AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 31/10/2026
Moat69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Disclosed carrier exclusivity, two-builder submarine and destroyer positions, capital intensity and repeated awards demonstrate strong shipbuilding barriers. Equivalent protection is not established for Mission Technologies.
durability · 3/4 · Successive multiyear destroyer awards, additional submarine construction work and growing backlog support persistence. Annual appropriations and customer concentration constrain durability; future carrier opportunities remain expectations.
customer dependency · 3/4 · Scarce qualified nuclear capacity, completed carrier-overhaul experience and the destroyer design-agent role indicate strong customer dependence. This is indirect evidence of replacement friction, without a quantified switching cost or binding exclusive future commitment.
erosion resilience · 2/4 · New awards and backlog growth coexist with realized labor, supplier and cost-overrun problems. Consolidated first-half margins held broadly steady, but Ingalls margins declined and carrier performance remained a drag. Structural protection provides incomplete economic insulation.
Pricing power50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · Favorable submarine contract adjustments in 2025 and carrier adjustments and incentives in second-quarter 2026 demonstrate some negotiated economic recovery. Actual adverse federal civilian repricing and historically less favorable contract economics offset this. Adjustments are not a clean measure of unit-price increases.
retention · 3/4 · Successive destroyer awards, additional submarine awards and continued new awards demonstrate repeat demand through procurement outcomes. This is indirect operating evidence of retention; no customer retention rate is inferred.
margin resilience · 2/4 · First-half 2026 consolidated operating margin remained approximately 5.6%, with a stronger second quarter, while Ingalls margins fell. Cost reimbursement, selective escalation provisions and favorable adjustments provide partial protection, but realized overruns and lower carrier performance show incomplete resilience.
contractual freedom · 1/4 · Firm fixed-price contracts generally prevent adjustment for incurred costs, cost-type profit is a negotiated fee and escalation protection is obtained only where possible. Customer dominance and actual adverse renegotiations demonstrate weak freedom over terms despite some favorable adjustments.
Predictability100
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 4.10
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.17
- observedAnnualPeriods
- 5.00
Financial strength46
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 65.71
- netDebtEbitGrade
- 41.37
- interestCoverageGrade
- 47.79
- currentRatioGrade
- 30.67
- Debt / FCF (x)
- 3.40
- Net debt / operating income (x)
- 2.93
- Interest coverage (x)
- 6.26
- Current ratio (x)
- 1.13
Capital allocation81
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 10.16
- 3-year average dilution (%)
- -0.67
- 3-year average SBC / revenue (%)
- 0.31
- cashConversionGrade
- 81.59
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · In 2025, $1.196 billion of operating cash supported $402 million of capital additions, a $132 million acquisition and $500 million of debt repayment without repurchases. First-half 2026 cash outflow, continuing investment and dividends reduced cash to $12 million; buybacks remained suspended. Management attributes the cash deterioration mainly to billing timing. Investment returns remain unproven.
incentive alignment · 2/4 · Actual 2025 NEO long-term awards were 70% performance rights, and actual 2026 performance-right grants have contingent vesting. Ownership, clawback and anti-hedging policies support alignment. However, unvested RSRs count toward ownership, individual compliance is unavailable, and Ingalls paid above-target annual incentives despite below-target operating-margin performance. The favorable advisory vote demonstrates shareholder support, not incentive effectiveness.
execution · 2/4 · Completed ship deliveries and maintenance, continued awards and reported throughput improvement demonstrate achievements. Realized supplier and labor difficulties, lower carrier performance and volatile cash conversion make execution mixed. Throughput is issuer-reported operating evidence; future throughput goals are not counted as achieved.
governance · 3/4 · Existing independent standing committees and chairman, annual elections, majority voting, shareholder nomination and special-meeting rights, and a clawback policy support strong formal governance. Management reports effective disclosure controls. These are issuer disclosures, with limited evidence of safeguards' effectiveness in contested situations.
Evidence
It is both capital- and skilled labor-intensive.
