About Us
Northrop Grumman is a leading global aerospace and defense technology company. Our pioneering solutions equip our
customers with capabilities they need to connect and protect the world and push the boundaries of human exploration
across the universe. Driven by a shared purpose to solve our customers’ toughest problems, our employees define possible
every day.
Sales
($ in billions)
$36.6
$39.3
$41.0
22
23
24
Backlog
($ in billions)
$78.7
$84.2
$91.5
22
23
24
Cash Dividends Declared
(per common share)
$6.76
$7.34
$8.05
22
23
24
Cash Provided by
Operating Activities
($ in billions)
$2.9
$3.9
$4.4
22
23
24
Adjusted Free
Cash Flow*
($ in billions)
$1.6
$2.1
$2.6
22
23
24
R&D and Capital
Expenditures
($ in billions)
$2.6
$3.0
$2.8
22
23
24
* Non-GAAP financial metric. For more information, including a definition, reconciliation to the most directly comparable GAAP measure and why we
believe this measure may be useful to investors, please refer to "Use of Non-GAAP Financial Measures" at the back of this Annual Report.
NORTHROP GRUMMAN 2024 ANNUAL REPORT
Dear Shareholders,
In an increasingly complex global security environment, Northrop Grumman remains
steadfast in delivering the strategic advantages the U.S. and our allies need to deter
aggression and achieve peace through strength.
At our core, we’re a technology company with unmatched breadth delivering
aerospace and defense solutions. Powered by the innovation and dedication of our
nearly 100,000 employees, Northrop Grumman delivers game-changing solutions. Key
program wins, increasing international demand, a diverse portfolio aligned to our
customers’ priorities and a laser-focus on performance demonstrate why we are trusted
to support our customers’ most complex missions with quality, speed and ingenuity.
In 2024, we challenged convention with first-of-their-kind systems like the Arctic Satellite
Broadband Mission, the first time a U.S. military payload was hosted on an
international satellite, and DARPA’s Manta Ray, which unlocked previously inaccessible
stretches of the ocean floor. Important program awards for U.S. Navy nuclear
command and control and Poland’s integrated air and missile defense showcased the breadth and depth of technology
expertise throughout Northrop Grumman. Across our company, continued investment in capabilities like solid rocket motor
production and advanced manufacturing capacity strengthen the foundation for our continued success.
Growing global demand for our solutions and a disciplined focus on driving efficiencies led to another year of strong
performance. Our annual sales grew by 4.4% to $41 billion, and removing over $200 million in cost throughout the
company helped increase our operating margin rate to 10.6%. We also achieved a book to bill ratio of 1.23 and ended
the year with a record $91.5 billion in backlog. In addition, our business generated $4.4 billion of operating cash flow
and $2.6 billion of adjusted free cash flow* for the year.
Our differentiated strategy and balanced approach to capital deployment drive the innovation and capacity needed to
meet our customers’ needs, fuel future growth, and create value for shareholders. Through $2.8 billion in R&D and capital
investments in 2024, we are designing, manufacturing and sustaining our next-generation systems. These investments allow
us to reduce time to field and enable us to rapidly ramp production while reducing costs. We also returned $3.7 billion to
shareholders through share repurchases and dividends as part of our disciplined approach to capital deployment.
Our ability to capitalize on opportunities and deliver exceptional results is a direct testament to the hard work and
dedication of every member of our company. Underpinned by our company values, our team’s unwavering commitment to
ethics and integrity fosters a culture where everyone can thrive. It earned us recognition in 2024 as one of LinkedIn’s best
places to grow a career, with a business rooted in transparency and accountability.
For decades, it has been our company's innovation, people, investments and relentless commitment to our customers’
missions that have created value. Proudly building on that legacy, we are better positioned than ever to help our customers
and deliver the technological leadership needed to meet their most challenging missions in 2025 and beyond.
Sincerely,
Kathy Warden
Chair, Chief Executive Officer and President
* Non-GAAP financial metric. For more information, including a definition, reconciliation to the most directly comparable GAAP measure and why we
believe this measure may be useful to investors, please refer to "Use of Non-GAAP Financial Measures" at the back of this Annual Report.
NORTHROP GRUMMAN 2024 ANNUAL REPORT
Elected Officers (As of March 1, 2025)
Kathy J. Warden
Chair, Chief Executive Officer and President
Ann M. Addison
Corporate Vice President
Matthew F. Bromberg
Corporate Vice President, Global Operations
Kenneth B. Crews
Corporate Vice President and Chief Financial
Officer
Heather M. Crofford
Corporate Vice President and Treasurer
Benjamin R. Davies
Corporate Vice President and President,
Defense Systems
Robert J. Fleming
Corporate Vice President and President, Space
Systems
Michael A. Hardesty
Corporate Vice President, Controller and Chief
Accounting Officer
Melanie M. Heitkamp
Corporate Vice President and Chief Human
Resources Officer
Thomas H. Jones
Corporate Vice President and President,
Aeronautics Systems
Jennifer C. McGarey
Corporate Vice President and Secretary
Stephen F. O'Bryan
Corporate Vice President and Global Business
Development Officer
Roshan S. Roeder
Corporate Vice President and President,
Mission Systems
Lucy C. Ryan
Corporate Vice President and Chief
Communications Officer
Kathryn G. Simpson
Corporate Vice President and General Counsel
Board of Directors (As of March 1, 2025)
Kathy J. Warden
Chair, Chief Executive Officer and President,
Northrop Grumman Corporation
David P. Abney 2† 3
Former Executive Chairman and Chief
Executive Officer, United Parcel Service
(package delivery and supply chain
management company)
Marianne C. Brown 1 3†
Former Chief Operating Officer, Global
Financial Solutions, Fidelity National
Information Services, Inc. (financial services
technology solutions provider)
Ann M. Fudge 1 4
Former Chairman and Chief Executive Officer,
Young & Rubicam Brands (marketing
communications company)
Madeleine A. Kleiner 2 3
Lead Independent Director, Northrop Grumman
Corporation; Former Executive Vice President
and General Counsel, Hilton Hotels
Corporation (hotel and resort company)
Arvind Krishna 2 4
Chairman and Chief Executive Officer,
International Business Machines Corporation
(information technology company)
Graham N. Robinson 2 4
Strategic Advisor, Stanley Black & Decker, Inc.
(manufacturer of tools and hardware)
Kimberly A. Ross 1 4
Former Chief Financial Officer, WeWork
(workplace solutions provider) and Baker
Hughes Company (energy technology
company)
Gary Roughead 2 4†
Admiral, United States Navy (Ret.) and Former
Chief of Naval Operations
Thomas M. Schoewe 1† 3
Former Executive Vice President and Chief
Financial Officer, Wal-Mart Stores, Inc.
(operator of retail stores)
James S. Turley 1 3
Former Chairman and Chief Executive Officer,
Ernst & Young (professional services
organization)
Mark A. Welsh III 1 4
President, Texas A&M University; General,
United States Air Force (Ret.) and Former Chief
of Staff, United States Air Force
Mary A. Winston 2 4
President and Founder, WinsCo Enterprises,
Inc. (financial and board governance advisory
consulting firm)
1 Member of Audit and Risk Committee
2 Member of Compensation and Human
Capital Committee
3 Member of Nominating and Corporate
Governance Committee
4 Member of Policy Committee
† Committee Chair
NORTHROP GRUMMAN 2024 ANNUAL REPORT
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, 2024
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
80-0640649
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
2980 Fairview Park Drive
Falls Church, Virginia
22042
(Address of principal executive offices)
(Zip code)
(703) 280-2900
(Registrant’s telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
NOC
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 Rule 405 of the Securities Act.
Yes ☒
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 ☐
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.
Yes ☒
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange
Act:
Large Accelerated Filer ☒
Accelerated Filer ☐
Smaller Reporting Company ☐
Non-accelerated Filer ☐
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant 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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
No ☒
As of June 30, 2024, 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 $63.7 billion.
As of January 27, 2025, 144,755,659 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 2025 Annual
Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.
NORTHROP GRUMMAN CORPORATION
TABLE OF CONTENTS
Page
PART I
Item 1.
Business
1
Item 1A.
Risk Factors
8
Item 1B.
Unresolved Staff Comments
21
Item 1C.
Cybersecurity
21
Item 2.
Properties
24
Item 3.
Legal Proceedings
25
Item 4.
Mine Safety Disclosures
25
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
26
Item 6.
[Reserved]
27
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
28
Overview
28
Consolidated Operating Results
30
Segment Operating Results
32
Product and Service Analysis
37
Backlog
38
Liquidity and Capital Resources
38
Critical Accounting Policies and Estimates
40
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
46
Item 8.
Financial Statements and Supplementary Data
47
Report of Independent Registered Public Accounting Firm
47
Consolidated Statements of Earnings and Comprehensive Income
49
Consolidated Statements of Financial Position
50
Consolidated Statements of Cash Flows
51
Consolidated Statements of Changes in Shareholders’ Equity
52
Notes to Consolidated Financial Statements
53
1. Summary of Significant Accounting Policies
53
2. Earnings Per Share, Share Repurchases and Dividends on Common Stock
61
3. Accounts Receivable, Net
62
4. Unbilled Receivables, Net
62
5. Inventoried Costs, Net
63
6. Income Taxes
64
7. Goodwill and Other Purchased Intangible Assets
67
8. Fair Value of Financial Instruments
67
9. Debt
68
10. Investigations, Claims and Litigation
70
11. Commitments and Contingencies
70
12. Retirement Benefits
72
13. Stock Compensation Plans and Other Compensation Arrangements
77
14. Leases
79
i
Page
15. Segment Information
80
16. Subsequent Event
87
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
88
Item 9A.
Controls and Procedures
88
Item 9B.
Other Information
88
Management’s Report on Internal Control over Financial Reporting
88
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
89
Certain Trading Agreements
90
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
90
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
91
Item 11.
Executive Compensation
92
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
92
Item 13.
Certain Relationships and Related Transactions, and Director Independence
92
Item 14.
Principal Accountant Fees and Services
92
PART IV
Item 15.
Exhibits, Financial Statement Schedules
93
Item 16.
Form 10-K Summary
100
Signatures
101
ii
PART I
Item 1. Business
HISTORY AND ORGANIZATION
History
Northrop Grumman Corporation (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”)
is a leading global aerospace and defense technology 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 (DoD) and
intelligence community. Our broad portfolio is aligned to support national security priorities and our solutions equip
our customers with capabilities they need to connect, protect and advance humanity.
The company is a leading provider of space systems, military aircraft, missile defense, advanced weapons and long-
range fires capabilities, mission systems, networking and communications, strategic deterrence systems, and
breakthrough technologies, such as advanced computing, microelectronics and cyber. We are focused on competing
and winning programs that enable continued growth, performing on our commitments and affordably delivering
capability our customers need. With the investments we've made in advanced technologies, combined with our
talented workforce and digital transformation capabilities, Northrop Grumman is well positioned to meet our
customers' needs today and in the future. For a discussion of risks associated with our operations, see “Risk
Factors.”
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 stealth aircraft. We developed into one of the largest defense
technology companies 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-enabling 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 Capital.
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 capabilities more
fully and to enhance efficient development and delivery of products and services. At December 31, 2024, the
company was aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems,
Defense Systems, Mission Systems and Space Systems.
Effective July 1, 2024, the company realigned the Strategic Deterrent Systems (SDS) division, which includes the
Ground-Based Strategic Deterrent (“Sentinel”) program, from Space Systems to Defense Systems. This realignment
is reflected in the financial information contained in this report.
NORTHROP GRUMMAN CORPORATION
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Subsequent Realignment - Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft
Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems. This realignment is not reflected in
the financial information contained in this report; it will be reflected in the company’s operating results beginning in
the first quarter of 2025.
AERONAUTICS SYSTEMS
Aeronautics Systems is a leader in the design, development, production, integration, sustainment and modernization
of military aircraft systems for the U.S. Air Force, the U.S. Navy, other U.S. government agencies, and international
customers. Major products include strategic long-range strike aircraft; tactical fighter and air dominance aircraft;
airborne battle management and command and control systems; and unmanned autonomous aircraft systems,
including high-altitude long-endurance (HALE) strategic intelligence, surveillance and reconnaissance (ISR)
systems. Approximately 45 percent of this business is performed through restricted programs. Key programs
include:
•
Development and production of the U.S. Air Force B-21 Raider long-range strike aircraft that defines sixth-
generation technologies;
•
Modernization and sustainment services for the B-2 Spirit stealth aircraft;
•
Fuselage production for the F-35 Lighting II Joint Strike Fighter and F/A-18 Super Hornet for use by U.S.
and international forces;
•
E-2D Advanced Hawkeye battle management aircraft production for the U.S. Navy, Japan, and France;
•
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; and
•
North Atlantic Treaty Organization (NATO) Alliance Ground Surveillance (AGS), a Global Hawk variant,
for strategic ISR missions conducted in multinational theater operations.
DEFENSE SYSTEMS
Defense Systems is a leader in the design, engineering, development, integration and production of strategic
deterrent systems, advanced tactical weapons, and missile defense solutions, and a provider of sustainment,
modernization and training services for manned and unmanned aircraft and electronics systems for the U.S. military
and a broad range of international customers. Major products and services include strategic missiles; integrated, all-
domain command and control (C2) systems; precision strike weapons; advanced propulsion, including tactical solid
rocket motors and high speed air-breathing and hypersonic systems; high-performance gun systems, ammunition,
precision munitions and advanced fuzes; and aircraft and mission systems logistics support, sustainment, operations
and modernization. Less than 5 percent of this business is performed through restricted programs. Key programs
include:
•
Sentinel Engineering & Manufacturing Development (EMD) program, initial phase of the modernization of
the intercontinental ballistic missile (ICBM) system that will serve as the ground-based strategic deterrent
for the U.S. nuclear triad;
•
Integrated Battle Command System (IBCS) for the U.S. Army and Poland, which is an open architecture
system that seamlessly integrates sensors and effectors to deliver among the most advanced C2 systems for
joint and coalition forces;
•
Medium (30mm and 20mm) and Large (120mm) caliber tactical and training ammunition production;
•
Guided Multiple Launch Rocket System (GMLRS) propulsion and warhead subsystems for a surface-to-
surface system used to defeat targets using indirect precision fires;
•
U.S. Navy’s Advanced Anti-Radiation Guided Missile (AARGM), a medium-range, air-to-surface missile,
and its extended range variant, AARGM-ER;
•
U.S. Air Force’s Stand-In Attack Weapon (SiAW), an advanced capability air-to-surface tactical missile for
the F-35;
•
Hypersonic Attack Cruise Missile (HACM) air-breathing, scramjet propulsion subsystem for the
hypersonic air-launched cruise missile to travel at speeds of Mach 5 or greater;
NORTHROP GRUMMAN CORPORATION
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•
Global system sustainment and operations support for the F-35, B-2, P-3 Orion, E-6B Mercury, KC-30A
multi-role tanker, C-27J transport, NATO AGS, Triton and restricted programs;
•
Precision Guidance Kit (PGK), replaces conventional fuzes for artillery and mortar munitions and
transforms them into Global Positioning System enabled precision guided weapons;
•
Forward Area Air Defense Command and Control (FAAD C2), the Army’s long-standing program of
record for short range air defense and Counter Rocket, Artillery and Mortar (C-RAM), as well as the
interim C2 for Counter Unmanned Aircraft Systems (C-UAS);
•
AAQ-24 sensor sustainment and repair for U.S. military customers; and
•
Special Electronics Mission Aircraft (SEMA) ISR support.
MISSION SYSTEMS
Mission Systems is a leader in advanced mission solutions and multifunction systems, primarily for the U.S. defense
and intelligence community, and international customers. Major products and services include command, 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; advanced microelectronics; navigation and positioning sensors; maritime power, propulsion and payload
launch systems; full spectrum cyber solutions; and intelligence processing systems. Approximately 30 percent of
this business is performed through restricted programs. Key unrestricted programs include:
•
Scalable Agile Beam Radar (SABR), an active electronically scanned array fire control radar system for
F-16 aircraft;
•
F-35 fire control radar and Distributed Aperture System (DAS), which provides 360 degree field of view
tracking, identifying, missile warning and night vision capabilities;
•
F-35 Communications, Navigation and Identification (CNI) integrated avionics system, which provides
secure communications and interoperability capabilities;
•
Ground/Air Task Oriented Radar (G/ATOR), a mobile multi-mode active electronically scanned array;
•
Surface Electronic Warfare Improvement Program (SEWIP) Block III, which protects surface ships from
anti-ship missiles, provides early detection, signal analysis and threat warning;
•
Airborne Early Warning & Control (AEW&C). The centerpiece of the E-7 AEW&C aircraft is the Multi-
role Electronically Scanned Array (MESA) radar which enables 360 degree long range advanced air
moving target indicator (AMTI) capabilities for Battle Management, Command and Control, and Maritime
Surveillance;
•
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;
•
Battlefield Airborne Communications Node (BACN), one of the first airborne gateway systems that allows
platforms to communicate and securely share data;
•
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;
•
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;
•
APR-39 DV(2) and EV(2) Radar Warning Receiver programs, which provide a digital radar warning
receiver for the U.S. Army, Navy and Marines;
•
Exploitation and cyber programs, which provide cyber and intelligence domain support through unique
intelligence and cyber capabilities;
•
AC/MC 130J Radio Frequency Countermeasures system, which provides superior situational awareness
and better enables aircraft survivability in operationally relevant environments; and
•
Embedded Global Positioning System (GPS) / Inertial Navigation Systems-Modernization (EGI-M)
program, which provides state-of-the-art airborne navigation capabilities with an open architecture that
enables rapid responses to future threats.
NORTHROP GRUMMAN CORPORATION
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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, and launch systems for national security, civil government,
commercial and international customers. Major products include satellites and spacecraft systems, subsystems,
sensors and payloads; ground systems; missile defense systems and interceptors; and launch vehicles and related
propulsion systems. Approximately 40 percent of this business is performed through restricted programs. Key
unrestricted programs include:
•
Evolved Strategic SATCOM (ESS) satellites and payloads providing assured, no-fail, and survivable
Nuclear Command and Control (NC3) communications capabilities;
•
Next-Generation Overhead Persistent Infrared (Next-Gen OPIR) program satellites and payloads providing
resilient and enhanced missile warning over the critical northern polar region;
•
Space Development Agency Tracking and Transport layers providing missile warning/tracking and
resilient, low-latency, high-volume data transport communication systems;
•
Missile defense systems, interceptors, targets, mission processing and boosters for the Missile Defense
Agency's (MDA) Ground-based Midcourse Defense Weapon Systems (GWS);
•
Cygnus spacecraft, used in the execution of our Commercial Resupply Services (CRS) contracts with
NASA to resupply and re-boost the International Space Station;
•
Development and production of solid rocket motors for NASA’s Space Launch System (SLS) heavy lift
vehicle;
•
Habitation and Logistics Outpost (HALO) module in support of NASA’s Lunar Gateway;
•
63-inch diameter Graphite Epoxy Motor (GEM 63) and the extended length variation (GEM 63XL) solid
rocket boosters used to provide lift capability for the ATLAS V and Vulcan launch vehicles;
•
Medium-class solid rocket motors for the U.S. Navy's Trident II Fleet Ballistic Missile program;
•
Glide Phase Interceptor (GPI) Cooperative Development producing interceptor capability to defeat
hypersonic threats;
•
Protected Tactical SATCOM (PTS) satellites and payloads providing resilient, protected tactical
communications to U.S. forces; and
•
Arctic Satellite Broadband Mission (ASBM) satellites and payloads expanding both commercial as well as
military broadband communications for an international partner.
CUSTOMER CONCENTRATION
Our largest customer is the U.S. government. Sales to the U.S. government accounted for 87 percent, 86 percent and
86 percent of sales during the years ended December 31, 2024, 2023 and 2022, respectively. For further information
on sales by customer type, contract type and geographic region, see Note 15 to the consolidated financial statements.
See “Risk Factors” for further discussion regarding risks related to customer concentration.
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 RTX 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 opportunities and the number of competitor protests of U.S. government
procurement awards.
It is common in the defense industry for work on major programs to be shared among a number of companies. A
company competing to be a prime contractor may, upon ultimate award of the contract to another competitor, serve
as a subcontractor to the ultimate prime contracting company. It is not unusual to compete for a contract award with
a peer company and, simultaneously, perform as a supplier to or a customer of that same competitor on other
contracts, or vice versa.
SEASONALITY
No material portion of our business is seasonal.
NORTHROP GRUMMAN CORPORATION
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BACKLOG
At December 31, 2024, total backlog, which is equivalent to the company’s remaining performance obligations, was
$91.5 billion as compared with $84.2 billion at December 31, 2023. 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.
INTELLECTUAL PROPERTY
We protect our technological innovations using a combination of trade secrets, patents, trademarks, and copyrights.
We routinely apply for patents related to the technologies we develop in the U.S. and in certain foreign jurisdictions.
We license some intellectual property rights to third parties and we also 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 macroeconomic factors and several
global events such as inflation, geopolitical conflicts and microelectronics shortages. In some cases, these challenges
have significantly increased the cost and/or lead time required to obtain certain raw materials. Nonetheless, these
challenges have not, to date, materially impacted our ability to perform on our contracts. See “Risk Factors” for
further discussion regarding risks related to raw materials.
HUMAN CAPITAL
Underpinned by our values and culture, we hire, promote, and pay based on merit and performance to ensure we
have the best team to deliver for our customers. Our focus on technology, innovation and career growth enables us
to attract qualified talent, particularly those with security clearances and requisite skills in multiple areas, including
science, technology, engineering and math. Our differentiated culture and workforce was a factor in our ability to
hire approximately 7,400 new employees in 2024, and as of December 31, 2024, we have approximately 97,000
employees.
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 diverse perspectives 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 accountability for the
sustainable 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.
Among other programs through which the company lives its values, the company maintains a Standards of Business
Conduct program through which our employees are empowered to raise concerns through multiple channels without
fear of reprisal. In addition to full-time ethics professionals, we also have over 150 business conduct advisors who
promote values and an ethical culture within the company. Additionally, our annual Employee Experience Survey
gives employees a voice and a mechanism to provide feedback on our culture and empower our leaders to enhance
the employee experience. This anonymous survey encourages employee candor on key engagement and inclusion
drivers, including belonging, respect, a sense of personal work accomplishment and recommending the company to
others. In 2024, 80 percent of employees responded to the survey, an indication that our employees believe their
feedback matters. Our performance on the annual survey is compared to the Qualtrics Global Benchmark and our
survey results exceeded many of their global norms for both engagement and inclusion. Our leaders review the
survey responses and work collaboratively with their teams to take meaningful actions based on survey results.
Our culture and values serve as an enabling force that helps us pioneer, perform and deliver on quality, which results
in value for our shareholders, customers, and employees. We actively seek candidates for employment from a wide
range of backgrounds and experiences to tap into the full spectrum of talent available now and in the future to create
a culture of belonging for everyone.
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Talent Management
Northrop Grumman’s talent strategy is focused on four key pillars: broadening talent pools; enhancing the employee
experience; building leaders of the future; and fostering employee growth. Our strategy addresses the external and
internal landscape and ensures that we can attract, retain and develop the workforce necessary to support the
continued success of the business.
We hold regular talent review discussions to ensure line of sight to talent at various levels of the organization. We
refresh and review succession plans to ensure a robust pipeline of talent and business continuity with a tight linkage
to development. We focus on accelerating learning and development of our leaders by providing a combination of
experiences, exposure and education.
Our employee development programs strengthen employee skills aligned to our current and future business needs
through on-the-job development, knowledge sharing and tools to support career growth. Employees utilize curated,
career-specific resources such as My Learning Experience, a machine learning enabled content aggregator that
creates a personalized learning experience for each employee. Our Education Assistance Program subsidizes tuition
and other educational institution fees to support development through job-related degrees and certificates. Our early-
in-career rotation program, Pathways, develops talent pipelines with both depth of critical skills and breadth of
experiences. Our technical cohort programs cultivate technical, domain expertise and collaborative thought
leadership for early through advanced career levels.
In a rapidly changing world, we maintain focus on keeping our team and our company prepared for the evolving
future of work. In addition to offering our employees flexible work arrangements, caregiver support and mental
health services that help our employees make their careers work within their lives, we also help our employees build
the careers that will serve them into the future. We ensure that our employees have the tools and resources to
develop their knowledge base and skill sets, so they can continue to thrive at Northrop Grumman even in the midst
of change. When our employees succeed and grow at work, our business succeeds and grows. Through a focus on
our employees, we remain agile and innovative, adapting to the future as it unfolds before us.
Employee Health and Safety
Health and safety are foundational to our success. People are our most valuable resource and we prioritize
occupational health and safety to position the company for long-term success.
Training and risk and hazard identification, mitigation and prevention are key components of Northrop Grumman’s
safety program. Everyone has a responsibility to identify workplace hazards, and employees may raise concerns
without fear of reprisal. We evaluate the effectiveness of our health and safety programs by conducting trend
analyses of our past performance and externally through benchmarking with industry peers and the U.S. Bureau of
Labor Statistics.
Collective Agreements
Approximately 4,100 employees are covered by 15 collective agreements in the U.S., of which we negotiated five
renewals in 2024 and expect to negotiate seven renewals in 2025.
See “Risk Factors” for further discussion regarding risks related to our workforce and employee relations.
REGULATORY MATTERS
Government Contract Security Restrictions
We are prohibited by the U.S. government from publicly discussing the details of 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 majority 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 applicable
FAR and CAS requirements include, but are not limited to, unallowable employee compensation, charitable
donations, interest expense, advertising, and certain legal and travel costs.
We monitor our contracts on a regular basis for compliance with our policies and procedures and applicable
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).
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Our long-term contracts typically fall into one of two contract types:
Cost-type contracts – 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
fee. As a result, cost-type contracts have less financial risk associated with unanticipated cost growth but generally
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 work within some specified time and stated dollar limitation. Fees on cost-
type contracts can be fixed in terms of dollar value or can be variable due to award and incentive fees, which 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 adjusted 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 variable consideration is
subsequently resolved. We estimate variable consideration as the most likely amount to which we expect to be
entitled.
Fixed-price contracts – Firm fixed-price contracts include a specified scope of work for a price that is a pre-
determined, negotiated amount and not typically subject to adjustment regardless of costs incurred by the contractor,
absent changes by the customer. As a result, fixed-price contracts typically have more financial risk associated with
unanticipated cost growth, but provide the opportunity for higher profit margins. 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 affects profitability. These 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.
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, unexpected macroeconomic factors or other circumstances, 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 15 to the consolidated financial statements for sales by contract type.
The following table summarizes sales for the year ended December 31, 2024, recognized by contract type and
customer category:
$ in millions
U.S.
Government(1)
International(2)
Other
Customers
Total
Percentage
of Total
Sales
Cost-type contracts
$
20,256 $
684 $
24 $
20,964
51 %
Fixed-price contracts
15,180
4,316
573
20,069
49 %
Total sales
$
35,436 $
5,000 $
597 $
41,033
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 a substantial
percentage of its 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.
Environmental
Our operations are subject to and affected by federal, state, local and foreign laws, regulations and enforcement
actions relating to protection of human health and the environment. We have incurred and expect to continue to
incur capital and operating costs to comply with applicable environmental laws and regulations and to achieve our
environmental sustainability goals. See “Risk Factors” and Notes 1 and 11 to the consolidated financial statements
for further information regarding environmental matters.
Our environmental sustainability goals focus on Northrop Grumman’s facilities in addition to supply chain partners
and customers:
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•
Net zero greenhouse gas emissions (GHG) in operations (Scopes 1 and 2) by 2035. Interim target of 50%
GHG emissions reduction by 2030;
•
Source 50 percent of total electricity from renewable sources by 2030;
•
Reduce 10% of absolute water withdrawals, reuse 10% of water withdrawals and replenish 10% of water
withdrawals, focusing in water-stressed regions — all by 2030;
•
Reduce solid waste sent to landfill and incineration by 10% by 2030;
•
In collaboration with key customers, work to develop a pioneering product stewardship program focused on
material efficiency, product design and life cycle assessment;
•
Expand Technology for Conservation initiatives in proximity to Northrop Grumman's U.S. locations by
2030, in collaboration with external partners.
