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Table of Contents                                        
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________________________________
FORM 10-Q
 ______________________________________________________________
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 001-34910
  ______________________________________________________________
HUNTINGTON INGALLS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
 ______________________________________________________________
Delaware90-0607005
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4101 Washington Avenue Newport News, Virginia 23607
(Address of principal executive offices and zip code)
(757) 380-2000
(Registrant’s telephone number, including area code)
 ______________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockHIINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large Accelerated Filer
☒
Accelerated Filer☐
Non-Accelerated Filer☐Smaller Reporting Company☐
Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐ No  ☒
As of October 27, 2023, 39,723,456 shares of the registrant's common stock were outstanding.


Table of Contents                                        
TABLE OF CONTENTS
 
  
PART I – FINANCIAL INFORMATIONPage
Item 1.
Item 2.
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


Table of Contents                                        
HUNTINGTON INGALLS INDUSTRIES, INC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
 
 Three Months Ended September 30Nine Months Ended September 30
(in millions, except per share amounts)2023202220232022
Sales and service revenues
Product sales$1,835 $1,774 $5,543 $5,327 
Service revenues981 852 2,734 2,537 
Sales and service revenues2,816 2,626 8,277 7,864 
Cost of sales and service revenues
Cost of product sales1,541 1,517 4,711 4,511 
Cost of service revenues859 747 2,411 2,252 
Income from operating investments, net9 13 25 47 
General and administrative expenses253 244 711 688 
Operating income172 131 469 460 
Other income (expense)
Interest expense(22)(27)(70)(79)
Non-operating retirement benefit37 71 111 209 
Other, net2 (13)11 (30)
Earnings before income taxes189 162 521 560 
Federal and foreign income tax expense41 24 114 104 
Net earnings$148 $138 $407 $456 
Basic earnings per share$3.70 $3.44 $10.18 $11.37 
Weighted-average common shares outstanding40.0 40.1 40.0 40.1 
Diluted earnings per share$3.70 $3.44 $10.18 $11.37 
Weighted-average diluted shares outstanding40.0 40.1 40.0 40.1 
Dividends declared per share$1.24 $1.18 $3.72 $3.54 
Net earnings from above$148 $138 $407 $456 
Other comprehensive income (loss)
Change in unamortized benefit plan costs4 12 13 (61)
Other— (1)— (2)
Tax benefit (expense) for items of other comprehensive income(2)(3)(4)16 
Other comprehensive income (loss), net of tax2 8 9 (47)
Comprehensive income$150 $146 $416 $409 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
Table of Contents                                        
HUNTINGTON INGALLS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
($ in millions)September 30, 2023December 31, 2022
Assets
Current Assets
Cash and cash equivalents$109 $467 
Accounts receivable, net of allowance for doubtful accounts of $2 million as of 2023 and 2022
698 636 
Contract assets1,300 1,240 
Inventoried costs194 183 
Income taxes receivable180 170 
Prepaid expenses and other current assets106 50 
Total current assets2,587 2,746 
Property, plant, and equipment, net of accumulated depreciation of $2,448 million as of 2023 and $2,319 million as of 2022
3,201 3,198 
Operating lease assets248 282 
Goodwill2,618 2,618 
Other intangible assets, net of accumulated amortization of $977 million as of 2023 and $881 million as of 2022
923 1,019 
Pension plan assets670 600 
Miscellaneous other assets374 394 
Total assets$10,621 $10,857 
Liabilities and Stockholders' Equity
Current Liabilities
Trade accounts payable$535 $642 
Accrued employees’ compensation361 345 
