Subsidiary Guarantors

Performance of the Company's obligations under the senior notes, including any repurchase obligations resulting from a change of control, is unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of HII's existing and future domestic restricted subsidiaries that guarantees debt under the Credit Facility (the "Subsidiary Guarantors"). The guarantees rank equally with all other unsecured and unsubordinated indebtedness of the Subsidiary Guarantors. The Subsidiary Guarantors are each directly or indirectly 100% owned by HII.

Set forth below are the unaudited condensed consolidating statements of operations and comprehensive income for the three and nine months ended September 30, 2012 and 2011, unaudited condensed consolidating statements of financial position as of September 30, 2012, and December 31, 2011, and the unaudited condensed consolidating statements of cash flows for the nine months ended September 30, 2012 and 2011, for HII, its aggregated subsidiary guarantors and its aggregated non-guarantor subsidiaries:

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)



	Three Months Ended September 30, 2012
($ in millions)	Huntington Ingalls Industries, Inc.			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Sales and service revenues
Product sales	$	—		$	1,367		$	—	$	—		$	1,367
Service revenues	—			229			6		(6		)	229
Total sales and service revenues	—			1,596			6		(6		)	1,596
Cost of sales and service revenues
Cost of product sales	—			1,187			—		—			1,187
Cost of service revenues	—			186			6		(6		)	186
Income (loss) from operating investments, net	—			7			—		—			7
General and administrative expenses	—			164			—		—			164
Operating income (loss)	—			66			—		—			66
Interest expense	(28		)	(1		)	—		—			(29		)
Equity in earnings (loss) of subsidiaries	31			—			—		(31		)	—
Earnings (loss) before income taxes	3			65			—		(31		)	37
Federal income taxes	(10		)	34			—		—			24
Net earnings (loss)	$	13		$	31		$	—	$	(31	)	$	13
Other comprehensive income (loss), net of tax	17			17			—		(17		)	17
Comprehensive income (loss)	$	30		$	48		$	—	$	(48	)	$	30

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(UNAUDITED)



	Three Months Ended September 30, 2011
($ in millions)	Huntington Ingalls Industries, Inc.			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Sales and service revenues
Product sales	$	—		$	1,384		$	—	$	—		$	1,384
Service revenues	—			209			—		—			209
Total sales and service revenues	—			1,593			—		—			1,593
Cost of sales and service revenues
Cost of product sales	—			1,166			—		—			1,166
Cost of service revenues	—			173			—		—			173
Income (loss) from operating investments, net	—			9			—		—			9
General and administrative expenses	—			153			—		—			153
Goodwill impairment	—			300			—		—			300
Operating income (loss)	—			(190		)	—		—			(190		)
Interest expense	(29		)	(1		)	—		—			(30		)
Equity in earnings (loss) of subsidiaries	(230		)	—			—		230			—
Earnings (loss) before income taxes	(259		)	(191		)	—		230			(220		)
Federal income taxes	(11		)	39			—		—			28
Net earnings (loss)	$	(248	)	$	(230	)	$	—	$	230		$	(248	)
Other comprehensive income (loss), net of tax	8			8			—		(8		)	8
Comprehensive income (loss)	$	(240	)	$	(222	)	$	—	$	222		$	(240	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(UNAUDITED)



	Nine Months Ended September 30, 2012
($ in millions)	Huntington Ingalls Industries, Inc.			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Sales and service revenues
Product sales	$	—		$	4,224		$	—	$	—		$	4,224
Service revenues	—			661			13		(13		)	661
Total sales and service revenues	—			4,885			13		(13		)	4,885
Cost of sales and service revenues
Cost of product sales	—			3,578			—		—			3,578
Cost of service revenues	—			562			13		(13		)	562
Income (loss) from operating investments, net	—			13			—		—			13
General and administrative expenses	—			506			—		—			506
Operating income (loss)	—			252			—		—			252
Interest expense	(83		)	(5		)	—		—			(88		)
Equity in earnings (loss) of subsidiaries	149			—			—		(149		)	—
Earnings (loss) before income taxes	66			247			—		(149		)	164
Federal income taxes	(30		)	98			—		—			68
Net earnings (loss)	96			149			—		(149		)	96
Other comprehensive income (loss), net of tax	45			45			—		(45		)	45
Comprehensive income (loss)	$	141		$	194		$	—	$	(194	)	$	141

