2021
Annual Report
Selected Financial Highlights
,
9
9
7
6
3
$
7
6
6
5
3
$
,
1
,
4
8
3
3
$
5
0
5
5
3
$
,
,
0
7
4
4
3
$
6
3
5
,
1
3
$
%
8
.
1
1
%
4
.
1
1
%
8
.
1
1
19
20
21
19
20
21
19
20
21
Sales
( $ in millions )
Organic Sales*
( $ in millions )
Segment Operating
Margin Rate*
6
1
.
6
$
7
6
5
6 $
.
1
.
5
$
.
3
6
5
2
$
.
5
6
3
2
$
1
2
.
1
2
$
7
9
2
4
$
,
5
0
3
4
$
,
7
6
5
3
$
,
19
20
21
19
20
21
19
20
21
Transaction-Adjusted
EPS*
Cash Dividends
Declared
(per Common Share)
Cash Provided by
Operating Activities
($ in Millions)
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(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:79)(cid:92)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:75)(cid:92)(cid:3)(cid:90)(cid:72)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:15)(cid:3)
(cid:83)(cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:166)(cid:56)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:167)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:68)(cid:70)(cid:78)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:17)
Dear Shareholders,
(cid:44)(cid:81)(cid:3)(cid:21)(cid:19)(cid:21)(cid:20)(cid:15)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:80)(cid:68)(cid:71)(cid:72)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:241)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:92)(cid:3)
(cid:82)(cid:73)(cid:3)(cid:83)(cid:85)(cid:82)(cid:241)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:70)(cid:85)(cid:72)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3)(cid:39)(cid:85)(cid:76)(cid:89)(cid:72)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
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(cid:86)(cid:87)(cid:72)(cid:83)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:76)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:72)(cid:3)(cid:68)(cid:81)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:87)(cid:85)(cid:72)(cid:81)(cid:74)(cid:87)(cid:75)(cid:72)(cid:81)(cid:3)
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(cid:87)(cid:82)(cid:3)(cid:71)(cid:72)(cid:72)(cid:83)(cid:72)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:76)(cid:81)(cid:74)(cid:73)(cid:88)(cid:79)(cid:3)(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
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(cid:88)(cid:81)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:17)
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(cid:87)(cid:75)(cid:85)(cid:72)(cid:68)(cid:87)(cid:86)(cid:3)(cid:70)(cid:68)(cid:79)(cid:79)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:84)(cid:88)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:86)(cid:82)(cid:83)(cid:75)(cid:76)(cid:86)(cid:87)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:83)(cid:82)(cid:85)(cid:87)(cid:73)(cid:82)(cid:79)(cid:76)(cid:82)(cid:17)(cid:3)(cid:49)(cid:82)(cid:85)(cid:87)(cid:75)(cid:85)(cid:82)(cid:83)(cid:3)(cid:42)(cid:85)(cid:88)(cid:80)(cid:80)(cid:68)(cid:81)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:80)(cid:82)(cid:81)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)
(cid:87)(cid:82)(cid:3)(cid:69)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:74)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:82)(cid:85)(cid:79)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:21)(cid:19)(cid:21)(cid:20)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:72)(cid:92)(cid:82)(cid:81)(cid:71)(cid:17)(cid:3)
2021 Performance
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(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:86)(cid:17)
NORTHROP GRUMMAN 2021 ANNUAL REPORT
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Our Strong, Sustainable Culture
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PAGE 2
NORTHROP GRUMMAN 2021 ANNUAL REPORT
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NORTHROP GRUMMAN 2021 ANNUAL REPORT
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(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)
(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:241)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:51)(cid:68)(cid:85)(cid:70)(cid:72)(cid:79)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)
(cid:11)(cid:68)(cid:3)(cid:83)(cid:68)(cid:70)(cid:78)(cid:68)(cid:74)(cid:72)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:92)(cid:3)(cid:70)(cid:75)(cid:68)(cid:76)(cid:81)(cid:3)
(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:12)
(cid:48)(cid:68)(cid:85)(cid:76)(cid:68)(cid:81)(cid:81)(cid:72)(cid:3)(cid:38)(cid:17)(cid:3)(cid:37)(cid:85)(cid:82)(cid:90)(cid:81)(cid:3)1 3
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:50)(cid:73)(cid:241)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:42)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)
(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:41)(cid:76)(cid:71)(cid:72)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:49)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)
(cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)
(cid:87)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)(cid:3)(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:85)(cid:12)
(cid:39)(cid:82)(cid:81)(cid:68)(cid:79)(cid:71)(cid:3)(cid:40)(cid:17)(cid:3)(cid:41)(cid:72)(cid:79)(cid:86)(cid:76)(cid:81)(cid:74)(cid:72)(cid:85)(cid:3)2 3
(cid:47)(cid:72)(cid:68)(cid:71)(cid:3)(cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:15)(cid:3)(cid:49)(cid:82)(cid:85)(cid:87)(cid:75)(cid:85)(cid:82)(cid:83)(cid:3)
(cid:42)(cid:85)(cid:88)(cid:80)(cid:80)(cid:68)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:30)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:241)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:54)(cid:72)(cid:80)(cid:83)(cid:85)(cid:68)(cid:3)(cid:40)(cid:81)(cid:72)(cid:85)(cid:74)(cid:92)(cid:3)
(cid:11)(cid:72)(cid:81)(cid:72)(cid:85)(cid:74)(cid:92)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:12)
(cid:36)(cid:81)(cid:81)(cid:3)(cid:48)(cid:17)(cid:3)(cid:41)(cid:88)(cid:71)(cid:74)(cid:72) 1 3
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)
(cid:50)(cid:73)(cid:241)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:60)(cid:82)(cid:88)(cid:81)(cid:74)(cid:3)(cid:9)(cid:3)(cid:53)(cid:88)(cid:69)(cid:76)(cid:70)(cid:68)(cid:80)(cid:3)(cid:37)(cid:85)(cid:68)(cid:81)(cid:71)(cid:86)(cid:3)(cid:11)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:12)
(cid:58)(cid:76)(cid:79)(cid:79)(cid:76)(cid:68)(cid:80)(cid:3)(cid:43)(cid:17)(cid:3)(cid:43)(cid:72)(cid:85)(cid:81)(cid:68)(cid:81)(cid:71)(cid:72)(cid:93)(cid:3)1† 4
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:73)(cid:241)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:51)(cid:51)(cid:42)(cid:3)(cid:44)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86)(cid:15)(cid:3)
(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:70)(cid:75)(cid:72)(cid:80)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:3)
(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:85)(cid:12)
(cid:48)(cid:68)(cid:71)(cid:72)(cid:79)(cid:72)(cid:76)(cid:81)(cid:72)(cid:3)(cid:36)(cid:17)(cid:3)(cid:46)(cid:79)(cid:72)(cid:76)(cid:81)(cid:72)(cid:85)(cid:3)2 3†
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:88)(cid:81)(cid:86)(cid:72)(cid:79)(cid:15)(cid:3)(cid:43)(cid:76)(cid:79)(cid:87)(cid:82)(cid:81)(cid:3)(cid:43)(cid:82)(cid:87)(cid:72)(cid:79)(cid:86)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:11)(cid:75)(cid:82)(cid:87)(cid:72)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:86)(cid:82)(cid:85)(cid:87)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:12)
(cid:46)(cid:68)(cid:85)(cid:79)(cid:3)(cid:45)(cid:17)(cid:3)(cid:46)(cid:85)(cid:68)(cid:83)(cid:72)(cid:78)(cid:3)2 3
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:50)(cid:73)(cid:241)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:55)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:76)(cid:72)(cid:86)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:11)(cid:68)(cid:72)(cid:85)(cid:82)(cid:86)(cid:83)(cid:68)(cid:70)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:88)(cid:76)(cid:79)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:12)
(cid:42)(cid:85)(cid:68)(cid:75)(cid:68)(cid:80)(cid:3)(cid:49)(cid:17)(cid:3)(cid:53)(cid:82)(cid:69)(cid:76)(cid:81)(cid:86)(cid:82)(cid:81)(cid:3)1 4
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:79)(cid:72)(cid:92)(cid:3)(cid:37)(cid:79)(cid:68)(cid:81)(cid:71)(cid:3)(cid:9)(cid:3)
(cid:39)(cid:72)(cid:70)(cid:78)(cid:72)(cid:85)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:54)(cid:55)(cid:36)(cid:49)(cid:47)(cid:40)(cid:60)(cid:3)(cid:44)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)
(cid:11)(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:82)(cid:82)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:68)(cid:85)(cid:71)(cid:90)(cid:68)(cid:85)(cid:72)(cid:12)
(cid:42)(cid:68)(cid:85)(cid:92)(cid:3)(cid:53)(cid:82)(cid:88)(cid:74)(cid:75)(cid:72)(cid:68)(cid:71)(cid:3)2 4†
(cid:36)(cid:71)(cid:80)(cid:76)(cid:85)(cid:68)(cid:79)(cid:15)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:49)(cid:68)(cid:89)(cid:92)(cid:3)(cid:11)(cid:53)(cid:72)(cid:87)(cid:17)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:68)(cid:89)(cid:68)(cid:79)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
(cid:55)(cid:75)(cid:82)(cid:80)(cid:68)(cid:86)(cid:3)(cid:48)(cid:17)(cid:3)(cid:54)(cid:70)(cid:75)(cid:82)(cid:72)(cid:90)(cid:72) 2† 4
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:73)(cid:241)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:58)(cid:68)(cid:79)(cid:16)(cid:48)(cid:68)(cid:85)(cid:87)(cid:3)(cid:54)(cid:87)(cid:82)(cid:85)(cid:72)(cid:86)(cid:15)(cid:3)
(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:82)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:86)(cid:87)(cid:82)(cid:85)(cid:72)(cid:86)(cid:12)
(cid:45)(cid:68)(cid:80)(cid:72)(cid:86)(cid:3)(cid:54)(cid:17)(cid:3)(cid:55)(cid:88)(cid:85)(cid:79)(cid:72)(cid:92) 1 3
(cid:41)(cid:82)(cid:85)(cid:80)(cid:72)(cid:85)(cid:3)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)
(cid:50)(cid:73)(cid:241)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:40)(cid:85)(cid:81)(cid:86)(cid:87)(cid:3)(cid:9)(cid:3)(cid:60)(cid:82)(cid:88)(cid:81)(cid:74)(cid:3)(cid:11)(cid:68)(cid:3)(cid:83)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)
(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:82)(cid:85)(cid:74)(cid:68)(cid:81)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:12)
(cid:48)(cid:68)(cid:85)(cid:78)(cid:3)(cid:36)(cid:17)(cid:3)(cid:58)(cid:72)(cid:79)(cid:86)(cid:75) 1 4
(cid:39)(cid:72)(cid:68)(cid:81)(cid:15)(cid:3)(cid:37)(cid:88)(cid:86)(cid:75)(cid:3)(cid:54)(cid:70)(cid:75)(cid:82)(cid:82)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:42)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:51)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:15)(cid:3)(cid:55)(cid:72)(cid:91)(cid:68)(cid:86)(cid:3)(cid:36)(cid:9)(cid:48)(cid:3)(cid:56)(cid:81)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:87)(cid:92)(cid:30)(cid:3)
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PAGE 2
NORTHROP GRUMMAN 2021 ANNUAL REPORT
(cid:51)(cid:36)(cid:42)(cid:40)(cid:3)(cid:22)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
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 1-16411
NORTHROP GRUMMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
2980 Fairview Park Drive
Falls Church, Virginia
(Address of principal executive offices)
80-0640649
(I.R.S. Employer
Identification Number)
22042
(Zip code)
Securities registered pursuant to section 12(b) of the Act:
(703) 280-2900
(Registrant’s telephone number, including area code)
Title of each class
Common Stock
Trading Symbol(s)
NOC
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in RuleRR
405 of the Securities Act.
No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act
Yes ☒
Yes ☐
No ☒
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 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.
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 ☐
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,”
company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer ☒
Non-accelerated Filer ☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Smaller Reporting Company ☐
Emerging Growth Company ☐
“smaller reporting company” and “emerging growth
Accelerated Filer ☐
ff
As of June 30, 2021, the aggregate market value of the common stock (based upon the closing price of the stock on the New York Stock Exchange) of the
registrant held by non-affiliates was approximately $58.2 billion.
Yes ☐
No ☒
As of January 24, 2022, 156,101,934 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Northrop Grumman Corporation’s Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A for
the 2022 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safetyt Disclosures
Properties
Legal Proceedings
NORTHROP GRUMMAN CORPORATION
TABLE OF CONTENTS
PART I
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[Reserved]
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Consolidated Operating Results
Segment Operating Results
Product and Service Analysis
Backlog
Liquidity and Capia tal Resources
Critical Accounting Policies, Estimates and Judgments
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supple
mentary Data
u
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings and Comprehensive Income
Consolidated Statements of Financial Position
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Shareholders’ Equity
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
2. Dispositions
3. Earnings Per Share, Share Repurchases and Dividends on Common Stock
4. Accounts Receivabla e, Net
5. Unbilled Receivables, Net
6. Inventoried Costs, Net
7. Income Taxes
8. Goodwill and Other Purchased Intangible Assets
9. Fair Value of Financial Instruments
10. Debt
11. Investigations, Claims and Litigation
12. Commitments and Contingencies
13. Retirement Benefits
14. Stock Compensation Plans and Other Compensation Arrangements
15. Leases
16. Segment Information
i
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Informa
tion
ff
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 15. Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary
tt
Signatures
PART IV
ii
NORTHROP GRUMMAN CORPORATRR ION
Item 1. Business
HISTORY AND ORGANIZATION
PART I
History
Northrop Grumman Corporation (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”)
is a leading global aerospace and defense company. We deliver a broad range of products, services and solutions to
U.S. and international customers, and principally to the U.S. Department of Defens
e (DoD) and intelligence
community. Our broad portfolio is aligned to support national security priorities and our solutions equip our
customers with capaa bila
ities they need to connect, protect and advance humanity.
ff
a
lities, mission systems, networking and communications, strategic deterrence systems, and
The company is a leading provider of space systems, advanced aircraft, missile defense, advanced weapons and
long-range fires capabi
breakthrough technologies, such as artificial intelligence, advanced computing and cyber. We are focused on
competing and winning programs that enablea
delivering capaa bila
with our talented workforce and digital transformation capaa bila
our customers' needs today and in the future. For a discussion of risks associated with our operations, see “Risk
Factors.”
y
continued growth, performing on our commitments and affordabl
ity our customers need. With the investments we've made in advanced technologies, combined
ities, Northrop Grumman is well positioned to meet
ff
The company originally was formed in 1939 in Hawthorne, California as Northrop Aircraft Incorporated and was
reincorporated in Delaware in 1985, as Northrop Corporation. Northrop Corporation was a principal developer of
flying wing technology, including the B-2 Spirit bomber. The company developed into one of the largest defense
contractors in the world through a series of acquisitions, as well as organic growth, including the following:
•
•
•
•
•
•
•
•
1994 - Acquired Grumman Corporation, a premier military aircraft systems integrator. The combined
company was renamed Northrop Grumman Corporation;
1996 - Acquired the defense and electronics businesses of Westinghouse Electric Corporation, developer of
sophisticated radar and other electronics systems;
2001 - Acquired Litton Industries, Inc., a global electronics and information technology company and full
service shipbuilder;
2001 - Acquired Newport News Shipbuilding Inc., designer and builder of nuclear-powered aircraft carriers
and submarines;
2002 - Acquired TRW Inc., developer of military and civil space systems and payloads, and integrator of
complex, mission-enablia
ng systems and services;
2011 - Completed the spin-off of Huntington Ingalls Industries, Inc., operator of our former shipbuilding
business, comprised largely of a part of Litton Industries and Newport News Shipbuilding;
2018 - Acquired Orbital ATK, Inc. (OATK), developer and producer of satellites and other space systems,
launch vehicles and missile products; and
2021 - Completed the sale of our IT and mission support services business (the “IT services divestiture”) to
Veritas Capia tal.
Organization
From time to time, we acquire or dispose of businesses and realign contracts, programs or businesses among and
within our operating segments. Internal realignments are typically designed to leverage existing capaa bila
ities more
fully and to enhance efficient development and delivery of products and services. At December 31, 2021, the
company was aligned in four operating sectors, which also comprisem
Defense Systems, Mission Systems and Space Systems.
our reportablea
segments: Aeronautics Systems,
AERONAUTICS SYSTEMS
Aeronautics Systems is a leader in the design, development, production, integration, sustainment and modernization
of advanced aircraft systems for the U.S. Air Force, the U.S. Navy, other U.S. government agencies, and
international customers. These aircraft systems support four mission areas: strike; air dominance; battle management
-1-
NORTHROP GRUMMAN CORPORATRR ION
and control; and intelligence, surveillance and reconnaissance (ISR). Aeronautics Systems is reported in two
business areas: Autonomous Systems and Manned Aircraft.
Autonomous Systems – provides unmanned autonomous aircraft systems, including high-altitude
(HALE) strategic ISR systems and vertical take-off and landing (VTOL) tactical ISR systems. Key programs
include:
long-endurance
t
• MQ-4C Triton, which provides wide area strategic ISR over vast ocean and coastal regions for maritime
domain awareness to the U.S. Navy and Australia;
•
•
RQ-4 Global Hawk, which provides high resolution imagery of land masses for theater awareness and
strategic ISR to the U.S. Air Force, Japan, and the Republic of Korea;
North Atlantic Treaty Organization (NATO) Alliance Ground Surveillance (AGS), a Global Hawk variant,
for strategic ISR missions conducted in multinational theater operations; and
• MQ-8B and MQ-8C Fire Scout, ship-based, VTOL tactical ISR systems that provide situational awareness
and precision targeting for the U.S. Navy.
Manned Aircraft – provides strategic long-range strike aircraft, tactical fighter and air dominance aircraft, and
airborne battle management and command and control systems. Key programs include:
•
•
•
•
Development and production of the U.S. Air Force B-21 Raider long-range strike bomber, as well as
modernization and sustainment services for the B-2 Spirit bomber;
Fuselage production for the F/A-18 Super Hornet and the F-35 Lighting II Joint Strike Fighter for use by
U.S. and international forces;
E-2D Advanced Hawkeye battle management aircraft production for the U.S. Navy, Japan, and France; and
E-8C Joint Surveillance Target Attack Radar System (JSTARS) aircraft sustainment and modernization for
the U.S. Air Force.
DEFENSE SYSTEMS
Defense Systems is a leader in the design, development, production, integration, sustainment and modernization of
weapon and mission systems for U.S. militaryrr and civilian agency customers, and a broad range of international
customers. Majora
and mission systems sustainment and modernization. The sector is reported in two business areas: Battle
Management & Missile Systems, and Mission Readiness.
products and services include integrated battle management systems, weapons systems and aircraft
d battle management, sensors, targeting and surveillance systems – a backbone architecturett
systems, including munitions and missiles. The business provides integration and interoperabila
Battle Management & Missile Systems – designs, develops and integrates multi-domain command and control (C2)
a
and weapons
net-enablea
Domain Command and Control (JADC2) capabl
defense C2 systems. It also develops and produces precision strike weapons; advanced propulsion, including high
speed air-breathing and hypersonic systems; and high-performance gun systems and precision munitions.
Competencies include system and software development; integration of weapona
component development and production; and production of advanced fuzes, munitions and defense electronics. Key
programs include:
e of integrating sensors and shooters, as well as air and missile
systems; tactical missile and
for Joint All-
ity of
a
•
•
•
•
•
Integrated Air and Missile Defense Battle Command System (IBCS) for the U.S. Army and Poland, which
is a system that integrates sensors and effectors to deliver among the most advanced C2 systems for joint
and coalition forces;
Counter Rocket, Artillery and Mortar (C-RAM), a set of systems used to detect and destroy incoming
threats;
U.S. Navy’s Advanced Anti-Radiation Guided Missile (AARGM), a medium-range, air-to-surface missile,
and its extended range variant, AARGM-ER;
Guided Multiple Launch Rocket System (GMLRS) propulsion and warhead subsystems for a surface-to-
surface system used to defeat targets using indirect precision fires up to 70-plus kilometers;
Precision Guidance Kit (PGK), replaces conventional fuzes for artillery and mortar munitions and
transforms them into Global Positioning System enablea
d precision guided weapons;
and
a
-2-
NORTHROP GRUMMAN CORPORATRR ION
•
U.S. Army’s Mission Command Training Program (MCTP), providing the design, development and
support to train and exercise senior Army Commanders on modern warfighting operations.
Mission Readiness – provides full life cycle service and support for softwa
logistics support, sustainment, operations and modernization for air, sea and ground systems. It also supports critical
warfighter training for complex missions in a realistic virtual
t
electronics and embedded software sustainment; digital engineering and extended reality training for platform
logistics; and maintenance. Key programs include:
environment. Competencies include aircraft,
re, weapons systems and aircraft, and
ff
•
•
•
•
Global system sustainment and operations support for the F-35, B-2, E-8C JSTARS surveillance aircraft,
P-3 Orion, KC-30A multi-role tanker, C-27J transport, Global Hawk and Triton programs;
Special Electronics Mission Aircraft (SEMA) intelligence, surveillance and reconnaissance support;
AAQ-24 sensor sustainment and repair for U.S. military customers; and
APN-241 radar sustainment, repair and production for U.S. militaryrr and foreign military sales (FMS)
customers.
MISSION SYSTEMS
Mission Systems is a leader in advanced mission solutions and multifunction systems, primarily for the U.S. defense
products and services include cyber; command,
and intelligence community, and international customers. Majora
control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR) systems; radar,
electro-optical/infrared (EO/IR) and acoustic sensors; electronic warfare systems; advanced communications and
network systems; cyber solutions; intelligence processing systems; navigation; and maritime power, propulsion and
payload launch systems. The sector is reported in four business areas: Airborne Multifunction Sensors; Maritime/
Land Systems & Sensors; Navigation, Targeting & Survivability; and Networked Information Solutions.
ff
ion Sensors – delivers products, systems and services that support airborne platforms with multi-
Airborne Multifunct
function radio frequency (RF) and EO/IR systems; radar, electronic warfare and situational awareness mission
systems; and high altitude ISR sensors. Competencies include fire control, surveillance and early warning and
control radar systems; electronic attack and electronic support systems; and multi-sensor processing. Key
unrestricted programs include:
•
•
•
•
Early Warning & Control (AEW&C). The center piece of the E-7 AEW&C aircraft is the Multi-
r
Airborne
role Electronically Scanned Array (MESA) radar which enablea
moving target indicator (AMTI) capabi
Surveillance;
a
lities for Battle Management, Command and Control, and Maritime
s 360 degree long range advanced air
F-35 fire control radar and Distributed Aperturett
tracking, identifying, missile warning and night vision capaa bila
ities;
System (DAS), which provides 360 degree field of view
LONGBOW Fire Control Radar (FCR), which provides fire control radar capaa bila
helicopter fleet; and
ities for the global AH-64
Scalable Agile Beam Radar (SABR), an active electronically scanned array fire control radar system for
F-16 aircraft.
a
Maritime/Land Systems & Sensors – delivers products, systems and services that enable maritime and ground
platform mission capabi
lities via sensors, targeting and surveillance systems; electronic warfare systems; mission
module integration; power, propulsion and control systems; and missile launchers. Competencies include ground
and maritime radar systems; nuclear ship propulsion and power generation systems; shipboard missile and
encapsulated payload launch systems; integrated bridge systems; unmanned maritime vehicles; high-resolution
undersea sensors; deep-sea packaging; and mission integration. Key unrestricted programs include:
•
•
•
Surface Electronic Warfare Improvement Program (SEWIP) Block III, which protects surface ships from
anti-ship missiles, provides early detection, signal analysis and threat warning;
Ground/Air Task Oriented Radar (G/ATOR), a mobile multi-mode active electronically scanned array;
Littoral Combat Ship Mission Module Integration, which provides engineering design, support and
production of mission modules for U.S. Navy littoral combat ships;
-3-
NORTHROP GRUMMAN CORPORATRR ION
•
•
DDG Modernization, which is comprised of several subsystems to support modernization of Arleigh
Burke-class guided missile destroyers including Integrated Bridge and Navigation Systems (IBNS) and ship
control systems; and
Offshore Patrol Cutter (OPC), the integrator for C5ISR systems on the U.S. Coast Guard OPC including
integrated bridge, navigation, command and control, computing network, machinery and propulsion
control.
r
ing & Survivability – delivers products, systems and services that support
Navigation, Target
targeting, self-protection and situational awareness mission systems; and provides embedded navigation and
positioning sensors for a range of platforms including ships, aircraft, spacecraft and weapons. Competencies include
EO/IR and RF self-protection; targeting and surveillance systems; digitized cockpits; and inertial navigation
systems. Key unrestricted programs include:
aircraft platforms with
u
•
•
•
•
•
•
LITENING Advanced Targeting Pod, an electro-optical infrared sensor system for targeting and
surveillance that enables aircrews to detect, acquire, identify and track targets at long ranges;
Large Aircraft and Common Infrared Countermeasures (LAIRCM, DoN LAIRCM, CIRCM) systems,
which protect large aircraft as well as rotary wing and medium fixed wing aircraft from infrared missiles
using advanced laser technology;
APR-39 DV(2) and EV(2) Radar Warning Receiver programs, which produce a digital radar warning
receiver for the U.S. Army, Navy and Marines;
AC/MC 130J Radio Frequency Countermeasures system, which provides superior situat
and better enables aircraft survivabila
ity in operationally relevant environments;
t
ional awareness
Embedded Global Positioning System (GPS) / Inertial Navigation Systems-Modernization (EGI-M)
program, which provides state-of-the-art airborne navigation capaa bila
enablea
s rapid responses to future threats; and
ities with an open architecturet
that
UH-60V Black Hawk integrated mission equipment package, which modernizes the U.S. Army’s Black
Hawk helicopters with a glass cockpit, including an integrated computational system, visual display system
and control display units, extending the life and mission capabi
lities of the UH-60 platform.
a
ff
ion Solutions - delivers products, systems and services in the areas of advanced communications
Networked Informat
and network systems, full spectrum cyber solutions, secure processing, transformational computing, advanced
technology development, and Signals Intelligence (SIGINT) mission systems. Competencies include software
defined radios and network gateways, communications and counter-communications systems; cyber mission
management; large scale cyber solutions for national security applications; cyber survivability; ground software
systems; and SIGINT sensors and processing. Key unrestricted programs include:
•
•
•
•
•
Battlefieldff
platforms to communicate and securely share data;
Airborne
r
Communications Node (BACN), one of the first airborne gateway systems that allows
F-35 Communications, Navigation and Identification (CNI) integrated avionics system, which provides
secure communications and interoperability capaa bila
ities;
Joint Counter Radio-Controlled Improvised Explosive Device Electronic Warfare (JCREW), a software-
jammer that provides protection from improvised explosive devices (IEDs);
programmablea
Exploitation and cyber programs, which provide cyber and intelligence domain support through unique
intelligence and cyber capabi
lities, and;
a
r
Signals Intelligence Payload (ASIP), which delivers key signals intelligence capaa bila
Airborne
warfighter by detecting, identifying, and locating radar and other types of electronic and modern
communication signals.
ities to the
-4-
NORTHROP GRUMMAN CORPORATIO
RR
N
SPACE SYSTEMS
Space Systems is a leader in delivering end-to-end mission solutions through the design, development, integration,
production and operation of space, missile defense, launch and strategic missile systems for national security, civil
government, commercial and international customers. Major products include satellites and payloads; ground
systems; missile defense systems and interceptors; launch vehicles and related propulsion systems; and strategic
missiles. The sector is reported in two business areas: Launch & Strategic Missiles, and Space.
tt
ii
c Missi
les – designs, develops, manufactures
Launch & Strategi
vehicles to place satellites into earth orbit; suborbital launch vehicles that place payloads into a variety of high-
altitude trajea ctories; large strategic missile systems; and missile defense systems. Competencies include large
strategic missile design, integration, production and sustainment, as well as the production of medium- and large-
class rocket propulsion systems for human and cargo launch vehicles, hypersonic boosters and missile defense
interceptors. Key programs include:
and integrates small- and medium-class space launch
t
•
•
Antares rocket, used in the execution of our Commercial Resupply Services (CRS) contracts with the
National Aeronautics and Space Administration (NASA);
Development and production of solid rocket motors for NASA’s Space Launch System (SLS) heavy lift
vehicle;
• Missile defense systems, interceptors, targets, mission processing and boosters for the Missile Defense
Agency's (MDA) Next-Generation Interceptor (NGI), Ground-based Midcourse Defense (GMD) system
and Ground Based Interceptor (GBI);
•
Ground Based Strategic Deterrent (GBSD) Engineering & Manufacturing
tt
Development (EMD) program;
• Medium-class solid rocket motors for the U.S. Navy's Trident II Fleet Ballistic Missile program; and
•
Intercontinental Ballistic Missile (ICBM) Ground Subsystem Support Contract (GSSC).
Space – designs, develops, manufactures and integrates spacecraft systems, subsystems, sensors, payloads and
ground systems to deliver mission capabi
orbit servicing, and human-rated space systems for earth orbit and deep-space exploration missions. Much of this
business is performed through restricted programs. Key unrestricted programs include:
lity to national security, science and environmental, communications, on-
a
•
•
•
•
•
•
Cygnus spacecraft, used in the execution of our CRS contracts with NASA;
Habitation and Logistics Outpost
tt
(HALO) module in support of NASA’s Gateway;
Advanced Extremely High Frequency (AEHF), Enhanced Polar System (EPS), Evolved Strategic
SATCOM (ESS), and Protected Tactical SATCOM (PTS) satellites and payloads providing survivablea
,
protected communications to U.S. forces;
Next-Generation Overhead Persistent Infrared (Next Gen OPIR) program satellites and payloads providing
data for missile defense;
Space sustainability driven by on orbit servicing vehicles Mission Extension Vehicle (MEV) 1 and 2; and
James Webb Space Telescope (JWST), a large infrared telescope built for NASA that was launched on
December 25, 2021 to study the origins of the universe.
CUSTOMER CONCENTRATION
Our largest customer is the U.S. government. Sales to the U.S. government accounted for 85 percent, 84 percent and
83 percent of sales during the years ended December 31, 2021, 2020 and 2019, respectively. For further information
on sales by customer type, contract type and geographic
region, see Note 16 to the consolidated financial statements.
See “Risk Factors” for further discussion regarding risks related to customer concentration.
a
COMPETITIVE CONDITIONS
We compete with many companies in the defense, intelligence and federal civil markets. The Boeing Company,
General Dynamics, L3Harris Technologies, Lockheed Martin, and Raytheon Technologies are some of our primary
competitors. Key characteristics of our industry include long operating cycles and intense competition, which is
evident through the number of competitors bidding on program opportunit
(competitor protests of U.S. government procurement awards).
ies and the number of bid protests
tt
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NORTHROP GRUMMAN CORPORATRR ION
It is common in the defense industry for work on majora
company competing to be a prime contractor may, upon ultimate award of the contract to another competitor, serve
as a subcont
ractor to the ultimate prime contracting company. It is not unusual to compete for a contract award with
u
a peer company and, simultaneously, perform as a suppli
contracts, or vice versa.
programs to be shared among a number of companies. A
er to or a customer of that same competitor on other
u
SEASONALITY
No material portion of our business is considered to be seasonal.
BACKLOG
d with $81.0 billion at December 31, 2020. In connection with the IT services divestiture,
At December 31, 2021, total backlog, which is equivalent to the company’s remaining performance obligations, was
$76.0 billion as comparem
the company reduced backlog by $1.4 billion during the first quarter of 2021 ($1.0 billion at Defense Systems, $0.2
billion at Mission Systems and $0.2 billion at Space Systems). For further information, see “Backlog” in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) and Note 1 to
the consolidated financial statements.
tt
INTELLECTUAL PROPERTY
t
We routinely apply for and own a number of U.S. and foreign patents related to the technologies we develop. We
also develop and protect intellectual property as trade secrets. In addition to owning a large portfolio of proprietary
intellectual
property, we license some intellectual property rights to third parties and we license or otherwise obtain
access to intellectual property from third parties. The U.S. government typically holds licenses to patents developed
in the performance of U.S. government contracts and may use or authorize others to use the inventions covered by
these patents for certain purposes. See “Risk Factors” for further discussion regarding risks related to intellectual
property.
RAW MATERIALS
We have experienced challenges with access to certain raw materials due to several global events such as
microelectronics shortages and COVID-19. Nonetheless, these challenges have not to date led to significant cost
increases or schedule delays. See “Risk Factors” for further discussion regarding risks related to raw materials.
HUMAN CAPITAL
employee engagement, innovation and
Creating a diverse, talented and inclusive workplace is central to our culture,
excellence, and in performing and delivering on our commitments. Our culturett
nt factor in our ability to
continue attracting and retaining qualified employees, particularly those with security clearances and requisite skills
in multiple areas, including science, technology, engineering and math. This focus was a factor in our ability to hire
approximately 9,500 new employees in 2021 and as of December 31, 2021, we have approximately 88,000
employees.
m
is an importa
t
Additional information regarding our human capita
in our Sustainability Report and Proxy
Statement, which can be found on our company website. Information on our website, including our Sustainabila
Report, is not incorporated by reference into this Annual Report.
al strategy is availablea
ity
Our Values and Culture
Our values reflect our priorities and form the bedrock of our culture:
• We do the right thing – we earn trust, act with ethics, integrity and transparency, treat everyone with
respect, value diversity and foster safe and inclusive environments.
• We do what we promise – we own the delivery of results, focused on quality.
• We commit to shared success – we work together to focus on the mission and take accountabila
ity for the
sustainablea
success of our people, customers, shareholders, suppliers and communities.
• We pioneer – with fierce curiosity, dedication and innovation, we seek to solve the world’s most
challenging problems.
We believe our values are vital to the continued and future success of the company, and in our ability to attract and
retain a diverse workforce. Our values are also integral to our commitment to long-term sustainability, with robust
environmental, social and governance (ESG) practices across our company. The company has a Standards of
Business Conduct program. All employees are empowered to raise concerns without fear of reprisal. We employ 140
business conduct advisors whose job is to promote values and an ethical culturett
within the company.
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NORTHROP GRUMMAN CORPORATION
Our annual employee survey gives employees the opportunity to provide feedback on our culture. This survey is
managed by a third-party vendor to encourage candor and solicit feedback on many aspects of engagement,
including company leadership, culture,
82 percent, an indication that our employees believe their feedback is important, and we were named a “High
Performing Company” by the third-party vendor based on our strong survey results. Our leaders review the survey
feedback and work with their teams to take action based on survey results.
inclusion and career development. In 2021, our employee response rate was
t
Diversity,yy Equity and Inclusion
Diversity, equity and inclusion (DE&I) are, and have long been, critical to our culturet
Our focus on DE&I enhances engagement and increases innovation and quality, enabling us to deliver better
performance for our shareholders, customers, and employees. Diversity is one of the company’s non-financial ESG
performance metrics and is reviewed by the Board of Directors. Across our total employee population, as of
December 31, 2021, 25 percent are female, 36 percent are people of color, 18 percent are veterans and 9 percent are
persons with disabilities. Over the past 10 years, at the vice president level, we have more than doubled the
representation of females from 16 percent to 35 percent and increased the representation of people of color by
approximately 65 percent, from 11 percent to 18 percent.
and our company’s success.
Talent Acquisition, Management and Development
We execute our Talent Management strategy with the whole employee experience in mind. We utilize an employee
experience continuum that focuses on key career milestones and aligns our employee development, engagement and
retention efforts
es throughout their careers. We believe this holistic approach
m
to talent management results in a better experience for our employees, from recruiting to retirement.
with the specific needs of our employe
o
ff
We hold regular talent review discussions to ensure insight into talent at various levels of the organization.
Succession plans are refreshed and reviewed to ensure a robust, diverse pipeline of talent and business continuity
with a tight linkage to development.
We design our employee development programs to strengthen employee skills aligned to our current and future
business needs, encourage knowledge transfer and support
u
My Learning Experience, a machine learning enabled content aggregator designed to create a unique and
personalized learning experience for each employee. We offer our employees online career-specific tools and
resources and we also support development opportunities through educad
tion
Assistance Program. Our early-in-career rotation program, Pathways, develops talent pipelines with both depth of
skills and breadth of experiences that are critical to the company’s future talent needs. Our technical cohort
programs are designed to cultivate technical, domain expertise and collaborat
through advanced career levels.
tional institutions with our Educad
ive thought leadership for early
career growth and progression. In late 2020, we launched
a
As our company continues to grow, we rely on an integrated talent acquisition program. The company strategically
of business needs and priorities. In order to accomplish our
attracts, identifies, and onboards candidates in support
goals, we seek talent with different perspectives, skills and experiences; maintain strategic relationships with
colleges; offer a robust employee referral program; and partner with numerous diversity organizations, military
organizations and our trusted external partners. The company continues to monitor the evolving hiring environment,
while applying agile recruiting methods to ensure employe
es and candidates have an exceptional experience.
m
u
lople are our most
ployees, customers,
Employee Healthtt and Safety
Pe
employe
ac itions iin response to hthe COVID-19 pa dndemiic to hhellp protect hthe hhe lal hth, safetyy
dand othhers. See “COVID-19” iin MD&A for f
lval bluable resource, andd we
hothers at our fa icilili ities.
i ivisitors andd
further didisc
iussion.
h
kwork dilidiliggentlyly to protect hthe hheallthh, safetyy
dand
llwell b-beinging of our
iDuri gng 2021, we hhave takken, andd contiinue to takke,
dand
llwell b-beinging of our em lpl yoyees
brobust
Health and safety are a core focus in everything we do. Risk and hazard identification, abatement and prevention are
key components of Northrop Grumman’s safety program. Everyone has a responsibility to identify workplace
hazards and we empower employees to report these hazards without fear of repercussion. We evaluate the
effectiveness of our health and safetff y programs externally, through benchmarking with industry peers and the U.S.
Bureau of Labor
Statistics. Internally, we determine program effectiveness by conducting trend analyses of our past
a
performance.
Collective Agreegg mentstt
Approximately 3,900 employees are covered by 15 collective agreements in the U.S., of which we negotiated five
renewals in 2021 and expect to negotiate four renewals in 2022.
See “Risk Factors” for further discussion regarding risks related to our workforce and employee relations.
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NORTHROP GRUMMAN CORPORATIO
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REGULATORY MATTERS
Government Contract Security Restrictions
We are prohibited by the U.S. government from publicly discussing the details of certain classified programs. These
programs are generally referred to as “restricted” in this Annual Report. The consolidated financial statements and
financial information in this Annual Report reflect the operating results of our entire company, including restricted
programs.
Contracts
We generate the majoa rity of our business from long-term contracts with the U.S. government for development,
production and support activities. Unless otherwise specified in a contract, allowable and allocable costs are billed to
contracts with the U.S. government pursuant to the Federal Acquisition Regulation (FAR) and U.S. government
Cost Accounting Standards (CAS), which are regulations that govern cost accounting requirements for government
contracts. Examples of costs incurred by us and not billed to the U.S. government in accordance with applicablea
FAR and CAS requirements include, but are not limited to, unallowable employee compensation, charitable
donations, interest expense, advertising and certain legal costs.
We monitor our contracts on a regular basis for compliance with our policies and procedures and applicablea
government laws and regulations. In addition, costs incurred and allocated to contracts with the U.S. government are
routinely audited by the Defense Contract Audit Agency (DCAA).
Our long-term contracts typically fall into one of two contract types:
t
contracts can be fixed in terms of dollar value or can be variable due to award and incentive fees, which
Cost-type contractstt – Cost-type contracts include cost plus fixed fee, cost plus award fee and cost plus incentive fee
contracts. Cost-type contracts generally provide for reimbursement of a contractor’s allowable costs incurred plus
contracts have less financial risk associated with unanticipated cost growth but generally
fee. As a result, cost-type
provide lower profit margins than fixed-price contracts. Cost-type contracts typically require that the contractor use
its best efforts to accomplish the scope of the work within some specified time and stated dollar limitation. Fees on
cost-type
t
are generally based on performance criteria such as cost, schedule, quality and/or technical performance. Award fees
are determined and earned based on customer evaluation of the company’s performance against contractual criteria.
Incentive fees are generally based on cost or schedule and provide for an initially negotiated fee to be adjuste
d later,
based on the relationship of total allowable costs to total target costs or as schedule milestones are met. Award and
incentive fees are included in total estimated sales to the extent it is probable that a significant reversal in the amount
of cumulative revenue recognized will not occur when the uncertainty associated with the variablea
subsequently resolved. We estimate variablea
entitled.
consideration as the most likely amount to which we expect to be
consideration is
d
tt
– Firm fixed-price contracts include a specified scope of work for a price that is a pre-
Fixeii d-price contracts
determined, negotiated amount and not generally subject to adjustment regardless of costs incurred by the
contractor, absent changes in scope by the customer. As a result, fixed-price contracts have more financial risk
associated with unanticipated cost growth, but generally provide the opportunity for higher profit margins than cost-
type contracts. Certain fixed-price incentive fee contracts provide for reimbursement of the contractor’s allowable
costs plus a fee up to a cost ceiling amount, typically through a cost-sharing ratio that affecff
contracts effectively become firm fixed-price contracts once the cost-share ceiling is reached. Time-and-materials
contracts are considered fixed-price contracts as they specify a fixed hourly rate for each labor
hour charged.
ts profitabila
ity. These
a
Profit margins on our contracts may vary materially depending on, among other things, the contract type, contract
phase (e.g., development, low-rate production or mature production), negotiated fee arrangements, achievement of
performance objectives, and cost, schedule and technical performance.
See Note 1 to the consolidated financial statements and “Risk Factors” for further information regarding our
contracts and Note 16 to the consolidated financial statements for sales by contract type.
-8-
NORTHROP GRUMMAN CORPORATRR ION
lowing table summarizes sales for the year ended December 31, 2021, recognized by contract type and
The folff
customer category:
$ in millions
Cost-type contracts
Fixed-price contracts
Total sales
U.S.
Government(1)
17,357
$
12,977
30,334
$
International(2)
653
$
4,329
4,982
$
$
$
Other
Customers
18
333
351
$
$
Percentage
of Total
Sales
51 %
49 %
100 %
Total
18,028
17,639
35,667
(1) Sales to the U.S. government include sales from contracts for which we are the prime contractor, as well as those for which we
are a subcontractor and the ultimate customer is the U.S. government. Each of the company’s segments derives substantial
revenue from the U.S. government.
(2) International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a
subcontractor and the ultimate customer is an international customer. These sales include foreign military sales contracted
through the U.S. government.
a
Environmental
Our operations are subject to and affected by federal, state, local and foreign laws, regulations and enforcement
actions relating to protection of the environment. In 2015, we announced our 2020 environmental sustainabila
ity
goals: to reduce absolut
e greenhouse gas emissions by 30 percent from 2010 levels; to reduce potable water use by
20 percent from 2014 levels; and to achieve a 70 percent solid waste diversion rate (away from landfills). In 2021,
we measured our performance against these goals and exceeded our greenhouse gas goal by reducing emissions 44
percent and met our potablea
waste diversion from landfills, achieving a 69 percent diversion rate, falff
challenged by changes in collection methods and waste haulers at some sites, related, in some cases, to COVID-19.
