HUNTINGTON INGALLS INDUSTRIES, INC. (HII)

CIK: 0001501585. SIC: 3730 Ship & Boat Building & Repairing. Latest 10-K as of: 2026-02-05.

SIC breadcrumb: Manufacturing > Transportation Equipment > SIC 3730 Ship & Boat Building & Repairing

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1501585. Latest filing source: 0001501585-26-000006.

Selected Fundamentals

Metric	Value	Unit	FY	Filed
Revenue	12,484,000,000	USD	2025	2026-02-05
Net income	605,000,000	USD	2025	2026-02-05
Assets	12,749,000,000	USD	2025	2026-02-05

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-05. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001501585.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Metric	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025
Revenue	7,068,000,000	7,441,000,000	8,176,000,000	8,899,000,000	9,361,000,000	9,524,000,000	10,676,000,000	11,454,000,000	11,535,000,000	12,484,000,000
Net income	573,000,000	479,000,000	836,000,000	549,000,000	696,000,000	544,000,000	579,000,000	681,000,000	550,000,000	605,000,000
Operating income	876,000,000	881,000,000	951,000,000	736,000,000	799,000,000	513,000,000	565,000,000	781,000,000	535,000,000	657,000,000
Diluted EPS	12.14	10.46	19.09	13.26	17.14	13.50	14.44	17.07	13.96	15.39
Assets	6,352,000,000	6,374,000,000	6,383,000,000	7,031,000,000	8,157,000,000	10,627,000,000	10,857,000,000	11,215,000,000	12,141,000,000	12,749,000,000
Liabilities	4,699,000,000	4,616,000,000	4,867,000,000	5,443,000,000	6,256,000,000	7,819,000,000	7,368,000,000	7,122,000,000	7,475,000,000	7,676,000,000
Stockholders' equity	1,653,000,000	1,758,000,000	1,516,000,000	1,588,000,000	1,901,000,000	2,808,000,000	3,489,000,000	4,093,000,000	4,666,000,000	5,073,000,000
Net margin	8.11%	6.44%	10.23%	6.17%	7.44%	5.71%	5.42%	5.95%	4.77%	4.85%
Operating margin	12.39%	11.84%	11.63%	8.27%	8.54%	5.39%	5.29%	6.82%	4.64%	5.26%

Financial Charts

Macro Cross-References

CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
UNRATE - Unemployment Rate
FEDFUNDS - Federal Funds Effective Rate
CES0500000003 - Average Hourly Earnings of All Employees, Total Private
DFEDTARU - Federal Funds Target Range - Upper Limit
DFEDTARL - Federal Funds Target Range - Lower Limit
DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
PCEPI - Personal Consumption Expenditures: Chain-type Price Index
PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
PPIACO - Producer Price Index by Commodity: All Commodities
T10YIE - 10-Year Breakeven Inflation Rate
U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
PAYEMS - All Employees, Total Nonfarm
CIVPART - Labor Force Participation Rate
EMRATIO - Employment-Population Ratio
UNEMPLOY - Unemployed
CE16OV - Employment Level
ICSA - Initial Claims
JTSJOL - Job Openings: Total Nonfarm
JTSQUR - Quits: Total Nonfarm
GDPC1 - Real Gross Domestic Product
A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
INDPRO - Industrial Production: Total Index
TCU - Capacity Utilization: Total Index
HOUST - New Privately-Owned Housing Units Started: Total Units
PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
RSAFS - Advance Retail Sales: Retail Trade
PCE - Personal Consumption Expenditures
DSPIC96 - Real Disposable Personal Income
PSAVERT - Personal Saving Rate
M2SL - M2
BOPGSTB - U.S. International Trade in Goods and Services: Balance

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-05. Report date: 2025-12-31.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following discussion should be read along with the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K along with the other sections of this Form 10-K, including Item 1A. Risk Factors, as well as Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2024.

Business Environment

The United States political and economic environment in 2025 has been shaped by renewed national emphasis on industrial resilience, defense readiness, and maritime strength. However, against a backdrop of heightened geopolitical tension and domestic policy realignment, we continue to see uncertainty in the economy, our industry, and our company. Our customers, suppliers, and subcontractors continue to face challenges. We cannot 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.

U.S. Political and Economic Environment – The political and economic landscape of the United States in 2025 has been characterized by policy realignment and a complex macroeconomic environment. The Trump Administration (the "Administration") has pursued a renewed emphasis on domestic production, trade protectionism, and deregulation, particularly across the energy, manufacturing, and technology sectors. Heightened political polarization and intermittent fiscal disputes, including a historic 43-day funding lapse, have underscored the challenges of policy continuity and long-term fiscal planning. Despite these disruptions, defense spending continues to benefit from strong bipartisan support, with consensus around the need to maintain U.S. technological superiority and military readiness amid rising global security challenges.

The Administration’s “America First” economic and security agenda has accelerated efforts to repatriate critical manufacturing and expand production capacity. Policy initiatives have prioritized procurement reform, domestic

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sourcing mandates, and investment incentives to stimulate innovation in advanced defense technologies, including hypersonics, cyber defense, artificial intelligence, and space systems.

Economically, the United States continues to experience inflationary pressures and elevated interest rates. The economic and policy environment remains fluid, with the main variables revolving around tariffs and immigration. Fiscal conditions remain constrained, with federal debt exceeding 120% of GDP, highlighting the imbalances within the broader economy.

For the defense sector, these macroeconomic conditions have resulted in mixed impacts. While higher borrowing costs and input inflation have placed pressure on working capital and contract execution, strong defense demand and federal funding have continued to support revenue stability across the industrial base. Increased emphasis on domestic sourcing and production security has also stimulated capital investment in U.S. manufacturing facilities and supplier networks.

Supply chain realignment remains a central theme in 2025. Continued global disruptions and tariff adjustments have encouraged U.S. defense firms to diversify supplier networks, enhance vertical integration, and invest in advanced manufacturing technologies. Federal programs aimed at supporting small and mid-tier suppliers have further reinforced the broader defense ecosystem.

