UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ______________________________________________________________

FORM 10-Q

 ______________________________________________________________

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

For the quarterly period ended September 30, 2022

or

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

For the transition period from ________ to ________

Commission file number 001-34910

  ______________________________________________________________

HUNTINGTON INGALLS INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 ______________________________________________________________

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

4101 Washington Avenue Newport News, Virginia 23607

(Address of principal executive offices and zip code)

(757) 380-2000

(Registrant’s telephone number, including area code)

 ______________________________________________________________

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

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

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

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

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

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

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

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

As of October 28, 2022, 39,903,536 shares of the registrant's common stock were outstanding.

TABLE OF CONTENTS

 

	PART I – FINANCIAL INFORMATION	Page
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations and Comprehensive Income	1
	Condensed Consolidated Statements of Financial Position	2
	Condensed Consolidated Statements of Cash Flows	3
	Condensed Consolidated Statements of Changes in Equity	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	37
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		40

HUNTINGTON INGALLS INDUSTRIES, INC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

 

	Three Months Ended September 30				Nine Months Ended September 30
(in millions, except per share amounts)	2022		2021		2022		2021
Sales and service revenues
Product sales	$	1,774	$	1,701	$	5,327	$	5,185
Service revenues	852		637		2,537		1,662
Sales and service revenues	2,626		2,338		7,864		6,847
Cost of sales and service revenues
Cost of product sales	1,517		1,453		4,511		4,402
Cost of service revenues	747		554		2,252		1,450
Income from operating investments, net	13		11		47		31
Other income and gains, net	—		2		—		3
General and administrative expenses	244		226		688		636
Operating income	131		118		460		393
Other income (expense)
Interest expense	(27)		(24)		(79)		(63)
Non-operating retirement benefit	71		45		209		135
Other, net	(13)		2		(30)		10
Earnings before income taxes	162		141		560		475
Federal and foreign income tax expense (benefit)	24		(6)		104		51
Net earnings	$	138	$	147	$	456	$	424
Basic earnings per share	$	3.44	$	3.65	$	11.37	$	10.52
Weighted-average common shares outstanding	40.1		40.3		40.1		40.3
Diluted earnings per share	$	3.44	$	3.65	$	11.37	$	10.52
Weighted-average diluted shares outstanding	40.1		40.3		40.1		40.3
Dividends declared per share	$	1.18	$	1.14	$	3.54	$	3.42
Net earnings from above	$	138	$	147	$	456	$	424
Other comprehensive income (loss)
Change in unamortized benefit plan costs	12		43		(61)		102
Other	(1)		(1)		(2)		1
Tax benefit (expense) for items of other comprehensive income	(3)		(11)		16		(26)
Other comprehensive income (loss), net of tax	8		31		(47)		77
Comprehensive income	$	146	$	178	$	409	$	501

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

1

HUNTINGTON INGALLS INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

($ in millions)	September 30, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	117	$	627
Accounts receivable, net of allowance for doubtful accounts of $2 million as of 2022 and $9 million as of 2021	721		433
Contract assets	1,564		1,310
Inventoried costs	174		161
Income taxes receivable	180		209
Prepaid expenses and other current assets	61		50
Total current assets	2,817		2,790
Property, plant, and equipment, net of accumulated depreciation of $2,283 million as of 2022 and $2,149 million as of 2021	3,136		3,107
Operating lease assets	236		241
Goodwill	2,618		2,628
Other intangible assets, net of accumulated amortization of $846 million as of 2022 and $741 million as of 2021	1,054		1,159
Pension plan assets	355		281
Miscellaneous other assets	399		421
Total assets	$	10,615	$	10,627
Liabilities and Stockholders' Equity
Current Liabilities
Trade accounts payable	$	539	$	603
Accrued employees’ compensation	355		361
Current portion of long-term debt	399		—
Current portion of postretirement plan liabilities	137		137
Current portion of workers’ compensation liabilities	241		252
Contract liabilities	768		651
Other current liabilities	453		423
Total current liabilities	2,892		2,427
Long-term debt	2,605		3,298
Pension plan liabilities	394		351
Other postretirement plan liabilities	360		368
Workers’ compensation liabilities	486		506
Long-term operating lease liabilities	202		194
Deferred tax liabilities	274		313
Other long-term liabilities	354		362
Total liabilities	7,567		7,819
Commitments and Contingencies (Note 12)
Stockholders’ Equity
Common stock, $0.01 par value; 150 million shares authorized; 53.5 million shares issued and 39.9 million shares outstanding as of September 30, 2022, and 53.4 million shares issued and 40.0 million shares outstanding as of December 31, 2021	1		1
Additional paid-in capital	2,014		1,998
Retained earnings	4,203		3,891
Treasury stock	(2,200)		(2,159)
Accumulated other comprehensive loss	(970)		(923)
Total stockholders’ equity	3,048		2,808
Total liabilities and stockholders’ equity	$	10,615	$	10,627