We are continuing our commitment to climate and environmental sustainability and are in the process of finalizing
the next generation of goals for 2022 and beyond.
water reduction goal of 20 percent. We made strong progress in increasing our solid
ling just short of our goal. We were
We have incurred and expect to continue to incur capita
environmental laws and regulations and to achieve our environmental sustainability commitments. See “Risk
Factors” and Notes 1 and 12 to the consolidated finaff
environmental matters.
al and operating costs to comply with appl
further information regarding
ncial statements forff
icable
a
EXECUTIVE OFFICERS
See “Directors, Executive Officers and Corporate Governance” forff
information about our executive officers.
AVAILABLE INFORMATION
Our principal executive offices are located at 2980 Fairview Park Drive, Falls Church, Virginia 22042. Our
telephone number is (703) 280-2900 and our home page is www.northropgrumman.com.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statement
for the annual shareholders’ meeting, as well as any amendments to those reports, are availablea
through our website as soon as reasonably practicablea
Commission (SEC). You can learn more about us by reviewing our SEC filff ings on the investor relations page of our
website.
after we file them with the U.S. Securities and Exchange
free of charge
The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information
about SEC registrants, including Northrop Grummrr
an Corporation.
,
References to our website and the SEC’s website in this report are provided as a convenience and do not constitutett
and should not be viewed as, incorporation by reference of the information contained on, or availablea
through, such
websites. Such information should not be considered a part of this report, unless otherwise expressly incorporated by
reference in this report.
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NORTHROP GRUMMAN CORPORATRR ION
Item 1A. Risk Factors
Our consolidated financial position, results of operations and cash flows are subjecb
are not exclusively within our control, that may cause actual performance to differ materially from historical or
projected futurett
the information contained in this report as the outcome of one or more of these risks could have a material adverse
effect on our financial position, results of operations and/or cash flows.
performance. We encourage you to consider carefully the risk factors described below in evaluating
t to various risks, many of which
Industry and Economic Risks
▪ We depend heavilyii on a single customer, the U.S. government, for a substanti
alii
tt
portiontt
of our business.
ii
Changes
in this customer’s prioritiett s and spendingn could have a material adverse effect on our financial position, resultsll
of operations and/or cash flows.
Our primary customer is the U.S. government, from which we derived 85 percent of our sales in 2021; we have a
number of large programs with the U.S. Department of the Air Force, in particular. The U.S. government has the
ability to delay, modify or cancel ongoing competitions, procurements and programs, as well as to change its future
acquisition strategy. We cannot predict the impact on existing, follow-on, replacement or futuret
programs from
potential changes in the threat environment, defense spending levels, government priorities, political leadership,
procurement practices and strategy, military strategy and planning; or broader changes in social, economic or
political demands and priorities.
The U.S. government generally has the ability to terminate contracts, in whole or in part, for its convenience or for
default based on performance. In the event of termination for convenience, contractors are generally protected by
provisions covering reimbursement for costs incurred and profit on those costs up to the amount authorized under
the contract, but not the anticipated profit that would have been earned. In the event of termination due to default,
contractors may be required to pay for re-procurement costs in excess of the original contract price, net of the value
of work accepted from the original contract, as well as other damages. Termination due to our default could have a
material adverse effecff
of operations and/or cash flows.
t on our reputation, our ability to compete for other contracts and our financial position, results
The U.S. government also has the ability to stop work under a contract for a limited period of time for its
convenience. The U.S. government has invoked and could invoke this ability across a limited or broad number of
contracts. In the event of a stop work order, contractors are typically protected by provisions covering
reimbursement for costs incurred to date and for costs associated with the temporary stoppage of work plus a
reasonable fee. However, such temporary stoppages often introduce inefficiencies and result in financial and other
damages for which contractors may not be able to negotiate full recovery. In some cases, they have also ultimately
resulted and could result in termination of a contract for convenience or reduced futuret
orders.
t
A significant shift in government priorities, programs or acquisition strategies could have a material adverse effecff
on our financial position, results of operations and/or cash flows.
▪
ll
ant delays
Significi
can negati
e
position, resultsll of operations and/or//
our business
vely impactm
ii
ll
cash flows.
or reductions in appropriati
i
ons for our programs and U.S. government funding more broadlyll
and programs and couldll have a material adverse effect on our financial
U.S. government programs are subject to annual congressional budget authorization and appropriation processes.
For many programs, Congress appropriates funds on an annual fiscal year basis even though the program
performance period may extend over several years. Programs are often partially funded initially and additional funds
are committed only as Congress makes further appropriations. When we incur costs in excess of funds obligated on
a contract, we are generally at risk for reimbursement of those costs unless and until additional funds are obligated to
the contract. We cannot predict the extent to which funding for individual programs will be included, increased or
reduced as part of the annual appropriations ultimately approved or in separate supplemental appropriations or
continuing resolutions. Laws and plans adopted by the U.S. government relating to, along with pressures on the
federal budget, potential changes in priorities and defense spending levels, the appropriations process, use of
continuing resolutions (with restrictions, e.g., on new starts) and the federal debt limit, have adversely affected and
could adversely affecff
customers. In the event government funding for our significant programs becomes unavailablea
delayed, or planned orders are reduced, our contract or subcontract for such programs has at times been, and in the
future may be, terminated or adjusted by the government or prime contractor.
t the funding for individual programs and delay purchasing or payment decisions by our
, or is reduced or
The U.S. continues to face an uncertain and changing political environment and substantial fiscal and economic
challenges, which affecff
t funding. The budget environment and uncertainty surrounding the appropriations processes
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NORTHROP GRUMMAN CORPORATIO
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and the debt ceiling, remain significant short and long-term risks. See “Overview – U.S. Political and Economic
Environment” in MD&A. Considerable uncertainty exists regarding how future budget and program decisions will
unfold, including the defense spending priorities. If annual appropriations bills are not timely enacted, the U.S.
government may continue to operate under a continuing resolution, restricting new contract or program starts,
presenting resource allocation challenges and placing limitations on some planned program budgets, and we may
face a government shutdown of unknown duration. If a prolonged government shutdown of the DoD were to occur,
it could result in program cancellations, disruptions and/or stop work orders and could limit the U.S. government’s
ability to progress programs and make timely payments, and our ability to perform on our U.S. government contracts
and successfully compete for new work. If the statutt ory debt limit is not increased adequately, we could be obligated
to work without receiving timely payments.
Future funding for certain programs in which we participate may be reduced, delayed or cancelled. In addition,
budget cuts globally could continue to adversely affecff
ers, and our
employee base. While we believe that our business is well-positioned in areas for future defense spending, changing
priorities, budget pressures, defense spending cuts, challenges in the appropriations process, the debt ceiling and
ongoing fiscal debates remain uncertain.
t the viability of our subcontractors and suppli
u
Significant delays or reductions in appropriations for our current and futuret
continuing resolution; an extended debt ceiling breach or government shutdown; and/or futurett
budget and program
decisions, among other items, may negatively impact our business and programs and could have a material adverse
effect on our financial position, results of operations and/or cash flows.
programs; long-term funding under a
▪ We use estimat
estt when accountingtt
ii
for contracts. Contract cost growth or changes in estimated contract revenues
and coststt can affect our profitabi
liii tyii and our overall financial position.
ii
Contract accounting requires judgment relative to assessing risks, estimating contract revenues and costs, and
assumptim ons regarding performance. Due to the size and nature of many of our contracts, the estimation of total
revenues and costs at completion is complex and subject to many variables. Incentives, awards and/or penalties
related to performance on contracts are considered in estimating revenue and profit rates when there is sufficient
information to assess anticipated performance. Suppliers’ expected performance is also considered.
ted when estimated contract costs increase. Reasons for increased
and complexity of the work,
Our operating income can be adversely affecff
estimated contract costs include: design issues; changes in estimates of the naturet
including technical or quality issues or requests for additional work; production challenges, including those resulting
ity or reduced productivity of qualified and timely cleared labor;
from the timeliness of customer funding, unavailabila
the availability, performance, and quality of significant subcontractors; supplier issues, including the costs,
timeliness and availability of materials and component
s; changes in laws or regulations; actions necessary for long-
term customer satisfaction; and natural disasters or environmental matters. We have filed and may file requests for
adjustment or claims to seek recovery in whole or in part for our increased costs and aim to protect against
equitablea
these risks through contract terms and conditions when practical, but the government may disagree with our requests
and may not have funding to cover them.
m
a
t
t
fixed-price contracts inherently tend to have more
contracts, including as a result of inflationary pressures, labor shortages, and increased
Our risk varies with the type of contract. Due to their nature,
financial risk than cost-type
labor
rates. In 2021, approximately half of our sales were derived from fixed-price contracts. We have typically
a
looked to fixed-price contracts where costs can be more reasonably estimated based on actual experience, such as for
production programs. However, our customers may also seek fixed-price contracts for development programs, where
the risks are greater. In addition, our contracts contain provisions relating to cost controls and audit rights. If we do
not achieve our estimates or meet terms specified in our contracts, our profitabila
reduced, and we have incurred and may incur losses.
ity has at times been and may be
Certain of our fixed-price contracts include or may include fixed-price development work. This work is inherently
more uncertain, and, as a result, there is typically more variabila
development stage. As work progresses into production, the risks associated with estimating the total costs are
typically reduced. While management uses its best judgment to estimate costs associated with fixed-price
development contracts, future events could result in adjustments.
ity in estimates of the costs to complete the
Under cost-type contracts, allowable costs incurred by the contractor are generally subject to reimbursement plus a
fee. We often enter into cost-type contracts for development programs with complex design and technical
challenges. These cost-type programs typically have award or incentive fees that are uncertain and may be earned
over extended periods or towards the end of the contract. In these cases, the associated financial risks are primarily
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NORTHROP GRUMMAN CORPORATION
in recognizing profit, which ultimately may not be earned, or program cancellation if cost, schedule, or technical
performance issues arise. We also face additional financial risk due to the number of contract solicitations requiring
the contractor to bid on cost-type development work and related fixed-price production lots and/or options in one
submission, or cost-type development work requiring the contractor to provide certain items to the customer at the
contractor’s expense or at little or no fee.
We also face the risk that contracts do not or will not enable full recovery of costs incurred as a result of or related to
the COVID-19 pandemic.
Because of the significance of management’s judgments and the estimation processes, it is possible that materially
different amounts could be obtained if different assumptim ons were used or if the underlying circumstances were to
change. Changes in underlying assumptions, circumstances or estimates, and the failure to prevail on claims for
equitablea
our overall financial position, results of operations and/or cash flows. See “Critical Accounting Policies, Estimates
and Judgments” in MD&A.
adjustments could have a material adverse effect on the profitability of one or more of our contracts and on
▪
Compem titiii on withinii our markets and bid protests
revenues and market share.ee
tt
may affect our abiliii tyii
to winii new contractstt and resultll in reduced
a
ity and competition, and our own success in winning business. We are facing increasing
ity in competing for contracts. We have seen, and anticipate we will continue to see, increased
ity, more extensive or
ities in some areas, or be willing to accept more risk or
We operate in highly competitive markets and our competitors may have more financial capac
specialized engineering, manufacturing, or marketing capaa bila
lower profitabila
competition in some of our core markets, especially as a result of budget pressures for many customers, a continued
focus on affordabila
competition in the U.S. and outside the U.S. from U.S., foreign and multinational firms, including new entrants. We
are also facing increasing competm ition for, and more limited access to various critical products, services and other
supplies, including related to scarcity of resources, and mergers and acquisitions. In some instances outside the U.S.,
foreign companies may receive loans, subsidies and other assistance from their governments that may not be
available to U.S. companies and foreign companies may be subject to fewer restrictions on technology transfer.
Some customers, including the DoD, are turning to commercial contractors, rather than traditional defense
contractors, for some products and services, and continue to utilize small business contractors or determine to source
work internally. In addition, our success in competing and remaining cost-competm itive depends, in part, on our
ability successfully to adopt and integrate new digital manufacturing and operating technologies into our products
and services.
Bid protests can result in contract modifications or the award decision being reversed and loss of the contract award.
Even where a bid protest does not result in the loss of an award, the resolution can extend the time until the contract
activity can begin, and delay earnings.
If we are unable to continue to compete successfully against our current or futuret
or to prevail against other attempts to interfere with our ability to obtain and retain awards, we may experience
declines in futurett
results of operations and/or cash flows.
revenues and market share, which could have a material adverse effect on our financial position,
competitors, or prevail in protests,
Legal and Regulatory Risks
▪ We are subject to various investigati
i
ons, claill ms,
ii
,s enforcement actions, litigii
tt
ation,
tt
and other
e
legal
proceedings that could ultimtt
ately be resolved against
s
disputes
us.
ii
and complexity of our business make us susceptible to investigations, claims, disputes, enforcement
The size, naturet
actions, prosecutions, litigation and other legal proceedings, particularly those involving governments, which have at
times been, and may continue to be, increasingly aggressive. We are and may become subject to investigations,
claims, disputes, enforcement actions and administrative, civil or criminal litigation, arbitration or other legal
of matters, including, but not limited to, government contracts,
proceedings globally and across a broad arrayr
commercial transactions, false claims, false statements, antitrust, complim ance with government orders, mischarging,
contract performance, fraud, procurement integrity, securities laws and requirements, products liability, warranties,
hazardous materials, personal injury
tt
divestitures,
and equity, labor,
health and safety, the COVID-19 pandemic and the company’s response to it, accidents, launch
failures and employee benefits and plans, including plan administration, improper payments, and issues related to
privacy and security (cyber and physical), as well as matters relating to the Orbital ATK Federal Trade Commission
(FTC) decision and order. See Note 11 to the consolidated financial statements for information regarding the Orbital
claims, environmental, shareholder derivative actions, acquisitions and
m
intellectual property, tax, corporate law and obligations, employe
a
es, export/import, anti-corruption, debt
n
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NORTHROP GRUMMAN CORPORATRR ION
ATK FTC decision and order and subsequent interactions with FTC staff. These matters can divert financial and
management resources; result in administrative, civil or criminal fines, penalties or other sanctions (including
judgments, convictions, consent or other voluntary decrees or agreements), compensat
non-monetary relief, or other liabilities; and otherwise harm our business and our ability to obtain and retain awards.
Certain allegations against a contractor may lead to suspension or debarment from government contracts or
suspension of export/itt mport privileges for the company or one or more of its components. Suspension or debarment
or criminal resolutions in particular could have a material adverse effecff
t on the company because of our reliance on
government contracts and export authorizations. An investigation, claim, dispute, enforcement action or litigation,
even if pending or not ultimately substantiated or if fully indemnified or insured, can also negatively impact our
reputation among our customers and the public, and make it substantially more difficult for us to compete effectively
for business, obtain and retain awards, ensure funding for our programs or obtain adequate insurance in the future.
Investigations, claims, disputes, enforcement actions, litigation or other legal proceedings could have a material
adverse effect on our financial position, results of operations and/or cash flows.
ory, treble or other damages,
m
▪
▪
conduct of emplm oye
m
The improper
which we participate can impactm
operations and/or//
ll
cash flows.
ll
es, agents, subcontractors, suppliell rs, business
ee
our reputati
on, our abilityii
to do business
tt
partners
ii
ii
and our financ
ii
or joint ventures in
ial position, resultsll of
We have implemented policies, procedures, training and other compliance controls, and have negotiated terms
designed to prevent misconduct by employees, agents or others working on our behalf or with us that would violate
the applicable laws of the jurisdictions in which we operate, including laws governing improper payments to
government officials, the protection of export controlled or classified information, false claims, procurement
integrity, cost accounting and billing, competition, information security and data privacy, or the terms of our
contracts. However, we cannot ensure that we will prevent all such misconduct committed by our employees, agents,
subcontractors, suppliers, business partners or others working on our behalf or with us. We have in the past
experienced and may in the future experience such misconduct, despite a vigorous complim ance program and strong
culture. This risk of improper conduct may increase as we continue to expand globally, with greater opportunities
and demands to do more business with local and new partners. At the same time, law enforcement agencies are
continuing to focus on combating global corruption and other misconduct. In the ordinary course of our business we
form and are members of joint ventures
arrangements of any type). Notwithstanding our robust process, we are unable to prevent any and all misconduct or
violations of applicable laws by these joint ventures
partners. Improper actions by our employees or those with whom or through whom we do business subjects us to
risk of administrative, civil or criminal investigations and enforcement actions; monetary and non-monetary
penalties; liabilities; and the loss of privileges and other sanctions, including suspension and debarment, which could
negatively impact our reputation and ability to conduct business and could have a material adverse effect on our
financial position, results of operations and/or cash flows.
(with that term used throughout to refer to joint efforts or business
(including their officers, directors and employees) or our
t
t
ons and contratt
As a U.S. government contractor, we and our partners
regulati
rr
ct terms
ll
be adversely affectedtt
government as to our compliance
business practices globally.ll
withtt
ll
are subject to various procurement and other
tt
ons or terms,s or any negative findingsn
by changes in such laws,w regulati
tt
to our industry,
as well as those more broadly applicable,ll and we could
by the U.S.
applicablell
laws,
e
tt
them. We alsoll may be adversely affectedtt
by changes in our custome
tt
rs’
cablea
U.S. government contractors (including their subcontractors and others with whom they do business) must complym
with many significant procurement regulations and other specific legal requirements, as well as ones more broadly
. These regulations and other requirements, although sometimes customary in government contracting,
a
appli
increase our performance and compliance costs and risks, and are regularly evolving. These costs are not always
fully recoverablea
. New laws, regulations or procurement requirements or changes to current ones (including, for
example, related to cybersecurity, information protection, cost accounting, COVID-19, recovery of employee
compensation costs, counterfeit parts, pensions, anti-human trafficking, and use of certain non-US equipment) can
significantly increase our costs and risks and reduce our profitability.
We operate in a highly regulated environment and are routinely audited and reviewed by the U.S. government and
its agencies, such as the DCAA, Defense Contract Management Agency (DCMA) and the DoD Inspector General.
These agencies review performance under our contracts, our cost structure and accounting, and our compliance with
appli
laws, regulations, terms and standards, as well as the adequacy of our systems in meeting government
a
requirements. Costs ultimately found to be unallowable or improperly allocated to a specific contract will not be
reimbursed or must be refunded. When an audit uncovers improper or illegal activities, we are subject to possible
civil and criminal penalties, sanctions, forfeiturett
of profits or suspension or debarment. Whether or not illegal
cablea
-13-
NORTHROP GRUMMAN CORPORATIO
RR
N
activities are alleged, the U.S. governmr
systems to be inadequate, with significant financial impact, regardless of the ultimate outcome. In addition, we risk
serious reputational harm in situations involving allegations of improprie
ent has the ability to decrease or withhold certain payments when it deems
ty made against us or our business partners.
m
ity, efficiencies, business systems, recovery of costs
Our industry has experienced, and we expect it will continue to experience, significant changes to business practices
globally, largely as a result of an increased focus on affordabila
defense funds. We have experienced and may continue to experience an increased
and a reprioritization of availablea
number of audits and challenges to our claims and our government accounting business systems for current and past
years, as well as a lengthened period of time required to close open audits, an increased number of broad requests for
information and an increased risk of withholding of payments. For example, the thresholds for certain allowable
costs in the U.S., including compensation costs, have been significantly reduced; the allowability of other types of
costs, including certain costs related to environmental remediation and pensions, and certain assumptim ons used by
the company to determine pension expense, are being challenged, debated and, in certain cases, modified, all with
potentially significant financial costs to the company. The U.S. government is also pursuing alternatives to shift
additional responsibility and performance risks to the contractor. The U.S. government has been pursuing and may
continue to pursue policies that could negatively impact our profitabila
incentive-based fee arrangements; different award criteria; non-traditional contract provisions; and government
contract negotiation offers that indicate what our costs should be, among others, have affected and may in the futurett
affect our profitability and predictability.
ity. Changes in procurement practices favoring
We (again, including our subcontractors and others with whom we do business) also are subject to, and expected to
perform in compliance with, a vast array of federal, state and local laws, regulations, contract terms and
requirements related to our industry, our products and the businesses we operate, as well as those more broadly
applicable to industry, such as securities laws. These laws and regulations include, but are not limited to, the
Truthful Cost or Pricing Data Act, False Claims Act, Procurement Integrity Act, Federal Communications
Commission Act, CAS, FAR, International Traffic in Arms Regulations promulgated under the Arms Export
Control Act, Export Administration Regulations promulgated under the Export Control Reform Act, international
sanctions, Close the Contractor Fraud Loophole Act and the Foreign Corrupt Practices Act (FCPA) (and other
similar anti-corruption provisions), as well as orders, rules and regulations administered by the Bureau of Alcohol,
Tobacco, Firearms and Explosives, and those related to pandemics. These requirements, whether specific to our
industry or broadly applicablea
violated any such requirements (including both those specific to our business and those more broadly applicablea
are found not to have acted responsibly, we may be subject to reductions of the value of contracts; contract
modifications or termination; the withholding of payments from our customer; the loss of export/import privileges;
administrative or civil judgments and liabilities; criminal judgments or convictions, liabilities and consent or other
voluntary decrees or agreements; other sanctions; the assessment of penalties, fines, or compensatory, treble or other
damages or non-monetary relief or actions; or suspension or debarment.
, may limit our conduct and ability to achieve our goals. If we are found to have
), or
If we or those with whom we do business do not complym with the laws, regulations, contract terms and processes to
which we are subject or if customer business practices or requirements change significantly, including with respect
to allowable costs, it could affecff
t our ability to compete and have a material adverse effect on our financial position,
results of operations and/or cash flows.
▪
Environi mental matters,
includingii
government and third partytt claimll
position, results of operations
tt
tt
and/or//
ll
cash flows.
n
unforese
s, couldll have a material adverse effect on our reputati
en costs associatedtt withii
ll
complianc
ee
efforts,
and
ff
ii
on and our financial
e and remediationtt
ff
ed by a variety of federal, state, local and foreign environmental laws and
Our operations are subject to and affect
regulations, including as they may be changed or enforced differently over time. Compliance with these
environmental laws and regulations requires, and is expected to continue to require, significff ant operating and capita
al
costs. We may be subject to substantial administrative, civil or criminal fines, penalties or other sanctions (including
suspension and debarment) for violations. If we are found to be in violation of the Federal Clean Air Act or the
Clean Water Act, the facility or facilities involved in the violation could be placed by the Environmental Protection
Agency on a list of facilities that generally cannot be used in performing on U.S. government contracts until the
violation is corrected.
We incur, and expect to continue to incur, substantial remediation costs related to the cleanup of pollutants
previously released into the environment. Stricter or different enforcement of existing laws and regulations; new
laws, regulations or cleanup requirements; discovery of previously unknown or more extensive contamination or
new contaminants; imposition of fines, penalties, compensatory or other damages (including natural resource
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NORTHROP GRUMMAN CORPORATRR ION
damages); a determination that certain remediation or other environmental costs are unallowablea
allocation or insurance coverage; and/or the insolvency or other inability or unwillingness of other parties to pay
their share of such costs could require us to incur material additional costs in excess of those anticipated.
; rulings on
We also are and may become a party to various legal proceedings and disputes involving government and private
parties (including individual and class actions) relating to alleged impacts from pollutants released into the
environment. These matters could result in compensatory or other damages, remediation costs, fines, penalties, and
non-monetary relief, and adverse determinations on allowability or insurance coverage.
The company is engaged in remediation activities relating to environmental conditions allegedly resulting from
historic operations at the former United States Navy and Grumman facilities in Bethpage, New York. We have
incurred, and expect to continue to incur, as included in Note 12, substantial remediation costs related to the legacy
Bethpage environmental conditions. It is also possible that applicablea
standards and other claims and requirements to which we are subject may continue to change, and our costs may
increase materially. In December 2020, the parties reached a tentative agreement with the State of New York
regarding the steps the company will take to implement the State’s Amended Record of Decision and to resolve
certain other potential claims, including for natural resource damages. We understand that the State will next seek
court approval of the consent decree. We are also in discussions with the DoD (Navy and DCMA) and the Bethpage
and South Farmingdale Water Districts to explore whether claims involving these parties can be resolved at this
stage. In addition to disputes and legal proceedings with government entities related to environmental conditions at
the site (including remediation, allocation and allowability), we are a party to various, and may become a party to
disputes and legal proceedings with individual and class action plaintiffs alleging personal injury and property
damage, with insurance carriers, and with other parties.
remediation, allocation and allowability
In addition, at times, government and private parties seek to hold us responsible for liabilities or obligations related
to former operations that have been divested or spun-off (including our former shipbuilding business) and/or for
which we believe other parties have agreed to be responsible and/or to indemnify us, directly or indirectly. The
indemnity related rights we have may not be sufficient to protect us against such liabilities.
The impact of these factors is difficult to predict, but one or more of them could harm our reputation and business
and have a material adverse effecff
t on our financial position, results of operations and/or cash flows.
▪
ipatedtt
Unantictt
ll
and cash flow.
changes in our taxaa provisions or exposure
xx
to additiii onal tax liabi
i
liii tiii es could affect our profitabi
liii tyii
ii
We are subject to income and other taxes in the U.S. and foreign jurisdictions. Changes in applicable U.S. (federal,
state and local) or foreign tax laws and regulations, or their interpretation and application, including the possibility
of retroactive effecff
they did in 2017 upon passage of the Tax Cuts and Jobs Act. In addition, the final determination of any state or
federal tax audits or related litigation, in particular with regard to the sustainment of our positions on research credits
and timing of revenue recognition under IRC Section 451(b), could be materially different from our historical
.
income tax provisions and accruals
ted and could continue to affect our tax expense and profitabila
ity as, for example,
t, have affecff
rr
As a result of the acquisition of OATK in 2018, we are subjeu
tax audits and legal challenges involving OATK and its subsidiaries, their successors, the spinoff of its then
subsidiary Vista Outdoor Inc. (Vista) in 2015 and related matters. OATK entered into a tax matters agreement with
Vista, pursuant to which, in certain circumstances and subject to certain limitations, Vista is required to indemnify
OATK against taxes on the spinoff. However, there are circumstances pursuant to which we may be unablea
an indemnification payment or we may be required to indemnify Vista.
ct to outstanding tax audits and may be subject to future
to obtain
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and
development expenditures
174. Although Congress is considering legislation that would defer the amortization requirement to later years, we
have no assurance that the provision will be repealed or otherwise modified. If the requirement is not modified, it
will materially reduce our cash flows beginning in 2022.
currently and requires taxpayers to amortize them over five years pursuant to IRC Section
t
Changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicablea
regulations, the interpretation or application thereof, or a final determination of tax audits or litigation or agreements,
could have a material adverse effect on our financial position, results of operations and/or cash flows.
laws and
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NORTHROP GRUMMAN CORPORATRR ION
Business and Operational Risks
▪ We face various risks relatedtt
to healthtt epidemics,s pandemics and similarii
outbreaks, which may have material
adverse effectstt on our business,
ii
ii
financ
ial position,
tt
resultsll ofo operations and/or cash flows.
a
We face a wide variety of risks related to health epidemics, pandemics and similar outbrea
ks, especially of infectious
diseases, including COVID-19. Since first reported in late 2019, the COVID-19 pandemic has dramatically impacted
the global health and economic environment, including millions of confirmed cases and deaths, business slowdowns
or shutdowns, labor
regulatory challenges, inflationary pressures and market volatility. Although we have, to date, managed to continue
most of our operations, we cannot predict the futurett
including its economic impact, will not have a material adverse impacm t on our business, financial position, results of
operations and/or cash flows. (For further information relating to the evolving environment, our experience to date,
and various steps taken related to the COVID-19 pandemic, see MD&A).
shortages, supply chain challenges, changes in government spending and requirements,
course of events nor can we assure that this global pandemic,
t
d
Our operations have been and, we expect, will continue to be further impacted by the COVID-19 pandemic. The
pandemic likely will continue to impact our workforce, including staffing levels (as a result of illnesses, quarantine,
isolation and absenteeism) and adjuste
d work locations and schedules; our facilities and access to them; those with
whom we do business and on whom we rely to continue our operations; travel restrictions; and, overall, our ability
to perform as required, at cost and on schedule, and to achieve and increase efficff
iencies. The pandemic may require
us to continue to take extraordinary measures to protect the health and well-being of our employees. We have
incurred and will continue to incur additional costs which may not be fully recoverable. If, going forward,
significant portions of our workforce are unablea
level of operations, staffing and performance, we can expect facility closures, work slowdowns or stoppages, and
adverse impacm ts on our overall performance, operations and financial results. The macroeconomic impacts of the
pandemic, including a tightened labor
will also likely continue to affect our company. They may further affecff
t our ability to hire, develop and retain our
talented and diverse workforce, to maintain performance levels (especially cost and schedule), and to maintain our
corporate culture. We expect to continue to incur additional costs as a result of the COVID-19 outbreak, including to
protect the health and well-being of our employees, to respond to government requirements, and as a result of
impacts on operations and performance, including staffing and schedule, which costs we may not be fully able to
recover. We are and may be subject to additional regulatory requirements, enforcement actions and litigation, again
with costs and liabilities that are not fully recoverablea
market and government requirements, including those related to vaccinations,
to work effectively, or we are otherwise unablea
to maintain our
or insured.
a
The continued global pandemic has impacm ted and may continue to impact the company’s supply chains. If our
suppliers have increased challenges with their workforce (including as a result of illness, absenteeism, reactions to
health and safety or government requirements), facility closures, timely access to necessary components, materials
al, and access to fundamental support services (such as
and other supplies at reasonable prices, access to capita
shipping and transportation), they may be unable to provide the agreed-upon goods and services in a timely,
compliant and cost-effective manner. We have incurred and may in the futuret
incur additional costs and delays in
our business, including as a result of higher prices, schedule delays or the need to identify and develop alternative
suppliers, and we may need to provide additional resources to support our suppli
performance under our contracts. In some instances, we may be unablea
under our current contracts and hampering new ones.
to do that, incurring additional liabilities
ers or otherwise continue
u
The global COVID-19 crisis has put extraordinary pressures on the U.S. government and governments around the
world. In some cases, it has caused delays or limits in the ability of the government and other customers (including
other prime contractors) to perform, including making timely payments and awards to us, negotiating contracts and
agreeing on appropriate costs for recovery, performing quality inspections, supporting testing, accepting delivery,
approving
a
facilities. In addition, as a result of the COVID-19 crisis, we expect continued changes in our customers’ priorities
and practices, as our customers in both the U.S. and globally confront competing budget priorities, staffing
challenges and limited resources. These changes may impact current and future programs, customer priorities,
government payments and other practices, procurements, and funding decisions.
security clearances (for individuals and facilities), and providing necessary personnel, equipment and
While we have significff ant sources of cash and liquidity and access to committed and uncommitted credit lines, a
prolonged period of generating lower cash from operations could adversely affecff
the achievement of our strategic objectives. Additionally, there can be no assurance that we will not face credit
rating downgrades, and such downgrades could adversely affect
our cost of funds, liquidity and access to capita
markets. Market volatility may also impact investment performance and our expected asset valuations and returns,
t both our financial condition and
al
ff
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NORTHROP GRUMMAN CORPORATIO
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which could materially impact the calculation of long-term liabilities such as our pension obligations. And
inflationary pressures related to COVID-19 could adversely affect our business further, including through increased
cost of labor
and materials on our contracts.
a
We continue to work with our stakeholders in an effort to address responsibly this global pandemic. We continue to
monitor the situat
customers, and to take certain actions in an effort
ion, to assess further possible implications to our employe
to mitigate various adverse consequences.
es, business, supply chain and
m
ff
tt
We expect that the longer the COVID-19 pandemic, including its economic disruption, continues, the greater the
adverse impacm t on our business operations, financial performance and results of operations could be. Given the
tremendous uncertainties and variablea
or any futurett
of operations and/or cash flows.
pandemic, but any one could have a material adverse effecff
s, we cannot at this time predict the impact of the global COVID-19 pandemic,
t on our business, financial position, results
▪
Our business
ii
could be negat
e
ivtt elyll
impacm ted by cyber and other securityii
tt
threats or disrupt
ions.
ii
As a defense contractor, we face significant cyber and other security threats, including attempts to gain unauthorized
access to and to harm sensitive information and networks; insider threats; ransomware; threats to the safety of our
directors, officers and employe
products, and
subcontractors or others in our supply chain (referred to inclusively as suppliers); and threats from terrorist acts, civil
unrest or other acts of aggression. We are also subject to increasing government, customer and other cyber and
security requirements, including disclosure obligations.
es; threats to the security and viability of our facilities, infrastructure,
m
tt
We have robust measures in place to address and mitigate cyber-related risks. However, we have experienced cyber
attacks and expect we will continue to experience additional attacks in the future.
cybersecurity and resiliency of our networks and products and to enhance our internal controls and processes, which
are designed to help protect our systems and infrastructure.
monitoring, training, incident response capabi
technology, and products and services. However, these efforts
These include timely detection of incidents through
lities, and mitigating cyber and security risks to our data, systems,
t We continue to invest in the
may not be fully effective.
a
ff
tt
Our customers and partners (including our suppliers and joint ventures) with whom we do business and entrust
confidential data, and on whom we rely to provide products and services, face similar threats and growing
requirements, including ones for which others may seek to hold us responsible. We depend on our customers,
suppliers, and other business partners to implem ment adequate controls and safeguards to protect against and report
cyber incidents. If they fail to do so, we may suffer financial and other harm, including to our information,
operations, performance, employees, customers and reputation.
Although we implement various measures and controls to monitor and mitigate risks associated with these threats
and to increase the cyber resiliency of our infrastructurett
will be sufficient. Successful attacks could lead to losses or misuse of sensitive information or capabil
corruption of data; harm to personnel, infrastructurett
interruptions in our operations and performance; and the misuse of our products, as well as damage to our reputation
as a government contractor and provider of cyber-related or cyber-protected goods and services.
and products, there can be no assurance that these processes
or products; financial costs and liabilities; protracted
ities; theft or
a
Cyber threats, both on premises and in the cloud, are evolving and include, but are not limited to: malicious
software, destructive malware, ransomware, attempts to gain unauthorized access to systems or data, disruption to
operations, critical systems or denial of service attacks; unauthorized release of confidential, personal or otherwise
protected information (ours or that of our employees, customers or partners); corruption of data, networks or
systems; harm to individuals; and loss of assets. In addition, we could be impacted by cyber threats or other
disruptions or vulnerabilities found in products or services we use or in our internal, partners’ or customers’ systems
that are used in connection with our business. Some of these threats are zero-day attacks associated with unknown
third party software or product vulnerabila
tively mitigated, could damage
our reputation, require remedial actions and lead to loss of business, regulatory actions, potential liability and other
financial losses.
ities. These events, if not prevented or effecff
We also face threats to our physical security, including to our facilities and the safety and well-being of our people.
These threats could involve terrorism, insider threats, workplace violence, civil unrest, natural disasters, damaging
our company. Our customers and suppliers face similar
weather, fires or similar acts, which could adversely affect
risks that, if realized, could also adversely impact our operations. The business impact of such acts could include
delays, manufacturing downtime, and other impacts that could detrimentally impact our ability to perform our
operations. We could also incur unanticipated costs to remediate impacts, loss of business and ability to win new
business, which could adversely impact our cash flow, financial condition or results of operations.
ff
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NORTHROP GRUMMAN CORPORATIO
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We provide systems, products and services to various customers (government and commercial) who also face cyber
threats. Our systems, products and services may themselves be subject to cyber threats and/or they may not be able
to detect or deter threats, or effectively to mitigate resulting losses. These losses could adversely affect our
customers and our company.
We also face increasing disclosure obligations related to cyber and other security events. Despite rigorous processes,
we risk failing to meet all of our disclosure obligations and/or having our disclosures misinterpreted.
The occurrence and impact of these various risks and considerations are difficult to predict, but one or more of them
could result in the loss or corruption of information or capaa bila
reputation, loss of business, disruption in our business, contractual
which could have a material adverse effecff
ities, harm to individuals or property,t damage to our
or regulatory actions and liabilities, any one of
t
t on our financial position, results of operations and/or cash flows.
▪
•
Our abilityii
ii
maintain
to winii new competm ittt ions
tt
a qualified workforce.
and meet the needs of our custome
tt
rs depends, in part,tt on our abilityii
to
tt
ies are heavily dependent upon our ability to attract and retain sufficient
Our operating results and growth opportunit
personnel with security clearances and requisite skills in multiple areas, including science, technology, engineering
and math, and who share our values and are able to operate effectively consistent with our culture.
Outside the U.S.,
it is increasingly important that we are also able to attract and retain personnel with relevant local qualifications and
es and commercial
experience. We are facing increased competition for talent, both with traditional defense companim
companies, and increasing wage rates. If qualified personnel are more scarce or more difficult to attract or retain
under reasonable terms, or if we experience a high level of attrition, generally or in particular areas, or if such
personnel are increasingly unablea
related costs and we could face challenges performing on various of our programs. In addition, the macroeconomic
market and government requirements, including those related
impacts of the pandemic, including a tightened labor
to vaccinations, may further affecff
t our ability to hire, develop and retain our talented and diverse workforce, and to
maintain performance levels and our corporate culture.
in remote work. There is also the risk that we are unablea
more broadly, to meet sustainability goals increasingly required by our shareholders, employe
stakeholders.
These challenges may be further compounded by an increase
to achieve our diversity, equity and inclusion objectives or,
m
to obtain security clearances on a timely basis, we would expect higher labor-
es and other
a
a
tt
tt
Certain of our employees are covered by collective agreements. We generally have been able to renegotiate renewals
to expiring agreements without significant disruption of operating activities. If we experience difficulties with
renewals and renegotiations of existing collective agreements, or new demands, or if our employees pursue new
collective representation, we could incur additional expenses and may be subject to work stoppages, slow-downs or
other labor-rela
a
employees who are covered by such agreements or representation.
ted disruptions. Any such expenses or delays could adversely affect our programs served by
If we are unable to attract and retain a qualified workforce, we may be unable to maintain our competitive position,
which could have a material adverse effect on our financial position, results of operations and/or cash flows.
Our earningii
as well as raw materi
sgg and profitabi
tt
ii
alii
and component availabil
itll ytt and pricing.n
ll
liii tyii depend, in part,tt on subcontractor and suppliell r performance and financial viabiliii tyii
We rely on other companies to provide raw materials, chemicals and components and subsystem
produce hardware elements and sub-assemblies, provide software and intellectual property, provide information
about
the parts they supply to us, and perform some of the services we need for our operations or provide to our
a
customers, and to do so in compliance with all applicablea
strong values and cultures.
(referred to inclusively as suppliers), failure to meet regulatory or contractual requirements, unethical behavior, or a
misalignment between our contractual obligations to our customers and our agreement with our suppliers, have had
and may continue to have various adverse impacts on the company, including on our ability to meet our
commitments to customers.
laws, regulations and contract terms, while maintaining
Disruptions or performance problems caused by our subcontractors or other suppliers
s for our products,
u
t
Our ability to perform our obligations on time is adversely affecff
provide the agreed-upon products, materials or informa
regulations.
compliant and cost-effective manner or otherwise to meet the requirements of the contract or applicablea
Changes in political or economic conditions, including changes in defense budgets or credit availability or sanctions,
or other changes impacting a supplier, as well as their ability to retain talent and other resources, and requirements
ted and could in the future adversely affect the financial
imposed on them by other customers, has adversely affecff
ity of our suppliers to perform adequately has
a
stabili
ty of our suppliers and/or their ability to perform. The inabila
tion, or perform the agreed-upon services in a timely,
ted if one or more of our suppliers is unable to
ff
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NORTHROP GRUMMAN CORPORATRR ION
resulted in and could in the future result in the need for us to transition to alternate suppliers if availablea
u
could result in significant incremental cost and delay or the need for us to provide other resources to support
existing suppli
cyber and other requirements.
ers. This risk increases as the demands grow for our suppliers to meet extensive government-related
, which
our
u
t
In connection with our U.S. government contracts, we are required to procure certain materials, components and
parts from supply sources approved by the customer. Among many other examples, we require assured access to
microelectronics. Our ability to produce and/or deliver products will be significantly impacted if the
microelectronics manufacturing
regulatory requirements, both domestically and internationally, many of which apply to our suppliers. As a prime,
we are often responsible for not only our compliance with these regulatory requirements, but that of our suppliers
too. In some cases, there has been only one supplier, or one domestic supplier, for certain components. If a supplier
cannot appropriately meet our needs, experiences disruptions to production or is otherwise unavailable or not fully
available, including if a supplier is impacted by shipping and logistics delays, we may be unablea
to find a suitable
alternative and to meet our obligations.
supply chain is cut off or significantly delayed. We also are facing increased
Our procurement practices are intended to reduce the likelihood of our procurement of counterfeit, unauthorized or
otherwise non-compliant parts or materials. We rely on our suppliers to comply with applicablea
terms, including regarding the parts or materials we procure from them; in some circumstances, we rely on
certifications provided by our suppliers regarding their compliance. We also rely on our suppli
mitigate the risk of cyber and security threats or other disruptions with respect to the products, component
services they deliver to us and the information entrusted to them by us or our customers and to comply with
applicable contractual
terms and laws, including cybersecurity and related certification requirements.
ers effectively to
s and
laws and contract
m
u
t
If our suppliers fail to perform or we are unablea
products, materials or services; or if they do not comply with all applicable laws, regulations, requirements and
contract terms, including if what we receive is counterfeit or otherwise improper, it could have a material adverse
effect on our financial position, results of operations and/or cash flows.
to procure, or experience significant delays in deliveries of, needed
•
Riskskk associatedtt withii
of our customers, shareholdersrr and other stakeholde
ii
business
and operations.
ii
climat
tt
ett change and other environmental impactm
s,tt and increased focus and evolvill ngii
views
rs on clima
ll
te change issues, couldll negatively affect our
The effects of climate change create short and long-term financial risks to our business, both in the U.S. and
globally. We have significant operations located in regions that have been, and may in the future be, exposed to
significant weather events and other natural disasters. Climate related changes can increase variabila
otherwise impact natural disasters, including weather patterns, with the potential for increased frequency and
severity of significant weather events (e.g., flooding, hurricanes and tropical storms), natural hazards (e.g., increased
and sea levels, and long-term changes in precipitation patterns (e.g., drought,
wildfire risk), rising mean temperaturett
desertification, and/or poor water quality). For examplem , in recent years, our facilities in Lake Charles, LA, and
Melbourne, FL, were damaged by hurricanes, which temporarily interrupted site operations and had significant
adverse impacm ts on our employees, their families and the local communities. We expect climate change will
continue to affecff
coastal areas and areas prone to extreme weather events and water scarcity. Our suppliers are also subject to natural
disasters that could affect their ability to deliver or performff
under our contracts, including as a result of disruptions
to their workforce and critical infrastructure.
manufacturing
es and communities in the future, particularly at facilities in
and could increase insurance and other operating costs.