The labor market continues to present challenges for our company, our industry, and the supply chain. Our ability to increase throughput and meet production schedules is directly impacted by labor availability and performance. We monitor labor market conditions and trends and work to mitigate the effects of labor challenges through a variety of measures. Challenges in the labor market are addressed through targeted talent acquisition, partnerships with community colleges, apprentice school sourcing and recruiting, workforce succession planning, and initiatives to retain employees. Labor shortages and retention are also impacting our supply chain, resulting in longer lead times for materials, parts, and other supplies. Our supply chain has been impacted further by delivery delays, raw materials shortages, and price increases caused by continued inflationary pressures.

The shipbuilding defense industry is unique in many ways. It is both capital- and skilled labor-intensive. The U.S. Navy, a large single customer with many needs and requirements, dominates the industry's customer base and is served by a fragile supplier base that has trended toward exclusive providers. The Department continues to adjust its procurement practices and streamline acquisition organizations and processes in an ongoing effort to reduce costs, gain efficiencies, and enhance program management and control. Additionally, the U.S. Navy must compete with other national priorities, including other defense activities, non-defense discretionary spending, and entitlement programs, for a share of federal budget funding. While the impact to our business resulting from these developments remains uncertain, they could have a material impact on current programs, as well as new business opportunities with the Department.

Defense Spending Environment – 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. Additionally, under the Act, Congress provided mandatory funding of more than $29 billion for Shipbuilding and the Maritime Industrial Base. This funding included one Virginia class (SSN 774) fast attack submarine and two Arleigh-Burke class (DDG 51) guided-missile destroyers, and provided additional funding for amphibious warfare ships and unmanned surface vessels.

Overall, the fiscal year 2026 NDAA authorizes $900.6 billion in national security funding. The legislation supports our shipbuilding priorities with a total authorization of $26 billion for shipbuilding programs, including procurement authorization for the third Columbia class (SSBN 826) submarine and advance procurement for future submarines, one Virginia class (SSN 774) fast attack submarine and advance procurement for future submarines, advance procurement for future Arleigh-Burke class (DDG 51) class destroyers, and full funding for the Gerald R. Ford class (CVN 78) aircraft carrier program. Additionally, the fiscal year 2026 NDAA provides authorization for William J. Clinton (CVN 82) and George W. Bush (CVN 83), including incremental funding, advance construction, and advance procurement authorities; incremental funding and authorization for up to five Columbia class (SSBN 826) submarines; and continuous production authority for certain components of Virginia class (SSN 774) submarines.

Fiscal year 2026 began on October 1, 2025 without annual appropriations legislation or a continuing resolution. As a result, parts of the U.S. Government temporarily shut down. On November 12, after a 43-day federal government shutdown, lawmakers passed and the President signed a continuing resolution funding the government until

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January 30, 2026. Lawmakers also passed three annual funding bills – Military Construction-VA, Agriculture-FDA, and Legislative Branch – to fund parts of the government long-term.

The negotiated fiscal year 2026 defense appropriations bill includes continued incremental funding for Enterprise (CVN 80) and Doris Miller (CVN 81), along with advance procurement for William J. Clinton (CVN 82); continued funding for the RCOH of USS John C. Stennis (CVN 74); funding for the Virginia class (SSN 774) and Columbia class (SSBN 826) submarine programs; advanced procurement for the Arleigh Burke class (DDG 51) program, including additional funding for shipyard infrastructure and wage enhancements; and funding for long-lead-time materials for the new frigate program. Additionally, the bill provides $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.

Global Geopolitical Environment – The global geopolitical and economic environment continues to be impacted by uncertainty, heightened geopolitical tensions, and instability. Geopolitical relationships continue 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. In addition, changes in the global economic environment, including changes in international trade policies, including those imposing tariffs, could further impact the global market for defense products. 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, trade policy, and a challenging labor market.

Program Descriptions

For convenience, a brief description of certain programs discussed in this Annual Report on Form 10-K is included in the Glossary of Programs.

CONTRACTS

We generate most of our revenues from long-term U.S. Government contracts for the production of goods and services. Government contracts typically include the following cost elements: direct material, labor and subcontracting costs, and certain indirect costs, including allowable general and administrative expenses. 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.

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 DCAA 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 in Item 8.

•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.

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•Time and Materials Contracts - 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- 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.

CRITICAL ACCOUNTING POLICIES, ESTIMATES, AND JUDGMENTS

Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Management considers an accounting policy to be critical if it is important to our financial condition and results of operations and requires significant judgment and estimates by management in its application. The development and selection of these critical accounting policies have been determined by our management. We have reviewed our critical accounting policies and estimates with the audit committee of our board of directors. Due to the significant judgment involved in selecting certain of the assumptions used in these policies, it is possible that different parties could choose different assumptions and reach different conclusions. While we base estimates and assumptions on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. We consider our policies relating to the following matters to involve our most critical accounting policies and estimates:

•Revenue recognition;

•Retirement related benefit plans; and

•Workers' compensation.

See Note 2: Summary of Significant Accounting Policies in Item 8 for further information.

Revenue Recognition

Most of our revenues are derived from long-term contracts for the production of goods and services provided to the U.S. Government, which are generally accounted for by recognizing revenues over time using a cost-to-cost measure of progress. In estimating contract costs, we utilize a profit-booking rate based upon performance expectations that incorporate a number of assumptions and estimates regarding risks related to technical requirements, feasibility, schedule, and contract costs. Management performs periodic reviews of the contracts to evaluate the underlying risks, which may increase the profit-booking rate as we are able to mitigate and retire such risks. For the impacts of changes in estimates on our consolidated statements of operations and comprehensive income, see Note 7: Revenue in Item 8.

Retirement Related Benefit Plans

We recognize, on a plan-by-plan basis, the funded status of our retirement related benefit plans as an asset or liability on our balance sheet, with corresponding adjustments to after-tax accumulated other comprehensive loss and deferred tax assets or liabilities. The funded status represents the difference between the benefit obligation and the fair value of plan assets. See Note 17: Employee Pension and Other Postretirement Benefits in Item 8.

