ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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DELAWARE
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90-0607005
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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PART I – FINANCIAL INFORMATION
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II – OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Three Months Ended
March 31 |
||||||
(in millions, except per share amounts)
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|
2016
|
|
2015
|
||||
Sales and service revenues
|
|
|
|
|
||||
Product sales
|
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$
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1,429
|
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$
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1,250
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Service revenues
|
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334
|
|
|
320
|
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||
Total sales and service revenues
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1,763
|
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1,570
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Cost of sales and service revenues
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|
||||
Cost of product sales
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1,139
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985
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Cost of service revenues
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289
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280
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Income (loss) from operating investments, net
|
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—
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1
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General and administrative expenses
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137
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150
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Operating income (loss)
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198
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|
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156
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|
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Other income (expense)
|
|
|
|
|
||||
Interest expense
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(19
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)
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(23
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)
|
||
Other, net
|
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(2
|
)
|
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—
|
|
||
Earnings (loss) before income taxes
|
|
177
|
|
|
133
|
|
||
Federal income taxes
|
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41
|
|
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46
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Net earnings (loss)
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$
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136
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$
|
87
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|
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Basic earnings (loss) per share
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$
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2.89
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$
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1.80
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Weighted-average common shares outstanding
|
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47.0
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|
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48.4
|
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||
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|
|
|
||||
Diluted earnings (loss) per share
|
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$
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2.87
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|
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$
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1.79
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Weighted-average diluted shares outstanding
|
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47.4
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48.7
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||
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||||
Dividends declared per share
|
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$
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0.50
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|
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$
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0.40
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|
|
|
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|
|
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Net earnings (loss) from above
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$
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136
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$
|
87
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Other comprehensive income (loss)
|
|
|
|
|
||||
Change in unamortized benefit plan costs
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20
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|
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22
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Other
|
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—
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(2
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)
|
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Tax benefit (expense) for items of other comprehensive income
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(8
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)
|
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(7
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)
|
||
Other comprehensive income (loss), net of tax
|
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12
|
|
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13
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Comprehensive income (loss)
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$
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148
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$
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100
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($ in millions)
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March 31
2016 |
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December 31
2015 |
||||
Assets
|
|
|
|
|
||||
Current Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
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$
|
793
|
|
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$
|
894
|
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Accounts receivable, net
|
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1,086
|
|
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1,074
|
|
||
Inventoried costs, net
|
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283
|
|
|
285
|
|
||
Prepaid expenses and other current assets
|
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41
|
|
|
31
|
|
||
Total current assets
|