Current portion of long-term debt255 399 
Current portion of postretirement plan liabilities134 134 
Current portion of workers’ compensation liabilities223 229 
Contract liabilities878 766 
Other current liabilities431 380 
Total current liabilities2,817 2,895 
Long-term debt2,213 2,506 
Pension plan liabilities219 214 
Other postretirement plan liabilities257 260 
Workers’ compensation liabilities452 463 
Long-term operating lease liabilities212 246 
Deferred tax liabilities341 418 
Other long-term liabilities377 366 
Total liabilities6,888 7,368 
Commitments and Contingencies (Note 10)
Stockholders’ Equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 53,595,352 shares issued and 39,779,936 shares outstanding as of September 30, 2023, and 53,503,317 shares issued and 39,863,456 shares outstanding as of December 31, 2022
1 1 
Additional paid-in capital2,038 2,022 
Retained earnings4,532 4,276 
Treasury stock(2,248)(2,211)
Accumulated other comprehensive loss(590)(599)
Total stockholders’ equity3,733 3,489 
Total liabilities and stockholders’ equity$10,621 $10,857 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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HUNTINGTON INGALLS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Nine Months Ended September 30
($ in millions)20232022
Operating Activities
Net earnings$407 $456 
Adjustments to reconcile to net cash used in operating activities
Depreciation163 158 
Amortization of purchased intangibles96 105 
Amortization of debt issuance costs6 6 
Provision for doubtful accounts— (7)
Stock-based compensation27 28 
Deferred income taxes(81)(14)
Loss (gain) on investments in marketable securities(10)34 
Change in
Accounts receivable(62)(281)
Contract assets(60)(254)
Inventoried costs(12)(13)
Prepaid expenses and other assets(66)(4)
Accounts payable and accruals45 48 
Retiree benefits(55)(99)
Other non-cash transactions, net10 2 
Net cash provided by operating activities408 165 
Investing Activities
Capital expenditures
Capital expenditure additions(164)(179)
Grant proceeds for capital expenditures14 — 
Investment in affiliates(24)(5)
Proceeds from equity method investments61 6 
Other investing activities, net2 — 
Net cash used in investing activities(111)(178)
Financing Activities
Repayment of long-term debt(455)(300)
Dividends paid(149)(142)
Repurchases of common stock(37)(41)
Employee taxes on certain share-based payment arrangements(13)(14)
Other financing activities, net(1)— 
Net cash used in financing activities(655)(497)
Change in cash and cash equivalents(358)(510)
Cash and cash equivalents, beginning of period467 627 
Cash and cash equivalents, end of period$109 $117 
Supplemental Cash Flow Disclosure
Cash paid for income taxes (net of refunds)$227 $107 
Cash paid for interest$63 $61 
Non-Cash Investing and Financing Activities
Capital expenditures accrued in accounts payable$6 $5 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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HUNTINGTON INGALLS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) 
Three Months Ended September 30, 2023 and 2022
($ in millions)		Common StockAdditional Paid-in CapitalRetained Earnings (Deficit)Treasury StockAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Balance as of June 30, 2022$1 $2,002 $4,113 $(2,186)$(978)$2,952 
Net earnings— — 138 — — 138 
Dividends declared ($1.18 per share)
— — (48)— — (48)
Stock-based compensation— 12 — — — 12 
Other comprehensive income, net of tax— — — — 8 8 
Treasury stock activity— — — (14)— (14)
Balance as of September 30, 2022$1 $2,014 $4,203 $(2,200)$(970)$3,048 
Balance as of June 30, 2023$1 $2,030 $4,434 $(2,227)$(592)$3,646 
Net earnings— — 148 — — 148 
Dividends declared ($1.24 per share)
— — (50)— — (50)
Stock-based compensation— 8 — — — 8 
Other comprehensive income, net of tax— — — — 2 2 
Treasury stock activity— — — (21)— (21)
Balance as of September 30, 2023$1 $2,038 $4,532 $(2,248)$(590)$3,733 

