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Huntington Ingalls Industries(HII) - 2023 Q4 - Annual Report

Cybersecurity Threats - Company faces significant cyber security threats, including advanced nation-state actors and ransomware, which could disrupt operations and compromise sensitive information[137] - As of the report date, no cybersecurity threats have materially affected the company, but the increasing sophistication of cyber threats poses ongoing risks[194] Contract and Cost Recovery - Company's ability to recover costs and realize profits depends on contract types (firm fixed-price, fixed-price incentive, cost-type, or time and material) with U.S. Government customers[110] - Company's procurement practices may be affected by changes in U.S. Government contract terms, including incentive-based fee arrangements and cost mandates, impacting profitability[95] Workforce and Specialized Skills - Company's reliance on qualified personnel with specialized skills, including engineering and cybersecurity, is critical to operational performance[116] - Company's suppliers and subcontractors face challenges due to COVID-19, including workforce issues, material shortages, and higher prices, impacting timely delivery and costs[134] Shipbuilding and Fleet Size - U.S. Navy fleet size reduced from 566 ships in 1989 to 291 ships as of December 31, 2023, leading to workforce reductions and intense competition for future shipbuilding programs[99] - Company's shipbuilding programs are subject to potential adverse effects if U.S. Government-owned shipyards invest in refueling nuclear-powered aircraft carriers[101] - The company's Pascagoula shipyard facilities are located on approximately 800 acres, with a 99-year lease, and are expected to remain in use for at least 43 more years[196] - The Newport News shipyard, one of the largest in the U.S., spans approximately 550 acres and includes extensive manufacturing and training facilities[198] Financial and Market Risks - Company's goodwill and purchased intangible assets accounted for approximately 23% and 8%, respectively, of total assets as of December 31, 2023[144] - Company's pension risk transfer transactions using group annuity contracts (GACs) may require additional contributions or result in noncash settlement charges[128] - The company is highly susceptible to claims and litigation, which could result in material cash payments or charges against operating income, potentially impacting financial position, results of operations, or cash flows[162] - Market volatility and adverse capital market conditions may affect the company's ability to access cost-effective funding and expose it to risks related to supplier and subcontractor financial viability[175] - The company is exposed to market risks, including interest rates and inflation[339] Intellectual Property and Acquisitions - The company relies on third-party intellectual property licenses, and there is a risk of being unable to secure necessary licenses on commercially reasonable terms in the future[167] - The company faces challenges in completing and integrating acquisitions, which could lead to unanticipated costs, liabilities, and adverse effects on business and results of operations[178] Climate Change and Compliance Costs - Company's operations and compliance costs may increase due to climate change regulations, including greenhouse gas emissions and energy taxes[154] Business Segments and Operations - As of December 31, 2023, the company's major operations are spread across multiple locations in the U.S., supporting various business segments including C5ISR, CEW&S, LVC, Fleet sustainment, Unmanned Systems, and Nuclear and Environmental Services[200]