HUNTINGTON INGALLS INDUSTRIES, INC.
For the period ended Mar 31, 2026. Filed May 5, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 5, 2026
HII$288.74-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-10-30.
0001501585-25-000112
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-05.
0001501585-26-000029
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 156 previous paragraphs and 140 current paragraphs.
94 unchanged; 38 reworded; 7 added; 23 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 16 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Defense Spending Environment – The fiscal year 2026 budget cycle concluded with the passage of the Consolidated Appropriations Act, 2026, signed into law February 3, 2026. The fiscal year 2026 defense appropriations bill includes continued incremental funding for Enterprise (CVN 80) and Doris Miller (CVN 81), along with advance procurement for William J. Clinton (CVN 82); continued funding for the RCOH of USSJohn C. Stennis (CVN 74); funding for the Virginia class (SSN 774) and Columbia class (SSBN 826) submarine programs; advanced procurement for the Arleigh Burke class (DDG 51) destroyer program, including additional funding for shipyard infrastructure and wage enhancements; and funding for long-lead-time materials for the new FF(X) frigate program. Additionally, the bill provides funding for the Maritime Industrial Base to invest in critical areas including supplier capacity and capability, strategic outsourcing, workforce training, and technology and infrastructure.
Current report
On April 3, 2026, the Trump Administration released the President's topline recommendations on funding levels for fiscal year 2027. The proposed budget recommends $60.2 billion in discretionary funding for the shipbuilding construction account and an additional $5.6 billion in mandatory funding, for a total of $65.8 billion for shipbuilding procurement. Included in the discretionary request is funding for one Columbia class (SSBN 826) submarine, two Virginia class (SSN 774) submarines, one Arleigh Burke class (DDG 51) destroyer, one San Antonio class (LPD 17) amphibious transport dock ship, one America class (LHA 6) amphibious assault ship, and the first FF(X) frigate. The fiscal year 2027 budget request continues funding Gerald R. Ford class (CVN 78) aircraft carriers and aircraft carrier refueling programs, and provides initial advance procurement funding for the lead ship of the Trump class (BBG(X)) battleship program. The fiscal year 2027 budget request also reflects increased investments in capability enablers including unmanned surface and underwater vehicles.
Current report
Ingalls revenues, including intersegment sales, for the three months ended March 31, 2026, increased $88 million, or 14%, from the same period in 2025, primarily driven by higher volumes in surface combatants.
Current report
Mission Technologies segment operating income for the three months ended March 31, 2026, was $35 million, compared to segment operating income of $40 million for the same period in 2025. The decrease was primarily due to lower equity income from nuclear and environmental joint ventures, partially offset by higher performance in Warfare Systems.
Current report
Segment cost of product sales for the three months ended March 31, 2026, increased $291 million, or 20%, compared with the same period in 2025, primarily due to the higher volumes described above.
Current report
In January 2026, the Organization for Economic Co-operation and Development issued administrative guidance on Pillar Two’s 15% global minimum tax, including a “side-by-side" ("SbS") system with permanent and temporary safe harbors. The U.S. is recognized as a qualified SbS regime, which effectively alleviates U.S. based multi-national companies from top-up tax collectible under Pillar Two. We expect that the SbS system or other transitional safe harbor provisions will be broadly applicable to our international operations and, accordingly, do not expect Pillar Two to have a material impact on our effective tax rate, consolidated results of operations, financial position, or cash flows.
Current report
Cash used in operating activities for the three months ended March 31, 2026, was $390 million, compared with cash used in operating activities of $395 million for the same period in 2025.
Removed paragraphs (23)
Previous report
Defense Spending Environment –On May 2, 2025, the Trump Administration released the President's topline recommendations on discretionary funding levels for fiscal year 2026, followed by detailed budget justification documents in June. Additionally, under the Public Law 119-21 (the "Act"), Congress provided mandatory funding for more than $29 billion for Shipbuilding and the Maritime Industrial Base. This funding included one Virginia class (SSN 774) fast attack submarine and two Arleigh-Burke class (DDG 51) guided-missile destroyers, and provided additional funding for amphibious warfare ships and unmanned surface vessels.
