4		%				84.8		%																84.3		%				84.6		%
Cost of service revenues						746						414						332						80		%				1,505						896						609						68		%
% of service revenues						89.6		%				88.5		%																89.3		%				87.4		%
Income from operating investments, net						27						12						15						125		%				34						20						14						70		%
Other income and gains (losses), net						1						(2)						3						150		%				—						1						(1)						(100)		%
General and administrative expenses						227						204						23						11		%				444						410						34						8		%
% of sales and service revenues						8.5		%				9.1		%																8.5		%				9.1		%
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 June 30, 2022, increased $31 million, or 2%, compared with the same period in 2021. Cost of product sales for the six months ended June 30, 2022, increased $45 million, or 2%, compared with the same period in 2021. Ingalls cost of product sales decreased $28 million and $38 million for the three and six months ended June 30, 2022, respectively, primarily as a result of volume decreases described above, partially offset by higher risk retirement on Harrisburg (LPD 30). Newport News cost of product sales increased $56 million and $76 million for the three and six months ended June 30, 2022, respectively, primarily as a result of volume increases described above. Mission Technologies cost of product sales increased $5 million for the three months ended June 30, 2022, driven by year-to-year variances in contract mix. Mission Technologies cost of product sales increased $11 million for the six months ended June 30, 2022, driven by volume increases described above. Cost of product sales related to the Operating FAS/CAS Adjustment decreased $2 million and $4 million for the three and six months ended June 30, 2022, respectively, as described below.

Cost of product sales as a percentage of product sales decreased from 84.8% for the three months ended June 30, 2021, to 83.4% for the three 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), 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 and receipt of a contract incentive on USS Jack H. Lucas (DDG 125) in 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).

Cost of Service Revenues

Cost of service revenues for the three months ended June 30, 2022, increased $332 million, or 80%, compared with the same period in 2021. Cost of service revenues for the six months ended June 30, 2022, increased $609 million, or 68%, compared with the same period in 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 $50 million for the three and six months ended June 30, 2022, respectively, primarily as a result of lower volumes described above. Mission Technologies cost of service revenues increased $342 million and $648 million for the three and six months ended June 30, 2022, respectively, primarily as a result of higher volumes described above. Cost of service revenues

related to the Operating FAS/CAS Adjustment was flat for the three months ended June 30, 2022 and decreased $1 million for the six months ended June 30, 2022, as described below.

Cost of service revenues as a percentage of service revenues increased from 88.5% for the three months ended June 30, 2021, to 89.6% for the three months ended June 30, 2022, primarily driven by 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. Cost of service revenues as a percentage of service revenues increased from 87.4% for the six months ended June 30, 2021, to 89.3% for the six months ended June 30, 2022, primarily driven by 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.

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 six months ended June 30, 2022, increased $15 million and $14 million, respectively, from the same periods in 2021, primarily due to higher equity income from our investment in an unconsolidated ship repair and specialty fabrication joint venture, partially offset by lower equity income from our nuclear and environmental joint ventures.

Other Income and Gains (Losses), Net

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 June 30, 2022 and 2021, respectively. The favorable change of $3 million was primarily due to a loss recognized in the second quarter of 2021 as a result of the final purchase price adjustment to a gain on the sale of our oil and gas business. 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 June 30, 2022, increased $23 million and $34 million, respectively, from the same periods in 2021, primarily due to higher overhead costs as a result of the acquisition of Alion in the third quarter of 2021 and current state income tax expense, partially offset by 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

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 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 June 30, 2022, was $225 million, compared with segment operating income of $169 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), 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 and receipt of 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), 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.

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

						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
FAS benefit (expense)						$	19					$	(7)					$	26					371		%				$	43					$	(14)					$	57					407		%
CAS cost						13						14						(1)						(7)		%				23						27						(4)						(15)		%
FAS/CAS Adjustment						32						7						25						357		%				66						13						53						408		%
Non-operating retirement benefit						(67)						(44)						(23)						(52)		%				(138)						(90)						(48)						(53)		%
Operating FAS/CAS Adjustment						$	(35)					$	(37)					$	2					5		%				$	(72)					$	(77)					$	5					6		%

The Operating FAS/CAS Adjustment was a net expense of $35 million and $37 million for the three months ended June 30, 2022 and 2021, respectively. The Operating FAS/CAS Adjustment was a net expense of $72 million and $77 million for the six months ended June 30, 2022 and 2021, respectively. The favorable changes in the Operating FAS/CAS Adjustment of $2 million and $5 million for the three and six months ended June 30, 2022, respectively, were primarily driven by the more immediate recognition of higher interest rates under FAS.