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

2

HUNTINGTON INGALLS INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30
($ in millions)	2022		2021
Operating Activities
Net earnings	$	456	$	424
Adjustments to reconcile to net cash provided by (used in) operating activities
Depreciation	158		154
Amortization of purchased intangibles	105		48
Amortization of debt issuance costs	6		6
Provision for doubtful accounts	(7)		—
Stock-based compensation	28		19
Deferred income taxes	(14)		74
Loss (gain) on investments in marketable securities	34		(12)
Change in
Accounts receivable	(281)		52
Contract assets	(254)		(179)
Inventoried costs	(13)		(7)
Prepaid expenses and other assets	(4)		(116)
Accounts payable and accruals	48		93
Retiree benefits	(99)		(73)
Other non-cash transactions, net	2		6
Net cash provided by operating activities	165		489
Investing Activities
Capital expenditures
Capital expenditure additions	(179)		(216)
Grant proceeds for capital expenditures	—		11
Acquisitions of businesses, net of cash received	—		(1,636)
Investment in affiliates	(5)		(22)
Proceeds from disposition of business	—		20
Other investing activities, net	6		1
Net cash used in investing activities	(178)		(1,842)
Financing Activities
Proceeds from issuance of long-term debt	—		1,650
Repayment of long-term debt	(300)		—
Debt issuance costs	—		(22)
Dividends paid	(142)		(138)
Repurchases of common stock	(41)		(87)
Employee taxes on certain share-based payment arrangements	(14)		(7)
Net cash (used in) provided by financing activities	(497)		1,396
Change in cash and cash equivalents	(510)		43
Cash and cash equivalents, beginning of period	627		512
Cash and cash equivalents, end of period	$	117	$	555
Supplemental Cash Flow Disclosure
Cash paid for income taxes (net of refunds)	$	107	$	31
Cash paid for interest	$	61	$	39
Non-Cash Investing and Financing Activities
Capital expenditures accrued in accounts payable	$	5	$	4

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

3

HUNTINGTON INGALLS INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) 

Three Months Ended September 30, 2022 and 2021 ($ in millions)	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
Balance as of June 30, 2021	$	1	$	1,977	$	3,718	$	(2,128)	$	(1,501)	$	2,067
Net earnings	—		—		147		—		—		147
Dividends declared ($1.14 per share)	—		—		(46)		—		—		(46)
Stock-based compensation	—		7		—		—		—		7
Other comprehensive income, net of tax	—		—		—		—		31		31
Treasury stock activity	—		—		—		(17)		—		(17)
Balance as of September 30, 2021	$	1	$	1,984	$	3,819	$	(2,145)	$	(1,470)	$	2,189
Balance as of June 30, 2022	$	1	$	2,002	$	4,113	$	(2,186)	$	(978)	$	2,952
Net earnings	—		—		138		—		—		138
Dividends declared ($1.18 per share)	—		—		(48)		—		—		(48)
Stock-based compensation	—		12		—		—		—		12
Other comprehensive income, net of tax	—		—		—		—		8		8
Treasury stock activity	—		—		—		(14)		—		(14)
Balance as of September 30, 2022	$	1	$	2,014	$	4,203	$	(2,200)	$	(970)	$	3,048

