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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Emerging growth 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
June 30 |
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Six Months Ended
June 30 |
||||||||||||
(in millions, except per share amounts)
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2017
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2016
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2017
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2016
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||||||||
Sales and service revenues
|
|
|
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||||||||
Product sales
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$
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1,397
|
|
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$
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1,364
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|
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$
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2,697
|
|
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$
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2,793
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Service revenues
|
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461
|
|
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336
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|
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885
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|
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670
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||||
Sales and service revenues
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1,858
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1,700
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3,582
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3,463
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||||
Cost of sales and service revenues
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||||||||
Cost of product sales
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1,104
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1,043
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2,174
|
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2,182
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||||
Cost of service revenues
|
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385
|
|
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290
|
|
|
748
|
|
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579
|
|
||||
Income (loss) from operating investments, net
|
|
1
|
|
|
1
|
|
|
3
|
|
|
1
|
|
||||
General and administrative expenses
|
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133
|
|
|
151
|
|
|
262
|
|
|
288
|
|
||||
Operating income (loss)
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237
|
|
|
217
|
|
|
401
|
|
|
415
|
|
||||
Other income (expense)
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|
|
|
|
|
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|
|
|
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||||||
Interest expense
|
|
(17
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)
|
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(18
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)
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(35
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)
|
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(37
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)
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||||
Other, net
|
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(2
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)
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—
|
|
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(1
|
)
|
|
(2
|
)
|
||||
Earnings (loss) before income taxes
|
|
218
|
|
|
199
|
|
|
365
|
|
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376
|
|
||||
Federal and foreign income taxes
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71
|
|
|
66
|
|
|
99
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|
|
107
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||||
Net earnings (loss)
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$
|
147
|
|
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$
|
133
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$
|
266
|
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$
|
269
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||||||||
Basic earnings (loss) per share
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$
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3.22
|
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$
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2.83
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$
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5.78
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|
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$
|
5.72
|
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Weighted-average common shares outstanding
|
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45.7
|
|
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47.0
|
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46.0
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47.0
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||||
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||||||||
Diluted earnings (loss) per share
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$
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3.21
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$
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2.80
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$
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5.77
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$
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5.68