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2,203
|
|
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2,284
|
|
||
Property, plant, and equipment, net of accumulated depreciation of $1,519 million as of 2016 and $1,489 million as of 2015
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1,809
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|
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1,827
|
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Goodwill
|
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956
|
|
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956
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Other intangible assets, net of accumulated amortization of $470 million as of 2016 and $465 million as of 2015
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490
|
|
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495
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Deferred tax assets
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313
|
|
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336
|
|
||
Miscellaneous other assets
|
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125
|
|
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126
|
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Total assets
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$
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5,896
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$
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6,024
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Liabilities and Stockholders' Equity
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Current Liabilities
|
|
|
|
|
||||
Trade accounts payable
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$
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252
|
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$
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317
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Accrued employees’ compensation
|
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186
|
|
|
215
|
|
||
Current portion of postretirement plan liabilities
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143
|
|
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143
|
|
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Current portion of workers’ compensation liabilities
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228
|
|
|
227
|
|
||
Advance payments and billings in excess of revenues
|
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72
|
|
|
125
|
|
||
Other current liabilities
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274
|
|
|
247
|
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||
Total current liabilities
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1,155
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1,274
|
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Long-term debt
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1,275
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|
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1,273
|
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Pension plan liabilities
|
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960
|
|
|
1,001
|
|
||
Other postretirement plan liabilities
|
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423
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|
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423
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Workers’ compensation liabilities
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462
|
|
|
460
|
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Other long-term liabilities
|
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100
|
|
|
103
|
|
||
Total liabilities
|
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4,375
|
|
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4,534
|
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Commitments and Contingencies (Note 14)
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—
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—
|
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Stockholders’ Equity
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||||
Common stock, $0.01 par value; 150 million shares authorized; 52.6 million issued and 47.1 million outstanding as of March 31, 2016, and 52.0 million issued and 46.9 million outstanding as of December 31, 2015
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1
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1
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Additional paid-in capital
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1,933
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1,978
|
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Retained earnings (deficit)
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960
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|
|
848
|
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Treasury stock
|
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(540
|
)
|
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(492
|
)
|
||
Accumulated other comprehensive income (loss)
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(833
|
)
|
|
(845
|
)
|
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Total stockholders’ equity
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1,521
|
|
|
1,490
|
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Total liabilities and stockholders’ equity
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$
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5,896
|
|
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$
|
6,024
|
|
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Three Months Ended March 31
|
||||||
($ in millions)
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2016
|
|
2015
|
||||
Operating Activities
|
|
|
|
|
||||
Net earnings (loss)
|
|
$
|
136
|
|
|
$
|
87
|
|
Adjustments to reconcile to net cash provided by (used in) operating activities
|
|
|
|
|
||||
Depreciation
|
|
41
|
|
|
39
|
|
||
Amortization of purchased intangibles
|
|
5
|
|
|
7
|
|
||
Amortization of debt issuance costs
|
|
2
|
|
|
3
|
|
||
Stock-based compensation
|
|
5
|
|
|
4
|
|
||
Deferred income taxes
|
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15
|
|
|
(1
|
)
|
||
Change in
|
|
|
|
|
||||
Accounts receivable
|
|
(12
|
)
|
|
(189
|
)
|
||
Inventoried costs
|
|
2
|
|
|
3
|
|
||
Prepaid expenses and other assets
|
|
(9
|
)
|
|
(11
|
)
|
||
Accounts payable and accruals
|
|
(112
|
)
|
|
39
|
|
||
Retiree benefits
|
|
(21
|
)
|
|
30
|
|
||
Other non-cash transactions, net
|
|
2
|
|
|
(1
|
)
|
||
Net cash provided by (used in) operating activities
|
|
54
|
|
|
10
|
|
||
Investing Activities
|
|
|
|
|
||||
Additions to property, plant, and equipment
|
|
(37
|
)
|
|
(20
|
)
|
||
Acquisitions of businesses, net of cash received
|
|
—
|
|
|
(6
|
)
|
||
Proceeds from disposition of assets
|
|
—
|
|
|
32
|
|
||
Net cash provided by (used in) investing activities
|
|
(37
|
)
|
|
6
|
|
||
Financing Activities
|
|
|
|
|
||||
Dividends paid
|
|
(24
|
)
|
|
(19
|
)
|
||
Repurchases of common stock
|
|
(44
|
)
|
|
(29
|
)
|
||
Employee taxes on certain share-based payment arrangements
|
|
(50
|
)
|
|
(54
|
)
|
||
Net cash provided by (used in) financing activities
|
|
(118
|
)
|
|
(102
|
)
|
||
Change in cash and cash equivalents
|
|
(101
|
)
|
|
(86
|
)
|
||
Cash and cash equivalents, beginning of period
|
|
894
|
|
|
990
|
|
||
Cash and cash equivalents, end of period
|
|
$
|
793
|
|
|
$
|
904
|
|