Disruptions also impact the availabila
t our facilities, operations, employe
ity and cost of materials needed for
ity in or
m
tt
tt
ff
to combat both potential
t us, our suppliers and our customers. Some of our facilities are, for example, engaged in
Increased worldwide focus on climate change has led to legislative and regulatory efforts
causes and adverse impacm ts of climate change, including regulation of greenhouse gas emissions. New or more
stringent laws and regulations related to greenhouse gas emissions and other climate change related concerns may
adversely affecff
manufacturing processes that produce greenhouse gas emissions, including carbon dioxide, or rely on products from
others that do so. We have worked for years to reduce our reliance on fossil-based energy sources, to decrease our
greenhouse gas emissions, to reduce our consumption of water and production of waste, and to ensure our
compliance with environmental regulations where we operate, enhancing our record of environmental sustainability.
However, new and evolving laws and regulations could mandate different or more restrictive standards, could
require capita
and could require changes on a more accelerated time frame. Our suppliers may face similar challenges and incur
additional compliance costs that are passed on to us. These direct and indirect costs may adversely impact our results
al investments to transition to low carbon technologies, could adversely impact our ongoing operations,
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NORTHROP GRUMMAN CORPORATRR ION
of operations and financial condition. And non-compliance with legislative and regulatory requirements could also
negatively impact our reputation and ability to do business.
In May 2021, the Administration issued Executive Order 14030, Climate-Related Financial Risk, directing the FAR
Council, in consultation with the Chair of the Council on Environmental Quality, to consider amendments to the
FAR to help ensure that majoa r federal agency procurements reduce the risk of climate change, including requiring
the social cost of greenhouse gas emissions to be considered in procurement decisions. Amendments to the FAR
and/or other changes to contract terms could cause us to incur additional operating and compliance costs (directly
and from our suppliers) or otherwise impact our ability to win business and operate successfully.
Changes in our customers’ requirements, priorities, and ways of doing business are also likely to have an impact on
our business, operations, and financial success. These changes create opportunities and risks. If, for example, our
customers develop requirements and adopt procurement policies that place further emphasis on social and
environmental objectives, and we are unablea
our products, winning new business, and growing our revenues
to meet those evolving demands, we will be less successful in selling
Investors, advisory services, government regulators, lenders and other market participants have focused increasingly
on the environmental or “sustainability” practices of companies. Shareholders, financial institutions and others have
increasingly looked to a company’s environmental, social and governance practices, disclosures and performance
before making investment or other financial decisions. Regulators have been increasing requirements and
enforcement activities. We believe our practices, disclosures and performance are strong and growing. However, if
they do not meet investor, lender, regulator, or other stakeholder expectations and standards, which continue to
evolve, our access to capita
be adversely affected. An enforcement action could harm our reputation, financial position and ability to grow. A
failure to meet expectations may materially negatively affecff
liquidity, or implement our strategies.
al may be negatively impacted, including in both the equity and debt markets, and we will
t our results of operations, ability to manage our
The company is building on its environmental record, with a particular focus on the reduction of carbon emissions
from our operations, and a target date to achieve net zero carbon emissions. The company is committed to working
to achieve its climate change related objectives. However, the costs of doing so may be greater than expected, and
there can be no assurance the company will achieve its objectives, or meet the evolving sustainability expectations
and standards of our investors or other external stakeholders. Any failure to achieve our goals, a perception that we
are not responsible environmental stewards, or failure effecff
tively to respond to new or evolving legal and regulatory
requirements or other sustainability concerns could adversely affect our business, reputation or financial position.
The effects and costs of climate change (or other related environmental concerns), or any failure to meet related
requirements and expectations could have a material adverse effect on our financial position, results of operations
and/or cash flows.
▪
rr
Our intertt nation
laws and regulati
tt
factors,
ii
al business
xx
exposes
ons.
e
us to additional
tt
ii
risks,
including risks
ii
relatedtt
to geopolitll ictt al and economic
Sales to customers outside the U.S. are an important component of our strategy. Our international business
tt
(including our participation in joint ventures,
to numerous political and economic factors, legal requirements, cross-cultural
associated with doing business globally. These risks differ in some respects from those associated with our U.S.
business and our exposure to such risks may increase if and as our international business continues to grow.
requirements for local content, and our global supply chain) is subject
considerations and other risks
tt
Our international business is generally subject to both U.S. and foreign laws and regulations, including, without
limitation, laws and regulations relating to export/import controls, sanctions, technology transfers, government
contracts and procurement, data privacy and protection, investment, exchange rates and controls, the FCPA and
other anti-corruption laws, anti-boycott provisions, securities laws, labor and employment, works councils and other
groups, anti-human trafficking, taxes, environment, immunity, security restrictions and intellectual
a
labor
Failure by us, our employees, affiliates, partners or others with whom we work to comply with applicablea
regulations could result in administrative, civil, commercial or criminal liabilities, including suspension or
debarment from government contracts or suspension of export/import privileges. Our customers outside of the U.S.
also often have the ability to terminate contracts for convenience as well as for default based on performance.
Suspension or debarment, or termination of a contract due to default could have a material adverse effect on our
reputation, our ability to compete for other contracts and our financial position, results of operations and/or cash
flows.
property.
laws and
t
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NORTHROP GRUMMAN CORPORATRR ION
New regulations and requirements, or changes to existing ones in countries in which we operate can significantly
increase our costs and risks of doing business internationally. Despite robust processes, we also face risks related to
the unintended or unauthorized use of our products and resources.
Changes in laws, regulations, political leadership and environment, political relations and instability, and/or security
risks may dramatically affect our ability to conduct or continue to conduct profitablea
markets, including sales to customers outside the U.S. and purchases from suppliers outside the U.S. Our
international business is impacted by changes in U.S. and foreign national policies and priorities, and geopolitical
relationships, any of which may be influenced by changes in the threat environment, political leadership,
geopolitical uncertainties, world events, government budgets, and economic and political factors more generally.
Any of these factors may impact funding for programs, our ability to perform, our supply chain, export
authorizations, purchasing decisions or customer payments. We also could be affected by the residual impacts of
Britain’s exit from the European Union, the full impacts of which are still evolving. Global economic conditions and
fluctuations in foreign currency exchange rates and credit could further impact our business.
business in international
laws, particularly where we rely on a sole source supplier.
to design our products on a
tive basis or to obtain and retain all necessary export licenses and authorizations. The U.S. government can
Our contracts with non-U.S. customers in some cases also include terms and reflect legal requirements that create
additional risks. They may include industrial cooperation agreements requiring specific in-country purchases, hiring
of local nationals, local investments, manufacturing or other operational or financial obligations, including offset
obligations, and provide for significant penalties if we fail to meet such requirements. They may also require us to
enter into letters of credit, performance or surety bonds, bank guarantees and/or other financial arrangements to
secure our obligations. We also are dependent on in-country suppliers and we face risks related to their failure to
perform in accordance with the contracts and applicablea
Our ability to sell products outside the U.S. could be adversely affecff
cost effecff
deny, change or revoke export authorization. Our business outside of the U.S. also depends on our ability to attract
and retain sufficient qualified personnel with the skills and/or security clearances in the markets in which we do
business. More broadly, our ability effecff
tively to pursue and execute contracts outside the U.S. may be impacted by
our ability to partner successfully with non-U.S. companies, including through joint ventures, teaming agreements,
co-production or other arrangements. This risk includes the ability to timely identify and negotiate appropriate
arrangements with local partners, potential exposure for their actions and the ability to effecff
tively terminate these
partnership arrangements. This risk may increase, depending on local requirements regarding who we partner with
and under what circumstances, particularly where we partner with government-affiliated entities.
ted if we are unablea
The products and services we provide, including those provided by suppliers and joint ventures
interest, are sometimes in countries with unstablea
conflicts, different business practices and/or developing legal systems. This may increase the risk to our employees,
suppliers or other third parties, and increase our risk to a wide range of liabilities, as well as loss of property or
damage to our products.
governments, economic or fiscal challenges, military or political
in which we have an
t
The occurrence and impact of these factors is difficult to predict, but one or more of them could have a material
adverse effect on our financial position, results of operations and/or cash flows.
tt
▪ Many of our contracts contain performance obligat
ions
allyll complex,
ll
require state-of-the-art manufacturing experti
xx
tt
ions
our control.ll Failure to meet our contractual obligat
that require innovative designi
seii
could adversely affect our profitabi
or are dependent upon factors not
,yy
liii tyii
capabilitll iett s, are
ll
ii
ll
technologic
ll
whollyll witii hintt
tt
reputati
on and future prospects.tt
technologically advanced and innovative products and services, which are
We design, develop and manufacturett
applied by our customers in a variety of environments, including highly demanding operating conditions, to
accomplish challenging missions. Problems and delays in development or delivery, or system failures, as a result of
issues with respect to design, technology, research and development funding, intellectual property rights, labor,
tively a
inabila
broad array of programs, manufacturing materials or components, or subcontractor (or other supplier) performance
can prevent us from meeting requirements and create significant risk and liabilities. Similarly, failures to perform on
schedule or otherwise to fulfill our contractual obligations can negatively impact our financial position, reputation
and ability to win futurett
ity to achieve learning curve assumptions, operation of artificial intelligence, inabila
a
ity to manage effecff
business.
In addition, our products cannot be tested and proven in all situations and are otherwise subject to unforeseen
problems. Examples of unforeseen problems that could negatively affecff
loss on launch or flight of spacecraft, loss of aviation platforms, premature failure of products that cannot be
accessed for repair or replacement, unintended explosions, problems with design, quality and workmanship, country
t revenue, schedule and profitabila
ity include
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NORTHROP GRUMMAN CORPORATIO
RR
N
of origin of procured materials, inadequate supplier components and degradation of product performance. These
failures can result, either directly or indirectly, in loss of life or property. Factors that may affect revenue and
profitability include: inaccurate cost estimates, design issues, human factors, unfores
een costs and expenses,
diversion of management focus, loss of follow-on work, replacement obligations, and repayment to the government
customer of certain contract cost and fee payments previously received.
ff
Certain contracts, primarily involving space satellite systems, contain provisions that entitle the customer to recover
fees in the event of failure of the system upon launch or subsequent deployment for less than a specified period of
time. Under such terms, we are generally required to forfeit fees previously recognized and/or collected.
If we are unable to meet our obligations, including due to issues regarding the design, development or manufacturett
of our products or services, or we experience launch, platform or satellite system failures, it could have a material
adverse effect on our reputation, our ability to compete for other contracts and our financial position, results of
operations and/or cash flows.
▪
ii
Our business
our overall financial position.
is subject to disruptiontt
caused by natural disasters
tt
that could adversely affect our profitabi
liii tyii and
ii
We have significant operations, including centers of excellence, located in regions that have been, and may in the
future be, exposed to hurricanes, earthquakes, water levels, wildfires and other natural disasters. Our subcontractors
disasters that could affect their ability
and other suppliers have also been, and may in the futuret
to deliver or perform under a contract. Although preventative measures may help to mitigate damage, the damage
and disruption resulting from natural disasters, the nature,
climate change, and delays in recovery may be significant.
frequency and severity of which may be impacted by
be, subject to natural
tt
tt
If insurance or other risk transfer mechanisms are unavailablea
a significant disruption to our business due to a natural
financial position, results of operations and/or cash flows.
t
or insufficient to recover all costs or if we experience
disaster, it could have a material adverse effect on our
▪ We provide products and services, including relatedtt
tt
various environmental,ll regulatory,
ial,ll reputati
ii
financ
to hazardous and highi
ii
risks.
tt
onal and other
ll
riskii
tt
operations,
which subjects us to
m
s. All of these and other activities subject us to various
elements. We develop missile systems, and counter systems, including strategic
We provide products and services related to hazardous and high risk operations. Among other such operations, our
products and services are used in nuclear-related activities (including nuclear-powered platforms) and used in
support of nuclear-related operations of third parties. In addition, certain of our products are provided with space
launch services. We use and provide energetic materials and solid rocket motors, including products that involve
highly explosive or flammablea
deterrents, as well as subsystems and component
extraordinary risks, including (1) potential liabilities relating to nuclear or launch-related incidents, unintended
initiation of energetic materials and explosions, including risk of personal injury,
environmental harm; (2) to the harmful effects on the environment and human health that may result from nuclear-
related activities, operations or incidents, as well as the storage, handling and disposal of radioactive materials; and
(3) to failed launches. We may be subject to reputational harm and potential liabilities arising out of a nuclear,
launch or explosive incident, or other hazardous operation, whether or not the cause was within our control, and
insurance may not be reasonably available. Under some circumstances, the U.S. government and prime contractors
may provide for certain indemnification and other protection under certain of our government related contracts,
including pursuant to, or in connection with, Publiu
Industries Indemnity Act and the Terrorism Risk Insurance Reauthorization Act, for certain risks, but those
protections may not be available and they are limited in scope.
c Law 85-804, 10 U.S.C. 2354, the Price-Anderson Nuclear
property damage and
n
Certain of our products, such as small, medium and large caliber ammunition and solid rocket motors and liquid
propulsion engines, involve the use, manufacturett
These activities have resulted and may result in incidents that cause workplace injuri
shut down or other disruption of manufacturing, production delays, environmental harm and expense, fines and
liability to third parties. We have safety and loss prevention programs, which provide for pre-construction reviews,
along with safety audits of operations involving explosive materials, to attempt to mitigate some such incidents, as
well as potentially insurance coverage. We and our customers may experience similar or more serious incidents in
the future which could result in various liabilities and production delays.
and/or handling of a variety of explosive and flammable materials.
es and fatalities, the temporary
n
In addition, our customers may use or misuse our products and services in ways that can be unusually hazardous or
risky, or in ways that are not intended, creating potential liabilities for our company as the provider of the products
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NORTHROP GRUMMAN CORPORATRR ION
and services. In the event of an incident, if our customers fail to use our products properly or as intended, or if our
products or services do not operate as intended, we could be subject to reputational harm and potential liabilities.
If there was a nuclear incident or other nuclear-related damages, an incident related to launch activities, an incident
related to the use of energetics or rocket motors, or an incident or other damages related to or caused by the use of
our products and services in connection with hazardous activities or risks, and if insurance coverage or
indemnification or other protection was not fully available to cover our losses and liabilities, it could adversely
affect our reputation and have a material adverse effect on our financial position, results of operations and/or cash
flows.
▪ We may be unablell
affect our abiliii tyii
fullyll
to exploit
to compete,e our reputati
or adequateltt yll
ee
to protect intellell ctual property rights
i
ial position, resultsll of operations and/or//
,s which could materiallyll
ll
cash flows.
on and our financ
ii
ll
t
To perform on our contracts and to win new business, we depend on our ability to develop, protect and exploit our
intellectual
demands from our customers to access and obtain rights in our intellectual property, and positions taken by our
suppliers and competm itors challenge our ability to exploit, protect and access intellectual property.
property and also to access the intellectual property of others under reasonable terms. Increasing
We own many forms of intellectual property, including U.S. and foreign patents, trademarks, copyrights and trade
secrets and we license or otherwise obtain access to various intellectual property rights of third parties. The U.S.
property that we
government and certain foreign governments hold licenses or other rights to certain intellectual
develop in performance of government contracts, and at times seek to use or authorize others to use such intellectual
property, including in competition with us and including where we do not believe they are entitled to do so.
Governments continue to increase efforts
could reduce our ability to develop, protect and exploit certain of our intellectual
Governments also decline at times to make intellectual property of others available to us under acceptablea
property, which
property rights and to compete.
terms.
to assert or obtain more extensive rights in intellectual
ff
t
t
tt
We rely significantly upon proprietary technology, information, processes and know-how. We typically seek to
property agreements with our employees and other
protect this information, including by entering into intellectual
ractors. These agreements and other measures may not provide
parties such as consultants, teammates and subcont
adequate protection for our trade secrets and other proprietary information. In the event of an infringement of such
intellectual
property rights, a breach of a confidentiality agreement, a misuse or theft of our intellectual property or
divulgence of proprietary information, we may not have adequate legal remedies. In addition, our trade secrets or
other proprietary information may otherwise become known or be independently developed by competitors.
u
t
t
In some instances, our ability to seek, win or perform contracts requires us to access and use third party intellectual
property. This requires that the government or our customer is willing and able to provide rights to such third party
intellectual
reasonable terms. That may not be practicable.
property, or that we are able to negotiate directly with third parties to obtain necessary rights on
t
t
Our intellectual property is subject to challenge, invalidation, misappropriation or circumvention by third parties.
Our access to and use of intellectual
challenges. Litigation to determine the scope of intellectual property rights, even if ultimately successful, could be
costly and could divert management’s attention away from other aspects of our business. Moreover, the laws
concerning intellectual property rights vary among countries and the protection provided to our intellectual property
by foreign laws and courts may not be favorable.
property licensed or otherwise obtained from third parties is also subject to
tt
adequately to exploit our intellectual property rights, to protect our intellectual property rights, or to
If we are unablea
obtain rights to intellectual property of others, it could have a material adverse effect on our reputation, ability to
compete for and perform on contracts, financial position, results of operations and/or cash flows.
▪
Our future success depends, in part, on our abiliii tyii
technologie
s, facilitll iett s and equipment to winii new competm ittt ions
tt
ll
to develop new products and new technologie
ll
s and maintainii
and meet the needs of our custome
tt
rs.
Many of the markets in which we operate are characterized by rapidly changing technologies. The product, program
and service needs of our customers change and evolve regularly. Our success in the competitive defense industry
depends upon our ability to identify emerging technological trends, develop technologically advanced, innovative
and cost-effecff
tive products and services and market these products and services to our customers in the U.S. and
internationally. In addition, our ability to develop innovative and technologically advanced products depends on
continued funding for, and investment in, research and development projects. Our success also depends on our
continued access to assured suppliers of important technologies and components
and our ability to provide the
people, technologies, facilities, equipment and financial capac
maximum efficff
iency. Our customers and markets also increasingly require us to be agile and efficient, digitally
ity needed to deliver those products and services with
m
a
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NORTHROP GRUMMAN CORPORATIO
RR
N
ity that our customers seek. If we are unablea
enabled and able to harness integrated digital technologies and capabi
to continue to develop new products and technologies in a
affordabila
timely fashion, and successfully to effect digital transformation, or if we fail to achieve market acceptance more
rapidly than our competitors, we may be unablea
materially adversely affecff
future business to our competm itors, which also could have a material adverse effect on our ability to generate
favorablea
flows.
financial results and maintain market share and on our financial position, results of operations and/or cash
ted. If we fail to maintain our competitive position, we could lose a significant amount of
to maintain our competitive position and our future success could be
lities to deliver solutions with the agility and
a
General and Other Risk Factors
▪
▪
▪
Our insurance coverage, customer indemnifications
inadequate to cover all of our signific
tt
material
ii
ant risks
losses we incur,r which could adversely affect our profitabi
ii
i
tt
or other
ll
tt
or our insurers maya deny coverage of or be unablell
liii tyii protections maya be unavailable
or
to pay for
i
liabi
liii tyii and overall financial position.
ity). Not every risk or
, at times we are not able to obtain it at a price or on terms acceptablea
shed markets to cover significant risks and liabilities (including, for example, natural disasters, space launches
We endeavor to obtain insurance agreements from financially solid, responsible, highly rated counterparties in
establia
and on-orbit operations, cyber security, hazardous operations, energetics and products liabila
liability can be insured, and for risks that are or should be insurable, the policy limits and terms of coverage
reasonably obtainable in the market may not be sufficient to cover actual losses or liabila
insurance coverage is availablea
increasing exclusions. Disputes with insurance carriers, including over policy terms, reservation of rights, the
applicability of coverage (including exclusions), compliance with provisions (including notice) and/or the
insolvency of one or more of our insurers has affected and may continue to affecff
recovery, and our ability to obtain insurance coverage at reasonable rates in the future.
may be entitled to certain legal protections or indemnifications from our customers through contractual
laws, regulations or otherwise. However, these protections are not always availablea
obtain, are typically subject to certain terms or limitations, including the availabila
sufficient to cover losses or liabila
protections are not availablea
our financial position, results of operations and/or cash flows.
ities incurred. If insurance coverage, customer indemnifications and/or other legal
on
or are not sufficient to cover risks or losses, it could have a material adverse effect
In some circumstances we
t
t the availabila
tt
, are difficult to negotiate and
ity of funds, and may not be
ities incurred. Even if
ity or timing of
to us or without
provisions,
ff
Pension and other postreti
ii
reme
tt
ee
cantlyll dependin
i
fluctuate signifi
e
ve or other regulator
ii
and legislati
yr actions.
nt benefitii (OPB)B obligati
gn upon investment performance of pl
ons and relatedtt
anll
ff
i
s and fundingii
expense
requirements maya
xx
assets, changes in actuarial assumptim ons,
The company’s pension and OPB obligations and related expenses are dependent upon the investment performance
of plan assets and various assumptions, including discount rates, mortality and the estimated long-term rates of
returntt
and OPB plans could have a material adverse effecff
flows.
on plan assets. Investment performance of plan assets and changes in assumptions associated with our pension
t on our financial position, results of operations and/or cash
Funding requirements for our pension plans, including Pension Benefit Guarantyt Corporation premiums, are subject
to legislative and other government regulatory actions. In accordance with government regulations, pension plan
cost recoveries under our U.S. government contracts may occur in different periods from when they are recognized
for financial statement purposes or when pension funding is made. These timing differences, as well as government
challenges to pension and OPB cost recovery, could have a material adverse effecff
t on our financial position, results
of operations and/or cash flows.
Business investments and/or//
recordeddd
dd
owns
losses and write-d
tt
substantial
goodwillll and other long-lin
that would reduce our operatingtt
ii
income.
ved assets may become impaire
m
d, resultill ngii
in
Goodwill accounts for approximately 41 percent of our total assets as of December 31, 2021. Although we currently
have excess fair value of our reporting units over their respective carrying values, changes in business conditions or
in the market-based inputs used in our goodwill impairment test, could result in significff ant write-offs of goodwill or
other long-lived assets, which could have a material adverse effect on our financial condition and/or results of
operations.
Item 1B. Unresolved Staff Comments
None.
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NORTHROP GRUMMAN CORPORATRR ION
FORWARD-LOOKING STATEMENTS AND PROJECTIONS
ff
rd-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
This Annual Report on Form 10-K and the information we are incorporating by reference contain statements that
constitute “forwa
Words such as “will,” “expect,” “anticipate,” “intend,” “may,” “could,” “should,” “plan,” “project,” “forecast,”
“believe,” “estimate,” “outlook,” “trends,” “goals” and similar expressions generally identify these forward-looking
statements. Forward-looking statements include, among other things, statements relating to our futuret
condition, results of operations and/or cash flows. Forward-looking statements are based upon assumptions,
expectations, plans and projections that we believe to be reasonablea
These statements are not guarantees of future performance and inherently involve a wide range of risks and
uncertainties that are difficult to predict. Specific risks that could cause actual results to differ materially from those
expressed or implied in these forward-looking statements include, but are not limited to, those identified under “Risk
Factors” and other important factors disclosed in this report and from time to time in our other filings with the SEC.
These risks and uncertainties are amplified by the global COVID-19 pandemic, which has caused and will continue
to cause significant challenges, instability and uncertainty. They include:
when made, but which may change over time.
financial
Industry and Economic Risks
•
•
•
•
our dependence on the U.S. government for a substantial portion of our business
significant delays or reductions in appropriations for our programs, and U.S. government funding and program
support more broadly
the use of estimates when accounting for our contracts and the effect of contract cost growth and/or changes in
estimated contract revenues and costs
increased competition within our markets and bid protests
Legal and Regulatory Risks
•
•
•
•
•
investigations, claims, disputes, enforcement actions, litigation and/or other legal proceedings
the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures
which we participate and the impact on our reputation and our ability to do business
t
in
changes in procurement and other laws, regulations, contract terms and practices applicable to our industry,
findings by the U.S. government as to our complim ance with such requirements, and changes in our customers’
business practices globally
environmental matters, including unforeseen environmental costs and government and third party claims
unanticipated changes in our tax provisions or exposure to additional tax liabilities
Business and Operational Risks
•
•
•
•
•
•
health epidemics, pandemics or similar outbreaks), including
impacts of the COVID-19 pandemic (or futurett
potential new variants, case surges or prolonged recovery periods, their effecff
varying related government requirements, on: our business, our ability to maintain a qualified and productive
workforce, work slowdowns or stoppages, labor shortages, supply chain and logistics challenges, costs we
cannot recover and liabilities for which we are not compensated, performance challenges (including cost and
schedule), government funding, changes in government acquisition priorities and processes, government
payment rules and practices, insurance challenges, and potential impacts on access to capita
the fair value of our assets
al, the markets and
ts on the broader environment, and
cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners
the ability to maintain a qualified workforce with the required security clearances and requisite skills
the performance and financial viability of our subcontractors and suppli
raw materials and components
u
ers and the availabila
ity and pricing of
climate change, its impacm ts on our company,
customers, shareholders and regulators), and changes in laws, regulations and priorities related to greenhouse
gas emissions and other climate change related concerns
our operations and our stakeholders (employe
es, suppliers,
m
m
our exposure to additional risks as a result of our international business, including risks related to geopolitical
and economic factors, suppliers, laws and regulations
-25-
NORTHROP GRUMMAN CORPORATRR ION
•
•
•
•
•
our ability to meet performance obligations under our contracts, including obligations that require innovative
ities, are technologically complex, require certain manufacturing expertise or are dependent on
design capaa bila
factors not wholly within our control
natural disasters
products and services we provide related to hazardous and high risk operations, including the production and
t us to various environmental, regulatory, financial, reputational and other
use of such products, which subjecb
risks
our ability appropriately to exploit and/or protect intellectual
t
property rights
our ability to develop new products and technologies and maintain technologies, facilities, and equipment to
win new competitions and meet the needs of our customers
General and Other Risk Factors
•
•
•
the adequacy and availability of our insurance coverage, customer indemnifications or other liability protections
investment performance of plan assets, changes in actuarial assumptim ons associated with our pension
the futurett
and other postretirement benefit plans and legislative or other regulatory actions impacm ting our pension and
postretirement benefit obligations
changes in business conditions that could impact business investments and/or recorded goodwill or the value of
other long-lived assets
We urge you to consider the limitations on, and risks associated with, forward-looking statements and not unduly
rely on the accuracy of forward-looking statements. These forward-looking statements speak only as of the date this
report is first filed or, in the case of any document incorporated by reference, the date of that document. We
undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, futuret
events or otherwise, except as required by applicable law.
Item 2. Properties
At December 31, 2021, we had approximately 51 million square feet of floor space at 489 separate locations,
primarily in the U.S., for manufacturing,
We leased to third parties approximately 232,000 square feet of our owned and leased facilities. The company’s
majora
warehousing, research and testing, administration and various other uses.
operations are at the following locations:
tt
Aeronautics Systems
El Segundo, Mojave, Palmdale, Redondo Beach and San Diego, CA; Melbourne and St. Augustine, FL; Iuka and
Moss Point, MS; Beavercreek, OH; Oklahoma City, OK; and Clearfield, UT.
Defense Systems
Huntsville, AL; Mesa and Sierra Vista, AZ; Los Angeles, CA; Warner Robins, GA; Lake Charles, LA; Cumberland
and Elkton, MD; Elk River and Plymouth, MN; Dulles, McLean and Radford, VA; and Keyser, WV. Locations
outside the U.S. include Australia.
Mission Systems
McClellan, San Diego, Sunnyvale and Woodland Hills, CA; Apopka, FL; Rolling Meadows, IL; Annapolis,
Annapolis Junction, Elkridge, Halethorpe, Linthicum and Sykesville, MD; Bethpage and Williamsville, NY;
Cincinnati, OH; Salt Lake City, UT; and Chantilly, Charlottesville and Fairfax, VA. Locations outside the U.S.
include France, Germany, Italy and the United Kingdom.
Space Systems
Huntsville, AL; Chandler, Gilbert and Tempe, AZ; Azusa, Carson, Los Angeles, Manhattan Beach, Oxnard,
Redondo Beach and San Diego, CA; Aurora and Colorado Springs, CO; Devens, MA; Eden Prairie, MN; Brigham
City, Clearfield, Magna, Ogden, Roy and Tremonton, UT; and Dulles and Sterling, VA.
Corporate
Falls Church, VA.
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NORTHROP GRUMMAN CORPORATRR ION
The folff
lowing is a summary of our floor space at December 31, 2021:
Square feet (in thousands)
Aeronautics Systems
Defense Systems
Mission Systems
Space Systems
Corporate
Total
Owned
Leased
3,415
1,367
7,933
9,350
372
22,437
6,386
3,497
4,397
7,819
398
22,497
U.S. Government
Owned/Leased
3,336
2,286
—
548
—
6,170
Total
13,137
7,150
12,330
17,717
770
51,104
We maintain our properties in good operating condition and believe the productive capaa
adequate to meet current contractual
requirements and those for the foreseeable futff ure.
tt
t
city of our properties is
Item 3. Legal Proceedings
We have provided information about certain legal proceedings in which we are involved in Notes 11 and 12 to the
consolidated financial statements.
We are a party to various investigations, lawsuits, arbitration, claims, enforcement actions and other legal
proceedings, including government investigations and claims, that arise in the ordinary course of our business. These
types of matters could result in administrative, civil or criminal fines, penalties or other sanctions (which terms
include judgments or convictions and consent or other voluntary decrees or agreements); compensat
other damages; non-monetary relief or actions; or other liabia lities. Government regulations provide that certain
allegations against a contractor may lead to suspension or debarment from future government contracts or
suspension of export privileges for the company or one or more of its components. The naturett
of legal proceedings
is such that we cannot assure the outcome of any particular matter. For additional information on pending matters,
please see Notes 11 and 12 to the consolidated financial statements, and for further information on the risks we face
from existing and futurett
proceedings, please see “Risk Factors.”
investigations, lawsuits, arbitration, claims, enforcement actions and other legal
ory, treble or
m
Consistent with SEC Regulation S-K Item 103, we have elected to disclose those environmental proceedings with a
governmental entity as a party where the company reasonably believes such proceeding would result in monetary
sanctions, exclusive of interest and costs, of $1.0 million or more.
Item 4. Mine Safety Disclosures
No information is required in response to this item.
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NORTHROP GRUMMAN CORPORATRR ION
Item 5. Market forff Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
PART II
COMMON STOCK
We have 800,000,000 shares authorized at a $1 par value per share, of which 156,284,423 shares and 166,717,179
shares were issued and outstanding as of December 31, 2021 and 2020, respectively.
PREFERRED STOCK
We have 10,000,000 shares authorized at a $1 par value per share, of which no shares were issued and outstanding
as of December 31, 2021 and 2020.
MARKET INFORMATION
Our common stock is listed on the New York Stock Exchange and trades under the symbol NOC.
HOLDERS
As of January 24, 2022, there were 19,801 common shareholders of record.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The tablea
below summarizes our repurchases of common stock during the three months ended December 31, 2021:
Period
October 2, 2021 - October 29, 2021
October 30, 2021 - November 26, 2021(2)
November 27, 2021 - December 31, 2021
Total
Total
Number
of Shares
Purchased
324,809
1,697,050
Average
Price
Paid per
Share(1)
$ 381.98
355.80
458,499
367.94
2,480,358
$ 361.47
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
under the
Plans or Programs
($ in millions)
324,809
1,697,050
458,499
2,480,358
$
$
2,981
2,377
2,209
2,209
(1) Includes commissions paid.
(2) The company entered into an accelerated share repurchase agreement with Goldman Sachs & Co. LLC to repurchase $500
million of the company’s common stock and received an initial delivery of shares representing approximately 85 percent of the
share repurchase agreement.
Share repurchases take place from time to time, subject to market and regulatory conditions and management’s
discretion, in the open market or in privately negotiated transactions. The company retires its common stock upon
repurchase and, in the periods presented, has not made any purchases of common stock other than in connection
with these publicly announced repurchase programs.
See Note 3 to the consolidated finaff
ncial statements forff
further information on our share repurchase programs.
-28-
NORTHROP GRUMMAN CORPORATRR ION
STOCK PERFORMANCE GRAPH
Comparison of Cumulative Five Year Total Return
the Standard & Poor’s (S&P) 500 Index and the S&P Aerospace & Defens
ff
e (A&D)
Index
Among Northrop Grumman,
rr
$400
$350
$300
$250
$200
$150
$100
$50
$0
2016
2017
2018
2019
2020
2021
Period Ending
Northrop Grumman
S&P 500 Index
S&P A&D Index
• Assumes $100 invested at the close of business on December 31, 2016, in Northrop Grurr mman Corporation
common stock, the S&P 500 Index and the S&P A&D Index.
assumes reinvestment of dividends.
• The cumulative total returnt
• The S&P A&D Index is comprised of The Boeing Company, General Dynamics Corporation, Howmet
Aerospace Inc., Huntington Ingalls Industries Inc., L3Harris Technologies, Inc., Lockheed Martin
Corporation, Northrop Grurr mman Corporation, Raytheon Technologies Corporation, Textron, Inc., and
TransDigm Group Incorporated.
• The total returntt
• This graph is not deemed to be “filed” with the SEC or subject to the liabila
is weighted according to market capitalization of each company at the beginning of each year.
ities of Section 18 of the Securities
Exchange Act of 1934 (the Exchange Act), and should not be deemed to be incorporated by reference into
any of our prior or subsequent filings under the Securities Act of 1933 or the Exchange Act.
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NORTHROP GRUMMAN CORPORATION
Item 6. [Reserved]
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NORTHROP GRUMMAN CORPORATRR ION
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIERR W
The following discussion should be read along with the financial statements included in this Form 10-K, as well as
Part II, “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” of our
Form 10-K for the year ended December 31, 2020 (“2020 Annual Report on Form 10-K”).
Disposition of IT and Mission Support Services Business
Effective January 30, 2021 (the “Divestiture date”), we completed the sale of our IT and mission support services
business (the “IT services divestiture”) for $3.4 billion in cash and recorded a pre-tax gain of $2.0 billion. The IT
and mission support services business was comprised of the majori
business); select cyber, intelligence and missions support programs, which
Systems (excluding the Vinnell Arabiaa
were part of the former CIMS division of Mission Systems; and the former Space Technical Services business unit
of Space Systems. Operating results include sales and operating income for the IT and mission support services
business prior to the Divestiturett
date. See Note 2 to the consolidated financial statements for further information
regarding the disposition.
ty of the former IS&S division of Defense
a
COVID-19
COVID-19 was first reported in late 2019. In March 2020, the World Health Organization characterized COVID-19
as a global pandemic, and the President declared a national emergency concerning the COVID-19 outbrea
k. In the
almost two years since then, the pandemic has dramatically impacted the global health and economic environment,
including millions of confirmed cases and deaths, business slowdowns or shutdowns, labor
shortfalls, supply chain
challenges, regulatory challenges, and market volatility. We discussed in some detail in our Annual Report on Form
10-K for the fiscal year ended December 31, 2020, and subsequent SEC filings in 2021, the pandemic, its impacts
and risks, and actions taken up to the time of each filing. In this Form 10-K, we provide a further update.
a
t
The company’s leadership, our crisis management and business resumption teams, and local site leadership continue
closely to monitor and address the pandemic and related developments, including the impact on our company, our
employees, our customers, our suppliers and our communities. The company has considered and continues to
consider and be guided by health data and evolving guidance from the Centers for Disease Control and Prevention
(CDC), in particular, as well as other health organizations globally, federal, state and local governmental authorities,
and our customers, among others. We have taken, and continue to take, robust actions to help protect the health,
safetyt and well-being of our employees, to support continued performance, to support our suppliers and local
communities, and to continue to serve our customers. Our goals have been, and continue to be to lessen the potential
adverse impacm ts, both health and economic, and to continue to position the company for long-term success. Like the
communities in which we operate, our actions have varied depending on the spread of COVID-19 and applicable
government requirements, the needs of our employees, the needs of our customers and the needs of our business.
Over the course of 2021, COVID-19 case rates and the health and economic impacts of the pandemic fluctuated
dramatically in different communities in the U.S. and globally, particularly with the spread of new variants. But we
continued to see a prolonged impact on the economy, our industry, and our company, with increased challenges for
customers and suppliers, labor
We expect these and other impacts to continue and they could worsen, depending on the future course of the
pandemic and actions taken in connection with it.
shortages, supply chain challenges, and increasing inflation, among other impacts.
a
In the U.S., the Food and Drug Administration issued emergency use authorization for COVID-19 vaccines and the
government began extensive efforts to administer them. The company also has taken various steps to encourage and
facilitate vaccination access for our employees, in accordance with federal guidance. We have provided paid leave
and flexibility for employees to get vaccinated, and strongly encouraged our workforce to take care of themselves
and their colleagues. In September 2021, the White House issued an executive order and guidance from the Safer
Federal Workforce Task Force broadly requiring many U.S.-based federal contractors to be fully vaccinated by
December 8, 2021 (or to have an approved accommodation). In early November 2021, the federal government
extended that deadline to January 18, 2022. On December 7, 2021, a federal district judge issued an order,
temporarily suspending the government from enforcing the federal contractor mandate. That order is on appeal.
State and local governments are also taking actions related to the pandemic, imposing
additional and varying
requirements on industry. We have taken and are taking steps strongly to encourage our employees to be fully
vaccinated (or to have an approved accommodation) to protect our workplace and to position the company to
comply with the executive order, guidance, and related contract terms, if and as necessary, as we continue to
evaluate the evolving situation and our customers’ requirements. Evolving government requirements, including
regarding a vaccine mandate, along with the broader impacts of the continuing pandemic, could significantly impact
m
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NORTHROP GRUMMAN CORPORATRR ION
our workforce and performance, as well as those of our suppliers, and result in costs that we may not be able to
recover fully. The company continues to take robust actions globally to protect the health, safety and well-being of
our employees, and to serve our customers with continued performance. We also continue to take steps to support
our suppliers, with a particular focus on critical small and midsized business partners, including passing through
increased progress payments from the DoD to our suppliers and accelerating payments to certain suppliers.
ted by the impact of the COVID-19
The company’s fourth quarter 2021 revenue and operating income were affecff
pandemic on the company and the broader economic environment, including through a tightened labor
elevated levels of employee leave, evolving government requirements, and supply
are expected to continue and could worsen and affecff
qualified workforce and to perform fully for our customers (including with respect to cost and schedule), with
delayed or reduced sales and additional liabilities, losses and costs, that we may not be able to recover fully. Our
ers, the company, our economy and our global community face both continuing and
employees, customers and suppli
new or evolving challenges related to the pandemic, and we cannot predict how this dynamic situat
ion will evolve or
the impact it will have on the company, or our financial position, results of operations and/or cash flows. For further
information on the pandemic and the potential impact to the company of COVID-19, see “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and “Liquidity and Capia tal Resources” below and
“Risk Factors.”
a
chain challenges. These factors
t further our ability (and that of our suppliers) to maintain a
market,
u
u
tt
Global Security and Economic Environment
The U.S. and its allies continue to face a global security environment of heightened tensions and instabila
from state and non-state actors, including majora
tensions, diverse regional security concerns and political instabila
undersea to space to cyber. The market for defense products, services and solutions globally is driven by these
complex and evolving security challenges, considered in the broader context of political and socioeconomic
priorities.
ity, threats
global powers, as well as terrorist organizations, emerging nuclear
ity. Global threats persist across all domains, from
The global geopolitical and economic environments also continue to be impacted by uncertainty. Geopolitical
relationships are changing and global economic growth is expected to remain in the low single digits in 2022
reflecting the impact of and uncertainty surrounding geopolitical tensions globally and financial market volatility
and the COVID-19 pandemic. The global economy may also be affected by the residual legal, regulatory and
economic impacts of Britain’s exit from the European Union, the full impacts of which are complex and gradually
becoming evident. Rising inflation also could lead to increased interest rates, raising the cost of borrowing for the
federal government, which could impact other spending priorities. Additionally, economic tensions and changes in
international trade policies, including higher tariffs on imported goods and materials and renegotiation of free trade
agreements, could impact the global market for defense products, services and solutions.
U.S. Political and Economic Environment
On May 28, 2021, the Administration released its budget request for FY 2022. The budget proposed $753 billion for
national defense programs and $770 billion in non-defense discretionary funding. It continues to be the subject of
debate in Congress. The Administration’s budget request included funding for an infrastructure and economic
recovery plan and an educad
the $1.2 trillion Infrastructure and Investment and Jobs Act. Enactment of the infrastructure plan and any future
spending plans, as well as the costs of the pandemic (as discussed more above), may have broader implications for
the defense industry, our customers’ budgets and priorities, and the overall economic environment, including the
national debt. It is difficult to predict the specific course of futurett
national security remains very substantial. We believe that our capaa bila
defense, hypersonics, counter-hypersonics, survivable aircraft and mission systems should help our customers
threats and, as a result, continue to allow for long-term profitable growth in our business.
defend against futurett
tion and economic support plan. On November 15, 2021, the President signed into law
defense budgets. However, the threat to U.S.
ities, particularly in space, missiles, missile
FY 2022 appropriations have not been enacted to date. On September 30, 2021, a continuing resolution was enacted,
providing funding generally at FY 2021 levels through December 3, 2021; the continuing resolution was further
extended through February 18, 2022. Congressional deliberations over FY 2022 appropriations have demonstrated
broad support for national security, with increased funding proposed in certain areas for national defense above the
Administration’s budget request. It remains uncertain whether and, if so, when the government will approve FY
2022 appropriations, with which programs funded at what levels, and for how long the government will operate
under a continuing resolution, with potential impacts on our programs and new starts, in particular.
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NORTHROP GRUMMAN CORPORATRR ION
The Bipartisan Budget Act of 2019 suspended the debt ceiling through July 31, 2021. In October 2021, the statutory
debt limit was increased by $480 billion and, in December 2021, was further increased by $2.5 trillion, which is
currently expected to allow the Treasury Department to finance the government into 2023.
The political environment, federal budget and debt ceiling are expected to continue to be the subject of considerablea
debate, which could have material impacts on defense spending broadly and the company’s programs in particular.
For further information on the risks we face from the current political and economic environment, see “Risk
Factors.”
Operating Performance Assessment and Reporting
We manage and assess our business based on our performance on contracts and programs (typically larger contracts
or two or more closely-related contracts). We recognize sales from our portfolio of long-term contracts as control is
transferred to the customer, primarily over time on a cost-to-cost basis (cost incurred relative to costs estimated at
completion). As a result, sales tend to fluctuate in concert with costs incurred across our large portfolio of contracts.