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Weighted-average diluted shares outstanding
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45.8
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47.5
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46.1
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47.4
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||||
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||||||||
Dividends declared per share
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$
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0.60
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$
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0.50
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$
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1.20
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$
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1.00
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||||||||
Net earnings (loss) from above
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$
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147
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$
|
133
|
|
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$
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266
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$
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269
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Other comprehensive income (loss)
|
|
|
|
|
|
|
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||||||||
Change in unamortized benefit plan costs
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23
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19
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45
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|
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39
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Other
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3
|
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—
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7
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—
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Tax benefit (expense) for items of other comprehensive income
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(10
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)
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(7
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)
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(20
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)
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(15
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)
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Other comprehensive income (loss), net of tax
|
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16
|
|
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12
|
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32
|
|
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24
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|
||||
Comprehensive income (loss)
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$
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163
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$
|
145
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$
|
298
|
|
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$
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293
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($ in millions)
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June 30
2017 |
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December 31
2016 |
||||
Assets
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Current Assets
|
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Cash and cash equivalents
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$
|
553
|
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$
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720
|
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Accounts receivable, net of allowance for doubtful accounts of $28 million as of 2017 and $4 million as of 2016
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1,201
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1,164
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Inventoried costs, net
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204
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|
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210
|
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||
Prepaid expenses and other current assets
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75
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48
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Total current assets
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2,033
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2,142
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Property, plant, and equipment, net of accumulated depreciation of $1,699 million as of 2017 and $1,627 million as of 2016
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2,034
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1,986
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Goodwill
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1,218
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1,234
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Other intangible assets, net of accumulated amortization of $508 million as of 2017 and $488 million as of 2016
|
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528
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548
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Deferred tax assets
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267
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|
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314
|
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||
Miscellaneous other assets
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110