Nine Months Ended September 30, 2022 and 2021 ($ in millions)	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
Balance as of December 31, 2020	$	1	$	1,972	$	3,533	$	(2,058)	$	(1,547)	$	1,901
Net earnings	—		—		424		—		—		424
Dividends declared ($3.42 per share)	—		—		(138)		—		—		(138)
Stock-based compensation	—		12		—		—		—		12
Other comprehensive income, net of tax	—		—		—		—		77		77
Treasury stock activity	—		—		—		(87)		—		(87)
Balance as of September 30, 2021	$	1	$	1,984	$	3,819	$	(2,145)	$	(1,470)	$	2,189
Balance as of December 31, 2021	$	1	$	1,998	$	3,891	$	(2,159)	$	(923)	$	2,808
Net earnings	—		—		456		—		—		456
Dividends declared ($3.54 per share)	—		—		(142)		—		—		(142)
Stock-based compensation	—		16		(2)		—		—		14
Other comprehensive loss, net of tax	—		—		—		—		(47)		(47)
Treasury stock activity	—		—		—		(41)		—		(41)
Balance as of September 30, 2022	$	1	$	2,014	$	4,203	$	(2,200)	$	(970)	$	3,048

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

4

HUNTINGTON INGALLS INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. DESCRIPTION OF BUSINESS

Huntington Ingalls Industries, Inc. ("HII" or the "Company") is a global, all-domain defense partner, building and delivering the world’s most powerful, survivable naval ships and technologies that safeguard America’s seas, sky, land, space, and cyber. HII is organized into three reportable segments: Ingalls Shipbuilding ("Ingalls"), Newport News Shipbuilding ("Newport News"), and Mission Technologies (formerly named Technical Solutions). For more than a century, the Company's Ingalls segment in Mississippi and Newport News segment in Virginia have built more ships in more ship classes than any other U.S. naval shipbuilder. The Mission Technologies segment delivers high-value engineering and technology solutions to enable multi-domain distributed operations in the government and commercial services markets.

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

2. BASIS OF PRESENTATION

Principles of Consolidation - The unaudited condensed consolidated financial statements of HII and its subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the instructions to Form 10-Q promulgated by the Securities and Exchange Commission ("SEC"). All intercompany transactions and balances are eliminated in consolidation. For classification of current assets and liabilities related to its long-term production contracts, the Company uses the duration of these contracts as its operating cycle, which is generally longer than one year.

These unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature considered necessary by management for a fair presentation of the unaudited condensed consolidated financial position, results of operations, and cash flows and should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

The quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is management's long-standing practice to establish interim closing dates using a "fiscal" calendar, which requires the businesses to close their books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. The effects of this practice only exist for interim periods within a reporting year.

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

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

5

The Company maintains multiple grantor trusts to fund certain non-qualified pension plans. These trusts were valued at $196 million and $220 million as of September 30, 2022, and December 31, 2021, respectively, and are presented within miscellaneous other assets within the unaudited condensed consolidated statements of financial position. These trusts consist primarily of investments in marketable securities, which are held at fair value within Level 1 of the fair value hierarchy.

The estimated fair values of the Company's total long-term debt (including current portion) as of September 30, 2022, and December 31, 2021, were $2,768 million and $3,449 million, respectively. The estimated fair value of the current portion of the Company's long-term debt was $386 million as of September 30, 2022. The fair values of the Company's long-term debt were calculated based on recent trades of the Company's debt instruments in inactive markets, which fall within Level 2 under the fair value hierarchy.

Debt Prepayment - As of September 30, 2022, $325 million of the Company's Term Loan due August 19, 2024 has been prepaid, with a remaining balance of $325 million.

3. ACCOUNTING STANDARDS UPDATES

Accounting pronouncements issued but not effective until after December 31, 2022, are not expected to have a material impact on the Company's consolidated financial position, results of operations, and cash flows.