Supplemental Cash Flow Disclosure
|
|
|
|
|
||||
Cash paid for income taxes
|
|
$
|
39
|
|
|
$
|
26
|
|
Cash paid for interest
|
|
$
|
1
|
|
|
$
|
23
|
|
Non-Cash Investing and Financing Activities
|
|
|
|
|
||||
Capital expenditures accrued in accounts payable
|
|
$
|
4
|
|
|
$
|
3
|
|
Three Months Ended March 31, 2016 and 2015
($ 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, 2014
|
|
$
|
1
|
|
|
$
|
1,959
|
|
|
$
|
525
|
|
|
$
|
(258
|
)
|
|
$
|
(862
|
)
|
|
$
|
1,365
|
|
Net earnings (loss)
|
|
—
|
|
|
—
|
|
|
87
|
|
|
—
|
|
|
—
|
|
|
87
|
|
||||||
Dividends declared ($0.40 per share)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
||||||
Additional paid-in capital
|
|
—
|
|
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
||||||
Other comprehensive income (loss), net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
||||||
Treasury stock activity
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
||||||
Balance as of March 31, 2015
|
|
$
|
1
|
|
|
$
|
1,922
|
|
|
$
|
593
|
|
|
$
|
(287
|
)
|
|
$
|
(849
|
)
|
|
$
|
1,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance as of December 31, 2015
|
|
$
|
1
|
|
|
$
|
1,978
|
|
|
$
|
848
|
|
|
$
|
(492
|
)
|
|
$
|
(845
|
)
|
|
$
|
1,490
|
|
Net earnings (loss)
|
|
—
|
|
|
—
|
|
|
136
|
|
|
—
|
|
|
—
|
|
|
136
|
|
||||||
Dividends declared ($0.50 per share)
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
||||||
Additional paid-in capital
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
||||||
Other comprehensive income (loss), net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
12
|
|
||||||
Treasury stock activity
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48
|
)
|
|
—
|
|
|
(48
|
)
|
||||||
Balance as of March 31, 2016
|
|
$
|
1
|
|
|
$
|
1,933
|
|
|
$
|
960
|
|
|
$
|
(540
|
)
|
|
$
|
(833
|
)
|
|
$
|
1,521
|
|
($ in millions)
|
|
Benefit Plans
|
|
Other
|
|
Total
|
||||||
Balance as of December 31, 2014
|
|
$
|
(864
|
)
|
|
$
|
2
|
|
|
$
|
(862
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
||||||
Amortization of net actuarial loss (gain)
1
|
|
22
|
|
|
—
|
|
|
22
|
|
|||
Tax benefit (expense) for items of other comprehensive income
|
|
(8
|
)
|
|
1
|
|
|
(7
|
)
|
|||
Net current period other comprehensive income (loss)
|
|
14
|
|
|
(1
|
)
|
|
13
|
|
|||
Balance as of March 31, 2015
|
|
(850
|
)
|
|
1
|
|
|
(849
|
)
|
|||
|
|
|
|
|
|
|
||||||
Balance as of December 31, 2015
|
|
(843
|
)
|
|
(2
|
)
|
|
(845
|
)
|
|||
Other comprehensive income (loss) before reclassifications
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
||||||
Amortization of net actuarial loss (gain)
1
|
|
20
|
|
|
—
|
|
|
20
|
|
|||
Tax benefit (expense) for items of other comprehensive income
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
|||
Net current period other comprehensive income (loss)
|
|
12
|
|
|
—
|
|
|
12
|
|
|||
Balance as of March 31, 2016
|
|
$
|
(831
|
)
|
|
$
|
(2
|
)
|
|
$
|
(833
|
)
|
|
|
Three Months Ended
March 31 |
||||||
(in millions, except per share amounts)
|
|
2016
|
|
2015
|
||||
Net earnings (loss)
|
|
$
|
136
|
|
|
$
|
87
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding
|
|
47.0
|
|
|
48.4
|
|
||
Net dilutive effect of stock options and awards
|
|
0.4
|
|
|
0.3
|
|
||
Dilutive weighted-average common shares outstanding
|
|
47.4
|
|
|
48.7
|
|
||
|
|
|
|
|
||||
Earnings (loss) per share - basic
|
|
$
|
2.89
|
|
|
$
|
1.80
|
|
Earnings (loss) per share - diluted
|
|
$
|
2.87
|
|
|
$
|
1.79
|
|
|
|
Three Months Ended
March 31 |
||||||
($ in millions)
|
|
2016
|
|
2015
|
||||
Sales and Service Revenues
|
|
|
|
|
||||
Ingalls
|
|
$
|
586
|
|
|
$
|
469
|
|
Newport News
|
|
1,153
|
|
|
1,061
|
|
||
Other
|
|
24
|
|
|
40
|
|
||
Total sales and service revenues
|
|
$
|
1,763
|
|
|
$
|
1,570
|
|
Operating Income (Loss)
|
|
|
|
|
||||
Ingalls
|
|
$
|
82
|
|
|
$
|
45
|
|
Newport News
|
|
89
|
|
|
93
|
|
||
Other
|
|
(5
|
)
|
|
(10
|
)
|
||
Total segment operating income (loss)
|
|
166
|
|
|
128
|
|
||
Non-segment factors affecting operating income (loss)
|
|
|
|
|
||||
FAS/CAS Adjustment
|
|
35
|
|
|
27
|
|
||
Deferred state income taxes
|
|
(3
|
)
|
|
1
|
|
||
Total operating income (loss)
|
|
$
|
198
|
|
|
$
|
156
|
|
($ in millions)
|
|
March 31
2016 |
|
December 31
2015 |
||||
Assets
|
|
|
|
|
||||
Ingalls
|
|
$
|
1,302
|
|
|
$
|
1,324
|
|
Newport News
|
|
3,306
|
|
|
3,286
|
|
||
Other
|
|
75
|
|
|
78
|
|
||
Corporate
|
|
1,213
|
|
|
1,336
|
|
||
Total assets
|
|
$
|
5,896
|
|
|
$
|
6,024
|
|
($ in millions)
|
|
March 31
2016 |
|
December 31
2015 |
||||
Production costs of contracts in process
|
|
$
|
189
|
|
|
$
|
193
|
|
Raw material inventory
|
|
94
|
|
|
92
|
|
||
Total inventoried costs, net
|
|
$
|
283
|
|
|
$
|
285
|
|
($ in millions)
|
|
March 31
2016 |
|
December 31
2015 |
||||
Senior notes due December 15, 2021, 5.000%
|
|
$
|
600
|
|
|
$
|
600
|
|
Senior notes due November 15, 2025, 5.000%
|
|
600
|
|
|
600
|
|
||
Mississippi economic development revenue bonds due May 1, 2024, 7.81%
|
|
84
|
|
|
84
|
|
||
Gulf opportunity zone industrial development revenue bonds due December 1, 2028, 4.55%
|
|
21
|
|
|
21
|
|
||
Less unamortized debt issuance costs
|
|
(30
|
)
|
|
(32
|
)
|
||
Total long-term debt
|
|
$
|
1,275
|
|
|
$
|
1,273
|
|
|
|
Three Months Ended
March 31 |
||||||||||||||
|
|
Pension Benefits
|
|
Other Benefits
|
||||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
||||||||
Service cost
|
|
$
|
33
|
|
|
$
|
37
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Interest cost
|
|
65
|
|
|
61
|
|
|
6
|
|
|
7
|
|
||||
Expected return on plan assets
|
|
(87
|
)
|
|
(88
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization of prior service cost (credit)
|
|
5
|
|
|
5
|
|
|
(5
|
)
|
|
(5
|
)
|
||||
Amortization of net actuarial loss (gain)
|
|
21
|
|
|
21
|
|
|
(1
|
)
|
|
1
|
|
||||
Net periodic benefit cost
|
|
$
|
37
|
|
|
$
|
36
|
|
|
$
|
3
|
|
|
$
|
6
|
|
|
|
Three Months Ended
March 31 |
||||||
($ in millions)
|
|
2016
|
|
2015
|
||||
Pension plans
|
|
|
|
|
||||
Qualified minimum
|
|
$
|
—
|
|
|
$
|
—
|
|
Discretionary
|
|
|
|
|
||||
Qualified
|
|
53
|
|
|
2
|
|
||
Non-qualified
|
|
1
|
|
|
1
|
|
||
Other benefit plans
|
|
8
|
|
|
8
|
|
||
Total contributions
|
|
$
|
62
|
|
|
$
|
11
|
|
|
|
Stock Awards
(in thousands)
|
|
Weighted-Average
Grant Date Fair
Value
|
|
Weighted-Average Remaining Contractual Term
(in years)
|
|||
Total stock awards
|
|
603
|
|
|
$
|
110.24
|
|
|
1.4
|
|
|
Shares Under
Option
(in thousands)
|
|
Weighted-
Average
Exercise Price
|
|
Weighted- Average
Remaining
Contractual Term
(in years)
|
|
Aggregate
Intrinsic
Value
($ in millions)
|
|||||
Outstanding and exercisable at March 31, 2016
|
|
262
|
|
|
$
|
37.73
|
|
|
0.9
|
|
$
|
26
|
|
•
|
Revenue recognition;
|
•
|
Purchase accounting, goodwill, and intangible assets;
|
•
|
Litigation, commitments and contingencies;
|
•
|
Retirement related benefit plans; and
|
•
|
Workers' compensation.
|
•
|
Flexibly-Priced Contracts
- Includes both cost-type and fixed-price incentive 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. Fixed-price incentive contracts also provide for reimbursement of the contractor's allowable costs, but are subject to a cost-share limit that
|
•
|
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 is not generally subject to adjustment regardless of costs incurred by the contractor. Time and materials contracts, which specify a fixed hourly rate for each labor hour charged, are considered firm fixed-price contracts. Approximately
2%
and
5%
of our revenues for the
three months ended
March 31, 2016
and
2015
, respectively, were generated from firm fixed-price arrangements.