|
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128
|
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Total assets
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$
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6,190
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$
|
6,352
|
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Liabilities and Stockholders' Equity
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Current Liabilities
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|
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||||
Trade accounts payable
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$
|
325
|
|
|
$
|
316
|
|
Accrued employees’ compensation
|
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244
|
|
|
241
|
|
||
Current portion of postretirement plan liabilities
|
|
147
|
|
|
147
|
|
||
Current portion of workers’ compensation liabilities
|
|
218
|
|
|
217
|
|
||
Advance payments and billings in excess of revenues
|
|
94
|
|
|
166
|
|
||
Other current liabilities
|
|
219
|
|
|
256
|
|
||
Total current liabilities
|
|
1,247
|
|
|
1,343
|
|
||
Long-term debt
|
|
1,281
|
|
|
1,278
|
|
||
Pension plan liabilities
|
|
1,043
|
|
|
1,116
|
|
||
Other postretirement plan liabilities
|
|
431
|
|
|
431
|
|
||
Workers’ compensation liabilities
|
|
443
|
|
|
441
|
|
||
Other long-term liabilities
|
|
95
|
|
|
90
|
|
||
Total liabilities
|
|
4,540
|
|
|
4,699
|
|
||
Commitments and Contingencies (Note 15)
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|
|
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|
||||
Stockholders’ Equity
|
|
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|
||||
Common stock, $0.01 par value; 150 million shares authorized; 52.9 million shares issued and 45.5 million shares outstanding as of June 30, 2017, and 52.6 million shares issued and 46.2 million shares outstanding as of December 31, 2016
|
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
|
1,928
|
|
|
1,964
|
|
||
Retained earnings (deficit)
|
|
1,534
|
|
|
1,323
|
|
||
Treasury stock
|
|
(894
|
)
|
|
(684
|
)
|
||
Accumulated other comprehensive income (loss)
|
|
(919
|
)
|
|
(951
|
)
|
||
Total stockholders’ equity
|
|
1,650
|
|
|
1,653
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
6,190
|
|
|
$
|
6,352
|
|
|
|
Six Months Ended
June 30 |
||||||
($ in millions)
|
|
2017
|
|
2016
|
||||
Operating Activities
|
|
|
|
|
||||
Net earnings (loss)
|
|
$
|
266
|
|
|
$
|
269
|
|
Adjustments to reconcile to net cash provided by (used in) operating activities
|
|
|
|
|
||||
Depreciation
|
|
82
|
|
|
83
|
|
||
Amortization of purchased intangibles
|
|
20
|
|
|
11
|
|
||
Amortization of debt issuance costs
|
|
3
|
|
|
3
|
|
||
Provision for doubtful accounts
|
|
22
|
|
|
—
|
|
||
Stock-based compensation
|
|
20
|
|
|
11
|
|
||
Deferred income taxes
|
|
28
|
|
|
39
|
|
||
Change in
|
|
|
|
|
||||
Accounts receivable
|
|
(60
|
)
|
|
52
|
|
||
Inventoried costs
|
|
5
|
|
|
5
|
|
||
Prepaid expenses and other assets
|
|
(1
|
)
|
|
(13
|
)
|
||
Accounts payable and accruals
|
|
(74
|
)
|
|
(130
|
)
|
||
Retiree benefits
|
|
(27
|
)
|
|
(106
|
)
|
||
Other non-cash transactions, net
|
|
—
|
|
|
(1
|
)
|
||
Net cash provided by (used in) operating activities
|
|
284
|
|
|
223
|
|
||
Investing Activities
|
|
|
|
|
||||
Additions to property, plant, and equipment
|
|
(137
|
)
|
|
(85
|
)
|
||
Acquisitions of businesses, net of cash received
|
|
3
|
|
|
—
|
|
||
Proceeds from disposition of assets
|
|
1
|
|
|
4
|
|
||
Net cash provided by (used in) investing activities
|
|
(133
|
)
|
|
(81
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Dividends paid
|
|
(55
|
)
|
|
(48
|
)
|
||
Repurchases of common stock
|
|
(207
|
)
|
|
(86
|
)
|
||
Employee taxes on certain share-based payment arrangements
|
|
(56
|
)
|
|
(50
|
)
|
||
Net cash provided by (used in) financing activities
|
|
(318
|
)
|
|
(184
|
)
|
||
Change in cash and cash equivalents
|
|
(167
|
)
|
|
(42
|
)
|
||
Cash and cash equivalents, beginning of period
|
|
720
|
|
|
894
|
|
||
Cash and cash equivalents, end of period
|
|
$
|
553
|
|
|
$
|
852
|
|
Supplemental Cash Flow Disclosure
|
|
|
|
|
||||
Cash paid for income taxes
|
|
$
|
100
|
|
|
$
|
123
|
|
Cash paid for interest
|
|
$
|
36
|
|
|
$
|
36
|
|
Non-Cash Investing and Financing Activities
|
|
|
|
|
||||
Capital expenditures accrued in accounts payable
|
|
$
|
3
|
|
|
$
|
2
|
|
Six Months Ended June 30, 2017 and 2016
($ 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, 2015
|
|
$
|
1
|
|
|
$
|
1,978
|
|
|
$
|
848
|
|
|
$
|
(492
|
)
|
|
$
|
(845
|
)
|
|
$
|
1,490
|
|
Net earnings (loss)
|
|
—
|
|
|
—
|
|
|
269
|
|
|
—
|
|
|
—
|
|
|
269
|
|
||||||
Dividends declared ($1.00 per share)
|
|
—
|
|
|
—
|
|
|
(48
|
)
|
|
—
|
|
|
—
|
|
|
(48
|
)
|
||||||
Additional paid-in capital
|
|
—
|
|
|
(39
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
||||||
Other comprehensive income (loss), net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
24
|
|
||||||
Treasury stock activity
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(84
|
)
|
|
—
|
|
|
(84
|
)
|
||||||
Balance as of June 30, 2016
|
|
$
|
1
|
|
|
$
|
1,939
|
|
|
$
|
1,069
|
|
|
$
|
(576
|
)
|
|
$
|
(821
|
)
|
|
$
|
1,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance as of December 31, 2016
|
|
$
|
1
|
|
|
$
|
1,964
|
|
|
$
|
1,323
|
|
|
$
|
(684
|
)
|
|
$
|
(951
|
)
|
|
$
|
1,653
|
|
Net earnings (loss)
|
|
—
|
|
|
—
|
|
|
266
|
|
|
—
|
|
|
—
|
|
|
266
|
|
||||||
Dividends declared ($1.20 per share)
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
||||||
Additional paid-in capital
|
|
—
|
|
|
(36
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(36
|
)
|
||||||
Other comprehensive income (loss), net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
32
|
|
||||||
Treasury stock activity
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(210
|
)
|
|
—
|
|
|
(210
|
)
|
||||||
Balance as of June 30, 2017
|
|
$
|
1
|
|
|
$
|
1,928
|
|
|
$
|
1,534
|
|
|
$
|
(894
|
)
|
|
$
|
(919
|
)
|
|
$
|
1,650
|
|
($ in millions)
|
|
Benefit Plans
|
|
Other