Due to the applicablea
FAR and CAS requirements that govern our U.S. government business, most types of costs are
allocable to U.S. government contracts. As such, we do not focus on individual cost groupings (such as
manufacturing, engineering and design labor,
(G&A) costs), as much as we do on total contract cost, which is the key driver of our sales and operating income.
subcontractor, material, overhead and general and administrative
a
In evaluating our operating performance, we primarily focus on changes in sales and operating margin rates. Where
applicable, significant fluctuations in operating performance attributable to individual contracts or programs, or
changes in a specific cost element across multiple contracts, are described in our analysis. Based on this approach
and the nature of our operations, the discussion of results of operations below first focuses on our four segments
before distinguishing between products and services. Changes in sales are generally described in terms of volume,
while changes in operating margin rates are generally described in terms of performance and/or contract mix. For
purposes of this discussion, volume generally refers to increases or decreases in sales or cost from production/
service activity levels and performance generally refers to non-volume related changes in profitability. Contract mix
generally refers to changes in the ratio of contract type and/or life cycle (e.g., cost-type,
production, and/or sustainment).
fixed-price, development,
t
CONSOLIDATED OPERATRR ING RESULTS
For purposes of the operating results discussion below, we assess our performance using certain financial measures
that are not calculated in accordance with accounting principles generally accepted in the United States of America
(“GAAP” or “FAS”). Organic sales is defined as total sales excluding sales attributablea
divestiture.
measure in evaluating the company’s underlying sales growth as well as in providing an understanding of our
ongoing business and future sales trends by presenting the company’s sales before the impact of divestiturett
This measure may be useful to investors and other users of our financial statements as a supplemental
to the company's IT services
activity.
tt
tt
Transaction-adjusted net earnings and transaction-adjusted earnings per share (transaction-adjusted EPS) exclude
impacts related to the IT services divestiture,
including the gain on sale of the business, associated federal and state
income tax expenses, transaction costs, and the make-whole premium for early debt redemption. They also exclude
the impact of mark-to-market pension and OPB (“MTM”) benefit/(expense) and related tax impacts, which are
generally only recognized during the fourth quarter. These non-GAAP measures may be useful to investors and
other users of our financial statements as supplemental measures in evaluating the company’s underlying financial
performance by presenting the company’s operating results before the non-operational impact of divestituret
and pension and OPB actuarial gains and losses. These measures are also consistent with how management views
the underlying performance of the business as the impact of the IT services divestiturett
and MTM accounting are not
considered in management’s assessment of the company’s operating performance or in its determination of incentive
compensation awards.
activity
We reconcile these non-GAAP financial measures to their most directly comparable GAAP financial measures
below. These non-GAAP measures may not be defined and calculated by other companies in the same manner and
should not be considered in isolation or as an alternative to operating results presented in accordance with GAAP.
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NORTHROP GRUMMAN CORPORATRR ION
Selected financial highlights are presented in the tabla e below:
per share amounts
$ in millions, excepte
Sales
Operating costs and expenses
Operating costs and expex nses as a % of so ales
Gain on sale of business
Operating income
Operating margin rate
Mark-to-market pension and OPB benefit (expense)
Federal and foreign income tax expense
Effeff ctive income tax rate
Net earnings
Diluted earnings per share
Sales
The tablea
s below reconcile sales to organic sales:
Year Ended December 31
2020
$ 36,799
32,734
2019
$ 33,841
29,872
2021
$ 35,667
31,996
89.7 %
1,980
5,651
15.8 %
2,355
1,933
21.6 %
7,005
43.54
89.0 %
—
4,065
11.0 %
(1,034)
539
14.5 %
3,189
88.3 %
—
3,969
11.7 %
(1,800)
300
11.8 %
2,248
19.03
13.22
% Change in
2021
2020
(3)%
(2)%
NM
39 %
9 %
10 %
NM
2 %
(328)% (43)%
80 %
259 %
120 %
129 %
42 %
44 %
$ in millions
Sales
Year Ended December 31
2021
IT
services
sales
Organic
sales
Sales
2020
IT
services
sales
Organic
sales
Organic
sales %
change
Aeronautics Systems
$ 11,259 $
— $
11,259
$ 12,169 $
— $ 12,169
ff
Defense
Systems
Mission Systems
Space Systems
5,776
10,134
10,608
Intersegment eliminations
(2,110)
(106)
(42)
(16)
2
5,670
10,092
10,592
7,543
10,080
8,744
(1,637)
(527)
(182)
5,906
9,553
8,562
(2,108)
(1,737)
17
(1,720)
(7)%
(4)%
6 %
24 %
Total
$ 35,667 $
(162) $
35,505
$ 36,799 $
(2,329) $ 34,470
3 %
$ in millions
Sales
Year Ended December 31
2020
IT
services
sales
Organic
sales
Sales
2019
IT
services
sales
Organic
sales
Organic
sales %
change
Aeronautics Systems
$ 12,169 $
— $
12,169
$ 11,116 $
— $ 11,116
ff
Defense
Systems
Mission Systems
Space Systems
7,543
10,080
8,744
Intersegment eliminations
(1,737)
(1,637)
(527)
(182)
17
5,906
9,553
8,562
7,495
9,410
7,425
(1,594)
(555)
(180)
5,901
8,855
7,245
(1,720)
(1,605)
24
(1,581)
9 %
— %
8 %
18 %
Total
$ 36,799 $
(2,329) $
34,470
$ 33,841 $
(2,305) $ 31,536
9 %
tt
2021 sales decreased $1.1 billion, or 3 percent, due to a $2.2 billion reduction in sales related to the IT services
divestiture.
2021 organic sales increased $1.0 billion, or 3 percent due to higher sales at Space and Mission Systems,
partially offset by lower sales at Aeronautics Systems and Defense Systems. 2020 sales included a $444 million sale
of equipment to a restricted customer at Aeronautics Systems.
See “Segment Operating Results” below for further information by segment and “Product and Service Analysis” for
product and service detail. See Note 16 to the consolidated finaff
company’s sales by customer type, contract type and geographic
region for each of our segments.
information regarding the
ncial statements forff
a
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NORTHROP GRUMMAN CORPORATRR ION
Operating Income and Margin Rate
2021 operating income increased $1.6 billion, or 39 percent, primarily due to the IT services divestiture, including
the $2.0 billion pre-tax gain on sale and $192 million of unallocated corporate expense forff
state taxes
and transaction costs, partially offset by a $288 million reduction in the FAS/CAS operating adjust
divestiture-re
tt
related to the company’s 2021 MTM benefit. 2021 operating margin rate increased to 15.8 percent from 11.0 percent
reflecting the items above.
lated unallocated corporate expenses were partially offset by higher deferred state taxes principally
d ment. Lower non-
unallowablea
a
2021 G&A costs as a percentage of sales increased to 10.1 percent from 9.3 percent, primarily dued
investments for future business opportunities and a lower G&A cost mix in the divested IT services business.
to an increase in
For further information regarding product and service operating costs and expenses, see “Product and Service
Analysis” below.
Mark-to-Market Pension and OPB Benefit/Expense
The primary components of pre-tax MTM benefit (expense) are presented in the tablea
below:
$ in millions
Actuarial gains (losses) on projected benefit obligation
Actuarial gains on plan assets
MTM benefit (expense)
Year Ended December 31
2020
2019
2021
$
$
1,163
1,192
2,355
$
$
(3,570) $
2,536
(1,034) $
(4,866)
3,066
(1,800)
2021 MTM benefit of $2.4 billion was primarily driven by a 30 basis point increase in the discount rate from year
of approximately 10.9 percent compared to our 7.5 percent asset returnt
end 2020 and actuat
assumptim on.
l net plan asset returns
t
Federal and Foreign Income Taxes
The 2021 effective tax rate (ETR) increased to 21.6 percent from 14.5 percent in the prior year period primarily due
to federal income taxes resulting from the IT services divestiture,
related to $1.2 billion of nondeductible goodwill in the divested business. The company’s 2021 MTM benefit did not
significantly impact the 2021 ETR; however, MTM expense in 2020 reduced the 2020 ETR by 1.3 percentage
points. See Note 7 to the consolidated finaff
including $250 million of income tax expense
additional information.
ncial statements forff
t
-35-
NORTHROP GRUMMAN CORPORATRR ION
Net Earnings
The tablea
below reconciles net earnings to transaction-adjusted net earnings:
$ in millions
Net earnings
MTM (benefit) expense
MTM-related deferred state tax expense (benefit)(1)
Federal tax expense (benefit) of items above
(2)
a
MTM adjust
d ment, net of tax
Gain on sale of business
State tax impact(3)
Transaction costs
Make-whole premium
Federal tax impact of items above
a
(4)
Transaction adjust
d ment, net of tax
Transaction-adjusted net earnings
Year Ended December 31
2019
2020
2021
$ 2,248
$ 3,189
$ 7,005
1,800
1,034
(2,355)
(81)
(54)
124
(361)
(206)
469
1,358
774
(1,762)
—
—
(1,980)
—
—
160
—
—
32
—
—
54
—
—
614
—
—
(1,120)
$ 3,606
$ 3,963
$ 4,123
% Change in
2020
2021
42 %
120 %
(328)% (43)%
(330)% (33)%
(328)% (43)%
(328)% (43)%
NM
NM
NM
NM
NM
NM
10 %
NM
NM
NM
NM
NM
NM
4 %
(1) The deferred state tax impact was calculated using the company’s blended state tax rate of 5.25 percent in 2021 and 2020 and
4.50 percent in 2019 and is included in Unallocated corporate expense within operating income.
(2) The federal tax impact in each period was calculated by subtracting the defeff rred state tax impact from MTM benefit (expense)
and applying the 21 percent federal statutory rate.
(3) The state tax impact includes $62 million of incremental tax expense related to $1.2 billion of nondeductible goodwill in the
divested business.
(4) The federal tax impact was calculated by applying the 21 percent federal statutory rate to the adjustment items and also
includes $250 million of incremental tax expense related to $1.2 billion of nondeductible goodwill in the divested business.
2021 net earnings increased $3.8 billion, or 120 percent, principally dued
benefit, net of tax, and a $1.1 billion increase associated with the IT services divestiture,
adjusted net earnings increased $160 million, or 4 percent, primarily due to lower unallocated corporate expense and
higher segment operating income, partially offset by higher income tax expense.
to a $2.5 billion increase in our MTM
net of tax. Transaction-
tt
-36-
NORTHROP GRUMMAN CORPORATRR ION
Diluted Earnings Per Share
The tablea
below reconciles diluted earnings per share to transaction-adjusted EPS:
Diluted earnings per share
MTM (benefit) expense per share
MTM-related deferred state tax expense (benefit) per share(1)
Federal tax expense (benefit) of items above
per share(2)
a
d ment per share, net of tax
MTM adjust
Gain on sale of business per share
State tax impact(3) per share
Transaction costs per share
Make-whole premium per share
Federal tax impact of items above
a
(4) per share
d ment per share, net of tax
Transaction adjust
Transaction-adjusted EPS
Year Ended December 31
2019
2020
2021
$ 13.22
$ 19.03
$ 43.54
10.59
6.17
(14.64)
(0.48)
(0.32)
0.77
(2.12)
(1.23)
2.92
7.99
4.62
(10.95)
—
—
(12.31)
—
—
0.99
—
—
0.20
—
—
0.34
—
—
3.82
—
—
(6.96)
$ 21.21
$ 23.65
$ 25.63
% Change in
2020
2021
44 %
129 %
(337)% (42)%
(341)% (33)%
(337)% (42)%
(337)% (42)%
NM
NM
NM
NM
NM
NM
12 %
NM
NM
NM
NM
NM
NM
8 %
(1) The deferred state tax impact was calculated using the company’s blended state tax rate of 5.25 percent in 2021 and 2020 and
4.50 percent in 2019 and is included in Unallocated corporate expense within operating income.
(2) The federal tax impact in each period was calculated by subtracting the deferred state tax impact from MTM benefit (expense)
and applying the 21 percent federal statutory rate.
(3) The state tax impact includes $62 million of incremental tax expense related to $1.2 billion of nondeductible goodwill in the
divested business.
(4) The federal tax impact was calculated by applying the 21 percent federal statutory rate to the adjustment items and also
includes $250 million of incremental tax expense related to $1.2 billion of nondeductible goodwill in the divested business.
2021 diluted earnings per share increased $24.51, or 129 percent, principally duedd
MTM benefit, net of tax, and a $6.96 increase associated with the IT services divestiture,
adjusted EPS increased $1.98, or 8 percent, reflecting a 4 percent increase in transaction-adjusted net earnings and a
4 percent decrease in weighted-average diluted shares outstanding.
to a $15.57 increase in our 2021
net of tax. Transaction-
t
SEGMENT OPERATING RESULTS
Basis of Presentation
The company is aligned in four operating sectors, which also comprisem
Systems, Defense Systems, Mission Systems and Space Systems. For a more complete description of each
segment’s products and services, see “Business.”
our reportablea
segments: Aeronautics
We present our sectors in the following business areas, which are reported in a manner reflecting core capaa bila
ities:
Aeronautics Systems
Autonomous Systems
Defense Systems
Battle Management &
Missile Systems
Manned Aircraft
Mission Readiness
tion
Mission Systems
Airborne Multifunc
ff
Sensors
Maritime/Land Systems &
Sensors
Navigation, Targeting &
Space Systems
Launch & Strategic
Missiles
Space
Survivabila
ity
Networked Information
Solutions
Effective during the firff st quarter of 2021 within Mission Systems, the businesses of the former CIMS business area
that remained with Northrop Grumman after the IT services divestituret
business unit and F-35 Communications, Navigation and Identification programs within the former Airborne,
Sensors & Networks business area to form the Networked Information Solutions business area. The Airborne
Sensors & Networks business area was then renamed the Airborne Multifunction Sensors business area to better
reflect its new portfolio. This change had no impact on the segment operating results of Mission Systems as a whole.
were merged with the Communications
r
-37-
NORTHROP GRUMMAN CORPORATRR ION
This section discusses segment sales, operating income and operating margin rate. A reconciliation of segment
operating income to total operating income is provided below.
Segment Operating Income and Margin Rate
Segment operating income, as reconciled in the tablea
below, and segment operating margin rate (segment operating
income divided by sales) are non-GAAP measures that refleff ct the combined operating income of our four segments
less the operating income associated with intersegment sales. Segment operating income includes pension expense
allocated to our sectors under FAR and CAS and excludes FAS pension service expense and unallocated corporate
items (certain corporate-level expenses, which are not considered allowable or allocable under appl
icable FAR and
CAS requirements, and costs not considered part of management’s evaluation of segment operating performance).
These non-GAAP measures may be useful to investors and other users of our financial statements as supplemental
measures in evaluating the finff ancial performance and operational trends of our sectors. These measures may not be
defined and calculated by other companies in the same manner and should not be considered in isolation or as
alternatives to operating results presented in accordance with GAAP.
a
$ in millions
Operating income
Reconciliation to segment operating income:
CAS pension expense
FAS pension service expense
FAS/CAS operating adjust
d ment
Gain on sale of business
IT services divestiture – unallowablea
transaction costs
state taxes and
Intangible asset amortization and PP&E step-up depreciation
MTM-related deferred state tax expense (benefit)(1)
Other unallocated corporate expense
Year Ended December 31
2019
2020
2021
$3,969
$4,065
$5,651
% Change in
2021
2020
39 %
2 %
(544)
414
(130)
(1,980)
192
254
124
106
(827)
409
(418)
—
—
322
(54)
273
(832)
367
(465)
—
—
390
(81)
165
(34)%
(1)%
1 % 11 %
(69)% (10)%
NM
NM
NM
NM
(21)% (17)%
(330)% (33)%
(61)% 65 %
Unallocated corporate (income) expense
$(1,304) $ 541
$ 474
(341)% 14 %
Segment operating income
Segment operating marginr
rate
$4,217
$4,188
$3,978
1 %
5 %
11.8 % 11.4 % 11.8 %
(1) Represents the deferred state tax benefit associated with MTM benefit (expense), which is recorded in Unallocated corporate
expense consistent with other changes in deferred state taxes.
g
g
p
g
Segment Operating Income and Margin Rate
2021 segment operating income increased $29 million, or 1 percent. Higher operating income at Space Systems and
Mission Systems was driven by increased volume and improved performance. Lower operating income at Defense
Systems is due to the impact of the IT services divestiture and lower operating income at Aeronautics Systems
principally relates to net unfavorable EAC adjustments on F-35. 2021 segment operating income fromff
services business was $20 million as comparem
quarter 2021 benefit of approximately $100 million due to the impact of lower overhead rates on the company’s
fixed price contracts. Segment operating margin rate increased to 11.8 percent from 11.4 percent and reflects higher
operating margin rates at Mission Systems, Defense Systems and Space Systems.
d to $247 million in 2020. Segment operating income includes a first
the IT
p
FAS/CAS Operating Adjustment
The decrease in our 2021 FAS/CAS operating adjust
favorablea
plan asset returns
g
t
j
in 2020 and changes in certain CAS actuarial assumptions as of December 31, 2020.
d ment is due to lower CAS pension expense resulting from
(
p
p
Unallocated Corporate Income (Expense)
)
The increase in 2021 unallocated corporate income (expense) is primarily due to a $2.0 billion pre-tax gain on the
sale of our IT services business, partially offset by $192 million of unallowablea
associated with the divestiture. Lower non-divestiture-related unallocated corporate expense reflects a $60 million
er Orbital ATK prior to the
benefit from insurance settlements related to shareholder litigation involving the formff
company’s acquisition, that was resolved in June 2019, as well as benefits recognized during
the year associated
d
with changes in deferre
d state taxes, partially offset by higher deferred state tax expense related to the company’s
ff
2021 MTM benefit.
state taxes and transaction costs
-38-
NORTHROP GRUMMAN CORPORATRR ION
Net Estimate-At-Complem tion (EAC) Adjust
(net EAC adjust
significant effect on reported sales and operating income and the aggregate amounts are presented in the tabla e below:
d ments) using the cumulative catch-up method of accounting. Net EAC adjustments can have a
nts - We record changes in estimated contract earnings at completion
dd mett
$ in millions
Favorable EAC adjustments
Unfavorable EAC adjustments
Net EAC adjustments
Net EAC adjustments by segment are presented in the tabla e below:
$ in millions
Aeronautics Systems
Defense Systems
Mission Systems
Space Systems
Eliminations
Net EAC adjustments
$
$
$
Year Ended December 31
2020
2019
2021
1,242
(715)
527
$
$
1,082
(616)
466
$
$
1,040
(560)
480
Year Ended December 31
2020
2019
2021
$
25
113
263
134
(8)
$
77
148
216
33
(8)
$
527
$
466
$
143
99
189
63
(14)
480
For purposes of the discussion in the remainder of this Segment Operating Results section, references to operating
income and operating margin rate refleff ct segment operating income and segment operating margin rate, respectively.
AERONAUTICS SYSTEMS
$ in millions
Sales
Operating income
Operating margin rate
Year Ended December 31
2021
$ 11,259
1,093
2020
$ 12,169
1,206
2019
$ 11,116
1,188
% Change in
2021
2020
(7)%
(9)%
9 %
2 %
9.7 %
9.9 %
10.7 %
Sales
2021 sales decreased $910 million, or 7 percent, dued
to lower volume in both Manned Aircraft and Autonomous
Systems. Lower sales reflect a $444 million sale of equipment to a restricted customer in 2020, $150 million of
lower F-35 sales, lower A350 production activity, and lower volume on the B-2 Defensive
Modernization (DMS) program and certain Global Hawk programs.
Management Systems
ff
Operating Income
2021 operating income decreased $113 million, or 9 percent, principally due to lower sales. 2021 operating margin
rate decreased to 9.7 percent from 9.9 percent due to lower net favorablea
offset by improved performance on Autonomous Systems programs.
EAC adjustments, driven by F-35, partially
DEFENSE SYSTEMS
$ in millions
Sales
Operating income
Operating margin rate
Year Ended December 31
2020
$ 7,543
846
11.2 %
2021
$ 5,776
696
12.0 %
2019
$ 7,495
793
10.6 %
% Change in
2021
(23)%
(18)%
2020
1 %
7 %
Sales
2021 sales decreased $1.8 billion, or 23 percent, primarily dued
services divestiture. 2021 organic sales decreased $236 million, or 4 percent, due to $397 million lower sales in
connection with the close-out of the contract at the Army’s Lake City at mmunition plant (Lake City) and lower
volume on an international training program, partially offset by higher volume on several programs including
Republic of Korea Global Hawk Contractor Logistics Support (ROK Global Hawk CLS), U.S. Customs and Border
Protection P-3 (CBP P-3), GMLRS, B-2 sustainment and advanced fuze
to a $1.5 billion reduction in sales related to the IT
s.
ff
-39-
NORTHROP GRUMMAN CORPORATRR ION
Operating Income
2021 operating income decreased $150 million, or 18 percent, due to the impact of the IT services divestiture.
Operating margin rate increased to 12.0 percent from 11.2 percent and reflects improved performance at Battle
Management and Missile Systems due to changes in mix as a result of recent contract completions.
MISSION SYSTEMS
$ in millions
Sales
Operating income
Operating margin rate
Year Ended December 31
2020
$ 10,080
1,459
14.5 %
2021
$ 10,134
1,579
15.6 %
2019
$ 9,410
1,408
15.0 %
% Change in
2021
2020
1 %
8 %
7 %
4 %
Sales
2021 sales increased $54 million, or 1 percent, due to higher volume across the sector, partially offset by a
$485 million reduction in sales related to the IT services divestiture. 2021 organic sales increased $539 million, or 6
percent. Maritime/Land Systems and Sensors sales increased primarily due to $137 million higher volume on G/
ATOR and higher marine systems volume. Airborne Multifunction Sensors sales increased principally due to $105
million higher volume on airborne radar programs, including SABR, and higher restricted sales, partially offset by
lower volume on airborne electronic warfare programs. Navigation, Targeting and Survivability sales increased
principally duedd
Information Solutions sales increased principally due to higher volume on electronic warfare programs, including
JCREW, and higher intercompany volume, partially offset by lower volume on F-35 CNI programs.
to $124 million higher intercompany volume largely related to GBSD ramp-up. Networked
Operating Income
2021 operating income increased $120 million, or 8 percent, due to a higher operating margin rate and higher sales.
Operating margin rate increased to 15.6 percent from 14.5 percent due to higher net favff orable EAC adjustments,
which reflect improved performance and the firff st quarter 2021 reduction in overhead rates, the favorable resolution
of certain government accounting matters in the second quarter of 2021 and mix changes largely related to the IT
services divestiture.
tt
SPACE SYSTEMS
$ in millions
Sales
Operating income
Operating margin rate
Year Ended December 31
2020
$ 8,744
893
10.2 %
2021
$ 10,608
1,121
10.6 %
2019
$ 7,425
794
10.7 %
% Change in
2021
2020
21 %
26 %
18 %
12 %
Sales
2021 sales increased $1.9 billion, or 21 percent, dued
Space business areas, partially offset by a $166 million reduction in sales related to the IT services divestiture. 2021
organic sales increased $2.0 billion, or 24 percent. Launch & Strategic Missiles sales increased primarily dued
ramp-up on development programs, including a $1.1 billion increase on GBSD and a $206 million increase on NGI.
Space sales were driven by higher volume on restricted programs and increases of $192 million on Artemis and
$140 million on Next Gen OPIR.
to higher volume in both the Launch & Strategic Missiles and
to
Operating Income
2021 operating income increased $228 million, or 26 percent, due to higher sales and a higher operating margin rate.
Operating margin rate increased to 10.6 percent from 10.2 percent primarily dued
EAC
adjustments, which were largely driven by improved performance on commercial space programs and the first
quarter 2021 reduction in overhead rates.
to higher net favorablea
-40-
NORTHROP GRUMMAN CORPORATRR ION
PRODUCT AND SERVICE ANALYSIS
The folff
lowing table presents product and service sales and operating costs and expenses by segment:
$ in millions
Segment Information:
Aeronautics Systems
Product
Service
Intersegment eliminations
Total Aeronautics Systems
Defense Systems
Product
Service
Intersegment eliminations
Total Defense Systems
Mission Systems
Product
Service
Intersegment eliminations
Total Mission Systems
Space Systems
Product
Service
Intersegment eliminations
Total Space Systems
Segment Totals
Total Product
Total Service
Total Segment(1)
2021
Operating
Costs and
Expenses
Sales
Year Ended December 31
2020
Operating
Costs and
Expenses
Sales
2019
Operating
Costs and
Expenses
Sales
$
$
$
9,408
1,662
189
11,259
8,534
1,462
170
10,166
10,437
1,610
122
12,169
$
9,435
1,417
111
10,963
$
9,387
1,626
103
11,116
$
2,564
2,423
789
5,776
7,064
2,077
993
10,134
8,832
1,637
139
10,608
2,243
2,137
700
5,080
6,017
1,695
843
8,555
7,898
1,464
125
9,487
3,024
3,791
728
7,543
6,744
2,557
779
10,080
6,810
1,826
108
8,744
2,740
3,305
652
6,697
5,757
2,201
663
8,621
6,084
1,672
95
7,851
2,784
4,020
691
7,495
6,022
2,660
728
9,410
5,659
1,683
83
7,425
8,428
1,407
93
9,928
2,572
3,513
617
6,702
5,073
2,314
615
8,002
5,021
1,535
75
6,631
$
$
27,868
7,799
35,667
$
$
24,692
6,758
31,450
$
$
27,015
9,784
36,799
$
$
24,016
8,595
32,611
$
$
23,852
9,989
33,841
$
$
21,094
8,769
29,863
(1) A reconciliation of segment operating income to total operating income is included in “Segment Operating Results.”
Product Sales and Costs
2021 product sales increased $853 million, or 3 percent, due to ramp-up on development programs including GBSD
and NGI at Space Systems, as well as higher volume on airborne radar and land systems programs at Mission
Systems. The increase was partially offset by lower restricted sales and lower net favorablea
Aeronautics Systems as well as close-out of the Lake City contract at Defense Systems.
EAC adjustments at
.
2021 product costs increased $676 million, or 3 percent, consistent with the higher product sales described above
a
Service Sales and Costs
2021 service sales decreased $2.0 billion, or 20 percent, primarily due to the IT services divestiture. Year to date
2021 sales fromff
compared to $2.3 billion in the prior year period. The reductdd
partially offset by higher volume on the ROK Global Hawk CLS and CBP P-3 programs at Defense Systems.
the IT services business, which were largely included in service sales, were $162 million as
ions associated with the IT services divestiturett
were
2021 service costs decreased $1.8 billion, or 21 percent, consistent with the lower service sales described above.
BACKLOG
Backlog represents the futurett
to the company’s remaining performance obligations at the end of each period. It comprises both funded backlog
(firm orders for which funding is authorized and appropri
sales we expect to recognize on firm orders received by the company and is equivalent
ated) and unfunded backlog. Unexercised contract options
a
-41-
NORTHROP GRUMMAN CORPORATIRR
ON
and indefinite delivery indefinite quantity (IDIQ) contracts are not included in backlog until the time the option or
IDIQ task order is exercised or awarded. Backlog is converted into sales as costs are incurred or deliveries are made.
Backlog consisted of the folff
lowing at December 31, 2021 and 2020:
$ in millions
Aeronautics Systems
Defense Systems
Mission Systems
Space Systems
Total backlog
2021
Unfunded
9,435
$
547
4,366
30,904
$ 45,252
Total
Backlog
$ 18,277
6,349
14,306
37,114
$ 76,046
2020
Total
Backlog
$ 24,002
8,131
13,805
35,031
$ 80,969
% Change
in 2021
(24)%
(22)%
4 %
6 %
(6)%
$
Funded
8,842
5,802
9,940
6,210
$ 30,794
2021 net awards totaled $32.1 billion. Significant 2021 new awards include $6.1 billion for restricted programs
(primarily at Space Systems, Mission Systems and Aeronautics Systems), $3.2 billion for the SLS Booster
Production and Operations Contract, $2.6 billion for NGI, $2.2 billion for F-35, $1.0 billion for E-2 and $0.9 billion
for NASA’s HALO module. In connection with the IT services divestiture, the company reduced backlog by $1.4
billion during the firff st quarter of 2021 ($1.0 billion at Defense Systems, $0.2 billion at Mission Systems and $0.2
billion at Space Systems).
LIQUIDITY AND CAPITAL RESOURCES
We are focused on the efficient conversion of operating income into cash to provide for the company’s material cash
requirements, including working capia tal needs, satisfaction of contractual
commitments, funding of our pension and
OPB plans, investment in our business through capita
payments and share repurchases.
tt
and shareholder returnt
through dividend
al expenditures,
t
As of December 31, 2021, we had cash and cash equivalents of $3.5 billion; $295 million was held outside of the
U.S. by foreign subsidiaries. We expect cash and cash equivalents and cash generated fromff
supplemented by borrowings under credit facff
registration with the SEC, if needed, to be sufficient to provide liquidity to the company in the short-term and long-
term. The company has a fivff e-year senior unsecured credit facility in an aggregate principal amount of $2.0 billion,
and in April 2021, we renewed our one-year $500 million uncommitted credit facility. At December 31, 2021, there
was no balance outstanding under these credit facilities.
ilities, commercial paper and/or in the capital markets through our shelf
operating activities,
t
u
commitments include purchase obligations, repayments of long-term debt and
The company’s principal contractual
related interest, and payments under operating leases. At December 31, 2021, we had $17.7 billion of purchase
obligations, approximately half of which is short-term. Purchase obligations are largely comprised of open purchase
order commitments to suppli
risk associated with the purchase obligations on our U.S. government contracts is limited to the termination liability
provisions within those contracts. As such, we do not believe they represent a material liquidity risk to the company.
At December 31, 2021, we had capia tal expenditure commitments of $1.5 billion, which we expect to satisfy with
cash on hand. We also had provisions for uncertain tax positions of $1.6 billion, some or all of which could result in
future cash payments to various taxing authorities. At this time, we are unablea
to estimate the timing and amount of
any futurett
ractors under U.S. government contracts. In most circumstances, our
cash outflows related to these uncertain tax positions.
ers and subcont
u
Refer to the respective notes to the consolidated financial statements for further information about our share
repurchase programs (Note 3), commercial paper, credit facff
credit and guarantees (Note 12), futuret minimum contributions for the company’s pension and OPB plans (Note 13),
and lease payment obligations (Note 15).
ilities and long-term debt (Note 10), standby letters of
COVID-19 and the CARES Act
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) established a program with provisions
to allow U.S. companies to deferff
December 31, 2020 and pay such taxes in two installments in 2021 and 2022. Our first installment of deferred social
security taxes of $200 million was paid in the fourth quarter of 2021 and the second installment of $200 million is
due in the fourt
qualifying contractors forff
continues to seek, and anticipates continuing to seek, recovery for certain COVID-19-related costs under Section
h quarter of 2022. Under Section 3610, the CARES Act also authorized the government to reimburse
certain costs of providing paid leave to employees as a result of COVID-19. The company
the employer’s portion of social security taxes between March 27, 2020 and
ff
-42-
NORTHROP GRUMMAN CORPORATION
and
3610 of the CARES Act and through our contract provisions, though it is unclear what funds
certain
how much we will be able to recover. In addition, the DoD has, to date, taken steps to increase the rate forff
progress payments from 80 percent to 90 percent for costs incurred and work performed on relevant contracts; it is
unclear what steps the DoD will continue to take.
will be availablea
ff
Cash Flow Measures
In addition to our cash position, we consider various cash flowff
including cash provided by operating activities and adjuste
detail below.
d
measures in capia tal deployment decision-making,
d freeff
cash flow, a non-GAAP measure described in more
Operating Cash Flow
The tablea
below summarizes key components of cash flow provided by operating activities:
$ in millions
Net earnings
Gain on sale of business
Non-cash items(1)
Pension and OPB contributions
Changes in trade working capita
Other, net
Net cash provided by operating activities
al
Year Ended December 31
2020
2019
2021
$
$
7,005
(1,980)
(1,510)
(141)
181
12
3,567
$
$
3,189
—
1,799
(887)
227
(23)
4,305
$
$
2,248
—
2,251
(263)
128
(67)
4,297
(1) Includes depreciation and amortization, non-cash lease expense, MTM benefit (expense), stock based compensation expense,
deferred income taxes and net periodic pension and OPB income.
2021 cash provided by operating activities decreased $738 million principally due to federal and state taxes of $785
million paid in connection with the IT services divestiture. Lower 2021 pension and OPB contributions were largely
offset by the impact of CARES Act social security tax deferra
ff
rates.
ls and the 2020 increase in DoD progress payment
Adjusted Free Cash Flow
Adjusted free cash flow, as reconciled in the tabla e below, is a non-GAAP measure defined as net cash provided by
or used in operating activities, less capital expenditures, plus proceeds from the sale of equipment to a customer (not
otherwise included in net cash provided by or used in operating activities) and the after-tax impact of discretionary
pension contributions. Adjusted free cash flow includes proceeds from the sale of equipment to a customer as such
proceeds were generated in a customer sales transaction. It also includes the after-tax impact of discretionary
pension contributions for consistency and comparability of financial performance. This measure may not be defined
and calculated by other companies in the same manner. We use adjuste
planning for, and consideration of, acquisitions, the payment of dividends and stock repurchases. This non-GAAP
measure may be useful to investors and other users of our financial statements as a supplemental measure of our
cash performance, but should not be considered in isolation, as a measure of residual cash flow availablea
discretionary purposes, or as an alternative to operating cash flows presented in accordance with GAAP.
cash flow as a key factor in our
d freeff
for
d
The tablea
below reconciles net cash provided by operating activities to adjuste
d
d freeff
cash flow:
$ in millions
Net cash provided by operating activities
Capital expenditures
Proceeds from sale of equipment to a customer
After-tax discretionary pension contributions
Adjusted freeff
cash flow
% Change in
Year Ended December 31
2021
2020
2019
2020
2021
$ 4,297
$ 4,305
$ 3,567
(17)% — %
(1,264) — % 12 %
(1,420)
(1,415)
205
84
NM
(100)% 524 %
593
—
(39)% 18 %
$ 3,683
$ 2,236
— (59)%
95
$ 3,128
2021 adjusted freeff
to federal and state taxes of $785 million paid
related to the IT services divestiture as well as the impact of CARES Act social security tax deferrals and the 2020
increase in DoD progress payment rates.
cash flow decreased $1.4 billion, principally duedd
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NORTHROP GRUMMAN CORPORATRR ION
Investing Cash Flow
2021 net cash provided by investing activities was $2.1 billion compared to net cash used in investing activities of
$1.2 billion in the prior year, principally due to $3.4 billion in cash received from the sale of our IT services business
during the first quarter of 2021.
Financing Cash Flow
2021 net cash used in financing activities increased $6.6 billion, principally due to an increase of $3.2 billion in
share repurchases and $1.2 billion in debt repayments. 2020 net cash used in financing activities included $2.2
billion of net proceeds from the issuance of long-term debt.
CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
Our consolidated financial statements are prepared in conformity with GAAP, which requires us to make estimates
and assumptions about futurett
events that affect the amounts reported in our consolidated financial statements. We
employ judgment in making our estimates in consideration of historical experience, currently availablea
information
and various other assumptim ons that we believe to be reasonable under the circumstances. Actual results could differ
from our estimates and assumptions, and any such differences could be material to our consolidated financial
statements. We believe the following accounting policies are critical to the understanding of our consolidated
financial statements and require the use of significant management judgment in their application. For a summary of
our significant accounting policies, see Note 1 to the consolidated financial statements.
Revenue Recognition
Due to the long-term nature of our contracts, we generally recognize revenue over time using the cost-to-cost
method, which requires us to make reasonably dependable estimates regarding the revenue and cost associated with
the design, manufacturett
and delivery of our products and services.
Contract sales may include estimates of variable consideration, including cost or performance incentives (such as
award and incentive fees), contract claims and requests for equitablea
included in total estimated sales to the extent it is probable that a significant reversal in the amount of cumulative
consideration is subsequently
revenue recognized will not occur when the uncertainty associated with the variablea
resolved. We estimate variable consideration as the most likely amount to which we expect to be entitled.
adjustment (REAs). Variablea
consideration is
Our cost estimation process is based on the professional knowledge of our engineering, program management and
financial professionals, and draws on their significant experience and judgment. We prepare EACs for our contracts
and calculate an estimated contract profit based on total estimated contract sales and cost. Since our contracts
typically span a period of several years, estimation of revenue, cost, and progress toward complem tion requires the use
of judgment. Factors considered in these estimates include our historical performance, the availabila
and cost of labor,
the naturet
cost of materials, component
allocations.
and complexity of work to be performed, the effect of change orders, availability and
s and subcontracts, the effect
of any delays in performance and the level of indirect cost
ity, productivity
m
a
ff
We generally review and reassess our sales, cost and profit estimates for each significant contract at least annually or
more frequently as determined by the occurrence of events, changes in circumstances and evaluations of contract
performance to reflect the latest reliable information available. The company performs on a broad portfolio of long-
term contracts, including the development of complex and customized military platforms and systems, as well as
advanced electronic equipment and software, that often include technology at the forefront of science. Cost estimates
on fixed-price development contracts are inherently more uncertain as to future events than production contracts,
and, as a result, there is typically more variabila
unanticipated cost growth. Changes in estimates occur for a variety of reasons, including changes in contract scope,
the resolution of risk at lower or higher cost than anticipated, unanticipated performance and other risks affecff
contract costs, performance issues with subcontr
actors or suppliers, changes in indirect cost allocations, such as
overhead and G&A costs, and changes in estimated award and incentive fees. Identified risks typically include
technical, schedule and/or performance risk based on our evaluation of the contract effort.
estimates may include changes in, or resolution of, identified opportunities for operating margin improvem
ity in those estimates, as well as financial risk associated with
Similarly, the changes in
ting
ent.
m
u
ff
For the impacts of changes in estimates on our consolidated statements of earnings and comprehensive income, see
“Segment Operating Results” and Note 1 to the consolidated financial statements.
Retirement Benefits
Overview – The determination of projected benefit obligations, the fair value of plan assets, and pension and OPB
expense for our retirement benefit plans requires the use of estimates and actuarial assumptions. We perform an
annual review of our actuarial assumptions in consultation with our actuaries. As we determine changes in the
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NORTHROP GRUMMAN CORPORATRR ION
assumptions are warranted, or as a result of plan amendments, future pension and OPB expense and our projected
benefit obligation could increase or decrease. The principal estimates and assumptions that have a significant effect
on our consolidated financial position and annual results of operations are the discount rate, cash balance crediting
r market value of plan assets, and the mortality
rate, expected long-term rate of returnt
rate of those covered by our pension and OPB plans. The effecff
ts of actual results differing from our assumptions and
the effects of changing assumptim ons (i.e., actuari
upon annual remeasurement in the fourt
h quarter, or on an interim basis as triggering events warrant remeasurement.
al gains or losses) are recognized immediately through earnings
on plan assets, estimated faiff
ff
t
Discount Rate – The discount rate represents the interest rate used to determine the present value of future cash
flows currently expected to be required to settle our pension and OPB obligations. The discount rate is generally
based on the yield of high-quality corporate fixff ed-income investments. At the end of each year, we determine the
discount rate using a theoretical bond portfolio model of bonds rated AA or better to match the notional cash
outflows related to projected benefit payments forff
the factors noted above
2021 and 2.68 percent at December 31, 2020.
each of our significant benefit plans. Taking into consideration
, our weighted-average composite pension discount rate was 2.98 percent at December 31,
a
The effects of a hypothetical change in the discount rate may be nonlinear and asymmetrical for future years as the
discount rate changes. Holding all other assumptim ons constant, an increase or decrease of 25 basis points in the
December 31, 2021 discount rate assumption would have the following estimated effects on 2021 pension and OPB
obligations, which would be reflected in the 2021 MTM expense (benefit), and 2022 expected pension and OPB
expense:
$ in millions
25 Basis Point
Decrease in
Rate
25 Basis Point
Increase in
Rate
2021 pension and OPB obligation and MTM expense (benefit)
$
1,343
$
(1,274)
2022 pension and OPB (benefit) expense
(44)
40
l
ff
a, where participants’ hypothetical account balances are accumulated over time with
Crediting Rate – A portion of the company’s pension obligation and resulting pension expense is
Cash Balance
based on a cash balance formul
pay-based credits and interest. Interest is credited monthly using the current 30-Year Treasury bond rate. The
interest crediting rate is part of the cash balance formula and independent of actual pension investment earnings. The
cash balance crediting rate used for FAS purposes tends to move in concert with the discount rate but has an
offsetting effecff
t on pension benefit obligations and the related MTM expense (benefit). The minimum cash balance
crediting rate allowed under the plan is 2.25 percent. The cash balance crediting rate assumptim on has been set to the
minimum threshold of 2.25 percent as of December 31, 2021, and will remain at 2.25 percent through 2027. Holding
all other assumptions constant, an increase or decrease of 25 basis points in the December 31, 2021 cash balance
crediting rate assumptim on would have the following estimated effects on the 2021 pension benefit obligation, which
would be reflected in the 2021 MTM expense (benefit), and 2022 expected pension expense:
$ in millions
25 Basis Point
Decrease in
Rate
25 Basis Point
Increase in
Rate
2021 pension obligation and MTM expense (benefit)
$
2022 pension (benefit) expense
— $
—
151
10
t
The expected long-term rate of returntt
ted Long-Term Rate of Return on Plan Assets –tt
Expec
x
assumption reflects the average rate of net earnings we expect on current and future
is a long-term assumption, which we review annually and adjust to reflect changes in our long-term view of
and/or significant changes in our plan asset investment policy. Due to the inherent
expected market returns
uncertainty of this assumptim on, we consider multiple data points at the measurement date including the plan’s target
asset allocation, historical asset returns
and third party projection models of expected long-term returns for each of
the plans’ strategic asset classes. In addition to the data points themselves, we consider trends in the data points,
including changes from the prior measurement date. The EROA assumptions we use for pension benefits are
consistent with those used for OPB plans; however, we reduce the EROA for OPB plans to allow for the impact of
tax on investment earnings, as certain Voluntary Employee Beneficiary Association trusts are taxable.
on plan assets (EROA)
benefit plan investments. EROA
ff
t
During 2021, the Investment Committee of the company’s benefit plans reviewed and approve
asset class allocations. The current asset allocation is approximately 40% public equities, 30% fixed-income, 25%
d the plans’ major
a
-45-
NORTHROP GRUMMAN CORPORATIRR
ON
alternatives and 5% cash. At this time, the Investment Committee is not planning any significant changes to that
mix. For further information on plan asset investments, see Note 13 to the consolidated financial statements.
t
are not necessarily predictive of future market returns,
While historical market returns
performance supported by the stabila
we believe our actual historical performance is a reasonable metric to consider when developing our EROA. Our
average annual rate of returntt
average rates of returnt
arithmetic basis and net of expenses. Our 2021 actual
were approximately 8.8 percent and 9.6 percent, respectively, each determined on an
net plan asset returns
ity in our investment mix, investment managers, and active asset management,
from 1976 to 2021 was approximately 11.2 percent and our 20-year and 30-year rolling
were approximately 10.9 percent.
given our long history of plan
tt
tt
t
Consistent with our past practice, we obtained long-term capita
and, using our target asset allocation, developed an expected rate of returnt
considered not only the specific returns
to-year when developing our EROA.
t
al market forecasting models from several third parties
on plan assets from each model. We
projected by those third party models, but also changes in the models year-
For determining 2021 FAS expense, we assumed an expected long-term rate of returnt
percent and an expected long-term rate of returntt
have assumed an expected long-term rate of returntt
on pension plan assets of 7.5 percent and 7.19 percent on OPB
plans. Holding all other assumptim ons constant, an increase or decrease of 25 basis points in our December 31, 2021
EROA assumption would have the following estimated effects on 2022 expected pension and OPB expense:
on OPB plan assets of 7.22 percent. For 2022 FAS expense, we
on pension plan assets of 7.5
$ in millions
2022 pension and OPB expense (benefit)
25 Basis Point
Decrease
25 Basis Point
Increase
$
92
$
(92)
In addition, holding all other assumptions constant, an increase or decrease of 100 basis points in actual versus
lowing estimated effects on our 2022 MTM expense (benefit):
expected return on plan assets would have the folff
$ in millions
2022 MTM expense (benefit)
100 Basis Point
Decrease
100 Basis Point
Increase
$
369
$
(369)
, such as real estate, private equity, hedge funds and opportunist
Estimated FaiFF r MarkMM etkk Value of Planl
determinablea
. Estimated faiff
fair value using the best information availablea
values and net asset values (NAV), as well as valuation methodologies that include third party appraisals,
comparablea
transactions, discounted cash flow valuation models and public market data.