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
|
March 31
|
|
2016 over 2015
|
|||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Sales and service revenues
|
|
$
|
1,763
|
|
|
$
|
1,570
|
|
|
$
|
193
|
|
|
12
|
%
|
Cost of product sales and service revenues
|
|
1,428
|
|
|
1,265
|
|
|
163
|
|
|
13
|
%
|
|||
Income (loss) from operating investments, net
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
(100
|
)%
|
|||
General and administrative expenses
|
|
137
|
|
|
150
|
|
|
(13
|
)
|
|
(9
|
)%
|
|||
Operating income (loss)
|
|
198
|
|
|
156
|
|
|
42
|
|
|
27
|
%
|
|||
Interest expense
|
|
19
|
|
|
23
|
|
|
(4
|
)
|
|
(17
|
)%
|
|||
Other income (expense)
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
%
|
|||
Federal income taxes
|
|
41
|
|
|
46
|
|
|
(5
|
)
|
|
(11
|
)%
|
|||
Net earnings (loss)
|
|
$
|
136
|
|
|
$
|
87
|
|
|
$
|
49
|
|
|
56
|
%
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
|
March 31
|
|
2016 over 2015
|
|||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Product sales
|
|
$
|
1,429
|
|
|
$
|
1,250
|
|
|
$
|
179
|
|
|
14
|
%
|
Service revenues
|
|
334
|
|
|
320
|
|
|
14
|
|
|
4
|
%
|
|||
Sales and service revenues
|
|
$
|
1,763
|
|
|
$
|
1,570
|
|
|
$
|
193
|
|
|
12
|
%
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
|
March 31
|
|
2016 over 2015
|
|||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Cost of product sales
|
|
$
|
1,139
|
|
|
$
|
985
|
|
|
$
|
154
|
|
|
16
|
%
|
% of product sales
|
|
79.7
|
%
|
|
78.8
|
%
|
|
|
|
|
|
||||
Cost of service revenues
|
|
289
|
|
|
280
|
|
|
9
|
|
|
3
|
%
|
|||
% of service revenues
|
|
86.5
|
%
|
|
87.5
|
%
|
|
|
|
|
|
||||
Income (loss) from operating investments, net
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
(100
|
)%
|
|||
General and administrative expenses
|
|
137
|
|
|
150
|
|
|
(13
|
)
|
|
(9
|
)%
|
|||
% of total sales and service revenues
|
|
7.8
|
%
|
|
9.6
|
%
|
|
|
|
|
|
||||
Cost of sales and service revenues
|
|
$
|
1,565
|
|
|
$
|
1,414
|
|
|
$
|
151
|
|
|
11
|
%
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
|
March 31
|
|
2016 over 2015
|
|||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Segment operating income (loss)
|
|
$
|
166
|
|
|
$
|
128
|
|
|
$
|
38
|
|
|
30
|
%
|
FAS/CAS Adjustment
|
|
35
|
|
|
27
|
|
|
8
|
|
|
30
|
%
|
|||
Deferred state income taxes
|
|
(3
|
)
|
|
1
|
|
|
(4
|
)
|
|
(400
|
)%
|
|||
Total operating income (loss)
|
|
$
|
198
|
|
|
$
|
156
|
|
|
$
|
42
|
|
|
27
|
%
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
|
March 31
|
|
2016 over 2015
|
|||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
FAS expense
|
|
$
|
(40
|
)
|
|
$
|
(42
|
)
|
|
$
|
2
|
|
|
5
|
%
|
CAS cost
|
|
75
|
|
|
69
|
|
|
6
|
|
|
9
|
%
|
|||
FAS/CAS Adjustment
|
|
$
|
35
|
|
|
$
|
27
|
|
|
$
|
8
|
|
|
30
|
%
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
|
March 31
|
|
2016 over 2015
|
|||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Sales and Service Revenues
|
|
|
|
|
|
|
|
|
|||||||
Ingalls
|
|
$
|
586
|
|
|
$
|
469
|
|
|
$
|
117
|
|
|
25
|
%
|
Newport News
|
|
1,153
|
|
|
1,061
|
|
|
92
|
|
|
9
|
%
|
|||
Other
|
|
24
|
|
|
40
|
|
|
(16
|
)
|
|
(40
|
)%
|
|||
Total sales and service revenues
|
|
$
|
1,763
|
|
|
$
|
1,570
|
|
|
$
|
193
|
|
|
12
|
%
|
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|||||||
Ingalls
|
|
$
|
82
|
|
|
$
|
45
|
|
|
$
|
37
|
|
|
82
|
%
|
Newport News
|
|
89
|
|
|
93
|
|
|
(4
|
)
|
|
(4
|
)%
|
|||
Other
|
|
(5
|
)
|
|
(10
|
)
|
|
5
|
|
|
50
|
%
|
|||
Total Segment Operating Income (Loss)
|
|
166
|
|
|
128
|
|
|
38
|
|
|
30
|
%
|
|||
Non-segment factors affecting operating income (loss)
|
|
|
|
|
|
|
|
|
|||||||
FAS/CAS Adjustment
|
|
35
|
|
|
27
|
|
|
8
|
|
|
30
|
%
|
|||
Deferred state income taxes
|
|
(3
|
)
|
|
1
|
|
|
(4
|
)
|
|
(400
|
)%
|
|||
Total operating income (loss)
|
|
$
|
198
|
|
|
$
|
156
|
|
|
$
|
42
|
|
|
27
|
%
|
|
|
Three Months Ended
|
||||||
|
|
March 31
|
||||||
($ in millions)
|
|
2016
|
|
2015
|
||||
Gross favorable adjustments
|
|
$
|
76
|
|
|
$
|
59
|
|
Gross unfavorable adjustments
|
|
(7
|
)
|
|
(4
|
)
|
||
Net adjustments
|
|
$
|
69
|
|
|
$
|
55
|
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
|
March 31
|
|
2016 over 2015
|
|||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Sales and service revenues
|
|
$
|
586
|
|
|
$
|
469
|
|
|
$
|
117
|
|
|
25
|
%
|
Segment operating income (loss)
|
|
82
|
|
|
45
|
|
|
37
|
|
|
82
|
%
|
|||
As a percentage of segment sales
|
|
14.0
|
%
|
|
9.6
|
%
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
|
March 31
|
|
2016 over 2015
|
|||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Sales and service revenues
|
|
$
|
1,153
|
|
|
$
|
1,061
|
|
|
$
|
92
|
|
|
9
|
%
|
Segment operating income (loss)
|
|
89
|
|
|
93
|
|
|
(4
|
)
|
|
(4
|
)%
|
|||
As a percentage of segment sales
|
|
7.7
|
%
|
|
8.8
|
%
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
|
March 31
|
|
2016 over 2015
|
|||||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
|
Percent
|
|||||||
Sales and service revenues
|
|
$
|
24
|
|
|
$
|
40
|
|
|
$
|
(16
|
)
|
|
(40
|
)%
|
Segment operating income (loss)
|
|
(5
|
)
|
|
(10
|
)
|
|
5
|
|
|
50
|
%
|
|||
As a percentage of segment sales
|
|
(20.8
|
)%
|
|
(25.0
|
)%
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
||||||||||||
($ in millions)
|
|
Funded
|
|
Unfunded
|
|
Backlog
|
|
Funded
|
|
Unfunded
|
|
Backlog
|
||||||||||||
Ingalls
|
|
$
|
5,327
|
|
|
$
|
720
|
|
|
$
|
6,047
|
|
|
$
|
5,153
|
|
|
$
|
1,290
|
|
|
$
|
6,443
|
|
Newport News
|
|
8,032
|
|
|
7,098
|
|
|
15,130
|
|
|
6,026
|
|
|
9,513
|
|
|
15,539
|
|
||||||
Other
|
|
103
|
|
|
—
|
|
|
103
|
|
|
80
|
|
|
—
|
|
|
80
|
|
||||||
Total backlog
|
|
$
|
13,462
|
|
|
$
|
7,818
|
|
|
$
|
21,280
|
|
|
$
|
11,259
|
|
|
$
|
10,803
|
|
|
$
|
22,062