|
|
Total
|
||||||
Balance as of March 31, 2016
|
|
$
|
(831
|
)
|
|
$
|
(2
|
)
|
|
$
|
(833
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
||||||
Amortization of net actuarial loss (gain)
1
|
|
19
|
|
|
—
|
|
|
19
|
|
|||
Tax benefit (expense) for items of other comprehensive income
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|||
Net current period other comprehensive income (loss)
|
|
12
|
|
|
—
|
|
|
12
|
|
|||
Balance as of June 30, 2016
|
|
(819
|
)
|
|
(2
|
)
|
|
(821
|
)
|
|||
|
|
|
|
|
|
|
||||||
Balance as of March 31, 2017
|
|
(935
|
)
|
|
—
|
|
|
(935
|
)
|
|||
Other comprehensive income (loss) before reclassifications
|
|
—
|
|
|
3
|
|
|
3
|
|
|||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
||||||
Amortization of net actuarial loss (gain)
1
|
|
23
|
|
|
—
|
|
|
23
|
|
|||
Tax benefit (expense) for items of other comprehensive income
|
|
(9
|
)
|
|
(1
|
)
|
|
(10
|
)
|
|||
Net current period other comprehensive income (loss)
|
|
14
|
|
|
2
|
|
|
16
|
|
|||
Balance as of June 30, 2017
|
|
$
|
(921
|
)
|
|
$
|
2
|
|
|
$
|
(919
|
)
|
($ in millions)
|
|
Benefit Plans
|
|
Other
|
|
Total
|
||||||
Balance as of December 31, 2015
|
|
$
|
(843
|
)
|
|
$
|
(2
|
)
|
|
$
|
(845
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
||||||
Amortization of net actuarial loss (gain)
1
|
|
39
|
|
|
—
|
|
|
39
|
|
|||
Tax benefit (expense) for items of other comprehensive income
|
|
(15
|
)
|
|
—
|
|
|
(15
|
)
|
|||
Net current period other comprehensive income (loss)
|
|
24
|
|
|
—
|
|
|
24
|
|
|||
Balance as of June 30, 2016
|
|
(819
|
)
|
|
(2
|
)
|
|
(821
|
)
|
|||
|
|
|
|
|
|
|
||||||
Balance as of December 31, 2016
|
|
(948
|
)
|
|
(3
|
)
|
|
(951
|
)
|
|||
Other comprehensive income (loss) before reclassifications
|
|
—
|
|
|
7
|
|
|
7
|
|
|||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
||||||
Amortization of prior service cost (credit)
1
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Amortization of net actuarial loss (gain)
1
|
|
46
|
|
|
—
|
|
|
46
|
|
|||
Tax benefit (expense) for items of other comprehensive income
|
|
(18
|
)
|
|
(2
|
)
|
|
(20
|
)
|
|||
Net current period other comprehensive income (loss)
|
|
27
|
|
|
5
|
|
|
32
|
|
|||
Balance as of June 30, 2017
|
|
$
|
(921
|
)
|
|
$
|
2
|
|
|
$
|
(919
|
)
|
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
(in millions, except per share amounts)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net earnings (loss)
|
|
$
|
147
|
|
|
$
|
133
|
|
|
$
|
266
|
|
|
$
|
269
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
|
45.7
|
|
|
47.0
|
|
|
46.0
|
|
|
47.0
|
|
||||
Net dilutive effect of stock options and awards
|
|
0.1
|
|
|
0.5
|
|
|
0.1
|
|
|
0.4
|
|
||||
Dilutive weighted-average common shares outstanding
|
|
45.8
|
|
|
47.5
|
|
|
46.1
|
|
|
47.4
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Earnings (loss) per share - basic
|
|
$
|
3.22
|
|
|
$
|
2.83
|
|
|
$
|
5.78
|
|
|
$
|
5.72
|
|
Earnings (loss) per share - diluted
|
|
$
|
3.21
|
|
|
$
|
2.80
|
|
|
$
|
5.77
|
|
|
$
|
5.68
|
|
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Sales and Service Revenues
|
|
|
|
|
|
|
|
|
||||||||
Ingalls
|
|
$
|
639
|
|
|
$
|
585
|
|
|
$
|
1,189
|
|
|
$
|
1,171
|
|
Newport News
|
|
1,001
|
|
|
999
|
|
|
1,972
|
|
|
1,992
|
|
||||
Technical Solutions
|
|
244
|
|
|
143
|
|
|
469
|
|
|
351
|
|
||||
Intersegment eliminations
|
|
(26
|
)
|
|
(27
|
)
|
|
(48
|
)
|
|
(51
|
)
|
||||
Sales and service revenues
|
|
$
|
1,858
|
|
|
$
|
1,700
|
|
|
$
|
3,582
|
|
|
$
|
3,463
|
|
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
||||||||
Ingalls
|
|
$
|
98
|
|
|
$
|
88
|
|
|
$
|
164
|
|
|
$
|
170
|
|
Newport News
|
|
80
|
|
|
98
|
|
|
152
|
|
|
179
|
|
||||
Technical Solutions
|
|
9
|
|
|
(2
|
)
|
|
(9
|
)
|
|
1
|
|
||||
Segment operating income (loss)
|
|
187
|
|
|
184
|
|
|
307
|
|
|
350
|
|
||||
Non-segment factors affecting operating income (loss)
|
|
|
|
|
|
|
|
|
||||||||
FAS/CAS Adjustment
|
|
49
|
|
|
35
|
|
|
98
|
|
|
70
|
|
||||
Non-current state income taxes
|
|
1
|
|
|
(2
|
)
|
|
(4
|
)
|
|
(5
|
)
|
||||
Operating income (loss)
|
|
$
|
237
|
|
|
$
|
217
|
|
|
$
|
401
|
|
|
$
|
415
|
|
($ in millions)
|
|
June 30
2017 |
|
December 31
2016 |
||||
Assets
|
|
|
|
|
||||
Ingalls
|
|
$
|
1,364
|
|
|
$
|
1,362
|
|
Newport News
|
|
3,238
|
|
|
3,169
|
|
||
Technical Solutions
|
|
656
|
|
|
692
|
|
||
Corporate
|
|
932
|
|
|
1,129
|
|
||
Total assets
|
|
$
|
6,190
|
|
|
$
|
6,352
|
|
($ in millions)
|
|
June 30
2017 |
|
December 31
2016 |
||||
Production costs of contracts in process
|
|
$
|
107
|
|
|
$
|
116
|
|
Raw material inventory
|
|
97
|
|
|
94
|
|
||
Total inventoried costs, net
|
|
$
|
204
|
|
|
$
|
210
|
|
($ in millions)
|
|
Ingalls
|
|
Newport News
|
|
Technical Solutions
|
|
Total
|
||||||||
Balance as of December 31, 2016
|
|
$
|
175
|
|
|
$
|
721
|
|
|
$
|
338
|
|
|
$
|
1,234
|
|
Adjustments
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
(16
|
)
|
||||
Balance as of June 30, 2017
|
|
$
|
175
|
|
|
$
|
721
|
|
|
$
|
322
|
|
|
$
|
1,218
|
|
($ in millions)
|
|
June 30
2017 |
|
December 31
2016 |
||||
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
|
|
(24
|
)
|
|
(27
|
)
|
||
Total long-term debt
|
|
$
|
1,281
|
|
|
$
|
1,278
|
|
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||||||||||||||||||
|
|
Pension Benefits
|
|
Other Benefits
|
|
Pension Benefits
|
|
Other Benefits
|
||||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Service cost
|
|
$
|
36
|
|
|
$
|
33
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
71
|
|
|
$
|
66
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Interest cost
|
|
66
|
|
|
66
|
|
|
6
|
|
|
7
|
|
|
133
|
|
|
131
|
|
|
12
|
|
|
13
|
|
||||||||
Expected return on plan assets
|
|
(91
|
)
|
|
(86
|
)
|
|
—
|
|
|
—
|
|
|
(182
|
)
|
|
(173
|
)
|
|
—
|
|
|
—
|
|
||||||||
Amortization of prior service cost (credit)
|
|
4
|
|
|
4
|
|
|
(4
|
)
|
|
(4
|
)
|
|
8
|
|
|
9
|
|
|
(9
|
)
|
|
(9
|
)
|
||||||||
Amortization of net actuarial loss (gain)
|
|
24
|
|
|
21
|
|
|
(1
|
)
|
|
(2
|
)
|
|
48
|
|
|
42
|
|
|
(2
|
)
|
|
(3
|
)
|
||||||||