We calculate our retirement related benefit plan costs under both CAS and GAAP ("FAS"). The calculations under CAS and FAS require significant judgment. CAS prescribes the determination, allocation, and recovery of retirement related benefit plan costs on U.S. Government contracts through the pricing of products and services. FAS prescribes the methodology used to determine retirement related benefit plan expense or income, as well as the

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liability, for financial reporting purposes. The CAS requirements for these costs and their calculation methodologies differ from FAS. As a result, while both CAS and FAS use assumptions in their calculation methodologies, each method results in different calculated amounts of retirement related benefit plan costs.

We recover our CAS costs through the pricing of products and services on U.S. Government contracts, so that the CAS cost is recognized in segment product sales and service revenues and in the costs of those product sales and service revenues. In order to present our consolidated financial statements in accordance with FAS, we record the difference between our FAS expense and CAS cost (“FAS/CAS Adjustment”) as operating income within segment operating income and non-operating retirement benefit (expense).

The minimum funding requirements for our qualified pension plans are determined under the Employee Retirement Income Security Act of 1974 ("ERISA"), which is primarily based on the year's expected service cost and amortization of other previously unfunded liabilities. Effective January 1, 2011, we were subject to the funding requirements under the Pension Protection Act of 2006 (the "PPA"), which amended ERISA. Under the PPA and the American Rescue Plan Act of 2021, we are required to fully fund our pension plans over a rolling 15-year period as determined annually based upon the funded status at the beginning of each year. The PPA also introduced a variety of benefit restrictions that apply if a plan falls below certain funded percentages, as defined by the Internal Revenue Code. In funding our plans, we consider various factors, including the minimum funding requirements, the funded status needed to avoid potential benefit restrictions and other adverse consequences, minimum CAS funding requirements, and the current and anticipated funding levels of each plan.

Effective January 1, 2021, we adopted the Safe Harbor methodology for determining CAS pension costs. As a result, the interest rates used to calculate pension liabilities under CAS are consistent with those used in the determination of minimum funding requirements under ERISA.

Pension funding requirements for plan sponsors under ERISA are subject to pension relief in the form of higher interest rate assumptions introduced by the Moving Ahead for Progress in the 21st Century Act and subsequently extended by the American Rescue Plan Act of 2021. Using these minimum funding interest rates for the purposes of determining pension costs under CAS reduces volatility in CAS costs year-over-year and provides more predictable costs for our customers, while better aligning reimbursements of pension costs under our contracts with our required pension plan contributions under ERISA.

Due to the differences in requirements and calculation methodologies between FAS and CAS, our FAS pension expense is not necessarily indicative of the funding requirements under the PPA or the amounts we recover from the U.S. Government under CAS.

Assumptions - We account for our retirement related benefit plans on the accrual basis under FAS. The measurements of obligations, costs, assets, and liabilities require significant judgment. We annually review our assumptions, which are set at each year end and generally not changed during the following year unless a major plan event occurs, such as an amendment, curtailment, or settlement that would trigger a remeasurement. The key assumptions in these measurements are the interest rate used to discount future benefit payments and the expected long-term rate of return on plan assets.

Discount Rate - The assumed discount rate under FAS is used to determine the retirement related benefit plan obligations and expense, and represents the hypothetical rate at which plan benefit obligations could be effectively settled at the measurement date. Consequently, the discount rate can be volatile from year to year. The discount rate assumption is determined for each plan by constructing a hypothetical portfolio of high-quality bonds with cash flows that match the estimated outflows for future benefit payments to determine a single equivalent discount rate. Benefit payments are not only contingent on the terms of a plan but also on the underlying participant demographics, including current age and assumed mortality. We use only bonds that are denominated in U.S. dollars, are rated Aa or better by nationally recognized statistical rating agencies, have a minimum outstanding issue of $50 million as of the measurement date, and are not convertible or index-linked.

Expected Long-Term Rate of Return - The expected long-term rate of return on assets is used to calculate net periodic expense, based on such factors as historical returns, targeted asset allocations, investment policy, duration, expected future long-term performance of individual asset classes, interest rates, inflation, portfolio volatility, investment management and administrative fees, and risk management strategies. Historical plan asset performance alone has inherent limitations in predicting future returns. While studies are helpful in understanding past and current trends and performance, the rate of return assumption is based more on long-term prospective

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views to avoid short-term market influences. Unless plan assets and benefit obligations are subject to re-measurement during the year, the expected return on pension assets is based on the fair value of plan assets at the beginning of the year.

Mortality - Mortality assumptions are used to determine the retirement related benefit obligations and expense, and represent the likelihood and duration of benefit payments to plan participants based on historical experience and projected longevity. We periodically update our mortality assumptions as circumstances warrant.

Differences arising from actual experience or changes in assumptions might materially affect retirement related benefit plan obligations and the funded status. Actuarial gains and losses arising from differences between assumptions and actual experience or changes in assumptions are deferred in accumulated other comprehensive loss. This unrecognized amount is amortized as a component of net expense to the extent it exceeds 10% of the greater of the plan's benefit obligation or plan assets. The amortization period for actuarial gains and losses is the estimated average remaining service life of the plan participants. In 2025, the actual return on assets was approximately 10.7%, which was more than the expected return assumption of 8.00%. For the year ended December 31, 2025, the weighted average discount rates for our pension and other postretirement benefit plans decreased by 26 and 37 basis points, respectively. The difference in asset returns resulted in an actuarial gain of $187 million, and the discount rate changes resulted in an actuarial loss of $181 million for the year ended December 31, 2025.

An increase or decrease of 25 basis points in the discount rate and the expected long-term rate of return assumptions would have had the following approximate impacts on pension expense and obligations:

($ in millions)

Increase (Decrease) in 2026 Expense

Increase (Decrease) in December 31, 2025 Obligations

25 basis point decrease in discount rate

(1)

177

25 basis point increase in discount rate

(168)

25 basis point decrease in expected return on assets

25 basis point increase in expected return on assets

(18)

Assuming a 7.90% expected return on assets assumption, a $50 million pension plan contribution is generally expected to favorably impact the current year expected return on assets by approximately $2 million, depending on the timing of the contribution.

Sensitivities to assumptions are not necessarily linear and are specific to the time periods noted.

CAS Cost - In addition to providing the methodology for calculating retirement related benefit plan costs, CAS also prescribes the method for assigning those costs to specific periods. While the ultimate liability for such costs under FAS and CAS is similar, the pattern of cost recognition is different. The key drivers of CAS pension cost include the funded status and the method used to calculate CAS reimbursement for each of our plans. A plan’s CAS pension cost can only be allocated until the plan is fully funded as defined under the CAS requirements.