2025 Form 10-K, industry characteristics · Filed 05/02/2026
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.
2025 Form 10-K, industry customer and supplier structure · Filed 05/02/2026
Stennis (CVN 74). We believe our current position as the exclusive designer and builder of nuclear-powered aircraft carriers, our RCOH performance on the first seven Nimitz class (CVN 68) carriers, our highly trained workforce, the capital-intensive nature of RCOH work, and high barriers to entry due to required nuclear expertise, position us well for RCOH contract awards on the remaining Nimitz class (CVN 68) carriers, as well as future RCOH work on Gerald R.
2025 Form 10-K, aircraft carriers and RCOH · Filed 05/02/2026
We are one of only two companies in the United States currently capable of designing and building nuclear-powered submarines for the U.S.
2025 Form 10-K, nuclear submarine capabilities · Filed 05/02/2026
We have a teaming agreement with Electric Boat Corporation ("Electric Boat"), a division of General Dynamics Corporation ("General Dynamics"), to build Virginia class (SSN 774) fast attack nuclear submarines.
2025 Form 10-K, Virginia-class teaming agreement · Filed 05/02/2026
Government contracts or with government funding and may use or authorize other parties to use such intellectual property.
2025 Form 10-K, intellectual property · Filed 05/02/2026
While our intellectual property rights are important to our operations, we do not believe that any existing patent, license, or other intellectual property right is of such importance that its loss or termination would have a material adverse impact on our business.
2025 Form 10-K, intellectual-property materiality · Filed 05/02/2026
We have experienced price adjustments and renegotiations of certain of these contracts and may in the future continue to experience such impacts which could have an adverse impact on the programs in which we participate and, ultimately, our results.
2025 Form 10-K, realized federal civilian contract adjustments · Filed 05/02/2026
U.S. Government contracts often extend for years, and unforeseen events, such as technology difficulties, fluctuations in the price of raw materials, a significant increase in or sustained period of higher inflation, new or increased tariffs, supplier issues, including equipment delays, challenging labor market conditions, unexpected rework, and cost overruns, have in the past resulted, and may in the future result, in contract prices becoming less favorable or even unprofitable to us over time.
2025 Form 10-K, historical contract economics and cost growth · Filed 05/02/2026
Cost overruns have adversely impacted, and may continue to impact, our results of operations, which are dependent on our ability to maximize our earnings from our contracts.
2025 Form 10-K, realized cost overruns · Filed 05/02/2026
Surface Combatants We are a design agent for, and one of only two companies that constructs, Arleigh Burke class guided missile destroyers ("DDG"), a class of surface combatant.
2025 Form 10-K, surface combatants · Filed 05/02/2026
Lucas (DDG 125) in 2023. In 2018, we were awarded a multi-year contract for construction of six Arleigh Burke class (DDG 51) destroyers and, in 2020, a contract to construct an additional Arleigh Burke class (DDG 51) destroyer.
2025 Form 10-K, historical destroyer awards · Filed 05/02/2026
In 2023, we were awarded a multi-year contract for construction of six more Arleigh Burke class (DDG 51) destroyers, as well as the first option ship, for a total of seven ships.
2025 Form 10-K, 2023 multiyear destroyer award · Filed 05/02/2026
A shortage of skilled employees has and may continue to impact our ability to perform our contracts and may impact our ability to compete for new contracts.
2025 Form 10-K, skilled workforce risk · Filed 05/02/2026
Disruptions and performance issues from our suppliers and subcontractors, unanticipated cost growth for the products and services they provide, or inconsistencies between our contractual obligations to our customers and our agreements with our subcontractors and suppliers, have adversely impacted and may in the future impact our ability to meet our commitments to customers.
2025 Form 10-K, realized supplier performance problems · Filed 05/02/2026
We employ individuals specializing in 19 crafts and trades, with approximately 7,000 engineers and designers and approximately 3,600 employees with advanced degrees.
2025 Form 10-K, specialized workforce · Filed 05/02/2026
As of December 31, 2025, we had 1,096 Master Shipbuilders at Newport News and 212 at Ingalls.