Additional information regarding our environmental sustainability goals is available in our Sustainability Report,
which can be found on our company website.
EXECUTIVE OFFICERS
See “Directors, Executive Officers and Corporate Governance” for 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 available free of charge
through our website as soon as reasonably practicable after we file them with the U.S. Securities and Exchange
Commission (SEC). You can learn more about us by reviewing our SEC filings on the investor relations page of our
website.
The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information
about SEC registrants, including Northrop Grumman Corporation.
References to our website and the SEC’s website in this report are provided as a convenience and do not constitute,
and should not be viewed as, incorporation by reference of the information contained on, or available through, such
websites. Such information should not be considered a part of this report, unless otherwise expressly incorporated by
reference in this report.
Item 1A. Risk Factors
Our consolidated financial position, results of operations and cash flows are subject to various risks, many of which
are not exclusively within our control, that may cause actual performance to differ materially from historical or
projected future performance. We encourage you to consider carefully the risk factors described below in evaluating
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.
Industry and Economic Risks
•
We depend heavily on a single customer, the U.S. government, for a substantial portion of our business. Changes
in this customer’s strategies, priorities and spending could have a material adverse effect on our financial
position, results of operations and/or cash flows.
Our primary customer is the U.S. government, from which we derived 87 percent of our sales in 2024; 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 future programs from
potential changes in the threat and global security environment, defense spending levels, government and budgetary
priorities, political leadership, procurement practices and strategy, inflation and other macroeconomic trends,
military strategy; or broader changes in social, economic, security or political demands and priorities.
The U.S. government 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,
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but not the anticipated profit that would have been earned. However, to the extent insufficient funds have been
appropriated by the U.S. government to cover such costs, the U.S. government may assert that it is not required to
provide additional funding for such costs. 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 (or that of a teammate) 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.
Where program cost estimates exceed certain thresholds, our customer has been, and may in the future be, required
to provide congressional notification of significant or critical cost increases (or breaches) under the Nunn-McCurdy
Act, which, in some circumstances, could result in program restructure or termination. For example, in January 2024
the customer provided congressional notification that the Sentinel program (formerly called the Ground Based
Strategic Deterrent program) was under a Nunn-McCurdy breach review, which was completed in July 2024,
resulting in the certification for continuance of the program.
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 future orders.
•
Significant delays or reductions in appropriations for our programs or U.S. government funding more broadly,
including a prolonged continuing resolution, government shutdown or breach of the debt ceiling, and future
budget and program decisions can negatively impact our business and programs and could have a material
adverse effect on our financial position, results of operations and/or cash flows.
U.S. government programs are subject to annual congressional budget authorization and appropriation processes.
For many programs, Congress appropriates funds annually even though the program performance period may extend
over several years. Programs are often partially funded initially, with additional funds committed only as Congress
makes further appropriations. When we or our subcontractors incur costs in excess of funds obligated on a contract,
we are generally at risk for reimbursement unless and until additional funds are obligated to the contract. We cannot
predict what funding will ultimately be approved for individual programs. In addition, pressures on, as well as laws
and plans relating to the federal budget, potential changes in priorities and defense spending, the timing and
substance of the appropriations process, use of continuing resolutions (with restrictions, e.g., on new contract and
program starts) and the federal debt limit (including a breach of the federal debt ceiling), have adversely affected and
could adversely affect the amount and timing of funding for individual programs and delay purchasing or payments
by our customers. In the event government funding for our significant programs is reduced, delayed or unavailable,
or orders are reduced, our contracts or subcontracts, or competitions for such programs have at times been, and in
the future may be, terminated or changed.
The U.S. continues to face a changing geopolitical environment, along with substantial fiscal, economic and security
challenges, which affect funding and budgetary priorities. The budget and macroeconomic environment, global
security environment, political instability, and uncertainty surrounding the appropriations processes and the debt
ceiling, remain significant short and long-term risks. See “Overview” in MD&A. In addition, high deficit levels and
high debt servicing costs could drive cuts to federal spending. Considerable uncertainty exists regarding how future
budget and program decisions will unfold. If annual appropriations bills are not timely enacted, the U.S. government
may continue to operate under a continuing resolution (potentially of extended duration), restricting new contract or
program starts, presenting resource allocation challenges and placing limitations on budgets. We also may face a
prolonged government shutdown that could lead to program cancellations, disruptions and/or stop work orders and
could limit the U.S. government’s ability to progress programs and make timely payments. A prolonged shutdown
could limit our ability to perform on our contracts and successfully compete for new work. If the statutory debt limit
is not increased adequately, we could be obligated to work without receiving timely payments, and a prolonged
breach could have far-reaching adverse consequences. If the macroeconomic environment deteriorates, including
due to rising inflation or other causes, we could experience labor and supply chain challenges and increased costs
and existing or anticipated appropriated and contracted funds may not be sufficient to cover costs incurred on
existing or future programs.
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Future funding for certain programs in which we participate may be reduced, delayed or cancelled. Budget cuts
globally could adversely affect the viability of our subcontractors and suppliers. 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 possibility of a long-term continuing resolution (or series of continuing
resolutions) and breach of the debt ceiling, ongoing fiscal debates and the global economic and security environment
increase uncertainties and risk.
•
We use estimates when accounting for contracts. Contract cost growth or changes in estimated contract revenues
and costs can affect our profitability and could have a material adverse effect on our financial position, results of
operations and/or cash flows.
Contract accounting requires judgment, including in assessing risks, estimating contract revenues and costs, and
predicting future performance. Given the size and nature of our many contracts, estimating total revenues and costs
at completion is complex and subject to many variables. When there is sufficient information to assess expected
future performance, we consider performance related incentives, awards and penalties in estimating revenue and
profit rates. Suppliers’ expected performance, and the availability and costs of labor, materials and components, are
also considered.
Our operating income can be adversely affected when estimated contract costs increase, especially without
comparable increases in revenue. There are many reasons estimated contract costs can increase, including inflation,
labor challenges, supply chain challenges, and market and exchange rate volatility; delays or limitations in customer
funding; design or other development challenges; production challenges (including from technical or quality issues
and other performance concerns); inability to realize learning curves or other cost savings; changes in laws or
regulations; actions necessary for long-term customer satisfaction; and natural disasters or environmental matters.
We aim to mitigate this risk through contract terms, and we have submitted and may submit requests for equitable
adjustment (REAs), engineering change proposals or other claims to seek recovery in whole or in part for our
increased costs. We have also sought, and will seek, other avenues, as appropriate, to compensate the company for
certain unexpected cost increases. However, our contracts may not enable full recovery, and/or customers may
disagree with our requests or may not have funding to cover them.
Our risk varies with the type of contract. Fixed-price contracts inherently tend to have more financial risk than cost-
type contracts, including as a result of inflationary pressures, labor rates and shortages, challenges in estimating
contract revenues and costs and supplier challenges. In 2024, approximately half of our sales were derived from
fixed-price contracts. We have more often entered into fixed-price contracts where costs can be more reasonably
estimated based on actual experience, such as for mature production programs. However, our customers have
sought, and may in the future seek, fixed-price contracts for development programs, combined development and
production programs, or low-rate initial production programs, where the risks are greater. For example, such
contracts can create performance and financial risks, whether due to the estimates of costs required to complete such
contracts being subject to potentially significant variability or because of the challenge of starting and stabilizing
manufacturing production and test lines while concurrently validating final design and managing changes in
requirements or capabilities requested by the customer. In addition, our contracts contain provisions relating to cost
controls and audit rights. If we do not achieve our estimates or meet terms in our contracts, our profitability has at
times been and may be reduced, and we have incurred and may incur losses.
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 variability in estimates of the costs to complete the
development stage. As work progresses into production, the risks associated with estimating total costs are typically
reduced as compared to fixed-price development work. While management uses its best judgment to estimate costs
associated with fixed-price contracts, future events can result in significant adjustments. In addition, from time to
time, we may begin performing on a contract prior to completing contract negotiations. Uncertainties in final
contract terms, quantity and pricing, or loss of negotiating leverage associated with long delays could negatively
affect our profitability. Certain of our contracts also include options exercisable at the customer’s discretion. The
customer may decline to exercise an option, or the customer may exercise an option for which we may incur a loss
or perform at a low margin, either of which could adversely affect our results of operations.
Under cost-type contracts, allowable costs 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 may 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 financial risks are typically in recognizing profit, which ultimately may
not be earned, or program cancellation if cost, schedule, or technical performance issues arise. We also face
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additional financial risk when solicitations require us to bid on cost-type development work and fixed-price
production lots and/or options in one submission, where we must estimate the cost of production before a product
has been developed and tested, or cost-type development work requiring us to provide certain items at our expense
or with little or no fee. Macroeconomic challenges increase these risks.
Because of the significance of management’s judgments and the estimation processes, and the difficulties inherent in
estimating future costs, particularly in a challenging macroeconomic environment, it is possible that we could see
materially different results. Changes in underlying assumptions, circumstances or estimates, and the failure to
recover on requests for equitable adjustments, engineering change proposals or other claims could have a material
adverse effect on the profitability of one or more of our contracts and on our overall financial position, results of
operations and/or cash flows. See “Critical Accounting Policies and Estimates” in MD&A and Note 11 to the
consolidated financial statements.
•
Competition within our markets and bid protests, or other attempts to interfere with our ability to obtain and
retain awards, may affect our ability to win new contracts and result in reduced revenues, which could have a
material adverse effect on our financial position, results of operations and/or cash flows.
We operate in highly competitive markets and our competitors may have more financial capacity or more extensive
or specialized engineering, technical, manufacturing, marketing or servicing capabilities. They may be willing to
accept more risk or lower profitability in competing for contracts. We have seen, and anticipate we will continue to
see, increased competition in some of our core markets, especially as a result of our customers’ budget pressures,
their focus on affordability and competition, and our own success in winning business. We are facing increasing
competition in the U.S. and outside the U.S. from U.S., foreign and multinational firms, including new entrants, and
anticipate that mergers or acquisitions within our industry could further increase competition or could limit our
access to certain suppliers without appropriate remedies to protect our interests. We are also facing increasing
competition for, and more limited access to various critical products, services and other supplies. In some instances,
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. For
some products and services, some customers, including the DoD, are turning to commercial contractors, newer
entrants to markets and non-traditional defense contractors, which may have lower cost or more agile operating
structures and the ability to leverage changes in customer acquisition strategies (e.g., multiple awardees, short
lifecycles). In addition, some customers continue to utilize small business contractors or determine to source work
internally. Our success in competing depends, in part, on our ability to remain cost-competitive, respond to changes
in customer acquisition strategies, accurately anticipate our customers’ needs and successfully effect our digital
transformation strategy and adopt and integrate new digital technologies into our manufacturing, operations, and
products and services.
In addition, U.S. government procurement laws permit certain legal challenges to the terms of a contract solicitation
or award, referred to as a bid protest. Bid protests can result in award decisions being reversed and loss of the
contract award. Even where a bid protest does not result in such a loss, it can result in significant expenses and delay
the start of contract activities and revenue or result in contract modifications. We are also subject to risks associated
with our ability to challenge Other Transaction Authority (OTA) agreements, which the U.S. government can award
for certain research, prototype and production projects. OTA awards are not subject to all of the procurement
requirements that typically apply to DoD contracts and rights to protest such awards may be more limited than for
other contracts.
•
The global macroeconomic environment has negatively impacted and could in the future negatively impact our
business, and if we are unable to mitigate such challenges, it could have a material adverse effect on our
financial position, results of operations and/or cash flows.
Our business, financial position, results of operations and/or cash flows have been and may in the future be
adversely impacted by the global macroeconomic environment, which impacts have included and may in the future
include high rates of inflation; increased interest rates; tight credit in financial markets; widespread disruptions in
supply chains; workforce challenges, including labor shortages; and market volatility, including exchange rate
volatility. These and other macroeconomic challenges have led and can lead to increased costs, labor and supply
shortages, and delays and disruption in performance, as well as competing demands for scarce resources, which in
turn have adversely impacted and may continue to adversely impact our customers, our industry, our company, our
suppliers and others with whom we do business. We continue to work proactively to mitigate the challenges caused
by the macroeconomic environment, including, in some cases, seeking the inclusion of economic price adjustment
clauses or seeking to recover on requests for equitable adjustments, engineering change proposals or other claims.
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Legal and Regulatory Risks
•
We are subject to various investigations, claims, disputes, enforcement actions, litigation, and other legal
proceedings that could ultimately be resolved against us and could have a material adverse effect on our financial
position, results of operations and/or cash flows.
The size, nature and complexity of our business make us particularly susceptible to investigations, claims, disputes,
enforcement actions, prosecutions, litigation and other legal proceedings (collectively “legal proceedings”),
particularly those involving governments, which may continue to increase. We are or may become subject to legal
proceedings globally (including criminal, civil and administrative) and across a broad array of matters, including,
but not limited to, government contracts, cost accounting, financial accounting and reporting, false statements or
claims, cybersecurity and pension accounting and other employee benefit plan matters. These matters can divert
resources; result in administrative, civil or criminal fines, penalties or other sanctions (including judgments,
convictions, consent or other voluntary decrees or agreements), compensatory, treble or other damages, non-
monetary relief, or other liabilities; and otherwise harm our business and our ability to obtain and retain awards.
Certain outcomes may lead to suspension or debarment from government contracts or suspension of export/import
privileges for the company or one or more of its components. Suspension or debarment or criminal resolutions in
particular could have a material adverse effect on the company because of our reliance on government contracts and
export authorizations. Legal proceedings, even if pending or not ultimately resulting in adverse action, or if fully
indemnified or insured, can 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 adequate
funding for our programs or obtain adequate insurance in the future. See Note 10 to the consolidated financial
statements for information regarding the company’s investigations, claims and litigation.
•
As a U.S. government contractor, we and our partners are subject to various procurement and other laws,
regulations and contract terms applicable to our industry, as well as those more broadly applicable to industry,
and changes in such laws, regulations or terms, any negative findings by the U.S. government as to our or our
partners’ compliance with them, and changes in our customers’ business practices globally could affect our
ability to compete and have a material adverse effect on our financial position, results of operations and/or cash
flows.
U.S. government contractors (including their subcontractors and others with whom they do business) must comply
with various specific procurement laws, regulations, rules and other legal requirements, as well as ones more
broadly applicable. These various legal requirements, although sometimes customary in government contracting,
increase costs and risks. They have been and are evolving at a significant pace. The costs are not always fully
recoverable. New laws or other requirements, or changes to existing ones (including, for example, related to
cybersecurity, information and data protection, cost accounting, environment, sustainability, securities, competition,
compensation costs, taxes, counterfeit parts, pensions, and use of certain non-US equipment) or more expansive
interpretations or other changes in how government agencies construe existing ones, 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, our compliance, and the
adequacy of our systems in meeting government requirements. Costs ultimately found to be unallowable or
improperly allocated are generally not reimbursed or require us to refund the customer. When an audit uncovers
improper or illegal activities, we are subject to possible civil and criminal penalties, sanctions, or suspension or
debarment. Whether or not illegal activities are alleged, the U.S. government has the ability to decrease or withhold
certain payments when it deems 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 impropriety
made against us or our business partners.
Our industry has experienced, and we expect it will continue to experience, significant changes to business practices
globally, in part as a result of changes in the global security and threat environment and an increased focus on
affordability, efficiencies, business systems, recovery of costs and a reprioritization of available defense funds. We
have experienced and may continue to experience an increased number of audits and challenges to our claims and
our business systems for current and past years, as well as longer periods to close audits, broader requests for
information and an increased risk of withholdings of payments. The U.S. government has been pursuing and may
continue to pursue policies that could negatively impact our profitability, including those that shift additional
responsibility and performance risks to the contractor. Changes in procurement practices, including those favoring
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incentive-based fee arrangements; fixed price development or long-term production programs; different award
criteria; and non-traditional contract provisions have affected and may in the future affect our profitability and
predictability.
We (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 and regulations. These requirements, whether specific to our industry
or broadly applicable, can limit our ability to achieve our goals. If we are found to have violated any such
requirements, or are found not to have acted responsibly, we may be subject to a wide array of actions, including
contract modifications or termination; payment withholds; the loss of export/import privileges; administrative, civil
or criminal judgments or penalties (including convictions, agreements, fines, damages and non-monetary relief); or
suspension or debarment.
•
The improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in
which we participate can impact our reputation and our ability to do business, which could have a material
adverse effect on our financial position, results of operations and/or cash flows.
We face potential liability based on misconduct by employees, agents or others working with us or on our behalf that
could 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, intellectual
property and contract terms. Improper actions by our employees, agents or others working with us or on our behalf
also subject 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.
We have in the past experienced and may in the future experience misconduct committed by our employees, agents,
suppliers, partners or others working with us or on our behalf. This risk of improper conduct increases as we
continue to expand globally, with greater opportunities and demands to do more business with local and new
partners, and in new environments. At the same time, law enforcement agencies are continuing to focus
collaboratively on combating global corruption and other misconduct. In the ordinary course we form and are
members of joint ventures or other business arrangements and/or invest in third parties with whom we do business.
We may be unable to prevent misconduct or violations of applicable laws by these joint ventures or our partners,
including, in each case, their respective officers, directors and employees.
•
Environmental matters, including climate change, unforeseen costs associated with compliance and remediation
efforts, and government and third-party claims, could have a material adverse effect on our reputation and our
financial position, results of operations and/or cash flows.
Our operations are subject to and affected by a variety of federal, state, local and foreign environmental laws and
regulations, including as they may be expanded, otherwise changed or enforced differently over time. Compliance
with these existing and evolving environmental laws and regulations requires, and is expected to continue to require,
significant operating and capital costs. For example, some of these recently enacted laws and regulations prohibit the
use of certain chemicals or other substances that are used in our business, which has, in some cases, required us to
identify alternate sources, resulting in additional costs and/or otherwise impacting our business and operations. New
and evolving laws, regulations and rule makings globally impose different and at times more restrictive standards
and require greater disclosures. For example, certain jurisdictions, including the State of California and the European
Union, have enacted legislation which requires or would require more stringent greenhouse gas emissions and
climate risk reporting. They could also require capital investments, could adversely impact our ongoing operations,
and could require changes on a more accelerated time frame. We expect our suppliers to face similar challenges and
incur additional compliance costs that may be passed on to us. These direct and indirect costs can adversely impact
our results of operations and financial condition, and, if we are unable to comply with legislative and regulatory
requirements or meet our sustainability objectives, our reputation and ability to do business could be negatively
impacted. In addition, our customers’ requirements, priorities and ways of doing business with respect to
environmental matters, and climate change specifically, also may have an impact on our business, operations and
financial success.
Environmental matters may significantly impact our business and operations and present evolving risks and
challenges. Environmental impacts, including climate change specifically, create short and long-term financial risks
to our business 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. Increased worldwide focus on climate change has
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led to legislative and regulatory efforts to combat both potential causes and adverse impacts 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 have affected and will likely continue to affect us, our
suppliers and our customers. The company has set a goal to achieve net zero greenhouse gas emissions in our
operations by 2035 and is committed to working to achieve its climate change and other sustainability goals. We are
working to identify opportunities to utilize alternatives to fossil-based energy sources, to decrease our greenhouse
gas emissions, to reduce our consumption of water and generation of waste, and to ensure our compliance with
environmental regulations where we operate, enhancing our record of environmental sustainability. However, the
costs of doing so may be greater than expected, which could affect our ability to achieve our goals.
We may be subject to substantial administrative, civil or criminal fines, penalties or other sanctions (including
suspension, debarment or disqualification) for violations of environmental laws. 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 remediation standards or enforcement of existing laws
and regulations; new requirements, including regulation of new substances; discovery of previously unknown or
more extensive contamination or new contaminants; imposition of fines, penalties, or damages (including natural
resource damages); a determination that certain remediation or other costs are unallowable; rulings on allocation or
insurance coverage; and/or the insolvency, inability or unwillingness of other parties to pay their share, could require
us to incur material additional costs in excess of those anticipated.
We 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,
including bodily injury and property damage. For example, please see Note 10 for a discussion of certain disputes
and lawsuits related to legacy Bethpage environmental conditions. These matters could result in material
compensatory or other damages, remediation costs, penalties, and non-monetary relief, and adverse determinations
on allowability or insurance coverage.
Government and private parties also seek to hold us responsible for liabilities or obligations related to former
operations that have been divested or spun-off and/or for which we believe other parties have agreed to be
responsible and/or to indemnify us. These rights may not be sufficient to protect us.
•
Unanticipated changes in our tax provisions or an increase in our tax liabilities, whether due to changes in
applicable laws and 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.
We are subject to income and other taxes in the U.S. and foreign jurisdictions. Changes in applicable tax laws and
regulations, or their interpretation and application, including the possibility of retroactive effect, have affected and
could affect our tax expense. In addition, the final determination of any tax audits or related litigation, in particular
with regard to our positions on research credits, could be materially different from our historical income tax
provisions and accruals. In addition, we may be subject to future tax audits and legal challenges involving OATK,
which we acquired in 2018, or the spinoff of its then subsidiary Vista Outdoor, and we may be unable to obtain
indemnification or we may be required to indemnify Vista.
•
Cyber and other security threats or disruptions could have a material adverse effect on our reputation and our
financial position, results of operations and/or cash flows.
As a defense contractor, we face significant cyber and other security threats. They include, among other things,
attempts to gain unauthorized access to sensitive information or otherwise compromise the integrity, confidentiality
and/or availability of our systems, hardware and networks, and the information on them; insider threats;
ransomware; threats to the safety of our directors, officers and employees; threats to our facilities, infrastructure,
products (we produce and use), and subcontractors or other suppliers (referred to inclusively as suppliers); and
threats from terrorist acts, espionage, civil unrest and other acts of aggression. We are also subject to increasing
government, customer and other cyber and security requirements, including disclosure obligations.
Cyber threats, both on premises and in the cloud, are complex, continuous and evolving and include, but are not
limited to: malicious software, destructive malware, ransomware, targeting by more advanced and persistent
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adversaries, including nation states and other actors, zero-day attacks, 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 other protected information (ours or that of our employees, customers or partners);
corruption of data, networks or systems; harm to individuals; and loss of assets. We have been and 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. Further, the sophistication,
availability and use of artificial intelligence by threat actors present an increased level of risk. We have experienced
cyber attacks and, due to the evolving threat landscape, expect we will continue to experience additional attacks in
the future. The various measures and controls we have implemented to monitor and mitigate risks associated with
these threats and to increase the cyber resiliency of our infrastructure and products may not always be sufficient or
fully effective, particularly against previously unknown vulnerabilities, including those that could go undetected for
an extended period.
Cyber events have caused and could cause us harm and require us to undertake remedial actions. Successful attacks
can lead to losses or misuse of sensitive information or capabilities; theft or corruption of data; harm to personnel,
infrastructure or products; protracted disruptions in our operations and performance; and the misuse of our products.
They can also damage our reputation, impact our ability to obtain adequate insurance coverage, and lead to loss of
business, regulatory actions, and costs, liabilities or other financial losses for which we may not have adequate
sources of recovery.
Our customers and partners (including our suppliers and joint ventures) to whom we 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
implement and verify adequate controls and safeguards to protect against and report cyber incidents. If they fail to
deter, detect, remediate or report cyber incidents in a timely manner, we may suffer financial and other harm,
including to our information, operations, performance, employees and reputation. Further, the systems, products and
services that we provide to customers 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 and evolving disclosure obligations related to cyber and other security events and the risk of
failing to meet all our existing or future disclosure obligations and/or having our disclosures misinterpreted. National
security or public safety considerations may also affect, or in limited instances prevent, our public disclosure of a
cybersecurity incident in certain circumstances.
We also face threats to our physical security, including to our facilities and the safety and well-being of our people,
including senior executives. These threats could involve terrorism, insider threats, targeted threats against senior
executives, workplace violence, civil unrest, natural disasters, damaging weather or fires, which could adversely
affect our company. Our customers and suppliers face similar risks that, if realized, could also adversely impact our
operations. Such acts could cause delays, manufacturing downtime, or other impacts that could detrimentally impact
our ability to perform our operations. We could also incur unanticipated costs to remediate impacts and lost
business. For further discussion of our cybersecurity risk management, strategy and governance, see
“Cybersecurity.”
•
Our earnings and profitability depend, in part, on subcontractor and supplier performance, financial viability,
and compliance with regulatory requirements globally, as well as highly skilled labor, raw materials, chemicals,
parts, and component availability and pricing, and one or more of these factors could have a material adverse
effect on our financial position, results of operations and/or cash flows.
We rely on other companies to provide raw materials, chemicals, parts and components and subsystems for our
products, 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 customers, and to do so in compliance with all applicable laws, regulations and contract terms, while
maintaining strong values and cultures. Disruptions or performance problems with our subcontractors or other
suppliers (referred to inclusively as suppliers), unanticipated cost growth for the products and services they provide,
failure to meet regulatory or contractual requirements, unethical or illegal behavior, or a misalignment between our
contractual obligations to our customers and our agreements 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 and
financial expectations. This risk of delays and disruptions in the supply chain, and supply chain challenges more
broadly, has been and continues to be heightened globally due to the current macroeconomic environment.
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Our ability to perform our obligations on time is adversely affected if one or more of our suppliers is unable to
provide the agreed-upon products, materials or information, or perform the agreed-upon services in a timely,
compliant and cost-effective manner. We also may experience challenges performing if we are unable to use certain
raw materials, chemicals or other substances due to laws or other regulations that restrict or prohibit the use of such
items or cause suppliers to be unwilling or unable to supply them and we cannot obtain a reasonable substitute on a
cost-effective basis. Changes in political or economic conditions, including changes in demand, changes in the
macroeconomic environment (including inflation and labor and supply chain challenges), changes in defense
budgets and/or priorities, changes in the global security environment, changes in export/import restrictions,
sanctions and other trade restrictive activities, evolving requirements, or changes in access to critical technology and
materials (including metals and components), among others, have adversely affected and could in the future
adversely affect the financial stability of our suppliers and/or their ability to perform effectively. The inability of our
suppliers to perform effectively has required and may require us to provide them additional support and/or to
transition to alternate suppliers, if available, with additional costs and delays. We expect we will need to continue to
provide additional resources to support certain of our suppliers in performing under our contracts. In addition, if we
are unable to do that or if our suppliers are no longer able to perform due to financial difficulties, we may face
additional losses and liabilities under our current contracts and adversely impact the prospects for certain new ones.
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 and/or are restricted from procuring products or services from
certain sources. For example, we require assured access to certain microelectronics. Our ability to produce and/or
deliver products will be significantly impacted if the microelectronics manufacturing supply chain is cut off or
significantly delayed. For some components, there has been or may be only one supplier, or one domestic supplier.
If that supplier cannot meet our needs or if we are unable to procure components from certain suppliers due to
regulatory restrictions, we may be unable to find a suitable alternative and to meet our obligations.
We and our suppliers are also facing increased legal requirements globally. We may be held responsible not only for
our compliance, but that of our suppliers. Our procurement practices are intended to reduce the risk we procure
counterfeit, unauthorized or otherwise non-compliant parts or materials. We rely on our suppliers also to comply
with applicable laws, customer requirements and contract terms, to ensure the quality of their components and
effectively to mitigate the risk of cyber and security threats or other disruptions to their performance.
•
If we are unable to attract and retain a qualified workforce necessary for our business, we may be unable to
maintain our competitive position, meet the needs of our customers or achieve our results, which could have a
material adverse effect on our financial position, results of operations and/or cash flows.
Our operating results and growth opportunities are heavily dependent upon our ability to attract and retain sufficient
qualified personnel who are or can reasonably be cleared (and obtain program access), who have the 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 experience. We continue to face increased
competition for talent with traditional defense companies, new entrants in our markets and commercial companies,
globally, with increasing wage rates and, in some cases, greater flexibility around working conditions. Although we
have realized benefits from extensive hiring and retention programs in recent years, the risk of insufficient personnel
may increase, either broadly or with respect to select critical staffing requirements, including those with security
clearances. If necessary 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 unable to obtain security clearances or program access on a timely basis or are unable to be timely and
effectively trained, we would expect higher labor-related costs and we could face challenges performing on various
of our programs and meeting financial expectations. In addition, the macroeconomic environment, including
continued challenges in the global labor market, may further affect our ability to hire, develop and retain the
necessary workforce, and to maintain performance levels and our corporate culture.