Other FAS and CAS Pension Considerations - A key driver of the difference between FAS expense and CAS cost (and consequently the FAS/CAS Adjustment) is the pattern of earnings and expense recognition for actuarial gains and losses that arise when our asset and liability experiences differ from our assumptions under each set of requirements. Under FAS, our net actuarial gains and losses exceeding the 10% corridor are amortized over the estimated average remaining service life of the plan participants. Under CAS Harmonization, the amortization period is 10 years for actuarial gains and losses. Both FAS and CAS use a "market-related value" of plan assets approach to calculate the amount of deferred asset gains or losses to be amortized. Under CAS, actual asset gains and losses are systematically smoothed over five years, subject to certain limitations. For FAS, we do not use this smoothing method, and instead use fair value in determining our FAS expense. Accordingly, FAS expense generally reflects recent asset gains and losses sooner than CAS.

Additionally, CAS cost is only recognized for plans that are not fully funded as defined under CAS. If a plan becomes or ceases to be fully funded due to our asset or liability experience, our CAS cost will change accordingly.

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Retirement Plan Assets - Retirement plan assets are stated at fair value. Investments in equity securities (common and preferred) are valued at the last reported sales price when an active market exists. Investments in fixed-income securities are generally valued based on market transactions for comparable securities and various relationships between securities that are generally recognized by institutional traders. Investments in hedge funds, real estate investment funds, private partnerships, collective trust funds, and commingled funds are generally valued at their Net Asset Values ("NAV") or equivalent, which are based on the current fair values of the fund's underlying assets.

Management reviews independently appraised values, audited financial statements, and additional pricing information to evaluate the NAV or its equivalent.

For the limited group of investments for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value, additional information is obtained from the investment manager and evaluated internally to determine whether any adjustments are required to reflect fair value. See Note 17: Employee Pension and Other Postretirement Benefits in Item 8.

Accumulated Other Comprehensive Loss - Changes in assumptions and changes to plan assets and benefit obligations due to differences between actuarial assumptions and actual results are reported as actuarial gains and losses and recorded in accumulated other comprehensive loss, along with unrecognized prior service costs arising from plan amendments. As disclosed in Note 17: Employee Pension and Other Postretirement Benefits in Item 8, net pre-tax unrecognized actuarial gains as of December 31, 2025 and 2024 were $13 million and $59 million, respectively. The decrease in actuarial gains in 2025 was primarily driven by lower discount rates used to determine benefit obligations of $181 million, amortization of previously unrecognized actuarial losses of $11 million, offset by higher than expected asset returns of $187 million.

Net pre-tax unrecognized prior service costs (credits) as of December 31, 2025 and 2024 were $98 million and $111 million, respectively. These net deferred costs (credits) primarily originated from plan amendments, including those resulting from collective bargaining agreements. The change in unrecognized prior service costs (credits) in 2025 resulted from plan amendments and the amortization of previously accumulated prior service costs (credits).

Workers' Compensation

Our operations are subject to federal and state workers' compensation laws. We maintain self-insured workers' compensation plans and participate in federally administered second injury workers' compensation funds. We estimate the liability for such claims and funding requirements on a discounted basis utilizing actuarial methods based on various assumptions, which include our historical loss experience and projected loss development factors. We periodically, and at least annually, update our assumptions based on an actuarial analysis. For further information on workers’ compensation, see Note 16: Commitments and Contingencies in Item 8.

Accounting Standards Updates

See Note 3: Accounting Standards Updates in Item 8 for further information.

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CONSOLIDATED OPERATING RESULTS

The following table presents selected financial highlights:

Year Ended December 31

2025 over 2024

2024 over 2023

($ in millions)

2025

2024

2023

Dollars

Percent

Dollars

Percent

Sales and service revenues

12,484

11,535

11,454

949

Cost of product sales and service revenues

10,899

10,085

9,808

814

277

Income from operating investments, net

(3)

(6)

Other income and gains, net

120

(6)

(67)

(111)

(93)

General and administrative expenses

977

973

1,022

—

(49)

(5)

Operating income

657

535

781

122

(246)

(31)

Interest expense

(105)

(95)

(10)

(11)

—

Non-operating retirement benefit

190

179

148

Other, net

Federal and foreign income taxes

172

(79)

(46)

Net earnings

605

550

681

(131)

(19)

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 financial 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.

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 profit margin rate for a particular contract.

Sales and service revenues for the year ended December 31, 2025, increased $949 million, or 8%, compared to the same period in 2024, due to higher volumes at Newport News, Ingalls, and Mission Technologies.

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Net Cumulative Catch-up Revenue Adjustments

For the years ended December 31, 2025, 2024, and 2023, favorable and unfavorable cumulative catch-up revenue adjustments were as follows:

Year Ended December 31

($ in millions)

2025

2024

2023

Gross favorable adjustments

322

287

309

Gross unfavorable adjustments

(350)

(413)

(191)

Net adjustments

(28)

(126)

118

See Note 7: Revenue in Item 8 and Segment Operating Results in this section for additional information on our net cumulative catch-up revenue adjustments.

Cost of Product Sales and Service Revenues

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.

Refer to Segment Operating Results and Product and Service Revenues and Cost Analysis in this section for details related to cost of sales for both product sales and service revenues.

Income 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.

Refer to Segment Operating Results in this section for details related to income from operating investments.

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 in 2025 increased $4 million compared to 2024. The increase was primarily due to higher state income taxes, partially offset by lower overhead costs.

Operating Income

We consider operating income 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.

Segment Operating Income

We internally manage our operations by reference to "segment operating income," which is a non-GAAP measure and is defined as operating income before the Operating FAS/CAS Adjustment and non-current state income taxes, neither of which affects contract performance. Segment operating income is a measure we use to evaluate our core operating performance as it reflects the aggregate performance results of contracts within a segment. 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. 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

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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.