2025 Form 10-K, Master Shipbuilders · Filed 05/02/2026
Our Mission Technologies segment competes domestically and internationally against midsized to large traditional aerospace and defense ("A&D") companies and non-traditional defense technology companies.
2025 Form 10-K, Mission Technologies competition · Filed 05/02/2026
•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.
2025 Form 10-K, firm fixed-price contract terms · Filed 05/02/2026
•Cost-Type Contracts - Cost-type contracts provide for reimbursement of the contractor's allowable costs plus a fee that represents profit.
2025 Form 10-K, cost-type contract terms · Filed 05/02/2026
U.S. Government programs are subject to annual congressional budget authorization and appropriation processes even though program performance may extend over several years.
2025 Form 10-K, annual authorization and appropriation · Filed 05/02/2026
Restricted Performance Stock Rights - For the six months ended June 30, 2026, the Company granted approximately 0.1 million RPSRs at a weighted average share price of $433.96.
Second-quarter 2026 Form 10-Q, actual performance-right grants · Filed 30/07/2026
All of the RPSRs are subject to the achievement of performance-based targets at the end of the respective vesting periods and will ultimately vest between 0% and 200% of grant date value.
Second-quarter 2026 Form 10-Q, performance-based vesting conditions · Filed 30/07/2026
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.
Second-quarter 2026 Form 10-Q, inflation mitigation · Filed 30/07/2026
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, 2026, 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.
Second-quarter 2026 Form 10-Q, management disclosure-controls conclusion · Filed 30/07/2026
Total backlog as of June 30, 2026, and December 31, 2025, was $57.3 billion and $53.1 billion, respectively.
Second-quarter 2026 Form 10-Q, backlog · Filed 30/07/2026
The value of new contract awards during the six months ended June 30, 2026, was approximately $10.7 billion, primarily driven by awards at Newport News and Ingalls.
Second-quarter 2026 Form 10-Q, new contract awards · Filed 30/07/2026
2025 2026 vs. 2025 ($ in millions) 2026 2025 Dollars Percent 2026 2025 Dollars Percent Sales and service revenues $ 845 $ 724 $ 121 17 % $ 1,570 $ 1,361 $ 209 15 % Segment operating income 58 54 4 7 % 107 100 7 7 % As a percentage of segment sales 6.9 % 7.5 % 6.8 % 7.3 % Sales and Service Revenues Ingalls revenues, including intersegment sales, for the three months ended June 30, 2026, increased $121 million, or 17%, from the same period in 2025, primarily driven by higher volumes in amphibious assault ships.
Second-quarter 2026 Form 10-Q, Ingalls operating results · Filed 30/07/2026
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30 ($ in millions) 2026 2025 Operating Activities: Net earnings $ 357 $ 301 Adjustments to reconcile net cash provided by (used in) operating activities: Depreciation 112 110 Amortization of purchased intangibles 43 52 Stock-based compensation 31 33 Deferred income taxes 89 (19) Gain on investments in marketable securities (19) (10) Other non-cash transactions, net 12 9 Change in Accounts receivable (113) (165) Contract assets (396) (128) Inventoried costs (17) (7) Prepaid expenses and other assets (17) 57 Accounts payable and accruals (413) 272 Retiree benefits (90) (77) Net cash provided by (used in) operating activities (421) 428 Investing Activities: Capital expenditures Capital expenditure additions (193) (163) Grant proceeds for capital expenditures 3 3 Acquisitions of businesses — (133) Other investing activities, net 1 2 Net cash used in investing activities (189) (291) Financing Activities: Repayment of long-term debt — (500) Proceeds from line of credit borrowings 17 — Repayment of line of credit borrowings (17) — Dividends paid (109) (106) Employee taxes on certain share-based payment arrangements (43) (14) Other financing activities, net — (5) Net cash used in financing activities (152) (625) Change in cash and cash equivalents (762) (488) Cash and cash equivalents, beginning of period 774 831 Cash and cash equivalents, end of period $ 12 $ 343 Supplemental Cash Flow Disclosure Cash paid for income taxes (net of refunds) $ 12 $ 55 Cash paid for interest $ 59 $ 42 Non-Cash Investing and Financing Activities Capital expenditures accrued in accounts payable $ 14 $ 6 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Second-quarter 2026 Form 10-Q, six-month cash flows · Filed 30/07/2026
2025 ($ in millions) 2026 2025 Dollars Net cash provided by (used in) operating activities $ (421) $ 428 $ (849) Less capital expenditures: Capital expenditure additions (193) (163) (30) Grant proceeds for capital expenditures 3 3 — Free cash flow $ (611) $ 268 $ (879) Free cash flow for the six months ended June 30, 2026, decreased $879 million from the same period in 2025, primarily due to an unfavorable change in trade working capital driven by the timing of billings across programs.