Net periodic benefit cost
|
|
$
|
39
|
|
|
$
|
38
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
78
|
|
|
$
|
75
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
|
Six Months Ended
June 30 |
||||||
($ in millions)
|
|
2017
|
|
2016
|
||||
Pension plans
|
|
|
|
|
||||
Qualified minimum
|
|
$
|
—
|
|
|
$
|
—
|
|
Discretionary
|
|
|
|
|
||||
Qualified
|
|
91
|
|
|
167
|
|
||
Non-qualified
|
|
3
|
|
|
3
|
|
||
Other benefit plans
|
|
17
|
|
|
17
|
|
||
Total contributions
|
|
$
|
111
|
|
|
$
|
187
|
|
|
|
Stock Awards
(in thousands)
|
|
Weighted-Average
Grant Date Fair
Value
|
|
Weighted-Average Remaining Contractual Term
(in years)
|
|||
Total stock awards
|
|
443
|
|
|
$
|
146.30
|
|
|
1.2
|
•
|
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 affects profitability. Fixed-price incentive contracts effectively become firm fixed-price contracts once the
|
•
|
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. Time and materials contracts, which specify a fixed hourly rate for each labor hour charged, are considered firm fixed-price contracts. Approximately
6%
and
3%
of our revenues for the
three months ended
June 30, 2017
and
2016
, respectively, were generated from firm fixed-price arrangements. Approximately
7%
and
2%
of our revenues for the
six months ended
June 30, 2017
and
2016
, respectively, were generated from firm fixed-price arrangements.
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||||||||||
|
|
June 30
|
|
2017 over 2016
|
|
June 30
|
|
2017 over 2016
|
||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
||||||||||||||
Sales and service revenues
|
|
$
|
1,858
|
|
|
$
|
1,700
|
|
|
$
|
158
|
|
|
9
|
%
|
|
$
|
3,582
|
|
|
$
|
3,463
|
|
|
$
|
119
|
|
|
3
|
%
|
Cost of product sales and service revenues
|
|
1,489
|
|
|
1,333
|
|
|
156
|
|
|
12
|
%
|
|
2,922
|
|
|
2,761
|
|
|
161
|
|
|
6
|
%
|
||||||
Income (loss) from operating investments, net
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
%
|
|
3
|
|
|
1
|
|
|
2
|
|
|
200
|
%
|
||||||
General and administrative expenses
|
|
133
|
|
|
151
|
|
|
(18
|
)
|
|
(12
|
)%
|
|
262
|
|
|
288
|
|
|
(26
|
)
|
|
(9
|
)%
|
||||||
Operating income (loss)
|
|
237
|
|
|
217
|
|
|
20
|
|
|
9
|
%
|
|
401
|
|
|
415
|
|
|
(14
|
)
|
|
(3
|
)%
|
||||||
Interest expense
|
|
17
|
|
|
18
|
|
|
(1
|
)
|
|
(6
|
)%
|
|
35
|
|
|
37
|
|
|
(2
|
)
|
|
(5
|
)%
|
||||||
Other income (expense)
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
%
|
|
(1
|
)
|
|
(2
|
)
|
|
1
|
|
|
50
|
%
|
||||||
Federal and foreign income taxes
|
|
71
|
|
|
66
|
|
|
5
|
|
|
8
|
%
|
|
99
|
|
|
107
|
|
|
(8
|
)
|
|
(7
|
)%
|
||||||
Net earnings (loss)
|
|
$
|
147
|
|
|
$
|
133
|
|
|
$
|
14
|
|
|
11
|
%
|
|
$
|
266
|
|
|
$
|
269
|
|
|
$
|
(3
|
)
|
|
(1
|
)%
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||||||||||
|
|
June 30
|
|
2017 over 2016
|
|
June 30
|
|
2017 over 2016
|
||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
||||||||||||||
Product sales
|
|
$
|
1,397
|
|
|
$
|
1,364
|
|
|
$
|
33
|
|
|
2
|
%
|
|
$
|
2,697
|
|
|
$
|
2,793
|
|
|
$
|
(96
|
)
|
|
(3
|
)%
|
Service revenues
|
|
461
|
|
|
336
|
|
|
125
|
|
|
37
|
%
|
|
885
|
|
|
670
|
|
|
215
|
|
|
32
|
%
|
||||||
Sales and service revenues
|
|
$
|
1,858
|
|
|
$
|
1,700
|
|
|
$
|
158
|
|
|
9
|
%
|
|
$
|
3,582
|
|
|
$
|
3,463
|
|
|
$
|
119
|
|
|
3
|
%
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||||||||||
|
|
June 30
|
|
2017 over 2016
|
|
June 30
|
|
2017 over 2016
|
||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
||||||||||||||
Cost of product sales
|
|
$
|
1,104
|
|
|
$
|
1,043
|
|
|
$
|
61
|
|
|
6
|
%
|
|
$
|
2,174
|
|
|
$
|
2,182
|
|
|
$
|
(8
|
)
|
|
—
|
%
|
% of product sales
|
|
79.0
|
%
|
|
76.5
|
%
|
|
|
|
|
|
|
80.6
|
%
|
|
78.1
|
%
|
|
|
|
|
|
||||||||
Cost of service revenues
|
|
385
|
|
|
290
|
|
|
95
|
|
|
33
|
%
|
|
748
|
|
|
579
|
|
|
169
|
|
|
29
|
%
|
||||||
% of service revenues
|
|
83.5
|
%
|
|
86.3
|
%
|
|
|
|
|
|
|
84.5
|
%
|
|
86.4
|
%
|
|
|
|
|
|
||||||||
Income (loss) from operating investments, net
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
%
|
|
3
|
|
|
1
|
|
|
2
|
|
|
200
|
%
|
||||||
General and administrative expenses
|
|
133
|
|
|
151
|
|
|
(18
|
)
|
|
(12
|
)%
|
|
262
|
|
|
288
|
|
|
(26
|
)
|
|
(9
|
)%
|
||||||
% of sales and service revenues
|
|
7.2
|
%
|
|
8.9
|
%
|
|
|
|
|
|
|
7.3
|
%
|
|
8.3
|
%
|
|
|
|
|
|
||||||||
Cost of sales and service revenues
|
|
$
|
1,621
|
|
|
$
|
1,483
|
|
|
$
|
138
|
|
|
9
|
%
|
|
$
|
3,181
|
|
|
$
|
3,048
|
|
|
$
|
133
|
|
|
4
|
%
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||||||||||
|
|
June 30
|
|
2017 over 2016
|
|
June 30
|
|
2017 over 2016
|
||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
||||||||||||||
Segment operating income (loss)
|
|
$
|
187
|
|
|
$
|
184
|
|
|
$
|
3
|
|
|
2
|
%
|
|
$
|
307
|
|
|
$
|
350
|
|
|
$
|
(43
|
)
|
|
(12
|
)%
|
FAS/CAS Adjustment
|
|
49
|
|
|
35
|
|
|
14
|
|
|
40
|
%
|
|
98
|
|
|
70
|
|
|
28
|
|
|
40
|
%
|
||||||
Non-current state income taxes
|
|
1
|
|
|
(2
|
)
|
|
3
|
|
|
150
|
%
|
|
(4
|
)
|
|
(5
|
)
|
|
1
|
|
|
20
|
%
|
||||||
Operating income (loss)
|
|
$
|
237
|
|
|
$
|
217
|
|
|
$
|
20
|
|
|
9
|
%
|
|
$
|
401
|
|
|
$
|
415
|
|
|
$
|
(14
|
)
|
|
(3
|
)%
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||||||||||
|
|
June 30
|
|
2017 over 2016
|
|
June 30
|
|
2017 over 2016
|
||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
||||||||||||||
FAS expense
|
|
$
|
(42
|
)
|
|
$
|
(41
|
)
|
|
$
|
(1
|
)
|
|
(2
|
)%
|
|
$
|
(84
|
)
|
|
$
|
(81
|
)
|
|
$
|
(3
|
)
|
|
(4
|
)%
|
CAS cost
|
|
91
|
|
|
76
|
|
|
15
|
|
|
20
|
%
|
|
182
|
|
|
151
|
|
|
31
|
|
|
21
|
%
|
||||||
FAS/CAS Adjustment
|
|
$
|
49
|
|
|
$
|
35
|
|
|
$
|
14
|
|
|
40
|
%
|
|
$
|
98
|
|
|
$
|
70
|
|
|
$
|
28
|
|
|
40
|
%
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||||||||||
|
|
June 30
|
|
2017 over 2016
|
|
June 30
|
|
2017 over 2016
|
||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
||||||||||||||
Sales and Service Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Ingalls
|
|
$
|
639
|
|
|
$
|
585
|
|
|
$
|
54
|
|
|
9
|
%
|
|
$
|
1,189