Nine Months Ended September 30, 2023 and 2022
($ in millions)		Common StockAdditional Paid-in CapitalRetained Earnings (Deficit)Treasury StockAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Balance as of December 31, 2021$1 $1,998 $3,891 $(2,159)$(923)$2,808 
Net earnings— — 456 — — 456 
Dividends declared ($3.54 per share)
— — (142)— — (142)
Stock-based compensation— 16 (2)— — 14 
Other comprehensive loss, net of tax— — — — (47)(47)
Treasury stock activity— — — (41)— (41)
Balance as of September 30, 2022$1 $2,014 $4,203 $(2,200)$(970)$3,048 
Balance as of December 31, 2022$1 $2,022 $4,276 $(2,211)$(599)$3,489 
Net earnings— — 407 — — 407 
Dividends declared ($3.72 per share)
— — (149)— — (149)
Stock-based compensation— 16 (2)— — 14 
Other comprehensive income, net of tax— — — — 9 9 
Treasury stock activity— — — (37)— (37)
Balance as of September 30, 2023$1 $2,038 $4,532 $(2,248)$(590)$3,733 

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

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HUNTINGTON INGALLS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. DESCRIPTION OF BUSINESS

Huntington Ingalls Industries, Inc. ("HII" or the "Company") is a global, all-domain defense partner, building and delivering the world’s most powerful, survivable naval ships and technologies that safeguard America’s seas, sky, land, space, and cyber. HII is organized into three reportable segments: Ingalls Shipbuilding ("Ingalls"), Newport News Shipbuilding ("Newport News"), and Mission Technologies. For more than a century, the Company's Ingalls segment in Mississippi and Newport News segment in Virginia have built more ships in more ship classes than any other U.S. naval shipbuilder, making HII America's largest shipbuilder. The Mission Technologies segment develops integrated solutions that enable today's connected, all-domain force.

2. BASIS OF PRESENTATION

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

These unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature considered necessary by management for a fair presentation of the unaudited condensed consolidated financial position, results of operations, and cash flows and should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report on Form 10-K").

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

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

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

The Company maintains multiple grantor trusts to fund certain non-qualified pension plans. These trusts were valued at $211 million and $209 million as of September 30, 2023, and December 31, 2022, respectively, and are presented within miscellaneous other assets within the unaudited condensed consolidated statements of financial position. These trusts consist primarily of investments in marketable securities, which are held at fair value within Level 1 of the fair value hierarchy.

The estimated fair values of the Company's total long-term debt (including current portion), excluding finance lease liabilities, as of September 30, 2023, and December 31, 2022, were $2,264 million and $2,703 million, respectively. The estimated fair values of the current portion of the Company's long-term debt were $253 million and $390 million as of September 30, 2023 and December 31, 2022, respectively. The fair values of the Company's long-term debt were calculated based on recent trades of the Company's debt instruments in inactive markets, which fall within Level 2 under the fair value hierarchy.
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Debt - In April 2023, the Company amended its existing $1.5 billion credit facility (the "Revolving Credit Facility") and term loan due August 19, 2024 (the "Term Loan") to change the benchmark interest rate from the London Interbank Offered Rate to the Secured Overnight Financing Rate (“SOFR”). The current interest rate is based on SOFR plus an interest spread based on the Company's credit rating, plus an additional 0.10%. The Company does not expect the transition to the SOFR benchmark to materially impact its financial results. For further information on the Company's debt, see the Company's 2022 Annual Report on Form 10-K.

Goodwill Impairment and Annual Assessment Date Change - During the second quarter of 2023, the Company elected to change the measurement date of its annual goodwill impairment test from November 30 to October 31. The change is not material to the consolidated financial statements as it does not result in the delay, acceleration or avoidance of an impairment charge and the test is still performed in the fourth quarter. The Company continues to perform a quarterly assessment for impairment between annual tests for impairment.

Sale of Equity Method Investment - In June 2023, the Company sold its investment in an unconsolidated ship repair and specialty fabrication joint venture, Titan Acquisition Holdings, L.P. ("Titan"). The Company received $61 million in proceeds and recognized an immaterial loss on sale.

3. ACCOUNTING STANDARDS UPDATES

Accounting pronouncements issued but not effective until after December 31, 2023, are not expected to have a material impact on the Company's consolidated financial position, results of operations, and cash flows.

4. STOCKHOLDERS' EQUITY

Treasury Stock - In November 2019, the Company's board of directors authorized an increase in the Company's stock repurchase program from $2.2 billion to $3.2 billion and an extension of the term of the program to October 31, 2024. Repurchases are made from time to time at management's discretion in accordance with applicable federal securities laws. For the nine months ended September 30, 2023, the Company repurchased 175,555 shares at an aggregate cost of $37 million. For the nine months ended September 30, 2022, the Company repurchased 196,850 shares at an aggregate cost of $41 million. The cost of purchased shares is recorded as treasury stock in the unaudited condensed consolidated statements of financial position.

Dividends - The Company paid cash dividends totaling $149 million and $142 million for the nine months ended September 30, 2023 and 2022, respectively.

Accumulated Other Comprehensive Loss - Other comprehensive income (loss) refers to gains and losses recorded as an element of stockholders' equity but excluded from net earnings. The accumulated other comprehensive loss was comprised of unamortized benefit plan costs of $590 million and $599 million as of September 30, 2023 and December 31, 2022, respectively.