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 benefit for the three months ended June 30, 2022, was $1 million, compared to non-current state income tax expense of $4 million for the same period in 2021. The favorable change in non-current state income taxes was driven by a decrease in deferred state income tax expense, primarily attributable to an increase in expenses that are not currently deductible for income tax purposes. Non-current state income tax benefit for the six months ended June 30, 2022, was less than $1 million, compared to non-current state income tax expense of $8 million for the same period in 2021. The favorable change in non-current state income taxes was driven by a decrease in deferred state income tax expense, primarily attributable to an increase in expenses that are not currently deductible for income tax purposes.

Interest Expense

Interest expense for the three and six months ended June 30, 2022, increased $8 million and $13 million, respectively, compared with the same periods in 2021, primarily due to the issuance of senior notes and borrowing under the Term Loan in 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 six months ended June 30, 2022, the favorable change in the non-operating retirement benefit of $23 million and $48 million was primarily driven by higher 2021 returns on plan assets.

Other, Net

Other, net expense increased $17 million and $25 million for the three and six months ended June 30, 2022, respectively, compared with the same periods in 2021, primarily driven by 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 June 30, 2022 and 2021, were 19.8% and 19.9%, respectively. Our effective income tax rates on earnings from operations for the six months ended June 30, 2022 and 2021, were 20.1% and 17.1%, respectively. The effective tax rate for the three months ended June 30, 2022, was generally flat compared to the prior year. The higher effective tax rate for the six months ended June 30, 2022, was primarily attributable to a tax loss associated with the sale of our oil and gas business recorded in 2021.

For the three months ended June 30, 2022, our effective tax 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 research and development tax 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 9: Income Taxes.

SEGMENT OPERATING RESULTS

Basis of Presentation

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

The following table presents segment operating results:

						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
Sales and Service Revenues
Ingalls						$	658					$	670					$	(12)					(2)		%				$	1,289					$	1,319					$	(30)					(2)		%
Newport News						1,433						1,363						70						5		%				2,823						2,770						53						2		%
Mission Technologies						600						237						363						153		%				1,190						496						694						140		%
Intersegment eliminations						(29)						(39)						10						26		%				(64)						(76)						12						16		%
Sales and service revenues						$	2,662					$	2,231					$	431					19		%				$	5,238					$	4,509					$	729					16		%
Operating Income
Ingalls						$	106					$	80					$	26					33		%				$	192					$	171					$	21					12		%
Newport News						94						76						18						24		%				175						169						6						4		%
Mission Technologies						25						13						12						92		%				34						20						14						70		%
Segment operating income						225						169						56						33		%				401						360						41						11		%
Non-segment factors affecting operating income
Operating FAS/CAS Adjustment						(35)						(37)						2						5		%				(72)						(77)						5						6		%
Non-current state income taxes						1						(4)						5						125		%				—						(8)						8						100		%
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

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.

Cumulative Adjustments

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

						Three Months Ended June 30												Six Months Ended June 30
($ in millions)						2022						2021						2022						2021
Gross favorable adjustments						$	106					$	62					$	213					$	148
Gross unfavorable adjustments						(38)						(27)						(100)						(63)
Net adjustments						$	68					$	35					$	113					$	85

For the three months ended June 30, 2022, favorable cumulative 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 six months ended 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 Virginia class (SSN 774) submarine program and Fort Lauderdale (LPD 28). During the same period, none of the unfavorable cumulative catch-up margin adjustments were individually significant.

Ingalls

						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
Sales and service revenues						$	658					$	670					$	(12)					(2)		%				$	1,289					$	1,319					$	(30)					(2)		%
Segment operating income						106						80						26						33		%				192						171						21						12		%
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 June 30, 2022, decreased $12 million, or 2%, from the same period in 2021, primarily driven by lower revenues in surface combatants, partially offset by higher revenues in amphibious assault ships. Revenues on surface combatants decreased due to lower volumes on Jeremiah Denton (DDG 129) and USS Jack H Lucas (DDG 125), 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 six months ended June 30, 2022, decreased $30 million, or 2%, from the same period in 2021, primarily driven by lower revenues in surface combatants, partially offset by higher revenues in amphibious assault ships. Revenues on surface combatants decreased due to lower volumes on Jeremiah Denton (DDG 129), USS Jack H. Lucas (DDG 125), and Frank E. Petersen Jr. (DDG 121), partially offset by higher volumes on Thad Cochran (DDG 135). Revenues on amphibious assault ships increased due to higher volumes on LHA 9 (unnamed), Pittsburgh (LPD 31), and L-Class planning yard services contract and higher volumes on Harrisburg (LPD 30), partially offset by lower volumes on Fort Lauderdale (LPD 28) and Bougainville (LHA 8).