|
|
|
$
|
1,171
|
|
|
$
|
18
|
|
|
2
|
%
|
Newport News
|
|
1,001
|
|
|
999
|
|
|
2
|
|
|
—
|
%
|
|
1,972
|
|
|
1,992
|
|
|
(20
|
)
|
|
(1
|
)%
|
||||||
Technical Solutions
|
|
244
|
|
|
143
|
|
|
101
|
|
|
71
|
%
|
|
469
|
|
|
351
|
|
|
118
|
|
|
34
|
%
|
||||||
Intersegment eliminations
|
|
(26
|
)
|
|
(27
|
)
|
|
1
|
|
|
4
|
%
|
|
(48
|
)
|
|
(51
|
)
|
|
3
|
|
|
6
|
%
|
||||||
Sales and service revenues
|
|
$
|
1,858
|
|
|
$
|
1,700
|
|
|
$
|
158
|
|
|
9
|
%
|
|
$
|
3,582
|
|
|
$
|
3,463
|
|
|
$
|
119
|
|
|
3
|
%
|
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Ingalls
|
|
$
|
98
|
|
|
$
|
88
|
|
|
$
|
10
|
|
|
11
|
%
|
|
$
|
164
|
|
|
$
|
170
|
|
|
$
|
(6
|
)
|
|
(4
|
)%
|
Newport News
|
|
80
|
|
|
98
|
|
|
(18
|
)
|
|
(18
|
)%
|
|
152
|
|
|
179
|
|
|
(27
|
)
|
|
(15
|
)%
|
||||||
Technical Solutions
|
|
9
|
|
|
(2
|
)
|
|
11
|
|
|
550
|
%
|
|
(9
|
)
|
|
1
|
|
|
(10
|
)
|
|
(1,000
|
)%
|
||||||
Segment operating income (loss)
|
|
187
|
|
|
184
|
|
|
3
|
|
|
2
|
%
|
|
307
|
|
|
350
|
|
|
(43
|
)
|
|
(12
|
)%
|
||||||
Non-segment factors affecting operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
FAS/CAS Adjustment
|
|
49
|
|
|
35
|
|
|
14
|
|
|
40
|
%
|
|
98
|
|
|
70
|
|
|
28
|
|
|
40
|
%
|
||||||
Non-current state income taxes
|
|
1
|
|
|
(2
|
)
|
|
3
|
|
|
150
|
%
|
|
(4
|
)
|
|
(5
|
)
|
|
1
|
|
|
20
|
%
|
||||||
Operating income (loss)
|
|
$
|
237
|
|
|
$
|
217
|
|
|
$
|
20
|
|
|
9
|
%
|
|
$
|
401
|
|
|
$
|
415
|
|
|
$
|
(14
|
)
|
|
(3
|
)%
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30
|
|
June 30
|
||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Gross favorable adjustments
|
|
$
|
88
|
|
|
$
|
91
|
|
|
$
|
145
|
|
|
$
|
167
|
|
Gross unfavorable adjustments
|
|
(28
|
)
|
|
(17
|
)
|
|
(59
|
)
|
|
(24
|
)
|
||||
Net adjustments
|
|
$
|
60
|
|
|
$
|
74
|
|
|
$
|
86
|
|
|
$
|
143
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||||||||||
|
|
June 30
|
|
2017 over 2016
|
|
June 30
|
|
2017 over 2016
|
||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
||||||||||||||
Sales and service revenues
|
|
$
|
639
|
|
|
$
|
585
|
|
|
$
|
54
|
|
|
9
|
%
|
|
$
|
1,189
|
|
|
$
|
1,171
|
|
|
$
|
18
|
|
|
2
|
%
|
Segment operating income (loss)
|
|
98
|
|
|
88
|
|
|
10
|
|
|
11
|
%
|
|
164
|
|
|
170
|
|
|
(6
|
)
|
|
(4
|
)%
|
||||||
As a percentage of segment sales
|
|
15.3
|
%
|
|
15.0
|
%
|
|
|
|
|
|
13.8
|
%
|
|
14.5
|
%
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||||||||||
|
|
June 30
|
|
2017 over 2016
|
|
June 30
|
|
2017 over 2016
|
||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
||||||||||||||
Sales and service revenues
|
|
$
|
1,001
|
|
|
$
|
999
|
|
|
$
|
2
|
|
|
—
|
%
|
|
$
|
1,972
|
|
|
$
|
1,992
|
|
|
$
|
(20
|
)
|
|
(1
|
)%
|
Segment operating income (loss)
|
|
80
|
|
|
98
|
|
|
(18
|
)
|
|
(18
|
)%
|
|
152
|
|
|
179
|
|
|
(27
|
)
|
|
(15
|
)%
|
||||||
As a percentage of segment sales
|
|
8.0
|
%
|
|
9.8
|
%
|
|
|
|
|
|
7.7
|
%
|
|
9.0
|
%
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||||||||||
|
|
June 30
|
|
2017 over 2016
|
|
June 30
|
|
2017 over 2016
|
||||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percent
|
||||||||||||||
Sales and service revenues
|
|
$
|
244
|
|
|
$
|
143
|
|
|
$
|
101
|
|
|
71
|
%
|
|
$
|
469
|
|
|
$
|
351
|
|
|
$
|
118
|
|
|
34
|
%
|
Segment operating income (loss)
|
|
9
|
|
|
(2
|
)
|
|
11
|
|
|
550
|
%
|
|
(9
|
)
|
|
1
|
|
|
(10
|
)
|
|
(1,000
|
)%
|
||||||
As a percentage of segment sales
|
|
3.7
|
%
|
|
(1.4
|
)%
|
|
|
|
|
|
|
|
(1.9
|
)%
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
||||||||||||
($ in millions)
|
|
Funded
|
|
Unfunded
|
|
Backlog
|
|
Funded
|
|
Unfunded
|
|
Backlog
|
||||||||||||
Ingalls
|
|
$
|
6,894
|
|
|
$
|
1,699
|
|
|
$
|
8,593
|
|
|
$
|
6,033
|
|
|
$
|
692
|
|
|
$
|
6,725
|
|
Newport News
|
|
6,471
|
|
|
5,056
|
|
|
11,527
|
|
|
5,799
|
|
|
7,127
|
|
|
12,926
|
|
||||||
Technical Solutions
|
|
631
|
|
|
315
|
|
|
946
|
|
|
712
|
|
|
372
|
|
|
1,084
|
|
||||||
Total backlog
|
|
$
|
13,996
|
|
|
$
|
7,070
|
|
|
$
|
21,066
|
|
|
$
|
12,544
|
|
|
$
|
8,191
|
|
|
$
|
20,735
|
|
|
|
Six Months Ended
|
|
2017 over
|
||||||||
|
|
June 30
|
|
2016
|
||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
||||||
Net earnings (loss)
|
|
$
|
266
|
|
|
$
|
269
|
|
|
$
|
(3
|
)
|
Depreciation and amortization
|
|
105
|
|
|
97
|
|
|
8
|
|
|||
Provision for doubtful accounts
|
|
22
|
|
|
—
|
|
|
22
|
|
|||
Stock-based compensation
|
|
20
|
|
|
11
|
|
|
9
|
|
|||
Deferred income taxes
|
|
28
|
|
|
39
|
|
|
(11
|
)
|
|||
Retiree benefit funding less than (in excess of) expense
|
|
(27
|
)
|
|
(106
|
)
|
|
79
|
|
|||
Trade working capital decrease (increase)
|
|
(130
|
)
|
|
(87
|
)
|
|
(43
|
)
|
|||
Net cash provided by (used in) operating activities
|
|
$
|
284
|
|
|
$
|
223
|
|
|
$
|
61
|
|
|
|
Six Months Ended
|
|
2017 over
|
||||||||
|
|
June 30
|
|
2016
|
||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
Dollars
|
||||||
Net cash provided by (used in) operating activities
|
|
$
|
284
|
|
|
$
|
223
|
|
|
$
|
61
|
|
Less:
|
|
|
|
|
|
|
||||||
Capital expenditures
|
|
(137
|
)
|
|
(85
|
)
|
|
(52
|
)
|
|||
Free cash flow provided by (used in) operations
|
|
$
|
147
|
|
|
$
|
138
|
|
|
$
|
9
|
|
•
|
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 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 and environmental disasters and political instability;
|
•
|
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
|
|
|
|
America
class (LHA 6) amphibious assault ships
|
|
Design and build large deck amphibious assault ships that provide forward presence and power projection as an integral part of joint, interagency and multinational maritime expeditionary forces. The
America
class (LHA 6) ships, together with the
Wasp
class (LHD 1) ships, are the successors to the decommissioned
Tarawa
class (LHA 1) ships. The
America
class (LHA 6) ships optimize aviation operations and support capabilities. We delivered USS
America
(LHA 6) in April 2014,
Tripoli
(LHA 7) is currently under construction, and we were awarded a construction contract for
Bougainville
(LHA 8) in 2017.