|
|
|
|
Three Months Ended
|
|
2016 over
|
||||||||
|
|
March 31
|
|
2015
|
||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
||||||
Net earnings (loss)
|
|
$
|
136
|
|
|
$
|
87
|
|
|
$
|
49
|
|
Depreciation and amortization
|
|
48
|
|
|
49
|
|
|
(1
|
)
|
|||
Stock-based compensation
|
|
5
|
|
|
4
|
|
|
1
|
|
|||
Deferred income taxes
|
|
15
|
|
|
(1
|
)
|
|
16
|
|
|||
Retiree benefit funding less than (in excess of) expense
|
|
(21
|
)
|
|
30
|
|
|
(51
|
)
|
|||
Trade working capital decrease (increase)
|
|
(129
|
)
|
|
(159
|
)
|
|
30
|
|
|||
Net cash provided by (used in) operating activities
|
|
$
|
54
|
|
|
$
|
10
|
|
|
$
|
44
|
|
|
|
Three Months Ended
|
|
2016 over
|
||||||||
|
|
March 31
|
|
2015
|
||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
Dollars
|
||||||
Net cash provided by (used in) operating activities
|
|
$
|
54
|
|
|
$
|
10
|
|
|
$
|
44
|
|
Less:
|
|
|
|
|
|
|
||||||
Capital expenditures
|
|
(37
|
)
|
|
(20
|
)
|
|
(17
|
)
|
|||
Free cash flow provided by (used in) operations
|
|
$
|
17
|
|
|
$
|
(10
|
)
|
|
$
|
27
|
|
•
|
changes in government and customer priorities and requirements (including government budgetary constraints, shifts in defense spending, and changes in customer short-range and long-range plans);
|
•
|
our ability to obtain new contracts, estimate our future contract costs and perform our contracts effectively;
|
•
|
changes in procurement processes and government regulations and our ability to comply with such requirements;
|
•
|
our ability to deliver our products and services at an affordable life cycle cost and compete within our markets;
|
•
|
natural disasters;
|
•
|
adverse economic conditions in the United States and globally;
|
•
|
changes in key estimates and assumptions regarding our pension and retiree health care costs;
|
•
|
security threats, including cyber security threats, and related disruptions; and
|
•
|
other risk factors discussed herein and in our filings with the SEC.
|
Program Name
|
|
Program Description
|
|
|
|
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. CVN-72 USS
Abraham Lincoln
is currently undergoing RCOH and advance planning efforts for CVN-73 USS
George Washington
are in process in preparation for the expected start of its RCOH in 2017.
|
|
|
|
CVN-65 USS
Enterprise
|
|
Defuel and inactivate the world's first nuclear-powered aircraft carrier, which began in 2013.
|
|
|
|
CVN-78
Gerald R. Ford
-class aircraft carriers
|
|
Design and construction for the
Ford
-class program, which is the aircraft carrier replacement program for CVN-65 USS
Enterprise
and CVN-68
Nimitz
-class aircraft carriers. CVN-78
Gerald R. Ford
, the first ship of the
Ford
-class, is currently under construction. In June 2015, we were awarded a contract for the detail design and construction of CVN-79
John F. Kennedy
, following several years of engineering, advance construction, and purchase of long-lead time components and material. 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.
|
|
|
|
DDG-51
Arleigh Burke
-class destroyers
|
|
Build guided missile destroyers designed for conducting anti-air, anti-submarine, anti-surface and strike operations. The Aegis-equipped DDG-51
Arleigh Burke
-class destroyers are the U.S. Navy's primary surface combatant, and have been constructed in variants, allowing technological advances during construction. DDG-113
John Finn
and DDG-114
Ralph Johnson
are currently under construction. In June 2013, we were awarded a multi-year contract for construction of five additional DDG-51
Arleigh Burke
-class destroyers. The first three ships of that award, DDG-117
Paul Ignatius,
DDG-119
Delbert D. Black
, and DDG-121
Frank E. Petersen, Jr.
are currently under construction.
|
|
|
|
Energy products and services
|
|
Leverage our core competencies in nuclear operations, program management and heavy manufacturing for U.S. Department of Energy ("DoE") and commercial nuclear programs. We also provide a range of services to the energy and oil and gas industries as well as government customers.
|
|
|
|
Fleet Support services
|
|
Fleet Support provides comprehensive life cycle services, including depot maintenance, modernization, repairs, logistics and technical support, and planning yard services for naval and commercial vessels. We have ship repair facilities in Newport News, Virginia, and San Diego, California, which are near the U.S. Navy's largest homeports of Norfolk, Virginia and San Diego, respectively. We also perform emergent repair for the U.S. Navy on all classes of ships.
|
|
|
|
Legend
-class National Security Cutter
|
|
Design and build the U.S. Coast Guard's National Security Cutters, the largest and most technically advanced class of cutter in the U.S. Coast Guard. The NSC is equipped to carry out maritime homeland security, maritime safety, protection of natural resources, maritime mobility and national defense missions. The plan is for a total of eight ships, of which the first five ships have been delivered. NSC-6
Munro
, NSC-7
Kimball
and NSC-8
Midgett
are currently under construction.
|
|
|
|
LHA-6
America-
class amphibious assault ships
|
|
Design and build amphibious assault ships that provide forward presence and power projection as an integral part of joint, interagency and multinational maritime expeditionary forces. The LHA-6
America
-class ships, together with the LHD-1
Wasp
-class ships, are the successors to the decommissioned LHA-1
Tarawa
-class ships. The LHA-6
America
-class ships optimize aviation operations and support capabilities. LHA-7 Tripoli is currently under construction.
|
|
|
|
LPD-17
San Antonio-
class 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 LPD-17
San Antonio-
class 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. We are currently constructing LPD-26
John P.