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(UNAUDITED)



	Nine Months Ended September 30, 2011
($ in millions)	Huntington Ingalls Industries, Inc.			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Sales and service revenues
Product sales	$	—		$	4,201		$	—	$	—		$	4,201
Service revenues	—			639			—		—			639
Total sales and service revenues	—			4,840			—		—			4,840
Cost of sales and service revenues
Cost of product sales	—			3,543			—		—			3,543
Cost of service revenues	—			557			—		—			557
Income (loss) from operating investments, net	—			17			—		—			17
General and administrative expenses	—			471			—		—			471
Goodwill impairment	—			300			—		—			300
Operating income (loss)	—			(14		)	—		—			(14		)
Interest expense	(62		)	(13		)	—		—			(75		)
Equity in earnings (loss) of subsidiaries	(124		)	—			—		124			—
Earnings (loss) before income taxes	(186		)	(27		)	—		124			(89		)
Federal income taxes	(23		)	97			—		—			74
Net earnings (loss)	(163		)	(124		)	—		124			(163		)
Other comprehensive income (loss), net of tax	32			32			—		(32		)	32
Comprehensive income (loss)	$	(131	)	$	(92	)	$	—	$	92		$	(131	)

CONDENSED CONSOLIDATING STATEMENTS OF FINANCIAL POSITION (UNAUDITED)



	September 30, 2012
($ in millions)	Huntington Ingalls Industries, Inc.		Subsidiary Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current Assets
Cash and cash equivalents	$	765	$	—	$	1	$	—		$	766
Accounts receivable, net	—		883		—		—			883
Inventoried costs, net	—		332		—		—			332
Deferred income taxes	—		214		—		—			214
Prepaid expenses and other current assets	—		32		11		(12		)	31
Total current assets	765		1,461		12		(12		)	2,226
Property, plant, and equipment, net	—		1,988		—		—			1,988
Other Assets
Goodwill	—		844		—		—			844
Other purchased intangibles	—		552		—		—			552
Pension plan asset	—		64		—		—			64
Debt issuance costs	42		—		—		—			42
Miscellaneous other assets	—		147		—		—			147
Investment in subsidiaries	2,637		—		—		(2,637		)	—
Intercompany receivables	—		670		—		(670		)	—
Total other assets	2,679		2,277		—		(3,307		)	1,649
Total assets	$	3,444	$	5,726	$	12	$	(3,319	)	$	5,863

Liabilities and Stockholders' Equity
Current Liabilities
Trade accounts payable	$	—	$	292	$	—	$	—		$	292
Current portion of long-term debt	43		—		—		—			43
Current portion of workers’ compensation liabilities	—		216		—		—			216
Current portion of postretirement plan liabilities	—		172		—		—			172
Accrued employees’ compensation	—		194		—		—			194
Advance payments and billings in excess of costs incurred	—		112		—		—			112
Provision for contract losses	—		4		—		—			4
Other current liabilities	4		202		12		(12		)	206
Total current liabilities	47		1,192		12		(12		)	1,239
Long-term debt	1,689		105		—		—			1,794
Other postretirement plan liabilities	—		594		—		—			594
Pension plan liabilities	—		762		—		—			762
Workers’ compensation liabilities	—		383		—		—			383
Other long-term liabilities	—		53		—		—			53
Intercompany liabilities	670		—		—		(670		)	—
Total liabilities	2,406		3,089		12		(682		)	4,825
Stockholders’ equity	1,038		2,637		—		(2,637		)	1,038
Total liabilities and stockholders’ equity	$	3,444	$	5,726	$	12	$	(3,319	)	$	5,863

CONDENSED CONSOLIDATING STATEMENTS OF FINANCIAL POSITION (UNAUDITED)