|
|
|
|
Arleigh Burke
class (DDG 51) destroyers
|
|
Build guided missile destroyers designed for conducting anti-air, anti-submarine, anti-surface, and strike operations. The Aegis-equipped
Arleigh Burke
class (DDG 51) destroyers are the U.S. Navy's primary surface combatant, and have been constructed in variants, allowing technological advances during construction. In 2016 we delivered USS
John Finn
(DDG 113), and we are currently constructing
Ralph Johnson
(DDG 114). In June 2013, we were awarded a multi-year contract for construction of five additional
Arleigh Burke
class (DDG 51) destroyers:
Paul Ignatius
(DDG 117),
Delbert D. Black
(DDG 119),
Frank E. Petersen Jr.
(DDG 121),
Lenah H. Sutcliffe Higbee
(DDG 123), and
Jack H. Lucas
(DDG 125).
|
|
|
|
Carrier RCOH
|
|
Perform refueling and complex overhaul ("RCOH") of nuclear-powered aircraft carriers, which is required at the mid-point of their 50-year life cycle. USS
Abraham Lincoln
(CVN 72) was redelivered to the U.S. Navy in the second quarter of 2017 and advance planning efforts for USS
George Washington
(CVN 73) are in process in preparation for the expected start of its RCOH in 2017.
|
|
|
|
Columbia
class (SSBN 826) submarines
|
|
The U.S. Navy has committed to designing the
Columbia
class (SSBN 826) submarine as a replacement for the current aging
Ohio
class nuclear ballistic missile submarines, which were first introduced into service in 1981. The
Ohio
class SSBN includes 14 nuclear ballistic missile submarines and four nuclear cruise missile submarines. The
Columbia
class (SSBN 826) program currently anticipates 12 new ballistic missile submarines. The U.S. Navy has initiated the design process for the new class of submarines, and, in early 2017, the DOD signed the acquisition decision memorandum approving the
Columbia
class (SSBN 826) program’s Milestone B, which formally authorizes the program’s entry into the engineering and manufacturing development phase. We continue to perform design work as a subcontractor to Electric Boat, and we have entered into a team agreement with Electric Boat to build modules for the entire
Columbia
class (SSBN 826) submarine program that leverages our
Virginia
class (SSN 774) experience. The team agreement is subject to the U.S. Navy's concurrence. Construction of the first
Columbia
class (SSBN 826) submarine is expected to begin in 2021, with procurement of long-lead-time materials and advance construction beginning prior to that time.
|
|
|
|
Fleet support services
|
|
Provide comprehensive life-cycle sustainment services to the U.S. Navy fleet and other DoD and commercial maritime customers. We provide services including maintenance, modernization, and repair on all ship classes; naval architecture, marine engineering, and design; integrated logistics support; technical documentation development; warehousing, asset management, and material readiness; operational and maintenance training development and delivery; software design and development; IT infrastructure support and data delivery and management; and cyber security and information assurance. We provide undersea vehicle and specialized craft development and prototyping services.
|
|
|
|
USS
Gerald R. Ford
class (CVN 78) aircraft carriers
|
|
Design and construction for the
Ford
class program, which is the aircraft carrier replacement program for the decommissioned USS
Enterprise
(CVN 65) and
Nimitz
class (CVN 68) aircraft carriers. USS
Gerald R. Ford
(CVN 78), the first ship of the
Ford
class, was delivered to the U.S. Navy in the second quarter of 2017. In June 2015, we were awarded a contract for the detail design and construction of
John F. Kennedy
(CVN 79), following several years of engineering, advance construction, and purchase of long-lead time components and material. 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.
|
|
|
|
Integrated mission solutions services
|
|
Provide services including high-end information technology and mission-based solutions to DoD, intelligence, and federal civilian customers. Services include agile software engineering, development, and integration; Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance ("C4ISR") engineering and software integration; mobile application development and network engineering; modeling, simulation, and training; force protection and emergency management training and exercises; unmanned systems development, integration, operations, and maintenance; and mission-oriented intelligence, surveillance, and reconnaissance analytics.
|
|
|
|
Legend
class National Security Cutter
|
|
Design and build the U.S. Coast Guard's National Security Cutters ("NSCs"), the largest and most technically advanced class of cutter in the U.S. Coast Guard. The NSC is equipped to carry out maritime homeland security, maritime safety, protection of natural resources, maritime mobility, and national defense missions. The plan is for a total of nine ships, of which the first six ships have been delivered.