Changes in segment operating income are typically expressed in terms of volume, as discussed in Sales and Service Revenues above, or performance. Performance refers to changes in contract profit margin rates. These changes typically relate to profit recognition associated with revisions to estimated costs at completion ("EAC"), which 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, inflationary pressures on our supply chain, the effects of workforce stoppages and other labor-related shortfalls, the availability of raw materials, 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. Refer to Segment Operating Results in this section for activity within each segment.

The following table reconciles operating income to segment operating income:

Year Ended December 31

2025 over 2024

2024 over 2023

($ in millions)

2025

2024

2023

Dollars

Percent

Dollars

Percent

Operating income

657

535

781

122

(246)

(31)

Operating FAS/CAS Adjustment

(27)

(44)

(10)

(14)

Non-current state income taxes

(24)

(11)

204

(13)

(118)

Segment operating income

717

573

842

144

(269)

(32)

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 FAS and the expenses for these items included in segment operating income in accordance with 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:

Year Ended December 31

2025 over 2024

2024 over 2023

($ in millions)

2025

2024

2023

Dollars

Percent

Dollars

Percent

FAS benefit

100

113

CAS cost

FAS/CAS Adjustment

155

117

Non-operating retirement benefit

(190)

(179)

(148)

(11)

(6)

(31)

(21)

Operating FAS/CAS Adjustment expense

(35)

(62)

(72)

The Operating FAS/CAS Adjustment in 2025 was a net expense of $35 million, compared to a net expense of $62 million in 2024. The favorable change was primarily driven by higher interest rates under FAS.

We expect the FAS/CAS Adjustment in 2026 to be a net benefit of approximately $169 million (($123) million FAS and $46 million CAS), primarily driven by higher 2025 returns on plan assets.

We expect the Operating FAS/CAS Adjustment in 2026 to be a net expense of approximately $44 million ($90 million FAS and $46 million CAS), primarily driven by lower interest rates.

The expected FAS/CAS Adjustment is subject to change during 2026, when we remeasure our actuarial estimate of the unfunded benefit obligation with updated census data and other items later in the year.

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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 taxes are charged to contract costs and included in cost of sales and service revenues in segment operating income.

Non-current state income tax expense in 2025 was $25 million, compared to non-current state income tax benefit of $24 million in 2024. The unfavorable change in non-current state income taxes was driven by an increase in deferred state income tax expense, primarily attributable to a change in net capitalized research and development expenditures and an increase in the blended state income tax rate applied to our deferred tax balances.

SEGMENT OPERATING RESULTS

Basis of Presentation

Our discussion of business segment performance focuses on sales and service revenues and operating income, consistent with our approach for managing our business. We are aligned into three reportable segments: Ingalls, Newport News, and Mission Technologies.

The following table presents segment operating results:

Year Ended December 31

2025 over 2024

2024 over 2023

($ in millions)

2025

2024

2023

Dollars

Percent

Dollars

Percent

Sales and Service Revenues

Ingalls

3,078

2,767

2,752

311

Newport News

6,507

5,969

6,133

538

(164)

(3)

Mission Technologies

3,044

2,937

2,699

107

238

Intersegment eliminations

(145)

(138)

(130)

(7)

(5)

(8)

(6)

Sales and service revenues

12,484

11,535

11,454

949

Operating Income

Ingalls

233

211

362

(151)

(42)

Newport News

331

246

379

(133)

(35)

Mission Technologies

153

116

101

Segment operating income

717

573

842

144

(269)

(32)

Non-segment factors affecting operating income

Operating FAS/CAS Adjustment

(35)

(62)

(72)

Non-current state income taxes

(25)

(49)

(204)

118

Operating income

657

535

781

122

(246)

(31)

Key Segment Financial Measures

Refer to Consolidated Operating Results in this section for details related to sales and service revenues and segment operating income.

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Net Cumulative Catch-up Revenue Adjustments by Segment

For the years ended December 31, 2025, 2024, and 2023, net cumulative catch-up revenue adjustments by segment were as follows:

Year Ended December 31

($ in millions)

2025

2024

2023

Ingalls

Newport News

(64)

(154)

Mission Technologies

Net adjustments

(28)

(126)

118

See Note 7: Revenue in Item 8 and Consolidated Operating Results in this section for additional information on our net cumulative catch-up revenue adjustments.

Ingalls

Year Ended December 31

2025 over 2024

2024 over 2023

($ in millions)

2025

2024

2023

Dollars

Percent

Dollars

Percent

Sales and service revenues

3,078

2,767

2,752

311

Segment operating income

233

211

362

(151)

(42)

As a percentage of segment sales

7.6

13.2

Sales and Service Revenues

Ingalls sales and service revenues, including intersegment sales, increased $311 million, or 11%, in 2025 compared to 2024, primarily driven by higher volumes in surface combatants and amphibious assault ships.

Segment Operating Income

Ingalls segment operating income in 2025 was $233 million, compared to segment operating income of $211 million in 2024. The increase was primarily due to higher volumes and contract adjustments in surface combatants, partially offset by lower performance in amphibious assault ships.

Newport News

Year Ended December 31

2025 over 2024

2024 over 2023

($ in millions)

2025

2024

2023

Dollars

Percent

Dollars

Percent

Sales and service revenues

6,507

5,969

6,133

538

(164)

(3)

Segment operating income

331

246

379

(133)

(35)

As a percentage of segment sales

5.1

4.1

6.2

The Company’s Newport News segment continues to experience performance challenges in the construction of aircraft carriers and the Virginia class (SSN 774) submarine program. For the year ended December 31, 2025, cumulative catch-up revenue adjustments included significant unfavorable performance adjustments on the construction of aircraft carriers and Virginia class (SSN 774) submarines, which were offset by contract incentives.

Sales and Service Revenues

Newport News sales and service revenues, including intersegment sales, increased $538 million, or 9%, in 2025 compared to 2024, primarily driven by higher volumes in submarines and aircraft carriers.

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Segment Operating Income

Newport News segment operating income in 2025 was $331 million, compared to segment operating income of $246 million in 2024. The increase was primarily driven by contract adjustments in the Virginia class (SSN 774) submarine program, partially offset by contract adjustments and incentives in 2024 in the RCOH program.