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. However, other companies recently
have experienced challenges in renewing labor agreements. If, for example, we also experience difficulties with
renewals and renegotiations of existing collective agreements, or if our employees pursue new collective
representation, we could incur additional expenses and impacts on operating efficiency and may be subject to work
stoppages or other labor-related disruptions. Any such expenses or delays could adversely affect our performance
and results.
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•
Our international business exposes us to additional risks, including risks related to geopolitical and economic
factors, laws and regulations, which could have a material adverse impact on our financial position, results of
operations and/or cash flows.
Sales to customers outside the U.S. are an important component of our strategy. Our international business
(including our participation in joint ventures and other forms of collaboration, requirements for local content, and
our global supply chain) is subject to numerous political and economic factors, legal requirements, cross-cultural
considerations and other risks 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 is expected to increase if and as our
international business continues to grow.
Our international business is generally subject to both U.S. and foreign laws, regulations and practices. Failure by
us, our employees, partners or others with whom we work to comply with applicable laws and regulations could
result in administrative, civil, commercial or criminal liabilities, including suspension or debarment from
government contracts or suspension of export/import privileges. Failure to comply with local practices can adversely
impact our ability to win and perform business. 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. 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. We also face risks related to the unintended or unauthorized use of our products and
resources.
Changes in laws, political leadership and environment, and/or security risks may dramatically affect our ability to
conduct or continue to conduct business in international markets. Our international business is impacted by changes
in U.S. and non-U.S. national policies and priorities, and geopolitical relationships, any of which may be influenced
by changes in the global threat environment, political leadership, geopolitical and economic uncertainties, world
events, government budgets, inflationary pressures, sanctions imposed in countries where we do business or seek to
do business, and economic and political factors more generally. The U.S. and its allies and security partners continue
to face a global security environment of heightened tensions and instability, threats from state and non-state actors,
including major global powers, as well as terrorist organizations, emerging nuclear tensions, and diverse regional
security concerns. These factors have impacted and may in the future impact demand for our products and services,
the competitive position of our products and services, funding for programs, our ability to perform, our supply chain,
export authorizations, purchasing decisions or customer payments. Global macroeconomic conditions, as well as
fluctuations in foreign currency exchange rates and credit, are also likely to further impact our business.
Our contracts with non-U.S. customers in some cases include terms and reflect legal requirements that create
additional risks. Terms include requirements to hire, invest, manufacture or purchase locally, or specific financial
obligations, including offset obligations, and provisions that impose significant penalties if we fail to meet such
requirements. We have also been required to enter into letters of credit, performance bonds, bank guarantees or other
financial arrangements in certain cases. If we are dependent on certain suppliers, as in the U.S., we face risks related
to their failure to perform in accordance with legal requirements, particularly where we rely on a sole source
supplier. Our ability to sell products globally could be adversely affected if we are unable to design our products on
a cost effective basis or to obtain and retain all necessary export authorizations, which the U.S. government can
deny, change or revoke for reasons outside our control. 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. We also partner with non-U.S. companies, including through joint ventures and other forms of
collaboration, which subjects us to risks related to the ability to identify and negotiate appropriate arrangements with
qualified and acceptable local partners, potential exposure for their actions, and the ability effectively to terminate
these arrangements. Such risks are complicated further when we partner with government-affiliated entities.
The products and services we provide, including those provided by suppliers and joint ventures, are sometimes in
countries with unstable governments, economic or fiscal challenges, military or political conflicts, different business
practices and/or developing legal systems. This may increase the risk to our employees, suppliers or other third
parties, including for their safety, and increase our risk to a wide range of financial consequences and other
liabilities, as well as loss of property or damage to our products.
•
Our business is subject to significant disruptions caused by natural disasters or other events outside of our
control, which could have a material adverse effect on our financial position, results of operations and/or cash
flows.
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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, windstorms, heat waves, other extreme
weather conditions, acts of terrorism, power shortages and blackouts, telecommunications failures and other
significant disruptions, and epidemics, pandemics, and similar outbreaks, especially of infectious diseases. We
expect our facilities, operations, employees and communities in the future, particularly at facilities prone to extreme
weather events, such as in Florida and California, to continue to be at risk for future natural disasters or other
weather events (which may be exacerbated by climate change). Climate related changes can impact natural disasters,
including weather patterns, with the increased frequency and severity of significant weather events (e.g., flooding,
hurricanes and tropical storms), natural hazards (e.g., increased wildfire risk), rising mean temperature and sea
levels, and long-term changes in precipitation patterns (e.g., drought, desertification, water scarcity and/or poor
water quality).
Such natural disasters and other significant disruptions can interrupt our operations, impact our employees, and
result in significant costs and adversely affect our performance. Our subcontractors and other suppliers have also
been, and may in the future be, subject to natural disasters or other significant disruptions that could affect their
ability to deliver or perform. Disruptions also impact the availability and cost of materials needed for manufacturing
and can increase insurance and other operating costs, or result in a lack of available coverage. Although we take
steps to mitigate these risks, including considering them in determining where to put new businesses, the damage
and adverse effects of natural disasters and other significant disruptions, which may increase, as well as delays in
recovery, may be significant.
•
Our future success depends, in part, on our ability to innovate, develop new products and technologies, progress
and benefit from digital transformation and maintain technologies, facilities and equipment to win new
competitions and meet the needs of our customers. Failure to do so or meet our contractual obligations that
require innovative design could adversely affect our profitability, reputation and future prospects and have a
material adverse effect on our financial condition, results of operations and/or cash flows.
We design, develop and manufacture technologically advanced and innovative products and services, which are
applied by our customers in a variety of environments, including highly demanding operating conditions, to
accomplish challenging missions. Our success depends upon our ability to develop technologically advanced,
innovative and cost-effective products and services and market these products and services to our customers
globally. Our ability to develop innovative and technologically advanced products depends on the talent of our
workforce, continued funding for, and investment in, research and development projects, continued access to assured
suppliers of important technologies and components, our ability to compete (including with commercial companies)
and our ability to provide the people, technologies, facilities, equipment and financial capacity needed to develop
and deliver those products and services with maximum efficiency. To perform on our contracts and to win new
business, we also depend increasingly on our ability to progress successfully on our digital transformation strategy.
To meet evolving customer requirements, it is increasingly necessary to differentiate our offerings and to achieve
efficiencies in our operations through digital based solutions. If we are unable to continue to develop new products
and technologies in a timely fashion, and progress successfully to effect digital solutions and transformation, or if
we fail to achieve market acceptance more rapidly than our competitors, we may be unable to maintain our
competitive position and our future success could be materially adversely affected.
We aim to ensure that our technical solutions are responsibly developed, tested and operated. Problems and delays in
the successful development and delivery of our solutions, including as a result of issues with design, technology or
operations, digital transformation, inability to achieve learning curve assumptions, artificial intelligence,
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 future business.
In addition, our products cannot be tested and proven in all situations and are otherwise subject to unforeseen
problems that can negatively affect revenue, schedule and profitability, and result in loss of life or property. They
include 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
of origin of procured materials, inadequate supplier components and degradation of product performance. Factors
that may affect revenue and profitability also include: inaccurate cost estimates, design issues, human factors,
unforeseen 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.
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Certain contracts, primarily involving space satellite systems, contain provisions that entitle the customer to recover
payments and/or fees in the event of failure of the system or other performance challenges 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.
•
We provide products and services, including related to hazardous and high risk operations, which subjects us to
various environmental, regulatory, financial, reputational and other risks, and if any of these risks were to
materialize, it could have a material adverse effect on our reputation and our financial position, results of
operations and/or cash flows .
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 and
missile launches. We use and provide energetic materials, including in propulsion systems, which are highly
explosive and flammable. We develop missile systems, and counter systems, including strategic deterrents, as well
as subsystems and components. These and other activities subject us to various extraordinary risks, including those
associated with (1) nuclear-related or non-nuclear launch activities and operations, including failed launches; (2)
unintended release or initiation of energetic materials and explosions, whether in the development, test or use of
such energetic materials; and (3) the storage, handling and disposal of radioactive and other hazardous or flammable
materials and any changes in related regulations. We may be subject to potential liabilities, including for personal
injury and harm to human health, property damage, environmental harm, and reputational harm arising out of such
incidents or hazardous activities and operations, 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, including pursuant to, or in connection with, Public Law 85-804, 10
U.S.C. 3861, the Price-Anderson Nuclear Industries Indemnity Act, the NASA Space Act, the Commercial Space
Launch Act and the Terrorism Risk Insurance Reauthorization Act, for certain risks, but those protections may not
be available or adequate.
Certain of our products, such as medium and large caliber ammunition and propulsion systems, involve the use,
manufacture and/or handling of a variety of explosive and flammable materials or other hazardous substances. These
activities have resulted and may result in incidents that cause workplace injuries and fatalities, the temporary shut
down or other disruption of manufacturing, production delays, environmental harm and expense, fines and liabilities
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 avoid or mitigate some such incidents,
as well as potentially insurance coverage and indemnification to address resulting liabilities, but they may not be
successful.
In addition, our customers may use, handle or test our products and services in ways that can be unusually hazardous
or risky, or in ways that are not intended, not authorized or inconsistent with guidance and warnings, which may
create potential liabilities for our company, as well as reputational harm.
•
We may not be able to adequately protect and fully exploit our intellectual property rights or obtain necessary
rights to intellectual property of others, which could materially and adversely affect our ability to compete and
perform on contracts, and have a material adverse effect on our reputation and our financial position, results of
operations and/or cash flows.
To perform on our contracts and to win new business, we depend on our ability to develop, protect and exploit our
intellectual property and use the intellectual property of others. Increasing demands from our customers to access
and obtain rights in our intellectual property, and positions taken by our suppliers and competitors challenge our
ability to protect and exploit intellectual property.
We own many forms of intellectual property, including trade secrets, U.S. and foreign patents, trademarks, and
copyrights, and we license or otherwise obtain access to various intellectual property rights of third parties. The U.S.
government and certain foreign governments hold licenses or other rights to certain intellectual property that we
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. Governments continue to increase efforts to obtain more extensive rights
in contractors’ intellectual property, including where we do not believe they are entitled to do so under current law.
This could reduce our ability to develop, protect and exploit certain of our intellectual property rights and to
compete.
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Our products and services embody valuable trade secrets, proprietary information and know-how. We typically seek
to protect this information by entering into confidentiality and intellectual property agreements with our employees
and third parties such as consultants, collaborators and suppliers. These agreements and other measures may not
provide adequate protection for our trade secrets and other proprietary information. In the event of misuse, theft or
misappropriation of such intellectual property rights or breach of confidentiality obligations, 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.
In some instances, our ability to win or perform contracts requires us to use third party intellectual property. This
may require the government or our customer to provide rights to such third party intellectual property or for us to
negotiate directly with third parties to obtain necessary rights on reasonable terms,which may not be practicable.
Our intellectual property is subject to challenge, invalidation, or circumvention by third parties. Our access to and
use of intellectual property licensed or otherwise obtained from third parties is also subject to challenges. Litigation
to determine the scope of intellectual property rights, even if ultimately successful, has been and could in the future
be costly. Moreover, the legal framework concerning intellectual property rights varies among countries and the
protections under foreign laws and courts may not be favorable.
General and Other Risk Factors
•
Our insurance coverage, customer indemnifications or other liability protections may be unavailable or
inadequate to cover our significant risks, which could have a material adverse effect on our financial position,
results of operations and/or cash flows.
We endeavor to obtain insurance from financially stable, responsible, highly rated counterparties in established
markets to cover significant risks and liabilities (including, for example, natural disasters, space launches and on-
orbit operations, cyber security, hazardous operations, energetics and products liability). Not every risk or liability
can be insured, and insurance coverage is not always reasonably available. The policy limits and terms of coverage
reasonably obtainable may not be sufficient to cover actual losses or liabilities. For example, the space insurance
markets are experiencing increased price volatility and capacity constraint. Due to recent increases in the frequency
and severity of losses, insurers are decreasing limits, increasing pricing and some have exited the market. Even if
insurance coverage is available, we are not always able to obtain it at a price or on terms acceptable to us or without
increasing exclusions. Disputes with insurance carriers over the availability of coverage, and the insolvency of one
or more of our insurers has affected and may continue to affect the availability or timing of recovery, as well as our
ability to obtain insurance coverage at reasonable rates in the future. In some circumstances we may be entitled to
certain legal protections or indemnifications from our customers through contractual provisions, laws or otherwise.
However, these protections are not always available, are difficult to negotiate and obtain, are typically subject to
certain terms or limitations, including the availability of funds, and may not be sufficient to cover our losses or
liabilities.
•
Pension and other postretirement benefit (OPB) obligations and related expenses and funding requirements may
fluctuate significantly depending upon investment performance of plan assets, changes in actuarial assumptions,
and legislative or other regulatory actions.
The company’s pension and OPB obligations and related expenses are dependent upon the investment performance
of plan assets and various assumptions, including discount and interest rates, mortality and the estimated long-term
rates of return on plan assets. Changes in assumptions associated with our pension and OPB plans, investment
performance of plan assets, and gains or losses associated with changes in valuation of marketable securities related
to our non-qualified plans and other non-operating assets could have a material adverse effect on our financial
position, results of operations and/or cash flows.
Funding requirements for our pension plans, including Pension Benefit Guaranty 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 effect on our financial position, results
of operations and/or cash flows.
•
Business investments and/or recorded goodwill and other long-lived assets may become impaired, which could
have a material adverse effect on our financial condition and/or results of operations.
Goodwill is an intangible asset that we recognize in connection with acquisitions of third-party businesses. Goodwill
accounts for approximately 35 percent of our total assets as of December 31, 2024. Other long-lived assets
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principally comprise property, plant and equipment (PP&E) used in operating our business. The cost of PP&E
utilized in support of our commercial business, including approximately $575 million of PP&E in our commercial
space business, is not allocable to government contracts and is therefore subject to greater recoverability risk than
PP&E utilized in support of our U.S. government contracts. Although the fair value of our reporting units and the net
realizable value of our other long-lived assets currently exceed their respective carrying values, changes in business
conditions, the market-based inputs used in our goodwill impairment test, or our assumptions related to the
recoverability of our long-lived assets, could result in significant write-offs of goodwill or other long-lived assets.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We recognize the critical importance of maintaining the safety and security of our systems and data and have a
holistic process for overseeing and managing cybersecurity and related risks. This process is supported by both
management and our Board of Directors.
In 2024, our global cybersecurity function was maintained in our Chief Information Office, led by our Chief
Information Officer (CIO), who reported to our CEO. In 2025, we have brought together our chief information and
digital transformation offices into a newly formed Chief Information and Digital Office, led by our Chief
Information and Digital Officer (CIDO), who reports to the CEO. The Chief Information Security Officer (CISO),
who previously reported to the CIO, now reports to the CIDO and continues to lead our cybersecurity functions. The
CISO is responsible for the assessment and management of cybersecurity risk and the resiliency, protection and
defense of our networks and systems. The CISO leads a team of cybersecurity professionals with broad experience
and expertise, including in cybersecurity threat assessments and detection, mitigation technologies, cybersecurity
training, incident response, cyber forensics, data protection, privacy, insider threats and regulatory compliance. The
current CISO is an executive with extensive technical and operational experience in building and leading
cybersecurity and resiliency teams in the industry and government.
Our Board of Directors is responsible for overseeing our enterprise risk management activities in general, and each
of our Board committees assists the Board in the role of risk oversight. The full Board receives an update on the
company’s risk management process and the risk trends related to cybersecurity at least annually. The Audit and
Risk Committee specifically assists the Board in its oversight of risks related to cybersecurity. To help ensure
effective oversight, the CISO briefs the Audit and Risk Committee on the company’s information security and
cybersecurity risk posture at least four times a year.
In addition, the company’s Enterprise Risk Management Council (ERMC) considers risks relating to cybersecurity,
among other significant risks, and applicable mitigation plans to address such risks. The ERMC is comprised of the
Executive Leadership Team, as well as the Chief Accounting Officer, Chief Ethics and Compliance Officer,
Corporate Secretary, Chief Sustainability Officer, Treasurer and Vice President, Internal Audit. The CISO and the
CIDO (previously the CIO) attend each ERMC meeting. The ERMC meets during the year and receives periodic
updates from the CIDO and CISO on cybersecurity risks. We have an established process governing our response to
a cybersecurity incident from detection to mitigation, recovery, assessment, internal and external notifications and
functional stakeholder engagements with legal, privacy and risk management, among others. Depending on the
nature and severity of an incident, this process provides for escalating notification to our CEO and the Board
(including our Lead Independent Director and the Audit and Risk Committee chair), as appropriate.
Our approach to cybersecurity risk management includes the following key elements:
•
Multi-Layered Defense and Continuous Monitoring – We work to protect our computing environments and
products from cybersecurity threats through multi-layered defenses and apply lessons learned from our
defense and monitoring efforts to help prevent future attacks. We utilize data analytics to detect anomalies
and search for cyber threats. Our Cybersecurity Operations Center provides comprehensive cyber threat
detection and response capabilities and maintains a 24x7 monitoring system which complements the
technology, processes and threat detection techniques we use to monitor, manage and mitigate
cybersecurity threats or vulnerabilities. From time to time, we engage third-party consultants or other
advisors to assist in assessing, identifying and/or managing cybersecurity threats. We also periodically use
our Internal Audit function to conduct additional reviews and assessments.
•
Insider Threats – We maintain an insider threat program, led by our Vice President, Corporate and
Enterprise Security, designed to identify, assess, and address potential risks from within our company. Our
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program evaluates potential risks consistent with industry practices, customer requirements and applicable
law, including privacy and other considerations.
•
Information Sharing and Collaboration – We work with government, customer, industry and/or supplier
partners, such as the National Defense Information Sharing and Analysis Center and other government-
industry partnerships, to gather and develop best practices and share information to address cyber threats.
These relationships enable the rapid sharing of threat and vulnerability mitigation information across the
defense industrial base and supply chain.
•
Third Party Risk Management – We conduct cybersecurity assessments before sharing or allowing the
hosting or processing of sensitive data in computing environments managed by third parties, and our
standard terms and conditions contain contractual provisions requiring certain cybersecurity and data
protections and controls. Finally, we require these third parties to notify us promptly of cyber incidents or
data breaches so that we can assess potential impact on us.
•
Training and Awareness – We provide annual cybersecurity and information security awareness training to
our employees with network access to help identify, avoid and mitigate cybersecurity threats and insider
risks. This training also includes awareness about the policies and guidance associated with data privacy
and protection of personal information, and protection and security of our company, customer and other
third-party data. Our employees with network access also participate in annual spear phishing exercises.
We also periodically host cybersecurity and ransomware tabletop exercises with management and other
company functional stakeholders to practice rapid cyber incident response.
•
Supplier Engagement – We provide training and other resources to our suppliers to support cybersecurity
resiliency and data security principles in our supply chain. We also require our suppliers, subcontractors
and third-party service providers to comply with our standard cybersecurity-related terms and conditions, in
addition to any requirements from our customers, as a condition of doing business with us, and require
them to complete information security questionnaires to review and assess any potential cyber-related risks
depending on the nature of the services or products being provided.
•
Third Party Cybersecurity Service Providers – We engage third party service providers to expand the
capabilities and capacity of our cybersecurity program, including for design, monitoring and testing of the
program’s risk prevention and protection measures and process execution, including incident detection,
investigation, analysis and response, eradication and recovery. Additionally, several external entities
evaluate our cybersecurity program, including the U.S. Defense Contract Management Agency, the
Defense Industrial Base Cybersecurity Assessment Center and a Cybersecurity Maturity Model
Certification Third Party Assessment Organization, to assess and certify our cybersecurity regulatory
compliance. We also engage with external auditors and consultants who conduct audits and assessments of
our cybersecurity controls.
•
Product Security – We provide cyber threat intelligence to, and collaboration with, our product security
teams and share expertise in cyber vulnerability, exploit and resilience technology that can be applied to
network infrastructure and company product offerings.
While we have experienced cybersecurity incidents in the past, to date none have materially affected the company or
our financial position, results of operations and/or cash flows. We continue to invest in the cybersecurity and
resiliency of our networks and products and to enhance our internal controls and processes, which are designed to
help protect our programs, systems and infrastructure, and the information they contain. For more information
regarding the risks we face from cybersecurity threats, please see “Risk Factors.”
FORWARD-LOOKING STATEMENTS AND PROJECTIONS
This Annual Report on Form 10-K and the information we are incorporating by reference contain statements that
constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Words such as “will,” “expect,” “anticipate,” “intend,” “may,” “could,” “should,” “plan,” “project,” “forecast,”
“believe,” “estimate,” “guidance,” “outlook,” “trends,” “goals” and similar expressions generally identify these
forward-looking statements. Forward-looking statements include, among other things, statements relating to our
future financial condition, results of operations and/or cash flows. Forward-looking statements are based upon
assumptions, expectations, plans and projections that we believe to be reasonable when made, but which may
change over time. 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
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under “Risk Factors” and other important factors disclosed in this report and from time to time in our other filings
with the SEC. They include:
Industry and Economic Risks
•
our dependence on the U.S. government for a substantial portion of our business
•
significant delays or reductions in appropriations and/or for our programs, and U.S. government funding and
program support more broadly, including as a result of a prolonged continuing resolution and/or government
shutdown, and/or related to the global security environment or other global events
•
significant delays or reductions in payments as a result of or related to a breach of the debt ceiling
•
the use of estimates when accounting for our contracts and the effect of contract cost growth and our efforts to
recover or offset such costs and/or changes in estimated contract costs and revenues, including as a result of
inflationary pressures, labor shortages, supply chain challenges and/or other macroeconomic factors, and risks
related to management’s judgments and assumptions in estimating and/or projecting contract revenue and
performance which may be inaccurate
•
increased competition within our markets and bid protests
•
continued pressures from macroeconomic trends, including on costs, schedules, performance and ability to meet
expectations
Legal and Regulatory Risks
•
investigations, claims, disputes, enforcement actions, litigation (including criminal, civil and administrative)
and/or other legal proceedings
•
changes in procurement and other laws, SEC, DoD and other rules and regulations, contract terms and practices
applicable to our industry, findings by the U.S. government as to our compliance with such requirements, more
aggressive enforcement of such requirements and changes in our customers’ business practices globally
•
the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in
which we participate, including the impact on our reputation and our ability to do business
•
environmental matters, including climate change, 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
•
cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners,
and changes in related regulations
•
the performance and viability of our subcontractors and suppliers and the availability and pricing of raw
materials, chemicals, parts and components, particularly with inflationary pressures, increased costs, shortages
in labor and financial resources, supply chain disruptions, and extended material lead times
•
our ability to attract and retain a qualified and talented workforce with the necessary security clearances to meet
our performance obligations
•
our exposure to additional risks as a result of our international business, including risks related to global
security, geopolitical and economic factors, misconduct, suppliers, laws and regulations
•
natural disasters, epidemics, pandemics and similar outbreaks and other significant disruptions
•
our ability to innovate, develop new products and technologies, progress and benefit from digital transformation
and maintain technologies to meet the needs of our customers
•
products and services we provide related to hazardous and high risk operations, including the production and
use of such products, which subject us to various environmental, regulatory, financial, reputational and other
risks
•
our ability appropriately to protect and exploit intellectual property rights
NORTHROP GRUMMAN CORPORATION
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General and Other Risk Factors
•
the adequacy and availability of, and ability to obtain, insurance coverage, customer indemnifications or other
liability protections
•
the future investment performance of plan assets, gains or losses associated with changes in valuation of
marketable securities related to our non-qualified benefit plans, changes in actuarial assumptions associated
with our pension and other postretirement benefit plans and legislative or other regulatory actions impacting 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, and other potential future liabilities
You are urged 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, future events or otherwise, except as required by applicable law.
Item 2. Properties
At December 31, 2024, we had approximately 52 million square feet of floor space at 466 separate locations,
primarily in the U.S., for manufacturing, warehousing, research and testing, administration and various other uses.
We leased to third parties approximately 37,000 square feet of our owned and leased facilities. The company’s
major operations are at the following locations:
Aeronautics Systems
El Segundo, Mojave, Palmdale, 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 and Madison, AL; Mesa and Sierra Vista, AZ; Northridge, CA; Warner Robins, GA; Lake Charles, LA;
Elkton, MD; Elk River and Plymouth, MN; Ogden and Roy, UT; 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 and Gilbert, AZ; Azusa, Carson, Los Angeles, Manhattan Beach, Oxnard, Redondo Beach
and San Diego, CA; Aurora, Boulder, and Colorado Springs, CO; Beltsville, MD; Devens, MA; Clearfield, Corinne,
Magna, Salt Lake City and Tremonton, UT; and Dulles, McLean and Sterling, VA.
Corporate
Falls Church, VA
The following is a summary of our floor space at December 31, 2024:
Square feet (in thousands)
Owned
Leased
U.S. Government
Owned/Leased
Total
Aeronautics Systems
3,141
6,305
3,451
12,897
Defense Systems
921
4,857
2,285
8,063
Mission Systems
8,055
4,110
—
12,165
Space Systems
10,640
7,150
589
18,379
Corporate
372
268
—
640
Total
23,129
22,690
6,325
52,144
We maintain our properties in good operating condition and believe the productive capacity of our properties is
adequate to meet current contractual requirements and those for the foreseeable future.
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Item 3. Legal Proceedings
We have provided information about certain legal proceedings in which we are involved in Notes 10 and 11 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); compensatory, treble or
other damages; non-monetary relief; or other liabilities. 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 nature of legal proceedings is such that we cannot
assure the outcome of any particular matter. For additional information on pending matters, please see Notes 10 and
11 to the consolidated financial statements, and for further information on the risks we face from existing and future
investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, please see “Risk
Factors.”
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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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
COMMON STOCK
We have 800,000,000 shares authorized at a $1 par value per share, of which 144,952,026 shares and 150,109,271
shares were issued and outstanding as of December 31, 2024 and 2023, respectively.
PREFERRED STOCK
We have 10,000,000 shares authorized at a $1 par value per share, of which no shares were issued and outstanding
as of December 31, 2024 and 2023.
MARKET INFORMATION
Our common stock is listed on the New York Stock Exchange and trades under the symbol NOC.
HOLDERS
As of January 27, 2025, there were 17,776 common shareholders of record.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Period
Number
of Shares
Purchased
Average
Price
Paid per
Share(1)
Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
under the
Plans or Programs
($ in millions)(2)
September 28, 2024 - October 25, 2024
150,761 $ 530.15
150,761
$
1,483
October 26, 2024 - November 22, 2024
335,909
506.90
335,909
1,313
November 23, 2024 - December 31, 2024
376,550
478.58
376,550
4,133
Total
863,220 $ 498.61
863,220
$
4,133
(1) Excludes commissions paid and other costs of execution, including taxes.
(2) The value remaining on December 31, 2024 includes an additional $3.0 billion share repurchase authorization approved by the
company’s board of directors on December 11, 2024.
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 2 to the consolidated financial statements for further information on our share repurchase programs.
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STOCK PERFORMANCE GRAPH
Comparison of Cumulative Five Year Total Return
Among Northrop Grumman, the Standard & Poor’s (S&P) 500 Index and the S&P Aerospace & Defense (A&D)
Index
Period Ending
Northrop Grumman
S&P 500 Index
S&P A&D Index
2019
2020
2021
2022
2023
2024
$0
$50
$100
$150
$200
$250
$300
$350
$400
•
Assumes $100 invested at the close of business on December 31, 2019, in Northrop Grumman Corporation
common stock, the S&P 500 Index and the S&P A&D Index.
•
The cumulative total return assumes reinvestment of dividends.
•
The S&P A&D Index is comprised of Axon Enterprise, Inc., The Boeing Company, General Dynamics
Corporation, General Electric Company, Howmet Aerospace Inc., Huntington Ingalls Industries Inc.,
L3Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, RTX
Corporation, Textron Inc., and TransDigm Group Incorporated.
•
This graph is not deemed to be “filed” with the SEC or subject to the liabilities 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.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
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” (MD&A)
of our Form 10-K for the year ended December 31, 2023 (“2023 Annual Report on Form 10-K”). To the extent the
July 1, 2024 SDS realignment impacted the disclosures in the 2023 Annual Report on Form 10-K, we recast those
prior year MD&A disclosures herein.