4. ACQUISITIONS

On August 19, 2021, the Company acquired all of the outstanding common stock of Alion Holding Corp., the parent company of Alion Science and Technology Corporation (“Alion”), a technology-driven solutions provider. The Company accounted for the transaction as a business combination using the acquisition method of accounting in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805 Business Combinations. The purchase price was $1.79 billion, including $148 million of cash received in the acquisition. In connection with the acquisition, the Company originally recorded $1,024 million of goodwill, which included the value of Alion's workforce, and $720 million of intangible assets related to customer relationships and existing contract backlog. The goodwill is attributable to operational synergies and growth opportunities and was allocated to the Company's Mission Technologies segment. For the nine months ended September 30, 2022, the Company recorded a decrease to goodwill of $10 million, resulting from updates to Alion’s tax carryforwards and the true-up of estimated taxes to filed income tax returns for the pre-acquisition period. The acquisition accounting was completed at September 30, 2022. None of the goodwill resulting from this acquisition is expected to be amortizable for tax purposes.

Alion provides advanced engineering and research and development services in the areas of intelligence, surveillance, and reconnaissance, military training and simulation, cyber, data analytics, and other next-generation technology based solutions to the DoD and intelligence community customers, with the U.S. Navy representing about one-third of current annual revenues.

Pro Forma Financial Information

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

	Three Months Ended September 30				Nine Months Ended September 30
($ in millions, except per share amounts)	2022		Pro Forma 2021		2022		Pro Forma 2021
Sales and service revenues	$	2,626	$	2,532	$	7,864	$	7,687
Net earnings	$	138	$	142	$	456	$	416
Basic earnings per share	$	3.44	$	3.52	$	11.37	$	10.32
Diluted earnings per share	$	3.44	$	3.52	$	11.37	$	10.32

These unaudited pro forma results include adjustments associated with the acquisition, such as the amortization of acquired intangible assets and interest expense on debt financing.

6

The unaudited consolidated pro forma financial information was prepared in accordance with GAAP and is not necessarily indicative of the results of operations that would have occurred if the acquisition had been completed on the date indicated, nor is it indicative of the future operating results of the Company.

The unaudited pro forma results do not reflect events that either have occurred or may occur after the acquisition date, including, but not limited to, the anticipated realization of operating synergies in subsequent periods. These results also do not give effect to certain charges that the Company incurred in connection with the acquisition, including, but not limited to, additional professional fees and employee integration.

5. STOCKHOLDERS' EQUITY

Treasury Stock - In November 2019, the Company's board of directors authorized an increase in the Company's stock repurchase program from $2.2 billion to $3.2 billion and an extension of the term of the program to October 31, 2024. Repurchases are made from time to time at management's discretion in accordance with applicable federal securities laws. For the nine months ended September 30, 2022, the Company repurchased 196,850 shares at an aggregate cost of $41 million. For the nine months ended September 30, 2021, the Company repurchased 469,436 shares at an aggregate cost of $87 million. The cost of purchased shares is recorded as treasury stock in the unaudited condensed consolidated statements of financial position.

Dividends - The Company paid cash dividends totaling $142 million and $138 million for the nine months ended September 30, 2022 and 2021, respectively.

Accumulated Other Comprehensive Loss - Other comprehensive income (loss) refers to gains and losses recorded as an element of stockholders' equity but excluded from net earnings. The accumulated other comprehensive loss as of September 30, 2022, was comprised of unamortized benefit plan costs of $969 million and other comprehensive loss of $1 million. The accumulated other comprehensive loss as of December 31, 2021, was comprised of unamortized benefit plan costs of $923 million.