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The changes in accumulated other comprehensive loss by component for the three and nine months ended September 30, 2023 and 2022, were as follows:

($ in millions)Benefit PlansOtherTotal
Balance as of June 30, 2022$(977)$(1)$(978)
Other comprehensive income (loss) before reclassifications3 (1)2 
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1
5 — 5 
Amortization of net actuarial loss1
8 — 8 
Settlement gain1
(4)— (4)
Tax (expense) benefit for items of other comprehensive income(4)1 (3)
Net current period other comprehensive income8 — 8 
Balance as of September 30, 2022$(969)$(1)$(970)
Balance as of June 30, 2023$(592)$— $(592)
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1
3 — 3 
Amortization of net actuarial loss1
1 — 1 
Tax expense for items of other comprehensive income(2)— (2)
Net current period other comprehensive income2 — 2 
Balance as of September 30, 2023$(590)$— $(590)

($ in millions)Benefit PlansOtherTotal
Balance as of December 31, 2021$(923)$— $(923)
Other comprehensive loss before reclassifications(94)(2)(96)
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service credit1
13 — 13 
Amortization of net actuarial loss1
24 — 24 
Settlement gain1
(4)— (4)
Tax benefit for items of other comprehensive loss15 1 16 
Net current period other comprehensive loss(46)(1)(47)
Balance as of September 30, 2022$(969)$(1)$(970)
Balance as of December 31, 2022$(599)$— (599)
Amounts reclassified from accumulated other comprehensive loss
Amortization of prior service cost1
11 — 11 
Amortization of net actuarial loss1
2 — 2 
Tax expense for items of other comprehensive income(4)— (4)
Net current period other comprehensive income9 — 9 
Balance as of September 30, 2023$(590)$— $(590)
1 These accumulated comprehensive loss components are included in the computation of net periodic benefit cost. See Note 12: Employee Pension and Other Postretirement Benefits. The tax expense recorded in stockholders' equity for the amounts reclassified from accumulated other comprehensive loss for each of the three months ended September 30, 2023 and 2022, was $2 million. The tax expense recorded in stockholders' equity for the amounts reclassified from accumulated other comprehensive loss for the nine months ended September 30, 2023 and 2022, was $4 million and $8 million, respectively.

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5. EARNINGS PER SHARE

Basic and diluted earnings per common share were calculated as follows:
 Three Months Ended September 30Nine Months Ended September 30
(in millions, except per share amounts)2023202220232022
Net earnings$148 $138 $407 $456 
Weighted-average common shares outstanding40.0 40.1 40.0 40.1 
Net dilutive effect of stock awards— — — — 
Dilutive weighted-average common shares outstanding40.0 40.1 40.0 40.1 
Earnings per share - basic$3.70 $3.44 $10.18 $11.37 
Earnings per share - diluted$3.70 $3.44 $10.18 $11.37 

Under the treasury stock method, the Company has excluded from the diluted share amounts presented above the effects of 0.4 million Restricted Performance Stock Rights ("RPSRs") for each of the three and nine months ended September 30, 2023, and 2022.

6. REVENUE

Disaggregation of Revenue

The following tables present revenues on a disaggregated basis, in a manner that reconciles with the Company's reportable segment disclosures, for the following categories: product versus service type, customer type, contract type, and major program. The Company believes that this level of disaggregation provides investors with information to evaluate the Company’s financial performance and provides the Company with information to make capital allocation decisions in the most appropriate manner. For more information on the Company's contracts, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's 2022 Annual Report on Form 10-K.