Global Security Environment
The U.S. and its allies continue to face a global security environment of heightened tensions and instability, threats
from state and non-state actors, including in particular major global powers, as well as terrorist organizations,
increasing nuclear tensions, diverse regional security concerns and political instability. 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 circumstances and priorities. Our operations and financial
performance, as well as demand for our products and services, are impacted by these events, including global unrest.
The same is true for our suppliers and other business partners.
The conflicts in Ukraine and the Middle East and threats elsewhere, particularly in the Pacific region, have increased
global tensions and instability and highlighted security requirements globally, including in Europe, the Middle East
and the Pacific region, as well as the U.S. These conflicts have resulted in and may continue to result in increased
demand for defense products and services from allies and partner nations, particularly in those areas. For example,
we have experienced an increase in demand for certain of our products and services directly and indirectly related to
the conflict in Ukraine. We continue to monitor developments in these regions, but have not experienced, and do not
anticipate experiencing, significant adverse financial impacts directly from the conflicts in Ukraine or the Middle
East.
We believe the current global security environment highlights the significant national security threats to the U.S. and
its allies, and the need for strong deterrence and robust defense capabilities, and are actively evaluating both
opportunities and risks associated with this environment. We believe our capabilities, particularly in space, C4ISR,
missile defense, battle management, advanced weapons, strategic deterrence, and survivable aircraft and mission
systems should help our customers in the U.S. and globally defend against current and future threats and, as a result,
continue to allow for long-term profitable business growth.
Global Economic Environment
Over the past several years, the global economic environment has experienced extraordinary challenges, including
inflationary pressures; widespread delays and disruptions in supply chains; business slowdowns or shutdowns;
workforce challenges and labor shortfalls; and market volatility. These macroeconomic factors have contributed, and
in the future could contribute, to increased costs, delays, disruptions and other performance challenges, as well as
increased competing demands for limited resources to address such increased costs and other challenges, for our
company, our suppliers and partners, and our customers. We continue to work to address challenges caused by the
macroeconomic environment on our business. We have seen positive progress in the supply chain as on-time
deliveries and quality have improved. In remaining areas of pressure, we are proactively working with our suppliers
to ensure we meet our contract commitments. Although certain pockets of our business were adversely affected by
the broader macroeconomic environment during the fourth quarter of 2024, the overall financial impact on our
company has continued to subside.
In addition, an overall increase in interest rates in recent years has raised the cost of borrowing for governments, and
if rates further increase, it could impact government spending priorities (in the U.S. and allied countries, in
particular), including their demand for defense products. Economic tensions and changes in international trade
policies, including higher tariffs on imported goods and materials, the imposition of retaliatory tariffs or other trade
protection measures and renegotiation of free trade agreements, could also further impact the global market for
defense products, services and solutions.
U.S. Political, Budget and Regulatory Environment
The U.S. continues to face an uncertain and evolving political, budget and regulatory environment. In particular, it is
difficult to predict the specific course of future defense budgets. Current and future requirements related to the
conflicts in Ukraine and the Middle East, threats in the Pacific region and other security priorities, as well as the
macroeconomic environment, the national debt, and other domestic priorities, among other things, in the U.S. and
globally, will continue to impact our customers’ budgets, spending and priorities, and our industry. The U.S.
political environment may also impact defense budgets and priorities, issues related to the national debt, and
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government spending more broadly. We anticipate that issues related to budgetary priorities and defense spending
levels, the debt ceiling, and the spending caps imposed by the Fiscal Responsibility Act of 2023 (FRA), particularly
with respect to discretionary spending, will continue to be a subject of considerable debate, with a potentially
significant impact on our programs and the company.
Annual appropriations to fund the federal government for FY 2025 have not yet been enacted. Congress continues to
pass short-term continuing resolutions (CR) to fund the federal government. The most recent CR passed in
December 2024 extends current funding levels until March 14, 2025. It remains uncertain when the government will
approve FY 2025 appropriations, and the levels of funding FY 2025 appropriations will provide. Government
operations under an extended CR could have potential impacts on our programs and new starts, in particular.
The political environment, federal budget, debt ceiling and regulatory environment, including potential tax reform,
are expected to continue to be the subject of considerable debate, especially in light of the ongoing conflicts and
heightened global tensions, the macroeconomic environment and political tensions. The results of those debates
could have material impacts on defense spending broadly and the company’s programs in particular.
B-21 Program
In 2015, the U.S. Air Force awarded Northrop Grumman the B-21 contract, which includes a base contract for
engineering and manufacturing development (EMD) and five low-rate initial production (LRIP) options for a
baseline total of 21 aircraft. The EMD phase of the program is largely cost type and began at contract award. The
LRIP options are largely fixed price and are expected to continue to be awarded and executed through
approximately the end of the decade. In addition to the five LRIP options, Northrop Grumman and the U.S. Air
Force have established not to exceed (NTE) pricing for additional aircraft up to unit 40. The average NTE value for
these subsequent lots is above the average unit price of the five LRIP lots, and the NTE lots include an economic
price adjustment clause to help protect against certain inflationary pressures. Final terms, quantity, and pricing for
these subsequent lots are not fully negotiated.
During the fourth quarter of 2023, we recognized a projected loss of $1.56 billion across the five LRIP options.
During the fourth quarter of 2024, we again reviewed our estimated profitability on the program and made no
significant changes to the previously recognized loss. The company’s 2024 results reflect our current best estimate
of our cost to complete the LRIP and NTE aircraft, as well as the outcome of ongoing discussions with our suppliers
and our customer. If our estimated cost to complete the aircraft changes or our assumptions regarding contract
performance, quantities, supplier negotiations, or funding to mitigate the impact of macroeconomic disruptions are
resolved more or less favorably than what we have estimated, our financial position, results of operations and/or
cash flows could be materially affected.
Sentinel Program
In 2020, the U.S. Air Force awarded Northrop Grumman a $13.3 billion contract for the EMD phase of the Sentinel
program. In January 2024, the U.S. Air Force provided congressional notification that the Sentinel program was
under a Nunn-McCurdy breach review, which is required when total program cost estimates exceed certain defined
thresholds. This notification, which had been driven primarily by increases in cost estimates for the Production and
Deployment phases, commenced the process to achieve certification for continuance of the program and update its
baseline cost estimates. We are currently executing under a cost-type contract for the EMD phase, and the
Production and Deployment phases are yet to be priced and negotiated.
In July 2024, the Sentinel program was certified for continuation by the DoD upon completion of the Nunn-
McCurdy breach review. In connection with the certification, the DoD directed that the program be restructured,
including plans for infrastructure related to the command and launch segment, which was the main driver of the
increased cost estimates for the Production and Deployment phases. We are partnering with our customer to
establish a new program baseline as part of the restructuring activities.
During the fourth quarter of 2024, we reviewed our estimated profitability on the Sentinel program and made no
significant changes. The Sentinel EAC incorporates our best estimate of costs to complete the restructured EMD
effort; however, if the outcome is more or less favorable than what we have estimated, our financial position, results
of operations and/or cash flows could be materially affected.
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.
NORTHROP GRUMMAN CORPORATION
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Due to the applicable 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, subcontractor, material, overhead and general and administrative
(G&A) costs), as much as we do on total contract cost, which is the key driver of our sales and operating income.
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, which are
typically described in terms of changes in net EAC adjustments. Contract mix generally refers to changes in the ratio
of contract type and/or life cycle (e.g., cost-type, fixed-price, development, production, and/or sustainment).
CONSOLIDATED OPERATING 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”).
Mark-to-market adjusted net earnings (MTM-adjusted net earnings) and MTM-adjusted earnings per share (MTM-
adjusted EPS) exclude MTM pension and OPB 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 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 MTM accounting is not considered in management’s assessment of the company’s
operating performance or in its determination of incentive compensation awards.
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.
Selected financial highlights are presented in the table below:
Year Ended December 31
% Change in
$ in millions, except per share amounts
2024
2023
2022
2024
2023
Sales
$ 41,033
$ 39,290
$ 36,602
4 %
7 %
Operating costs and expenses
36,663
36,753
33,001
— %
11 %
Operating costs and expenses as a % of sales
89.4 %
93.5 %
90.2 %
Operating income
4,370
2,537
3,601
72 %
(30) %
Operating margin rate
10.6 %
6.5 %
9.8 %
Mark-to-market pension and OPB benefit (expense)
443
(422)
1,232
NM
NM
Federal and foreign income tax expense
842
290
940
190 %
(69) %
Effective income tax rate
16.8 %
12.4 %
16.1 %
Net earnings
4,174
2,056
4,896
103 %
(58) %
Diluted earnings per share
$ 28.34
$ 13.53
$ 31.47
109 %
(57) %
Sales
2024 sales increased $1.7 billion, or 4 percent, due to a 12 percent growth in sales at Aeronautics Systems and
higher sales at Mission Systems and Defense Systems, partially offset by lower sales at Space Systems largely
driven by a reduction of $595 million associated with wind-down of work on the restricted space and NGI programs,
as previously disclosed. 2024 sales reflect continued strong demand for our products and services.
NORTHROP GRUMMAN CORPORATION
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See “Segment Operating Results” below for further information by segment and “Product and Service Analysis” for
product and service detail. See Note 15 to the consolidated financial statements for information regarding the
company’s sales by customer type, contract type and geographic region for each of our segments.
Operating Income and Margin Rate
2024 operating income increased $1.8 billion, or 72 percent, primarily due to higher operating income at
Aeronautics Systems, largely driven by the prior year $1.56 billion charge on the B-21 program, as well as higher
operating income at Space Systems and Defense Systems. 2024 operating income also increased due to a $122
million increase in the FAS/CAS operating adjustment, partially offset by $73 million of higher unallocated
corporate expense, largely due to a $127 million increase in deferred state taxes related to the MTM benefit
(expense) and prior year B-21 charge and $25 million of lower intangible amortization and PP&E step-up
depreciation. 2024 operating margin rate increased to 10.6 percent from 6.5 percent reflecting the items above.
2024 G&A costs as a percentage of sales decreased to 9.7 percent from 10.2 percent primarily due to higher sales.
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 table below:
Year Ended December 31
$ in millions
2024
2023
2022
Actuarial gains (losses) on projected benefit obligation
$
1,314 $
(1,489) $
9,662
Actuarial (losses) gains on plan assets
(871)
1,067
(8,430)
MTM benefit (expense)
$
443 $
(422) $
1,232
The 2024 MTM benefit of $443 million was primarily driven by a 58 basis point increase in the discount rate from
year end 2023, partially offset by actual net plan asset returns of 4.7 percent compared to our 7.5 percent asset return
assumption.
Federal and Foreign Income Taxes
The 2024 effective tax rate (ETR) increased to 16.8 percent from 12.4 percent in 2023 primarily due to the impact of
the prior year B-21 charge and the MTM adjustment on our ETR. The 2024 MTM benefit increased the 2024 ETR
by 0.4 percentage points, whereas the prior year B-21 charge and MTM expense collectively reduced the 2023 ETR
by 3.8 percentage points. The 2024 ETR also reflects a net reduction in tax reserves largely due to a recent federal
court decision, partially offset by higher interest expense on unrecognized tax benefits. See Note 6 to the
consolidated financial statements for additional information.
Net Earnings
The table below reconciles net earnings to MTM-adjusted net earnings:
Year Ended December 31
% Change in
$ in millions
2024
2023
2022
2024
2023
Net earnings
$ 4,174 $ 2,056 $ 4,896
103 %
(58) %
MTM (benefit) expense
(443)
422 (1,232)
NM
NM
MTM-related deferred state tax expense (benefit)(1)
23
(22)
65
NM
NM
Federal tax expense (benefit) of items above(2)
88
(84)
245
NM
NM
MTM adjustment, net of tax
(332)
316
(922)
NM
NM
MTM-adjusted net earnings
$ 3,842 $ 2,372 $ 3,974
62 %
(40) %
(1) The deferred state tax impact in each period was calculated using the company’s blended state tax rate of 5.25 percent 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.
2024 net earnings increased $2.1 billion, or 103 percent, primarily due to $1.8 billion of higher operating income, an
$865 million increase in our MTM benefit (expense), and a $126 million increase in the non-operating FAS pension
benefit. These increases were partially offset by a $552 million increase in income tax expense, a $97 million gain
NORTHROP GRUMMAN CORPORATION
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recognized in the prior year upon the sale of our minority investment in an Australian business, and $76 million of
higher interest expense on our long-term debt.
Diluted Earnings Per Share
The table below reconciles diluted earnings per share to MTM-adjusted EPS:
Year Ended December 31
% Change in
2024
2023
2022
2024
2023
Diluted earnings per share
$ 28.34 $ 13.53 $ 31.47
109 %
(57) %
MTM (benefit) expense per share
(3.02)
2.78
(7.92)
NM
NM
MTM-related deferred state tax expense (benefit) per share(1)
0.16
(0.14)
0.42
NM
NM
Federal tax expense (benefit) of items above per share(2)
0.60
(0.56)
1.57
NM
NM
MTM adjustment per share, net of tax
(2.26)
2.08
(5.93)
NM
NM
MTM-adjusted EPS
$ 26.08 $ 15.61 $ 25.54
67 %
(39) %
(1) The deferred state tax impact in each period was calculated using the company’s blended state tax rate of 5.25 percent 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.
2024 diluted earnings per share increased $14.81, or 109 percent, reflecting the 103 percent increase in net earnings
described above and a 3 percent reduction in weighted-average diluted shares outstanding.
SEGMENT OPERATING RESULTS
Basis of Presentation
The company is aligned in four operating sectors, which also comprise our reportable segments: Aeronautics
Systems, Defense Systems, Mission Systems and Space Systems.
Effective July 1, 2024, the company realigned the Strategic Deterrent Systems (SDS) division, which includes the
Ground-Based Strategic Deterrent (“Sentinel”) program, from Space Systems to Defense Systems. This realignment
is reflected in the financial information contained in this report.
Subsequent Realignment - Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft
Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems. This realignment is not reflected in
the financial information contained in this report; it will be reflected in the company’s operating results beginning in
the first quarter of 2025.
For a more complete description of each segment’s products and services, see “Business.”
Segment Operating Income and Margin Rate
Segment operating income, as reconciled in the table below, and segment operating margin rate (segment operating
income divided by sales) are non-GAAP measures that reflect 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 applicable 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 financial 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.
NORTHROP GRUMMAN CORPORATION
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Year Ended December 31
% Change in
$ in millions
2024
2023
2022
2024
2023
Operating income
$ 4,370
$ 2,537
$ 3,601
72 %
(30) %
Operating margin rate
10.6 %
6.5 %
9.8 %
Reconciliation to segment operating income:
CAS pension expense
(279)
(154)
(167)
81 %
(8) %
FAS pension service expense
239
236
367
1 %
(36) %
FAS/CAS operating adjustment
(40)
82
200
NM
(59) %
Intangible asset amortization and PP&E step-up
depreciation
97
122
242
(20) %
(50) %
Deferred state tax expense (benefit)(1) of MTM
adjustment
23
(22)
65
NM
(134) %
Deferred state tax benefit of B-21 charge(1)
—
(82)
—
NM
NM
Other unallocated corporate expense
94
123
145
(24) %
(15) %
Unallocated corporate expense
214
141
452
52 %
(69) %
Segment operating income
$ 4,544
$ 2,760
$ 4,253
65 %
(35) %
Segment operating margin rate
11.1 %
7.0 %
11.6 %
(1) Represents the deferred state tax expense (benefit) associated with MTM benefit (expense) and the prior year B-21 charge,
which are recorded in Unallocated corporate expense consistent with other changes in deferred state taxes.
Segment Operating Income and Margin Rate
2024 segment operating income increased $1.8 billion, or 65 percent, primarily due to higher operating income at
Aeronautics Systems, largely driven by the prior year $1.56 billion charge on the B-21 program, as well as higher
operating income at Space Systems and Defense Systems. Segment operating margin rate increased to 11.1 percent
reflecting higher operating margin rates at Aeronautics Systems and Space Systems, partially offset by a lower
operating margin rate at Mission Systems.
FAS/CAS Operating Adjustment
The 2024 FAS/CAS operating adjustment reflects higher CAS pension expense largely driven by plan asset returns
in prior years and changes in certain CAS actuarial assumptions as of December 31, 2023.
Unallocated Corporate Expense
The increase in 2024 unallocated corporate expense is primarily due to a $127 million increase in deferred state
taxes associated with the prior year B-21 charge and the MTM adjustment, partially offset by lower intangible asset
amortization and PP&E step-up depreciation and a loss recognized in the prior year in connection with the
divestiture of a small international subsidiary.
Net Estimate-At-Completion (EAC) Adjustments - We record changes in estimated contract earnings at completion
(net EAC adjustments) using the cumulative catch-up method of accounting. Net EAC adjustments can have a
significant effect on reported sales and operating income and the aggregate amounts are presented in the table below:
Year Ended December 31
$ in millions
2024
2023
2022
Favorable EAC adjustments
$
1,461 $
1,314 $
1,337
Unfavorable EAC adjustments
(1,111)
(1,230)
(977)
Net EAC adjustments
$
350 $
84 $
360
NORTHROP GRUMMAN CORPORATION
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Net EAC adjustments by segment are presented in the table below:
Year Ended December 31
$ in millions
2024
2023
2022
Aeronautics Systems
$
151 $
(44) $
174
Defense Systems
96
91
104
Mission Systems
59
149
138
Space Systems
42
(101)
(31)
Eliminations
2
(11)
(25)
Net EAC adjustments
$
350 $
84 $
360
AERONAUTICS SYSTEMS
Aeronautics Systems is a leader in the design, development, production, integration, sustainment and modernization
of military aircraft systems for the U.S. Air Force, the U.S. Navy, other U.S. government agencies, and international
customers. Major products include strategic long-range strike aircraft; tactical fighter and air dominance aircraft;
airborne battle management and command and control systems; and unmanned autonomous aircraft systems,
including high-altitude long-endurance (HALE) strategic intelligence, surveillance and reconnaissance (ISR)
systems.
Year Ended December 31
% Change in
$ in millions
2024
2023
2022
2024
2023
Sales
$ 12,030
$ 10,786
$ 10,531
12 %
2 %
Operating income (loss)
1,182
(473)
1,116
NM
NM
Operating margin rate
9.8 %
(4.4) %
10.6 %
Sales
2024 sales increased $1.2 billion, or 12 percent, primarily due to the continuing transition to production on B-21
driving higher restricted volume, a $448 million increase in F-35 production and sustainment volume due, in part, to
the timing of materials, a $134 million increase in Triton LRIP production volume, a $134 million increase in E-2
fleet sustainment and modernization work, and higher volume on Global Hawk sustainment activities.
Operating Income
2024 operating income increased $1.7 billion primarily due to the prior year $1.56 billion charge on the B-21
program as well as higher sales. Operating margin rate increased to 9.8 percent principally due to the prior year B-21
charge.
DEFENSE SYSTEMS
Defense Systems is a leader in the design, engineering, development, integration and production of strategic
deterrent systems, advanced tactical weapons, and missile defense solutions, and a provider of sustainment,
modernization and training services for manned and unmanned aircraft and electronics systems for the U.S. military
and a broad range of international customers. Major products and services include strategic missiles; integrated, all-
domain command and control (C2) systems; precision strike weapons; advanced propulsion, including tactical solid
rocket motors and high speed air-breathing and hypersonic systems; high-performance gun systems, ammunition,
precision munitions and advanced fuzes; and aircraft and mission systems logistics support, sustainment, operations
and modernization.
Year Ended December 31
% Change in
$ in millions
2024
2023
2022
2024
2023
Sales
$ 8,560
$ 8,289
$ 7,629
3 %
9 %
Operating income
866
829
781
4 %
6 %
Operating margin rate
10.1 %
10.0 %
10.2 %
NORTHROP GRUMMAN CORPORATION
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Sales
2024 sales increased $271 million, or 3 percent, primarily due to a $182 million increase on Sentinel as that program
continues to ramp, a $163 million increase on certain military ammunition programs, a $124 million increase on
Stand-in Attack Weapon (SiAW) as the program ramps and higher volume from timing of materials and increased
order quantities on the Guided Multiple Launch Rocket System (GMLRS) program. These increases were partially
offset by a $262 million decrease due to the completion of an international training program and lower volume on
the Special Electronic Mission Aircraft (SEMA) program as it nears completion.
2023 sales increased $660 million, or 9 percent, primarily due to a $426 million increase driven by Sentinel ramp-
up, as well as higher volume on ammunition programs, GMLRS, an international training program, Hypersonic
Attack Cruise Missile (HACM), and SiAW.
Operating Income
2024 operating income increased $37 million, or 4 percent, primarily due to higher sales. Operating margin rate was
comparable to the prior period.
2023 operating income increased $48 million, or 6 percent, due to higher sales, partially offset by a lower operating
margin rate. Operating margin rate decreased to 10.0 percent from 10.2 percent, primarily due to lower net EAC
adjustments.
MISSION SYSTEMS
Mission Systems is a leader in advanced mission solutions and multifunction systems, primarily for the U.S. defense
and intelligence community, and international customers. Major products and services include command, 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; advanced microelectronics; navigation and positioning sensors; maritime power, propulsion and payload
launch systems; full spectrum cyber solutions; and intelligence processing systems.
Year Ended December 31
% Change in
$ in millions
2024
2023
2022
2024
2023
Sales
$ 11,399
$ 10,895
$ 10,396
5 %
5 %
Operating income
1,598
1,609
1,618
(1) %
(1) %
Operating margin rate
14.0 %
14.8 %
15.6 %
Sales
2024 sales increased $504 million, or 5 percent, primarily due to higher volume on restricted advanced
microelectronics and technology programs, increased marine systems sales due, in part, to the timing of materials,
and higher Ground/Air Task Oriented Radar (G/ATOR) volume due to continued ramp-up on full-rate production
(FRP) awards. These increases were partially offset by lower sales on restricted airborne radar programs and the
Scalable Agile Beam Radar (SABR) program.
Operating Income
2024 operating income decreased $11 million, or 1 percent, due to a lower operating margin rate, partially offset by
higher sales. Operating margin rate decreased to 14.0 percent from 14.8 percent primarily due to lower net EAC
adjustments on certain airborne radar production programs due, in part, to production inefficiencies that have driven
higher labor costs, as well as changes in contract mix toward more cost-type content. These decreases were partially
offset by sales growth on higher margin advanced microelectronics programs.
NORTHROP GRUMMAN CORPORATION
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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, and launch systems for national security, civil government,
commercial and international customers. Major products include satellites and spacecraft systems, subsystems,
sensors and payloads; ground systems; missile defense systems and interceptors; and launch vehicles and related
propulsion systems.
Year Ended December 31
% Change in
$ in millions
2024
2023
2022
2024
2023
Sales
$ 11,731
$ 11,873
$ 10,570
(1) %
12 %
Operating income
1,254
1,130
1,078
11 %
5 %
Operating margin rate
10.7 %
9.5 %
10.2 %
Sales
2024 sales decreased $142 million, or 1 percent, primarily due to wind-down of work on the restricted space and
NGI programs, which reduced sales by $595 million. This reduction was partially offset by a $302 million increase
on Space Development Agency (SDA) satellite programs and a $130 million increase on the Habitation and
Logistics Outpost (HALO) program.
2023 sales increased $1.3 billion, or 12 percent, primarily due to higher volume on restricted programs and ramp-up
on development programs, including $333 million on the Next-Gen Polar program, $219 million on the NGI
program, $119 million on the SDA Tranche 1 Tracking Layer program and $102 million on the SDA Tranche 2
Transport Layer program. These increases were partially offset by a $172 million decrease for CRS missions and a
$109 million decrease on the HALO program.
Operating Income
2024 operating income increased $124 million, or 11 percent, primarily due to a higher operating margin rate.
Operating margin rate increased to 10.7 percent from 9.5 percent primarily due to higher net EAC adjustments
largely driven by the HALO program as previously disclosed.
2023 operating income increased $52 million, or 5 percent, due to higher sales, partially offset by a lower operating
margin rate. Operating margin rate decreased to 9.5 percent from 10.2 percent primarily due to a prior year
$96 million gain recognized in connection with a land exchange transaction, as well as lower net EAC adjustments
driven by $100 million of unfavorable EAC adjustments on the HALO program in 2023. These decreases were
partially offset by a $42 million benefit from insurance recoveries in our commercial space business during 2023.
NORTHROP GRUMMAN CORPORATION
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PRODUCT AND SERVICE ANALYSIS
The following table presents product and service sales and operating costs and expenses by segment:
Year Ended December 31
$ in millions
2024
2023
2022
Segment Information:
Sales
Operating
Costs and
Expenses
Sales
Operating
Costs and
Expenses
Sales
Operating
Costs and
Expenses
Aeronautics Systems
Product
$
9,064 $
8,248 $
8,157 $
8,942 $
7,981 $
7,161
Service
2,723
2,382
2,389
2,099
2,311
2,042
Intersegment eliminations
243
218
240
218
239
212
Total Aeronautics Systems
12,030
10,848
10,786
11,259
10,531
9,415
Defense Systems
Product
5,843
5,304
5,282
4,819
4,604
4,163
Service
1,862
1,641
2,231
1,959
2,231
1,985
Intersegment eliminations
855
749
776
682
794
700
Total Defense Systems
8,560
7,694
8,289
7,460
7,629
6,848
Mission Systems
Product
8,076
7,000
7,749
6,669
7,376
6,291
Service
2,146
1,805
2,092
1,730
2,005
1,639
Intersegment eliminations
1,177
996
1,054
887
1,015
848
Total Mission Systems
11,399
9,801
10,895
9,286
10,396
8,778
Space Systems
Product
9,743
8,711
9,709
8,844
8,561
7,664
Service
1,576
1,398
1,681
1,468
1,533
1,404
Intersegment eliminations
412
368
483
431
476
424
Total Space Systems
11,731
10,477
11,873
10,743
10,570
9,492
Total Product
$
32,726 $
29,263 $
30,897 $
29,274 $
28,522 $
25,279
Total Service
8,307
7,226
8,393
7,256
8,080
7,070
Total Segment(1)
$
41,033 $
36,489 $
39,290 $
36,530 $
36,602 $
32,349
(1)A reconciliation of segment operating income to total operating income is included in “Segment Operating Results.”
Product Sales and Costs
2024 product sales increased $1.8 billion, or 6 percent, due to an increase in product sales at all four sectors. The
increase was principally driven by higher volume on restricted programs, F-35, Triton and E-2 at Aeronautics
Systems, higher volume on Sentinel, certain military ammunition programs, SiAW and GMLRS at Defense
Systems, higher restricted sales, partially offset by lower SABR volume, at Mission Systems and sales growth on
SDA satellite programs and HALO, partially offset by wind-down of work on the restricted space and NGI
programs, at Space Systems.
2023 product sales increased $2.4 billion, or 8 percent, due to an increase in product sales at all four sectors. The
increase was principally driven by higher volume on restricted programs and NGI at Space Systems, higher volume
on Sentinel, ammunition programs, GMLRS, HACM, and the Integrated Battle Command System (IBCS) program
at Defense Systems, and higher restricted sales at Mission Systems and Aeronautics Systems.
2024 product costs were comparable to the prior year, reflecting a higher operating margin rate principally due to the
prior year $1.56 billion charge on the B-21 program at Aeronautics Systems and higher EAC adjustments at Space
Systems, largely driven by the HALO program.
2023 product costs increased $4.0 billion, or 16 percent, consistent with the higher product sales described above
and reflect a lower operating margin rate principally due to the previously described $1.56 billion charge on the
B-21 program at Aeronautics Systems and lower net EAC adjustments on Space Systems production programs.
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Service Sales and Costs
2024 service sales decreased $86 million, or 1 percent, primarily due to a decrease in service sales at Defense
Systems principally due to the completion of an international training program and lower volume on SEMA,
partially offset by an increase in service sales at Aeronautics Systems driven by higher volume on restricted
programs and Global Hawk.
2023 service sales increased $313 million, or 4 percent, due to an increase in service sales at Space Systems,
Mission Systems, and Aeronautics Systems. The increase was principally driven by higher restricted sales at Space
Systems and Aeronautics Systems, and higher volume on restricted programs and F-35 sustainment at Mission
Systems.
