Huntington Ingalls Industries 10-Q 2025-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2025

or

For the transition period from ________ to ________

Commission file number 001-34910

HUNTINGTON INGALLS INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

4101 Washington Avenue Newport News, Virginia 23607

(Address of principal executive offices and zip code)

(757) 380-2000

(Registrant’s telephone number, including area code)

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

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.

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 July 25, 2025, 39,240,631 shares of the registrant's common stock were outstanding.

TABLE OF CONTENTS

HUNTINGTON INGALLS INDUSTRIES, INC.

PART I - FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

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

HUNTINGTON INGALLS INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

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OVERVIEW

Our Business

Huntington Ingalls Industries, Inc. ("HII", "we", "us", or "our") is a global, all-domain defense partner, building and delivering the world’s most powerful, survivable naval ships and technologies that safeguard America’s seas, sky, land, space, and cyber. For more than a century, our Ingalls Shipbuilding segment ("Ingalls") in Mississippi and Newport News Shipbuilding segment ("Newport News") in Virginia have built more ships in more ship classes than any other U.S. naval shipbuilder, making us America's largest shipbuilder. Our Mission Technologies segment develops integrated technology solutions and products that enable today's connected, all-domain force. Headquartered in Newport News, Virginia, we employ 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 is organized into four groups, All-Domain Operations, Warfare Systems, Global Security, and Uncrewed Systems, and specializes in a wide range of services and products across our capabilities, which include command, control, computers, communications, cyber, intelligence, surveillance, and reconnaissance ("C5ISR") systems and operations; the application of artificial intelligence and machine learning to battlefield decisions; defensive and offensive cyber, electronic warfare & space; uncrewed systems; live, virtual, and constructive training solutions; fleet sustainment; 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, 2024 (our "2024 Annual Report on Form 10-K").

Business Environment

The federal budget environment remains a significant long-term risk, and we continue to see uncertainty in the economy, our industry, and our company. Our customers and suppliers continue to face challenges, and 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. We cannot clearly predict how long these challenges will continue, whether these challenges will change over time, or whether our actions to address these challenges will be successful.

Defense Spending Environment – The federal government is operating under the Full-Year Continuing Appropriations and Extensions Act, 2025, signed into law March 15, 2025. This marks the first time the DoD has operated under a Continuing Resolution ("CR") for a full fiscal year. While unprecedented, exceptions were made to the Navy Shipbuilding and Conversion account in the full-year CR to provide the necessary authorities and funding for program execution.

The fiscal year 2026 budget process is unique. As proposed, the first budget submission of Donald Trump’s second Administration requested two Congressional bills to be passed — a base annual appropriations bill and a budget reconciliation bill. For fiscal year 2026, the Administration recommends a National Defense budget of $1.01 trillion, of which $961.6 billion is specific to the Pentagon and consists of $848.3 billion for the Pentagon’s annual discretionary budget and $113.3 billion for the Pentagon in mandatory funding via Congressional reconciliation. On May 2, 2025, the Administration released the President's topline recommendations on discretionary funding levels for fiscal year 2026, followed by detailed budget justification documents in June. The Department of the Navy requested $248.9 billion in the base budget and $43.3 billion in reconciliation funds. Included in the Navy's proposed fiscal year 2026 budget is $47.4 billion for shipbuilding — $20.9 billion in the base budget request and $26.5 billion in reconciliation funding. The proposed budget relies on reconciliation funding to fund 14 of 17 battle force ships requested.

Combined, the base budget and reconciliation budget reflect continued investment in shipbuilding. The Navy’s fiscal year 2026 base discretionary budget request seeks one Columbia class (SSBN 826) ballistic missile submarine, one

Virginia class (SSN 774) fast attack submarine and one ocean surveillance ship. The budget reconciliation bill, known as the One Big Beautiful Bill Act (the "Act"), was signed into law on July 4, 2025 and includes more than $29 billion for Shipbuilding and the Maritime Industrial Base. The Act funds one Virginia class (SSN 774) fast attack submarine, two Arleigh Burke class (DDG 51) guided-missile destroyers, nine Landing Ship Mediums and two John Lewis class (T-AO 205) fleet oilers. Funding is also provided for amphibious warfare ships and unmanned surface vessels.