Murtha
and LPD-27
Portland
. The LPD-17
San Antonio
-class currently includes a total of 11 ships.
|
|
|
|
Savannah River Nuclear Solutions, LLC
|
|
Participate, as a minority member in a joint venture, in the management and operation of DoE nuclear sites, currently at the Savannah River Site near Aiken, South Carolina, and potentially at other DoE sites. Our joint venture partners at the Savannah River Site include Fluor Federal Services, Inc. and Honeywell International Inc.
|
|
|
|
SSBN(X)
Ohio
-class Submarine Replacement Program
|
|
Perform, through an agreement with Electric Boat, as design subcontractor for the SSBN(X)
Ohio
-class replacement boats. The U.S. Navy has committed to designing a replacement class for the SSBN
Ohio
-class ballistic missile submarines, which were first introduced into service in 1981. The SSBN
Ohio
-class includes 14 ballistic missile submarines and four nuclear cruise missile submarines. The
Ohio
Replacement Program currently anticipates 12 new ballistic missile submarines over a 15-year period at a cost of approximately $5 billion to $7 billion each. The U.S. Navy has initiated the design process for the new class of submarine, and we have begun design work as a subcontractor to Electric Boat. Congress has delayed the start of the first
Ohio
replacement submarine by two years and construction is now expected to begin in 2021, with procurement of long-lead-time materials in 2017 and delivery in 2030. The first
Ohio
-class ballistic missile submarine is expected to be retired in 2027 with an additional submarine being retired each year thereafter. By 2030 the
Ohio
-class ballistic missile submarine fleet is expected to be ten. The current fiscal environment and uncertainty in defense budgets may cause additional delay to the start of construction or result in a reduction in the number of ships being procured, but we believe the
Ohio
Replacement Program may represent an opportunity for us in the future.
|
|
|
|
SSN-774
Virginia
-class fast attack submarines
|
|
Construct attack submarines as the principal subcontractor to Electric Boat. The SSN-774
Virginia
-class 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.
|
Period
|
|
Total Number of Shares Purchased
1
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Program
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)
2
|
||||||
January 1, 2016 to January 31, 2016
|
|
117,622
|
|
|
$
|
123.60
|
|
|
117,622
|
|
|
$
|
693.7
|
|
February 1, 2016 to February 29, 2016
|
|
55,504
|
|
|
125.94
|
|
|
55,504
|
|
|
686.7
|
|
||
March 1, 2016 to March 31, 2016
|
|
487,475
|
|
|
133.77
|
|
|
193,600
|
|
|
660.5
|
|
||
Total
|
|
660,601
|
|
|
$
|
131.30
|
|
|
366,726
|
|
|
$
|
660.5
|
|
3.1
|
|
|
Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., filed March 30, 2011 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on April 4, 2011).
|
|
|
|
|
3.2
|
|
|
Certificate of Amendment to the Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., dated May 28, 2014 (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed on August 7, 2014).
|
|
|
|
|
3.3
|
|
|
Certificate of Amendment to the Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc., dated May 21, 2015 (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q filed on August 6, 2015).
|
|
|
|
|
3.4
|
|
|
Restated Bylaws of Huntington Ingalls Industries, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on February 1, 2016).
|
|
|
|
|
10.1
|
|
|
Huntington Ingalls Industries, Inc. Annual Incentive Plan (as amended and restated).
|
|
|
|
|
10.2
|
|
|
First Amendment to the Huntington Ingalls Industries, Inc. Annual Incentive Plan (as amended and restated).
|
|
|
|
|
11
|
|
|
Computation of Per Share Earnings (provided in Note 7 "Earnings Per Share" of the Notes to the Unaudited Condensed Consolidated Financial Statements included in this Report).
|
|
|
|
|
12.1
|
|
|
Ratio of Earnings to Fixed Charges.
|
|
|
|
|
31.1
|
|
|
Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
31.2
|
|
|
Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
32.1
|
|
|
Certificate of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
32.2
|
|
|
Certificate of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
101
|
|
|
The following financial information for the company, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Comprehensive Income, (ii) the Condensed Consolidated Statements of Financial Position, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Changes in Equity, and (v) the Notes to Condensed Consolidated Financial Statements.
|
Date:
|
May 5, 2016
|
Huntington Ingalls Industries, Inc.
|
|
|
|
(Registrant)
|
|
|
|
||
|
|
By:
|
/s/ Nicolas Schuck
|
|
|
|
Nicolas Schuck
|
|
|
|
Corporate Vice President, Controller and Chief Accounting Officer
|
1.
|
Appropriated Incentive Compensation— The amount appropriated to the Plan for a Performance Year by the Committee.
|
2.
|
Code—The Internal Revenue Code of 1986, as amended from time to time.
|
3.
|
Committee—The Compensation Committee of the Board of Directors of Huntington Ingalls Industries, Inc.
|
4.
|
Company—Huntington Ingalls Industries, Inc. and such of its subsidiaries as are consolidated in its consolidated financial statements.
|
5.
|
Director—A member of the Board of Directors of Huntington Ingalls Industries, Inc.
|
6.
|
Incentive Compensation—Awards payable under this Plan.
|
7.
|
Officer—A Participant who is an elected corporate officer of the rank of Vice President and above and the Presidents of those consolidated subsidiaries that the Committee determines to be significant in the overall corporate operations.
|
8.
|
Participant—An employee of the Company granted or eligible to receive an Incentive Compensation award under this Plan.
|
9.
|
Performance Criteria—The performance criteria is a weighted combination of various financial and non-financial factors approved by the Committee for the Performance Year.
|
10.
|
Performance Year—The year with respect to which an award of Incentive Compensation is calculated and paid.
|
11.
|
Plan—This Huntington Ingalls Industries, Inc. Annual Incentive Plan.
|
12.
|
Plan Year—The fiscal year of Huntington Ingalls Industries, Inc.
|
13.
|
Section 162(m) Officer— An employee who is a “covered employee” as defined in Section 162(m) of the Code with respect to an award of Incentive Compensation under the Plan for any Performance Year.
|
14.
|
Section 162(m) Policy— The Performance-Based Compensation Policy of Huntington Ingalls Industries, Inc., as amended from time to time.
|
1.
|
The persons eligible to receive Incentive Compensation awards under this Plan are Officers and appointed vice presidents, senior management, middle management and individual key contributors (employees normally in a position that customarily perform quasi-management or team leadership duties); provided that Incentive Compensation awards under this Plan to any Officers who are Section 162(m) Officers for a Performance Year shall be subject to the Section 162(m) Policy. In addition, employees may be eligible to receive Incentive Compensation awards under this Plan if they have specific individual goals that directly contribute to the attainment of their respective business unit’s operating goals or if employees are considered “high performing” and are in a position to make measurable and significant contributions to the success of the Company.
|
2.