Previous report
Lawmakers continue to consider the annual budget request for the federal government. The U.S. House of Representatives approved a fiscal year 2026 defense appropriations measure in July, and the U.S. Senate Committee on Appropriations advanced its defense appropriations measure out of committee in July. The House and Senate Committees on Armed Services acted on their respective National Defense Authorization bills for fiscal year 2026, with the House approving the authorization bill in September and the Senate approving the authorization bill in October.
Previous report
Fiscal year 2026 began on October 1, 2025 without annual appropriations legislation or a continuing resolution. As a result, many parts of the U.S. Government temporarily shut down. This lapse in federal funding leaves the federal government sustaining only those activities that are determined to be excepted or funded through means other than fiscal year 2026 annual appropriations.
Previous report
Prior to the lapse in appropriations, the Department identified those missions and functions of the Department deemed high priority, including shipbuilding, that may continue through the use of available funds in the absence of new annual appropriations. Funds that remain available include those provided for certain shipbuilding programs under the Act.
Previous report
According to Department guidance, “The expiration of an appropriation does not require the termination of contracts (or issuance of stop work orders) funded by that appropriation unless a new obligation of funds is required under the contract and the contract is not required to support an excepted activity." "The Department may continue to enter into new contracts, or place task orders under existing contracts, to obtain supplies and services necessary to carry out or support excepted activities even though there are no available appropriations.”
Previous report
It remains uncertain at this point when funding will be enacted for fiscal year 2026 and whether it will be in the form of a continuing resolution or finalization of annual appropriations measures. We cannot predict the outcome of the fiscal year 2026 budget process, including any impact on the Company's programs.
Previous report
Ingalls revenues, including intersegment sales, for the three months ended September 30, 2025, increased $164 million, or 25%, from the same period in 2024, primarily driven by higher volumes in surface combatants.
Previous report
Ingalls segment operating income for the three months ended September 30, 2025, was $65 million, compared to segment operating income of $49 million for the same period in 2024. The increase was primarily driven by the higher volumes described above.
Previous report
Ingalls segment operating income for each of the nine months ended September 30, 2025 and 2024, was consistent at $165 million. Higher volumes and contract adjustments in surface combatants were offset by lower volumes and lower performance in amphibious assault ships.
Previous report
The Company’s Newport News segment continues to experience performance challenges in the construction of aircraft carriers and the Virginia class (SSN 774) submarine program.
Previous report
Newport News revenues, including intersegment sales, for the nine months ended September 30, 2025, increased $235 million, or 5%, from the same period in 2024, primarily driven by higher volumes in submarines.
Previous report
Newport News segment operating income for the nine months ended September 30, 2025, was $247 million, compared to segment operating income of $208 million for the same period in 2024. The increase was primarily driven by risk retirement in the Columbia class (SSBN 826) submarine program and contract adjustments in the Virginia class (SSN 774) submarine program, partially offset by contract adjustments and incentives in 2024 in the RCOH program.
Previous report
Mission Technologies revenues, including intersegment sales, for the nine months ended September 30, 2025, increased $89 million, or 4%, from the same period in 2024, primarily due to higher volumes in cyber, electronic warfare & space and live, virtual, and constructive training solutions, partially offset by lower volumes in fleet sustainment.
Previous report
Mission Technologies segment operating income for the three months ended September 30, 2025, was consistent with the same period in 2024, as changes in contract mix offset the higher volumes described above.
Previous report
Mission Technologies segment operating income for the nine months ended September 30, 2025, was $110 million, compared to segment operating income of $97 million for the same period in 2024. The increase was primarily due to the higher volumes described above.
Previous report
Segment cost of product sales for the three months ended September 30, 2025, increased $264 million, or 17%, compared with the same period in 2024, primarily due to the higher volumes described above.
Previous report
Product sales for the nine months ended September 30, 2025, increased $268 million, or 5%, from the same period in 2024, primarily due to higher volumes in submarines at Newport News and surface combatants at Ingalls, partially offset by lower volumes in amphibious assault ships at Ingalls.
Previous report
Segment cost of product sales for the nine months ended September 30, 2025, increased $261 million, or 6%, compared with the same period in 2024, primarily due to the changes in volume described above.