	December 31, 2011
($ in millions)	Huntington Ingalls Industries, Inc.		Subsidiary Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current Assets
Cash and cash equivalents	$	915	$	—	$	—	$	—		$	915
Accounts receivable, net	—		711		—		—			711
Inventoried costs, net	—		380		—		—			380
Deferred income taxes	—		232		—		—			232
Prepaid expenses and other current assets	—		30		—		—			30
Total current assets	915		1,353		—		—			2,268
Property, plant, and equipment, net	—		2,033		—		—			2,033
Other Assets
Goodwill	—		844		—		—			844
Other purchased intangibles	—		567		—		—			567
Pension plan asset	—		64		—		—			64
Debt issuance costs	48		—		—		—			48
Miscellaneous other assets	—		177		—		—			177
Investment in subsidiaries	2,358		—		—		(2,358		)	—
Intercompany receivables	—		692		—		(692		)	—
Total other assets	2,406		2,344		—		(3,050		)	1,700
Total assets	$	3,321	$	5,730	$	—	$	(3,050	)	$	6,001

Liabilities and Stockholders' Equity
Current Liabilities
Trade accounts payable	$	—	$	380	$	—	$	—		$	380
Current portion of long-term debt	29		—		—		—			29
Current portion of workers’ compensation liabilities	—		201		—		—			201
Current portion of postretirement plan liabilities	—		172		—		—			172
Accrued employees’ compensation	—		221		—		—			221
Advance payments and billings in excess of costs incurred	—		101		—		—			101
Provision for contract losses	—		19		—		—			19
Other current liabilities	26		223		—		—			249
Total current liabilities	55		1,317		—		—			1,372
Long-term debt	1,725		105		—		—			1,830
Other postretirement plan liabilities	—		581		—		—			581
Pension plan liabilities	—		936		—		—			936
Workers’ compensation liabilities	—		361		—		—			361
Other long-term liabilities	—		49		—		—			49
Intercompany liabilities	669		23		—		(692		)	—
Total liabilities	2,449		3,372		—		(692		)	5,129
Stockholders’ equity	872		2,358		—		(2,358		)	872
Total liabilities and stockholders’ equity	$	3,321	$	5,730	$	—	$	(3,050	)	$	6,001

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)



	Nine Months Ended September 30, 2012
($ in millions)	Huntington Ingalls Industries, Inc.			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	(76	)	$	34		$	1	$	—	$	(41	)
Investing Activities
Additions to property, plant, and equipment	—			(92		)	—		—		(92		)
Net cash provided by (used in) investing activities	—			(92		)	—		—		(92		)
Financing Activities
Proceeds from issuance of long-term debt	—			—			—		—		—
Repayment of long-term debt	(22		)	—			—		—		(22		)
Debt issuance costs	—			—			—		—		—
Repayment of notes payable to former parent and accrued interest	—			—			—		—		—
Dividend to former parent in connection with spin-off	—			—			—		—		—
Proceeds from stock option exercises	6			—			—		—		6
Net transfers from (to) former parent	—			—			—		—		—
Cash sweep/funding by parent	(58		)	58			—		—		—
Net cash provided by (used in) financing activities	(74		)	58			—		—		(16		)
Change in cash and cash equivalents	(150		)	—			1		—		(149		)
Cash and cash equivalents, beginning of period	915			—			—		—		915
Cash and cash equivalents, end of period	$	765		$	—		$	1	$	—	$	766

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)



	Nine Months Ended September 30, 2011
($ in millions)	Huntington Ingalls Industries, Inc.			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	(29	)	$	83		$	—	$	—	$	54
Investing Activities
Additions to property, plant, and equipment	—			(119		)	—		—		(119		)
Net cash provided by (used in) investing activities	—			(119		)	—		—		(119		)
Financing Activities
Proceeds from issuance of long-term debt	1,775			—			—		—		1,775
Repayment of long-term debt	(14		)	—			—		—		(14		)
Debt issuance costs	(54		)	—			—		—		(54		)
Repayment of notes payable to former parent and accrued interest	—			(954		)	—		—		(954		)
Dividend to former parent in connection with spin-off	(1,429		)	—			—		—		(1,429		)
Proceeds from stock option exercises	1			—			—		—		1
Net transfers from (to) former parent	—			1,276			—		—		1,276
Cash sweep/funding by parent	286			(286		)	—		—		—
Net cash provided by (used in) financing activities	565			36			—		—		601
Change in cash and cash equivalents	536			—			—		—		536
Cash and cash equivalents, beginning of period	—			—			—		—		—
Cash and cash equivalents, end of period	$	536		$	—		$	—	$	—	$	536