Mission Technologies

Year Ended December 31

2025 over 2024

2024 over 2023

($ in millions)

2025

2024

2023

Dollars

Percent

Dollars

Percent

Sales and service revenues

3,044

2,937

2,699

107

238

Segment operating income

153

116

101

As a percentage of segment sales

5.0

3.9

3.7

Sales and Service Revenues

Mission Technologies sales and service revenues, including intersegment sales, for the year ended December 31, 2025, increased $107 million, or 4%, compared to 2024, primarily due to higher volumes in Warfare Systems, Global Security, and Unmanned Systems, partially offset by lower volumes in All-Domain Operations.

Mission Technologies sales and service revenues, including intersegment sales, for the year ended December 31, 2024, increased $238 million, or 9%, compared to 2023, primarily due to higher volumes in All-Domain Operations and Warfare Systems.

Segment Operating Income

Mission Technologies segment operating income for the year ended December 31, 2025, was $153 million, compared to segment operating income of $116 million in 2024. The increase was primarily due to lower purchased intangible amortization, higher performance in Warfare Systems, and the higher volumes described above.

Mission Technologies segment operating income for the year ended December 31, 2024, was $116 million, compared to segment operating income of $101 million in 2023. The increase was primarily driven by higher performance in Global Security, higher equity income from operating investments, and the higher volumes described above, partially offset by the settlement of a representations and warranties insurance claim related to the acquisition of Hydroid in 2023.

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PRODUCT AND SERVICE REVENUES AND COST ANALYSIS

The following table presents segment sales and service revenues by both product and service:

Segment Sales and Service Revenues

($ in millions)

Year Ended December 31

2025 over 2024

2024 over 2023

Segment Information

2025

2024

2023

Dollars

Percent

Dollars

Percent

Ingalls

Product

2,597

2,424

2,495

173

(71)

(3)

Service

469

335

248

134

Intersegment

(1)

(11)

Total Ingalls

3,078

2,767

2,752

311

Newport News

Product

5,397

4,921

5,053

476

(132)

(3)

Service

1,109

1,045

1,077

(32)

(3)

Intersegment

(2)

(67)

—

Total Newport News

6,507

5,969

6,133

538

(164)

(3)

Mission Technologies

Product

139

119

116

Service

2,773

2,691

2,465

226

Intersegment

132

127

118

Total Mission Technologies

3,044

2,937

2,699

107

238

Segment Totals

Product

8,133

7,464

7,664

669

(200)

(3)

Service

4,351

4,071

3,790

280

281

Total Segment

12,484

11,535

11,454

949

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The following table presents segment cost of sales and service revenues by both product and service:

Segment Cost of Sales and Service Revenues

($ in millions)

Year Ended December 31

2025 over 2024

2024 over 2023

Segment Information

2025

2024

2023

Dollars

Percent

Dollars

Percent

Ingalls

Product

2,258

2,070

2,031

188

Service

409

294

207

115

Intersegment

(1)

(11)

Total Ingalls

2,679

2,372

2,247

307

125

Newport News

Product

4,685

4,276

4,254

409

Service

931

865

900

(35)

(4)

Intersegment

(2)

(67)

—

Total Newport News

5,617

5,144

5,157

473

(13)

—

Mission Technologies

Product

109

102

121

(19)

(16)

Service

2,472

2,416

2,223

193

Intersegment

132

127

118

Total Mission Technologies

2,713

2,645

2,462

183

Segment Totals

Product

7,052

6,448

6,406

604

Service

3,812

3,575

3,330

237

245

Total Segment (1)

10,864

10,023

9,736

841

287

(1) Operating FAS/CAS Adjustment is excluded from segment cost of product sales and service revenues.

Product Sales and Segment Cost of Product Sales

Product sales in 2025 increased $669 million, or 9%, from 2024, primarily due to higher volumes in submarines and aircraft carriers at Newport News, and higher volumes in surface combatants and amphibious assault ships at Ingalls.

Segment cost of product sales in 2025 increased $604 million, or 9%, compared to 2024, primarily due to the higher product volumes described above.

Service Revenues and Segment Cost of Service Revenues

Service revenues in 2025 increased $280 million, or 7%, from 2024, primarily due to higher volumes in surface combatants at Ingalls, Global Security and Warfare Systems at Mission Technologies, and naval nuclear support services at Newport News, partially offset by lower volumes in All-Domain Operations at Mission Technologies.

Cost of service revenues in 2025 increased $237 million, or 7%, compared to 2024, primarily due to the changes in service volumes described above.

Service revenues in 2024 increased $281 million, or 7%, from 2023, primarily as a result of higher volumes at Mission Technologies in All-Domain Operations and Warfare Systems.

Cost of service revenues in 2024 increased $245 million, or 7%, compared to 2023, consistent with the higher service volumes described above.

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OTHER FINANCIAL INFORMATION

Interest Expense

Interest expense for the year ended December 31, 2025, was $105 million, compared to $95 million in 2024. The increase was primarily driven by higher interest expense related to the 2030 and 2035 Senior Notes issued in November 2024.

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.

The non-operating retirement benefit in 2025 was $190 million, compared to $179 million in 2024. The favorable change was primarily driven by amortization of net actuarial costs.

Other, Net

Other, net income in 2025 was $35 million, compared to other, net income of $24 million in 2024. The increase in other, net income was primarily driven by an increase in unrealized gains on investments.

Federal and Foreign Income Taxes

Our effective tax rate on earnings from continuing operations was 22.1% in 2025, compared to 14.5% in 2024. The increase in our effective tax rate for 2025 was primarily attributable to a reduction in the estimated research and development tax credits for the prior period recorded in the current period.

For the year ended December 31, 2025, our effective tax rate differed from the federal statutory corporate income tax rate of 21% primarily due to a reduction in the estimated research and development tax credits for the prior period recorded in the current period.

In 2021, the Organization for Economic Co-operation and Development ("OECD") announced a two-pillar solution to address tax challenges arising from the digitalization of the economy, which included a 15% global minimum tax under Pillar Two Model Rules ("Pillar Two"). On January 5, 2026, the OECD released a "side-by-side package" (“SbS”) for Pillar Two that includes administrative guidance on a SbS system, a permanent simplified effective tax rate safe harbor, an extension of the transitional country-by-country reporting safe harbor through 2027, and a substance-based tax incentive safe harbor. Under this guidance, the U.S. is recognized as a qualified SbS regime which effectively alleviates U.S.-based multi-national companies from top-up tax collectible under the Pillar Two income inclusion and undertaxed payments rules. While we may be subject to Qualified Domestic Minimum Top-up Taxes in the jurisdictions in which we operate, the safe harbors provided by SbS are broadly applicable and we do not expect the Pillar Two framework to have a material impact on our effective tax rate, consolidated results of operations, financial position, or cash flows.