2024 service costs were comparable to the prior year, consistent with the change in services sales described above.
2023 service costs increased $186 million, or 3 percent, consistent with the higher service sales described above and
reflects a higher operating margin rate on Space Systems service programs.
BACKLOG
Backlog represents the future sales we expect to recognize on firm orders received by the company and is equivalent
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 appropriated) and unfunded backlog. Unexercised contract options
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 following at December 31, 2024 and 2023:
2024
2023
$ in millions
Funded
Unfunded
Total
Backlog
Total
Backlog
% Change
in 2024
Aeronautics Systems
$ 10,689 $ 13,409 $ 24,098 $ 19,583
23 %
Defense Systems
9,873
17,845
27,718
20,198
37 %
Mission Systems
11,574
4,869
16,443
16,108
2 %
Space Systems
7,526
15,683
23,209
28,341
(18) %
Total backlog
$ 39,662 $ 51,806 $ 91,468 $ 84,230
9 %
2024 net awards totaled $50.6 billion. Significant 2024 new awards include $11.8 billion for restricted programs
(primarily at Aeronautics Systems, Mission Systems, and Space Systems), $3.5 billion for the Take Charge and
Move Out (TACAMO) mission, $3.5 billion for F-35 (primarily at Aeronautics Systems), $2.4 billion for E-2, $1.8
billion for Next-Gen OPIR Polar, $0.9 billion for Poland IBCS, and $0.8 billion for certain military ammunition
programs.
During 2024, the company reduced unfunded backlog by $1.6 billion and $0.7 billion related to terminations for
convenience in our restricted space business and on the NGI program at Space Systems, respectively.
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 capital needs, satisfaction of contractual commitments, funding of our pension and
OPB plans, investment in our business through capital expenditures, and shareholder return through dividend
payments and share repurchases.
As of December 31, 2024, we had cash and cash equivalents of $4.4 billion; $268 million was held outside of the
U.S. by foreign subsidiaries. We expect cash and cash equivalents and cash generated from operating activities,
supplemented by borrowings under credit facilities, commercial paper and/or in the capital markets through our shelf
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 five-year senior unsecured credit facility in an aggregate principal amount of $2.5 billion,
and in April 2024, we renewed our one-year $500 million uncommitted credit facility. At December 31, 2024, there
were no borrowings outstanding under these credit facilities. In January 2024, we issued $2.5 billion of unsecured
senior notes for general corporate purposes, including debt repayment, share repurchases and working capital.
The company’s principal contractual commitments include purchase obligations, repayments of long-term debt and
related interest, and payments under operating leases. At December 31, 2024, we had $20.5 billion of purchase
obligations, approximately half of which is short-term. Purchase obligations are largely comprised of open purchase
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order commitments to suppliers and subcontractors under U.S. government contracts. In most circumstances, our
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, 2024, we had capital expenditure commitments of $1.5 billion, which we expect to satisfy with
cash on hand. We also had provisions for uncertain tax positions of $1.4 billion, some or all of which could result in
future cash payments to various taxing authorities. At this time, we are unable to estimate the timing and amount of
any future cash outflows related to these uncertain tax positions.
Refer to the respective notes to the consolidated financial statements for further information about our share
repurchase programs (Note 2), commercial paper, credit facilities and long-term debt (Note 9), standby letters of
credit and guarantees (Note 11), future minimum contributions for the company’s pension and OPB plans (Note 12),
and lease payment obligations (Note 14).
Income Tax Matters
During the fourth quarter of 2024, the company entered into an agreed Revenue Agent’s Report (“RAR”) for certain
matters related to the company’s 2018-2020 federal income tax returns, largely related to our methods of accounting
associated with the timing of revenue recognition and related costs under IRC Section 451(b). The company made a
$956 million payment in December 2024, inclusive of associated interest, in connection with the agreed RAR. Refer
to Note 6 to the financial statements for further information about our unrecognized tax benefits.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the option to deduct research and
development expenditures in the current year and requires taxpayers to amortize them over five years pursuant to
IRC Section 174. Our 2024 and 2023 cash from operations were reduced for federal estimated tax payments we
made related to Section 174 of approximately $350 million and $500 million, respectively. In the future, Congress
may consider legislation that would defer the amortization requirement to later years, possibly with retroactive
effect. In the meantime, we expect to continue to make additional federal tax payments based on the current Section
174 tax law, which we estimate will reduce our 2025 cash from operations by approximately $230 million. The
impact of Section 174 on our cash from operations depends on the amount of research and development
expenditures incurred by the company and whether the IRS issues guidance on the provision which differs from our
current interpretation, among other things.
Cash Flow Measures
In addition to our cash position, we consider various cash flow measures in capital deployment decision-making,
including cash provided by operating activities and adjusted free cash flow, a non-GAAP measure described in more
detail below.
Operating Cash Flow
The table below summarizes key components of cash provided by operating activities:
Year Ended December 31
$ in millions
2024
2023
2022
Net earnings
$
4,174 $
2,056 $
4,896
B-21 charge
—
1,559
—
Non-cash items(1)
8
551
(1,305)
Pension and OPB contributions
(129)
(139)
(136)
Changes in trade working capital
274
(144)
(600)
Other, net
61
(8)
46
Net cash provided by operating activities
$
4,388 $
3,875 $
2,901
(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.
2024 cash provided by operating activities increased $513 million, or 13 percent, principally due to improved trade
working capital, largely driven by lower net tax payments, as well as higher net earnings.
Adjusted Free Cash Flow
Adjusted free cash flow, as reconciled in the table 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, if any. Adjusted free cash flow includes proceeds from the sale of equipment to a customer as
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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 adjusted free cash flow as a key factor in our
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 available for
discretionary purposes, or as an alternative to operating cash flows presented in accordance with GAAP.
The table below reconciles net cash provided by operating activities to adjusted free cash flow:
Year Ended December 31
% Change in
$ in millions
2024
2023
2022
2024
2023
Net cash provided by operating activities
$ 4,388 $ 3,875 $ 2,901
13 %
34 %
Capital expenditures
(1,767) (1,775) (1,435)
— %
24 %
Proceeds from sale of equipment to a customer
—
—
155
NM
(100) %
Adjusted free cash flow
$ 2,621 $ 2,100 $ 1,621
25 %
30 %
2024 adjusted free cash flow increased $521 million, or 25 percent, principally due to higher net cash provided by
operating activities.
Investing Cash Flow
2024 net cash used in investing activities increased $167 million principally due to the receipt of proceeds from the
sale of minority investments in the prior year.
Financing Cash Flow
2024 net cash used in financing activities decreased $366 million primarily due to $1.05 billion of lower debt
repayments and a $500 million increase in proceeds from long-term debt, partially offset by a $1.0 billion increase in
share repurchases and a $70 million increase in dividends paid. Cash returned to shareholders through share
repurchases and dividends totaled $3.7 billion in 2024 and $2.6 billion in 2023.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in conformity with GAAP, which requires us to make estimates
and assumptions about future events that affect the amounts reported in our consolidated financial statements. We
employ judgment in making our estimates in consideration of historical experience, currently available information
and various other assumptions 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, manufacture 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), un-priced change orders, REAs and contract claims. Variable consideration is 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 variable consideration is subsequently resolved.
We estimate variable consideration as the most likely amount to which we expect to be entitled.
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 often
span a period of several years, estimation of revenue, cost, and progress toward completion requires the use of
judgment. Factors considered in these estimates include our historical performance, the availability, productivity and
cost of labor, the nature and complexity of work to be performed, the effect of change orders, availability and cost of
materials, components and subcontracts, the effect of any delays in performance and the level of indirect cost
allocations.
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We also consider the impact of macroeconomic factors on our estimates, in particular on contract EACs that span
several years. For example, we have included in our EACs management’s best estimate of the impact inflation and
disruptions in the supply chain have had and may continue to have on our contracts. Although the overall financial
impact these macroeconomic factors have had on our company has largely subsided, volatility of the recent
macroeconomic environment has added complexity to our estimation process and may result in our contract EACs
having more variability in the future than they might otherwise have had if the estimates had been prepared in a
more stable macroeconomic environment.
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. These assessments require judgments and estimates
that can be affected by any number of these factors over time, which may cause actual results to differ materially
from those estimates as facts and circumstances change or become known to us.
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 and early-stage/
low-rate production contracts are inherently more uncertain as to future events than on mature, full-rate production
contracts. As a result, there is typically more variability in those estimates and greater financial risk associated with
unanticipated cost growth on fixed-price development contracts and early-stage/low-rate production contracts.
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 affecting contract costs,
performance issues with subcontractors 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. Similarly, the changes in estimates may include
changes in, or resolution of, identified opportunities for operating margin improvement.
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. When we determine changes in the
assumptions are warranted, or as a result of plan amendments, future pension and OPB expense and our projected
benefit obligation could increase or decrease materially. The principal estimates and assumptions that have a
significant effect on our consolidated financial position and results of operations are the discount rate, cash balance
crediting rate, expected long-term rate of return on plan assets, estimated fair market value of plan assets, and the
mortality rate of those covered by our pension and OPB plans. The effects of actual results differing from our
assumptions and the effects of changing assumptions (i.e., actuarial gains or losses) are recognized immediately
through earnings upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events
warrant remeasurement.
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 fixed-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 for each of our significant benefit plans. Taking into consideration
the factors noted above, our weighted-average composite pension discount rate was 5.73 percent at December 31,
2024 and 5.15 percent at December 31, 2023.
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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 assumptions constant, an increase or decrease of 25 basis points in the
December 31, 2024 discount rate assumption would have the following estimated effects on 2024 pension and OPB
obligations, which would be reflected in the 2024 MTM expense (benefit), and 2025 expected pension and OPB
expense:
$ in millions
25 Basis Point
Decrease in
Rate
25 Basis Point
Increase in
Rate
2024 pension and OPB obligation and MTM expense (benefit)
$
785 $
(750)
2025 pension and OPB (benefit) expense
(20)
19
Cash Balance Crediting Rate – A portion of the company’s pension obligation and resulting pension expense is
based on a cash balance formula, where participants’ hypothetical account balances are accumulated over time with
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 returns. The
cash balance crediting rate tends to move in concert with the discount rate but has an offsetting effect 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 assumption has been set to its current level of 4.78 percent
as of December 31, 2024, increasing to 4.90 percent by 2030. Holding all other assumptions constant, an increase or
decrease of 25 basis points in the December 31, 2024 cash balance crediting rate assumption would have the
following estimated effects on the 2024 pension benefit obligation, which would be reflected in the 2024 MTM
(benefit) expense, and 2025 expected pension expense:
$ in millions
25 Basis Point
Decrease in
Rate
25 Basis Point
Increase in
Rate
2024 pension obligation and MTM (benefit) expense
$
(101) $
104
2025 pension (benefit) expense
(9)
9
Expected Long-Term Rate of Return on Plan Assets – The expected long-term rate of return on plan assets (EROA)
assumption reflects the average rate of net earnings we expect on current and future benefit plan investments. EROA
is a long-term assumption, which we review annually and adjust to reflect changes in our long-term view of
expected market returns and/or significant changes in our plan asset investment policy. Due to the inherent
uncertainty of this assumption, we consider multiple data points at the measurement date including the plan’s target
asset allocation, historical plan 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.
During 2024, the Investment Committee of the company’s benefit plans reviewed the plans’ major asset class
allocations and approved an update to increase the target fixed-income asset allocation from 43% to 45%. The actual
asset allocation as of December 31, 2024 was approximately 41% fixed-income, 29% public equities, 23%
alternatives, 6% private credit and 1% 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 12 to the consolidated financial
statements.
While historical market returns are not necessarily predictive of future market returns, given our long history of plan
performance supported by the stability in our investment mix, investment managers, and active asset management,
we believe our actual historical performance is a reasonable metric to consider when developing our EROA. Our
average annual rate of return from 1976 to 2024 was approximately 10.5 percent and our 20-year and 30-year rolling
average rates of return were approximately 7.5 percent and 8.9 percent, respectively, each determined on an
arithmetic basis and net of expenses. Our 2024 return on plan assets, net of expenses, was approximately 4.7
percent.
Consistent with our past practice, we obtained long-term capital market forecasting models from several third parties
and, using our target asset allocation, developed an expected rate of return on plan assets from each model. We
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considered not only the specific returns projected by those third-party models, but also changes in the models year-
to-year when developing our EROA.
For determining 2024 FAS expense, we assumed an expected long-term rate of return on pension plan assets of 7.5
percent and an expected long-term rate of return on OPB plan assets of 7.12 percent. For 2025 FAS expense, we
have assumed an expected long-term rate of return on pension plan assets of 7.5 percent and 7.08 percent on OPB
plans. Holding all other assumptions constant, an increase or decrease of 25 basis points in our December 31, 2024
EROA assumption would have the following estimated effects on 2025 expected pension and OPB expense:
$ in millions
25 Basis Point
Decrease
25 Basis Point
Increase
2025 pension and OPB expense (benefit)
$
75 $
(75)
In addition, holding all other assumptions constant, an increase or decrease of 100 basis points in actual versus
expected return on plan assets would have the following estimated effects on our 2025 MTM expense (benefit):
$ in millions
100 Basis Point
Decrease
100 Basis Point
Increase
2025 MTM expense (benefit)
$
300 $
(300)
Estimated Fair Market Value of Plan Assets – For certain plan assets where the fair market value is not readily
determinable, such as real estate, private equity, hedge funds and opportunistic investments, we develop estimates of
fair value using the best information available. Estimated fair values on these plan assets are based on redemption
values and net asset values (NAV), as well as valuation methodologies that include third-party appraisals,
comparable transactions, discounted cash flow valuation models and public market data.
Mortality Rate – We use mortality assumptions to estimate life expectancies of plan participants. In October 2014,
the Society of Actuaries Retirement Plans Experience Committee (RPEC) issued updated mortality tables and a
mortality improvement scale, which reflected longer life expectancies than previously projected. In October 2019,
the RPEC issued an updated mortality base table (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.
The RPEC has not released a projection scale since MP-2021, citing complexities in incorporating the substantial
number of “excess deaths” in 2020 and 2021 into their existing model and uncertainties about future expectations
primarily related to COVID-19. As such, after considering the information released by the RPEC in October 2021 as
well as the company’s recent mortality experience, we adopted the full MP-2021 projection scale while continuing
to use the Pri-2012 White Collar table, supplemented with 50% of the Gradual Wear-Off illustration as outlined in
the RPEC’s 2022 Mortality Improvement Update paper to reflect the future impacts of COVID-19, to develop our
mortality assumptions used in calculating our pension and OPB obligations recognized at December 31, 2024, and
the amounts estimated for our 2025 pension and OPB expense.
For further information regarding our pension and OPB plans, see “Risk Factors” and Notes 1 and 12 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 facts 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
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
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than anticipated; information regarding the potential causes and effects of contamination; results of efforts to involve
other responsible parties; financial capabilities of other responsible parties; changes in laws and regulations, their
interpretation or application; contractual obligations affecting remediation or responsibilities; and improvements in
remediation technology. As we expect to recover a significant 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
recoverability of our environmental remediation costs, assessing, among other things, U.S. government regulations,
our U.S. government contract mix and past practices. Portions of the company’s environmental liabilities we do not
expect to be recoverable have been expensed. As of December 31, 2024, we expect approximately 93 percent of the
company’s environmental remediation costs to be recoverable; however, to the extent our judgments on the
recoverability of our environmental remediation costs change or the unallowable portion of our environmental
remediation costs otherwise increase, there could be a significant impact on our consolidated financial position,
annual results of operations and/or cash flows.
Income Tax Matters – The evaluation of tax positions taken in a filed tax return, or planned to be taken in a future
tax return or claim, requires the use of judgment. We establish reserves for uncertain tax positions when, despite the
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 return or claim. The company follows a recognition and measurement
approach, considering the facts, circumstances, and information available at the reporting date. We exercise
judgment in determining the level of evidence necessary and appropriate to support our assessment using all
available information. The technical merits of a given tax position are derived from sources of authority in the tax
law and their applicability to the facts and circumstances of the position. In measuring the tax position, the company
considers the amounts and probabilities of the outcomes that could be realized upon settlement. When it is 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. As of December 31, 2024, we
have approximately $1.4 billion in unrecognized tax benefits. 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, annual results of operations and/or cash flows.
For further information on litigation, commitments and contingencies, see “Risk Factors” and Note 1, Note 6, Note
10 and Note 11 to the consolidated financial statements.
Goodwill and Long-Lived 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 record property, plant and equipment (PP&E) for capital assets used in operating our business. The cost of
PP&E utilized in support of our government contracts is generally allowable and allocable cost in accordance with
applicable FAR and CAS requirements, which limits our risk of impairment on those assets. However, the cost of
PP&E utilized in support of our commercial business, including approximately $575 million of PP&E used in our
commercial space business, is not allocable to government contracts and is therefore subject to greater recoverability
risk.
Impairment Testing – We test for impairment 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, 2024 and 2023,
respectively, indicated that the estimated fair value of each reporting unit significantly exceeded its respective
carrying value. There were no impairment charges recorded in the years ended December 31, 2024, 2023 and 2022.
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 2024, we 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, consistent with our operating plans. This
income valuation method requires management to project sales, operating expenses, working capital, capital
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spending and cash flows for the reporting units over a multi-year period, as well as to determine the weighted-
average cost of capital (WACC) used as a discount rate and terminal value assumptions. The WACC takes into
account the relative weights of each component of our consolidated capital structure (equity and debt) and represents
the expected cost of new capital adjusted as appropriate to consider lower risk profiles associated with longer-term
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.
We test for impairment of our long-lived assets when events or changes in circumstances indicate that the carrying
amount of these assets may not be recoverable. Our assessment is based on our projection of the undiscounted future
operating cash flows of the related asset group. If such projections indicate that future 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, 2024, 2023 and
2022.
Impairment assessment inherently involves management judgments as to assumptions about expected future cash
flows and the impact of market conditions on those assumptions. Due to the many variables inherent in developing
the estimates used in our impairment analyses, differences in assumptions may have a material effect on the results
of those impairment analyses.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
EQUITY RISK
We have been and continue to be exposed to market risk with respect to our portfolio of marketable securities with a
fair value of $347 million at December 31, 2024. These securities are exposed to market volatilities, changes in price
and interest rates.
INTEREST RATE RISK
We are exposed to interest rate risk on variable-rate short-term credit facilities for which there were no borrowings
outstanding at December 31, 2024. At December 31, 2024, we have $16.3 billion of long-term debt, primarily
consisting of fixed-rate debt, with a fair value of approximately $15.3 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. Additionally, if we were to refinance our
long-term debt, it may be refinanced at higher interest rates.
FOREIGN CURRENCY RISK
In certain circumstances, we are exposed to foreign currency risk. We enter foreign currency forward contracts to
manage a portion of the exchange rate risk related to receipts from customers and payments to suppliers
denominated in foreign currencies. We do not hold or issue derivative financial instruments for trading purposes. At
December 31, 2024, foreign currency forward contracts with a notional amount of $399 million were outstanding.
At December 31, 2024, 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.
INFLATION RISK
The global macroeconomic environment has experienced extraordinary challenges in recent years, including the
highest rates of inflation in 40 years. The company, its subcontractors and other suppliers, have experienced, and
may in the future experience, pressures from heightened levels of inflation and challenges from the macroeconomic
environment. Certain of our fixed-price contracts include economic price adjustment (EPA) clauses to help protect
the company against inflationary pressures. However, these EPA clauses may not be able to fully mitigate adverse
impacts of rising inflation on the company’s financial position, results of operations and/or cash flows.
NORTHROP GRUMMAN CORPORATION
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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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2024, 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, 2024, based on the
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated January 29, 2025 expressed an unqualified opinion
on the Company’s internal control over financial reporting.
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 Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial
statements that was communicated or required to be communicated to the audit and risk committee and that (1)
relates 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
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
Revenue Recognition - Estimates of Revenue and Cost at Completion for Select Long-Term Contracts - Refer
to Note 1 to the financial statements
Critical Audit Matter Description
As further described in Note 1 to the financial statements, the Company recognizes revenue as control is transferred
to the customer, which for long-term contracts is generally 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
reasonably dependable estimates regarding the revenue and costs associated with the design, manufacture and
delivery of their products or services. The Company estimates profit on these contracts as the difference between
total estimated revenue and total estimated costs at completion and recognizes that profit as costs are incurred. We
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analyzed the Company’s contract portfolio to identify contracts that we believe had elevated financial or
performance risk. For those contracts identified, the evaluation of one or more of the assumptions used to recognize
revenue required extensive audit effort due to the complexity of the contracts and a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the revenue and cost estimates for these contracts identified included the following,
among others:
•
We tested the operating effectiveness of controls over the significant assumptions and judgments
underlying the estimates of revenues and costs to completion associated with these long-term contracts.
•
Based on the risk characteristic identified on an individual contract, we evaluated certain revenue and cost
assumptions by:
–
Reading the underlying contract and any amendments or modifications to understand the
contractual requirements and performance obligations.
–
Assessing the timing of recognition of any incentive fees or award fees based on contract terms
and relevant historical trends.
–
Evaluating management’s ability to achieve the estimates of remaining revenue and costs by
performing inquiries with the Company’s program and business management regarding their basis
of estimates including work plans, engineering specifications, program labor and suppliers,
challenges or opportunities related to the program, actual performance to date compared to plan,
and any recent correspondence between the Company and the customer on changes in scope or
contractual terms.
–
Evaluating selected changes to the estimates of costs to completion and obtaining supporting
documentation on the appropriateness of the timing and amounts of these changes in estimates.
–
Testing the accuracy and completeness of the information used in developing estimates, as well as
the mathematical accuracy of management’s calculation of revenue recognized during the period
for the performance obligations.
/s/
Deloitte & Touche LLP
McLean, Virginia
January 29, 2025
We have served as the Company’s auditor since 1975.
NORTHROP GRUMMAN CORPORATION
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CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Year Ended December 31
$ in millions, except per share amounts
2024
2023
2022
Sales
Product
$ 32,726
$ 30,897
$ 28,522
Service
8,307
8,393
8,080
Total sales
41,033
39,290
36,602
Operating costs and expenses
Product
26,188
26,226
22,761
Service
6,483
6,513
6,367
General and administrative expenses
3,992
4,014
3,873
Total operating costs and expenses
36,663
36,753
33,001
Operating income
4,370
2,537
3,601
Other (expense) income
Interest expense
(621)
(545)
(506)
Non-operating FAS pension benefit
656
530
1,505
Mark-to-market pension and OPB benefit (expense)
443
(422)
1,232
Other, net
168
246
4
Earnings before income taxes
5,016
2,346
5,836
Federal and foreign income tax expense
842
290
940
Net earnings
$
4,174
$
2,056
$
4,896
Basic earnings per share
$
28.39
$
13.57
$
31.61
Weighted-average common shares outstanding, in millions
147.0
151.5
154.9
Diluted earnings per share
$
28.34
$
13.53
$
31.47
Weighted-average diluted shares outstanding, in millions
147.3
152.0
155.6
Net earnings (from above)
$
4,174
$
2,056
$
4,896
Other comprehensive (loss) income, net of tax
Change in cumulative translation adjustment
(2)
23
(16)
Change in other, net
(22)
2
6
Other comprehensive (loss) income, net of tax
(24)
25
(10)
Comprehensive income
$
4,150
$
2,081
$
4,886
The accompanying notes are an integral part of these consolidated financial statements.
NORTHROP GRUMMAN CORPORATION
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31
$ in millions, except par value
2024
2023
Assets
Cash and cash equivalents
$
4,353
$
3,109
Accounts receivable, net
1,272
1,454
Unbilled receivables, net
5,908
5,693
Inventoried costs, net
1,455
1,109
Prepaid expenses and other current assets
1,286
2,341
Total current assets
14,274
13,706
Property, plant and equipment, net of accumulated depreciation of $8,733 for 2024 and
$7,964 for 2023
10,536
9,653
Operating lease right-of-use assets
1,770
1,818
Goodwill
17,512
17,517
Intangible assets, net
254
305
Deferred tax assets
1,599
1,020
Pension and other postretirement benefit plan assets
2,184
1,331
Other non-current assets
1,230
1,194
Total assets
$ 49,359
$ 46,544
Liabilities
Trade accounts payable
$
2,599
$
2,110
Accrued employee compensation
2,271
2,251
Advance payments and billings in excess of costs incurred
4,070
4,193
Other current liabilities
5,188
3,388
Total current liabilities
14,128
11,942
Long-term debt, net of current portion of $1,582 for 2024 and $70 for 2023
14,692
13,786
Pension and other postretirement benefit plan liabilities
1,120
1,290
Operating lease liabilities
1,798
1,892
Other non-current liabilities
2,331
2,839
Total liabilities
34,069
31,749
Commitments and contingencies (Note 11)
Shareholders’ equity
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:
2024—144,952,026 and 2023—150,109,271
145
150
Paid-in capital
—
—
Retained earnings
15,297
14,773
Accumulated other comprehensive loss
(152)
(128)
Total shareholders’ equity
15,290
14,795
Total liabilities and shareholders’ equity
$ 49,359
$ 46,544
The accompanying notes are an integral part of these consolidated financial statements.
NORTHROP GRUMMAN CORPORATION
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
$ in millions
2024
2023
2022
Operating activities
Net earnings
$
4,174
$
2,056
$
4,896
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization
1,370
1,338
1,342
Mark-to-market pension and OPB (benefit) expense
(443)
422
(1,232)
Stock-based compensation
101
87
99
Deferred income taxes
(582)
(988)
(321)
B-21 charge
—
1,559
—
Net periodic pension and OPB income
(438)
(308)
(1,193)
Pension and OPB contributions
(129)
(139)
(136)
Changes in assets and liabilities:
Accounts receivable, net
182
54
(44)
Unbilled receivables, net
(215)
247
(646)
Inventoried costs, net
(358)
(220)
(205)
Prepaid expenses and other assets
35
(86)
2
Accounts payable and other liabilities
(513)
519
572
Income taxes payable, net
1,143
(658)
(279)
Other, net
61
(8)
46
Net cash provided by operating activities
4,388
3,875
2,901
Investing activities
Capital expenditures
(1,767)
(1,775)
(1,435)
Proceeds from sale of equipment to a customer
—
—
155
Proceeds from sale of minority investments
—
197
—
Other, net
18
(4)
39
Net cash used in investing activities
(1,749)
(1,582)
(1,241)
Financing activities
Net proceeds from issuance of long-term debt
2,495
1,995
—
Payments of long-term debt
—
(1,050)
—
Common stock repurchases
(2,514)
(1,500)
(1,504)
Cash dividends paid
(1,186)
(1,116)
(1,052)
Payments of employee taxes withheld from share-based awards
(58)
(52)
(50)
Other, net
(132)
(38)
(7)
Net cash used in financing activities
(1,395)
(1,761)
(2,613)
Increase (decrease) in cash and cash equivalents
1,244
532
(953)
Cash and cash equivalents, beginning of year
3,109
2,577
3,530
Cash and cash equivalents, end of period
$
4,353
$
3,109
$
2,577
The accompanying notes are an integral part of these consolidated financial statements.
NORTHROP GRUMMAN CORPORATION
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Year Ended December 31
$ in millions, except per share amounts
2024
2023
2022
Common stock
Beginning of year
$
150
$
153
$
156
Common stock repurchased
(5)
(3)
(4)
Shares issued for employee stock awards and options
—
—
1
End of year
145
150
153
Paid-in capital
Beginning of year
—
—
—
End of year
—
—
—
Retained earnings
Beginning of year
14,773
15,312
12,913
Common stock repurchased
(2,510)
(1,519)
(1,497)
Net earnings
4,174
2,056
4,896
Dividends declared
(1,185)
(1,114)
(1,052)
Stock compensation
45
38
52
End of year
15,297
14,773
15,312
Accumulated other comprehensive loss
Beginning of year
(128)
(153)
(143)
Other comprehensive (loss) income, net of tax
(24)
25
(10)
End of year
(152)
(128)
(153)
Total shareholders’ equity
$ 15,290
$ 14,795
$ 15,312
Cash dividends declared per share
$
8.05
$
7.34
$
6.76
The accompanying notes are an integral part of these consolidated financial statements.