Assetstt – For certain plan assets where the fair market value is not readily
r values on these plan assets are based on redemption
ic investments, we develop estimates of
t
t
es Retirement Plans Experience Committee (RPEC) issued updat
Mortality Rate – Mortality assumptions are used to estimate life expectancies of plan participants. In October 2014,
the Society of Actuari
mortality improvement scale, which reflected longer life eff
the RPEC issued an updated mortality base tabla e (the Private Retirement Plans Mortality table for 2012 (Pri-2012)),
which we adopted after reviewing our own historical mortality experience. In October 2021, the RPEC released a
new projection scale (MP-2021) that included additional underlying data for 2019, which included an increase in life
expectancies relative to the prior year.
xpectancies than previously projected. In October 2019,
ed mortality tabla es and a
u
After considering the information released by the RPEC in October 2021 as well as the company’s recent mortality
l MP-2021 projection scale while continuing to
experience in light of the COVID-19 pandemic, we adopted the fulff
use the Pri-2012 White Collar tabla e. Accordingly, we updated the mortality assumptions used in calculating our
pension and OPB obligations recognized at December 31, 2021, and the amounts estimated forff
our 2022 pension
and OPB expense.
For further information regarding our pension and OPB plans, see “Risk Factors” and Notes 1 and 13 to the
consolidated financial statements.
Litigation, Commitments and Contingencies
We are subject to a range of claims, disputes, enforcement actions, investigations, lawsuits, overhead cost claims,
environmental matters, income tax matters and administrative proceedings that arise in the ordinary course of
business. Estimating liabilities and costs associated with these matters requires judgment based upon the
professional knowledge and experience of management. We determine whether to record a reserve and, if so, what
amount based on consideration of the facff
ts and circumstances of each matter as then known to us. Determinations
regarding whether to record a reserve and, if so, of what amount, reflect management’s assessment regarding what is
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NORTHROP GRUMMAN CORPORATRR ION
likely to occur; they do not necessarily reflect what management believes should occur. The ultimate resolution of
any such exposure to us may vary materially from earlier estimates as further facts and circumstances develop or
become known to us.
Environmental Matters – We are subject to environmental laws and regulations in the jurisdictions in which we do
or have done business. Factors that could result in changes to the assessment of probability, range of reasonably
estimated costs and environmental accruals include: modification of planned remedial actions; changes in the
estimated time required to conduct remedial actions; discovery of more or less extensive (or different) contamination
than anticipated; information regarding the potential causes and effecff
ts of contamination; results of efforts to involve
other responsible parties; financial capabi
interpretation or application; contractual obligations affecting remediation or responsibilities; and improvements in
remediation technology. As we expect to be able to recover a portion of environmental remediation liabilities
through overhead charges on government contracts, such amounts are deferred in prepaid expenses and other current
assets (current portion) and other non-current assets until charged to contracts. We use judgment to evaluate the
ity of our environmental remediation costs, assessing, among other things, U.S. government regulations,
recoverabila
our U.S. government contract mix and past practices. Portions of the company’s environmental liabilities we do not
expect to be recoverablea
lities of other responsible parties; changes in laws and regulations, their
have been expensed.
a
t
or planned to be taken in a future
Income Taxaa Matters – The evaluation of tax positions taken in a filed tax return,
or claim, requires the use of judgment. We establish reserves for uncertain tax positions when, despite the
tax returnt
belief that our tax positions are supportable, there remains uncertainty in a tax position taken in our filed tax returns
or planned to be taken in a future tax returnt
or claim. The company follows a recognition and measurement
approach, considering the facts, circumstances, and information available at the reporting date. Judgment is
exercised by the company in determining the level of evidence necessary and appropriate to support its assessment
using all availablea
information. The technical merits of a given tax position are derived from sources of authority in
the tax law and their applicabila
company considers the amounts and probabila
more likely than not that a tax position will be sustained, we record the largest amount of tax benefit with a greater
than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority. To the extent we
prevail in matters for which reserves have been established or are required to pay amounts in excess of reserves,
there could be a significant impact on our consolidated financial position and annual results of operations. Our 2021
increase in unrecognized tax benefits of $149 million was primarily related to our methods of accounting associated
with the timing of revenue recognition and related costs and the 2017 Tax Cuts and Jobs Act, which includes related
final revenue recognition regulations issued in December 2020 under IRC Section 451(b) and procedural guidance
issued in August 2021.
ity to the facts and circumstances of the position. In measuring the tax position, the
ities of the outcomes that could be realized upon settlement. When it is
tt
For further information on litigation, commitments and contingencies, see “Risk Factors” and Note 1, Note 7, Note
11 and Note 12 to the consolidated financial statements.
Goodwill and Other Purchased Intangible Assets
Overview – We allocate the purchase price of acquired businesses to the underlying tangible and intangible assets
acquired and liabilities assumed based upon their respective fair values, with the excess recorded as goodwill. Such
fair value assessments require judgments and estimates that can be affected by contract performance and other
factors over time, which may cause final amounts to differ materially from original estimates. Adjustments to the
fair value of purchased assets and liabilities after the initial measurement period are recognized in net earnings.
We recognize purchased intangible assets in connection with our business acquisitions at fair value on the
acquisition date. The most significant purchased intangible assets recognized from our acquisitions are generally
customer-related intangible assets, including customer contracts and commercial customer relationships. We
determine the fair value of those customer-related intangible assets based on estimates and judgments, including the
amount and timing of expected future cash flows, long-term growth rates and discount rates. In some cases, we use
discounted cash flow analyses, which are based on estimates of future sales, earnings and cash flows after
considering such factors as general market conditions, customer budgets, existing firm and future orders, changes in
working capita
al, long term business plans and recent operating performance.
Impairment Testing – We test for impaim rment of goodwill annually at each of our reporting units, which comprise
our operating segments. The results of our annual goodwill impairment tests as of December 31, 2021 and 2020,
respectively, indicated that the estimated fair value of each reporting unit exceeded its respective carrying value.
There were no impairmm
ent charges recorded in the years ended December 31, 2021, 2020 and 2019.
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NORTHROP GRUMMAN CORPORATRR ION
In addition to performing an annual goodwill impairment test, we may perform an interim impairment test if events
occur or circumstances change that suggest goodwill in any of our reporting units may be impaired. Such indicators
may include, but are not limited to, the loss of significant business, significant reductions in federal government
appropriations or other significant adverse changes in industry or market conditions. During 2021, we considered
COVID-19-related impacts on our business and determined there were no impairment indicators requiring us to
perform an interim goodwill impairment test.
When testing goodwill for impairment, we compare the fair values of each of our reporting units to their respective
carrying values. To determine the fair value of our reporting units, we primarily use the income approach based on
the cash flows we expect the reporting units to generate in the future,
income valuation method requires management to project sales, operating expenses, working capita
spending and cash flows for the reporting units over a multi-year period, as well as to determine the weighted-
average cost of capia tal (WACC) used as a discount rate and terminal value assumptim ons. The WACC takes into
account the relative weights of each component of our consolidated capia tal structure (equity and debt) and represents
the expected cost of new capita
contracts and barriers to market entry. The terminal value assumptions are applied to the final year of the discounted
cash flow model. We use industry multiples (including relevant control premiums) of operating earnings to
corroborate the fair values of our reporting units determined under the market valuation method of the income
approach.
al adjusted as appropriate to consider lower risk profiles associated with longer-term
consistent with our operating plans. This
al, capita
al
tt
We test for impaim rment of our purchased intangible assets when events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverablea
undiscounted futurett
undiscounted cash flows are not sufficient to recover the carrying amount, we recognize a non-cash impairment
charge to reduce the carrying amount to fair value. There were no impairment charges recorded in the years ended
December 31, 2021, 2020 and 2019.
. Our assessment is based on our projection of the
operating cash flows of the related asset group. If such projections indicate that future
Impairment assessment inherently involves management judgments as to assumptim ons about expected future cash
flows and the impact of market conditions on those assumptions. Due to the many variablea
estimation of a business’ fair value and the relative size of our recorded goodwill and other purchased intangible
ff
assets, differences in assumptions may have a material effect
on the results of our impairment analysis.
s inherent in the
-48-
NORTHROP GRUMMAN CORPORATRR ION
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
EQUITY RISK
We are exposed to market risk with respect to our portfolio of marketable securities with a fair value of $418 million
at December 31, 2021. These securities are exposed to market volatilities, changes in price and interest rates.
INTEREST RATE RISK
We are exposed to interest rate risk on variablea
outstanding at December 31, 2021. At December 31, 2021, we have $12.8 billion of long-term debt, primarily
consisting of fixed-rate debt, with a fair value of approximately $15.1 billion. The terms of our fixed-rate debt
obligations do not generally allow investors to demand payment of these obligations prior to maturity. Therefore, we
do not have significant exposure to interest rate risk for our fixed-rate debt; however, we do have exposure to fair
value risk if we repurchase or exchange long-term debt prior to maturity.
-rate short-term credit facilities for which there were no borrowings
FOREIGN CURRENCY RISK
In certain circumstances, we are exposed to foreign currency risk. We enter into foreign currency forward contracts
to manage a portion of the exchange rate risk related to receipts from customers and payments to suppli
denominated in foreign currencies. We do not hold or issue derivative financial instruments for trading purposes. At
December 31, 2021, foreign currency forward contracts with a notional amount of $120 million were outstanding.
At December 31, 2021, a 10 percent unfavorable foreign exchange rate movement would not have a material impact
on our consolidated financial position, annual results of operations and/or cash flows.
ers
u
INFLATION RISK
We have generally been able to anticipate increases in costs when pricing our contracts. Bids for longer-term firm
fixed-price contracts typically include assumptions for labor and other cost escalations in amounts that historically
have been sufficient to cover cost increases over the period of performance.
-49-
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Northrop Grumman Corporation
Falls Church, Virginia
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Northrop Grumman Corporation
and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of
earnings and comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in
the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States
of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on the
criteria establia
Organizations of the Treadway Commission and our report dated January 26, 2022 expressed an unqualified opinion
on the Company’s internal control over financial reporting.
shed in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial
statements that were communicated or required to be communicated to the audit and risk committee and that (1)
relate to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any
way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
Revenue Recognition - Cost and Revenue Estimates for Development Contracts - Refer to Note 1 to the
financial statements
Critical Audit Matter Descripti
i
on
As more fully described in Note 1 to the financial statements, the Company recognizes substantially all revenue as
control is transferred to the customer on their long-term contracts over time using the cost-to-cost method (cost
incurred relative to total cost estimated at completion). Use of the cost-to-cost-method requires the Company to
make reasonablya
delivery of their products or services. The Company estimates profit on these contracts as the differe
nce between
total estimated sales and total estimated costs at completion and recognizes that profit as costs are incurred. Cost
estimates regarding the revenue and costs associated with the design, manufacture and
dependablea
ff
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NORTHROP GRUMMAN CORPORATRR ION
estimates on contracts requiring development work are inherently more uncertain as to future events than production
contracts, and, as a result, there is typically more variability in those estimates. Certain of these contracts are fixed
price in nature,
type contracts may have award or incentive fees that are subjecb
periods or towards the end of the contract. As a result, the estimation of costs required to complete these contracts
and the expected revenues that will be earned is complex and requires significant judgment.
which results in greater financial risk associated with unanticipated cost growth. Alternatively, cost-
t to uncertainty and may be earned over extended
t
Given the judgment necessary to make reasonably dependablea
estimates regarding the revenue and costs associated
with such contracts, auditing these estimates required extensive audit effort due to the complexity of the underlying
programs and a high degree of auditor judgment when performing audit procedures and evaluating the results of
those procedures.
How the Critical Audit Matter Was Addresse
dd
d in the Audit
Our auditing procedures related to the cost and revenue estimates for these development contracts included the
following, among others:
• We tested the effecff
tiveness of controls over the estimates of total costs and revenues on such contracts,
including development costs and any related award or incentive fee estimates for the relevant performance
obligations.
• We selected certain long-term contracts for testing and performed the following procedures:
–
–
–
Evaluated whether the recognition of revenue over time on such contracts was appropriate based
on the terms and conditions of each contract, including whether continuous transfer of control to
the customer occurred as progress was made toward fulfilling the performance obligation.
Tested management’s identificatio
underlying goods and services were highly interdependent and interrelated.
n of distinct performance obligations by evaluating whether the
ff
Tested management’s determination of the transaction price, including any award or incentive
fees, based on the consideration expected to be received in accordance with the rights and
obligations establia
shed under the contracts and any contractual
tt modifications.
–
Evaluated the estimates of total cost and revenue for the performance obligation by:
▪
▪
▪
▪
Conducting inquiries at the relevant program locations, or virtually, (as a result of the
COVID-19 pandemic and remote working environment) regarding any challenges related
to the program.
Comparing costs incurred to date to the costs management estimated to be incurred to
date.
Evaluating management’s ability to achieve the estimates of total cost and revenue by
performing corroborating inquiries with the Company’s program and business
management, and testing management’s process used to develop the estimates based on
er contracts. This
their work plans, engineering specifications, program labor,
includes management’s process to identify COVID-19 impacts to programs, which could
include forecasted cost impacts and assumptim ons on the ability to recover those costs.
u
and suppli
a
Comparing management’s estimates for the selected contracts to costs and revenues of
.
similar performance obligations, when applicablea
–
Tested the mathematical accuracy of management’s calculation of revenue recognized during the
period for the performance obligations.
Income Taxes - Uncertain Tax Positions - Refer to Notes 1 and 7 to the financial statements
Critical Audit Matter Descripti
i
on
in the U.S. federal jurisdiction and in various state and foreign jurisdictions.
The Company files income tax returnsr
Uncertain tax positions reflect the Company’s expected treatment of tax positions taken in a filed tax return,
planned to be taken in a future tax returnr or claim, which have not been reflected in measuring income tax expense
or taxes payable for financial reporting purposes. Until these positions are sustained by the taxing authorities or the
statute of limitations concerning such issues lapse
resulting from such positions and reports the tax effects as a liability for uncertain tax positions in its consolidated
statements of financial position. The Company has recognized increased uncertain tax positions in recent years
s, the Company does not generally recognize the tax benefits
or
a
t
-51-
NORTHROP GRUMMAN CORPORATRR ION
principally related to state apportionment, the methods of accounting associated with the timing of revenue
recognition and related costs, and the 2017 Tax Act. Until the matters are resolved, the outcome is inherently
uncertain and the Company discloses a summary of changes in their uncertain tax positions within the notes to their
financial statements.
Auditing the assumptim ons associated with the Company’s uncertain tax positions involves especially challenging
judgments given the complexity and inherent subjectivity involved in evaluating the potential outcomes of these
matters.
How the Critical Audit Matter Was Addresse
dd
d in the Audit
Our audit procedures related to the assumptim ons used in determining uncertain tax positions included the following,
among others:
• We tested the effecff
tiveness of internal controls relating to the identification and completeness of, and
recognition for, uncertain tax positions, including management’s controls over the underlying key
assumptim ons and inputs used to derive the estimates.
• With the assistance of our income tax specialists, we selected specific uncertain tax positions for testing and
performed the following procedures:
–
Inquired both in-person and virtually (as a result of the COVID-19 pandemic and the remote
working environment) of the Company’s tax department, financial reporting department, and other
personnel directly involved in the development of the estimates.
– Obtained supporting documentation and evaluated how the Company supported the position,
including the assumptim ons and estimates used for measurement, and how the taxing authorities
.
have historically challenged the tax position, if applicablea
– Obtained and read opinions provided by external counsel, as applicablea
, regarding the tax position
taken by the Company.
–
–
Evaluated whether the uncertain tax position met the “more likely than not” recognition threshold.
Evaluated the appropriateness and consistency of the methodologies and assumptions used by
management when developing these estimates.
• We tested the mathematical accuracy of management’s calculations.
/s/
Deloitte & Touche LLP
McLean, Virginia
January 26, 2022
We have served as the Company’s auditor since 1975.
-52-
NORTHROP GRUMMAN CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
$ in millions, except per share amounts
Sales
Product
Service
Total sales
Operating costs and expenses
Product
Service
General and administrative expenses
Total operating costs and expenses
Gain on sale of business
Operating income
Other (expense) income
Interest expense
Non-operating FAS pension benefit
Mark-to-market pension and OPB benefit (expense)
Other, net
Earnings before income taxes
Federal and foreign income tax expense
Net earnings
Basic earnings per share
Weighted-average common shares outstanding, in millions
Diluted earnings per share
Weighted-average diluted shares outstanding, in millions
Net earnings (from above)
Other comprehensive loss
Change in unamortized prior service credit, net of tax expense of $2 in
2021, $14 in 2020 and $15 in 2019
Change in cumulative translation adjust
d ment and other, net
Other comprehensive loss, net of tax
Comprehensive income
Year Ended December 31
2020
2019
2021
$ 27,868
7,799
35,667
$ 27,015
9,784
36,799
$ 23,852
9,989
33,841
22,309
6,090
3,597
31,996
1,980
5,651
(556)
1,469
2,355
19
8,938
1,933
7,005
43.70
160.3
43.54
160.9
$
$
$
21,559
7,762
3,413
32,734
—
4,065
(593)
1,198
(1,034)
92
3,728
539
3,189
19.08
167.1
19.03
167.6
$
$
$
18,675
7,907
3,290
29,872
—
3,969
(528)
800
(1,800)
107
2,548
300
2,248
13.28
169.3
13.22
170.0
$
$
$
$
7,005
$
3,189
$
2,248
(8)
(7)
(15)
6,990
(41)
10
(31)
3,158
(47)
2
(45)
2,203
$
$
$
The accompanying notes are an integral part of these consolidated finff ancial statements.
-53-
NORTHROP GRUMMAN CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
$ in millions, except par value
Assets
Cash and cash equivalents
Accounts receivable, net
Unbilled receivables, net
Inventoried costs, net
Prepaid expenses and other current assets
Assets of disposal group held for sale
Total current assets
Property, plant and equipment, net of accumulated depreciation of $6,819 for 2021 and
$6,335 for 2020
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Deferred tax assets
Other non-current assets
Total assets
Liabilities
Trade accounts payable
Accrued employee compensation
Advance payments and billings in excess of costs incurred
Other current liabilities
Liabilities of disposal group held for sale
Total current liabilities
Long-term debt, net of current portion of $6 for 2021 and $742 for 2020
Pension and other postretirement benefit plan liabia lities
Operating lease liabilities
Deferred tax liabila
Other non-current liabilities
ities
Total liabilities
Commitments and contingencies (Note 12)
Shareholders’ equity
cember 31
2021
2020
$
3,530
1,467
5,492
811
1,126
—
12,426
7,894
1,655
17,515
578
200
2,311
$ 42,579
$
2,197
1,993
3,026
2,314
—
9,530
12,777
3,269
1,590
490
1,997
29,653
$
4,907
1,501
5,140
759
1,402
1,635
15,344
7,071
1,533
17,518
783
311
1,909
$ 44,469
$
1,806
1,997
2,517
3,002
258
9,580
14,261
6,498
1,343
—
2,208
33,890
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued and
outstanding
Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding:
2021—156,284,423 and 2020—166,717,179
Paid-in capia tal
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these consolidated finff ancial statements.
—
—
156
—
12,913
(143)
12,926
$ 42,579
167
58
10,482
(128)
10,579
$ 44,469
-54-
NORTHROP GRUMMAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
$ in millions
Operating activities
Net earnings
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization
Mark-to-market pension and OPB (benefit) expense
Stock-based compensation
Deferred income taxes
Gain on sale of business
Net periodic pension and OPB income
Pension and OPB contributions
Changes in assets and liabilities:
Accounts receivable, net
Unbilled receivables, net
Inventoried costs, net
Prepaid expenses and other assets
Accounts payable and other liabia lities
Income taxes payablea
, net
Other, net
Net cash provided by operating activities
Investing activities
al expenditures
Divestiture of IT services business
tt
Capita
Proceeds from sale of equipment to a customer
Other, net
Net cash provided by (used in) investing activities
Financing activities
Net proceeds from issuance of long-term debt
Payments of long-term debt
Payments to credit facff
ilities
Net repayments of commercial paper
Common stock repurchases
Cash dividends paid
Payments of employee taxes withheld from share-based awards
Other, net
Net cash used in financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
ar Ended December 31
2021
2020
2019
$
7,005
$
3,189
$
2,248
1,239
(2,355)
94
603
(1,980)
(1,091)
(141)
(10)
(414)
(52)
66
376
215
12
3,567
3,400
(1,415)
84
(11)
2,058
—
(2,236)
—
—
(3,705)
(983)
(34)
(44)
(7,002)
(1,377)
4,907
3,530
$
1,267
1,034
90
210
—
(802)
(887)
(285)
160
18
(147)
719
(238)
(23)
4,305
—
(1,420)
205
4
(1,211)
2,239
(1,027)
(78)
—
(490)
(953)
(66)
(57)
(432)
2,662
2,245
4,907
$
1,265
1,800
127
(509)
—
(432)
(263)
122
(335)
(135)
(78)
617
(63)
(67)
4,297
—
(1,264)
—
57
(1,207)
—
(500)
(31)
(198)
(744)
(880)
(65)
(6)
(2,424)
666
1,579
2,245
$
The accompanying notes are an integral part of these consolidated finff ancial statements.
-55-
NORTHROP GRUMMAN CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
$ in millions, except per share amounts
Common stock
Beginning of year
Common stock repurchased
Shares issued for employee stock awards and options
End of year
Paid-in capital
Beginning of year
Common stock repurchased
Stock compensation
Other
End of year
Retained earnings
Beginning of year
Common stock repurchased
Net earnings
Dividends declared
Stock compensation
Other
End of year
Accumulated other comprehensive loss
Beginning of year
Other comprehensive loss, net of tax
End of year
Total shareholders’ equity
Cash dividends declared per share
Year Ended December 31
2020
2019
2021
$
$
167
(11)
—
156
58
(60)
2
—
—
10,482
(3,645)
7,005
(989)
60
—
12,913
$
168
(1)
—
167
—
—
63
(5)
58
8,748
(479)
3,189
(951)
(36)
11
10,482
(128)
(15)
(143)
$ 12,926
6.16
$
(97)
(31)
(128)
$ 10,579
5.67
$
$
$
171
(3)
—
168
—
—
—
—
—
8,068
(751)
2,248
(880)
63
—
8,748
(52)
(45)
(97)
8,819
5.16
The accompanying notes are an integral part of these consolidated finff ancial statements.
-56-
NORTHROP GRUMMAN CORPORATRR ION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Northrop Grumman Corporation is a leading global aerospace and defense company. We deliver a broad range of
products, services and solutions to U.S. and international customers, and principally to the U.S. Department of
Defense and intelligence community. Our broad portfolio is aligned to support national security priorities and our
solutions equip our customers with capaa bila
ities they need to connect, protect and advance humanity.
a
lities, mission systems, networking and communications, strategic deterrence systems, and
The company is a leading provider of space systems, advanced aircraft, missile defense, advanced weapons and
long-range fires capabi
breakthrough technologies, such as artificial intelligence, advanced computing and cyber. We are focused on
competing and winning programs that enable continued growth, performing on our commitments and affordablya
delivering capaa bila
ity our customers need. With the investments we've made in advanced technologies, combined
with our talented workforce and digital transformation capaa bila
our customers' needs today and in the future.
ities, Northrop Grumman is well positioned to meet
Principles of Consolidation
The consolidated financial statements include the accounts of Northrop Grumman and its subsidiaries and joint
or other investments for which we consolidate the financial results. Intercompany accounts, transactions
t
ventures
and profits are eliminated in consolidation. Investments in equity securities and joint ventures where the company
has significant influence, but not control, are accounted for using the equity method.
Basis of Presentation
Effective January 30, 2021 (the “Divestiture date”), we complem ted the sale of our IT and mission support services
business (the “IT services divestiture”) for $3.4 billion in cash and recorded a pre-tax gain of $2.0 billion. The IT
and mission support services business was comprised of the majori
Systems (excluding the Vinnell Arabia business); select cyber, intelligence and missions support programs, which
were part of the former CIMS division of Mission Systems; and the former Space Technical Services business unit
of Space Systems. The assets and liabilities of the IT and mission support services business were classified as held
for sale in the consolidated statement of financial position as of December 31, 2020. Operating results include sales
and operating income for the IT and mission support services business prior to the Divestiturett
date. See Note 2 for
further information regarding the divestiturett
and Note 8 for the allocation of goodwill to the divestiture.
ty of the former IS&S division of Defense
a
During the first quarter of 2021, we changed the naming convention for our FAS/CAS pension accounts. The Net
FAS (service)/CAS pension adjustment is now referred to as the FAS/CAS operating adjustmd
ent and the FAS (non-
service) pension benefit is now referred to as the Non-operating FAS pension benefit. This change does not impact
any current or previously reported amounts. During the second quarter of 2021, we changed the presentation of the
retiree benefits component
period amounts have been conformed to current period presentation and this change does not impacm t previously
reported cash provided by operating activities.
s in the operating cash flow section of the consolidated statements of cash flows. Prior
m
Accounting Estimates
The company’s consolidated financial statements are prepared in conformity with U.S. GAAP. The preparation
thereof requires management to make estimates and judgments that affect
liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts
of sales and expenses during the reporting period. Estimates have been prepared using the most current and best
availaba le information; however, actual results could differ materially from those estimates.
the reported amounts of assets and
ff
a
Revenue Recognition
The majori
production of goods, the provision of services, or a combination of both. The company classifies sales as product or
service based on the predominant attributes of each performance obligation.
ty of our sales are derived from long-term contracts with the U.S. government for the development or
The company recognizes revenue for each separately identifiablea
promise to transfer a distinct good or service to a customer. In most cases, goods and services provided under the
company’s contracts are accounted for as single performance obligations due to the complex and integrated nature of
our products and services. These contracts generally require significant integration of a group of goods and/or
services to deliver a combined output.
In some contracts, the company provides multiple distinct goods or services
to a customer, most commonly when a contract covers multiple phases of the product life cycle (e.g., development,
s as separate
production, sustainment, etc.). In those cases, the company accounts for the distinct contract deliverablea
performance obligation in a contract representing a
tt
-57-
NORTHROP GRUMMAN CORPORATRR ION
performance obligations and allocates the transaction price to each performance obligation based on its relative
standalone selling price, which is generally estimated using cost plus a reasonable margin. Warranties are provided
on certain contracts, but do not typically provide for services beyond standard assurances and are therefore not
considered to be separate performance obligations. Assets recognized from the costs to obtain or fulfi
not material.
ll a contract are
ff
t
The company recognizes revenue as control is transferred to the customer, either over time or at a point in time. In
general, our U.S. government contracts contain termination for convenience and/or other clauses that generally
provide the customer rights to goods produced and/or in-process. Similarly, our non-U.S. government contracts
generally contain contractual
goods and services that do not have an alternative use. For most of our contracts, control is effectively transferred
during the period of performance, so we generally recognize revenue over time using the cost-to-cost method (cost
incurred relative to total cost estimated at completion). The company believes this represents the most appropriate
measurement towards satisfaction of its performance obligations. Revenue for contracts in which the control of
goods produced does not transfer until delivery to the customer is recognized at a point in time (i.e., typically uponu
delivery).
termination clauses or entitle the company to payment for work performed to date forff
Contracts are often modified for changes in contract specifications or requirements, which may result in scope and/
or price changes. Most of the company’s contract modifications are for goods or services that are not distinct in the
context of the contract and are therefore accounted for as part of the original performance obligation through a
cumulative EAC adjustment.
Contract Estimates
Use of the cost-to-cost method requires us to make reasonably dependable estimates regarding the revenue and cost
associated with the design, manufacture and delivery of our products and services. The company estimates profit on
these contracts as the difference between total estimated sales and total estimated cost at completion and recognizes
that profit as costs are incurred. Significant judgment is used to estimate total sales and cost at completion.
Contract sales may include estimates of variable consideration, including cost or performance incentives (such as
consideration is included in total estimated sales to
award and incentive fees), contract claims and REAs. Variablea
the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur
when the uncertainty associated with the variablea
consideration as the most likely amount to which we expect to be entitled.
consideration is subsequently resolved. We estimate variablea
We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a
cumulative basis. Cumulative EAC adjustments represent the cumulative effect of the changes on current and prior
periods; sales and operating margins in futurett
periods are recognized as if the revised estimates had been used since
contract inception. If it is determined that a loss is expected to result on an individual performance obligation, the
loss, including an allocation of G&A costs, is charged against income in the
entire amount of the estimable future
period the loss is identified.
ff
The following tablea
presents the effect of aggregate net EAC adjustments:
$ in millions, except per share data
Revenue
Operating income
Net earnings(1)
Diluted earnings per share(1)
(1) Based on a 21% federal statutory tax rate.
Year Ended December 31
2021
2020
2019
$
$
568
527
416
2.59
$
504
466
368
2.20
538
480
379
2.23
ents. During the third quarter of 2021, we recorded a $42 million unfavorablea
EAC adjustments on a single performance obligation can have a significant effect on the company’s financial
statements. When such adjustments occur, we generally disclose the nature,
impact of the adjustmd
on the F-35 program at Aeronautics Systems dued
COVID-19-related impacts on the labor
an additional $93 million unfavorablea
continued labor-related production impacts largely driven by COVID-19. During the fourth quarter of 2021, we
modified our F-35 production plan to support a more consistent flow on the program and expect gradually to
EAC adjustment on the F-35 program at Aeronautics Systems related to
lated production inefficiencies largely driven by
underlying conditions and financial
market and employee leave. During the fourth quarter of 2021, we recorded
EAC adjustment
to labor-re
a
a
tt
-58-
NORTHROP GRUMMAN CORPORATRR ION
increase production rate over time as COVID-19-related impacts subside. No other such adjustments were
significant to the finff ancial statements during
the years ended December 31, 2021, 2020 and 2019.
dd
Backlog
Backlog represents the futff urett
to the company’s remaining performance obligations at the end of each period. It comprises both funded backlog
ated) and unfunded backlog. Unexercised contract options
(firm orders for which funding is authorized and appropri
and IDIQ contracts are not included in backlog until the time an option or IDIQ task order is exercised or awarded.
sales we expect to recognize on firm orders received by the company and is equivalent
a
Company backlog as of December 31, 2021 was $76.0 billion. Of our December 31, 2021 backlog, we expect to
recognize approxim
a
months, with the remainder to be recognized thereafter.
ately 40 percent as revenue over the next 12 months and 60 percent as revenue over the next 24
Contract Assets and Liabilities
For each of the company’s contracts, the timing of revenue recognition, customer billings, and cash collections
results in a net contract asset or liabila
ity at the end of each reporting period. Fixed-price contracts are typically billed
to the customer either using progress payments, whereby amounts are billed monthly as costs are incurred or work is
completed, or performance based payments, which are based upon the achievement of specific, measurable events or
accomplishments defined and valued at contract inception. Cost-type contracts are typically billed to the customer
on a monthly or semi-monthly basis.
Contract assets are equivalent to and reflected as Unbilled receivablea
s in the consolidated statements of financial
position and are primarily related to long-term contracts where revenue recognized under the cost-to-cost method
exceeds amounts billed to customers. Unbilled receivablea
s are classified as current assets and, in accordance with
industry practice, include amounts that may be billed and collected beyond one year due to the long-cycle naturett
many of our contracts. Accumulated contract costs in unbilled receivables include costs such as direct production
costs, facff
s also
include certain estimates of variable consideration described above. These contract assets are not considered a
significant financing component of the company’s contracts as the payment terms are intended to protect the
customer in the event the company does not perform on its obligations under the contract.
tory and engineering overhead, production tooling costs, and allowable G&A. Unbilled receivablea
of
Contract liabilities are equivalent to and reflected as Advance payments and billings in excess of costs incurred in
the consolidated statements of financial position. Certain customers make advance payments prior to the company’s
satisfaction of its obligations on the contract. These amounts are recorded as contract liabila
obligations are satisfied, either over time as costs are incurred or at a point in time when deliveries are made.
Contract liabilities are not a significant financing component as they are generally utilized to pay for contract costs
within a one-year period or are used to ensure the customer meets contractual requirements.
ities until such
Net contract assets are as follows:
$ in millions
Unbilled receivables, net
Advance payments and amounts in excess of costs incurred
Net contract assets
December 31,
2021
December 31,
2020
$ Change
%
Change
$
$
5,492
(3,026)
2,466
$
$
5,140 $
(2,517)
2,623 $
352
(509)
(157)
7 %
20 %
(6)%
The change in the balances of the company’s contract assets and liabia lities primarily results fromff
between revenue recognition and customer billings and/or payments. Net contract assets as of December 31, 2021
decreased 6 percent from the prior year, primarily due to an increase in Advance payments and amounts in excess of
costs incurred at Aeronautics Systems, partially offset by an increase in unbilled receivables driven by sales growth
at Space Systems.
timing differences
The amount of revenue recognized for the years ended December 31, 2021, 2020 and 2019 that was included in the
contract liabila
ity balance at the beginning of each year was $2.0 billion, $1.6 billion and $1.3 billion, respectively.
e
on of Revenue
Disaggregati
See Note 16 for information regarding the company’s sales by customer type, contract type and geographic
for each of our segments. We believe those categories best depict how the nature,
our revenue and cash flows
are affected by economic facff
tors.
a
ff
tt
amount, timing and uncertainty of
region
-59-
NORTHROP GRUMMAN CORPORATIO
RR
N
General and Administrative Expenses
In accordance with applicablea
incurred at the segment and corporate locations are considered allowablea
contracts. Allowablea
and proposal (B&P) costs, are allocated on a systematic basis to contracts in progress and are included as a
component of total estimated contract costs.
FAR and CAS requirements, most general management and corporate expenses
G&A costs, including independent research and development (IR&D) and bid
and allocablea
and allocablea
costs to our U.S. government
Research and Development
Company-sponsored research and development activities primarily include efforts related to government programs.
Company-sponsored IR&D expenses totaled $1.1 billion, $1.1 billion and $953 million in 2021, 2020 and 2019,
respectively, which represented 3.2 percent, 2.9 percent and 2.8 percent of total sales, respectively. Customer-funded
research and development activities are charged directly to the related contracts.
Income Taxes
Provisions for federal and foreign income taxes are calculated on reported earnings before income taxes based on
current tax law and include the cumulative effect of any changes in tax rates from those used previously in
determining deferred tax assets and liabilities. Such provisions differ from the amounts currently payable because
certain items of income and expense are recognized in different periods for financial reporting purposes than for
income tax purposes. The company recognizes federal and foreign interest accruedrr
benefits in income tax expense. Federal tax penalties are also recognized as a component of income tax expense.
related to unrecognized tax
In accordance with applicablea
FAR and CAS requirements, current state and local income and franchise taxes are
generally considered allowable and allocable costs to our U.S. government contracts and, consistent with industry
practice, are recorded in operating costs and expenses. The company generally recognizes changes in deferred state
taxes and unrecognized state tax benefits in unallocated corporate expenses.
or claim, which have not been reflected in measuring income tax expense
for financial reporting purposes. Until these positions are sustained by the taxing authorities or the
Uncertain tax positions reflect the company’s expected treatment of tax positions taken in a filed tax return, or
planned to be taken in a future tax returntt
or taxes payablea
statutett
resulting from such positions and reports the tax effecff
statements of financial position.
of limitations concerning such issues lapses, the company does not generally recognize the tax benefits
ts as a liability for uncertain tax positions in its consolidated
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash in banks and highly liquid instruments with original maturities of
three months or less, primarily consisting of bank time deposits and investments in institutional money market
funds. Cash in bank accounts often exceeds federally insured limits.
Fair Value of Financial Instruments
The company measures the fair value of its financial instruments using observable and unobservable inputs.
Observable inputs reflect market data obtained from independent sources, while unobservablea
market assumptions.
inputs reflect internal
These two types of inputs create the following fair value hierarchy:
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments
in markets that are not active; and model-derived valuations whose inputs are observablea
.
significff ant value drivers are observablea
or whose
Level 3 - Significant inputs to the valuation model are unobservable.
securities to partially fund non-qualified employee benefit plans. A
The company holds a portfolio of marketablea
portion of these securities are held in common/collective trust funds and are measured at fair value using NAV per
share as a practical expedient. Marketablea
basis and are included in Other non-current assets in the consolidated statements of financial position. Changes in
unrealized gains and losses on trading securities are included in Other, net in the consolidated statements of earnings
and comprehensive income. Investments in held-to-maturity instruments with original maturities greater than three
months are recorded at amortized cost.
securities accounted for as trading are recorded at fair value on a recurring
Derivative financial instruments are recognized as assets or liabilities in the financial statements and measured at fair
value on a recurring basis. Changes in the fair value of derivative financial instruments that are designated as fair
value hedges are recorded in net earnings, while changes in the fair value of derivative financial instruments that are
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NORTHROP GRUMMAN CORPORATIO
R
N
designated as cash flowff
derivative financial instruments not designated as hedging instruments, gains or losses resulting from changes in the
fair value are reported in Other, net in the consolidated statements of earnings and comprehensive income.
hedges are recorded as a component of other comprehensive income until settlement. For
customers and payments to suppli
The company uses derivative financial instruments to manage its exposure to foreign currency exchange risk related
to receipts fromff
u
forward contracts). For foreign currency forwar
company utilizes the income approach to determine the fair value using internal models based on observablea market
inputs such as forward rates, interest rates, our own credit risk and our counterparties’ credit risks.
d contracts, where model-derived valuations are appropriate, the
ign currencies (i.e., foreign currency
ers denominated in foreff
ff
The company does not use derivative financial instruments forff
leveraged financial instruments. Credit risk related to derivative financial instruments is considered minimal and is
managed through the use of multiple counterparties with high credit standards and periodic settlements of positions,
as well as by entering into master netting agreements with most of our counterparties.
trading or speculative purposes, nor does it use
Inventoried Costs
Inventoried costs generally comprise costs associated with unsatisfied performance obligations on contracts
accounted for using point in time revenue recognition, costs incurred in excess of existing contract requirements or
funding that are probable of recovery and other accruedrr
allocated to specific contracts. Product inventory primarily consists of raw materials and is stated at the lower of cost
or net realizablea
contract costs that are expected to be recoverablea
value, generally using the average cost method.
when
Inventoried costs include direct production costs, factory and engineering overhead, production tooling costs, and
allowable G&A. G&A included in Inventoried costs, net was $44 million and $41 million as of December 31, 2021
and 2020, respectively. Inventoried costs are classified as current assets and, in accordance with industry practice,
include amounts related to contracts having production cycles longer than one year.
Cash Surrender Value of Life Insurance Policies
The company maintains whole life insurance policies on a group of executives, which are recorded at their cash
surrender value as determined by the insurance carrier. The company also has split-dollar life insurance policies on
former officers and executives from acquired businesses, which are recorded at the lesser of their cash surrender
value or premiums paid. These policies are utilized as a partial funding source for deferred compensation and other
non-qualified employee retirement plans. As of December 31, 2021 and 2020, the carrying values associated with
these policies were $440 million and $419 million, respectively, and are recorded in Other non-current assets in the
consolidated statements of financial position.
Property, Plant and Equipment
Property, plant and equipment are depreciated over the estimated useful lives of individual assets. Most assets are
depreciated using declining-balance methods, with the remainder using the straight-line method. Depreciation
expense is generally an allowable and allocable cost in accordance with appl
recorded in the same segment where the related assets are held. However, the additional depreciation expense related
to the step-up in fair value of property, plant and equipment acquired through business combinations is recorded in
unallocated corporate expense within operating income as such depreciation is not allocable to government contracts
and not considered part of management’s evaluation of segment operating performance. Major classes of property,
plant and equipment and their useful lives are as follows:
icable FAR and CAS requirements and
a
lifei
in years,rr $ in millions
Usefule
Land and land improvements
Buildings and improvements
Machinery and other equipment
Capita
re costs
alized softwa
Leasehold improvements
Property, plant and equipment, at cost
Accumulated depreciation
Property, plant and equipment, net
ff
Useful Life
Up to 40(1)
Up to 45
Up to 20
3-5
Lease Term(2)
December 31
2021
2020
$
$
636
3,019
8,064
481
2,513
14,713
(6,819)
7,894
$
$
628
2,762
7,206
602
2,208
13,406
(6,335)
7,071
(1) Land is not a depreciable asset.
(2) Leasehold improvements are depreciated over the shorter of the useful life of the asset or lease term.
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NORTHROP GRUMMAN CORPORATIO
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During the fourth quarter of 2020, the company completed a sale of equipment to a customer on a restricted
Aeronautics Systems program for $444 million. The company previously intended to use the equipment for internal
purposes so we recognized the acquisition costs as capita
plant and equipment. As we regularly sell this type of equipment to customers in the ordinary course of business, we
recorded the sale as a revenue transaction and included the net book value of the equipment in Operating costs and
expenses. Although we generally classify proceeds from revenue transactions as cash inflows from operating
activities, we recognized the proceeds from this transaction as cash inflows from investing activities, consistent with
our prior recognition of the cost to acquire the equipment as capital expenditures. The company received cash
payments of $84 million and $205 million related to the equipment sale during 2021 and 2020, respectively, and
included it in Proceeds from sale of equipment to a customer in the consolidated statement of cash flows. The
remaining $155 million is expected to be collected in 2022.
and included the equipment in property,
al expenditures
tt
During the year ended December 31, 2021, the company received lease incentives for landlord funded leasehold
improvements of $150 million related to a Space Systems real estate lease, which were recorded in PP&E and
included in non-cash investing activities. Non-cash investing activities also include capia tal expenditures incurred but
not yet paid of $91 million, $72 million and $166 million as of December 31, 2021, 2020 and 2019, respectively.
Goodwill and Other Purchased Intangible Assets
The company tests goodwill for impairment at least annually as of December 31, or when an indicator of potential
impairment exists. When performing the goodwill impairment test, the company uses a discounted cash flow
approach corroborated by comparative market multiples, where appropriate, to determine the fair value of its
reporting units.