BACKLOG

Total backlog as of December 31, 2025 and 2024, was approximately $53.1 billion and $48.7 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 as of December 31, 2025 and 2024, respectively.

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The following table presents funded and unfunded backlog by segment as of December 31, 2025 and 2024:

December 31, 2025

December 31, 2024

Total

($ in millions)

Funded

Unfunded

Backlog

Funded

Unfunded

Backlog

Ingalls

14,925

2,856

17,781

13,519

2,333

15,852

Newport News

15,337

14,588

29,925

12,079

14,666

26,745

Mission Technologies

1,723

3,710

5,433

1,824

4,292

6,116

Total backlog

31,985

21,154

53,139

27,422

21,291

48,713

We expect approximately 21% of the $53.1 billion total backlog as of December 31, 2025, to be converted into sales during the year ending December 31, 2026. U.S. Government orders comprised substantially all of the backlog as of December 31, 2025 and 2024.

Contract Awards

The value of new contract awards during the year ended December 31, 2025, was approximately $16.9 billion, primarily driven by awards at Newport News and Ingalls, inclusive of a contract modification for construction of two additional Block V Virginia class submarines.

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 inform our capital deployment strategy, 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 net cash provided by operating activities:

Year Ended December 31

2025 over 2024

2024 over 2023

($ in millions)

2025

2024

2023

Dollars

Percent

Dollars

Percent

Net earnings

605

550

681

(131)

(19)

Depreciation and amortization of purchased intangibles

329

326

347

(21)

(6)

Stock-based compensation

135

(11)

(32)

Deferred income taxes

203

(122)

(113)

325

266

(9)

(8)

Gain on investments in marketable securities

(34)

(22)

(23)

(12)

(55)

Other non-cash transactions, net

130

(19)

(66)

Retiree benefits

(154)

(112)

(75)

(42)

(38)

(37)

(49)

Trade working capital decrease (increase)

170

(260)

430

165

(350)

(389)

Net cash provided by operating activities

1,196

393

970

803

204

(577)

(59)

We have historically maintained a capital structure comprised of a mix of equity and debt financing. We expect to meet our current debt obligations as they come due through internally generated funds from current levels of operations, existing borrowing facilities, and/or through refinancing in the debt markets prior to the maturity dates of our debt.

Cash Flows

Operating Activities

Cash provided by operating activities in 2025 was $1,196 million, compared to $393 million provided by operating activities in 2024. The favorable change in operating cash flow was primarily due to a favorable change in trade working capital driven by the timing of billings across programs, lower cash paid for income taxes, and higher earnings.

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We expect cash generated from operations in 2026, in combination with our current cash and cash equivalents, as well as existing borrowing facilities, to be sufficient to service debt and retiree benefit plans, meet contractual obligations, and fund capital expenditures for at least the next 12 calendar months beginning January 1, 2026 and beyond such 12-month period based on our current business plans.

Investing Activities

Cash used in investing activities in 2025 was $521 million, compared to $348 million used in investing activities in 2024. The change in investing cash was primarily driven by the acquisition of W International and an increase in capital expenditures.

For 2026, we expect our capital expenditures for maintenance and sustainment to be approximately 1.0% to 1.5% of annual revenues and our discretionary capital expenditures to be approximately 3.0% to 3.5% of annual revenues. Our capital expenditures are expected to increase due to investments to expand our shipbuilding capacity.

Financing Activities

Cash used in financing activities in 2025 was $732 million, compared to $356 million provided by financing activities in 2024. The change in cash provided by financing activities was primarily due to proceeds from the issuance of long term debt in the prior year and higher repayment of long term debt in the current year, partially offset by lower repurchases of common stock.

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 them 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:

Year Ended December 31

($ in millions)

2025

2024

2023

Net cash provided by operating activities

1,196

393

970

Less capital expenditures:

Capital expenditure additions

(402)

(367)

(292)

Grant proceeds for capital expenditures

Free cash flow

800

692

Free cash flow in 2025 increased $760 million from 2024, primarily due to a favorable change in trade working capital driven by the timing of billings across programs, lower cash paid for income taxes, and higher earnings, partially offset by higher capital expenditures.

Retirement Related Benefit Plan Contributions

ERISA, including amendments under pension relief legislation, defines the minimum amount we must contribute to our qualified defined benefit pension plans. In determining whether to make discretionary contributions to these plans above the minimum required amounts, we consider various factors, including maintaining the funded status needed to avoid potential benefit restrictions and other adverse consequences, maintaining minimum CAS funding requirements, and the current and anticipated future funding levels of each plan. The contributions to our qualified defined benefit pension plans are affected by a number of factors, including published Internal Revenue Service

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("IRS") interest rates, the actual return on plan assets, actuarial assumptions, and demographic experience. These factors and our resulting contributions also impact the funded status of the plans.

We made the following minimum and discretionary contributions to our pension and other postretirement benefit plans in the years ended December 31, 2025, 2024, and 2023:

Year Ended December 31

($ in millions)

2025

2024

2023

Pension plans

Discretionary

Qualified

—

Non-qualified

Other benefit plans

Total contributions

As of December 31, 2025 and 2024, our qualified pension plans were funded 126% and 125%, respectively on a FAS basis. As of December 31, 2025 and 2024, these plans were sufficiently funded on an ERISA basis so as not to be subject to benefit payment restrictions. The funded percentages under ERISA and FAS vary due to inherent differences in the assumptions and methodologies used to calculate the respective obligations. We expect our 2026 cash contributions to our qualified defined benefit pension plans to be approximately $2 million, all of which we anticipate will be discretionary and which are exclusive of CAS cost recoveries in our contracts. Due to the differences in calculation methodologies, our FAS expense is not necessarily representative of our funding requirements or CAS cost recoveries.