NORTHROP GRUMMAN CORPORATION
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Northrop Grumman Corporation is a leading global aerospace and defense technology 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 capabilities they need to connect, protect and advance humanity.
The company is a leading provider of space systems, military aircraft, missile defense, advanced weapons and long-
range fires capabilities, mission systems, networking and communications, strategic deterrence systems, and
breakthrough technologies, such as advanced computing, microelectronics and cyber. We are focused on competing
and winning programs that enable continued growth, performing on our commitments and affordably delivering
capability our customers need. With the investments we've made in advanced technologies, combined with our
talented workforce and digital transformation capabilities, Northrop Grumman is well positioned to meet our
customers' needs today and in the future.
Principles of Consolidation and Reporting
The consolidated financial statements (the “financial statements”) include the accounts of Northrop Grumman and
its subsidiaries and joint ventures or other investments for which we consolidate the financial results. Intercompany
accounts, transactions 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.
The financial statements are prepared in conformity with U.S. GAAP and in accordance with the rules of the SEC.
The financial statements include adjustments of a normal recurring nature considered necessary by management for
a fair presentation of the company’s consolidated financial position, results of operations and cash flows. For
classification of certain current assets and liabilities, we consider the duration of our customer contracts when
defining our operating cycle, which is generally longer than one year.
Effective July 1, 2024, the company realigned the Strategic Deterrent Systems (SDS) division, which includes the
Ground-Based Strategic Deterrent (“Sentinel”) program, from Space Systems to Defense Systems. This realignment
is reflected in the financial information contained in this report.
Subsequent Realignment - Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft
Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems. This realignment is not reflected in
the financial information contained in this report; it will be reflected in the company’s operating results beginning in
the first quarter of 2025.
Accounting Estimates
Preparation of the financial statements requires management to make estimates and judgments that affect the
reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements,
as well as the reported amounts of sales and expenses during the reporting period. Estimates have been prepared
using the most current and best available information; however, actual results could differ materially from those
estimates.
Revenue Recognition
The majority of our sales are derived from long-term contracts with the U.S. government for the development or
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.
The company recognizes revenue for each separately identifiable performance obligation in a contract representing a
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,
production, sustainment, etc.). In those cases, the company accounts for the distinct contract deliverables as separate
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 fulfill a contract are
not material.
NORTHROP GRUMMAN CORPORATION
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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 termination clauses or entitle the company to payment for work performed to date for
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 upon
delivery).
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
award and incentive fees), un-priced change orders, REAs and contract claims. Variable consideration is 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 variable consideration is subsequently resolved.
We estimate variable consideration as the most likely amount to which we expect to be entitled.
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 future 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
entire amount of the estimable future loss, including an allocation of G&A costs, is charged against income in the
period the loss is identified.
B-21 Program
During the fourth quarter of 2023, we recognized a projected loss of $1.56 billion across the five LRIP options of the
B-21 program. As of December 31, 2024, the remaining loss accrual is $1.3 billion, which is included in Other
current liabilities.
Net EAC Adjustments
The following table presents the effect of aggregate net EAC adjustments:
Year Ended December 31
$ in millions, except per share data
2024
2023
2022
Revenue
$
396 $
298 $
447
Operating income
350
84
360
Net earnings(1)
277
66
284
Diluted earnings per share(1)
1.88
0.43
1.83
(1) Based on a 21% federal statutory tax rate.
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, underlying conditions and financial
impact of the adjustments. During the third quarter of 2024, we recorded a $39 million favorable EAC adjustment on
the HALO program at Space Systems related to the resolution of an engineering change proposal (ECP) as
previously disclosed. During 2023, we recorded a $143 million unfavorable EAC adjustment on the first LRIP lot of
the B-21 program at Aeronautics Systems and $100 million of unfavorable EAC adjustments on the HALO program
at Space Systems. During 2022, we recorded $133 million of favorable EAC adjustments on the EMD phase of the
NORTHROP GRUMMAN CORPORATION
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B-21 program at Aeronautics Systems. No other such adjustments were significant to the financial statements during
the years ended December 31, 2024, 2023 and 2022.
Backlog
Backlog represents the future sales we expect to recognize on firm orders received by the company and is equivalent
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 appropriated) and unfunded backlog. Unexercised contract options
and IDIQ contracts are not included in backlog until the time an option or IDIQ task order is exercised or awarded.
Company backlog as of December 31, 2024 was $91.5 billion. Of our December 31, 2024 backlog, we expect to
recognize approximately 40 percent as revenue over the next 12 months and 65 percent as revenue over the next 24
months, with the remainder to be recognized thereafter.
During 2024, the company reduced unfunded backlog by $1.6 billion and $0.7 billion related to terminations for
convenience in our restricted space business and on the NGI program at Space Systems, respectively.
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 liability 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 receivables 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 receivables are classified as current assets and include amounts that
may be billed and collected beyond one year due to the long-cycle nature of many of our contracts. Accumulated
contract costs in unbilled receivables include costs such as direct production costs, factory and engineering
overhead, production tooling costs, and allowable G&A. Unbilled receivables 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.
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 liabilities until such
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.
Net contract assets are as follows:
$ in millions
December 31,
2024
December 31,
2023
$ Change
%
Change
Unbilled receivables, net
$
5,908 $
5,693 $
215
4 %
Advance payments and amounts in excess of costs incurred
(4,070)
(4,193)
123
(3) %
Net contract assets
$
1,838 $
1,500 $
338
23 %
Changes in the company’s contract assets and liabilities primarily result from timing differences between revenue
recognition and customer billings and/or payments. Net contract assets as of December 31, 2024 increased 23
percent from the prior year, primarily due to the burn down of advances on certain Aeronautics Systems programs
and an increase in unbilled receivables on several programs at Space Systems.
The amount of revenue recognized for the years ended December 31, 2024, 2023 and 2022 that was included in the
contract liability balance at the beginning of each year was $3.6 billion, $3.1 billion and $2.4 billion, respectively.
Disaggregation of Revenue
See Note 15 for information regarding the company’s sales by customer type, contract type and geographic region
for each of our segments. We believe those categories best depict how the nature, amount, timing and uncertainty of
our revenue and cash flows are affected by economic factors.
NORTHROP GRUMMAN CORPORATION
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General and Administrative Expenses
In accordance with applicable FAR and CAS requirements, most general management and corporate expenses
incurred at the segment and corporate locations are considered allowable and allocable costs to our U.S. government
contracts. Allowable and allocable G&A costs, including independent research and development (IR&D) and bid
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.
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, $1.2 billion and $1.2 billion in 2024, 2023 and 2022,
respectively, which represented 2.7 percent, 3.0 percent and 3.3 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 accrued related to unrecognized tax
benefits in income tax expense. Federal tax penalties are also recognized as a component of income tax expense.
In accordance with applicable 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 are, therefore, recorded in
operating costs and expenses. The company generally recognizes changes in deferred state taxes and unrecognized
state tax benefits in unallocated corporate expenses.
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 return or claim. Until these positions are sustained by the taxing authorities or the
statute of limitations concerning such issues lapses, the company does not generally recognize the tax benefits
resulting from such positions and reports the tax effects as a liability for uncertain tax positions in its consolidated
statements of financial position.
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 unobservable inputs reflect internal
market assumptions.
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 observable or whose
significant value drivers are observable.
Level 3 - Significant inputs to the valuation model are unobservable.
The company holds a portfolio of marketable securities to partially fund non-qualified employee benefit plans. A
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. Marketable securities accounted for as trading are recorded at fair value on a recurring
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.
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 Other, net in the consolidated statements of earnings and comprehensive income, while
changes in the fair value of derivative financial instruments that are designated as cash flow hedges are recorded as a
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component of other comprehensive income until the hedged transaction is recognized in earnings. For 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.
The company uses derivative financial instruments to manage its exposure to foreign currency exchange risk related
to receipts from customers and payments to suppliers denominated in foreign currencies (i.e., foreign currency
forward contracts). For foreign currency forward contracts, where model-derived valuations are appropriate, the
company utilizes the income approach to determine the fair value using internal models based on observable market
inputs such as forward rates, interest rates, our own credit risk and our counterparties’ credit risks.
The company does not use derivative financial instruments for trading or speculative purposes, nor does it use
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.
Inventoried Costs
The company records inventoried costs at the lower of cost or net realizable value. Inventoried costs are categorized
into raw materials, work in process, and finished goods. Raw materials are recognized using the average cost method
and are generally included in contract cost when allocated to specific contracts. Work in process primarily consists
of a) costs associated with specific anticipated contracts or costs incurred in excess of existing contract requirements,
which are probable of recovery, and b) costs associated with unsatisfied performance obligations on contracts
accounted for using point in time revenue recognition. Finished goods primarily consists of inventory maintained in
support of sustainment contracts.
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 $100 million and $65 million as of December 31, 2024
and 2023, respectively. Inventoried costs are classified as current assets and include amounts related to contracts
having production cycles longer than one year due to the long-cycle nature of our business.
Cash Surrender Value of Life Insurance Policies
The company maintains whole life and split-dollar life insurance policies primarily on former officers and
executives. Whole life insurance policies are recorded at their cash surrender value as determined by the insurance
carrier, and split-dollar life insurance policies 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, 2024 and 2023, the carrying values associated with these policies
were $416 million and $399 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 (PP&E) are depreciated over the estimated useful lives of individual assets.
Machinery and other equipment is primarily depreciated using declining-balance methods. The other asset categories
are generally depreciated using the straight-line method. Depreciation expense is generally an allowable and
allocable cost in accordance with applicable FAR and CAS requirements and is 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 PP&E
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 PP&E and their useful lives are as follows:
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December 31
Useful life in years, $ in millions
Useful Life
2024
2023
Land and land improvements
Up to 40(1)
$
782 $
742
Buildings and improvements
Up to 45
4,031
3,605
Machinery and other equipment
Up to 20
10,389
9,641
Capitalized software costs
3-5
779
553
Leasehold improvements
Lease Term(2)
3,288
3,076
Property, plant and equipment, at cost
19,269
17,617
Accumulated depreciation
(8,733)
(7,964)
Property, plant and equipment, net
$ 10,536 $
9,653
(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.
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 capital expenditures and included the equipment in PP&E. 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 the final cash payment of $155 million
related to the equipment sale during 2022 and included it in Proceeds from sale of equipment to a customer in the
consolidated statements of cash flows.
During the year ended December 31, 2022, the company acquired $46 million of internal use software through long-
term financing directly with the supplier. The software was recorded in PP&E as a non-cash investing activity and
the related liability was recorded in long-term debt as a non-cash financing activity. During the year ended
December 31, 2023, the company received lease incentives for landlord funded leasehold improvements of
$55 million related to Space Systems real estate leases, which were recorded in PP&E and included in non-cash
investing activities.
On December 28, 2022 the company acquired certain leased land in exchange for company-owned land, which had
been used previously for production-related activities at Space Systems. The exchange was accounted for as a
nonmonetary transaction, and the acquired land, valued at approximately $155 million, was recorded in PP&E as a
non-cash investing activity. The transaction resulted in a $96 million gain, which was reflected in operating costs
and expenses in the consolidated statements of earnings and comprehensive income.
Non-cash investing activities also include capital expenditures incurred but not yet paid of $242 million, $75 million
and $113 million as of December 31, 2024, 2023 and 2022, respectively.
Sale of Minority Investment
In July 2023, the company sold its minority investment in an Australian business for AUD $235 million (the
equivalent of $157 million upon settlement). The sale resulted in a pre-tax gain of $97 million, which is reflected in
Other, net on the consolidated statements of earnings and comprehensive income for the year ended December 31,
2023. Proceeds from the sale are included in investing activities on the consolidated statement of cash flows for the
year ended December 31, 2023.
Goodwill and Other Purchased Intangible Assets
Goodwill and other purchased intangible asset balances are included in the identifiable assets of their assigned
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 allocable to government contracts
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 useful lives.
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Leases
The company leases certain buildings, land and equipment. 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 company, we generally record 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.
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 generally 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 estimable and no amount within the range is
more likely 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, considering the financial viability of other liable parties.
Retirement Benefits
The company sponsors various defined benefit pension plans and defined contribution retirement plans covering
substantially all employees. In most cases, our defined contribution plans provide for a company match of 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.
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 assumptions.
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 also includes different assumptions 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
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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 each 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 (the “FAS/CAS operating adjustment”) 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 any given
reporting period.
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 of Accumulated other comprehensive loss and
amortized into earnings in future periods.
Stock Compensation
The company’s stock compensation plans are classified as equity plans. 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), net of estimated forfeitures. The company 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. For purposes of measuring
compensation expense for performance awards, the number of shares ultimately expected to vest is estimated at each
reporting date based on management’s expectations regarding the relevant performance criteria. At each reporting
date, the number of shares used to calculate compensation expense and diluted earnings per share is adjusted to
reflect the number ultimately expected to vest.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, are as follows:
December 31
$ in millions
2024
2023
Cumulative translation adjustment
$
(140) $
(138)
Other, net
(12)
10
Total accumulated other comprehensive loss
$
(152) $
(128)
Related Party Transactions
For all periods presented, the company had no material related party transactions.
Accounting Standards Updates
On November 27, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. Among
other new disclosure requirements, ASU 2023-07 requires companies to disclose significant segment expenses that
are regularly provided to the chief operating decision maker. We adopted the standard effective January 1, 2024 and
applied the disclosure requirements retrospectively to all prior periods presented in the financial statements.
Adoption of ASU 2023-07 did not have an impact on the company’s consolidated financial position, results of
operations and/or cash flows.
On December 14, 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income
Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the
effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative
threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid.
ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective
basis with the option to apply the standard retrospectively. We are evaluating the disclosure impact of ASU 2023-09;
however, the standard will not have an impact on the company’s consolidated financial position, results of
operations and/or cash flows.
On November 4, 2024, the FASB issued ASU No. 2024-03 Disaggregation of Income Statement Expenses (Subtopic
220-40). ASU 2024-03 requires disaggregation of certain expense captions into specified categories in disclosures
within the footnotes to the financial statements. ASU 2024-03 will be effective for annual periods beginning January
1, 2027 and interim periods beginning January 1, 2028 and will be applied on a prospective basis with the option to
apply the standard retrospectively. We are evaluating the disclosure impact of ASU 2023-09; however, we do not
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expect the standard will have a material impact on the company’s consolidated financial position, results of
operations and/or cash flows.
Other accounting standards updates adopted and/or issued, but not effective until after December 31, 2024, are not
expected to have a material effect on the company’s consolidated financial position, annual results of operations
and/or cash flows.
2. 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 effect of these securities totaled 0.3 million, 0.5 million and 0.7 million shares for
the years ended December 31, 2024, 2023 and 2022, respectively.
Share Repurchases
Share Repurchase Programs
On January 25, 2021, the company’s board of directors authorized a share repurchase program of up to $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 and were completed in April 2023.
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”).
Repurchases under the 2022 Repurchase Program commenced in April 2023 and were completed in February 2024.
On December 6, 2023, the company’s board of directors authorized a new share repurchase program of up to an
additional $2.5 billion in share repurchases of the company’s common stock (the “2023 Repurchase Program”).
Repurchases under the 2023 Repurchase Program commenced in February 2024 upon completion of the 2022
Repurchase Program. As of December 31, 2024, repurchases under the 2023 Repurchase Program totaled $1.4
billion; $1.1 billion remained under this share repurchase authorization. By its terms, the 2023 Repurchase Program
will expire when we have used all authorized funds for repurchases.
On December 11, 2024, 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 “2024 Repurchase Program”).
Repurchases under the 2024 Repurchase Program will commence upon completion of the 2023 Repurchase Program
and will expire when we have used all authorized funds for repurchases. As of December 31, 2024, there have been
no repurchases under the 2024 Repurchase Program and the company’s total outstanding share repurchase
authorization was $4.1 billion.
Accelerated Share Repurchase Agreements
During the first quarter of 2023, the company entered into an accelerated share repurchase (ASR) agreement with
Bank of America, N.A. (Bank of America) to repurchase $500 million of the company’s common stock as part of
the 2021 and 2022 Repurchase Programs. Under the agreement, we made a payment of $500 million to Bank of
America and received an initial delivery of 0.9 million shares valued at $400 million that were immediately canceled
by the company. The remaining balance of $100 million was settled on April 27, 2023 with a final delivery of
0.2 million shares from Bank of America. The final average purchase price was $458.28 per share.
During the first quarter of 2024, the company entered into an ASR agreement with Morgan Stanley & Co. LLC
(Morgan Stanley) to repurchase $1.0 billion of the company’s common stock as part of the 2022 Repurchase
Program. Under the agreement, we made a payment of $1.0 billion to Morgan Stanley and received an initial
delivery of 1.8 million shares valued at $800 million that were immediately canceled by the company. The
remaining balance of $200 million was settled on May 1, 2024 with a final delivery of 0.4 million shares from
Morgan Stanley. The final average purchase price was $455.73 per share.
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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The table below summarizes the company’s share repurchases to date under the authorizations described above:
Repurchase Program
Authorization Date
Amount
Authorized
(in millions)
Total
Shares
Retired
(in millions)
Average
Price
Per Share(1)
Date Completed
Shares Repurchased
(in millions)
Year Ended
December 31
2024
2023
2022
January 25, 2021
$
3,000
7.0 $
431.05
April 2023
—
1.4
3.3
January 24, 2022(2)
$
2,000
4.4 $
455.01
February 2024
2.5
1.9
—
December 6, 2023
$
2,500
2.9 $
472.26
2.9
—
—
December 11, 2024
$
3,000
— $
—
—
—
—
5.4
3.3
3.3
(1) Beginning with the 2022 Repurchase Program, the board of directors has approved that the purchases and authorizations under
our repurchase programs be exclusive of brokerage commissions and other costs of execution, including taxes. Commissions
paid are included for the 2021 Repurchase Program.
(2) The 2022 Repurchase Program completed in February 2024; however, it included the $1.0 billion ASR for which the final
delivery of shares was outstanding at the end of the first quarter of 2024. On May 1, 2024, the company received a final
delivery of 0.4 million shares for that ASR, which are included in the 2022 Repurchase Program authorization.
Dividends on Common Stock
In May 2024, the company increased the quarterly common stock dividend 10 percent to $2.06 per share from the
previous amount of $1.87 per share.
In May 2023, the company increased the quarterly common stock dividend 8 percent to $1.87 per share from the
previous amount of $1.73 per share.
In May 2022, the company increased the quarterly common stock dividend 10 percent to $1.73 per share from the
previous amount of $1.57 per share.
3. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net represent amounts billed and due from customers. Substantially all accounts receivable at
December 31, 2024 are expected to be collected in 2025. The company does not believe it has significant exposure
to credit risk as the majority of our accounts receivable are due from the U.S. government either as the ultimate
customer or in connection with foreign military sales.
Accounts receivable, net consisted of the following:
December 31
$ in millions
2024
2023
Due from U.S. government (1)
$
951 $ 1,184
Due from international and other customers
326
276
Accounts receivable, gross
1,277
1,460
Allowance for expected credit losses
(5)
(6)
Accounts receivable, net
$
1,272 $
1,454
(1) Includes receivables due from the U.S. government associated with foreign military sales, which are contracted with and paid
by the U.S. government.
4. UNBILLED RECEIVABLES, NET
Unbilled receivables, net represent revenue recognized under the cost-to-cost method that exceeds amounts billed to
customers. A large majority of the company’s unbilled receivables at December 31, 2024 are expected to be billed
and collected in 2025. Progress and performance-based payments are reflected as an offset to the related unbilled
receivable balances.
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Unbilled receivables, net consisted of the following:
December 31
$ in millions
2024
2023
Due from U.S. government (1)
Unbilled receivables
$ 22,871 $ 23,655
Progress and performance-based payments received
(17,300) (18,321)
Total due from U.S. government
5,571
5,334
Due from international and other customers
Unbilled receivables
1,108
1,720
Progress and performance-based payments received
(757)
(1,344)
Total due from international and other customers
351
376
Unbilled receivables, net of progress and performance-based payments received
5,922
5,710
Allowance for expected credit losses
(14)
(17)
Unbilled receivables, net
$
5,908 $
5,693
(1) Includes unbilled receivables due from the U.S. government associated with foreign military sales, which are contracted with
and paid by the U.S. government.
5. INVENTORIED COSTS, NET
Inventoried costs are principally 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 associated with our commercial businesses, while less significant in total, are subject to a greater
level of recoverability risk.
Inventoried costs, net consisted of the following:
December 31
$ in millions
2024
2023
Raw materials
$
293 $
338
Work in process
1,118
719
Finished goods
44
52
Inventoried costs, net
$
1,455 $
1,109
Inventoried costs, net increased $346 million, or 31 percent, largely due to an increase in costs incurred for specific
anticipated contracts to reduce customer delivery lead times.
The company recorded write-downs of commercial business inventory at Space Systems for which its cost exceeded
net realizable value of $43 million during the year ended December 31, 2023. In addition, the company recognized a
$45 million reduction of inventoried costs related to the B-21 program at Aeronautics Systems during the year ended
December 31, 2023.
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6. INCOME TAXES
Federal and foreign income tax expense consisted of the following:
Year Ended December 31
$ in millions
2024
2023
2022
Federal income tax expense:
Current
$
628 $
949 $ 1,289
Deferred
204
(670)
(353)
Total federal income tax expense
832
279
936
Foreign income tax expense:
Current
13
15
3
Deferred
(3)
(4)
1
Total foreign income tax expense
10
11
4
Total federal and foreign income tax expense
$
842 $
290 $
940
Earnings before income taxes associated with the company’s foreign operations are not material in the periods
presented.
Income tax expense differs from the amount computed by multiplying earnings before income taxes by the statutory
federal income tax rate due to the following:
Year Ended December 31
$ in millions
2024
2023
2022
Income tax expense at statutory rate
$ 1,053
21.0 % $
493
21.0 % $ 1,226
21.0 %
Research credit
(361)
(7.2)
(210)
(8.9)
(177)
(3.0)
Foreign derived intangible income
13
0.3
(63)
(2.7)
(66)
(1.1)
Settlements with taxing authorities
—
—
(1)
—
(86)
(1.5)
Net interest expense
145
2.9
69
2.9
22
0.4
Other, net
(8)
(0.2)
2
0.1
21
0.3
Total federal and foreign income taxes
$ 842
16.8 % $ 290
12.4 % $ 940
16.1 %
The 2024 ETR increased to 16.8 percent from 12.4 percent in 2023 primarily due to the impact of the prior year
B-21 charge and the MTM adjustment on our ETR. The 2024 MTM benefit increased the 2024 ETR by 0.4
percentage points, whereas the prior year B-21 charge and MTM expense collectively reduced the 2023 ETR by 3.8
percentage points. The 2024 ETR also reflects a net reduction in tax reserves largely due to a recent federal court
decision, partially offset by higher interest expense on unrecognized tax benefits.
The 2023 ETR decreased to 12.4 percent from 16.1 percent in 2022 primarily due to lower earnings before income
taxes as a result of the B-21 charge and MTM expense, which collectively reduced the 2023 ETR by 3.8 percentage
points. The 2022 MTM benefit increased the 2022 ETR by 1.2 percentage points.
Income tax payments, net of refunds received, were $880 million, $1.2 billion and $1.5 billion for the years ended
December 31, 2024, 2023 and 2022, respectively. Taxes receivable, which are included in Prepaid expenses and
other current assets in the consolidated statements of financial position, were $517 million and $1.5 billion as of
December 31, 2024 and 2023, respectively.
Net interest expense within the company’s federal, foreign and state income tax provisions was $164 million,
$62 million, and $29 million for the years ended December 31, 2024, 2023, and 2022, respectively.
The Organization for Economic Co-operation and Development issued Pillar Two model rules for a global minimum
tax of 15% effective January 1, 2024. While it is uncertain whether the United States will enact legislation to adopt
Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of
introducing legislation to implement Pillar Two. Pillar Two had no impact on our 2024 ETR, and we do not
currently expect Pillar Two to significantly impact our ETR going forward.
NORTHROP GRUMMAN CORPORATION
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Uncertain Tax Positions
We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. During the
fourth quarter of 2024, the company entered into an agreed RAR for certain matters related to the company’s
2018-2020 federal income tax returns, largely related to our methods of accounting associated with the timing of
revenue recognition and related costs under IRC Section 451(b), resulting in a $766 million reduction to our
unrecognized tax benefits and an immaterial impact to income tax expense. The matters not addressed by the agreed
RAR related to the company’s 2018-2020 federal tax returns are currently under Internal Revenue Service (IRS)
examination.
During the second quarter of 2023, the company entered into an agreed RAR for certain matters related to the
company’s 2014-2017 federal income tax returns, resulting in a $90 million reduction to our unrecognized tax
benefits and an immaterial impact to income tax expense. The matters not addressed by the agreed RAR related to
the company’s 2014-2017 federal income tax returns and refund claims related to its 2007-2016 federal tax returns
are currently under review by the IRS Appeals Office.
In the second quarter of 2023, the California Franchise Tax Board approved a resolution of the state examination
primarily related to California state apportionment in the company’s 2007 to 2016 tax years, resulting in a
$95 million reduction to our unrecognized tax benefits and an $11 million reduction to unallocated corporate
expense.
Tax returns for open tax years related to state and foreign jurisdictions remain subject to examination. As state
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 foreign jurisdictions are not material.
The company’s unrecognized tax benefits, excluding accrued interest and penalties of $373 million, $305 million
and $216 million as of December 31, 2024, 2023 and 2022, respectively, are presented below:
December 31
$ in millions
2024
2023
2022
Unrecognized tax benefits at beginning of the year
$ 1,994 $ 1,663 $ 1,630
Additions based on tax positions related to the current year
236
276
262
Additions for tax positions of prior years
90
254
6
Reductions for tax positions of prior years
(106)
(9)
(124)
Settlements with taxing authorities
(766)
(189)
(110)
Other, net
(1)
(1)
(1)
Net change in unrecognized tax benefits
(547)
331
33
Unrecognized tax benefits at end of the year
$ 1,447 $ 1,994 $ 1,663
The 2024 decrease in unrecognized tax benefits was primarily related to the settlement of certain matters related to
the company’s methods of accounting associated with the timing of revenue recognition under IRC Section 451(b)
as discussed above, partially offset by additional reserves on current year tax positions related to 451(b) (prior to
settlement) and research credits. It is reasonably possible that within the next 12 months the company’s
unrecognized tax benefits may increase by approximately $100 million.
If the income tax benefits from these tax positions are ultimately realized, $914 million of federal and foreign tax
benefits would reduce the company’s ETR.
Inclusive of accrued interest and penalties, the company’s current unrecognized tax benefits of $345 million and
$964 million as of December 31, 2024 and 2023, respectively, are included in Other current liabilities in the
consolidated statements of financial position.
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Deferred Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and tax purposes. Net deferred tax assets and liabilities are classified
as non-current in the consolidated statements of financial position.
The tax effects of temporary differences and carryforwards that gave rise to year-end deferred federal, state and
foreign tax balances, as presented in the consolidated statements of financial position, are as follows:
December 31
$ in millions
2024
2023
Deferred Tax Assets
Retiree benefits
$
— $
115
Capitalized research and experimental expenditures
4,816
3,380
Accrued employee compensation
386
400
Provisions for accrued liabilities
468
509
Inventory
36
279
Stock-based compensation
37
35
Operating lease liabilities
557
575
Tax credits
562
557
Other
241
215
Gross deferred tax assets
7,103
6,065
Less: valuation allowance
(526)
(517)
Net deferred tax assets
6,577
5,548
Deferred Tax Liabilities
Retiree benefits
153
—
Goodwill
534
534
Purchased intangibles
69
83
Property, plant and equipment, net
827
805
Operating lease right-of-use assets
554
563
Contract accounting differences
2,714
2,437
Other
127
106
Deferred tax liabilities
4,978
4,528
Total net deferred tax assets
$ 1,599 $
1,020
Realization of deferred tax assets is primarily dependent on generating sufficient taxable income in future periods.
The company believes it is more-likely-than-not our net deferred tax assets will be realized.
At December 31, 2024, the company has available tax credits and unused net operating losses of $627 million and
$318 million, respectively, that may be applied against future taxable income. The majority of tax credits and net
operating losses expire between 2025 and 2047, 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 $343 million and $42 million, respectively, as of December 31, 2024.