The following tables present revenues on a disaggregated basis:
Three Months Ended September 30, 2023
($ in millions)IngallsNewport NewsMission TechnologiesIntersegment EliminationsTotal
Revenue Type
Product sales$637 $1,170 $28 $— $1,835 
Service revenues73 281 627 — 981 
Intersegment1 2 30 (33)— 
Sales and service revenues$711 $1,453 $685 $(33)$2,816 
Customer Type
Federal$710 $1,451 $647 $— $2,808 
Commercial— — 7 — 7 
State and local government agencies— — 1 — 1 
Intersegment1 2 30 (33)— 
Sales and service revenues$711 $1,453 $685 $(33)$2,816 
Contract Type
Firm fixed-price$— $1 $77 $— $78 
Fixed-price incentive637 779 3 — 1,419 
Cost-type73 671 521 — 1,265 
Time and materials— — 54 — 54 
Intersegment1 2 30 (33)— 
Sales and service revenues$711 $1,453 $685 $(33)$2,816 
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Three Months Ended September 30, 2022
($ in millions)IngallsNewport NewsMission TechnologiesIntersegment EliminationsTotal
Revenue Type
Product sales$577 $1,185 $12 $— $1,774 
Service revenues41 259 552 — 852 
Intersegment5 1 31 (37)— 
Sales and service revenues$623 $1,445 $595 $(37)$2,626 
Customer Type
Federal$618 $1,444 $554 $— $2,616 
Commercial— — 9 — 9 
State and local government agencies— — 1 — 1 
Intersegment5 1 31 (37)— 
Sales and service revenues$623 $1,445 $595 $(37)$2,626 
Contract Type
Firm fixed-price$1 $1 $59 $— $61 
Fixed-price incentive577 723 — — 1,300 
Cost-type40 720 437 — 1,197 
Time and materials— — 68 — 68 
Intersegment5 1 31 (37)— 
Sales and service revenues$623 $1,445 $595 $(37)$2,626 

Nine Months Ended September 30, 2023
($ in millions)IngallsNewport NewsMission TechnologiesIntersegment EliminationsTotal
Revenue Type
Product sales$1,775 $3,688 $80 $— $5,543 
Service revenues171 777 1,786 — 2,734 
Intersegment6 3 88 (97)— 
Sales and service revenues$1,952 $4,468 $1,954 $(97)$8,277 
Customer Type
Federal$1,946 $4,465 $1,836 $— $8,247 
Commercial— — 29 — 29 
State and local government agencies— — 1 — 1 
Intersegment6 3 88 (97)— 
Sales and service revenues$1,952 $4,468 $1,954 $(97)$8,277 
Contract Type
Firm fixed-price$2 $3 $236 $— $241 
Fixed-price incentive1,776 2,432 4 — 4,212 
Cost-type168 2,030 1,464 — 3,662 
Time and materials— — 162 — 162 
Intersegment6 3 88 (97)— 
Sales and service revenues$1,952 $4,468 $1,954 $(97)$8,277 

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Nine Months Ended September 30, 2022
($ in millions)IngallsNewport NewsMission TechnologiesIntersegment EliminationsTotal
Revenue Type
Product sales$1,766 $3,496 $65 $— $5,327 
Service revenues136 768 1,633 — 2,537 
Intersegment10 4 87 (101)— 
Sales and service revenues$1,912 $4,268 $1,785 $(101)$7,864 
Customer Type
Federal$1,902 $4,264 $1,665 $— $7,831 
Commercial— — 32 — 32 
State and local government agencies— — 1 — 1 
Intersegment10 4 87 (101)— 
Sales and service revenues$1,912 $4,268 $1,785 $(101)$7,864 
Contract Type
Firm fixed-price$7 $12 $192 $— $211 
Fixed-price incentive1,762 2,180 — — 3,942 
Cost-type133 2,072 1,299 — 3,504 
Time and materials— — 207 — 207 
Intersegment10 4 87 (101)— 
Sales and service revenues$1,912 $4,268 $1,785 $(101)$7,864 

Three Months Ended September 30Nine Months Ended September 30
($ in millions)2023202220232022
Major Programs
Amphibious assault ships$396 $325 $1,093 $1,060 
Surface combatants and coast guard cutters313 291 853 840 
Other2 7 6 12 
Total Ingalls711 623 1,952 1,912 
Aircraft carriers782 762 2,447 2,318 
Submarines515 519 1,592 1,459 
Other156 164 429 491 
Total Newport News1,453 1,445 4,468 4,268 
Mission based solutions567 493 1,609 1,472 
Other118 102 345 313 
Total Mission Technologies685 595 1,954 1,785 
Intersegment eliminations(33)(37)(97)(101)
Sales and service revenues$2,816 $2,626 $8,277 $7,864 

As of September 30, 2023, the Company had $49.4 billion of remaining performance obligations. The Company expects to recognize approximately 30% of its remaining performance obligations as revenue through 2024, an additional 30% through 2026, and the balance thereafter.
Cumulative Catch-up Revenue Adjustments

For the three months ended September 30, 2023, net cumulative catch-up revenue adjustments increased operating income and increased diluted earnings per share by $21 million and $0.41, respectively. For the three months ended September 30, 2022, net cumulative catch-up revenue adjustments increased operating income and increased diluted earnings per share by $27 million and $0.53, respectively. For the nine months ended September 30, 2023, net cumulative catch-up revenue adjustments increased operating income and increased diluted earnings per share by $50 million and $0.99, respectively. For the nine months ended September 30, 2022, net cumulative
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catch-up revenue adjustments increased operating income and increased diluted earnings per share by $140 million and $2.75, respectively.