Previous report
Segment cost of service revenues for the three months ended September 30, 2025, increased $114 million, or 13%, compared with the same period in 2024, primarily due to the higher volumes described above.
Previous report
Service revenues for the nine months ended September 30, 2025, increased $209 million, or 7%, from the same period in 2024, primarily due to higher volumes in surface combatants at Ingalls, live, virtual, and constructive training solutions and cyber, electronic warfare & space at Mission Technologies, and naval nuclear support services at Newport News.
Previous report
Interest expense for the three months ended September 30, 2025, was $23 million, which was consistent with the same period in 2024. There were no individually significant drivers for interest expense during the period.
Previous report
We discuss below our significant operating, investing, and financing activities affecting cash flows for the nine months ended September 30, 2025 and 2024, as classified in our unaudited condensed consolidated statements of cash flows.
Previous report
Cash provided by operating activities for the nine months ended September 30, 2025, was $546 million, compared with cash provided by operating activities of $2 million for the same period in 2024. The change in operating cash flow was primarily due to a favorable change in trade working capital driven by the timing of billings across programs and lower payments for income taxes.
Reworded paragraphs (38)
Previous wording
We conduct most of our business with the U.S. Government, primarily the Department of War (the "Department"). As prime contractor, principal subcontractor, team member, or partner, we participate in many high-priority U.S. defense programs. Ingalls includes our non-nuclear ship design, construction, repair, and maintenance businesses. Newport News includes all of our nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses. Our Mission Technologies segment is organized into four groups, All-Domain Operations, Warfare Systems, Global Security, and Uncrewed Systems, and specializes in a wide range of services and products across our capabilities, which include command, control, computers, communications, cyber, intelligence, surveillance, and reconnaissance ("C5ISR") systems and operations; the application of artificial intelligence and machine learning to battlefield decisions; defensive and offensive cyber, electronic warfare & space; unmanned systems; live, virtual, and constructive training solutions; fleet sustainment; and critical nuclear operations.
Current wording
We conduct most of our business with the U.S. Government, primarily the Department of War. As prime contractor, principal subcontractor, team member, or partner, we participate in many high-priority U.S. defense programs. Ingalls includes our non-nuclear ship design, construction, repair, and maintenance businesses. Newport News includes all of our nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses. Our Mission Technologies segment provides a wide range of services and products, including command, control, computers, communications, cyber, intelligence, surveillance, and reconnaissance systems and operations; the application of artificial intelligence and machine learning to battlefield decisions; defense and offensive cyberspace strategies and electronic warfare; unmanned autonomous systems; live, virtual, and constructive training solutions; platform modernization; and critical nuclear operations.
Previous wording
The federal budget environment remains a significant long-term risk, and we continue to see uncertainty in the economy, our industry, and our company. Our customers and suppliers continue to face challenges, and we believe continued budget pressures could have serious implications for defense discretionary spending, the defense industrial base, including HII, and the customers, employees, suppliers, subcontractors, investors, and communities that rely on companies in the defense industrial base. We cannot clearly predict how long these challenges will continue, whether these challenges will change over time, or whether our actions to address these challenges will be successful.
Current wording
Against a backdrop of heightened geopolitical tension and domestic policy realignment, we continue to see uncertainty in the economy, our industry, and our company. Our customers, suppliers, and subcontractors continue to face challenges. We cannot predict how long these challenges will continue, whether these challenges will change over time, or whether our actions to address these challenges will be successful.
Previous wording
For further information on our business environment, see the discussion under Business Environment under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our 2024 Annual Report on Form 10-K.
Current wording
For further information on our business environment, see the Business Environment section under Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2025 Annual Report on Form 10-K.
Previous wording
Sales and service revenues for thethree and nine months ended September 30, 2025, increased $443 million, or 16%, and $477 million, or 6%, respectively compared to the same periods in 2024, primarily due to higher volumes at Newport News, Ingalls, and Mission Technologies.
Current wording
Sales and service revenues for thethree months ended March 31, 2026, increased $365 million, or 13%, compared to the same period in 2025, primarily due to higher volumes at Newport News, Ingalls, and Mission Technologies.