|
For Officers, at the beginning of, or prior to, a Performance Year, the Committee will determine the Officers granted or eligible to receive an Incentive Compensation award for such Performance Year.
|
3.
|
For all other eligible employees who are not Officers, at the beginning of, or prior to, a Performance Year, the Company’s CEO will approve the number of employees eligible for participation in this Plan for such Performance Year. Participants are then selected by their management based on an assessment of their position relative to other candidates, their performance, and their potential impact on achievement of business unit and the Company goals.
|
4.
|
Directors, as such, shall not participate in this Plan, but the fact that an Officer is also a Director shall not prevent participation.
|
5.
|
Eligibility for participation in this Plan does not guarantee that an eligible individual will actually be selected to participate. Participation in this Plan during any Performance Year does not imply nor guarantee participation in this Plan in future years.
|
6.
|
A Participant may be eligible to receive a pro-rated Incentive Compensation award in the
|
7.
|
Except as provided in Section III 6 (see above), in order to be eligible to receive a payment from this Plan, a Participant must be an active employee of the Company as of the last day of the Performance Year (and in no event will the Participant’s Incentive Compensation award with respect to that year be considered to have been earned prior to that time unless such condition is satisfied), unless an exception is approved in writing by the Committee (with respect to Officers) or the Company’s chief human resources and administrative officer (with respect to all non-Officer Participants).
|
1.
|
Corporation Goals:
|
2.
|
Financial Measures:
|
a.
|
Financial measures are established by the Committee at its sole discretion. Measures may include, but are not limited to: cash management, cash flow, return on investment, debt reduction, revenue growth, net earnings, and return on equity.
|
b.
|
The Committee approves a performance threshold, a target level and a maximum performance level for each of the financial measures for the Performance Year.
|
3.
|
Supplemental Goals:
|
4.
|
Individual Goals:
|
1.
|
The amount appropriated for this Plan for a Performance Year is based on the Committee’s determination of the UPF and applied to the individual incentive targets of Participants. These performance-adjusted targets are aggregated into the “Appropriated Incentive Compensation” for the Performance Year.
|
2.
|
In no event shall Incentive Compensation payable to Participants for a Performance Year exceed the Appropriated Incentive Compensation for this Plan as approved by the Committee. In no event shall Incentive Compensation payable to Participants who are Section 162(m) Officers for a Performance Year exceed the applicable limits set forth in the Section 162(m) Policy.
|
3.
|
Any Appropriated Incentive Compensation for a Performance Year, which is not actually distributed to the Participants as awards for such year, shall be forfeited and cannot be transferred to the following Performance Year.
|
1.
|
Individual Award Factors:
|
a.
|
Target award percentage—Each Participant’s target award percentage is established annually and is a percentage of annual aggregate salary that reflects the varying
|
b.
|
Individual performance—Unless otherwise determined by the Committee, each Participant will be evaluated in relation to the Participant’s achievement of predetermined individual goals and his/her relative contribution during the Performance Year compared to other Participants to the success or profit of the Company. This assessment of performance (the “individual performance factor” or “IPF”) is stated numerically and is a performance multiplier for individual incentive targets. The IPF may range from 0 to 1.5. Each Officer’s IPF will be determined by the Committee. For each other Participant, his/her IPF will be determined by the CEO or his delegate.
|
c.
|
Both the IPF (if applicable) and the UPF are multipliers for the individual Participant’s target award percentage to determine that Participant’s Incentive Compensation award.
|
2.
|
Awards:
|
a.
|
For Officers, the Committee will make the final determination of each Officer’s Incentive Compensation award for the Performance Year. In making its determination, the Committee will consider the CEO’s recommendations with respect to all Officers other than himself.
|
b.
|
For all other Participants who are not Officers, the CEO or his delegate will make the final determination of each such Participant’s Incentive Compensation award for the Performance Year. Prior to the payment of any such Incentive Compensation awards for a Performance Year, the CEO, or his delegate, may in his sole discretion, adjust or reduce to zero recommended amounts of Incentive Compensation awards to all or any of these Participants. The CEO or his delegate shall determine the amount of any adjustment in each of these Participant’s Incentive Compensation awards on the basis of such factors as he deems relevant, and shall not be required to establish any allocation or weighting component with respect to the factors he considers.
|
1.
|
The Committee shall be responsible for the administration of this Plan for Officers and the CEO shall be responsible for the administration of this Plan for all other Participants who are not Officers. The Committee or CEO, as applicable:
|
a.
|
Shall interpret this Plan, make any rules and regulations relating to the Plan, and determine factual questions arising in connection with the Plan, after such investigation or hearing (if any) as the applicable administrator may deem appropriate.
|
b.
|
The Committee shall determine which consolidated subsidiaries are significant for the purpose of determining which Participants are Officers.
|
c.
|
As soon as feasible after the close of each Performance Year and prior to the payment of any Incentive Compensation for such Performance Year, (i) the Committee shall review the performance of each Officer and determine the amount of each Officer’s individual Incentive Compensation award, if any, with respect to that Performance Year and (ii) the CEO shall review the recommended Incentive Compensation awards of selected Participants, as determined by the CEO, to determine if the award is appropriate with respect to that Performance Year, making any adjustments as he deems necessary, and approving each such Incentive Compensation award, if any, with respect to that Performance Year.
|
d.
|
The Committee shall have sole discretion in determining Incentive Compensation awards for Officers, except that in making awards the Committee may, in its discretion, request and consider the recommendations of the CEO and others whom it may designate.
|
e.
|
The Committee shall review the Incentive Compensation awards for the Section 162(m) Officers under the Section 162(m) Policy and shall make any adjustments to such awards necessary to ensure compliance with such policy.
|
f.
|
The CEO shall review and approve the total non-Officer Incentive Compensation award expenditure of each division and the Company overall.
|
g.
|
Any decisions made by the applicable administrator under the provisions of this SECTION VIII, as well as any interpretations of this Plan by the applicable administrator, shall be conclusive and binding on all parties concerned.
|
1.
|
Payments
|
a.
|
The amount of Incentive Compensation award determined for each Participant with respect to a given Performance Year shall be paid in cash or in common stock of Huntington Ingalls Industries, Inc. (“HII Common Stock”) or partly in cash and partly in HII Common Stock, as the Committee may determine. Subject to any applicable deferred compensation election to the contrary, payment of the Incentive Compensation award with respect to a given Performance Year shall be made in a lump sum payment between February 15 and March 15 of the year following such Performance Year.