Second-quarter 2026 Form 10-Q, free cash flow and billing timing · Filed 30/07/2026
For each of the six months ended June 30, 2026 and 2025, the Company did not repurchase any shares.
Second-quarter 2026 Form 10-Q, repurchase activity · Filed 30/07/2026
During the year we achieved critical milestones across the enterprise, including the delivery of Virginia-class submarine Massachusetts (SSN 798), guided missile destroyer Ted Stevens (DDG 128) and our 750th unmanned undersea vehicle (UUV).
2026 proxy, completed 2025 deliveries · Filed 20/03/2026
All long-term incentive compensation awards granted to our NEOs in 2025 were comprised of 70% Restricted Performance Stock Rights (“RPSRs”) and 30% Restricted Stock Rights (“RSRs”).
2026 proxy, actual 2025 NEO long-term award mix · Filed 20/03/2026
Blanchette Ingalls 2025 Metrics Goals @ 0% Goals @ 100% Goals @ 200% Performance Results Points Earned Weighting Final AIP Points Operational Metrics 0 100 200 161 161 40 % 64 Financial Metrics OM—Performance (%) 6.90 8.20 - 8.60 9.40 7.58 26 40 % 11 FCF—Performance ($M) 11 97 - 119 146 175 100 40 % 40 Financial Performance 51 Strategic Leadership Metrics 0 100 200 189 189 20 % 38 Total Performance (DPF) Total AIP Score 153 2025 AIP payouts for the NEOs were made at the performance scores reflected in the tables above; the performance scores represent the percentage of target incentive compensation at which payouts were made.
2026 proxy, actual Ingalls incentive results and payouts · Filed 20/03/2026
Board Structure and Governance: Highly qualified, independent Board with all standing committees comprising independent directors, an independent non-executive Chairman, and regular executive sessions without management Stockholder Rights: Annual elections for all directors, majority vote requirements for uncontested elections, and the ability for stockholders to propose their own nominees and call special meetings Stock Ownership: Robust stock ownership guidelines for directors and executives, a clawback policy for performance-based compensation, and a prohibition on hedging or pledging Company stock 4 Huntington Ingalls Industries, Inc.
2026 proxy, existing governance and ownership policies · Filed 20/03/2026
•Restricted Stock Rights (“RSRs”) (vested or unvested) granted in the form of restricted stock units and issued as part of a long-term incentive compensation award;
2026 proxy, ownership-guideline treatment of restricted stock rights · Filed 20/03/2026
HII
4101 Washington Ave. • Newport News, VA 23607
www.HII.com
Page 1 of 12
Results of Operations
Three Months Ended
Six Months Ended
June 30
June 30
($ in millions, except per share amounts)
2026
2025
$ Change
% Change
2026
2025
$ Change
% Change
Sales and service revenues
$
3,418
$
3,082
$
336
10.9
%
$
6,517
$
5,816
$
701
12.1
%
Operating income
210
163
47
28.8
%
365
324
41
12.7
%
Operating margin %
6.1
%
5.3
%
86 bps
5.6
%
5.6
%
3 bps
Segment operating income1
224
Second-quarter 2026 earnings release, consolidated quarterly and six-month results · Filed 30/07/2026
The increase in segment operating income was primarily driven by contract adjustments and incentives in aircraft carriers and the higher volumes described above, partially offset by lower performance in aircraft carriers.