Lawmakers proceeded with consideration of the fiscal year 2026 budget request for the Federal government, while simultaneously considering the reconciliation bill. On July 18, 2025, the House approved its Fiscal Year 2026 Defense Appropriations Bill which was developed to complement the defense investments in the reconciliation bill. For the shipbuilding account, the House appropriation bill provides $36.9 billion in base discretionary funding, including six battle force ships: one Columbia class (SSBN 826) ballistic missile submarine, two Virginia class (SSN 774) fast attack submarines, two Arleigh Burke class (DDG 51) guided missile destroyers, and one T-AGOS SURTASS ship for antisubmarine warfare. Additionally, the House appropriations bill includes $1.5 billion for the Maritime Industrial Base to invest in critical areas including supplier capacity and capability, strategic outsourcing, workforce training, and technology, and infrastructure; $1.6 billion for productivity enhancements to improve shipbuilder capability, capacity, and efficiency at the private nuclear shipyards; and $521 million for wage enhancements at the private nuclear shipyards. The timing of Senate Appropriations Committee action remains uncertain.

Both the Senate Armed Services Committee ("SASC") and the House Armed Services Committee ("HASC") approved their respective versions of the fiscal year 2026 National Defense Authorization Act ("NDAA") legislation in July.

The SASC authorization bill supports a total of $925 billion in fiscal year 2026 funding for national defense, including $878.7 billion for the Defense Department, $35.2 billion for defense programs within the Department of Energy, and $11.1 billion for defense spending outside the jurisdiction of the NDAA. Language is included in the bill that authorizes the procurement of up to five Columbia class (SSBN 826) ballistic missile submarines and supports amphibious warship production by reinforcing the statutory requirement for 31 amphibious ships. Additional funding is authorized for Virginia class (SSN 774) submarines and Arleigh Burke class (DDG 51) destroyers.

In addition to the Virginia class (SSN 774) submarine and two Arleigh Burke class (DDG 51) destroyers provided for by reconciliation, the HASC bill authorizes the procurement of the third Columbia class (SSBN 826) submarine and additional funding for Virginia class (SSN 774) submarines. Additionally, the HASC bill supports the authorization of advance procurement for future Columbia class (SSBN 826) submarines, additional funding for Virginia class (SSN 774) submarines, as well as completion

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We are exposed to certain market risks, including those relating to interest rates and inflation.

Interest Rates - Our floating rate financial instruments subject to interest rate risk include a $1.7 billion revolving credit facility and a $1.7 billion commercial paper program. As of June 30, 2025, we had no indebtedness outstanding under our revolving credit facility or our commercial paper program, and therefore had no interest rate risk with respect to these instruments.

Inflation - Macroeconomic factors have contributed, and we expect will continue to contribute, to increasing cost inflation for raw materials, components, and supplies. We mitigate some cost inflation risk by negotiating long-term agreements with certain raw material suppliers and incorporating price escalation provisions in customer contracts to the extent possible. We include assumptions of anticipated cost growth in the development of our cost of completion estimates, but if inflationary conditions continue over the long-term, our cost assumptions may not be sufficient to cover all cost escalation or may impact the availability of resources to execute the respective contracts. Persistent cost inflation over the long-term may have an adverse impact on our financial position, results of operations, or cash flows.

Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of June 30, 2025. Based on that evaluation, the Company's Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) concluded that, as of June 30, 2025, the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed in reports the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) accumulated and communicated to management to allow their timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company's internal control over financial reporting that occurred in the quarterly period covered by this report that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We have provided information about legal proceedings in which we are involved in the unaudited condensed consolidated financial statements in Part I, Item 1, which is incorporated herein by reference. In addition to the matters disclosed in Part I, Item 1, we are a party to various investigations, lawsuits, claims, and other legal proceedings that arise in the ordinary course of our business. Based on information available to us, we do not believe at this time that any of such other matters will individually, or in the aggregate, have a material adverse effect on our financial condition, results of operations, or cash flows. For further information on the risks we face from existing and future investigations, lawsuits, claims, and other legal proceedings, please see "Risk Factors" in Item 1A in the 2024 Annual Report on Form 10-K.

Consistent with the requirements of SEC Regulation S-K, Item 103, our threshold for disclosing any environmental legal proceeding involving a governmental authority is potential monetary sanctions that our management believes will exceed $1 million.

In addition to the other information set forth in this Quarterly Report on Form 10–Q, carefully consider the factors discussed in Part I, Item 1A Risk Factors in the 2024 Annual Report on Form 10–K, which could materially affect our business, financial condition, or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 June 30, 2025.

1 From the stock repurchase program's inception through June 30, 2025, we have purchased 14,584,709

shares at an average price of $167.82 per share for a total of $2.4 billion.

2 In November 2012, we announced the establishment of our stock repurchase program. In January 2024, our board

of directors authorized an increase in the stock repurchase program to $3.8 billion and an extension of the term to December 31, 2028.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Adoption or Termination of Trading Arrangements

None of our directors or officers (as defined in Exchange Act Rule 16a-1(f)) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.

SIGNATURES

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.