Kimball
(NSC 7) and
Midgett
(NSC 8) are currently under construction.
|
|
|
|
Naval nuclear support services
|
|
Provide services to and in support of the U.S. Navy, ranging from services supporting the Navy's carrier and submarine fleets to maintenance services at U.S. Navy training facilities. Naval nuclear support services include design, construction, maintenance, and disposal activities for in service U.S. Navy nuclear ships worldwide through mobile and in-house capabilities. Services include maintenance services on nuclear reactor prototypes.
|
|
|
|
Nuclear and environmental services
|
|
Provide services in nuclear management and operations, and nuclear and non-nuclear fabrication and repair. We provide site management, nuclear and industrial facilities operations and maintenance, decontamination and decommissioning, and radiological and hazardous waste management services. We provide services, including fabrication, equipment repair, and technical engineering services. Participate in a joint venture, Savannah River Nuclear Solutions, LLC, which provides site management and operations at the DoE's Savannah River Site near Aiken, South Carolina.
|
|
|
|
Oil and gas services
|
|
Deliver engineering, procurement, and construction management services to the oil and gas industry for major pipeline, production, and treatment facilities. These services include full life-cycle services for domestic and international projects, from concept identification through detail design, execution and construction, and decommissioning. Related field services include survey, inspection, commissioning and start-up, operations and maintenance, and optimization and debottlenecking.
|
|
|
|
San Antoni
o class (LPD 17) amphibious transport dock ships
|
|
Design and build amphibious transport dock ships, which are warships that embark, transport, and land elements of a landing force for a variety of expeditionary warfare missions, and also serve as the secondary aviation platform for Amphibious Readiness Groups. The
San Antonio
class (LPD 17) is the newest addition to the U.S. Navy's 21st century amphibious assault force, and these ships are a key element of the U.S. Navy's seabase transformation. In 2013, we delivered USS
Somerset
(LPD 25), and in 2016, we delivered USS
John P. Murtha
(LPD 26). We are currently constructing
Portland
(LPD 27) and
Fort Lauderdale
(LPD-28). The
San Antonio
class (LPD 17) currently includes a total of 11 ships.
|
|
|
|
The decommissioned USS
Enterprise
(CVN 65)
|
|
Defuel and inactivate the world's first nuclear-powered aircraft carrier, which began in 2013.
|
|
|
|
Virginia
class (SSN 774) fast attack submarines
|
|
Construct attack submarines as the principal subcontractor to Electric Boat. The
Virginia
class (SSN 774) is a post-Cold War design tailored to excel in a wide range of warfighting missions, including anti-submarine and surface ship warfare; special operation forces; strike; intelligence, surveillance, and reconnaissance; carrier and expeditionary strike group support; and mine warfare.
|
|
|
|
Period
|
|
Total Number of Shares Purchased
|
|
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)
1
|
||||||
April 1, 2017 to April 30, 2017
|
|
154,609
|
|
|
$
|
201.24
|
|
|
154,609
|
|
|
$
|
413.4
|
|
May 1, 2017 to May 31, 2017
|
|
292,661
|
|
|
195.69
|
|
|
292,661
|
|
|
356.1
|
|
||
June 1, 2017 to June 30, 2017
|
|
260,689
|
|
|
191.77
|
|
|
260,689
|
|
|
306.1
|
|
||
Total
|
|
707,959
|
|
|
$
|
195.46
|
|
|
707,959
|
|
|
$
|
306.1
|
|
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
|
|
|
First Amendment to the Huntington Ingalls Industries Savings Excess Plan.
|
|
|
|
|
11
|
|
|
Computation of Per Share Earnings (provided in Note 8 "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:
|
August 3, 2017
|
Huntington Ingalls Industries, Inc.
|
|
|
|
(Registrant)
|
|
|
|
||
|
|
By:
|
/s/ Nicolas Schuck
|
|
|
|
Nicolas Schuck
|
|
|
|
Corporate Vice President, Controller and Chief Accounting Officer
|
|
|
|
(Duly Authorized Officer and Principal Accounting Officer)
|
|
|
Six Months Ended
|
|
Year Ended December 31
|
||||||||||||||||||||
($ in millions)
|
|
2017
|
|
2016
|
|
2015
(1)
|
|
2014
(2)
|
|
2013
|
|
2012
|
||||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Earnings from continuing operations before income taxes
|
|
$
|
365
|
|
|
$
|
784
|
|
|
$
|
632
|
|
|
$
|
507
|
|
|
$
|
394
|
|
|
$
|
241
|
|
Amortization of Capitalized Interest
|
|
1
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||||
Interest Capitalized
|
|
(3
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
Net adjustment for earnings from affiliates
|
|
(3
|
)
|
|
4
|
|
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
2
|
|
||||||
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expensed and capitalized, including amortization of debt issuance
|
|
38
|
|
|
76
|
|
|
139
|
|
|
151
|
|
|
118
|
|
|
119
|
|
||||||
Portion of rental expenses on operating leases deemed to be representative of the interest factor
(3)
|
|
9
|
|
|
23
|
|
|
21
|
|
|
18
|
|
|
15
|
|
|
15
|
|
||||||
Total Earnings
|
|
$
|
407
|
|
|
$
|
886
|
|
|
$
|
792
|
|
|
$
|
673
|
|
|
$
|
531
|
|
|
$
|
377
|
|
Fixed Charges:
|
|
$
|
47
|
|
|
$
|
99
|
|
|
$
|
160
|
|
|
$
|
169
|
|
|
$
|
133
|
|
|
$
|
134
|
|
Ratio of earnings to fixed charges
|
|
8.7
|
|
|
8.9
|
|
|
5.0
|
|
|
4.0
|
|
|
4.0
|
|
|
2.8
|
|
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
|
|
Executive 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
|
|
Executive Vice President, Business Management and Chief Financial Officer
|