Second-quarter 2026 earnings release, Newport News income drivers · Filed 30/07/2026
•Redelivered Virginia-class submarine USS New Jersey (SSN 796) following completion of post-shakedown availability, a maintenance period that typically follows delivery of new ships and includes combat systems and electronics upgrades, as well as general maintenance on the submarine
Second-quarter 2026 earnings release, completed submarine maintenance · Filed 30/07/2026
Q1 2026 EARNINGS Enhancing Shipbuilding Throughput » Throughput improvement target of 15% YoY » Building on ~14% improvement achieved in 2025 » Multiple workforce improvement initiatives » Continue to expand new Charleston facility » Utilize contract labor to address critical gaps Rapidly Growing Trusted Industrial Base Network » Building on significant momentum » Doubled outsourced hours in 2025 » Continue to rapidly grow outsourced hours in 2026 New Contract Awards » Ensuring contract awards reflect current operating environment 2026 Operational Initiatives Update 4 Pursuing Multiple Throughput and Growth Drivers » Achieved 18% YoY throughput improvement in Q1 2026 » Collective bargaining agreement with meaningful wage enhancements ratified at Ingalls Shipbuilding » Newport News and Ingalls Shipbuilding apprentice schools collectively graduated ~200 future shipbuilding leaders
First-quarter 2026 earnings presentation, reported throughput achievements and targets · Filed 05/05/2026
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
($ in millions)
2025
2024
Operating Activities
Net earnings
$
605
$
550
Adjustments to reconcile to net cash provided by operating activities
Depreciation
225
217
Amortization of purchased intangibles
104
109
Stock-based compensation
54
23
Deferred income taxes
203
(122)
Loss (gain) on investments in marketable securities
(34)
(22)
Other non-cash transactions, net
23
10
Change in
Accounts receivable
(127)
256
Contract assets
(75)
(146)
Inventoried costs
(11)
(22)
Prepaid expenses and other assets
(66)
(33)
Accounts payable and accruals
449
(315)
Retiree benefits
(154)
(112)
Net cash provided by operating activities
1,196
393
Investing Activities
Capital expenditures
Capital expenditure additions
(402)
(367)
Grant proceeds for capital expenditures
6
14
Acquisitions of businesses
(132)
—
Proceeds from sale of investments
5
—
Other investing activities, net
2
5
Net cash used in investing activities
(521)
(348)
Financing Activities
Proceeds from issuance of long-term debt
—
1,000
Repayment of long-term debt
(500)
(229)
Proceeds from line of credit borrowings
—
42
Repayment of line of credit borrowings
—
(42)
Debt issuance costs
—
(17)
Dividends paid
(213)
(206)
Repurchases of common stock
—
(162)
Employee taxes on certain share-based payment arrangements
(14)
(25)
Other financing activities, net
(5)
(5)
Net cash provided by (used in) financing activities
(732)
356
Change in cash and cash equivalents
Full-year 2025 earnings release, annual cash flows · Filed 05/02/2026
The increases were primarily driven by contract adjustments in the Virginia-class submarine program, partially offset by contract adjustments and incentives in 2024 in the aircraft carrier refueling and complex overhaul program.
Full-year 2025 earnings release, Newport News contract adjustment drivers · Filed 05/02/2026
•Awarded contract modification for construction of two additional Block V Virginia-class submarines
Full-year 2025 earnings release, additional submarine construction award · Filed 05/02/2026
Votes on a proposal to approve, on an advisory basis, the compensation of the Company’s named executive officers were as follows:
For
Against
Abstentions
Broker Non-Votes
31,129,918
422,646
97,799
3,836,489
Item 3 - Proposal to Ratify the Appointment of the Company's Independent Auditor
May 1, 2026 Form 8-K, actual advisory compensation vote · Filed 01/05/2026