For the three and nine months ended September 30, 2023, no individual favorable cumulative catch-up revenue adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income. For the three and nine months ended September 30, 2023, no individual unfavorable cumulative catch-up revenue adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income.

Cumulative catch-up revenue adjustments for the three months ended September 30, 2022, included a favorable adjustment of $41 million on a contract at the Company's Newport News segment, which increased diluted earnings per share by $0.80. For the nine months ended September 30, 2022, no individual favorable cumulative catch-up revenue adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income. For the three and nine months ended September 30, 2022, no individual unfavorable cumulative catch-up revenue adjustment was material to the Company's unaudited condensed consolidated statements of operations and comprehensive income.

Contract Balances

The Company reports contract balances in a net contract asset or contract liability position on a contract-by-contract basis at the end of each reporting period. The Company’s net contract assets decreased $52 million from December 31, 2022, to September 30, 2023, primarily resulting from billings on certain U.S. Navy contracts. For the three and nine months ended September 30, 2023, the Company recognized revenue of $5 million and $678 million, respectively, related to its contract liabilities as of December 31, 2022. For the three and nine months ended September 30, 2022, the Company recognized revenue of $17 million and $548 million, respectively, related to its contract liabilities as of December 31, 2021.

7. SEGMENT INFORMATION

The following table presents segment results for the three and nine months ended September 30, 2023 and 2022:
 Three Months Ended September 30Nine Months Ended September 30
($ in millions)2023202220232022
Sales and Service Revenues
Ingalls$711 $623 $1,952 $1,912 
Newport News1,453 1,445 4,468 4,268 
Mission Technologies685 595 1,954 1,785 
Intersegment eliminations(33)(37)(97)(101)
Sales and service revenues$2,816 $2,626 $8,277 $7,864 
Operating Income
Ingalls$73 $50 $193 $242 
Newport News90 102 269 277 
Mission Technologies24 14 50 48 
Segment operating income187 166 512 567 
Non-segment factors affecting operating income
Operating FAS/CAS Adjustment(19)(36)(55)(108)
Non-current state income taxes4 1 12 1 
Operating income $172 $131 $469 $460 

Operating FAS/CAS Adjustment - The Operating FAS/CAS Adjustment represents the difference between the service cost component of our pension and other postretirement benefit plan expense determined in accordance with U.S. GAAP Financial Accounting Standards ("FAS") and our pension and other postretirement expense under U.S. Government Cost Accounting Standards ("CAS").

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The following table presents the Company's assets by segment:
($ in millions)September 30, 2023December 31, 2022
Assets
Ingalls$1,637 $1,633 
Newport News4,515 4,344 
Mission Technologies3,195 3,347 
Corporate1,274 1,533 
Total assets$10,621 $10,857 

8. INCOME TAXES

The Company's earnings are primarily domestic, and its effective income tax rates on earnings from operations for the three months ended September 30, 2023 and 2022, were 21.7% and 14.8%, respectively. For the nine months ended September 30, 2023 and 2022, the Company's effective income tax rates on earnings from operations were 21.9% and 18.6%, respectively. The higher effective tax rate for the three months ended September 30, 2023, was primarily attributable to prior period research and development tax credits recorded in 2022. The higher effective tax rate for the nine months ended September 30, 2023, was primarily attributable to prior period research and development tax credits recorded in 2022 and to a tax gain associated with the sale of the Company's interest in Titan.

For the three months ended September 30, 2023, the Company's effective income tax rate differed from the federal statutory corporate income tax rate primarily as a result of expenses that are not deductible for income tax purposes. For the nine months ended September 30, 2023, the Company's effective income tax rate differed from the federal statutory corporate income tax rate primarily as a result of tax gain associated with the sale of the Company’s interest in Titan. For the three and nine months ended September 30, 2022, the Company's effective income tax rates differed from the federal statutory corporate income tax rate primarily as a result of research and development tax credits for prior periods.

The Company's unrecognized tax benefits increased by $