Previous wording
For thethree and nine months ended September 30, 2025 and 2024, favorable and unfavorable cumulative catch-up revenue adjustments were as follows:
Current wording
For thethree months ended March 31, 2026 and 2025, favorable and unfavorable cumulative catch-up revenue adjustments were as follows:
Previous wording
General and administrative expenses for each of thethree and nine months ended September 30, 2025, decreased $7 million from the same periods in 2024, primarily due to lower overhead costs.
Current wording
General and administrative expenses for thethree months ended March 31, 2026 increased $12 million from the same period in 2025, primarily due to higher non-current state income taxes and higher overhead costs.
Previous wording
The Operating FAS/CAS Adjustment was a net expense of $9 million and $16 million for the three months ended September 30, 2025 and 2024, respectively. The Operating FAS/CAS Adjustment was a net expense of $25 million and $48 million for the nine months ended September 30, 2025 and 2024, respectively. The favorable change in the Operating FAS/CAS Adjustment for each period was primarily driven by higher interest rates under FAS.
Current wording
The Operating FAS/CAS Adjustment was a net expense of $9 million and $10 million for the three months ended March 31, 2026 and 2025, respectively. The favorable change in the Operating FAS/CAS Adjustment was primarily driven by higher asset returns in 2025.
Previous wording
Non-current state income tax expense was $9 million for the three months ended September 30, 2025, compared to a non-current state income tax benefit of $1 million for the three months ended September 30, 2024. Non-current state income tax expense was $12 million for the nine months ended September 30, 2025, compared to a non-current state income tax benefit of $3 million for the nine months ended September 30, 2024. The unfavorable changes in non-current state income taxes for the three and nine months ended September 30, 2025 were driven by an increase in deferred state income tax expense, primarily attributable to a change in net capitalized research and development expenditures.
Current wording
Non-current state income tax expense was $8 million for the three months ended March 31, 2026, compared to a non-current state income tax expense of less than $1 million for the three months ended March 31, 2025. The unfavorable change in non-current state income taxes was driven by an increase in deferred state income tax expense, primarily attributable to a change in net capitalized research and development expenditures and a change in state unrecognized tax benefits for the prior period.
Previous wording
For thethree and nine months ended September 30, 2025 and 2024, net cumulative catch-up revenue adjustments by segment were as follows:
Current wording
For thethree months ended March 31, 2026 and 2025, net cumulative catch-up revenue adjustments by segment were as follows:
Previous wording
Ingalls revenues, including intersegment sales, for the nine months ended September 30, 2025, increased $158 million, or 8%, from the same period in 2024, primarily driven by higher volumes in surface combatants, partially offset by lower volumes in amphibious assault ships.
Current wording
Ingalls segment operating income for the three months ended March 31, 2026, was $49 million, compared to segment operating income of $46 million for the same period in 2025. The increase was primarily driven by higher volumes in surface combatants, partially offset by lower performance in amphibious assault ships.
Previous wording
Newport News revenues, including intersegment sales, for the three months ended September 30, 2025, increased $205 million, or 15%, from the same period in 2024, primarily driven by higher volumes in submarines and aircraft carriers.
Current wording
Newport News revenues, including intersegment sales, for the three months ended March 31, 2026, increased $269 million, or 19%, from the same period in 2025, primarily driven by higher volumes in aircraft carriers, submarines, and naval nuclear support services.
Previous wording
Newport News segment operating income for the three months ended September 30, 2025, was $80 million, compared to segment operating income of $15 million for the same period in 2024. The increase was primarily driven by unfavorable cumulative catch-up adjustments in the Virginia class (SSN 774) submarine program and aircraft carriers in 2024.
Current wording
Newport News segment operating income for the three months ended March 31, 2026, was $88 million, compared to segment operating income of $85 million for the same period in 2025. The increase was primarily driven by the higher volumes described above, partially offset by contract adjustments and incentives in 2025 in the Virginia class (SSN 774) submarine program and lower performance in aircraft carrier construction.
Previous wording
Mission Technologies revenues, including intersegment sales, for the three months ended September 30, 2025, increased $78 million, or 11%, from the same period in 2024, primarily due to higher volumes in C5ISR; cyber, electronic warfare & space; and live, virtual, and constructive training solutions.