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

($ in millions)	Benefit Plans		Other		Total
Balance as of June 30, 2021	$	(1,502)	$	1	$	(1,501)
Other comprehensive income (loss) before reclassifications	14		(1)		13
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1	2		—		2
Amortization of net actuarial loss1	27		—		27
Tax expense for items of other comprehensive income	(11)		—		(11)
Net current period other comprehensive income (loss)	32		(1)		31
Balance as of September 30, 2021	$	(1,470)	$	—	$	(1,470)
Balance as of June 30, 2022	$	(977)	$	(1)	$	(978)
Other comprehensive income (loss) before reclassifications	3		(1)		2
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1	5		—		5
Amortization of net actuarial loss1	8		—		8
Settlement gain1	(4)		—		(4)
Tax (expense) benefit for items of other comprehensive income (loss)	(4)		1		(3)
Net current period other comprehensive income	8		—		8
Balance as of September 30, 2022	$	(969)	$	(1)	$	(970)

7

($ in millions)	Benefit Plans		Other		Total
Balance as of December 31, 2020	$	(1,546)	$	(1)	$	(1,547)
Other comprehensive income before reclassifications	14		1		15
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1	8		—		8
Amortization of net actuarial loss1	80		—		80
Tax expense for items of other comprehensive income	(26)		—		(26)
Net current period other comprehensive income	76		1		77
Balance as of September 30, 2021	$	(1,470)	$	—	$	(1,470)
Balance as of December 31, 2021	$	(923)	$	—	$	(923)
Other comprehensive loss before reclassifications	(94)		(2)		(96)
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1	13		—		13
Amortization of net actuarial loss1	24		—		24
Settlement gain1	(4)		—		(4)
Tax benefit for items of other comprehensive loss	15		1		16
Net current period other comprehensive loss	(46)		(1)		(47)
Balance as of September 30, 2022	$	(969)	$	(1)	$	(970)

1 These accumulated comprehensive loss components are included in the computation of net periodic benefit cost. See Note 13: Employee Pension and Other Postretirement Benefits. The tax benefit associated with amounts reclassified from accumulated other comprehensive loss for the three months ended September 30, 2022 and 2021, was $2 million and $8 million, respectively. The tax benefit associated with amounts reclassified from accumulated other comprehensive loss for the nine months ended September 30, 2022 and 2021, was $8 million and $23 million, respectively.

6. EARNINGS PER SHARE

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

	Three Months Ended September 30				Nine Months Ended September 30
(in millions, except per share amounts)	2022		2021		2022		2021
Net earnings	$	138	$	147	$	456	$	424
Weighted-average common shares outstanding	40.1		40.3		40.1		40.3
Net dilutive effect of stock awards	—		—		—		—
Dilutive weighted-average common shares outstanding	40.1		40.3		40.1		40.3
Earnings per share - basic	$	3.44	$	3.65	$	11.37	$	10.52
Earnings per share - diluted	$	3.44	$	3.65	$	11.37	$	10.52

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

8

7. REVENUE

Disaggregation of Revenue

The Company's contracts with customers typically fall into one of four categories: firm fixed-price, fixed-price incentive, cost-type, and time and materials.

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

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

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

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

The following tables present revenues on a disaggregated basis:

	Three Months Ended September 30, 2022
($ in millions)	Ingalls		Newport News		Mission Technologies		Intersegment Eliminations		Total
Revenue Type
Product sales	$	577	$	1,185	$	12	$	—	$	1,774
Service revenues	41		259		552		—		852
Intersegment	5		1		31		(37)		—
Sales and service revenues	$	623	$	1,445	$	595	$	(37)	$	2,626
Customer Type
Federal	$	618	$	1,444	$	554	$	—	$	2,616
Commercial	—		—		9		—		9
State and local government agencies	—		—		1		—		1
Intersegment	5		1		31		(37)		—
Sales and service revenues	$	623	$	1,445	$	595	$	(37)	$	2,626
Contract Type
Firm fixed-price	$	1	$	1	$	59	$	—	$	61
Fixed-price incentive	577		723		—		—		1,300
Cost-type	40		720		437		—		1,197
Time and materials	—		—		68		—		68
Intersegment	5		1		31		(37)		—
Sales and service revenues	$	623	$	1,445	$	595	$	(37)	$	2,626

9

	Three Months Ended September 30, 2021
($ in millions)	Ingalls		Newport News		Mission Technologies		Intersegment Eliminations		Total
Revenue Type
Product sales	$	586	$	1,088	$	27	$	—	$	1,701
Service revenues	38		263		336		—		637
Intersegment	4		3		31		(38)		—
Sales and service revenues	$