Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

HII performs impairment tests for goodwill as of November 30 of each year and between annual impairment tests if an event occurs or circumstances change that would more likely than not reduce the fair values of the Company's reporting units below their carrying values. Reporting units are aligned with the Company's businesses. The Company’s testing approach utilizes a combination of discounted cash flow analysis and comparative market multiples to determine the fair values of its businesses for comparison to their corresponding book values.

In connection with the Company’s annual goodwill impairment test as of November 30, 2021, management tested goodwill for each of its three reporting units with goodwill balances. As a result of the Company's annual goodwill impairment analysis, it estimated that the fair value of the Government Services reporting unit within the Technical Solutions segment exceeded carrying value by less than 10%. The Company determined that the estimated fair values of its remaining reporting units exceeded by more than 10% their corresponding carrying values as of November 30, 2021.

As a result of slower than expected growth in operating margin, a revised future outlook for the business, and less favorable market conditions, the Company concluded the fair value of its oil and gas reporting unit was less than its carrying value as of November 30, 2019. The Company recorded the resulting goodwill impairment charge of $29 million at the oil and gas reporting unit in its Technical Solutions segment in the fourth quarter of 2019.

Accumulated goodwill impairment losses as of each of December 31, 2021 and 2020, were $2,906 million. The accumulated goodwill impairment losses for Ingalls as of each of December 31, 2021 and 2020, were $1,568 million. The accumulated goodwill impairment losses for Newport News as of each of December 31, 2021 and 2020, were $1,187 million. The accumulated goodwill impairment losses for the Technical Solutions segment as of each of December 31, 2021 and 2020, were $151 million.

For the year ended December 31, 2021, the Company recorded $1,024 million of goodwill related to its acquisition of Alion. For the year ended December 31, 2020, the Company recorded $350 million of goodwill related to its acquisitions of Hydroid and SIS. For the year ended December 31, 2021, the Company recorded goodwill adjustments of $13 million relating to the acquisition of SIS, primarily related to allocations to other intangible

assets. For the year ended December 31, 2020, the Company recorded goodwill adjustments of $71 million relating to the acquisition of Hydroid, primarily related to allocations to other intangible assets. For the year ended December 31, 2020, the Company allocated $35 million of goodwill at its Technical Solutions segment to an asset group that was classified as held for sale.

For the years ended December 31, 2021 and 2020, the carrying amounts of goodwill changed as follows:


($ in millions)	Ingalls		Newport News		Technical Solutions		Total
Balance as of December 31, 2019	$	175	$	721	$	477	$	1,373
Acquisitions	—		—		350		350
Adjustments	—		—		(106)		(106)

Balance as of December 31, 2020	175		721		721		1,617
Acquisitions	—		—		1,024		1,024
Adjustments	—		—		(13)		(13)

Balance as of December 31, 2021	$	175	$	721	$	1,732	$	2,628

Other Intangible Assets

The Company performs tests for impairment of long-lived assets whenever events or circumstances suggest that long-lived assets may be impaired. In connection with the Alion purchase in 2021, the Company recorded $720 million of intangible assets pertaining to customer relationships and existing contract backlog, which is being amortized using the pattern of benefits method over a weighted-average life of 15 years. In connection with the SIS purchase in 2020, the Company recorded $13 million of intangible assets pertaining to technology and existing contract backlog, which is being amortized using the pattern of benefits method over a weighted-average life of ten years. In connection with the Hydroid purchase in 2020, the Company recorded $76 million of intangible assets pertaining to existing contract backlog, customer relationships, and technology, which is being amortized using the pattern of benefits method over a weighted-average life of nine years.

The Company's purchased intangible assets are being amortized on a straight-line basis or a method based on the pattern of benefits over their estimated useful lives. Net intangible assets consist primarily of amounts relating to customer relationships and existing contract backlog within Technical Solutions, as well as nuclear-powered aircraft carrier and submarine program intangible assets, with an aggregate weighted-average useful life of 29 years based on the long life cycle of the related programs. Aggregate amortization expense for the years ended December 31, 2021, 2020, and 2019, was $86 million, $56 million, and $47 million, respectively.

The Company expects amortization for purchased intangible assets of $141 million in 2022, $129 million in 2023, $108 million in 2024, $98 million in 2025, and $80 million in 2026.