Goodwill and other purchased intangible asset balances are included in the identifiablea
business segment. However, the company includes the amortization of other purchased intangible assets in
unallocated corporate expense within operating income as such amortization is not allocablea
and not considered part of management’s evaluation of segment operating performance. The company’s customer-
related intangible assets are generally amortized over their respective useful lives based on the pattern in which the
future economic benefits of the intangible assets are expected to be consumed. Other intangible assets are generally
amortized on a straight-line basis over their estimated usefulff
assets of their assigned
to government contracts
lives.
Leases
The company leases certain buildings, land and equipment. Under Accounting Standards Codification (ASC) 842, at
contract inception we determine whether a contract is or contains a lease and whether the lease should be classified
as an operating or finance lease. Operating lease balances are included in Operating lease right-of-use assets, Other
current liabilities, and Operating lease liabilities in our consolidated statements of financial position.
The company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value
of the future minimum lease payments over the lease term at commencement date. We use our incremental
borrowing rate based on the information available at commencement date to determine the present value of future
payments and the appropriate lease classification. Many of our leases include renewal options aligned with our
contract terms. We define the initial lease term to include renewal options determined to be reasonably certain. We
do not recognize a right-of-use asset and a lease liability for leases with an initial term of 12 months or less; we
recognize lease expense for these leases on a straight-line basis over the lease term. We elected the practical
expedient to not separate lease components from nonlease components and applied that practical expedient to all
material classes of leased assets.
Many of the company’s real property lease agreements contain incentives for tenant improvements, rent holidays or
rent escalation clauses. For tenant improvement incentives received, if the incentive is determined to be a leasehold
improvement owned by the lessee, the company generally records the incentives as a reduction to the right-of-use
asset, which reduces rent expense over the lease term. For rent holidays and rent escalation clauses during the lease
term, the company records rental expense on a straight-line basis over the term of the lease. For these lease
incentives, the company uses the date of initial possession as the commencement date, which is generally when the
company is given the right of access to the space and begins to make improvements in preparation for intended use.
Finance leases are not material to our consolidated financial statements and the company is not a lessor in any
material arrangements. We do not have any material restrictions or covenants in our lease agreements, sale-
leaseback transactions, land easements or residual value guarantees.
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NORTHROP GRUMMAN CORPORATIO
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Litigation, Commitments and Contingencies
We accrue for litigation, commitments and contingencies when management, after considering the facts and
circumstances of each matter as then known to management, has determined it is probable a liability will be found to
have been incurred and the amount of the loss can be reasonably estimated. When only a range of amounts is
reasonably estimable and no amount within the range is more likely than another, the low end of the range is
recorded. Legal fees are expensed as incurred. Due to the inherent uncertainties surrounding gain contingencies, we
generally do not recognize potential gains until realized.
Environmental Costs
We accrue for environmental liabilities when management determines that, based on the facts and circumstances
known to the company, it is probable the company will incur costs to address environmental impacts and the costs
are reasonably estimable. When only a range of amounts is reasonably estimablea
and no amount within the range is
more probable than another, we record the low end of the range. The company typically projects environmental
costs for up to 30 years, records environmental liabilities on an undiscounted basis, and excludes asset retirement
obligations and certain legal costs. At sites involving multiple parties, we accrue environmental liabilities based
upon our expected share of liability, taking into account the financial viabila
ity of other liable parties.
Retirement Benefits
The company sponsors various defined benefit pension plans and defined contribution retirement plans covering
es. In most cases, our defined contribution plans provide for a company match of
substantially all of its employe
employee contributions. The company also provides postretirement benefits other than pensions to eligible retirees
and qualifying dependents, consisting principally of health care and life insurance benefits.
m
The liabilities, unamortized prior service credits and annual income or expense of the company’s defined benefit
pension and OPB plans are determined using methodologies that involve several actuarial assumptim ons.
t
Because U.S. government regulations provide for the costs of pension and OPB plans to be charged to our contracts
in accordance with applicable FAR and CAS requirements, we calculate retiree benefit plan costs under both FAS
and CAS methods. While both FAS and CAS recognize a normal service cost component
in measuring periodic
pension cost, there are differences in the way the components of annual pension costs are calculated under each
method. Measuring plan obligations under FAS and CAS includes different assumptim ons and models, such as in
estimating returns
on plan assets, calculating interest expense and the periods over which gains/losses related to
pension assets and actuarial changes are recognized. As a result, annual retiree benefit plan expense amounts for
FAS are different from the amounts for CAS in any given reporting period even though the ultimate cost of
providing benefits over the life of the plans is the same under either method. CAS retiree benefit plan costs are
charged to contracts and are included in segment operating income, and the difference between the service cost
component of FAS expense and total CAS expense is recorded in operating income at the consolidated company
level. Not all net periodic pension expense is recognized in net earnings in the year incurred because it is allocated as
production costs and a portion remains in inventory at the end of a reporting period.
m
Actuarial gains and losses are immediately recognized in net periodic benefit cost for FAS through MTM benefit
(expense) upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant
remeasurement. Prior service credits are recognized as a component
amortized into earnings in futurett
of Accumulated other comprehensive loss and
periods.
m
Stock Compensation
The company’s stock compensation plans are classified as equity plans and compensation expense is generally
recognized over the vesting period of stock awards (typically three years), net of estimated forfeitures.
issues stock awards in the form of restricted performance stock rights and restricted stock rights. The fair value of
stock awards and performance stock awards is determined based on the closing market price of the company’s
common stock on the grant date. The fair value of market-based stock awards is determined at the grant date using a
Monte Carlo simulation model. At each reporting date, the number of shares used to calculate compensation expense
and diluted earnings per share is adjuste
d to reflect the number ultimately expected to vest.
The company
d
tt
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NORTHROP GRUMMAN CORPORATION
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
$ in millions
Unamortized prior service credit, net of tax expense of $1 forff
Cumulative translation adjustment and other, net
Total accumulated other comprehensive loss
2021 and $3 forff
2020
Related Party Transactions
For all periods presented, the company had no material related party transactions.
December 31
2021
2020
$
$
$
2
(145)
(143) $
10
(138)
(128)
Accounting Standards Updates
Accounting standards updates adopted and/or issued, but not effective until after December 31, 2021, are not
expected to have a material effect on the company’s consolidated financial position, annual results of operations
and/or cash flows.
2. DISPOSITIONS
Disposition of IT and Mission Support Services Business
Effective January 30, 2021, we completed the IT services divestiture for $3.4 billion in cash and recorded a pre-tax
gain of $2.0 billion. The IT and mission support services business was comprised of the majori
er IS&S
division of Defense Systems (excluding the Vinnell Arabia business); select cyber, intelligence and missions support
programs, which were part of the former CIMS division of Mission Systems; and the formff
Services business unit of Space Systems. The assets and liabilities of the IT and mission support services business
were classified as held forff
Operating results include sales and operating income for the IT and mission support services business prior to the
Divestiture date.
sale in the consolidated statement of financial position as of December 31, 2020.
er Space Technical
ty of the formff
a
The company recorded pre-tax profit of the IT and mission support services business of $20 million, $247 million
and $245 million forff
the years ended December 31, 2021, 2020 and 2019, respectively.
The carrying amounts of the majoa r classes of assets and liabilities of the IT and mission support services business
classified as held forff
sale as of December 31, 2020 were as follows:
$ in millions
Accounts receivable, net
Unbilled receivables, net
Other current assets
Property, plant and equipment
Operating lease right-of-use assets
Goodwill(1)
Total assets of disposal group held for sale
Trade accounts payable
Accrued employee compensation
Advance payments and billings in excess of costs incurred
Other current liabilities
Non-current operating lease liabilities
Total liabilities of disposal group held for sale
$
$
110
269
9
14
38
1,195
1,635
(99)
(59)
(31)
(42)
(27)
$
(258)
(1) See Note 8 forff
December 31, 2020.
a summary by reportable segment of Goodwill reclassified to Assets of disposal group held for sale as of
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NORTHROP GRUMMAN CORPORATRR ION
3. EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK
Basic Earnings Per Share
We calculate basic earnings per share by dividing net earnings by the weighted-average number of shares of
common stock outstanding during each period.
Diluted Earnings Per Share
Diluted earnings per share include the dilutive effect of awards granted to employees under stock-based
compensation plans. The dilutive effecff
the years ended December 31, 2021, 2020 and 2019, respectively.
t of these securities totaled 0.6 million, 0.5 million and 0.7 million shares for
Share Repurchases
On September 16, 2015, the company’s board of directors authorized a share repurchase program of up to $4.0
billion of the company’s common stock (the “2015 Repurchase Program”). On December 4, 2018, the company’s
board of directors authorized a share repurchase program of up to an additional $3.0 billion in share repurchases of
the company’s common stock (the “2018 Repurchase Program”). Repurchases under the 2015 Repurchase Program
commenced in March 2016 and were completed in March 2020 at which time repurchases under the 2018
Repurchase Program commenced. Repurchases under the 2018 Repurchase Program were completed in October
2021.
On January 25, 2021, the company’s board of directors authorized a new share repurchase program of up to an
additional $3.0 billion in share repurchases of the company’s common stock (the “2021 Repurchase Program”).
Repurchases under the 2021 Repurchase Program commenced in October 2021 upon the completion of the 2018
Repurchase Program. As of December 31, 2021, repurchases under the 2021 Repurchase Program totaled $0.8
billion; $2.2 billion remained under this share repurchase authorization. By its terms, the 2021 Repurchase Program
is set to expire when we have used all authorized funds for repurchases.
On January 24, 2022, the company’s board of directors authorized a new share repurchase program of up to an
additional $2.0 billion in share repurchases of the company’s common stock (the “2022 Repurchase Program”),
bringing the total outstanding authorization up to $4.2 billion. By its terms, repurchases under the 2022 Repurchase
Program will commence upon completion of the 2021 Repurchase Program and will expire when we have used all
authorized funds for repurchases.
During the first quarter of 2021, the company entered into an accelerated share repurchase (ASR) agreement with
Goldman Sachs & Co. LLC (Goldman Sachs) to repurchase $2.0 billion of the company’s common stock as part of
the 2018 Repurchase Program. Under the agreement, we made a payment of $2.0 billion to Goldman Sachs and
received an initial delivery of 5.9 million shares valued at $1.7 billion that were immediately canceled by the
company. The remaining balance of $300 million was settled on June 1, 2021 with a final delivery of 0.2 million
shares from Goldman Sachs. The final average purchase price was $327.29 per share.
During the fourth quarter of 2021, the company entered into an ASR agreement with Goldman Sachs to repurchase
$500 million of the company’s common stock as part of the 2021 Repurchase Program. Under the agreement, we
made a payment of $500 million to Goldman Sachs and received an initial delivery of 1.2 million shares valued at
$425 million that were immediately canceled by the company. The remaining balance of $75 million is included as a
reduction to Retained earnings on the consolidated statement of financial position. The final number of shares to be
repurchased will be based on the company’s daily volume-weighted average share price during the term of the
transaction, less a discount, and is expected to be completed in the first quarter of 2022. Goldman Sachs may be
required to deliver additional shares of common stock to the company at final settlement or, under certain
circumstances, the company may be required to either, at the company’s election, deliver shares or make a cash
payment to Goldman Sachs.
Share repurchases take place from time to time, subject to market and regulatory conditions and management’s
discretion, in the open market or in privately negotiated transactions. The company retires its common stock upon
repurchase and, in the periods presented, has not made any purchases of common stock other than in connection
with these publicly announced repurchase programs.
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NORTHROP GRUMMAN CORPORATRR ION
:
The table below summarizes the company’s share repurchases to date under the authorizations described above
a
Repurchase Program
Authorization Date
September 16, 2015
December 4, 2018
January 25, 2021
Amount
Authorized
(in millions)
4,000
$
3,000
$
$
3,000
(1) Includes commissions paid.
Total
Shares
Retired
(in millions)
15.4
8.9
Average
Price
Per Share(1) Date Completed
$
$
March 2020
October 2021
260.33
337.18
Shares Repurchased
(in millions)
Year Ended
December 31
2020
0.9
0.5
2021
—
8.4
2019
3.2
—
2.2
$
358.38
2.2
10.6
—
1.4
—
3.2
Dividends on Common Stock
In May 2021, the company increased the quarterly common stock dividend 8 percent to $1.57 per share from the
previous amount of $1.45 per share.
In May 2020, the company increased the quarterly common stock dividend 10 percent to $1.45 per share from the
previous amount of $1.32 per share.
In May 2019, the company increased the quarterly common stock dividend 10 percent to $1.32 per share from the
previous amount of $1.20 per share.
4. ACCOUNTS RECEIVABLE, NET
, net represent amounts billed and dued
Accounts receivablea
from customers. Substantially all accounts receivable at
December 31, 2021 are expected to be collected in 2022. The company does not believe it has significant exposure
to credit risk as the majoa rity of our accounts receivablea
customer or in connection with forei
are due from the U.S. government either as the ultimate
gn military sales.
ff
Accounts receivablea
, net consisted of the following:
$ in millions
(1)(1)
Due from U.S. government (1)
Due from international and other customers
Accounts receivable, gross
Allowance for expected credit losses
Accounts receivable, net
December 31
2021
2020
$
$
1,173
328
1,501
(34)
1,467
$
$
956
578
1,534
(33)
1,501
(1) Includes receivables due from the U.S. government associated with FMS sales. For FMS, we contract with and are paid by the
U.S. government.
5. UNBILLED RECEIVABLES, NET
s, net represent revenue recognized under the cost-to-cost method that exceeds amounts billed to
Unbilled receivablea
customers. Substantially all unbilled receivablea
2022. Progress and performance-based payments are reflected as an offset to the related unbilled receivablea
balances.
s at December 31, 2021 are expected to be billed and collected in
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NORTHROP GRUMMAN CORPORATION
Unbilled receivables, net consisted of the folff
lowing:
$ in millions
Due from U.S. government (1)
s
Unbilled receivablea
Progress and performance-based payments received
Total due from U.S. government
Due from international and other customers
Unbilled receivables
Progress and performance-based payments received
Total due from international and other customers
Unbilled receivables, net of progress and performance-based payments received
Allowance forff
Unbilled receivables, net
expected credit losses
December 31
2021
2020
$ 22,140
$ 19,315
(17,038)
5,102
(14,615)
4,700
2,913
(2,503)
410
5,512
(20)
5,492
$
3,361
(2,881)
480
5,180
(40)
5,140
$
(1) Includes unbilled receivables due from the U.S. government associated with FMS sales. For FMS, we contract with and are
paid by the U.S. government.
6. INVENTORIED COSTS, NET
Inventoried costs are primarily associated with contracts where the U.S. government is the primary customer,
therefore the company does not believe it has significant exposure to recoverability risk related to these amounts.
Inventoried costs, net consisted of the following:
$ in millions
Contracts in process
Product inventory and raw material
Inventoried costs, net
7. INCOME TAXES
Federal and foreign income tax expense consisted of the folff
lowing:
$ in millions
Federal income tax expense:
Current
Deferred
Total federal income tax expense
Foreign income tax expense:
Current
Deferred
Total foreign income tax expense
Total federal and foreign income tax expense
December 31
2021
2020
$
$
478
333
811
$
$
430
329
759
Year Ended December 31
2019
2020
2021
$ 1,398
518
1,916
6
11
17
$ 1,933
$
$
246
288
534
3
2
5
539
$
$
758
(474)
284
10
6
16
300
Earnings from foreign operations before income taxes are not material forff
all periods presented.
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NORTHROP GRUMMAN CORPORATION
Income tax expense differs
federal income tax rate dued
ff
from the amount computed by multiplying earnings before income taxes by the statutory
to the folff
lowing:
tt
$ in millions
Income tax expense at statutory rate
Research credit
Foreign derived intangible income
IT services divestiture nondeductible goodwill
Other, net
Total federal and foreign income taxes
2021
Year Ended December 31
2020
2019
$ 1,877
(192)
(50)
250
48
$ 1,933
21.0 % $
(2.2)
(0.6)
2.8
0.6
21.6 % $
783
(206)
(55)
—
17
539
21.0 % $
(5.5)
(1.5)
—
0.5
14.5 % $
535
(216)
(28)
—
9
300
21.0 %
(8.5)
(1.1)
—
0.4
11.8 %
The year to date 2021 ETR increased to 21.6 percent from 14.5 percent in the same period of 2020 primarily due to
federal income taxes resulting from the IT services divestiture, including $250 million of income tax expense related
to $1.2 billion of nondeductible goodwill in the divested business. The company’s 2021 MTM benefit did not
significantly impact the 2021 ETR; however, MTM expense in 2020 reduced the 2020 ETR by 1.3 percentage
points.
The year to date 2020 ETR increased to 14.5 percent from 11.8 percent in the same period of 2019. MTM expense
reduced the 2020 ETR by 1.3 percentage points and the 2019 ETR by 3.7 percentage points.
Income tax payments, net of refunds received, were $1.3 billion, $312 million and $324 million for the years ended
December 31, 2021, 2020 and 2019, respectively. Taxes receivablea
other current assets in the consolidated statements of financ
December 31, 2021 and 2020, respectively.
, which are included in Prepaid expenses and
ial position, were $571 million and $792 million as of
ff
Uncertain Tax Positions
We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. The
Northrop Grumman 2017-2018 federal tax returns
During the third quarter of 2021, the company requested an appeal with the IRS for the Northrop Grumman
2014-2016 federal income tax returns
In addition,
legacy OATK federal tax returns for the years ended March 31, 2014 and 2015, the nine-month transition period
ended December 31, 2015 and calendar years 2016-2017 (the “OATK 2014 to 2017 tax years”) are currently under
appeal with the IRS.
and refund claims related to its 2007-2016 federal tax returns.
are currently under Internal Revenue Service (IRS) examination.
tt
t
t
for open tax years related to state and foreign jurisdictions remain subject to examination. As state
Tax returns
tt
income taxes are generally considered allowable and allocable costs, any individual or aggregate state examination
impacts are not expected to have a material impact on our financial results. Amounts currently subject to
examination related to foreff
ign jurisdictions are not material.
The change in unrecognized tax benefits during 2021, 2020 and 2019, excluding interest, is as follows:
$ in millions
Unrecognized tax benefits at beginning of the year
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements with taxing authorities
Other, net
Net change in unrecognized tax benefits
Unrecognized tax benefits at end of the year
December 31
2020
$ 1,223
187
270
$
2021
$ 1,481
355
47
(251)
(190)
2019
748
158
400
(65)
(1)
(1)
149
$ 1,630
(7)
(2)
258
$ 1,481
(15)
(3)
475
$ 1,223
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NORTHROP GRUMMAN CORPORATRR ION
Our 2021 increase in unrecognized tax benefits was primarily related to our methods of accounting associated with
the timing of revenue recognition and related costs and the 2017 Tax Cuts and Jobs Act, which includes related final
revenue recognition regulations issued in December 2020 under IRC Section 451(b) and procedural guidance issued
in August 2021. As of December 31, 2021, we have approximately $1.6 billion in unrecognized tax benefits,
including $399 million related to our position on IRC Section 451(b). If these matters, including our position on IRC
cash flows. It is reasonably
Section 451(b), are unfavorably resolved, there could be a material impact on our futurett
possible that within the next 12 months unrecognized tax benefits may increase by approximately $120 million.
Additionally, it is reasonably possible that within the next twelve months, unrecognized tax benefits claimed in
legacy OATK’s 2014 to 2017 tax years may decline by up to $110 million through administrative resolution with
IRS Appeals.
Our current unrecognized tax benefits, which are included in Other current liabilities in the consolidated statements
of financial position, were $590 million and $433 million as of December 31, 2021 and 2020, respectively, with the
remainder of our unrecognized tax benefits included within Other non-current liabilities. These liabila
$175 million of accruedrr
realized, $664 million of federal and foreign tax benefits would reduce the company’s ETR.
interest and penalties. If the income tax benefits from these tax positions are ultimately
ities include
Net interest expense within the company’s federal, foreign and state income tax provisions was not material forff
years presented.
all
Deferred Income Taxes
Deferred income taxes reflect the net tax effecff
and liabilities forff
as non-current in the consolidated statements of financial position.
financial reporting purposes and tax purposes. Net deferre
ff
ts of temporary differences between the carrying amounts of assets
d tax assets and liabilities are classified
The tax effects of significant temporary differences and carryforwards that gave rise to year-end deferred fede
state and foreign tax balances, as presented in the consolidated statements of financial position, are as follows:
ff
ral,
$ in millions
Deferred Tax Assets
Retiree benefits
Accrued employee compensation
Provisions for accrued liabia lities
Inventory
Stock-based compensation
ities
Operating lease liabila
Tax credits
Other
Gross deferred tax assets
Less: valuation allowance
Net deferred tax assets
Deferred Tax Liabilities
Goodwill
Purchased intangibles
Property, plant and equipment, net
Operating lease right-of-use assets
Contract accounting differences
Other
Deferred tax liabila
ities
Total net deferred tax (liabilities) assets
December 31
2021
2020
$
$
$
804
371
156
649
39
493
431
135
3,078
(349)
2,729
533
148
755
444
1,036
103
3,019
(290) $
1,738
360
232
849
40
435
343
112
4,109
(307)
3,802
533
201
737
423
1,513
84
3,491
311
Realization of deferred tax assets is primarily dependent on generating sufficient taxable income in future
The company believes it is more-likely-than-not our net deferred tax assets will be realized.
ff
periods.
At December 31, 2021, the company has availablea
$316 million, respectively, that may be appli
tax credits and unused net operating losses of $524 million and
ed against future taxable income. The majority of tax credits and net
a
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NORTHROP GRUMMAN CORPORATION
operating losses expire in 2022 through 2046, however, some may be carried forward indefinitely. Due to the
uncertainty of the realization of the tax credits and net operating losses, the company has recorded valuation
allowances of $230 million and $40 million as of December 31, 2021, respectively.
Undistributed Foreign Earnings
As of December 31, 2021, the company has accumulated undistributed earnings generated by our foreign
subsidiaries and most have been taxed in the U.S. We intend to indefinitely reinvest these earnings, as well as future
earnings from our foreign subsidiaries to fundff
generation will be sufficient to meet futuret
our international operations. In addition, we expect futff urett
U.S. cash needs.
U.S. cash
8. GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS
Goodwill
Changes in the carrying amounts of goodwill for the years ended December 31, 2020 and 2021, were as follows:
$ in millions
Balance as of December 31, 2019
Reclassification to assets of disposal
sale (1)
group held forff
Other (2)
Balance as of December 31, 2020
Other (2)
Balance as of December 31, 2021
Aeronautics
Systems
Defense
Systems
Mission
Systems
Space
Systems
Total
$
3,467
$
4,376
$
6,062
$
4,803
$
18,708
—
—
3,467
—
3,467
$
$
(966)
5
3,415
(3)
3,412
$
$
(181)
—
5,881
—
5,881
$
$
(48)
—
4,755
—
4,755
$
$
(1,195)
5
17,518
(3)
17,515
$
$
(1) Represents the reclassification of goodwill to assets of disposal group held forff
sale due to the divestiture of our IT and mission
support services business that was pending as of December 31, 2020 (See Note 2).
(2) Other consists primarily of adjustments for foreign currency translation.
At December 31, 2021 and 2020, accumulated goodwill impairment losses totaled $417 million and $153 million at
Aeronautics Systems and Space Systems, respectively.
Other Purchased Intangible Assets
Net customer-related and other intangible assets are as follows:
$ in millions
Gross customer-related and other intangible assets
Less accumulated amortization
Net customer-related and other intangible assets
December 31
2021
2020
$
$
3,361
(2,783)
578
$
$
3,362
(2,579)
783
Amortization expense for 2021, 2020 and 2019, was $204 million, $262 million and $332 million, respectively. As
of December 31, 2021, the expected futurett
follows:
amortization of purchased intangibles for each of the next fivff e years is as
$ in millions
2022
2023
2024
2025
2026
$
197
79
56
44
42
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NORTHROP GRUMMAN CORPORATRR ION
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following tabla e presents the finff ancial assets and liabia lities the company records at fair value on a recurring basis
identified by the level of inputs used to determine fair value. See Note 1 forff
further information on our financial instruments.
the definitions of these levels and for
$ in millions
Financial Assets
Marketable securities
Marketable securities
valued using NAV
Total marketable
securities
Derivatives
December 31, 2021
Level 3
Level 2
Level 1
Total
Level 1
December 31, 2020
Level 3
Level 2
Total
$
393
$
1
$
7 $
401
$
377
$
1 $
— $
378
393
—
1
(1)
7
—
17
418
(1)
377
—
1
—
—
—
18
396
—
The notional value of the company’s foreign currency forwa
ff
million and $133 million, respectively. At December 31, 2021 and 2020, no portion of the notional value was
designated as a cash flowff
rd contracts at December 31, 2021 and 2020 was $120
hedge.
The derivative fair values and related unrealized gains/losses at December 31, 2021 and 2020 were not material.
There were no transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the years
ended December 31, 2021 and 2020.
The carrying value of cash and cash equivalents and commercial paper approxi
a
mates faiff
r value.
10. DEBT
Commercial Paper
The company maintains a commercial paper program that serves as a source of short-term financing with capacity to
issue unsecured commercial paper notes up tu
o $2.0 billion. There were no commercial paper borrowings outstanding
at December 31, 2021 and December 31, 2020, respectively. The outstanding balance of commercial paper
borrowings is recorded in Other current liabilities in the consolidated statements of financial position.
Credit Facility
In August 2018, the company entered into a fiveff
amount of $2.0 billion (the “2018 Credit Agreement”). In October 2019, the company amended the 2018 Credit
August 2023 to August 2024. The revolving credit facff
Agreement to extend its maturit
establia
other general corporate purposes. At December 31, 2021, there was no balance outstanding under this facility.
Commercial paper borrowings reduce the amount available forff
ility
shed under the 2018 Credit Agreement is intended to support the company’s commercial paper program and
borrowing under the 2018 Credit Agreement.
-year senior unsecured credit facff
ility in an aggregate principal
y date by one year fromff
tt
Our credit agreement contains generally customary terms and conditions, including covenants restricting the
company’s ability to sell all or substantially all of its assets, merge or consolidate with another entity or undertake
other fundam
ental changes and incur liens. The company also cannot permit the ratio of its debt to capia talization (as
ff
set forth in the credit agreement) to exceed 65 percent. At December 31, 2021, the company was in compliance with
all covenants under its credit agreement.
e
f So
eniSS
or Notes
Unsecured Senior Notes
Repayment
s ott
In March 2021, the company repaid $700 million of 3.50 percent unsecured notes uponu
In March 2021, the company redeemed $1.5 billion of 2.55 percent unsecured notes due October 2022. The
company recorded a pre-tax charge of $54 million principally related to the premium paid on the redemption, which
was recorded in Other, net in the unaudited condensed consolidated statements of earnings and comprehe
income.
tt
maturit
nsive
m
y.
Debt Exchange
On September 2, 2021, the company completed an exchange offer to eligible holders of the outstanding notes of our
direct wholly owned subsidiary, Northrop Grumman Systems Corporation (“NGSC”) maturing through 2036. An
aggregate principal amount of $422 million of the NGSC notes was exchanged for $422 million of Northrop
Grumman Corporation notes with the same interest rates and maturity dates as the NGSC notes exchanged. Because
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NORTHROP GRUMMAN CORPORATRR ION
the debt instruments are not substantially different, the exchange was treated as a debt modification for accounting
purposes with no gain or loss recognized.
Long-term debt consists of the following:
$ in millions
Fixed-rate notes and debentures, maturing in
2021
2022
2023
2025
2026
2027
2028
2030
2031
2040
2043
2045
2047
2050
Other
Debt issuance costs
Total long-term debt
Less: current portion(1)
Long-term debt, net of current portion
Interest rate
3.50%
2.55%
3.25%
2.93%
7.75% - 7.88%
3.20%
3.25%
4.40%
7.75%
5.05% - 5.15%
4.75%
3.85%
4.03%
5.25%
Various
December 31
2021
2020
$
— $
—
1,050
1,500
527
750
2,000
750
466
800
950
600
2,250
1,000
205
(65)
12,783
6
$ 12,777
700
1,500
1,050
1,500
527
750
2,000
750
466
800
950
600
2,250
1,000
235
(75)
15,003
742
$ 14,261
(1) The current portion of long-term debt is recorded in Other current liabilities in the consolidated statements of financial
position.
The estimated faiff
r value of long-term debt was $15.1 billion and $18.2 billion as of December 31, 2021 and 2020,
respectively. We calculated the fair value of long-term debt using Level 2 inputs, based on interest rates availablea
debt with terms and maturities similar to the company’s existing debt arrangements.
for
underlying long-term debt issued by the company or its subsidiaries contain various restrictions with
Indentures
tt
respect to the issuer, including one or more restrictions relating to limitations on liens, sale-leaseback arrangements
and funded debt of subsidiaries. The majoa rity of these fixed rate notes and debentures
are subject to redemption at
the company’s discretion at any time prior to maturity in whole or in part at the principal amount plus any make-
whole premium and accrued and unpaid interest. Interest on these fixed rate notes and debentures
annually in arrears.
are payablea
semi-
t
t
Total interest payments, net of interest received, were $570 million, $572 million and $521 million for the years
ended December 31, 2021, 2020 and 2019, respectively.
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NORTHROP GRUMMAN CORPORATIO
RR
N
Maturities of long-term debt as of December 31, 2021, are as follows:
$ in millions
Year Ending December 31
2022
2023
2024
2025
2026
Thereafter
Total principal payments
Unamortized premium on long-term debt, net of discount
Debt issuance costs
Total long-term debt
11. INVESTIGATIONS, CLAIMS AND LITIGATION
$
6
1,063
3
1,503
530
9,757
12,862
(14)
(65)
$ 12,783
v. United States, in the
On May 4, 2012, the company commenced an action, Northrop Grumman Systems Corp.rr
U.S. Court of Federal Claims. This lawsuit relates to an approximately $875 million firmff
fixed-price contract
awarded to the company in 2007 by the U.S. Postal Service (USPS) for the construction and delivery of flats
sequencing systems (FSS) as part of the postal automation program. The FSS were delivered. The company’s
lawsuit seeks approximately $63 million for unpaid portions of the contract price, and approximately $115 million
based on the company’s assertions that, through various acts and omissions over the life of the contract, the USPS
adversely affecff
ted the cost and schedule of performance and materially altered the company’s obligations under the
contract. The United States responded to the company’s complaint with an answer, denying most of the company’s
claims, and counterclaims seeking approximately $410 million, less certain amounts outstanding under the
contract. In the course of the litigation, the United States subsequently amended its counterclaim, reducing it to seek
approximately $193 million. The principal counterclaim alleges that the company delayed its performance and
caused damages to the USPS because USPS did not realize certain costs savings as early as it had expected. On
February 3, 2020, afteff
seven-week trial. After COVID-19-related interruptions, trial concluded on March 5, 2021. On October 12, 2021,
the parties completed post-trial briefing, and on December 8, 2021, the court held a post-trial oral argument.
Although the ultimate outcome of this matter cannot be predicted or reasonably estimated at this time, the company
intends to continue vigorously to pursue and defend the matter.
r extensive discovery and motions practice, the parties commenced what was expected to be a
The company is engaged in remediation activities relating to environmental conditions allegedly resulting from
historic operations at the former United States Navy and Grumman facilities in Bethpage, New York. For over 20
years, the company has worked closely with the United States Navy, the United States Environmental Protection
Agency, the New York State Department of Environmental Conservation (NYSDEC), the New York State
Department of Health and other federal, state and local governmental authorities, to address legacy environmental
conditions in Bethpage. In December 2019, the State of New York issued an Amended Record of Decision seeking
to impose additional remedial requirements beyond measures the company previously had been taking; the State
also communicated that it was assessing potential natural
a tentative agreement regarding the steps the company will take to implement the State’s Amended Record of
Decision and to resolve certain potential other claims, including for natural resource damages. On September 22,
2021, the State of New York issued forff
December 7, 2021, the public comment period closed. We understand that the State will next seek court approval of
the consent decree. We are also in discussions with the DoD (Navy and DCMA) and the Bethpage and South
Farmingdale Water Districts to explore whether claims involving these parties can be resolved at this stage.
public comment a new consent decree refleff cting the agreement. On
resource damages. In December 2020, the parties reached
tt
We have incurred, and expect to continue to incur, as included in Note 12, substantial remediation costs related to
the legacy Bethpage environmental conditions. It is also possible that appli
allowability standards and other requirements to which we are subject may continue to change, and our costs may
increase materially. In addition to disputes and legal proceedings related to environmental conditions at the site
(including remediation, allocation and allowability), we are a party to various, and may become a party to additional
disputes and legal proceedings with individual and class action plaintiffs aff
lleging personal injun ry and property
remediation, allocation and
cablea
a
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NORTHROP GRUMMAN CORPORATIO
RR
N
damage, with insurance carriers and with other parties. We cannot at this time predict or reasonablya
potential cumulative outcomes or ranges of possible liability of these aggregate Bethpage matters.
estimate the
ng the company’s acquisition of OATK to proceed and
In June 2018, the FTC issued a Decision and Order enablia
providing generally for the company to continue to make solid rocket motors available to competing missile primes
on a non-discriminatory basis. The company has taken and continues to take robust actions to help ensure
compliance with the terms of the Order. Similarly, the Compliance Officer, appointed under the Order, and the FTC
have taken and continue to take various actions to oversee compliance. In October 2019, the company received a
civil investigative demand from the FTC requesting certain information relating to a potential issue regarding the
company’s complim ance with the Order in connection with a then pending missile competition. The company
promptly provided information in response to the request. We have recently resumed discussions with staff at the
FTC regarding our response and their views. We cannot predict the outcome of those discussions, but we do not
believe they are likely to have a material adverse effect on the company’s consolidated financial position as of
December 31, 2021, or its annual results of operations and/or cash flows. We believe the company has been and
continues to be in compliance with the Order.
to various other investigations, lawsuits, arbitration, claims, enforcement actions and other
The company is a partyt
legal proceedings, including government investigations and claims, that arise in the ordinary course of our business.
The naturet
of legal proceedings is such that we cannot assure the outcome of any particular matter. However, based
on information availablea
other matters pending against the company is likely to have a material adverse effecff
financial position as of December 31, 2021, or its annual results of operations and/or cash flows.
to the company to date, the company does not believe that the outcome of any of these
t on the company’s consolidated
12. COMMITMENTS AND CONTINGENCIES
U.S. Government Cost Claims and Contingencies
From time to time, the company is advised of claims by the U.S. government concerning certain potential disallowed
costs, plus, at times, penalties and interest. When such findings are presented, the company and U.S. government
representatives engage in discussions to enablea
assess the amounts being claimed. Where appropriate, provisions are made to reflect the company’s estimated
exposure for such potential disallowed costs. Such provisions are reviewed periodically using the most recent
. The company believes it has adequately reserved for disputed amounts that are probablea
information availablea
reasonably estimablea
, and that the outcome of any such matters would not have a material adverse effect on its
consolidated financial position as of December 31, 2021, or its annual results of operations and/or cash flows.
the company to evaluate the merits of these claims, as well as to
and
The U.S. government has raised questions about an interest rate assumptim on used by the company to determine our
CAS pension expense. On June 1, 2020, the government provided written notice that the assumptions the company
used during the period 2013-2019 were potentially noncompliant with CAS. We submitted a formal response on
July 31, 2020, which we believe demonstrates the appropriateness of the assumptions used. On November 24, 2020,
the government replied to the company’s response, disagreeing with our position and requesting additional input,
which we provided on February 22, 2021 and further discussed with the government. We are prepared to engage
further if, and as, appropriate. The sensitivity to changes in interest rate assumptim ons makes it reasonably possible
the outcome of this matter could have a material adverse effect on our financial position, results of operations and/or
cash flows, although we are not currently able to estimate a range of any potential loss.
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NORTHROP GRUMMAN CORPORATIO
RR
N
Environmental Matters
The tablea
amount of reasonably possible future costs in excess of accrued costs and the deferre
recoverablea
below summarizes the amount accruedrr
ff
through overhead charges on U.S. government contracts as of December 31, 2021 and 2020:
d costs expected to be
for environmental remediation costs, management’s estimate of the
$ in millions
December 31, 2021
December 31, 2020
Accrued
Costs(1)(2)
$
572
614
Reasonably Possible
Future Costs in excess
of Accrued Costs(2)
363
346
$
$
Deferre
d
ff
Costs(3)
486
529
(1) As of December 31, 2021, $208 million is recorded in Other current liabilities and $364 million is recorded in Other non-
current liabilities.
(2) Estimated remediation costs are not discounted to present value. The reasonably possible future costs in excess of accrued
costs do not take into consideration amounts expected to be recoverable through overhead charges on U.S. government
contracts.
(3) As of December 31, 2021, $182 million is deferred in Prepaid expenses and other current assets and $304 million is deferred in
Other non-current assets. These amounts are evaluated for recoverability on a routine basis.
Although management cannot predict whether new information gained as our environmental remediation projects
progress, or as changes in facff
with respect to Bethpage, we do not anticipate that future remediation expenditures associated with our currently
identified projects will have a material adverse effect on the company’s consolidated financial position as of
December 31, 2021, or its annual results of operations and/or cash flows.
ts and circumstances occur, will materially affecff
t the estimated liability accrued, except
With respect to Bethpage, as discussed in Note 11, in December 2019, the State of New York issued an Amended
Record of Decision, seeking to impose additional remedial requirements beyond those the company previously had
been taking; the State also communicated that it was assessing potential natural
2020, the parties reached a tentative agreement regarding the steps the company will take to implement the State’s
Amended Record of Decision and to resolve certain potential other claims, including for natural resource damages.
On September 22, 2021, the State of New York issued forff
agreement. On December 7, 2021, the public comment period closed. We understand that the State will next seek
court approval of the consent decree. As discussed in Note 11, the applicable remediation standards and other
requirements to which we are subject may continue to change, our costs may increase materially, and those costs
.
may not be fully recoverablea
public comment a new consent decree refleff cting the
resource damages. In December
t
Financial Arrangements
In the ordinary course of business, the company uses standby letters of credit and guarantees issued by commercial
banks and surety bonds issued principally by insurance companies to guarantee the performance on certain
obligations. At December 31, 2021, there were $434 million of stand-by letters of credit and guarantees and $71
million of surety bt
onds outstanding.
Indemnifications
The company has provided indemnifications for certain environmental, income tax and other potential liabilities in
connection with certain of its divestitures.
adverse effect on the company’s consolidated financial position as of December 31, 2021, or its annual results of
operations and/or cash flows.
The settlement of these liabilities is not expected to have a material
t
13. RETIREMENT BENEFITS
Plan Descriptions
U.S. Defined Benefie t Pension Plans – The company sponsors several defineff
Pension benefits forff most participants are based on years of service, age and compensation. It is our policy to fund at
least the minimum amount required forff
all qualified plans, using actuarial cost methods and assumptions acceptable
under U.S. government regulations, by making payments into benefit trusts separate from the company.
d benefit pension plans in the U.S.
U.S. Defined Contribution Plans – The company also sponsors defined contribution plans covering the majority of
its employees, including certain employees covered under collective bargaining agreements. Company contributions
vary depending on date of hire, with a majority of employees being eligible forff
contributions. Based on date of hire, certain employees are eligible to receive a company non-elective contribution
employer matching of employee
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NORTHROP GRUMMAN CORPORATRR ION
or an enhanced matching contribution in lieu of a defined benefit pension plan benefit. The company’s contributions
to these defined contribution plans for the years ended December 31, 2021, 2020 and 2019, were $588 million, $590
million and $481 million, respectively.
Non-U.S.UU Benefitff Plans – The company sponsors several benefit plans forff
designed to provide benefits appropriate to local practice and in accordance with local regulations. Some of these
plans are funded using benefit trusts separate from the company.
non-U.S. employees. These plans are
enefie ts – The company funds a portion of the costs for certain health care and life insurance
a substantial number of its active and retired employees. In addition to a company and employee cost-
Medical and Life Bff
benefits forff
sharing feature,
tt
pocket limits, conformance to a schedule of reasonable feeff
benefits with other plans. The plans also provide for a Medicare carve-out. The company reserves the right to amend
or terminate the plans at any time.
the health plans also have provisions for deductibles, co-payments, coinsurance percentages, out-of-
s, the use of managed care providers and coordination of
Certain covered employees and dependents are eligible to participate in plans upon retirement if they meet specified
age and years of service requirements. The company provides subsidies to reimburse certain retirees for a portion of
the cost of individual Medicare-supplemental coverage purchased directly by the retiree through a private insurance
exchange. The company has capped the amount of its contributions to substant
postretirement medical and life benefit plans. In addition, after January 1, 2005 (or earlier at some businesses),
newly hired employees are not eligible for subsidized postretirement medical and life benefits.
ially all of its remaining
u
Summary Plan Results
:
The cost to the company of its retirement benefit plans is shown in the following tablea
Year Ended December 31
$ in millions
Components of net periodic benefit cost
(benefit)
Pension Benefits
2020
2019
2021
Medical and Life Bff
2021
2020
enefits
2019
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service (credit) cost
Mark-to-market (benefit) expense
Other
$
$
414
1,054
(2,512)
(9)
(1,921)
(1)
Net periodic benefit cost (benefit)
$ (2,975) $
409
1,226
(2,376)
(59)
1,034
10
244
$
367
1,360
(2,101)
(59)
1,783
—
$ 1,350
$
$
$
16
53
(105)
(1)
(434)
—
(471) $
$
17
67
(102)
4
—
2
(12) $
16
80
(92)
(3)
17
—
18
The tablea
ended December 31, 2019, 2020 and 2021:
below summarizes the components of changes in unamortized prior service credit (cost) for the years
$ in millions
Changes in unamortized prior service credit
Amortization of prior service credit
Tax expense
Change in unamortized prior service credit – 2019
Amortization of prior service credit (cost)
Tax expense
Change in unamortized prior service credit (cost) – 2020
Amortization of prior service credit (cost)
Tax expense
Change in unamortized prior service credit (cost) – 2021
Pension
Benefits
Medical and
Life Benefits
Total
$
$
59
(14)
45
59
(15)
44
9
(2)
7
$
$
3
(1)
2
(4)
1
(3)
1
—
1
$
$
62
(15)
47
55
(14)
41
10
(2)
8
The following tablea
d status and amounts recognized in the consolidated statements of finaff
position for the company’s defined benefit retirement plans. Pension benefits data includes the qualified plans,
sets forth the funde
ff
ncial
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NORTHROP GRUMMAN CORPORATION
foreign plans and U.S. unfunded non-qualified plans for benefits provided to directors, officers and certain
employees. The company uses a December 31 measurement date for its plans.