Undistributed Foreign Earnings
As of December 31, 2024, 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 fund our international operations. In addition, we expect future U.S. cash
generation will be sufficient to meet future U.S. cash needs.
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7. GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS
Goodwill
Changes in the carrying amounts of goodwill for the years ended December 31, 2023 and 2024, were as follows:
$ in millions
Aeronautics
Systems
Defense
Systems
Mission
Systems
Space
Systems
Total
Balance as of December 31, 2022
$
3,467 $
4,228 $
5,881 $
3,940 $
17,516
Other (1)
—
1
—
—
1
Balance as of December 31, 2023
$
3,467 $
4,229 $
5,881 $
3,940 $
17,517
Other (1)
—
(5)
—
—
(5)
Balance as of December 31, 2024
$
3,467 $
4,224 $
5,881 $
3,940 $
17,512
(1) Other consists primarily of adjustments for foreign currency translation.
At December 31, 2024 and 2023, accumulated goodwill impairment losses totaled $417 million at Aeronautics
Systems, $121 million at Space Systems, and $32 million at Defense Systems.
Other Purchased Intangible Assets
Net customer-related and other intangible assets are as follows:
December 31
$ in millions
2024
2023
Gross customer-related and other intangible assets
$
3,371 $
3,365
Less accumulated amortization
(3,117)
(3,060)
Net customer-related and other intangible assets
$
254 $
305
Amortization expense for 2024, 2023 and 2022, was $57 million, $80 million and $197 million, respectively. As of
December 31, 2024, the expected future amortization of purchased intangibles for each of the next five years is as
follows:
$ in millions
2025
$
45
2026
42
2027
31
2028
31
2029
31
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the financial assets and liabilities the company records at fair value on a recurring basis
identified by the level of inputs used to determine fair value. See Note 1 for the definitions of these levels and for
further information on our financial instruments.
December 31, 2024
December 31, 2023
$ in millions
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial Assets
Marketable securities
$
325 $
— $
14 $
339 $
321 $
1 $
8 $
330
Marketable securities
valued using NAV
8
9
Total marketable
securities
325
—
14
347
321
1
8
339
Derivatives
—
(11)
—
(11)
—
5
—
5
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The notional value of the company’s foreign currency forward contracts at December 31, 2024 and 2023 was $399
million and $286 million, respectively. The portion of notional value designated as a cash flow hedge at December
31, 2024 and 2023 was $273 million and $162 million, respectively.
The derivative fair values and related unrealized gains/losses at December 31, 2024 and 2023 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, 2024 and 2023.
The carrying value of cash and cash equivalents approximates fair value.
9. 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 to $2.5 billion. There were no commercial paper borrowings outstanding
at December 31, 2024 and December 31, 2023, respectively.
Credit Facility
The company maintains a five-year senior unsecured credit facility in an aggregate principal amount of $2.5 billion
(the “2022 Credit Agreement”) that matures in August 2027. The revolving credit facility established under the 2022
Credit Agreement is intended to support the company’s commercial paper program and other general corporate
purposes. Commercial paper borrowings reduce the amount available for borrowing under the 2022 Credit
Agreement. At December 31, 2024, there were no borrowings outstanding under this facility.
The 2022 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 fundamental changes and incur liens. The company also cannot permit the ratio of its debt to capitalization (as
set forth in the credit agreement) to exceed 65 percent. At December 31, 2024, the company was in compliance with
all covenants under its credit agreement.
Unsecured Senior Notes
Issuance of Senior Notes
In January 2024, the company issued $2.5 billion of unsecured senior notes for general corporate purposes,
including debt repayment, share repurchases, and working capital, as follows:
•
$500 million of 4.60% senior notes due 2029 (the “2029 Notes”),
•
$850 million of 4.90% senior notes due 2034 (the “2034 Notes”), and
•
$1.15 billion of 5.20% senior notes due 2054 (the “2054 Notes”).
In February 2023, the company issued $2.0 billion of unsecured senior notes for general corporate purposes,
including debt repayment, share repurchases, and working capital, as follows:
•
$1.0 billion of 4.70% senior notes due 2033 (the “2033 Notes”) and
•
$1.0 billion of 4.95% senior notes due 2053 (the “2053 Notes”).
We refer to the 2029 Notes, 2033 Notes, 2034 Notes, 2053 Notes and 2054 Notes, together, as the “notes.” Interest
on the notes is payable semi-annually in arrears. The notes are generally subject to redemption, in whole or in part,
at the company’s discretion at any time, or from time to time, prior to maturity at a redemption price equal to the
greater of 100% of the principal amount of the notes to be redeemed or an applicable “make-whole” amount, plus
accrued and unpaid interest.
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Repayments of Senior Notes
In August 2023, the company repaid $1.05 billion of 3.25 percent unsecured senior notes upon maturity.
Subsequent Event - In January 2025, the company repaid $1.5 billion of 2.93 percent unsecured senior notes upon
maturity.
Long-term debt consists of the following:
$ in millions
December 31
2024
2023
Fixed-rate notes and debentures, maturing in
Interest rate
2025
2.93%
$
1,500 $
1,500
2026
7.75% - 7.88%
527
527
2027
3.20%
750
750
2028
3.25%
2,000
2,000
2029
4.60%
500
—
2030
4.40%
750
750
2031
7.75%
466
466
2033
4.70%
1,000
1,000
2034
4.90%
850
—
2040
5.05% - 5.15%
800
800
2043
4.75%
950
950
2045
3.85%
600
600
2047
4.03%
2,250
2,250
2050
5.25%
1,000
1,000
2053
4.95%
1,000
1,000
2054
5.20%
1,150
—
Other
Various
264
332
Debt issuance costs
(83)
(69)
Total long-term debt
16,274
13,856
Less: current portion(1)
1,582
70
Long-term debt, net of current portion
$ 14,692 $ 13,786
(1) The current portion of long-term debt is recorded in Other current liabilities in the consolidated statements of financial
position.
The estimated fair value of long-term debt was $15.3 billion and $13.4 billion as of December 31, 2024 and 2023,
respectively. We calculated the fair value of long-term debt using Level 2 inputs, based on interest rates available for
debt with terms and maturities similar to the company’s existing debt arrangements.
Indentures underlying long-term debt issued by the company or its subsidiaries contain various restrictions with
respect to the issuer, including one or more restrictions relating to limitations on liens, sale-leaseback arrangements
and funded debt of subsidiaries. The majority 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 are payable semi-
annually in arrears.
Total interest payments, net of interest received and capitalized, were $475 million, $437 million and $474 million
for the years ended December 31, 2024, 2023 and 2022, respectively. The company capitalized interest expense of
$113 million, $95 million and $53 million during the years ended December 31, 2024, 2023 and 2022, respectively.
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Maturities of long-term debt as of December 31, 2024, are as follows:
$ in millions
Year Ending December 31
2025
$ 1,582
2026
534
2027
755
2028
2,044
2029
592
Thereafter
10,871
Total principal payments
16,378
Unamortized premium on long-term debt, net of discount
(21)
Debt issuance costs
(83)
Total long-term debt
$ 16,274
10. INVESTIGATIONS, CLAIMS AND LITIGATION
For over 25 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, the New York State
Department of Health and other federal, state and local governmental authorities, to address 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 11, substantial
remediation costs related to these Bethpage environmental conditions, including potential costs relating to
unanticipated developments such as new discoveries of potential contaminants. It is also possible that applicable
remediation standards and other requirements to which we are subject may continue to change, and that our costs
may increase materially. In 2022, we resolved several disputes and regulatory proceedings concerning the scope and
allocation of remediation responsibilities and costs related to this site and we continue remediation consistent with
agreements through which those disputes were resolved. The company continues to be involved in other
remediation-related disputes, none of which are material individually or in the aggregate. We are also a party to
various individual lawsuits and a putative class action in the Eastern District of New York alleging personal injury
and property damage related to the legacy Bethpage environmental conditions (the “Bethpage EDNY cases”). The
court has stayed the filed individual lawsuits, pending its decision on class certification, which the court will
undertake if an ongoing mediation between the parties is unsuccessful. We are also a party, and may become a party,
to other lawsuits brought by or against insurance carriers, and by other individual plaintiffs and/or putative classes,
as well as other parties. We cannot at this time predict or reasonably estimate the potential outcomes or ranges of
possible liability of the Bethpage EDNY cases.
The company received from the U.S. Department of Justice (DOJ) a criminal subpoena on December 9, 2022, and a
civil investigative demand (CID) on February 2, 2023, both seeking information regarding financial and cost
accounting and controls that appears focused on the interest rate assumptions the company used to determine our
U.S. Government Cost Accounting Standards (CAS) pension expense, which we discuss in Note 11 below. The
company is engaging with the government and responding to the requests. We cannot at this point predict the
outcome of these matters.
The company is a party to various other investigations, lawsuits, arbitration, claims, enforcement actions and other
legal proceedings, including government investigations and claims, that arise in the ordinary course of our business.
The nature of legal proceedings is such that we cannot assure the outcome of any particular matter. However, based
on information available to the company to date, the company does not believe that the outcome of any of these
other matters pending against the company is likely to have a material adverse effect on the company’s consolidated
financial position as of December 31, 2024, or its annual results of operations and/or cash flows.
11. 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 enable the company to evaluate the merits of these claims, as well as to
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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
information available. The company believes it has adequately reserved for disputed amounts that are probable and
reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its
consolidated financial position as of December 31, 2024, or its annual results of operations and/or cash flows.
In 2019, the Defense Contract Management Agency (DCMA) raised questions about an interest rate assumption
used by the company to determine our CAS pension expense. On June 1, 2020, DCMA 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 believed demonstrates the appropriateness of the
assumptions used. On November 24, 2020, DCMA replied to the company’s response, disagreeing with our position
and requesting additional input, which we provided on February 22, 2021. We subsequently continued to exchange
correspondence and engage with DCMA on this matter, including responding to requests for and providing
additional information. On February 15, 2024, DCMA sent to the company a Contracting Officer’s determination of
noncompliance with CAS, which is an interim, non-final determination, and the parties engaged in discussions. As
noted in Note 10 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID
on February 2, 2023, both seeking information that appears related to the interest rate assumptions at issue in our
discussions with DCMA. The company has responded to requests and expects to continue discussions with the DOJ
and DCMA as these matters progress. We cannot at this point predict the outcome of these matters. The sensitivity
to changes in interest rate assumptions makes it reasonably possible the outcome of the DCMA 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.
Environmental Matters
The table below summarizes the amount accrued for environmental remediation costs, management’s estimate of the
amount of reasonably possible future costs in excess of accrued costs and the deferred costs expected to be
recoverable through overhead charges on U.S. government contracts as of December 31, 2024 and 2023:
$ in millions
Accrued
Costs(1)(2)
Reasonably Possible
Future Costs in
Excess of Accrued
Costs(2)
Deferred
Costs(3)
December 31, 2024
$
546 $
377 $
507
December 31, 2023
584
387
518
(1) As of December 31, 2024, $196 million is recorded in Other current liabilities and $350 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, 2024, $186 million is deferred in Prepaid expenses and other current assets and $321 million is deferred in
Other non-current assets. These amounts reflect a $26 million increase during the second quarter of 2024 in our estimated
recovery of certain environmental remediation costs and are evaluated for recoverability on a routine basis.
Although management cannot predict whether (i) new information gained as our environmental remediation projects
progress, (ii) changes in remediation standards or other requirements to which we are subject, or (iii) other changes
in facts and circumstances will materially affect the estimated liability accrued, 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, 2024, or its annual results of operations and/or cash
flows.
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, 2024, there were $484 million of stand-by letters of credit and guarantees and $272
million of surety bonds outstanding.
Indemnifications
The company has provided indemnifications for certain environmental, income tax and other potential liabilities in
connection with certain of its divestitures. The settlement of these liabilities is not expected to have a material
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adverse effect on the company’s consolidated financial position as of December 31, 2024, or its annual results of
operations and/or cash flows.
12. RETIREMENT BENEFITS
Plan Descriptions
U.S. Defined Benefit Pension Plans – The company sponsors several defined benefit pension plans in the U.S.
Pension benefits for most participants are based on years of service, age and compensation. It is our policy to fund at
least the minimum amount required for qualified plans, using actuarial cost methods and assumptions acceptable
under U.S. government regulations, by making payments into benefit trusts separate from the company.
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 for employer matching of employee
contributions. Based on date of hire, certain employees are eligible to receive a company non-elective contribution
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, 2024, 2023 and 2022, were $657 million, $634
million and $558 million, respectively.
Non-U.S. Benefit Plans – The company sponsors several benefit plans for non-U.S. employees. These plans are
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.
Medical and Life Benefits – The company funds a portion of the costs for certain health care and life insurance
benefits for a substantial number of its active and retired employees. In addition to a company and employee cost-
sharing feature, the health plans also have provisions for deductibles, co-payments, coinsurance percentages, out-of-
pocket limits, conformance to a schedule of reasonable fees, the use of managed care providers and coordination of
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.
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 for substantially all its remaining 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.
Summary Plan Results
The cost to the company of its retirement benefit plans is shown in the following table:
Year Ended December 31
Pension Benefits
Medical and Life Benefits
$ in millions
2024
2023
2022
2024
2023
2022
Components of net periodic benefit cost
(benefit)
Service cost
$
239 $
236 $
367 $
4 $
5 $
9
Interest cost
1,526
1,568
1,136
62
67
47
Expected return on plan assets
(2,197) (2,098) (2,641)
(87)
(85)
(110)
Amortization of prior service credit
—
—
—
—
(1)
(1)
Mark-to-market (benefit) expense
(450)
442 (1,262)
7
(20)
30
Other
15
—
—
—
—
—
Net periodic benefit cost (benefit)
$
(867) $
148 $ (2,400) $
(14) $
(34) $
(25)
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The table below summarizes the changes in unamortized prior service credit for the years ended December 31, 2022,
2023 and 2024:
$ in millions
Pension
Benefits
Medical and
Life Benefits
Total
Changes in unamortized prior service credit
Amortization of prior service credit
$
— $
1 $
1
Tax expense
—
—
—
Decrease (increase) in unamortized prior service credit – 2022
—
1
1
Amortization of prior service credit
—
1
1
Tax expense
—
—
—
Decrease (increase) in unamortized prior service credit – 2023
—
1
1
(Increase) decrease in prior service credit
—
(12)
(12)
Amortization of prior service credit
—
—
—
Tax expense
—
3
3
(Increase) decrease in unamortized prior service credit – 2024
$
— $
(9) $
(9)
The following table sets forth the funded status and amounts recognized in the consolidated statements of financial
position for the company’s defined benefit retirement plans. Pension benefits data includes the qualified plans,
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.
Pension Benefits
Medical and
Life Benefits
$ in millions
2024
2023
2024
2023
Plan Assets
Fair value of plan assets at beginning of year
$ 30,251 $ 28,920 $
1,274 $
1,226
Net gain on plan assets
1,358
3,104
61
146
Employer contributions
96
105
33
34
Participant contributions
6
6
26
27
Benefits paid
(1,942)
(1,894)
(157)
(159)
Other
—
10
—
—
Fair value of plan assets at end of year
29,769
30,251
1,237
1,274
Projected Benefit Obligation
Projected benefit obligation at beginning of year
30,443
29,067
1,246
1,264
Service cost
239
236
4
5
Interest cost
1,526
1,568
62
67
Participant contributions
6
6
26
27
Actuarial (gain) loss
(1,295)
1,447
(19)
42
Benefits paid
(1,942)
(1,894)
(157)
(159)
Other
15
13
(12)
—
Projected benefit obligation at end of year
28,992
30,443
1,150
1,246
Funded status
$
777 $
(192) $
87 $
28
The decrease in the fair value of plan assets for the year ended December 31, 2024 was principally driven by
$2.1 billion of benefit payments, partially offset by net returns on plan assets of 4.7 percent. The decrease in our
projected benefit obligation for the year ended December 31, 2024, was primarily driven by $2.1 billion of benefit
payments and a 58 basis point increase in the discount rate from year end 2023, partially offset by $1.6 billion of
interest cost.
NORTHROP GRUMMAN CORPORATION
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Pension Benefits
Medical and
Life Benefits
$ in millions
2024
2023
2024
2023
Classification of amounts recognized in the consolidated
statements of financial position
Non-current assets
$
1,851 $
1,042 $
333 $
289
Current liability
(177)
(178)
(23)
(27)
Non-current liability
(897)
(1,056)
(223)
(234)
The accumulated benefit obligation for all defined benefit pension plans was $28.7 billion and $30.1 billion at
December 31, 2024 and 2023, respectively. Amounts for pension plans with accumulated benefit obligations in
excess of fair value of plan assets are as follows:
December 31
$ in millions
2024
2023
Projected benefit obligation
$
1,076 $
1,152
Accumulated benefit obligation
1,066
1,143
Fair value of plan assets
3
3
Plan Assumptions
On a weighted-average basis, the following assumptions were used to determine benefit obligations at December 31
of each year and net periodic benefit cost for the following year:
Pension Benefits
Medical and Life Benefits
2024
2023
2022
2024
2023
2022
Discount rate
5.73 %
5.15 %
5.54 %
5.69 %
5.20 %
5.57 %
Expected long-term return on plan assets
7.50 %
7.50 %
7.50 %
7.08 %
7.12 %
7.23 %
Initial cash balance crediting rate assumed for the
next year
4.78 %
4.02 %
3.96 %
Rate to which the cash balance crediting rate is
assumed to increase/decrease (the ultimate rate)
4.90 %
4.02 %
3.88 %
Year that the cash balance crediting rate reaches
the ultimate rate
2030
2029
2028
Rate of compensation increase
3.00 %
3.00 %
3.00 %
Initial health care cost trend rate assumed for the
next year
5.90 %
6.20 %
6.50 %
Rate to which the health care cost trend rate is
assumed to decline (the ultimate trend rate)
5.00 %
5.00 %
5.00 %
Year that the health care cost trend rate reaches
the ultimate trend rate
2028
2028
2028
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 return over the long term. Liability studies are conducted on a regular basis to provide guidance in
setting investment goals with an objective to balance risk. Risk targets are established and monitored against
acceptable ranges.
Our investment policies and procedures are designed to ensure the plans’ investments comply 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.
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For the majority of the plans’ assets, the investment policies require that the asset allocation be maintained within
the following ranges as of December 31, 2024:
Asset Allocation Ranges
Cash and cash equivalents
0% - 12%
Global public equities
18% - 38%
Fixed-income securities
35% - 55%
Alternative investments
10% - 30%
Private credit
0% - 15%
The table below provides the fair values of the company’s pension and Voluntary Employees’ Beneficiary
Association (VEBA) trust plan assets at December 31, 2024 and 2023, by asset category. The table also identifies
the level of inputs used to determine the fair value of assets in each category. See Note 1 for the definitions of these
levels. 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 table. The total fair value of these
investments is included in the table below to permit reconciliation of the fair value hierarchy to amounts presented in
the funded status table. As of December 31, 2024 and 2023, there were no investments expected to be sold at a value
materially different than NAV.
Level 1
Level 2
Level 3
Total
$ in millions
2024
2023
2024
2023
2024
2023
2024
2023
Asset category
Cash and cash equivalents
$ 223 $
85 $
751 $
830
$
974 $
915
U.S. equities
1,824 1,712
—
1
1,824
1,713
International equities
1,570 1,506
1,570
1,506
Fixed-income securities
U.S. Treasuries
17
—
3,520
3,890
3,537
3,890
U.S. Government Agency
97
124
97
124
Non-U.S. Government
1
—
282
176
283
176
Corporate debt
79
74
3,664
4,432
3,743
4,506
Asset backed
1,301
436
1,301
436
High yield debt
12
13
20
20
32
33
Bank loans
16
15
16
15
Derivatives and other assets
(55)
64
99
43 $
2 $
2
46
109
Investments valued using
NAV as a practical expedient
U.S. equities
1,486
1,294
International equities
4,071
3,972
Fixed-income funds
3,559
4,057
Hedge funds
32
38
Opportunistic investments
1,816
3,176
Private equity funds
3,521
3,466
Real estate funds
1,860
2,123
Private credit
1,779
—
Payables, net
(541)
(24)
Fair value of plan assets at
the end of the year
$ 3,671 $ 3,454 $ 9,750 $ 9,967 $
2 $
2 $ 31,006 $ 31,525
There were no transfers of plan assets into or out of Level 3 of the fair value hierarchy during the years ended
December 31, 2024 and 2023.
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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.
Derivatives and other assets include derivative assets with a fair value of $107 million and $172 million, derivative
liabilities with a fair value of $123 million and $101 million, and net notional amounts of $9.2 billion and $4.9
billion, as of December 31, 2024 and 2023, respectively. Derivative instruments may include exchange traded
futures contracts, interest rate swaps, options on futures and swaps, currency contracts, total return swaps and credit
default swaps. Notional amounts do not quantify risk or represent assets or liabilities of the pension and VEBA
trusts, but are used in the calculation of cash settlement under the contracts. Certain derivative financial instruments
within the pension trust are subject to master netting agreements with certain counterparties.
Investments in certain equity and fixed-income funds, which include common/collective trust funds, and alternative
investments, including hedge funds, opportunistic investments, private equity funds and real estate funds, are valued
based on the NAV derived by the investment managers, as a practical expedient, and are described further below.
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, 2024 and 2023, there were no unfunded commitments.
Fixed-income funds: Generally, redemption periods are daily, monthly or quarterly with a notice requirement of two
days. As of December 31, 2024 and 2023 there were no unfunded commitments.
Hedge funds: Consist of closed-end funds with a 5-10 year life as well as funds that allow redemption requests
subject to the liquidity limitations of the underlying investments. As of December 31, 2024 and 2023, unfunded
commitments were $6 million.
Opportunistic investments: Consist of closed-end funds with a 5-10 year life as well as funds that allow redemption
requests subject to the liquidity limitations of the underlying investments. As of December 31, 2024 and 2023,
unfunded commitments were $1.3 billion and $1.6 billion, respectively.
Private equity funds: The term of each fund is typically 10 or more years and the fund’s investors do not have an
option to redeem their interest in the fund. As of December 31, 2024 and 2023, unfunded commitments were $1.6
billion and $1.9 billion, respectively.
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, 2024 and 2023,
unfunded commitments were $24 million and $28 million, respectively.
Private credit: Consist of closed-end funds with a 5-10 year life as well as funds that allow redemption requests
subject to the liquidity limitations of the underlying investments. As of December 31, 2024, unfunded commitments
were $721 million.
At December 31, 2024 and 2023, the defined benefit pension trust held $1 million and $0, respectively, of Northrop
Grumman common stock. At December 31, 2024 and 2023, the VEBA trust did not hold any Northrop Grumman
common stock.
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Benefit Payments
The following table reflects estimated future benefit payments for the next ten years, based upon the same
assumptions used to measure the benefit obligation, and includes expected future employee service, as of December
31, 2024:
$ in millions
Pension Plans
Medical and
Life Plans
Total
Year Ending December 31
2025
$
2,058 $
111 $
2,169
2026
2,101
112
2,213
2027
2,138
111
2,249
2028
2,164
109
2,273
2029
2,183
106
2,289
2030 through 2034
10,909
473
11,382
In 2025, the company expects to contribute the required minimum funding of approximately $94 million to its
pension plans and approximately $33 million to its medical and life benefit plans. During the year ended December
31, 2024, the company made no discretionary pension contributions.
13. STOCK COMPENSATION PLANS AND OTHER COMPENSATION ARRANGEMENTS
Stock Compensation Plans
At December 31, 2024, the company had stock-based compensation awards outstanding under the following
shareholder-approved plans: the 2024 Long-Term Incentive Stock Plan (2024 Plan) and the 2011 Long-Term
Incentive Stock Plan (2011 Plan), both applicable to employees and non-employee directors, and the 1993 Stock
Plan for Non-Employee Directors (1993 SPND).
Employee Plans – On May 15, 2024, the company’s shareholders approved the company’s new 2024 Plan, which
replaced the 2011 Plan. The 2024 Plan authorized 5.75 million new shares (less the number of shares subject to any
new awards under the 2011 Plan between March 1 and May 15, 2024). Under the terms of the 2024 Plan, in the
event outstanding awards under the 2011 Plan expire or terminate without being exercised or paid, as the case may
be, such forfeited shares will become available for award under the 2024 Plan and increase the authorization. As of
December 31, 2024, 5.8 million shares remain available for issuance under the 2024 Plan.
The 2011 Plan provided for and the 2024 Plan provides for the following equity awards: stock options, stock
appreciation rights (SARs) and stock awards. Under the 2011 Plan and 2024 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% after 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 and 2024 Plan provide for accelerated
vesting, and in some instances forfeiture, of all or a portion of an award upon termination of employment.
Non-Employee Director Plans – Awards to non-employee directors are made pursuant to the Northrop Grumman
Corporation Equity Grant Program for Non-Employee Directors (the Director Program). The Director Program was
amended and restated effective January 1, 2016 (the Amended Director Program). The Director Program was again
amended and restated effective May 15, 2024, consistent with the shareholder-approved 2024 Plan (the Restated
Director Program). Under the Restated 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 annual shareholder
meeting. 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.
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 Amended Director Program and Restated Director Program are paid out in an
equivalent number of shares of Northrop Grumman common stock. Directors are credited with dividend equivalents
NORTHROP GRUMMAN CORPORATION
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in connection with the accumulated stock units until the shares of common stock relating to such stock units are
issued.
Compensation Expense
Stock-based compensation expense for the years ended December 31, 2024, 2023 and 2022 was $101 million, $87
million and $99 million, respectively. The related tax benefits for stock-based compensation for the years ended
December 31, 2024, 2023 and 2022 were $15 million, $9 million and $10 million, respectively.
At December 31, 2024, there was $102 million of unrecognized compensation expense related to unvested stock
awards granted under the company’s stock-based compensation plans. These amounts are expected to be charged to
expense over a weighted-average period of 1.3 years.
Stock Awards
Stock award activity for the years ended December 31, 2022, 2023 and 2024, is presented in the table below. Vested
awards do not include any adjustments to reflect the final performance measure for issued shares.
Stock
Awards
(in thousands)
Weighted-
Average
Grant Date
Fair Value
Per Share
Weighted-
Average
Remaining
Contractual
Term (in years)
Outstanding at January 1, 2022
580 $
314
1.4
Granted
238
397
Vested
(226)
327
Forfeited
(31)
320
Outstanding at December 31, 2022
561 $
344
1.4
Granted
216
478
Vested
(249)
315
Forfeited
(29)
373
Outstanding at December 31, 2023
499 $
417
1.3
Granted
238
465
Vested
(221)
366
Forfeited
(47)
450
Outstanding at December 31, 2024
469 $
462
1.4
The majority of our stock awards are granted annually during the first quarter.
The grant date fair value of shares issued in settlement of fully vested stock awards was $86 million, $99 million and
$93 million during the years ended December 31, 2024, 2023 and 2022, 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.
The following table presents the minimum and maximum aggregate payout amounts related to those cash awards
granted for the periods presented:
Year Ended December 31
$ in millions
2024
2023
2022
Minimum aggregate payout amount
$
35 $
34 $
32
Maximum aggregate payout amount
200
192
183
The majority of our cash awards are granted annually during the first quarter. CUs typically vest and settle in cash
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, 2024, there was $120 million
of unrecognized compensation expense related to cash awards.
NORTHROP GRUMMAN CORPORATION
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14. 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:
Year Ended December 31
$ in millions
2024
2023
2022
Operating lease cost
$
370 $
358 $
332
Variable lease cost
49
48
35
Short-term lease cost
51
69
51
Total lease cost
$
470 $
475 $
418
Supplemental Balance Sheet Information
Supplemental operating lease balance sheet information consists of the following:
Year Ended December 31
$ in millions
2024
2023
Operating lease right-of-use assets
$
1,770 $
1,818
Other current liabilities
324
300
Operating lease liabilities
1,798
1,892
Total operating lease liabilities
$
2,122 $
2,192
Other Supplemental Information
Other supplemental operating lease information consists of the following:
Year Ended December 31
$ in millions
2024
2023
Cash paid for amounts included in the measurement of operating
lease liabilities
$
373
$
341
Right-of-use assets obtained in exchange for new lease liabilities
272
314
Weighted average remaining lease term
10.4 years
11.0 years
Weighted average discount rate
4.0 %
3.9 %
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Maturities of Lease Liabilities
Maturities of operating lease liabilities as of December 31, 2024 are as follows:
$ in millions
Year Ending December 31
2025
$
388
2026
357
2027
299
2028
258
2029
225
Thereafter
1,091
Total lease payments
2,618
Less: imputed interest
(496)
Present value of operating lease liabilities
$
2,122
As of December 31, 2024, we have approximately $498 million in rental commitments for real estate leases that
have not yet commenced. These leases are expected to commence in 2025 and 2026 with lease terms of 3 to 20
years.