Current wording
Mission Technologies revenues, including intersegment sales, for the three months ended March 31, 2026, increased $13 million, or 2%, from the same period in 2025, primarily due to higher volumes in All-Domain Operations, Unmanned Systems, and Global Security, partially offset by lower volumes in Warfare Systems.
Previous wording
1 Operating FAS/CAS Adjustment is excluded from segment cost of product sales and service revenues.
Current wording
(1) Operating FAS/CAS Adjustment is excluded from segment cost of product sales and service revenues.
Previous wording
Product sales for the three months ended September 30, 2025, increased $311 million, or 18%, from the same period in 2024, primarily due to higher volumes in submarines and aircraft carriers at Newport News, and surface combatants at Ingalls.
Current wording
Product sales for the three months ended March 31, 2026, increased $291 million, or 17%, from the same period in 2025, primarily due to higher volumes in aircraft carriers and submarines at Newport News, and surface combatants at Ingalls.
Previous wording
Service revenues for the three months ended September 30, 2025, increased $132 million, or 13%, from the same period in 2024, primarily due to higher volumes in C5ISR and live, virtual, and constructive training solutions at Mission Technologies, higher volumes in naval nuclear support services and aircraft carriers at Newport News, and higher volumes in surface combatants at Ingalls.
Current wording
Service revenues for the three months ended March 31, 2026, increased $74 million, or 7%, from the same period in 2025, primarily due to higher volumes in naval nuclear support services and aircraft carriers at Newport News, and higher volumes in All-Domain Operations at Mission Technologies.
Previous wording
Segment cost of service revenues for the nine months ended September 30, 2025, increased $185 million, or 7%, compared with the same period in 2024, primarily due to the higher volumes described above.
Current wording
Segment cost of service revenues for the three months ended March 31, 2026, increased $61 million, or 7%, compared with the same period in 2025, primarily due to the higher volumes described above.
Previous wording
Interest expense for the nine months ended September 30, 2025, was $79 million, compared to $68 million for the same period in 2024. The increase in interest expense for the nine months ended September 30, 2025 was driven by an increase in outstanding long-term debt compared to the prior year period.
Current wording
Interest expense for the three months ended March 31, 2026, was $22 million, compared with $28 million for the same period in 2025. The decrease in interest expense was driven by a decrease in outstanding long-term debt from the prior period.
Previous wording
For thethree and nine months ended September 30, 2025, the non-operating retirement benefit was $48 million and $143 million, respectively, compared with $44 million and $134 million, respectively, for the same periods in 2024. The favorable change in the non-operating retirement benefit for both periods was primarily driven by the amortization of net actuarial costs.
Current wording
For thethree months ended March 31, 2026, the non-operating retirement benefit was $53 million, compared with $48 million for the same period in 2025. The favorable change in the non-operating retirement benefit was primarily driven by higher asset returns in 2025.
Previous wording
Other, net income for thethree and nine months ended September 30, 2025, was $18 million and $30 million, respectively, compared with other, net income of $9 million and $21 million, respectively, for the same periods in 2024. The increase in other, net income for both periods was primarily driven by an increase in unrealized gains on investments.
Current wording
Other, net income for thethree months ended March 31, 2026, was $2 million, compared with other, net income of $6 million for the same period in 2025. The decrease in other, net income was primarily driven by an increase in unrealized losses on investments.
Previous wording
Our effective income tax rates on earnings from operations for the three months ended September 30, 2025 and 2024, were 28.9% and 9.8%, respectively. Our effective income tax rates on earnings from operations for the nine months ended September 30, 2025 and 2024, were 23.0% and 16.6%, respectively. The higher effective tax rates for thethree and nine months ended September 30, 2025, were primarily attributable to a reduction in the estimated research and development tax credits for the prior period recorded in the current period.
Current wording
Our effective income tax rates on earnings from operations for the three months ended March 31, 2026 and 2025, were 20.7% and 20.3%, respectively.
Previous wording
For each of thethree and nine months ended September 30, 2025, our effective tax rate differed from the federal statutory corporate income tax rate of 21% primarily due to a reduction in the estimated research and development tax credits for the prior period recorded in the current period.