Segment Operating Income

Ingalls segment operating income for the three months ended June 30, 2022, was $106 million, compared with segment operating income of $80 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), 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).

Newport News

						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
Sales and service revenues						$	1,433					$	1,363					$	70					5		%				$	2,823					$	2,770					$	53					2		%
Segment operating income						94						76						18						24		%				175						169						6						4		%
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 June 30, 2022, increased $70 million, or 5%, from the same period in 2021, primarily driven by higher revenues in aircraft carriers, partially offset by lower volumes in 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), the construction of John F. Kennedy (CVN 79), and Enterprise (CVN 80), partially offset by lower volumes on 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.

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 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 June 30, 2022, was $94 million, compared with segment operating income of $76 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, partially offset by lower risk retirement on the Virginia class (SSN 774) submarine program.

Newport News segment operating income for the six months ended June 30, 2022, was $175 million, compared with segment operating income of $169 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 USS Gerald R. Ford (CVN 78), partially offset by lower risk retirement on the Virginia class (SSN 774) submarine program.

Mission Technologies

						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
Sales and service revenues						$	600					$	237					$	363					153		%				$	1,190					$	496					$	694					140		%
Segment operating income						25						13						12						92		%				34						20						14						70		%
As a percentage of segment sales						4.2		%				5.5		%																2.9		%				4.0		%

Sales and Service Revenues

Mission Technologies revenues for the three months ended June 30, 2022, increased $363 million, or 153%, from the same period in 2021, primarily due to higher volumes in DFS attributable to the acquisition of Alion in the third quarter of 2021.

Mission Technologies revenues for the six months ended June 30, 2022, increased $694 million, or 140%, from the same period in 2021, primarily due to higher volumes in DFS attributable to the acquisition of Alion in the third quarter of 2021.

Segment Operating Income

Mission Technologies segment operating income for the three months ended June 30, 2022, was $25 million, compared with segment operating income of $13 million for the same period in 2021. The increase was primarily driven by the acquisition of Alion in the third quarter of 2021 and higher equity income, partially offset by higher amortization of purchased intangible assets.

Mission Technologies segment operating income for the six months ended June 30, 2022, was $34 million, compared with segment operating income of $20 million for the same period in 2021. The increase was primarily driven by the acquisition of Alion in the third quarter of 2021 and higher equity income, partially offset by higher amortization of purchased intangible assets.

BACKLOG

Total backlog as of June 30, 2022, and December 31, 2021, was approximately $47.2 billion and $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 Indefinite Delivery/Indefinite Quantity orders. For contracts having no stated contract values, backlog includes only the amounts committed by the customer.

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

						June 30, 2022																		December 31, 2021
																		Total																		Total
($ in millions)						Funded						Unfunded						Backlog						Funded						Unfunded						Backlog
Ingalls						$	10,208					$	940					$	11,148					$	10,216					$	792					$	11,008
Newport News						13,025						18,386						31,411						11,121						21,198						32,319
Mission Technologies						1,361						3,289						4,650						1,334						3,789						5,123
Total backlog						$	24,594					$	22,615					$	47,209					$	22,671					$	25,779					$	48,450

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

Awards

The value of new contract awards during the six months ended June 30, 2022, was approximately $4 billion, including an award for the construction of 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:

						Six Months Ended June 30												2022 vs. 2021
($ in millions)						2022						2021						Dollars
Net earnings						$	318					$	277					$	41
Depreciation and amortization						178						131						47
Provision for doubtful accounts						(7)						—						(7)
Stock-based compensation						16						12						4
Deferred income taxes						(1)						31						(32)
Loss (gain) on investments in marketable securities						26						(12)						38
Retiree benefits						(65)						(70)						5
Trade working capital increase						(281)						(230)						(51)
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

leverage both to optimize our equity return and to pursue acquisitions. We expect to meet our current debt

obligations as they come due through internally generated funds from current levels of operations and/or through refinancing in the debt markets prior to the maturity dates of our debt.

Cash Flows

We discuss below our significant operating, investing, and financing activities affecting cash flows for the six months ended June 30, 2022 and 2021, as classified on our unaudited condensed consolidated statements of cash flows.

Operating Activities

Cash provided by operating activities for the six months ended June 30, 2022, was $184 million, compared with $139 million provided by operating activities for the same period in 2021. The favorable change in operating cash flow was primarily due to higher earnings, lower contributions to retiree benefit plans, and lower income tax payments, partially offset by changes in trade working capital and higher interest payments. The change in trade working capital was primarily driven by the timing of receipts of accounts receivable and payments of accounts payable.