$ in millions
Plan Assets
Fair value of plan assets at beginning of year
Net gain on plan assets
Employer contributions
Participant contributions
Benefits paid
Other
Fair value of plan assets at end of year
Projected Benefit Obligation
Projected benefit obligation at beginning of year
Service cost
Interest cost
Participant contributions
Actuari
t
Benefits paid
Other
al (gain) loss
Projected benefit obligation at end of year
Funded status
nsion Benefits
2020
2021
Medical and
Life Benefits
2021
2020
$
$ 34,452
3,637
104
8
(1,964)
(1)
36,236
$ 30,646
4,802
851
8
(1,865)
10
34,452
40,182
414
1,054
8
(794)
(1,964)
(12)
38,888
36,914
409
1,226
8
3,455
(1,865)
35
40,182
$
1,515
170
37
23
(157)
—
1,588
2,119
16
53
23
(369)
(157)
—
1,685
$ (2,652) $ (5,730) $
(97) $
1,392
218
36
24
(155)
—
1,515
2,048
17
67
24
115
(155)
3
2,119
(604)
Pension Benefits
The increase in the faiff
plan asset returns
returns of 16.2 percent and a $750 million discretionary pension contribution.
r value of our plan assets forff
of 10.9 percent. In 2020, the fair value of our plan assets increased primarily dued
the year ended December 31, 2021 was principally driven by net
to net plan asset
t
The decrease in our projected benefit obligation for the year ended December 31, 2021, was primarily driven by a 30
basis point increase in the discount rate from year end 2020. In 2020, our projected benefit obligation increased
primarily due to a 71 basis point decrease in the discount rate from year end 2019.
$ in millions
Classification of amounts recognized in the consolidated
statements of financial position
Non-current assets
Current liability
Non-current liability
Pension Benefits
Medical and
Life Benefits
2021
2020
2021
2020
$
462
$
211
$
285
$
(182)
(180)
(2,932)
(5,761)
(45)
(337)
179
(46)
(737)
The accumulated benefit obligation for all defined benefit pension plans was $38.3 billion and $39.6 billion at
December 31, 2021 and 2020, respectively.
Amounts for pension plans with accumulated benefit obligations in excess of fair value of plan assets are as follows:
$ in millions
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
December 31
$
2021
36,524
35,994
33,410
$
2020
37,681
37,135
31,741
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NORTHROP GRUMMAN CORPORATION
Plan Assumptions
On a weighted-average basis, the folff
of each year and net periodic benefit cost forff
the folff
lowing year:
lowing assumptions were used to determine benefit obligations at December 31
the
Discount rate
Expected long-term return on plan assets
Initial cash balance crediting rate assumed forff
next year
Rate to which the cash balance crediting rate is
assumed to increase (the ultimate rate)
Year that the cash balance crediting rate reaches
the ultimate rate
Rate of compensation increase
Initial health care cost trend rate assumed for the
next year
Rate to which the health care cost trend rate is
assumed to decline (the ultimate trend rate)
Year that the health care cost trend rate reaches
the ultimate trend rate
Pension Benefits
2020
2021
2.98 % 2.68 % 3.39 % 2.93 % 2.58 % 3.35 %
7.50 % 7.50 % 8.00 % 7.19 % 7.22 % 7.66 %
2019
Medical and Life Benefits
2019
2020
2021
2.25 % 2.25 % 2.39 %
2.25 % 2.25 % 2.64 %
2027
2025
2026
3.00 % 3.00 % 3.00 %
5.30 % 5.60 % 5.90 %
5.00 % 5.00 % 5.00 %
2023
2023
2023
over the long term. Through consultation with our investment management team and outside
Plan Assets and Investment Policy
Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and
investment returntt
investment advisers, management develops expected long-term returns
for each of the plans’ strategic asset classes.
In doing so, we consider a number of factors, including our historical investment performance, current market data
such as yields/price-earnings ratios, historical market returns
over long periods and periodic surveys of investment
managers’ expectations. Liabila
ity studies are conducted on a regular basis to provide guidance in setting investment
goals with an objective to balance risk. Risk targets are establia
shed and monitored against acceptablea
ranges.
tt
t
Our investment policies and procedures are designed to ensure the plans’ investments are in compliance with
ERISA. Guidelines are established defining permitted investments within each asset class. Derivatives are used for
transitioning assets, asset class rebalancing, managing currency risk and for management of fixed-income and
alternative investments.
For the maja ority of the plans’ assets, the investment policies require that the asset allocation be maintained within
the following ranges as of December 31, 2021:
Cash and cash equivalents
Global public equities
Fixed-income securities
s
Alternative investment
Asset Allocation Ranges
—% - 12%
30% - 50%
20% - 40%
8% - 38%
1
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NORTHROP GRUMMAN CORPORATRR ION
The table below provides the fair values of the company’s pension and Voluntary Employee Beneficiary Association
(VEBA) trust plan assets at December 31, 2021 and 2020, by asset category. The table also identifies the level of
inputs used to determine the faiff
r value of assets in each category. See Note 1 forff
Certain investments that are measured at fair value using NAV per share (or its equivalent) as a practical expedient
are not required to be categorized in the fair value hierarchy tabla e. The total faiff
included in the tabla e below to permit reconciliation of the fair value hierarchy to amounts presented in the funded
statustt
different than NAV.
table. As of December 31, 2021 and 2020, there were no investments expected to be sold at a value materially
r value of these investments is
tions of these levels.
the defini
ff
$ in millions
Asset category
Cash and cash equivalents
U.S. equities
International equities
Fixed-income securities
Level 1
Level 2
Level 3
Total
2021
2020
2021
2020
2021
2020
2021
2020
$
119
$
120
$ 2,268
$ 1,238
3,085
3,105
2,981
3,354
2
—
$ 2,387
$ 1,358
3,087
3,108
2,981
3,356
$
3
$
2
U.S. Treasuries
21
22
2,815
2,273
2,836
2,295
180
277
5,501
987
31
21
57
258
332
6,228
1,080
48
59
59
30
19
33
31
24
(2)
2
2
U.S. Government Agency
Non-U.S. Government
Corporate debt
Asset backed
High yield debt
Bank loans
Other assets
Investments valued using
NAV as a practical expedient
U.S. equities
International equities
Fixed-income funds
Hedge funds
Opportunistic investments
Private equity funds
Real estate funds
s, net
Payablea
ff
180
277
5,531
987
50
21
92
1,652
6,849
1,461
63
3,039
3,535
2,742
258
332
6,259
1,080
72
59
59
1,567
7,193
1,959
65
2,499
2,627
2,180
(73)
(232)
Fair value of plan assets at
the end of the year
$ 6,412
$ 6,530
$ 12,139
$ 11,575
$
5
$
4
$ 37,824
$ 35,967
There were no transfers of plan assets into or out of Level 3 of the fair value hierarchy during the years ended
December 31, 2021 and 2020.
Generally, investments are valued based on information in financial publications of general circulation, statistical
and valuation services, records of security exchanges, appraisal by qualified persons, transactions and bona fide
offers. Cash and cash equivalents are predominantly held in money market or short-term investment funds. U.S. and
international equities consist primarily of common stocks and institutional common trust funds. Investments in
certain equity securities, which include domestic and international securities and registered investment companies,
and exchange-traded funds
with fixed income strategies are valued at the last reported sales or quoted price on the
last business day of the reporting period. Fair values for certain fixed-income securities, which are not exchange-
traded, are valued using third-party pricing services.
ff
Other assets include derivative assets with a faiff
fair value of $38 million and $27 million, and net notional amounts of $3.7 billion and $2.3 billion, as of December
31, 2021 and 2020, respectively. Derivative instruments may include exchange traded future
s contracts, interest rate
swaps,a
amounts do not quantify risk or represent assets or liabilities of the pension and VEBA trusts, but are used in the
r value of $78 million and $29 million, derivative liabilities with a
and credit default swaps.a Notional
currency contracts, total returntt
options on futures and swaps,a
swapsa
ff
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NORTHROP GRUMMAN CORPORATRR ION
calculation of cash settlement under the contracts. The volume of derivative activity is commensurate with the
amounts disclosed at year-end. Certain derivative financial instruments within the pension trust
netting agreements with certain counterparties.
rr
are subject to master
Investments in certain equity and fixed-income funds
investments, including hedge funds, opportunistic investments, private equity funds
based on the NAV derived by the investment managers, as a practical expedient, and are described further below.
, which include common/collective trust
funds, and alternative
are valued
and real estate funds,
ff
ff
ff
rr
U.S. and International equities: Generally, redemption periods are daily, monthly or quarterly with a notice
requirement less than 90 days. As of December 31, 2021, unfunded commitments were $100 million. There were no
unfunded commitments as of December 31, 2020.
ff
Fixed-income funds:
days. There were no unfunded commitments as of December 31, 2021. Unfunded commitments were $2 million as
of December 31, 2020.
Generally, redemption periods are daily, monthly or quarterly with a notice requirement of two
that allow redemption requests
Hedge funds: Consist of closed-end funds with a 5-10 year life aff
subject to the liquidity limitations of the underlying investments. As of December 31, 2021 and 2020, unfunded
commitments were $6 million and $9 million, respectively.
s well as funds
ff
Opportunistic investments: Primarily held in partnerships with a 5-10 year life.ff As of December 31, 2021 and 2020,
unfunded commitments were $1.7 billion and $1.9 billion, respectively.
ff
Private equity funds:
option to redeem their interest in the fund.
billion and $2.3 billion, respectively.
The term of each fund is typically 10 or more years and the fund’s investors do not have an
As of December 31, 2021 and 2020, unfunded commitments were $2.1
ff
Real estate funds: Consist primarily of open-end funds that generally allow investors to redeem their interests in the
funds. Certain closed-end real estate funds have terms of 10 or more years. As of December 31, 2021 and 2020,
unfunded commitments were $350 million and $60 million, respectively.
For the years ended December 31, 2021 and 2020, the defineff
Northrop Grumman common stock.
d benefit pension and VEBA trusts did not hold any
Benefit Payments
The following tablea
assumptim ons used to measure the benefit obligation, and includes expected future
31, 2021:
reflects estimated future
benefit payments forff
ff
ff
the next ten years, based upon the same
employee service, as of December
$ in millions
Year Ending December 31
2022
2023
2024
2025
2026
2027 through 2031
Pension Plans
Medical and
Life Plans
Total
$
$
1,945
1,988
2,039
2,081
2,118
10,857
$
146
145
122
118
114
506
2,091
2,133
2,161
2,199
2,232
11,363
In 2022, the company expects to contribute the required minimum funding of approximately $100 million to its
pension plans and approximately $38 million to its medical and life benefit plans. During the year ended December
31, 2021, the company made no discretionary pension contributions.
14. STOCK COMPENSATION PLANS AND OTHER COMPENSATION ARRANGEMENTS
Stock Compensation Plans
At December 31, 2021, the company had stock-based compensat
shareholder-approved
non-employee directors, and the 1993 Stock Plan for Non-Employee Directors (1993 SPND).
m
plans: the 2011 Long-Term Incentive Stock Plan (2011 Plan), applicablea
ion awards outstanding under the folff
a
lowing
to employees and
Employee Plans – In May 2015, the company’s shareholders approved amendments to the 2011 Plan. These
amendments provided that shares issued under the plan would be counted against the aggregate share limit on a one-
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NORTHROP GRUMMAN CORPORATRR ION
for-one basis. As amended, 5.1 million shares plus 2.4 million of newly authorized shares were availablea
issuance under the 2011 Plan; as of December 31, 2021, 4.9 million shares remain available for issuance.
for
The 2011 Plan provides for the following equity awards: stock options, stock appreciation rights (SARs) and stock
awards. Under the 2011 Plan, no SARs have been granted and there are no outstanding stock options. Stock awards
include restricted performance stock rights (RPSR) and restricted stock rights (RSR). RPSRs generally vest and are
paid following the completion of a three-year performance period, based primarily on achievement of certain
performance metrics determined by the Board. RSRs generally vest 100% afteff
r three years. Each includes dividend
equivalents, which are paid concurrently with the RPSR or RSR. The terms of equity awards granted under the 2011
Plan provide for accelerated vesting, and in some instances forfeiture,
termination of employment.
of all or a portion of an award upon
tt
m
ee Director Plans – Awards to non-employe
Non-Employm
Corporation Equity Grant Program for Non-Employee Directors under the 2011 Plan (the Director Program), which
was amended and restated effective January 1, 2016. Under the amended Director Program, each non-employee
director is awarded an annual equity grant in the form of Automatic Stock Units, which vest on the one-year
anniversary of the grant date. Directors may elect to have all or any portion of their Automatic Stock Units paid on
(A) the earlier of (i) the beginning of a specified calendar year after the vesting date or (ii) their separation from
service as a member of the Board, or (B) on the vesting date.
e directors are made pursuant to the Northrop Grummrr
an
Directors also may elect to defer to a later year all or a portion of their remaining cash retainer or committee retainer
fees into a stock unit account as Elective Stock Units or in alternative investment options. Elective Stock Units are
awarded on a quarterly basis. Directors may elect to have all or a portion of their Elective Stock Units paid on the
earlier of (i) the beginning of a specified calendar year or (ii) their separation from service as a member of the
Board. Stock units awarded under the Director Program are paid out in an equivalent number of shares of Northrop
Grumman common stock. Directors are credited with dividend equivalents in connection with the accumulated stock
units until the shares of common stock relating to such stock units are issued.
Compensation Expense
Stock-based compensat
million and $127 million, respectively. The related tax (deficiencies) benefits for stock-based compensat
years ended December 31, 2021, 2020 and 2019 were $(2) million, $14 million and $14 million, respectively.
ion expense for the years ended December 31, 2021, 2020 and 2019 was $94 million, $90
ion for the
m
m
At December 31, 2021, there was $96 million of unrecognized compensation expense related to unvested stock
m
awards granted under the company’s stock-based compensat
expense over a weighted-average period of 1.3 years.
ion plans. These amounts are expected to be charged to
Stock Awards
Compensation expense for stock awards is measured at the grant date based on the fair value of the award and is
recognized over the vesting period (generally three years). The fair value of stock awards and performance stock
awards is determined based on the closing market price of the company’s common stock on the grant date. The fair
value of market-based stock awards is determined at the grant date using a Monte Carlo simulation model. For
purposes of measuring compensat
vest is estimated at each reporting date based on management’s expectations regarding the relevant performance
criteria.
ion expense for performance awards, the number of shares ultimately expected to
m
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NORTHROP GRUMMAN CORPORATRR ION
Stock award activity for the years ended December 31, 2019, 2020 and 2021, is presented in the tabla e below. Vested
awards do not include any adjustments to reflect the final performance measure for issued shares.
Outstanding at January 1, 2019
Granted
Vested
Forfeited
Outstanding at December 31, 2019
Granted
Vested
Forfeited
Outstanding at December 31, 2020
Granted
Vested
Forfeited
Outstanding at December 31, 2021
Stock
Awards
(in thousands)
796
339
Weighted-
Average
Grant Date
Fair Value
Per Share
244
$
274
Weighted-
Average
Remaining
Contractual
Term (in years)
0.8
(383)
(51)
701
262
(296)
(64)
603
304
(269)
(58)
580
$
$
$
222
280
278
350
305
303
311
296
286
318
314
0.9
1.4
1.4
The majori
a
ty of our stock awards are granted annually during the first quarter.
The grant date faiff
and $119 million during
r value of shares issued in settlement of fully vested stock awards was $103 million, $118 million
d
the years ended December 31, 2021, 2020 and 2019, respectively.
Cash Awards
The company grants certain employees cash units (CUs) and cash performance units (CPUs). Depending on actual
performance against financial objectives, recipients of CPUs earn between 0 and 200 percent of the original grant.
presents the minimum and maximum aggregate payout amounts related to those cash awards
The following tablea
granted for the periods presented:
$ in millions
Minimum aggregate payout amount
Maximum aggregate payout amount
Year Ended December 31
2021
2020
2019
$
31 $
178
31 $
175
36
203
a
ty of our cash awards are granted annually during the first quarter. CUs typically vest and settle in cash
The majori
on the third anniversary of the grant date, while CPUs generally vest and pay out in cash based primarily on the
achievement of certain performance metrics over a three-year period. At December 31, 2021, there was $115 million
of unrecognized compensation expense related to cash awards.
-82-
318
11
75
404
1,533
263
1,343
1,606
NORTHROP GRUMMAN CORPORATRR ION
15. LEASES
Total Lease Cost
Total lease cost is included in Product and Service costs in the consolidated statement of earnings and
comprehensive income and is recorded net of immaterial sublease income. Total lease cost is comprised of the
following:
$ in millions
Operating lease cost
Variablea
Short-term lease cost
Total lease cost
lease cost
Year Ended December 31
2021
2020
2019
$
$
315 $
31
80
426 $
320 $
28
93
441 $
Supplemental Balance Sheet Information
Supplemental operating lease balance sheet information consists of the following:
ff
$ in millions
Operating lease right-of-use assets
Other current liabilities
Operating lease liabia lities
Total operating lease liabilities
Year Ended December 31
2021
2020
$
$
1,655 $
284
1,590
1,874 $
Other Supplemental Information
Other supplemental operating lease information consists of the folff
ff
lowing:
$ in millions
Cash paid for amounts included in the measurement of operating
lease liabila
Right-of-use assets obtained in exchange for new lease liabila
ities
ities
Year Ended December 31
2021
2020
$
$
306
394
275
345
Weighted average remaining lease term
Weighted average discount rate
11.3 years
3.1 %
12.1 years
3.5 %
Maturities of Lease Liabilities
Maturities of operating lease liabila
ities as of December 31, 2021 are as follows:
$ in millions
Year Ending December 31
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: imputed interest
Present value of operating lease liabila
ities
$
$
322
297
251
206
173
1,058
2,307
(433)
1,874
As of December 31, 2021, we have approximately $300 million in rental commitments for real estate leases that
have not yet commenced. These leases are expected to commence in 2022 with lease terms of 3 to 16 years.
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NORTHROP GRUMMAN CORPORATRR ION
16. SEGMENT INFORMATION
The company is aligned in four operating sectors, which also comprise our reportable segments: Aeronautics
Systems, Defense Systems, Mission Systems and Space Systems.
The following tablea
presents sales and operating income by segment:
$ in millions
Sales
Aeronautics Systems
Defense Systems
Mission Systems
Space Systems
Intersegment eliminations
Total sales
Operating income
Aeronautics Systems
Defense Systems
Mission Systems
Space Systems
Intersegment eliminations
Total segment operating income
FAS/CAS operating adjustment
Unallocated corporate income (expense)
Total operating income
ar Ended December 31
2021
2020
2019
$ 11,259
5,776
10,134
10,608
(2,110)
35,667
$ 12,169
7,543
10,080
8,744
(1,737)
36,799
$ 11,116
7,495
9,410
7,425
(1,605)
33,841
1,093
696
1,579
1,121
(272)
4,217
130
1,304
5,651
$
1,206
846
1,459
893
(216)
4,188
418
(541)
4,065
$
1,188
793
1,408
794
(205)
3,978
465
(474)
3,969
$
d
FAS/CAS Operating Adjustmen
t
For finff ancial statement purposes, we account for our employee pension plans in accordance with FAS. However, the
cost of these plans is charged to our contracts in accordance with appl
icable FAR and CAS requirements. The FAS/
CAS operating adjustmd
difference between CAS pension expense included as cost in segment operating income and the service cost
component of FAS expense included in total operating income.
ent, previously referred to as the net FAS (service)/CAS pension adjustment, reflects the
a
Unallocated Corporate Income (Expense)
Unallocated corporate income (expense) includes the portion of corporate costs not considered allowable or
allocable under the applicable FAR and CAS requirements, and therefore not allocated to the segments, such as
changes in deferred state income taxes and a portion of management and administration, legal, environmental,
compensation, retiree benefits, advertising and other corporate unallowable costs. Unallocated corporate income
(expense) also includes costs not considered part of management’s evaluation of segment operating performance,
such as amortization of purchased intangible assets and the additional depreciation expense related to the step-up in
fair value of property, plant and equipment acquired through business combinations, as well as certain compensation
and other costs.
During the first quarter of 2021, the $2.0 billion pre-tax gain on the sale of our IT services business and $192 million
of unallowable state taxes and transaction costs associated with the divestiture were recorded in Unallocated
corporate income (expense).
-84-
NORTHROP GRUMMAN CORPORATION
Disaggregation of Revenue
Sales by Cb
usCC tomer TypTT e
$ in millions
Aeronautics Systems
U.S. government (1)
International (2)
Other customers
Intersegment sales
Aeronautics Systems sales
Defense Systems
U.S. government (1)
International (2)
Other customers
Intersegment sales
Defense Systems sales
Mission Systems
U.S. government (1)
International (2)
Other customers
Intersegment sales
Mission Systems sales
Space Systems
U.S. government (1)
International (2)
Other customers
Intersegment sales
Space Systems sales
Total
U.S. government (1)
International (2)
Other customers
Total Sales
2021
Year Ended December 31
2020
2019
$
%(3)
$
%(3)
$
%(3)
$
9,631
1,421
18
189
11,259
85 % $ 10,411
1,595
13 %
41
— %
122
2 %
100 % 12,169
86 % $
13 %
— %
1 %
100 %
9,258
1,688
67
103
11,116
3,595
1,317
75
789
5,776
7,223
1,846
72
993
10,134
62 %
23 %
1 %
14 %
100 %
71 %
18 %
1 %
5,103
1,317
395
728
7,543
7,279
1,945
77
10 %
779
100 % 10,080
68 %
17 %
5 %
10 %
100 %
72 %
19 %
1 %
8 %
100 %
4,952
1,442
410
691
7,495
6,765
1,839
78
728
9,410
83 %
15 %
1 %
1 %
100 %
66 %
19 %
6 %
9 %
100 %
72 %
19 %
1 %
8 %
100 %
9,885
93 %
8,110
93 %
6,959
94 %
398
186
139
4 %
2 %
1 %
331
195
108
4 %
2 %
1 %
185
198
83
2 %
3 %
1 %
10,608
100 %
8,744
100 %
7,425
100 %
30,334
85 % 30,903
4,982
351
14 %
1 %
5,188
708
84 %
14 %
2 %
27,934
5,154
753
83 %
15 %
2 %
$ 35,667
100 % $ 36,799
100 % $ 33,841
100 %
(1) Sales to the U.S. government include sales from contracts for which we are the prime contractor, as well as those for which we
are a subcontractor and the ultimate customer is the U.S. government. Each of the company’s segments derives substantial
revenue from the U.S. government.
(2) International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a
subcontractor and the ultimate customer is an international customer. These sales include foreign military sales contracted
through the U.S. government.
(3) Percentages calculated based on total segment sales.
-85-
NORTHROP GRUMMAN CORPORATION
Sales by Cb
ontCC ractt
t TypTT e
$ in millions
Aeronautics Systems
Cost-type
Fixed-price
Intersegment sales
Aeronautics Systems sales
Defense Systems
Cost-type
Fixed-price
Intersegment sales
Defense Systems sales
Mission Systems
Cost-type
Fixed-price
Intersegment sales
Mission Systems sales
Space Systems
Cost-type
Fixed-price
Intersegment sales
Space Systems sales
Total
Cost-type
Fixed-price
Total Sales
2021
Year Ended December 31
2020
2019
$
%(1)
$
%(1)
$
%(1)
49 % $
51 %
$
5,419
5,651
189
11,259
35 %
65 %
34 %
66 %
74 %
26 %
1,739
3,248
789
5,776
3,139
6,002
993
10,134
7,731
2,738
139
10,608
6,142
5,905
122
12,169
2,345
4,470
728
7,543
3,582
5,719
779
10,080
6,369
2,267
108
8,744
51 % $
49 %
5,299
5,714
103
11,116
34 %
66 %
39 %
61 %
74 %
26 %
2,509
4,295
691
7,495
3,335
5,347
728
9,410
5,336
2,006
83
7,425
48 %
52 %
37 %
63 %
38 %
62 %
73 %
27 %
18,028
17,639
$ 35,667
51 % 18,438
49 % 18,361
50 %
50 %
16,479
17,362
49 %
51 %
$ 36,799
$ 33,841
(1) Percentages calculated based on external customer sales.
-86-
NORTHROP GRUMMAN CORPORATION
Sales by Gb
eographic Region
e
$ in millions
Aeronautics Systems
United States
Asia/Pacific
Europe
All other (1)
Intersegment sales
Aeronautics Systems sales
Defense Systems
United States
Asia/Pacific
Europe
All other (1)
Intersegment sales
Defense Systems sales
Mission Systems
United States
Asia/Pacific
Europe
All other (1)
Intersegment sales
Mission Systems sales
Space Systems
United States
Asia/Pacific
Europe
All other (1)
Intersegment sales
Space Systems sales
Total
United States
Asia/Pacific
Europe
All other (1)
Total Sales
2021
Year Ended December 31
2020
2019
$
%(2)
$
%(2)
$
%(2)
$
9,649
896
461
64
189
11,259
87 % $ 10,452
841
8 %
574
4 %
180
1 %
122
12,169
87 % $
7 %
5 %
1 %
9,325
810
587
291
103
11,116
3,670
465
314
538
789
5,776
7,295
518
1,004
324
993
10,134
10,071
60
328
10
139
10,608
74 %
9 %
6 %
11 %
80 %
6 %
10 %
4 %
96 %
1 %
3 %
— %
5,498
402
315
600
728
7,543
7,356
707
893
345
779
10,080
8,305
18
300
13
108
8,744
81 %
6 %
4 %
9 %
79 %
8 %
9 %
4 %
96 %
— %
4 %
— %
5,362
369
249
824
691
7,495
6,843
637
850
352
728
9,410
7,157
20
147
18
83
7,425
30,685
1,939
2,107
936
$ 35,667
86 % 31,611
1,968
5 %
2,082
6 %
1,138
3 %
$ 36,799
86 %
5 %
6 %
3 %
28,687
1,836
1,833
1,485
$ 33,841
85 %
7 %
5 %
3 %
79 %
5 %
4 %
12 %
79 %
7 %
10 %
4 %
98 %
— %
2 %
— %
85 %
6 %
5 %
4 %
(1) All other is principally comprised of the Middle East.
(2) Percentages calculated based on external customer sales.
-87-
NORTHROP GRUMMAN CORPORATION
Intersegment Sales and Operating Income
Sales between segments are recorded at values that include intercompany operating income forff
segment based on that segment’s estimated average operating margin rate forff
operating income is eliminated in consolidation, so that the company’s total sales and total operating income refleff ct
only those transactions with external customers. See Note 1 forff
external sales. Such intercompany
additional information.
the performing
The following tablea
presents intersegment sales and operating income beforeff
eliminations:
$ in millions
Intersegment sales and operating income
Aeronautics Systems
Defense Systems
Mission Systems
Space Systems
Total
2021
Year Ended December 31
2020
2019
Sales
Operating
Income
Sales
Operating
Income
Sales
Operating
Income
$
189
789
993
139
$ 2,110
$ 19
89
150
14
$ 272
$
122
728
779
108
$ 1,737
$ 11
76
116
13
$ 216
$
103
691
728
83
$ 1,605
$ 10
74
113
8
$ 205
Assets
Substantially all of the company’s operating assets are located in the U.S. The following tabla e presents assets by
segment:
$ in millions
Assets
Aeronautics Systems
Defense Systems
Mission Systems
Space Systems
Corporate assets(1)
Total assets
December 31
2021
2020
$
$
9,423
5,911
9,869
10,760
6,616
42,579
$
$
8,997
7,352
10,029
10,028
8,063
44,469
(1) Corporate assets principally consist of cash and cash equivalents, refundable taxes, deferred tax assets, property, plant and
equipment, marketable securities and deferred costs associated with certain environmental matters.
Capital Expenditures and Depreciation and Amortization
The following tablea
presents capital expenditures and depreciation and amortization by segment:
Year Ended December 31
$ in millions
2021
2020
2019
Aeronautics Systems
Defense Systems
Mission Systems
Space Systems
Corporate
Total
$
$
Capita
465
133
236
530
51
1,415
tt
$
al Expenditures
540
$
78
302
440
60
1,420
$
$
528
71
229
352
84
1,264
$
$
2021
2019
2020
Depreciation and Amortization(1)
224
$
44
133
189
428
1,018
238
48
150
211
358
1,005
216
45
170
247
295
973
$
$
$
(1) Corporate amounts include the amortization of purchased intangible assets and the additional depreciation expense related to
the step-up in fair value of property, plant and equipment acquired through business combinations as they are not considered
part of management’s evaluation of segment operating performance.
-88-
NORTHROP GRUMMAN CORPORATRR ION
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
DISCLOSURE CONTROLS AND PROCEDURES
Our principal executive officer (Chairman, Chief Executive Offiff cer and President) and principal financial officer
(Corporate Vice President and Chief Financial Officer) have evaluated the company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange
Act)) as of December 31, 2021, and have concluded that these controls and procedures are effecff
tive to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These
disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in the reports that we file or submit is accumulated and communicated to
management, including the principal executive officer and the principal financial officer, as appropriate to allow
timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the three months ended December 31, 2021, no change occurred in our internal control over financial
reporting that materially affected, or is reasonably likely to materially affecff
reporting.
t, our internal control over financial
Item 9B. Other Information
None.
-89-
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Northrop Grumman Corporation (the company) prepared and is responsible for the consolidated
financial statements and all related financial information contained in this Annual Report. This responsibility
includes establishing and maintaining effective internal control over financial reporting. The company’s internal
control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America.
To comply with the requirements of Section 404 of the Sarbanes–Oxley Act of 2002, the company designed and
implemented a structured and comprehensive assessment process to evaluate its internal control over financial
reporting across the enterprise. The assessment of the effectiveness of the company’s internal control over financial
reporting is based on criteria establia
Committee of Sponsoring Organizations of the Treadway Commission. Because of its inherent limitations, a system
of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect
misstatements. Management regularly monitors its internal control over financial reporting, and actions are taken to
correct deficiencies as they are identified. Based on its assessment, management has concluded that the company’s
internal control over financial reporting was effecff
shed in Internal Control—Inte— grated
Framework (2013) issued by the
tive as of December 31, 2021.
e
Deloitte & Touche LLP issued an attestation report dated January 26, 2022, concerning the company’s internal
control over financial reporting, which is contained in this Annual Report. The company’s consolidated financial
statements as of and for the year ended December 31, 2021, have been audited by the independent registered public
accounting firm of Deloitte & Touche LLP in accordance with the standards of the Public Company Accounting
Oversight Board (United States).
/s/ Kathy J. Warden
Chairman, Chief Executive Officer and President
/s/ David F. Keffer
rr
Corporat
e Vice President and Chief Financial Officer
January 26, 2022
-90-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Northrop Grumman Corporation
Falls Church, Virginia
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Northrop Grumman Corporation and subsidiaries
(the “Company”) as of December 31, 2021, based on criteria establia
Frameworkrr
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion,
the Company maintained, in all material respects, effecff
31, 2021, based on the criteria establia
tive internal control over financial reporting as of December
Frameworkrr (2013) issued by COSO.
shed in Internal Control - Integrated
shed in Internal Control - Integrated
e
e
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021 of the
Company and our report dated January 26, 2022 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effecff
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
tive internal control over financial reporting and
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures
of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effecff
t on the financial statements.
tt
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
ct to the risk that controls may become
Also, projections of any evaluation of effectiveness to future periods are subjeu
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Deloitte & Touche LLP
McLean, Virginia
January 26, 2022
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
-91-
NORTHROP GRUMMAN CORPORATIRR
ON
Item 10. Directors, Executive Officers and Corporate Governance
PART III
DIRECTORS
Information about our Directors will be incorporated herein by reference to the Proxy Statement for the 2022 Annual
Meeting of Shareholders, to be filff ed with the SEC within 120 days after the end of the company’s fiscal year.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Our executive officers as of January 26, 2022, are listed below, along with their ages on that date, positions and
offices held with the company, and principal occupations and employment, focus
ed primarily on the past fivff e years.
ff
Name
Kathy J. Warden
Age
Office Held
50 Chairman, Chief
Executive Officer
and President
Since
2019
Ann M. Addison
60 Corporate Vice
2019
2018
2010
2013
Mark A. Caylor
Sheila C. Cheston
Michael A. Hardesty
Thomas H. Jones
Lesley A. Kalan
David F. Keffer
Blake E. Larson
President and
Chief Human
Resources Officer
57 Corporate Vice
President and
President, Mission
Systems Sector
63 Corporate Vice
President and
General Counsel
50 Corporate Vice
President,
Controller, and
Chief Accounting
Officer
55 Corporate Vice
President and
President,
Aeronautics
Systems Sector
48 Corporate Vice
President and
Chief Strategy and
Development
Officer
44 Corporate Vice
President and
Chief Financial
Officer
62 Corporate Vice
President
David T. Perry
57 Corporate Vice
2019
President and
Chief Global
Business Officer
Recent Business Experience
Chief Executive Officer and President (2019);
President and Chief Operating Officer (2018);
Corporate Vice President and President, Mission
Systems Sector (2016-2017)
Corporate Vice President (2018); Executive Vice
President and Chief Human Resources Officer,
Leidos (2016-2018); Vice President, Human
Resources, Lockheed Martin (2010-2016)
Corporate Vice President and President,
Enterprise Services and Chief Strategy Officer
(2014-2017)
2021 Vice President and General Manager, Airborne
C4ISR Division, Mission Systems Sector
(2017-2020); Vice President and General
Manager, Advanced Concepts & Technologies
Division, Mission Systems Sector (2015-2017)
Corporate Vice President, Government Relations
(2018-2019); Vice President, Legislative Affairs
(2010-2017)
2020
2020 General Partner, Blue Delta Capital Partners
2022
(2018-2020); Chief Financial Officer and
Executive Vice President, CSRA,RR Inc.
(2015-2018)
Corporate Vice President and President, Space
Systems Sector (2020-2021); Corporate Vice
President and President, Former Innovation
Systems Sector (2018-2020); Chief Operating
Officer, Orbital ATK, Inc. (2015-2018)
Corporate Vice President and Chief Global
Business Development Officer (2012-2019)
Mary D. Petryszyn
60 Corporate Vice
2020 Vice President and General Manager, Land and
President and
President, Defense
Systems Sector
Avionics C4ISR Division, Mission Systems
Sector (2016-2019), Vice President, Global
Strategy and Mission Solutions, Aerospace
Systems Sector (2015-2016)
-92-
NORTHROP GRUMMAN CORPORATRR ION
Name
Shawn N. Purvis
Age
Office Held
48 Corporate Vice
Since
2018 Vice President and Chief Information Officer
Recent Business Experience
Lucy C. RyanRR
Thomas L. Wilson
President and
President,
Enterprise
Services
48 Corporate Vice
President,
Communications
53 Corporate Vice
President and
President, Space
Systems Sector
(2016-2017); Vice President and General
Manager, Cyber Division, Former Information
Systems Sector (2014-2016)
2019 Vice President, Enterprise Communications
(2018); Director of Communications, General
Dynamics (2010-2018)
2022 Vice President and General Manager, Strategic
Space Systems Division, Space Systems Sector
(2020-2021); Vice President of Strategy and
Business Development, Space Systems Sector
(2020); Vice President of Business
Development, Former Innovation Systems Sector
(2018-2020); Vice President of Strategy and
Business Development, Space Systems Group,
Orbital ATK, Inc. (2015-2018)
AUDIT COMMITTEE FINANCIAL EXPERT
The information as to the Audit and Risk Committee and the Audit and Risk Committee Financial Expert will be
incorporated herein by reference to the Proxy Statement for the 2022 Annual Meeting of Shareholders.
CODE OF ETHICS
We have adopted Standards of Business Conduct for all of our employees, including the principal executive officer,
principal finff ancial officer and principal accounting officer. The Standards of Business Conduct can be found
on our
internet website at www.northropgrumman.com under “Who We Are – Investors – Corporate Governance –
Standards of Business Conduct.” A copy of the Standards of Business Conduct is available to any stockholder who
requests it by writing to: Northrop Grummrr
an Corporation, c/o Office of the Secretary, 2980 Fairview Park Drive,
Falls Church, VA 22042. We disclose amendments to provisions of our Standards of Business Conduct by posting
amendments on our website. Waivers of the provisions of our Standards of Business Conduct that apply
directors and executive officers are disclosed in a Current Report on Form 8-K.
to our
a
ff
The website and information contained on it or incorporated in it are not intended to be incorporated in this Annual
Report on Form 10-K or other filings with the SEC.
OTHER DISCLOSURES
Other disclosures required by this Item will be incorporated herein by reference to the Proxy Statement for the 2022
Annual Meeting of Shareholders.
Item 11. Executive Compensation
Information concerning Executive Compensation, including information concerning Compensation Committee
Interlocks and Insider Participation and the Compensation Committee Report, will be incorporated herein by
reference to the Proxy Statement for the 2022 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information as to Securities Authorized for Issuance Under Equity Compensation Plans and Security Ownership
of Certain Beneficial Owners and Management will be incorporated herein by reference to the Proxy Statement for
the 2022 Annual Meeting of Shareholders.
For a description of securities authorized under our equity compensation plans, see Note 14 to the consolidated
financial statements.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information as to Certain Relationships and Related Transactions and Director Independence will be
incorporated herein by reference to the Proxy Statement for the 2022 Annual Meeting of Shareholders.
-93-
NORTHROP GRUMMAN CORPORATION
Item 14. Principal Accounting Fees and Services
The information as to Principal Accounting Fees and Services will be incorporated herein by reference to the Proxy
Statement for the 2022 Annual Meeting of Shareholders.
-94-
NORTHROP GRUMMAN CORPORATION
Item 15. Exhibits, Financial Statement Schedules
PART IV
(a) 1. Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Financial Statements
Consolidated Statements of Earnings and Comprehensive Income
Consolidated Statements of Financial Position
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Shareholders’ Equity
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
All schedules have been omitted because they are not applicable, not required, or the information has been
otherwise supplied in the consolidated financial statements or notes to the consolidated financial
statements.
3. Exhibits
2(a)
2(b)
2(c)
2(d)
3(a)
3(b)
4(a)
4(b)
4(c)
Agreement and Plan of Merger among Titan II, Inc. (formerly Northrop Grumman Corporation),
Northrop Grumman Corporation (formerly New P, Inc.) and Titan Merger Sub Inc., dated
March 30, 2011 (incorporated by reference to Exhibit 10.1 to Form 8-K filed April 4, 2011, File
No. 001-16411)
Separation and Distribution Agreement dated as of March 29, 2011, among Titan II, Inc.
an Corporation), Northrop Grummrr
(formerly Northrop Grummrr
Inc.), Huntington Ingalls Industries, Inc., Northrop Grumman Shipbuilding, Inc. and Northrop
Grumman Systems Corporation (incorporated by reference to Exhibit 10.2 to Form 8-K filed
April 4, 2011, File No. 001-16411)
an Corporation (formerly New P,
Agreement and Plan of Merger dated as of September 17, 2017, among Northrop Grumman
Corporation, Neptune Merger, Inc. and Orbit
2.1 to Form 8-K filed September 18, 2017, File No. 001-16411)
al ATK, Inc. (incorporated by reference to Exhibit
r
Transaction Agreement dated as of April 28, 2014, among Alliant Techsystems Inc., Vista
Spinco Inc., Vista Merger Sub Inc. and Orbital Sciences Corporation (incorporated by reference
to Exhibit 2.1 to Alliant Techsystems Inc. (now known as Northrop Grumman Innovation
Systems, Inc.) Form 8-K filed May 2, 2014, File No. 001-16411)
Amended and Restated Certificate of Incorporation of Northrop Grumman Corporation dated
May 29, 2012 (incorporat
30, 2012, filed July 25, 2012, File No. 001-16411)
ed by reference to Exhibit 3.1 to Form 10-Q for the quarter ended June
rr
Amended and Restated Bylaws of Northrop Grumman Corporation dated December 4, 2018
(incorporated by reference to Exhibit 3.1 to Form 8-K filed December 10, 2018, File No.
001-16411)
Registration Rights Agreement dated as of January 23, 2001, by and among Northrop Grumman
Corporation (now Northrop Grumman Systems Corporat
Grumman Corporation) and Unitrin, Inc. (incorporated by reference to Exhibit(d)(6) to
Amendment No. 4 to Schedule TO filed January 31, 2001, File No. 001-3229)
ion), NNG, Inc. (now Northrop
rr
dated as of October 15, 1994, between Northrop Grummrr
Indenturet
Grumman Systems Corporat
(incorporated by reference to Exhibit 4.1 to Form 8-K filed October 25, 1994, File No.