Current wording
For thethree months ended March 31, 2026, our effective tax rate did not differ materially from the federal statutory corporate income tax rate of 21%.
Previous wording
Total backlog as of September 30, 2025, and December 31, 2024, was $55.7 billion and $48.7 billion, respectively. Total backlog includes both funded backlog (firm orders for which funding is contractually obligated by the customer) and unfunded backlog (firm orders for which funding is not currently contractually obligated by the customer). Backlog excludes unexercised contract options and unfunded indefinite delivery/indefinite quantity orders. For contracts having no stated contract values, backlog includes only the amounts committed by the customer as of September 30, 2025 and December 31, 2024, respectively.
Current wording
Total backlog as of March 31, 2026, and December 31, 2025, was $54.0 billion and $53.1 billion, respectively. Total backlog includes both funded backlog (firm orders for which funding is contractually obligated by the customer) and unfunded backlog (firm orders for which funding is not currently contractually obligated by the customer). Backlog excludes unexercised contract options and unfunded indefinite delivery/indefinite quantity orders. For contracts having no stated contract values, backlog includes only the amounts committed by the customer as of March 31, 2026 and December 31, 2025, respectively.
Previous wording
We expect approximately 21% of the $48.7 billion total backlog as of December 31, 2024, to be converted into sales in 2025. U.S. Government orders comprised substantially all of the backlog as of September 30, 2025 and December 31, 2024.
Current wording
We expect approximately 21% of the $53.1 billion total backlog as of December 31, 2025, to be converted into sales in 2026. U.S. Government orders comprised substantially all of the backlog as of March 31, 2026 and December 31, 2025.
Previous wording
The value of new contract awards during the nine months ended September 30, 2025, was approximately $16.0 billion, primarily driven by awards at Newport News and Ingalls, inclusive of a contract modification for construction of two additional Block VVirginia-class submarines.
Current wording
The value of new contract awards during the three months ended March 31, 2026, was approximately $4.0 billion, primarily driven by awards at Newport News and Ingalls.
Previous wording
We seek to efficiently convert operating results into cash for deployment in operating our businesses, implementing our business strategy, and maximizing stockholder value. We use various financial measures to inform our capital deployment strategy, including net cash provided by operating activities and free cash flow. We believe these measures are useful to investors in assessing our financial performance.
Current wording
We seek to efficiently convert operating results into cash for deployment in operating our businesses, implementing our business strategy, and maximizing stockholder value. We use various financial measures to inform our capital deployment strategy, including net cash used in operating activities and free cash flow. We believe these measures are useful to investors in assessing our financial performance.
Previous wording
The following table summarizes key components of cash flow provided by operating activities:
Current wording
The following table summarizes key components of cash flow used in operating activities:
Previous wording
We have historically maintained a capital structure comprised of a mix of equity and debt financing. We vary our leverage both to optimize our equity return and to pursue acquisitions. We expect to meet our current debt obligations as they come due through internally generated funds from current levels of operations, existing borrowing facilities, and/or through refinancing in the debt markets prior to the maturity dates of our debt.
Current wording
We have historically maintained a capital structure comprised of a mix of equity and debt financing. We expect to meet our current debt obligations as they come due through internally generated funds from current levels of operations, existing borrowing facilities, and/or through refinancing in the debt markets prior to the maturity dates of our debt.
Previous wording
Cash used in investing activities for the nine months ended September 30, 2025, was $387 million, compared to $238 million used in investing activities for the same period in 2024. The change in investing cash was primarily driven by the acquisition of W International.
Current wording
Cash used in investing activities for the three months ended March 31, 2026, was $71 million, compared to $199 million used in investing activities for the same period in 2025. The change in investing cash was primarily driven by the acquisition of a business in the first quarter of 2025.
Previous wording
For 2025, we expect our capital expenditures for maintenance and sustainment to be approximately 1.0% to 1.5% of annual revenues and our discretionary capital expenditures to be approximately 2.0% to 2.5% of annual revenues. Our capital expenditures are expected to increase due to investments to expand our shipbuilding capacity.