We expect cash generated from operations in combination with our current cash and cash equivalents, as well as existing credit facilities, to be sufficient to service debt and retiree benefit plans, meet contractual obligations, and finance capital expenditures for at least the 12 months beginning July 1, 2022, and beyond such 12-month period based on our current business plan.

Investing Activities

Cash used in investing activities for the six months ended June 30, 2022, was $101 million, compared with $134 million used in investing activities for the same period in 2021. The change in investing cash was driven by lower capital expenditures in 2022 and contribution of our San Diego Shipyard to a joint venture in 2021, partially offset by

the disposition of our oil and gas business in 2021. For 2022, we expect our capital expenditures for maintenance and sustainment to be approximately 1.0% of annual revenues and our discretionary capital expenditures to be approximately 1.5% to 2.0% of annual revenues.

Financing Activities

Cash used in financing activities for the six months ended June 30, 2022, was $335 million, compared with $169 million used in financing activities for the same period in 2021. The change in financing cash was primarily due to an increase in the repayment of long-term debt of $200 million, an increase of $7 million in employee taxes on certain share-based payment arrangements, and a $2 million increase in cash dividend payments, partially offset by a decrease of $43 million in common stock repurchases.

Free Cash Flow

Free cash flow represents cash provided by operating activities less capital expenditures net of related grant proceeds. Free cash flow is not a measure recognized under GAAP. Free cash flow has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, net earnings as a measure of our performance or net cash provided by operating activities as a measure of our liquidity. We believe free cash flow is an important liquidity measure for our investors because it provides insight into our current and period-to-period performance and our ability to generate cash from continuing operations. We also use free cash flow as a key operating metric in assessing the performance of our business and as a key performance measure in evaluating management performance and determining incentive compensation. Free cash flow may not be comparable to similarly titled measures of other companies.

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

						Six Months Ended June 30												2022 vs. 2021
($ in millions)						2022						2021						Dollars
Net cash provided by operating activities						$	184					$	139					$	45
Less capital expenditures:
Capital expenditure additions						(102)						(134)						32
Grant proceeds for capital expenditures						—						2						(2)
Free cash flow						$	82					$	7					$	75

Free cash flow for the six months ended June 30, 2022, increased $75 million from the same period in 2021, primarily due to higher earnings, lower capital expenditures, lower contributions to retiree benefit plans, and lower income tax payments, partially offset by changes in trade working capital and higher interest payments.

Governmental Regulation and Supervision

The U.S. Government has the ability, pursuant to regulations relating to contractor business systems, to decrease or withhold contract payments if it determines significant deficiencies exist in one or more such systems. As of June 30, 2022 and 2021, the cumulative amounts of payments withheld by the U.S. Government under our contracts subject to these regulations were not material to our liquidity or cash flows.

Off-Balance Sheet Arrangements

In the ordinary course of business, we use 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 our self-insured workers' compensation plans. As of June 30, 2022, $15 million in letters of credit were issued but undrawn and $276 million of surety bonds were outstanding. As of June 30, 2022, we had no other significant off-balance sheet arrangements.

ACCOUNTING STANDARDS UPDATES

See Note 3: Accounting Standards Updates in Part I, Item 1 for information related to accounting standards updates.

FORWARD-LOOKING STATEMENTS AND PROJECTIONS

Statements in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission ("SEC"), as well as other statements we may make from time to time, other than statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by words such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," and similar words or phrases or the negative of these words or phrases. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable when made, we cannot guarantee future results, levels of activity, performance, or achievements. There are a number of important factors that could cause our actual results to differ materially from the results anticipated by our forward-looking statements, which include, but are not limited to:

• 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.

There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business, and we undertake no obligation to update or revise any forward-looking statements. You should not place undue reliance on any forward looking statements that we may make.

GLOSSARY OF PROGRAMS

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. In 2020, we delivered USS Tripoli (LHA 7), 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. We delivered USS Paul Ignatius (DDG 117), 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: 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), 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")						Develops integrated solutions that enable today's connected, all–domain force. Capabilities include: C5ISR systems and operations; the application of artificial intelligence ("AI") and machine learning to battlefield decisions; defensive and offensive cyberspace strategies and electronic warfare ("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 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 U.S. Navy nuclear ships worldwide through mobile and in-house capabilities. Services include maintenance services on nuclear reactor prototypes.
Nuclear and environmental services						Supports the national security mission of the Department of Energy ("DoE") through the management and operation of its sites, as well as the safe cleanup of legacy waste across the country. We meet our clients' toughest nuclear and environmental challenges and are positioned to serve the growing commercial nuclear power plant decommissioning 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. 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						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.