|
b.
|
The Committee may impose such conditions, including forfeitures and restrictions, as the Committee believes will best serve the interests of the Company and the purposes of this Plan.
|
c.
|
In making awards of HII Common Stock, the Committee shall first determine all Incentive Compensation awards in terms of dollars. The total dollar amount of all Incentive Compensation awards for a particular Performance Year shall not exceed the Appropriated Incentive Compensation for that Performance Year under this Plan. After fixing the total amount of each Participant’s Incentive Compensation award in terms of dollars, then if some or all of the award is to be paid in HII Common Stock, the dollar amount of the Incentive Compensation award so to be paid shall be converted into shares of HII Common Stock by using the fair market value of such stock on the date such dollar amount was fixed. “Fair market value” shall be the closing price of such stock on the New York Stock Exchange on the applicable date, or, if no sales of such stock occurred on that date, then on the last preceding date on which such sales occurred. No fractional share shall be issued.
|
d.
|
If an Incentive Compensation award is paid in HII Common Stock, the number of shares shall be appropriately adjusted for any stock splits, stock dividends, re-capitalization or other relevant changes in capitalization effective after the date the applicable number of shares is determined and prior to the date as of which the Participant becomes the record owner of the shares received in payment of the award. All such adjustments thereafter shall accrue to the Participant as the record owner of the shares.
|
e.
|
HII Common Stock issued in payment of Incentive Compensation awards may, at the option of the Board of Directors of the Company, be either originally issued shares or treasury shares, and any such shares so issued shall count against the applicable limits of the Company’s 2012 Long-Term Incentive Stock Plan or any successor equity compensation plan of the Company, as the case may be.
|
f.
|
Distribution of awards shall be governed by the terms and conditions applicable to such awards, as determined by the Committee or its delegate. An award, the payment of which is to be deferred pursuant to the terms of an employment agreement, shall be paid as provided by the terms of such agreement. Awards or portions thereof deferred pursuant to the Huntington Ingalls Industries Deferred Compensation Plan, the Huntington Ingalls Industries Savings Excess Plan, or any other deferred compensation plan or deferral arrangement shall be paid as provided in such plan or arrangement.
|
g.
|
The Company shall have the right to deduct from all payments under this Plan any federal, state, or local taxes required by law to be withheld with respect to such payments.
|
h.
|
No Participant or any other party claiming an interest in amounts earned under this Plan shall have any interest whatsoever in any specific asset of the Company. To the
|
1.
|
Participation in this Plan shall not constitute an agreement of the Participant to remain in the employ of and to render his/her services to the Company, or of the Company to continue to employ such Participant, and the Company may terminate the employment of a Participant at any time with or without cause.
|
2.
|
In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
|
3.
|
All costs of implementing and administering the Plan shall be borne by the Company.
|
4.
|
All obligations of the Company under this Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
|
5.
|
This Plan and any agreements hereunder, shall be governed by and construed in accordance with the laws of the state of Delaware.
|
6.
|
The rights of a Participant or any other person to any payment or other benefits under this Plan may not be assigned, transferred, pledged, or encumbered except by will or the laws of decent or distribution.
|
7.
|
This Plan does not constitute a contract. This Plan does not confer upon any person any right to receive a bonus or any other payment or benefit. There is no commitment or obligation on the part of the Company (or any affiliate) to continue any bonus plan (similar to this Plan or otherwise) in any particular year.
|
8.
|
This Plan and the Incentive Compensation awards under the Plan are intended to comply with (or be exempt from, as the case may be) Section 409A of the Code so as to avoid any tax, penalty or interest under Section 409A of the Code. This Plan shall be construed, operated and administered consistent with this intent.
|
(a)
|
Target award percentage—Each Participant’s target award percentage is established annually and is a percentage of an amount (typically annual aggregate salary, or, for any Participant who does not receive an annual salary or who receives only a
de minimis
annual salary, such other amount as the Committee may determine) that reflects the varying impact of the Participant’s positions on business results. Generally Officers will have higher target award percentages than senior middle managers and so forth.
|
|
|
Three Months Ended March 31
|
|
Year Ended December 31
|
||||||||||||||||||||
($ in millions)
|
|
2016
|
|
2015
(1)
|
|
2014
(2)
|
|
2013
|
|
2012
|
|
2011
(3)
|
||||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Earnings from continuing operations before income taxes
|
|
$
|
177
|
|
|
$
|
632
|
|
|
$
|
507
|
|
|
$
|
394
|
|
|
$
|
241
|
|
|
$
|
(4
|
)
|
Amortization of Capitalized Interest
|
|
—
|
|
|
2
|
|
|
1
|
|
|
2
|
|
|
2
|
|
|
3
|
|
||||||
Interest Capitalized
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
||||||
Net adjustment for earnings from affiliates
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
2
|
|
|
—
|
|
||||||
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expensed and capitalized, including amortization of debt issuance
|
|
19
|
|
|
139
|
|
|
151
|
|
|
118
|
|
|
119
|
|
|
106
|
|
||||||
Portion of rental expenses on operating leases deemed to be representative of the interest factor
(4)
|
|
3
|
|
|
21
|
|
|
18
|
|
|
15
|
|
|
15
|
|
|
15
|
|
||||||
Total Earnings
|
|
$
|
199
|
|
|
$
|
792
|
|
|
$
|
673
|
|
|
$
|
531
|
|
|
$
|
377
|
|
|
$
|
118
|
|
Fixed Charges:
|
|
$
|
22
|
|
|
$
|
160
|
|
|
$
|
169
|
|
|
$
|
133
|
|
|
$
|
134
|
|
|
$
|
121
|
|
Ratio of earnings to fixed charges
|
|
9.0
|
|
|
5.0
|
|
|
4.0
|
|
|
4.0
|
|
|
2.8
|
|
|
1.0
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Huntington Ingalls Industries, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ C. Michael Petters
|
|
C. Michael Petters
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Huntington Ingalls Industries, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Christopher D. Kastner
|
|
Christopher D. Kastner
|
|
Corporate Vice President, Business Management and Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.
|
|
/s/ C. Michael Petters
|
|
C. Michael Petters
|
|
President and Chief Executive Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.
|
|
/s/ Christopher D. Kastner
|
|
Christopher D. Kastner
|
|
Corporate Vice President, Business Management and Chief Financial Officer
|