Current wording
For 2026, we expect our capital expenditures for maintenance and sustainment to be approximately 1.0% to 1.5% of annual revenues and our discretionary capital expenditures to be approximately 3.0% to 3.5% of annual revenues. Our capital expenditures are expected to increase due to investments to expand our shipbuilding capacity.
Previous wording
Cash used in financing activities for the nine months ended September 30, 2025, was $678 million, compared with $184 million used in financing activities for the same period in 2024. The change in cash used in financing activities was primarily due to a $396 million decrease in proceeds from our commercial paper program and a $271 million increase in repayments of long term debt, partially offset by a decrease of $162 million in common stock repurchases.
Current wording
Cash used in financing activities for the three months ended March 31, 2026, was $97 million, compared with $70 million used in financing activities for the same period in 2025. The change in cash used in financing activities was primarily due to an increase in employee taxes on certain share-based payment arrangements.
Previous wording
Free cash flow represents cash provided by operating activities less capital expenditures net of related grant proceeds. Free cash flow is not a measure recognized under GAAP. Free cash flow has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, net earnings as a measure of our performance or net cash provided by operating activities as a measure of our liquidity. We believe free cash flow is an important liquidity measure for our investors because it provides them insight into our current and period-to-period performance and our ability to generate cash from continuing operations. We also use free cash flow as a key operating metric in assessing the performance of our business and as a key performance measure in evaluating management performance and determining incentive compensation. Free cash flow may not be comparable to similarly titled measures of other companies.
Current wording
Free cash flow represents cash used in operating activities less capital expenditures net of related grant proceeds. Free cash flow is not a measure recognized under GAAP. Free cash flow has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, net earnings as a measure of our performance or net cash used in operating activities as a measure of our liquidity. We believe free cash flow is an important liquidity measure for our investors because it provides them insight into our current and period-to-period performance and our ability to generate cash from continuing operations. We also use free cash flow as a key operating metric in assessing the performance of our business and as a key performance measure in evaluating management performance and determining incentive compensation. Free cash flow may not be comparable to similarly titled measures of other companies.
Previous wording
The following table reconciles net cash provided by operating activities to free cash flow:
Current wording
The following table reconciles net cash used in operating activities to free cash flow:
Previous wording
Free cash flow for the nine months ended September 30, 2025, increased $521 million from the same period in 2024, primarily due to a favorable change in trade working capital driven by the timing of billings across programs and lower payments for income taxes.
Current wording
Free cash flow for the three months ended March 31, 2026, increased $1 million from the same period in 2025.
Previous wording
See Note 3: Accounting Standards Updates in Part I, Item 1 for further information.
Current wording
See Note 3: Accounting Standards Updates for further information.
Previous wording
Statements in this Quarterly Report on Form 10-Q and in our other filings with the SEC, as well as other statements we may make from time to time, other than statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "guidance," "outlook," "predicts," "potential," "continue," and similar words or phrases or the negative of these words or phrases. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable when made, we cannot guarantee future results, levels of activity, performance, or achievements. There are a number of important factors that could cause our actual results to differ materially from the results anticipated by our forward-looking statements, which include, but are not limited to:
Current wording
within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "guidance," "outlook," "predicts," "potential," "continue," and similar words or phrases or the negative of these words or phrases. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable when made, we cannot guarantee future results, levels of activity, performance, or achievements. There are a number of important factors that could cause our actual results to differ materially from the results anticipated by our forward-looking statements, which include, but are not limited to:
Previous wording
•changes in business practices, procurement processes and government regulations and our ability to comply with such requirements;
Current wording
•changes in business practices, procurement processes and government regulations, including changes through executive orders, contract terms, or other policies or practices applicable to our industry, and our ability to comply with such requirements;
Previous wording
•security threats, including cyber security threats, and related disruptions;
Current wording
•security threats, including cybersecurity threats, and related disruptions;
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Current report — wording carried from elsewhere
Statements in this Quarterly Report on Form 10-Q and in our other filings with the SEC, as well as other statements we may make from time to time, other than statements of historical fact, constitute "forward-looking statements"
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Previous report — wording carried elsewhere
1 Operating FAS/CAS Adjustment is excluded from segment cost of product sales and service revenues.