001-3229)
an Corporation (now Northrop
ion) and The Chase Manhattan Bank (National Association), Trustee
rr
rr
dated as of March 30, 2011 by and among Northrop Grumman
to JPMorgan Chase
First Supplemental Indenturett
Systems Corporat
ion, The Bank of New York Mellon (successor trustee
Bank and The Chase Manhattan Bank, N.A.), Titan II, Inc. (formerly known as Northrop
Grumman Corporation), and Titan Holdings II, L.P., to Indenture dated as of October 15, 1994,
ion) and
between Northrop Grumman Corporation (now Northrop Grumman Systems Corporat
The Chase Manhattan Bank, N.A., Trustee
Q for the quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)
(incorporated by reference to Exhibit 4.1 to Form 10-
rr
rr
rr
-95-
NORTHROP GRUMMAN CORPORATRR ION
4(d)
4(e)
4(f)
4(g)
4(h)
4(i)
4(j)
4(k)
4(l)
4(m)
4(n)
Second Supplemental Indenture dated as of March 30, 2011 by and among Northrop Grumman
Systems Corporation, The Bank of New York Mellon (successor trustee
Bank and The Chase Manhattan Bank, N.A.), Titan Holdings II, L.P., and Northrop Grumman
Corporation (formerly known as New P, Inc.), to Indenture dated as of October 15, 1994,
between Northrop Grumman Corporation (now Northrop Grumman Systems Corporation) and
The Chase Manhattan Bank, N.A., Trustee
Q for the quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)
(incorporated by reference to Exhibit 4.2 to Form 10-
to JPMorgan Chase
rr
rr
Form of Officers’ Certificate (without exhibits) establishing the terms of Northrop Grumman
Corporation’s (now Northrop Grumman Systems Corporation’s) 7.875% Debentures
(incorporated by reference to Exhibit 4.3 to Form S-4 Registration Statement No. 333-02653
filed April 19, 1996)
due 2026
t
Form of Northrop Grumman Corporation’s (now Northrop Grumman Systems Corporation’s)
7.875% Debentures
Statement No. 333-02653 filed April 19, 1996)
due 2026 (incorporated by reference to Exhibit 4.6 to Form S-4 Registration
tt
Form of Officers’ Certificate establia
Northrop Grumman Systems Corporation’s) 7.75% Debentures
reference to Exhibit 10.9 to Form 8-K filed April 17, 2001, File No. 001-16411)
shing the terms of Northrop Grumman Corporation’s (now
due 2031 (incorporated by
t
Senior Indenture dated as of December 15, 1991, between Litton Industries, Inc. (predecessor-in-
interest to Northrop Grumman Systems Corporation) and The Bank of New York, as trustee,
under which its 7.75% and 6.98% debentures due 2026 and 2036 were issued, and specimens of
such debentures (incorporated by reference to Exhibit 4.1 to the Form 10-Q of Litton Industries,
Inc. for the quarter ended April 30, 1996, filed June 11, 1996, File No. 001-3998)
with respect to Senior Indenture dated December 15, 1991, dated as of
Supplemental Indenturet
April 3, 2001, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman
Systems Corporation), Northrop Grummrr
Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.7 to
Form 10-Q for the quarter ended March 31, 2001, filed May 10, 2001, File No. 001-16411)
an Corporation, Northrop Grummrr
an Systems
with respect to Senior Indenture dated December 15, 1991, dated as of
Supplemental Indenturet
December 20, 2002, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman
Systems Corporation), Northrop Grummrr
Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4(t) to
Form 10-K for the year ended December 31, 2002, filed March 24, 2003, File No. 001-16411)
an Corporation, Northrop Grummrr
an Systems
rr
dated as of March 30, 2011 by and among Northrop Grumman
ion (successor-in-interest to Litton Industries, Inc.), The Bank of New York
Third Supplemental Indenturett
Systems Corporat
Mellon (formerly known as The Bank of New York), as trustee, Titan II, Inc. (formerly known as
Northrop Grumman Corporation), and Titan Holdings II, L.P., to Senior Indenturett
December 15, 1991, between Litton Industries, Inc. and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.5 to Form 10-Q for the quarter ended March 31, 2011,
filed April 27, 2011, File No. 001-16411)
dated
rr
dated as of March 30, 2011 by and among Northrop Grumman
ion (successor-in-interest to Litton Industries, Inc.), The Bank of New York
Fourth Supplemental Indenturett
Systems Corporat
Mellon (formerly known as The Bank of New York) as trustee, Titan Holdings II, L.P., and
Northrop Grumman Corporation (formerly known as New P, Inc.), to Senior Indenturet
December 15, 1991, between Litton Industries, Inc. and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.6 to Form 10-Q for the quarter ended March 31, 2011,
filed April 27, 2011, File No. 001-16411)
dated
between TRW Inc. (predecessor-in-interest to Northrop Grumman Systems
Indenturet
Corporation) and Mellon Bank, N.A., as trustee
reference to Exhibit 2 to the Form 8-A Registration Statement of TRW Inc. dated July 3, 1986,
File No. 001-02384)
, dated as of May 1, 1986 (incorporated by
rr
First Supplemental Indenturett
Systems Corporat
(incorporated by reference to Exhibit 4(b) to Form S-3 Registration Statement No. 33-30350 of
TRW Inc.)
between TRW Inc. (predecessor-in-interest to Northrop Grumman
ion) and Mellon Bank, N.A., as trustee
, dated as of August 24, 1989
rr
rr
-96-
NORTHROP GRUMMAN CORPORATRR ION
4(o)
4(p)
4(q)
4(r)
4(s)
4(t)
4(u)
4(v)
4(w)
4(x)
4(y)
Fifth Supplemental Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman
e, dated as of June 2,
Systems Corporation) and The Chase Manhattan Bank, as successor truste
1999 (incorporated by reference to Exhibit 4(f) to Form S-4 Registration Statement
No. 333-83227 of TRW Inc. filed July 20, 1999)
rr
Ninth Supplemental Indenturet
& Mission Systems Corp.rr
The Bank of New York Mellon, as successor trustee
Northrop Grumman Systems Corporat
K for the year ended December 31, 2009, filed February 9, 2010, File No. 001-16411)
(predecessor–in-interest to Northrop Grumman Systems Corporat
an Corporation; and
dated as of December 31, 2009 among Northrop Grumman Space
ion);
ion (incorporated by reference to Exhibit 4(p) to Form 10-
; Northrop Grummrr
rr
rr
rr
rr
and TRW, Inc.), The Bank of New York Mellon, as successor trustee
ion (successor-in-interest to Northrop Grumman Space & Mission Systems
Tenth Supplemental Indenture dated as of March 30, 2011, by and among Northrop Grumman
Systems Corporat
Corp.rr
Bank and to Mellon Bank, N.A., Titan II Inc. (formerly known as Northrop Grumman
Corporat
rr
N.A., as trustee, dated as of May 1, 1986 (incorporated by reference to Exhibit 4.7 to Form 10-Q
for the quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)
ion), and Titan Holdings II, L.P., to Indenture between TRW Inc. and Mellon Bank,
to JPMorgan Chase
rr
rr
and TRW Inc.), The Bank of New York Mellon, as successor trustee
ion (successor-in-interest to Northrop Grumman Space & Mission Systems
Eleventh Supplemental Indenture dated as of March 30, 2011, by and among Northrop Grumman
Systems Corporat
Corp.rr
to JPMorgan Chase
Bank and to Mellon Bank, N.A., Titan Holdings II, L.P., and Northrop Grumman Corporation
(formerly known as New P, Inc.) to Indenture between TRW Inc. and Mellon Bank, N.A., as
trustee, dated as of May 1, 1986 (incorporated by reference to Exhibit 4.8 to Form 10-Q for the
quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)
rr
Twelfth Supplemental Indenture, dated as of August 25, 2021, to the Indenture dated as of May
1, 1986, by and among Northrop Grummrr
Corporat
rr
4.1 to Form 8-K filed August 27, 2021, File No. 001-16411)
ion and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit
ion, Northrop Grummrr
an Systems Corporat
an
rr
Thirteenth Supplemental Indenture,
May 1, 1986, by and among Northrop Grummrr
Corporat
rr
4.2 to Form 8-K filed August 27, 2021, File No. 001-16411)
tt
dated as of August 25, 2021, to the Indenture dated as of
an Systems Corporat
rr
ion, Northrop Grummrr
an
ion and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit
dated as of November 21, 2001, between Northrop Grumman Corporation and
Indenturet
JPMorgan Chase Bank, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed
November 21, 2001, File No. 001-16411)
First Supplemental Indenturett
Corporat
rr
November 21, 2001 (incorporated by reference to Exhibit 4(a) to Form 8-K filed July 30, 2009,
File No. 001-16411)
ion and The Bank of New York Mellon, as successor trustee
dated as of July 30, 2009, between Northrop Grumman
to Indenture dated as of
rr
u
ion and The Bank of New York Mellon, as successor trustee
mental Indenture dated as of November 8, 2010, between Northrop Grumman
Second Supple
Corporat
, to Indenture dated as of
rr
November 21, 2001 (incorporated by reference to Exhibit 4(a) to Form 8-K filed November 8,
2010, File No. 001-16411)
rr
Form of Northrop Grumman Corporation’s 5.050% Senior Note due 2040 (incorporated by
reference to Exhibit C to Exhibit 4(a) to Form 8-K filed November 8, 2010, File No. 001-16411)
Third Supplemental Indenturett
dated as of March 30, 2011, by and among Titan II, Inc. (formerly
known as Northrop Grumman Corporation), The Bank of New York Mellon, as successor trustee
to JPMorgan Chase Bank, and Titan Holdings II, L.P., to Indenture dated as of November 21,
2001 between Northrop Grumman Corporation and JPMorgan Chase Bank, as trustee
(incorporated by reference to Exhibit 4.9 to Form 10-Q for the quarter ended March 31, 2011,
filed April 27, 2011, File No. 001-16411)
rr
-97-
NORTHROP GRUMMAN CORPORATION
4(z)
4(aa)
4(bb)
4(cc)
4(dd)
4(ee)
4(ff)
4(gg)
4(hh)
4(ii)
4(jj)
4(kk)
4(ll)
Fourth Supplemental Indenture dated as of March 30, 2011, by and among Titan Holdings II,
L.P., The Bank of New York Mellon, as successor truste
Northrop Grumman Corporation (formerly known as New P, Inc.), to Indenture dated as of
November 21, 2001 between Northrop Grumman Corporation and JPMorgan Chase Bank, as
trustee (incorporated by reference to Exhibit 4.10 to Form 10-Q for the quarter ended March 31,
2011, filed April 27, 2011, File No. 001-16411)
e to JPMorgan Chase Bank, and
rr
Fifthff Suppu lemental Indenture, dated as of May 31, 2013, between Northrop Grumman
Corporat
rr
to Indenture dated as of November 21, 2001 (incorporated by reference to Exhibit 4(a) to Form
8-K filed May 31, 2013, File No. 001-16411)
ion and The Bank of New York Mellon, as successor to JPMorgan Chase Bank, Trustee,
Form of 3.250% Senior Note due 2023 (incorporated by reference to Exhibit B to Exhibit 4(a) to
Form 8-K filed May 31, 2013, File No. 001-16411)
Form of 4.750% Senior Note due 2043 (incorporated by reference to Exhibit C to Exhibit 4(a) to
Form 8-K filed May 31, 2013, File No. 001-16411)
Sixth Supplemental Indenture, dated as of February 6, 2015, between Northrop Grumman
Corporation and The Bank of New York Mellon, as successor to JPMorgan Chase Bank, Trustee,
to Indenture dated as of November 21, 2001 (incorporated by reference to Exhibit 4.1 to Form 8-
K filed February 6, 2015, File No. 001-16411)
Form of 3.850% Senior Note due 2045 (incorporated by reference to Exhibit A to Exhibit 4.1 to
Form 8-K filed February 6, 2015, File No. 001-16411)
Seventh Supplemental Indenture,
e,
Corporation and The Bank of New York Mellon, as successor to JPMorgan Chase Bank, Truste
to Indenture dated as of November 21, 2001 (incorporated by reference to Exhibit 4.1 to Form 8-
K filed December 1, 2016, File No. 001-16411)
dated as of December 1, 2016, between Northrop Grumman
rr
t
Form of 3.200% Senior Note due 2027 (incorporated by reference to Exhibit A to Exhibit 4.1 to
Form 8-K filed December 1, 2016, File No. 001-16411)
Eighth Supplemental Indenture,
Corporation and The Bank of New York Mellon, as successor to JPMorgan Chase Bank, Trustee,
to Indenture dated as of November 21, 2001 (incorporated by reference to Exhibit 4.1 to Form 8-
K filed October 13, 2017, File No. 001-16411)
dated as of October 13, 2017, between Northrop Grumman
t
u
mental Indenture, dated as of March 23, 2020, between Northrop Grummrr
rr
Ninth Supple
an
Corporation and The Bank of New York Mellon, as successor to JPMorgan Chase, Truste
Indenturet
filed March 24, 2020, File No. 001-16411)
dated as of November 21, 2001 (incorporated by reference to Exhibit 4.1 to Form 8-K
e, to
Form of 2.930% Senior Note due 2025 (incorporated by reference to Exhibit C to Exhibit 4.1 to
Form 8-K filed October 13, 2017, File No. 001-16411)
Form of 3.250% Senior Note due 2028 (incorporated by reference to Exhibit D to Exhibit 4.1 to
Form 8-K filed October 13, 2017, File No. 001-16411)
Form of 4.030% Senior Note due 2047 (incorporated by reference to Exhibit E to Exhibit 4.1 to
Form 8-K filed October 13, 2017, File No. 001-16411)
4(mm)
Form of 4.400% Senior Note due 2030 (incorporated by reference to Exhibit 4.1 to Form 8-K
filed March 24, 2020, File No. 001-16411)
4(nn)
4(oo)
4(pp)
Form of 5.150% Senior Note due 2040 (incorporated by reference to Exhibit 4.1 to Form 8-K
filed March 24, 2020, File No. 001-16411)
Form of 5.250% Senior Note due 2050 (incorporated by reference to Exhibit 4.1 to Form 8-K
filed March 24, 2020, File No. 001-16411)
Tenth Supplemental Indenture,
Corporation and The Bank of New York Mellon, as successor to JPMorgan Chase Bank, Trustee,
to Indenture dated as of November 21, 2001 (incorporated by reference to Exhibit 4.1 to Form 8-
K filed September 3, 2021, File No. 001-16411)
dated as of September 2, 2021, between Northrop Grumman
tt
-98-
NORTHROP GRUMMAN CORPORATRR ION
4(qq)
4(rr)
4(ss)
4(tt)
4(uu)
4(vv)
4(ww)
4(xx)
10(a)
10(b)
10(c)
10(d)
+10(e)
+10(f)
Form of 7.875% Senior Note due 2026 (incorporated by reference to Exhibit A in Exhibit 4.1 to
Form 8-K filed September 3, 2021, File No. 001-16411)
Form of 7.750% Senior Note due 2026 (incorporated by reference to Exhibit B in Exhibit 4.1 to
Form 8-K filed September 3, 2021, File No. 001-16411)
Form of 6.650% Senior Note due 2028 (incorporated by reference to Exhibit C in Exhibit 4.1 to
Form 8-K filed September 3, 2021, File No. 001-16411)
Form of 7.750% Senior Note due 2029 (incorporated by reference to Exhibit D in Exhibit 4.1 to
Form 8-K filed September 3, 2021, File No. 001-16411)
Form of 7.750% Senior Note due 2031 (incorporated by reference to Exhibit E in Exhibit 4.1 to
Form 8-K filed September 3, 2021, File No. 001-16411)
Form of 6.980% Senior Note due 2036 (incorporated by reference to Exhibit F in Exhibit 4.1 to
Form 8-K filed September 3, 2021, File No. 001-16411)
Registration Rights Agreement, dated as of September 2, 2021, between Northrop Grumman
Corporation and BofA Securities, Inc., BNP Paribas Securities Corp. and Wells Fargo Securities,
LLC, as dealer managers (incorporated by reference to Exhibit 4.8 to Form 8-K filed September
3, 2021, File No. 001-16411)
Description of Securities (incorporated by reference to Exhibit 4(ll) to Form 10-K for the year
ended December 31, 2019, filed January 30, 2020, File No. 001-16411)
Credit Agreement, dated as of August 17, 2018, among Northrop Grumman Corporation, as
Borrower; Northrop Grumman Systems Corporation, as Guarantor; the lenders party thereto and
JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1
to Form 8-K filed August 17, 2018, File No. 001-16411)
(i)
Extension and Amendment Agreement, dated as of October 17, 2019, among Northrop
Grumman Corporation, as Borrower, Northrop Grumman Systems Corporation, as
Guarantor, the issuing banks party thereto, the lenders party thereto and JPMorgan Chase
Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Form
8-K filed October 21, 2019, File No. 001-16411)
Form of Guarantee dated as of April 3, 2001, by Northrop Grumman Corporation of the
indenture indebtedness issued by Litton Industries, Inc. (predecessor-in-interest to Northrop
Grumman Systems Corporation) (incorporated by reference to Exhibit 10.10 to Form 8-K filed
April 17, 2001, File No. 001-16411)
Form of Guarantee dated as of April 3, 2001, by Northrop Grumman Corporation of Northrop
Grumman Systems Corporation indenturet
Exhibit 10.11 to Form 8-K and filed April 17, 2001, File No. 001-16411)
indebtedness (incorporated by reference to
Form of Guarantee dated as of March 27, 2003, by Northrop Grummrr
Guarantor, in favor of JP Morgan Chase Bank, as trustee, of certain debt securities issued by the
former Northrop Grumman Space & Mission Systems Corp. (predecessor-in-interest to Northrop
Grumman Systems Corporat
quarter ended March 31, 2003, filed May 14, 2003, File No. 001-16411)
ion) (incorporated by reference to Exhibit 4.2 to Form 10-Q for the
an Corporation, as
rr
(i)
First Amendment to Guarantee, dated as of August 25, 2021, to the Guarantee dated as of
March 27, 2003, by and among Northrop Grumman Systems Corporat
Grumman Corporation and The Bank of New York Mellon, as trustee (incorporated by
reference to Exhibit 10.1 to Form 8-K filed August 27, 2021, File No. 001-16411)
ion, Northrop
rr
Northrop Grumman Corporation 1993 Stock Plan for Non-Employee Directors (as Amended and
Restated January 1, 2010) (incorporated by reference to Exhibit 10.1 to Form 10-Q for the
quarter ended June 30, 2009, filed July 23, 2009, File No. 001-16411)
Amended and Restated 2011 Long-Term Incentive Stock Plan (as amended and restated effecff
as of May 20, 2015) (incorporated by reference to Appendix B to the Company’s Proxy
Statement on Schedule 14A for the 2015 Annual Meeting of Shareholders filed April 6, 2015,
File No. 001-16411)
tive
-99-
NORTHROP GRUMMAN CORPORATRR ION
(i)
Northrop Grumman Corporation Equity Grant Program for Non-Employee Directors
under the Northrop Grumman 2011 Long-Term Incentive Stock Plan, Amended and
Restated Effective as of January 1, 2016 (incorporated by reference to Exhibit 10.1 to
Form 10-Q for the quarter ended September 30, 2015, filed October 28, 2015, File No.
001-16411)
(ii) Grant Certificate Specifying the Terms and Conditions Applicable to 2018 Restricted
Stock Rights Granted Under the 2011 Long-Term Incentive Stock Plan (incorporated by
reference to Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2018, filed April
25, 2018, File No. 001-16411)
(iii) Grant Certificate Specifying the Terms and Conditions Applicable to 2018 Restricted
Performance Stock Rights Granted Under the 2011 Long-Term Incentive Stock Plan
(incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended March 31,
2018, filed April 25, 2018, File No. 001-16411)
(iv) Grant Certificate Specifying the Terms and Conditions Applicable to Special 2018
Restricted Stock Rights Granted to Blake Larson Under the 2011 Long-Term Incentive
Stock Plan (incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended
June 30, 2018, filed July 25, 2018, File No. 001-16411)
(v)
(vi)
Grant Certificate Specifying the Terms and Conditions Applicable to 2018 Restricted
Stock Rights Granted to Mark Caylor Under the 2011 Long-Term Incentive Stock Plan
(incorporated by reference to Exhibit 10(g)(xvii) to Form 10-K for the year ended
December 31, 2018, filed January 31, 2019, File No. 001-16411)
2019 Restricted Stock Rights Grant Agreement Granted Under the 2011 Long-Term
Incentive Stock Plan (incorporated by reference to Exhibit 10.1 to Form 10-Q for the
quarter ended March 31, 2019, filed April 24, 2019, File No. 001-16411)
(vii) 2019 Restricted Performance Stock Rights Grant Agreement Granted Under the 2011
Long-Term Incentive Stock Plan (incorporated by reference to Exhibit 10.2 to Form 10-Q
for the quarter ended March 31, 2019, filed April 24, 2019, File No. 001-16411)
(viii) 2020 Restricted Stock Rights Grant Agreement Granted Under the 2011 Long-Term
Incentive Stock Plan (incorporated by reference to Exhibit 10.1 to Form 10-Q for the
quarter ended March 31, 2020, filed April 29, 2020, File No. 001-16411)
(ix)
(x)
(xi)
2020 Restricted Performance Stock Rights Grant Agreement Granted Under the 2011
Long-Term Incentive Stock Plan (incorporated by reference to Exhibit 10.2 to Form 10-Q
for the quarter ended March 31, 2020, filed April 29, 2020, File No. 001-16411)
2020 Restricted Stock Rights Grant Agreement Granted to Blake Larson and Janis
Pamiljans Under the 2011 Long-Term Incentive Stock Plan (incorporated by reference to
Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2020, filed April 29, 2020,
File No. 001-16411)
2021 Restricted Stock Rights Grant Agreement Granted Under the 2011 Long-Term
Incentive Stock Plan (incorporated by reference to Exhibit 10.2 to Form 10-Q for the
quarter ended March 31, 2021, filed April 29, 2021, File No. 001-16411)
(xii) 2021 Restricted Performance Stock Rights Grant Agreement Granted Under the 2011
Long-Term Incentive Stock Plan (incorporated by reference to Exhibit 10.3 to Form 10-Q
for the quarter ended March 31, 2021, filed April 29, 2021, File No. 001-16411)
(xiii) 2021 Restricted Stock Rights Grant Agreement Granted to Blake Larson Under the 2011
Long-Term Incentive Stock Plan (incorporated by reference to Exhibit 10.4 to Form 10-Q
for the quarter ended March 31, 2021, filed April 29, 2021, File No. 001-16411)
+10(g)
Northrop Grumman 2011 Long-Term Incentive Stock Plan (As Amended Through December 4,
2014) (incorporated by reference to Exhibit 10(h) to Form 10-K for the year ended December 31,
2014, filed February 2, 2015, File No. 001-16411)
-100-
NORTHROP GRUMMAN CORPORATRR ION
(i)
Summary of Non-Employee Director Award Terms Under the 2011 Long-Term Incentive
Stock Plan effective December 21, 2011 (incorporated by reference to Exhibit 10(j)(ii) to
Form 10-K for the year ended December 31, 2011, filed February 8, 2012, File No.
001-16411)
(ii) Northrop Grumman Corporation Equity Grant Program for Non-Employee Directors
under the Northrop Grumman 2011 Long-Term Incentive Stock Plan, Amended and
Restated Effective January 1, 2015 (incorporated by reference to Exhibit 10(h)(ii) to Form
2, 2015, File No. 001-16411)
10-K for the year ended December 31, 2014, filed February
rr
+10(h)
Northrop Grumman Supplemental Plan 2 (Amended and Restated Effective as of January 1,
2014) (incorporated by reference to Exhibit 10(l) to Form 10-K for the year ended December 31,
2013, Filed February 3, 2014, File No. 001-16411)
(i)
Appendix B to the Northrop Grumman Supplemental Plan 2: ERISA Supplemental
Program 2 (Amended and Restated Effective as of January 1, 2014) (incorporated by
reference to Exhibit 10(l)(i) to Form 10-K for the year ended December 31, 2013, filed
February 3, 2014, File No. 001-16411)
(ii) Appendix G to the Northrop Grumman Supplemental Plan 2: Officers Supplemental
Executive Retirement Program (Amended and Restated Effective as of January 1, 2012)
(incorporated by reference to Exhibit 10(k)(iv) to Form 10-K for the year ended December
31, 2011, filed February 8, 2012, File No. 001-16411)
(iii) Appendix I to the Northrop Grummrr
an Supplemental Plan 2: Officers Supplemental
Executive Retirement Program II (Amended and Restated January 1, 2014) (incorporated
by reference to Exhibit 10(k)(iv) to Form 10-K for the year ended December 31, 2015,
filed February 1, 2016, File No. 001-16411)
(iv)
(v)
First Amendment to the Northrop Grumman Supplemental Plan 2, dated December 20,
2017 (Effective as of December 31, 2017) (incorporated by reference to Exhibit 10(j)(v) to
Form 10-K for the year ended December 31, 2017, filed January 29, 2018, File No.
001-16411)
u
First Amendment to Appendix F to the Northrop Grumman Supplemental Plan 2, CPC
Supplem
by reference to Exhibit 10(h)(v) to Form 10-K for the year ended December 31, 2019,
filed January 30, 2020, File No. 001-16411)
ental Executive Retirement Program, effective December 30, 2019 (incorporated
+10(i)
+10(j)
+10(k)
+10(l)
+10(m)
+10(n)
Northrop Grumman Supplementary Retirement Income Plan (formerly TRW Supplementary
Retirement Income Plan) (Amended and Restated Effective January 1, 2014) (incorporated by
reference to Exhibit 10(m) to Form 10-K for the year ended December 31, 2013, filed February
3, 2014, File No. 001-16411)
Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation
(Amended and Restated Effective December 31, 2019) (incorporated by reference to Exhibit
10(j) to Form 10-K for the year ended December 31, 2019, filed January 30, 2020, File No.
001-16411)
Non-Employee Director Compensation Term Sheet, effecff
reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2020, filed July 30, 2020,
File No. 001-16411)
tive May 20, 2020 (incorporated by
Non-Employee Director Compensation Term Sheet, effecff
reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2021, filed July 29, 2021,
File No. 001-16411)
tive May 19, 2021 (incorporated by
Form of Indemnification Agreement between Northrop Grumman Corporation and its directors
and executive officers (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter
ended March 31, 2012, filed April 25, 2012, File No. 001-16411)
Northrop Grumman Deferred Compensation Plan (Amended and Restated Effective as of April
1, 2016) (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended March
31, 2016, filed April 27, 2016, File No. 001-16411)
-101-
NORTHROP GRUMMAN CORPORATRR ION
+10(o)
+10(p)
+10(q)
+10(r)
+10(s)
+10(t)
+10(u)
+10(v)
+10(w)
+10(x)
+10(y)
+10(z)
+10(aa)
*21
*23
*24
The 2002 Incentive Compensation Plan of Northrop Grumman Corporat
ion, As Amended and
Restated effective January 1, 2009 (incorporated by reference to Exhibit 10.6 to Form 10-Q for
the quarter ended March 31, 2009, filed April 22, 2009, File No. 001-16411)
rr
Northrop Grumman 2006 Annual Incentive Plan and Incentive Compensation Plan, as amended
and restated effective January 1, 2022 (incorporated by reference to Exhibit 10.2 to Form 10-Q
for the quarter ended June 30, 2021, filed July 29, 2021, File No. 001-16411)
Northrop Grumman Innovation Systems Nonqualified Deferr
and restated January 1, 2019 (incorporated by reference to Exhibit 10(r) to Form 10-K for the
year ended December 31, 2018, filed January 31, 2019, File No. 001-16411)
ed Compensation Plan, as amended
ff
Northrop Grumman Savings Excess Plan (Amended and Restated Effective as of January 1,
2020) (incorporated by reference to Exhibit 10(s) to Form 10-K for the year ended December 31,
2019, filed January 30, 2020, File No. 001-16411)
Northrop Grumman Offiff cers Retirement Account Contribution Plan (Amended and Restated
Effective as of January 1, 2019) (incorporated by reference to Exhibit 10(v) to Form 10-K for the
year ended December 31, 2018, filed January 31, 2019, File No. 001-16411)
Northrop Grumman Innovation Systems Defined Benefit Supplemental Executive Retirement
tive January 1, 2019 (incorporated by reference to Exhibit
Plan, as amended and restated effecff
10(x) to Form 10-K for the year ended December 31, 2018, filed January 31, 2019, File No.
001-16411)
(i)
First Amendment to Northrop Grumman Innovation Systems Defineff
tive December 31, 2019 (incorporated by
Supplemental Executive Retirement Plan, effecff
reference to Exhibit 10(v)(i) to Form 10-K for the year ended December 31, 2019, filed
January 30, 2020, File No. 001-16411)
d Benefit
Northrop Grumman Innovation Systems Defined Contribution Supplemental Executive
Retirement Plan, as amended and restated effecff
Exhibit 10(y) to Form 10-K for the year ended December 31, 2018, filed January 31, 2019, File
No. 001-16411)
tive January 1, 2019 (incorporated by reference to
Executive Basic Life Insurance and Accidental Death and Dismemberment Insurance Policy
dated January 1, 2019 (incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter
ended March 31, 2019, filed April 24, 2019, File No. 001-16411)
Executive Long-Term Disabila
reference to Exhibit 10.5 to Form 10-Q for the quarter ended March 31, 2019, filed April 24,
2019, File No. 001-16411)
ity Insurance Policy dated January 1, 2019 (incorporated by
Executive Supplemental Individual Disabila
ity Insurance Plan dated June 30, 2014 (incorporated
by reference to Exhibit 10(z) to Form 10-K for the year ended December 31, 2017, filed January
29, 2018, File No. 001-16411)
Group Personal Excess Liability Policy effective as of January 1, 2021 (incorporated by
reference to Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2021, filed April 29,
2021, File No. 001-16411)
Letter dated January 10, 2018 from Northrop Grumman Corporation to Blake Larson regarding
compensation effecff
quarter ended June 30, 2018, filed July 25, 2018, File No. 001-16411)
tive June 6, 2018 (incorporated by reference to Exhibit 10.3 to Form 10-Q for
Letter dated Februaryrr 3, 2020 from Northrop Grummrr
compensation effecff
10-Q for the quarter ended March 31, 2020, filed April 29, 2020, File No. 001-16411)
tive February 17, 2020 (incorporated by reference to Exhibit 10.4 to Form
an Corporation to David Keffer regarding
Subsidiaries
Consent of Independent Registered Public Accounting Firm
Power of Attorney
*31.1
Certification of Kathy J. Warden pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
-102-
NORTHROP GRUMMAN CORPORATRR ION
*31.2
Certification of David F. Keffer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
**32.1
Certification of Kathy J. Warden pursuant to Section 906 of the Sarbane
r
s-Oxley Act of 2002
**32.2
Certification of David F. Keffer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*101
Northrop Grumman Corporation Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, formatted as inline XBRL (Extensible Business Reporting Language); (i)
the Cover Page, (ii) the Consolidated Statements of Earnings and Comprehensive Income,
(iii) Consolidated Statements of Financial Position, (iv) Consolidated Statements of Cash Flows,
(v) Consolidated Statements of Changes in Shareholders’ Equity, and (vi) Notes to Consolidated
Financial Statements. The instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
*104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+
*
**
Management contract or compensatory plan or arrangement
Filed with this Report
Furnished with this Report
Item 16. Form 10-K Summary
None.
-103-
NORTHROP GRUMMAN CORPORATION
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has dulyd
caused this report to be signed on its behalf by the undersigned, thereunto dulyd
January 2022.
authorized, on the 26th day of
SIGNATURES
NORTHROP GRUMMAN CA
ORPORATIRR
ON
By:
/s/ Michael A. Hardesty
Michael A. Hardesty
Corporate Vice President, Controller, and Chief
Accounting Officer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on behalf of the
registrant this the 26th day of January 2022, by the following persons and in the capacities indicated.
Signature
g
Kathy J. Warden*
*
David F. Keffer
ff
Michael A. Hardesty
David P. Abney*
Marianne C. Brown*
Donald E. Felsinger*
Ann M. Fudge*
William H. Hernandez*
Madeleine A. Kleiner*
Karl J. Krapek*
a
Graham N. Robinson*
Gary Roughead*
Thomas M. Schoewe*
James S. Turley*
Mark A. Welsh III*
*By:
/s/ Jennifer C. McGarey
Jennifer C. McGarey
Corporate Vice President and Secretary
Attorney-in-Fact
pursuant to a power of attorney
Title
Chairman, Chief Executive Officer and President (Principal
Executive Officer), and Director
Corporate Vice President and Chief Financial Officer (Principal
Financial Officer)
Corporate Vice President, Controller and Chief Accounting
Officer
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
-104-
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:56)(cid:86)(cid:72)(cid:3)(cid:50)(cid:73)(cid:3)(cid:49)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)
(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:11)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:79)(cid:72)(cid:86)(cid:3)(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:83)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)
(cid:82)(cid:73)(cid:3)(cid:36)(cid:80)(cid:72)(cid:85)(cid:76)(cid:70)(cid:68)(cid:12)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:241)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:54)(cid:40)(cid:38)(cid:12)(cid:3)(cid:53)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:42)(cid:17)(cid:3)(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:90)(cid:72)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:88)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:241)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)
(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:87)(cid:85)(cid:72)(cid:81)(cid:71)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:92)(cid:3)(cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)
(cid:69)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:3)(cid:81)(cid:68)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:15)(cid:3)(cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:69)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:76)(cid:86)(cid:82)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)
(cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:87)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:42)(cid:36)(cid:36)(cid:51)(cid:17)(cid:3)(cid:39)(cid:72)(cid:241)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)
(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:71)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:17)(cid:3)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)
(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:71)(cid:72)(cid:241)(cid:81)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:88)(cid:87)(cid:76)(cid:79)(cid:76)(cid:93)(cid:72)(cid:3)(cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:17)
Organic Sales:
(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:169)(cid:86)(cid:3)(cid:44)(cid:55)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:71)(cid:76)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:17)(cid:3)(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)
(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:88)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:169)(cid:86)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:79)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3)(cid:68)(cid:86)(cid:3)(cid:90)(cid:72)(cid:79)(cid:79)(cid:3)(cid:68)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:82)(cid:81)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:87)(cid:85)(cid:72)(cid:81)(cid:71)(cid:86)(cid:3)(cid:69)(cid:92)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:169)(cid:86)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:69)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:76)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)
(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:92)(cid:17)(cid:3)
($M)
(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)
(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:44)(cid:55)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)
Total organic sales
(cid:54)(cid:83)(cid:68)(cid:70)(cid:72)(cid:3)(cid:54)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:86)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)
(cid:54)(cid:83)(cid:68)(cid:70)(cid:72)(cid:3)(cid:54)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:86)(cid:3)(cid:44)(cid:55)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)
Space Systems total organic sales
2021
(cid:7)(cid:22)(cid:24)(cid:15)(cid:25)(cid:25)(cid:26)(cid:3)
(cid:11)(cid:20)(cid:25)(cid:21)(cid:12)(cid:3)
$35,505
(cid:7)(cid:20)(cid:19)(cid:15)(cid:25)(cid:19)(cid:27)(cid:3)
(cid:11)(cid:20)(cid:25)(cid:12)(cid:3)
$10,592
2020
(cid:7)(cid:22)(cid:25)(cid:15)(cid:26)(cid:28)(cid:28)(cid:3)
(cid:11)(cid:21)(cid:15)(cid:22)(cid:21)(cid:28)(cid:12)(cid:3)
$34,470
(cid:7)(cid:27)(cid:15)(cid:26)(cid:23)(cid:23)(cid:3)
(cid:11)(cid:20)(cid:27)(cid:21)(cid:12)(cid:3)
$8,562
2019
(cid:7)(cid:22)(cid:22)(cid:15)(cid:27)(cid:23)(cid:20)
(cid:11)(cid:21)(cid:15)(cid:22)(cid:19)(cid:24)(cid:12)
$31,536
(cid:7)(cid:26)(cid:15)(cid:23)(cid:21)(cid:24)
(cid:11)(cid:20)(cid:27)(cid:19)(cid:12)
$7,245
(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:48)(cid:68)(cid:85)(cid:74)(cid:76)(cid:81)(cid:3)(cid:53)(cid:68)(cid:87)(cid:72)(cid:29)(cid:3)
(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:74)(cid:76)(cid:81)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)
(cid:11)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:12)(cid:3)(cid:85)(cid:72)(cid:240)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:69)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:73)(cid:82)(cid:88)(cid:85)(cid:3)
(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:79)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:17)(cid:3)(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)
(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:41)(cid:36)(cid:53)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:36)(cid:54)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:41)(cid:36)(cid:54)(cid:3)(cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:88)(cid:81)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:86)(cid:3)(cid:11)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:16)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)
(cid:81)(cid:82)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:70)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:41)(cid:36)(cid:53)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:36)(cid:54)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)
(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:169)(cid:86)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:12)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)
(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:88)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)
(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:87)(cid:85)(cid:72)(cid:81)(cid:71)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)
(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:69)(cid:72)(cid:3)(cid:71)(cid:72)(cid:241)(cid:81)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:80)(cid:72)(cid:3)(cid:80)(cid:68)(cid:81)(cid:81)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)
(cid:69)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:76)(cid:86)(cid:82)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:79)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:42)(cid:36)(cid:36)(cid:51)(cid:17)
($M)
(cid:54)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)
Operating income
(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:74)(cid:76)(cid:81)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)
Reconciliation to segment operating income
(cid:3)(cid:3)(cid:3)(cid:41)(cid:36)(cid:54)(cid:18)(cid:38)(cid:36)(cid:54)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:56)(cid:81)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:11)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:12)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)
Segment operating income
(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:85)(cid:74)(cid:76)(cid:81)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)
2021
(cid:7)(cid:22)(cid:24)(cid:15)(cid:25)(cid:25)(cid:26)(cid:3)
$5,651
(cid:20)(cid:24)(cid:17)(cid:27)(cid:8)(cid:3)
(cid:11)(cid:20)(cid:22)(cid:19)(cid:12)(cid:3)
(cid:7)(cid:11)(cid:20)(cid:15)(cid:22)(cid:19)(cid:23)(cid:12)(cid:3)
$4,217
(cid:20)(cid:20)(cid:17)(cid:27)(cid:8)(cid:3)
2020
(cid:7)(cid:22)(cid:25)(cid:15)(cid:26)(cid:28)(cid:28)(cid:3)
$4,065
(cid:20)(cid:20)(cid:17)(cid:19)(cid:8)(cid:3)
(cid:11)(cid:23)(cid:20)(cid:27)(cid:12)(cid:3)
(cid:7)(cid:24)(cid:23)(cid:20)(cid:3)
$4,188
(cid:20)(cid:20)(cid:17)(cid:23)(cid:8)(cid:3)
2019
(cid:7)(cid:22)(cid:22)(cid:15)(cid:27)(cid:23)(cid:20)(cid:3)
$3,969
(cid:20)(cid:20)(cid:17)(cid:26)(cid:8)
(cid:11)(cid:23)(cid:25)(cid:24)(cid:12)
(cid:7)(cid:23)(cid:26)(cid:23)
$3,978
(cid:20)(cid:20)(cid:17)(cid:27)(cid:8)
NORTHROP GRUMMAN 2021 ANNUAL REPORT
(cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:16)(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:40)(cid:51)(cid:54)(cid:29)(cid:3)
(cid:39)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:169)(cid:86)(cid:3)(cid:44)(cid:55)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)
(cid:71)(cid:76)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:15)(cid:3)(cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:72)(cid:71)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)
(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)(cid:15)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:16)(cid:90)(cid:75)(cid:82)(cid:79)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:80)(cid:76)(cid:88)(cid:80)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:68)(cid:85)(cid:79)(cid:92)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:3)(cid:85)(cid:72)(cid:71)(cid:72)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:90)(cid:72)(cid:79)(cid:79)(cid:3)(cid:68)(cid:86)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:16)
(cid:87)(cid:82)(cid:16)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:11)(cid:48)(cid:55)(cid:48)(cid:12)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:241)(cid:87)(cid:3)(cid:11)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:88)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:169)(cid:86)(cid:3)
(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:79)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:241)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:69)(cid:92)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:169)(cid:86)(cid:3)(cid:71)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)
(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:69)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:82)(cid:81)(cid:16)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:44)(cid:55)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:71)(cid:76)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:50)(cid:51)(cid:37)(cid:3)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)
(cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:72)(cid:86)(cid:17)(cid:3)(cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:16)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:40)(cid:51)(cid:54)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:17)(cid:3)
Diluted earnings per share
(cid:48)(cid:55)(cid:48)(cid:3)(cid:11)(cid:69)(cid:72)(cid:81)(cid:72)(cid:241)(cid:87)(cid:12)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)
(cid:3) (cid:48)(cid:55)(cid:48)(cid:16)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:11)(cid:69)(cid:72)(cid:81)(cid:72)(cid:241)(cid:87)(cid:12)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)
(cid:3) (cid:41)(cid:72)(cid:71)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:11)(cid:69)(cid:72)(cid:81)(cid:72)(cid:241)(cid:87)(cid:12)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:86)(cid:3)(cid:68)(cid:69)(cid:82)(cid:89)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)
MTM adjustment per share, net of tax
(cid:3)(cid:3)(cid:3)(cid:42)(cid:68)(cid:76)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)
(cid:3) (cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)
(cid:3) (cid:48)(cid:68)(cid:78)(cid:72)(cid:16)(cid:90)(cid:75)(cid:82)(cid:79)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:80)(cid:76)(cid:88)(cid:80)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)
(cid:3) (cid:41)(cid:72)(cid:71)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:86)(cid:3)(cid:68)(cid:69)(cid:82)(cid:89)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)
Transaction adjustment per share, net of tax
Transaction-adjusted EPS
2021
$43.54
(cid:11)(cid:20)(cid:23)(cid:17)(cid:25)(cid:23)(cid:12)(cid:3)
(cid:19)(cid:17)(cid:26)(cid:26)(cid:3)
(cid:21)(cid:17)(cid:28)(cid:21)(cid:3)
(10.95)
(cid:11)(cid:20)(cid:21)(cid:17)(cid:22)(cid:20)(cid:12)(cid:3)
(cid:19)(cid:17)(cid:28)(cid:28)(cid:3)
(cid:19)(cid:17)(cid:21)(cid:19)(cid:3)
(cid:19)(cid:17)(cid:22)(cid:23)(cid:3)
(cid:22)(cid:17)(cid:27)(cid:21)(cid:3)
(6.96)
$25.63
2020
$19.03
(cid:25)(cid:17)(cid:20)(cid:26)(cid:3)
(cid:11)(cid:19)(cid:17)(cid:22)(cid:21)(cid:12)(cid:3)
(cid:11)(cid:20)(cid:17)(cid:21)(cid:22)(cid:12)(cid:3)
4.62
(cid:164)(cid:3)
(cid:164)(cid:3)
(cid:164)(cid:3)
(cid:164)(cid:3)
(cid:164)(cid:3)
–
2019
$13.22
(cid:20)(cid:19)(cid:17)(cid:24)(cid:28)
(cid:11)(cid:19)(cid:17)(cid:23)(cid:27)(cid:12)
(cid:11)(cid:21)(cid:17)(cid:20)(cid:21)(cid:12)
7.99
(cid:164)
(cid:164)
(cid:164)
(cid:164)
(cid:164)
–
$23.65
$21.21
NORTHROP GRUMMAN 2021 ANNUAL REPORT
General Information
Northrop Grumman Corporation
on the Internet
Information on Northrop Grumman and
its sectors, including press releases and
this Annual Report and the Sustainabilty
Report, can be found at
www.northropgrumman.com
Annual Meeting of Shareholders
Wednesday, May 18, 2022
8 a.m. EDT
The 2022 Annual Meeting of Shareholders of
Northrop Grumman Corporation will be held
on Wednesday, May 18, 2022 at 8 a.m. Eastern.
Northrop Grumman Corportaion
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:50)(cid:73)(cid:241)(cid:70)(cid:72)
2980 Fairview Park Drive
Falls Church, Virginia 22042
Independent Auditors
Deloitte & Touche LLP
Stock Listing
Northrop Grumman Corporation common
stock is listed on the New York Stock Exchange
(trading symbol NOC).
Transfer Agent, Registrar
and Dividend Paying Agent
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
(877) 498-8861
www.computershare.com/investor
Dividend Reinvestment Program
Registered owners of Northrop Grumman
Corporation common stock are eligible
to participate in the company’s Automatic
Dividend Reinvestment Plan. Under this
plan, shares are purchased with reinvested
cash dividends and voluntary cash
(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:88)(cid:83)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:241)(cid:72)(cid:71)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)
per calendar year.
For information on the company’s Dividend
Reinvestment Service, contact our Transfer
Agent and Registrar, Computershare.
Company Shareholder Services
Shareholders with questions regarding
stock ownership should contact our Transfer
Agent and Registrar, Computershare. Stock
ownership inquiries may also be directed to
Northrop Grumman’s Shareholder Services
via email at sharesrv@ngc.com.
Duplicate Mailings
Shareholders with more than one account
or who share the same address with
another shareholder may receive more than
one Annual Report. To eliminate duplicate
mailings or to consolidate accounts, contact
Computershare. Separate dividend checks
and proxy materials will continue to be sent
for each account on our records.
Investor Relations
Securities analysts, institutional investors
and portfolio managers should contact
Northrop Grumman Investor Relations
at investors@ngc.com.
Media Relations
Inquiries from the media should
be directed to Northrop Grumman
Corporate Communications at
(703) 280-4456 or send an email to
newsbureau@ngc.com.
Electronic Delivery
of Future Shareholder
Communications
If you would like to help conserve
natural resources and reduce the
costs incurred by Northrop Grumman
Corporation in mailing proxy materials,
you can consent to receiving all future
proxy statements, proxy cards and
Annual Reports electronically via e-mail
or the Internet. To sign up for electronic
delivery, registered shareholders may
log onto www.computershare.com/
investor.
NORTHROP GRUMMAN 2021 ANNUAL REPORT
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NORTHROP GRUMMAN 2019 ANNUAL REPORT