We expect 2026 contributions to our other postretirement benefit plans to be approximately $35 million, which are exclusive of CAS cost recoveries under our contracts. Contributions for other postretirement benefit plans are not required to be funded in advance and are paid on an as-incurred basis.

Other Sources and Uses of Capital

Stockholder Distributions - In November 2025, our board of directors authorized an increase in our quarterly cash dividend to $1.38 per share. The board previously increased the quarterly cash dividend to $1.35 per share in November 2024 and $1.30 per share in November 2023. We paid cash dividends totaling $213 million ($5.43 per share), $206 million ($5.25 per share), and $200 million ($5.02 per share) in the years ended December 31, 2025, 2024, and 2023, respectively.

In January 2024, our board of directors authorized an increase to our stock repurchase program from $3.2 billion to $3.8 billion and an extension of the term of the program to December 31, 2028. Repurchases are made from time to time at management's discretion in accordance with applicable federal securities laws. For the year ended December 31, 2025, the Company did not repurchase any shares. For the year ended December 31, 2024, the Company repurchased 607,841 shares at an aggregate cost of $163 million, including $1 million of accrued excise tax. For the year ended December 31, 2023, the Company repurchased 337,007 shares at an aggregate cost of $75 million. The cost of repurchased shares is recorded as treasury stock in the consolidated statements of financial position.

Additional Capital - In May 2025, the Company repaid $500 million aggregate principal amount of its 3.844% senior notes upon their maturity. The repayment was funded using a combination of cash on hand and proceeds from the Company’s commercial paper program.

In November 2024, we issued $500 million aggregate principal amount of 5.353% senior notes due 2030 and $500 million aggregate principal amount of 5.749% senior notes due 2035. The net proceeds from these senior notes were used for general corporate purposes, including debt repayment (which included repayment of our 3.844% senior notes due 2025 and commercial paper borrowings) and working capital.

In September 2024, we amended and restated our existing $1.5 billion credit facility, increasing the capacity thereunder to $1.7 billion and extending the maturity date to September 2029 (the "Second Amended and Restated

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

In September 2024, our borrowing capacity under our unsecured commercial paper note program increased from $1 billion to $1.7 billion. As of December 31, 2025, the Company had no outstanding debt under the commercial paper program.

Contractual Obligations - Our future contractual obligations are related to debt, leases, pension liabilities, unrecognized tax benefits, workers' compensation, and purchase obligations. See Note 13: Debt, Note 15: Leases, Note 17: Employee Pension and Other Postretirement Benefits, Note 12: Income Taxes, Note 2: Summary of Significant Accounting Policies, and Note 16: Commitments and Contingencies in Item 8 for information about those obligations. Our purchase obligations as of December 31, 2025, were approximately $7,063 million, with approximately $3,442 million expected to be paid in 2026 and $3,621 million thereafter. A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. As of December 31, 2025, future scheduled periodic interest payments on our outstanding long-term debt, including commitment fees that we are obligated to pay on our existing $1.7 billion Second Amended and Restated Revolving Credit Facility, were approximately $582 million, with approximately $114 million expected to be paid in 2026 and $468 million thereafter.

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 December 31, 2025, $11 million in letters of credit were issued but undrawn and $368 million of surety bonds were outstanding. As of December 31, 2025, we had no other significant off-balance sheet arrangements.

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GLOSSARY OF PROGRAMS

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

Program Name

Program Description

Aircraft 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 John C. Stennis (CVN 74) arrived at Newport News for the start of its RCOH in May 2021, and USS George Washington (CVN 73) was redelivered to the U.S. Navy in May 2023.

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 2023, we were awarded a long-lead-time material contract for Helmand Province (LHA 10), and in 2024, we were awarded a contract modification for the detail design and construction of Helmand Province (LHA 10). We are currently constructing Bougainville (LHA 8) and Fallujah (LHA 9).

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 Jack H. Lucas (DDG 125) and USS Ted Stevens (DDG 128) in 2023 and 2025, respectively. We have contracts to construct the following Arleigh Burke class (DDG 51) destroyers: Jeremiah Denton (DDG 129), George M. Neal (DDG 131), Sam Nunn (DDG 133), Thad Cochran (DDG 135), John F. Lehman (DDG 137), Telesforo Trinidad (DDG 139), Ernest E. Evans (DDG 141), Charles J. French (DDG 142), Richard J. Danzig (DDG 143), Intrepid (DDG 145), and Robert Kerrey (DDG 146).

Columbia class (SSBN 826) submarines

Design and construct modules for Columbia class (SSBN 826) nuclear ballistic missile submarines ("SSBNs") as a subcontractor to Electric Boat. SSBNs are the most secure and survivable of our nation’s nuclear deterrent triad. Columbia class SSBNs will carry approximately 70 percent of the nation’s nuclear arsenal. The Columbia class (SSBN 826) program plan of record is to construct 12 new SSBNs to replace the current aging Ohio class. As a subcontractor to Electric Boat, we leverage our Virginia class (SSN 774) experience to perform design work and build modules for the entire Columbia class (SSBN 826) submarine program. 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) submarine program. Construction of the first Columbia class (SSBN 826) submarine began in 2020. In 2023, we received an award modification for long-lead-time material and advance construction for the next five boats.

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.

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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. There were initially 11 ships for this program, of which the first ten ships have been delivered. In 2025, we reached agreement with the U.S. Coast Guard to terminate production and delivery of the 11th and final ship.

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, such as those at the Kenneth A. Kesselring Site, a research and development facility in New York that supports the U.S. Navy, which were completed in 2024.

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 were awarded a long-lead-time material contract for Philadelphia (LPD 32). In 2023, we received an award modification for the detail design and construction of Philadelphia (LPD 32). In 2024, we delivered USS Richard M. McCool Jr. (LPD 29), and we were awarded a multi-ship procurement contract for the construction of Travis Manion (LPD 33), LPD 34 (unnamed), and LPD 35 (unnamed). We are currently constructing Harrisburg (LPD 30), Pittsburgh (LPD 31), and Philadelphia (LPD 32).

Virginia class (SSN 774) fast attack submarines

Construct attack submarines as part of a teaming agreement with 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.