15. 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. We generally organize our segments based on the
nature of products and services offered.
The company’s chief operating decision maker (“CODM”) is the Chair, Chief Executive Officer and President. The
CODM is responsible for allocating resources and assessing performance of the consolidated enterprise and
operating sectors. The profitability measure the CODM uses to assess segment performance and allocate resources is
segment operating income (and related margin rate, calculated as segment operating income divided by sales) by
comparing historical, actual, and forecasted amounts on a regular basis.
NORTHROP GRUMMAN CORPORATION
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The following table presents sales, operating costs and expenses, and operating income by segment:
Year Ended December 31
$ in millions
2024
2023
2022
Aeronautics Systems
Sales
$ 12,030 $ 10,786 $ 10,531
Operating costs and expenses:
Product
8,248
8,942
7,161
Service
2,382
2,099
2,042
Intersegment
218
218
212
Aeronautics Systems operating income (loss)
1,182
(473)
1,116
Defense Systems
Sales
8,560
8,289
7,629
Operating costs and expenses:
Product
5,304
4,819
4,163
Service
1,641
1,959
1,985
Intersegment
749
682
700
Defense Systems operating income
866
829
781
Mission Systems
Sales
11,399
10,895
10,396
Operating costs and expenses:
Product
7,000
6,669
6,291
Service
1,805
1,730
1,639
Intersegment
996
887
848
Mission Systems operating income
1,598
1,609
1,618
Space Systems
Sales
11,731
11,873
10,570
Operating costs and expenses:
Product
8,711
8,844
7,664
Service
1,398
1,468
1,404
Intersegment
368
431
424
Space Systems operating income
1,254
1,130
1,078
Intersegment profit eliminations
(356)
(335)
(340)
Total segment operating income
4,544
2,760
4,253
FAS/CAS operating adjustment
40
(82)
(200)
Unallocated corporate expense
(214)
(141)
(452)
Total operating income
$
4,370 $
2,537 $
3,601
Other (expense) income
Interest expense
(621)
(545)
(506)
Non-operating FAS pension benefit
656
530
1,505
Mark-to-market pension and OPB benefit (expense)
443
(422)
1,232
Other, net
168
246
4
Earnings before income taxes
$
5,016 $
2,346 $
5,836
FAS/CAS Operating Adjustment
For financial 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 applicable FAR and CAS requirements. The FAS/
CAS operating adjustment reflects the 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.
NORTHROP GRUMMAN CORPORATION
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Unallocated Corporate (Expense) Income
Unallocated corporate (expense) income includes the portion of corporate costs not considered allowable or
allocable under 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 (expense) income 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 PP&E acquired through business combinations, as well as certain compensation and other costs.
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Disaggregation of Revenue
Sales by Customer Type
Year Ended December 31
2024
2023
2022
$ in millions
$
%(3)
$
%(3)
$
%(3)
Aeronautics Systems
U.S. government(1)
$ 10,087
86 % $
9,132
87 % $
8,930
87 %
International(2)
1,678
14 %
1,379
13 %
1,344
13 %
Other customers
22
— %
35
— %
18
— %
Intersegment sales
243
240
239
Aeronautics Systems sales
12,030
100 %
10,786
100 %
10,531
100 %
Defense Systems
U.S. government(1)
6,333
82 %
5,946
79 %
5,406
79 %
International(2)
1,301
17 %
1,491
20 %
1,358
20 %
Other customers
71
1 %
76
1 %
71
1 %
Intersegment sales
855
776
794
Defense Systems sales
8,560
100 %
8,289
100 %
7,629
100 %
Mission Systems
U.S. government(1)
8,322
81 %
7,999
81 %
7,471
80 %
International(2)
1,809
18 %
1,757
18 %
1,809
19 %
Other customers
91
1 %
85
1 %
101
1 %
Intersegment sales
1,177
1,054
1,015
Mission Systems sales
11,399
100 %
10,895
100 %
10,396
100 %
Space Systems
U.S. government(1)
10,694
94 %
10,805
95 %
9,516
95 %
International(2)
212
2 %
278
2 %
337
3 %
Other customers
413
4 %
307
3 %
241
2 %
Intersegment sales
412
483
476
Space Systems sales
11,731
100 %
11,873
100 %
10,570
100 %
Total
U.S. government(1)
35,436
87 %
33,882
86 %
31,323
86 %
International(2)
5,000
12 %
4,905
13 %
4,848
13 %
Other customers
597
1 %
503
1 %
431
1 %
Total Sales
$ 41,033
100 % $ 39,290
100 % $ 36,602
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 a substantial
percentage of its 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 external customer sales.
NORTHROP GRUMMAN CORPORATION
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Sales by Contract Type
Year Ended December 31
2024
2023
2022
$ in millions
$
%(1)
$
%(1)
$
%(1)
Aeronautics Systems
Cost-type
$
5,373
46 % $
5,235
50 % $
5,013
49 %
Fixed-price
6,414
54 %
5,311
50 %
5,279
51 %
Intersegment sales
243
240
239
Aeronautics Systems sales
12,030
10,786
10,531
Defense Systems
Cost-type
4,002
52 %
3,991
53 %
3,516
51 %
Fixed-price
3,703
48 %
3,522
47 %
3,319
49 %
Intersegment sales
855
776
794
Defense Systems sales
8,560
8,289
7,629
Mission Systems
Cost-type
4,589
45 %
4,116
42 %
3,622
39 %
Fixed-price
5,633
55 %
5,725
58 %
5,759
61 %
Intersegment sales
1,177
1,054
1,015
Mission Systems sales
11,399
10,895
10,396
Space Systems
Cost-type
7,000
62 %
7,637
67 %
6,560
65 %
Fixed-price
4,319
38 %
3,753
33 %
3,534
35 %
Intersegment sales
412
483
476
Space Systems sales
11,731
11,873
10,570
Total
Cost-type
20,964
51 %
20,979
53 %
18,711
51 %
Fixed-price
20,069
49 %
18,311
47 %
17,891
49 %
Total Sales
$ 41,033
$ 39,290
$ 36,602
(1) Percentages calculated based on external customer sales.
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Sales by Geographic Region
Year Ended December 31
2024
2023
2022
$ in millions
$
%(3)
$
%(3)
$
%(3)
Aeronautics Systems
United States(1)
$ 10,109
86 % $
9,167
87 % $
8,948
87 %
Asia/Pacific
694
6 %
607
6 %
708
7 %
Europe
947
8 %
736
7 %
585
6 %
Other geographic regions(2)
37
— %
36
— %
51
— %
Intersegment sales
243
240
239
Aeronautics Systems sales
12,030
10,786
10,531
Defense Systems
United States(1)
6,404
83 %
6,022
80 %
5,477
80 %
Asia/Pacific
344
4 %
419
6 %
454
7 %
Europe
766
10 %
601
8 %
477
7 %
Other geographic regions(2)
191
3 %
471
6 %
427
6 %
Intersegment sales
855
776
794
Defense Systems sales
8,560
8,289
7,629
Mission Systems
United States(1)
8,413
82 %
8,084
82 %
7,572
81 %
Asia/Pacific
472
5 %
460
5 %
531
6 %
Europe
990
10 %
959
10 %
977
10 %
Other geographic regions(2)
347
3 %
338
3 %
301
3 %
Intersegment sales
1,177
1,054
1,015
Mission Systems sales
11,399
10,895
10,396
Space Systems
United States(1)
11,107
98 %
11,112
98 %
9,757
97 %
Asia/Pacific
42
1 %
82
1 %
109
1 %
Europe
134
1 %
159
1 %
213
2 %
Other geographic regions(2)
36
— %
37
— %
15
— %
Intersegment sales
412
483
476
Space Systems sales
11,731
11,873
10,570
Total
United States(1)
36,033
88 %
34,385
88 %
31,754
87 %
Asia/Pacific
1,552
4 %
1,568
4 %
1,802
5 %
Europe
2,837
7 %
2,455
6 %
2,252
6 %
Other geographic regions(2)
611
1 %
882
2 %
794
2 %
Total Sales
$ 41,033
$ 39,290
$ 36,602
(1) No country other than the United States represents greater than 10% of total company sales.
(2) Other geographic regions are principally comprised of the Middle East.
(3) Percentages calculated based on external customer sales.
NORTHROP GRUMMAN CORPORATION
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Segment Sales
The following table presents sales for each of our reportable segments and total intersegment eliminations:
Year Ended December 31
$ in millions
2024
2023
2022
Sales
Aeronautics Systems
$ 12,030 $ 10,786 $ 10,531
Defense Systems
8,560
8,289
7,629
Mission Systems
11,399
10,895
10,396
Space Systems
11,731
11,873
10,570
Intersegment eliminations
(2,687)
(2,553)
(2,524)
Total sales
$ 41,033 $ 39,290 $ 36,602
Intersegment Sales and Operating Income
Sales between segments are recorded at values that include intercompany operating income for the performing
segment based on that segment’s estimated average operating margin rate for external sales. Such intercompany
operating income is eliminated in consolidation, so that the company’s total sales and total operating income reflect
only those transactions with external customers. See Note 1 for additional information.
The following table presents intersegment sales and operating income:
Year Ended December 31
$ in millions
2024
2023
2022
Sales
Operating
Income
Sales
Operating
Income
Sales
Operating
Income
Intersegment sales and operating income
Aeronautics Systems
$ 243
$ 25 $ 240
$ 22 $ 239
$ 27
Defense Systems
855
106
776
94
794
94
Mission Systems
1,177
181 1,054
167 1,015
167
Space Systems
412
44
483
52
476
52
Total
$ 2,687
$ 356 $ 2,553
$ 335 $ 2,524
$ 340
Capital Expenditures and Depreciation and Amortization
The following table presents capital expenditures and depreciation and amortization for each of our reportable
segments and for Corporate:
Year Ended December 31
$ in millions
2024
2023
2022
2024
2023
2022
Capital Expenditures
Depreciation and Amortization
Aeronautics Systems
$
596 $
504 $
490 $
380 $
384 $
322
Defense Systems
139
164
166
180
184
174
Mission Systems
314
288
248
255
246
242
Space Systems
652
745
473
362
370
323
Corporate(1)
66
74
58
193
154
281
Total
$
1,767 $
1,775 $
1,435 $
1,370 $
1,338 $
1,342
(1) Corporate amounts include the amortization of purchased intangible assets and the additional depreciation expense related to
the step-up in fair value of PP&E acquired through business combinations as they are not considered part of management’s
evaluation of segment operating performance.
Assets
Our CODM does not use assets by segment to evaluate segment performance or allocate resources. Therefore, we do
not disclose assets by segment.
NORTHROP GRUMMAN CORPORATION
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16. SUBSEQUENT EVENT
On January 29, 2025, the company entered into a definitive agreement to sell substantially all of the Immersive
Mission Solutions (IMS) operating unit of Defense Systems for $327 million in cash. IMS is a provider of mission
training and satellite ground network communications software for U.S. government customers. The transaction,
which is subject to final government approvals and closing conditions, is expected to be completed mid-year 2025.
We expect to recognize an after-tax gain of approximately $150 million when the transaction closes.
NORTHROP GRUMMAN CORPORATION
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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 (Chair, Chief Executive Officer 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, 2024, and have concluded that these controls and procedures are effective 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, 2024, no change occurred in our internal control over financial
reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information
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 established in Internal Control—Integrated Framework (2013) issued by the
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 effective as of December 31, 2024.
Deloitte & Touche LLP issued an attestation report dated January 29, 2025, 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, 2024, 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
Chair, Chief Executive Officer and President
/s/ Kenneth B. Crews
Corporate Vice President and Chief Financial Officer
January 29, 2025
NORTHROP GRUMMAN CORPORATION
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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, 2024, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December
31, 2024, based on the criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
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, 2024 of the
Company and our report dated January 29, 2025 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
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.
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 effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
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 29, 2025
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CERTAIN TRADING AGREEMENTS
During the quarter ended December 31, 2024 none of our directors or officers (as defined in Rule 16a-1(f) of the
Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading
arrangement”, as those terms are defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
DIRECTORS
Information about our Directors will be incorporated herein by reference to the Proxy Statement for the 2025 Annual
Meeting of Shareholders, to be filed 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 29, 2025, are listed below, along with their ages on that date, positions and
offices held with the company, and principal occupations and employment, focused primarily on the past five years.
Kathy J. Warden
53
Chair, Chief
Executive Officer
and President
2019
Kenneth B. Crews
43
Corporate Vice
President and
Chief Financial
Officer
2024
Vice President and Chief Financial Officer,
Space Systems Sector (2023-2024); Vice
President and Chief Financial Officer, Mission
Systems Sector (2021-2023); Vice President and
Chief Financial Officer, Land and Avionics
C4ISR Division, Mission Systems Sector
(2017-2020)
Benjamin R. Davies
47
Corporate Vice
President and
President, Defense
Systems Sector
2024
Vice President and General Manager, Strategic
Deterrent Systems Division, Space Systems
Sector (2023-2024); Vice President and General
Manager, Networked Information Solutions
Division, Mission Systems Sector (2021-2023);
Vice President and General Manager, B-2
Program, Aeronautics Systems Sector
(2019-2021)
Robert J. Fleming
52
Corporate Vice
President and
President, Space
Systems Sector
2023
Vice President and General Manager, Strategic
Space Systems Division, Space Systems Sector
(2021-2023); Vice President, Business
Development and Strategy, Space Systems
Sector (2020-2021); Vice President, Space
Programs, Strategic Force Programs, Mission
Systems Sector (2019-2020)
Michael A. Hardesty
53
Corporate Vice
President,
Controller, and
Chief Accounting
Officer
2013
Thomas H. Jones
58
Corporate Vice
President and
President,
Aeronautics
Systems Sector
2021
Vice President and General Manager, Airborne
C4ISR Division, Mission Systems Sector
(2017-2020)
Roshan S. Roeder
45
Corporate Vice
President and
President, Mission
Systems Sector
2024
Corporate Vice President and President, Defense
Systems Sector (2022-2024); Vice President and
General Manager, Airborne Multifunction
Sensors, Mission Systems Sector (2020-2022);
Vice President Program Management,
Communications Business Unit, Mission
Systems Sector (2018-2020)
Kathryn G. Simpson
61
Corporate Vice
President and
General Counsel
2023
Vice President, Associate General Counsel,
Mission Systems Sector (2021-2023); Vice
President, Deputy General Counsel (2012-2021)
Name
Age
Office Held
Since
Recent Business Experience
NORTHROP GRUMMAN CORPORATION
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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 2025 Annual Meeting of Shareholders.
CODE OF ETHICS
We have adopted Standards of Business Conduct for our employees, including the principal executive officer,
principal financial officer and principal accounting officer. The Standards of Business Conduct can be found on our
website at www.northropgrumman.com under “Who We Are – Investors – Corporate Governance – Overview –
Standards of Business Conduct.” A copy of the Standards of Business Conduct is available to any stockholder who
requests it by writing to: Northrop Grumman 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 to our
directors and executive officers are disclosed in a Current Report on Form 8-K.
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, including with respect to insider trading arrangements and policies, will be
incorporated herein by reference to the Proxy Statement for the 2025 Annual Meeting of Shareholders.
Item 11. Executive Compensation
Information concerning Executive Compensation required by this Item 11, 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 2025 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 2025 Annual Meeting of Shareholders.
For a description of securities authorized under our equity compensation plans, see Note 13 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 2025 Annual Meeting of Shareholders.
Item 14. Principal Accountant Fees and Services
The information as to Principal Accountant Fees and Services will be incorporated herein by reference to the Proxy
Statement for the 2025 Annual Meeting of Shareholders.
NORTHROP GRUMMAN CORPORATION
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PART IV
Item 15. Exhibits, Financial Statement Schedules
(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)
Agreement and Plan of Merger dated as of September 17, 2017, among Northrop Grumman
Corporation, Neptune Merger, Inc. and Orbital ATK, Inc. (incorporated by reference to Exhibit
2.1 to Form 8-K filed September 18, 2017, File No. 001-16411)
2(b)
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)
3(a)
Restated Certificate of Incorporation of Northrop Grumman Corporation, dated May 15, 2024
(incorporated by reference to Exhibit 3.1 to Form 8-K filed May 16, 2024, File No. 001-16411)
3(b)
Amended and Restated Bylaws of Northrop Grumman Corporation dated May 17, 2023
(incorporated by reference to Exhibit 3.2 to Form 8-K filed May 19, 2023, File No. 001-16411)
4(a)
Indenture dated as of October 15, 1994, between Northrop Grumman Corporation (now Northrop
Grumman Systems Corporation) and The Chase Manhattan Bank (National Association), Trustee
(incorporated by reference to Exhibit 4.1 to Form 8-K filed October 25, 1994, File No.
001-3229)
4(b)
First Supplemental Indenture dated as of March 30, 2011 by and among Northrop Grumman
Systems Corporation, The Bank of New York Mellon (successor trustee to JPMorgan Chase
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,
between Northrop Grumman Corporation (now Northrop Grumman Systems Corporation) and
The Chase Manhattan Bank, N.A., Trustee (incorporated by reference to Exhibit 4.1 to Form 10-
Q for the quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)
4(c)
Second Supplemental Indenture dated as of March 30, 2011 by and among Northrop Grumman
Systems Corporation, The Bank of New York Mellon (successor trustee to JPMorgan Chase
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 (incorporated by reference to Exhibit 4.2 to Form 10-
Q for the quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)
4(d)
Form of Officers’ Certificate (without exhibits) establishing the terms of Northrop Grumman
Corporation’s (now Northrop Grumman Systems Corporation’s) 7.875% Debentures due 2026
(incorporated by reference to Exhibit 4.3 to Form S-4 Registration Statement No. 333-02653
filed April 19, 1996)
4(e)
Form of Northrop Grumman Corporation’s (now Northrop Grumman Systems Corporation’s)
7.875% Debentures due 2026 (incorporated by reference to Exhibit 4.6 to Form S-4 Registration
Statement No. 333-02653 filed April 19, 1996)
NORTHROP GRUMMAN CORPORATION
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4(f)
Form of Officers’ Certificate establishing the terms of Northrop Grumman Corporation’s (now
Northrop Grumman Systems Corporation’s) 7.75% Debentures due 2031 (incorporated by
reference to Exhibit 10.9 to Form 8-K filed April 17, 2001, File No. 001-16411)
4(g)
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)
4(h)
Supplemental Indenture with respect to Senior Indenture dated December 15, 1991, dated as of
April 3, 2001, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman
Systems Corporation), Northrop Grumman Corporation, Northrop Grumman Systems
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)
4(i)
Supplemental Indenture with respect to Senior Indenture dated December 15, 1991, dated as of
December 20, 2002, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman
Systems Corporation), Northrop Grumman Corporation, Northrop Grumman Systems
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)
4(j)
Third Supplemental Indenture dated as of March 30, 2011 by and among Northrop Grumman
Systems Corporation (successor-in-interest to Litton Industries, Inc.), The Bank of New York
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 Indenture dated
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)
4(k)
Fourth Supplemental Indenture dated as of March 30, 2011 by and among Northrop Grumman
Systems Corporation (successor-in-interest to Litton Industries, Inc.), The Bank of New York
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 Indenture dated
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)
4(l)
Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman Systems
Corporation) and Mellon Bank, N.A., as trustee, dated as of May 1, 1986 (incorporated by
reference to Exhibit 2 to the Form 8-A Registration Statement of TRW Inc. dated July 3, 1986,
File No. 001-02384)
4(m)
First Supplemental Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman
Systems Corporation) and Mellon Bank, N.A., as trustee, dated as of August 24, 1989
(incorporated by reference to Exhibit 4(b) to Form S-3 Registration Statement No. 33-30350 of
TRW Inc.)
4(n)
Fifth Supplemental Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman
Systems Corporation) and The Chase Manhattan Bank, as successor trustee, dated as of June 2,
1999 (incorporated by reference to Exhibit 4(f) to Form S-4 Registration Statement
No. 333-83227 of TRW Inc. filed July 20, 1999)
4(o)
Ninth Supplemental Indenture dated as of December 31, 2009 among Northrop Grumman Space
& Mission Systems Corp. (predecessor–in-interest to Northrop Grumman Systems Corporation);
The Bank of New York Mellon, as successor trustee; Northrop Grumman Corporation; and
Northrop Grumman Systems Corporation (incorporated by reference to Exhibit 4(p) to Form 10-
K for the year ended December 31, 2009, filed February 9, 2010, File No. 001-16411)
NORTHROP GRUMMAN CORPORATION
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4(p)
Tenth Supplemental Indenture dated as of March 30, 2011, by and among Northrop Grumman
Systems Corporation (successor-in-interest to Northrop Grumman Space & Mission Systems
Corp. and TRW, Inc.), The Bank of New York Mellon, as successor trustee to JPMorgan Chase
Bank and to Mellon Bank, N.A., Titan II Inc. (formerly known as Northrop Grumman
Corporation), and Titan Holdings II, L.P., to Indenture between TRW Inc. and Mellon Bank,
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)
4(q)
Eleventh Supplemental Indenture dated as of March 30, 2011, by and among Northrop Grumman
Systems Corporation (successor-in-interest to Northrop Grumman Space & Mission Systems
Corp. and TRW Inc.), The Bank of New York Mellon, as successor trustee 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)
4(r)
Twelfth Supplemental Indenture, dated as of August 25, 2021, to the Indenture dated as of May
1, 1986, by and among Northrop Grumman Systems Corporation, Northrop Grumman
Corporation and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit
4.1 to Form 8-K filed August 27, 2021, File No. 001-16411)
4(s)
Thirteenth Supplemental Indenture, dated as of August 25, 2021, to the Indenture dated as of
May 1, 1986, by and among Northrop Grumman Systems Corporation, Northrop Grumman
Corporation and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit
4.2 to Form 8-K filed August 27, 2021, File No. 001-16411)
4(t)
Indenture dated as of November 21, 2001, between Northrop Grumman Corporation and
JPMorgan Chase Bank, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed
November 21, 2001, File No. 001-16411)
4(u)
Second Supplemental Indenture dated as of November 8, 2010, between Northrop Grumman
Corporation and The Bank of New York Mellon, as successor trustee, to Indenture dated as of
November 21, 2001 (incorporated by reference to Exhibit 4(a) to Form 8-K filed November 8,
2010, File No. 001-16411)
4(v)
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)
4(w)
Third Supplemental Indenture 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)
4(x)
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 trustee to JPMorgan Chase Bank, and
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)
4(y)
Fifth Supplemental Indenture, dated as of May 31, 2013, 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(a) to Form
8-K filed May 31, 2013, File No. 001-16411)
4(z)
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)
4(aa)
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)
4(bb)
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)
NORTHROP GRUMMAN CORPORATION
-95-
4(cc)
Seventh Supplemental Indenture, dated as of December 1, 2016, 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 December 1, 2016, File No. 001-16411)
4(dd)
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)
4(ee)
Eighth Supplemental Indenture, dated as of October 13, 2017, 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 October 13, 2017, File No. 001-16411)
4(ff)
Ninth Supplemental Indenture, dated as of March 23, 2020, between Northrop Grumman
Corporation and The Bank of New York Mellon, as successor to JPMorgan Chase, Trustee, to
Indenture dated as of November 21, 2001 (incorporated by reference to Exhibit 4.1 to Form 8-K
filed March 24, 2020, File No. 001-16411)
4(gg)
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)
4(hh)
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)
4(ii)
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(jj)
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(kk)
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)
4(ll)
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)
4(mm)
Tenth Supplemental Indenture, dated as of September 2, 2021, 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 September 3, 2021, File No. 001-16411)
4(nn)
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)
4(oo)
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)
4(pp)
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)
4(qq)
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)
4(rr)
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)
4(ss)
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)
4(tt)
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)
4(uu)
Eleventh Supplemental Indenture, dated as of February 8, 2023, 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 8, 2023, File No. 001-16411)
NORTHROP GRUMMAN CORPORATION
-96-
4(vv)
Form of 4.700% Senior Note due 2033 (incorporated by reference to Exhibit A included in
Exhibit 4.1 to Form 8-K filed February 8, 2023, File No. 001-16411)
4(ww)
Form of 4.950% Senior Note due 2053 (incorporated by reference to Exhibit B included in
Exhibit 4.1 to Form 8-K filed February 8, 2023, File No. 001-16411)
4(xx)
Twelfth Supplemental Indenture, dated as of January 31, 2024, 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 January 31, 2024, File No. 001-16411)
4(yy)
Form of 4.600% Senior Note due 2029 (incorporated by reference to Exhibit A included in
Exhibit 4.1 to Form 8-K filed January 31, 2024, File No. 001-16411)
4(zz)
Form of 4.900% Senior Note due 2034 (incorporated by reference to Exhibit B included in
Exhibit 4.1 to Form 8-K filed January 31, 2024, File No. 001-16411)
4(aaa)
Form of 5.200% Senior Note due 2054 (incorporated by reference to Exhibit C included in
Exhibit 4.1 to Form 8-K filed January 31, 2024, File No. 001-16411)
10(a)
Credit Agreement, dated as of August 23, 2022, 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 23, 2022, File No. 001-16411)
10(b)
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)
10(c)
Form of Guarantee dated as of April 3, 2001, by Northrop Grumman Corporation of Northrop
Grumman Systems Corporation indenture indebtedness (incorporated by reference to
Exhibit 10.11 to Form 8-K and filed April 17, 2001, File No. 001-16411)
10(d)
Form of Guarantee dated as of March 27, 2003, by Northrop Grumman Corporation, as
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 Corporation) (incorporated by reference to Exhibit 4.2 to Form 10-Q for the
quarter ended March 31, 2003, filed May 14, 2003, File No. 001-16411)
(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 Corporation, Northrop
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)
‘+10(e)
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)
‘+10(f)
Amended and Restated 2011 Long-Term Incentive Stock Plan (as amended and restated effective
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)
(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)
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)
(iii)
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)
NORTHROP GRUMMAN CORPORATION
-97-
(iv)
2022 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, 2022, filed April 28, 2022, File No. 001-16411)
(v)
2022 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, 2022, filed April 28, 2022, File No. 001-16411)
(vi)
2023 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, 2023, filed April 26, 2023, File No. 001-16411)
(vii) 2023 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, 2023, filed April 26, 2023, File No. 001-16411)
(viii) Special 2023 Restricted Stock Rights Grant Agreement Granted to Roshan Roeder Under
the 2011 Long-Term Incentive Stock Plan (incorporated by reference to Exhibit 10(f)(viii)
to Form 10-K for the year ended December 31, 2023, filed January 25, 2024, File No.
001-16411)
(ix)
2024 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, 2024, filed April 25, 2024, File No. 001-16411)
(x)
2024 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, 2024, filed April 25, 2024, 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)
(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
10-K for the year ended December 31, 2014, filed February 2, 2015, File No. 001-16411)
‘+10(h)
Northrop Grumman 2024 Long-Term Incentive Stock Plan (incorporated by reference to Exhibit
10.1 to Form 8-K filed May 16, 2024, File No. 001-16411)
(i)
Northrop Grumman Corporation Equity Grant Program for Non-Employee Directors
under the Northrop Grumman 2024 Long-Term Incentive Stock Plan, Amended and
Restated effective May 15, 2024 (incorporated by reference to Exhibit 10.2 to Form 10-Q
for the quarter ended June 30, 2024, filed July 25, 2024, File No. 001-16411)
‘+10(i)
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 I to the Northrop Grumman 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)
NORTHROP GRUMMAN CORPORATION
-98-
(iii)
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)
‘+10(j)
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)
‘+10(k)
Non-Employee Director Compensation Term Sheet, effective May 15, 2024 (incorporated by
reference to Exhibit 10.3 to Form 10-Q for the quarter ended June 30, 2024, filed July 25, 2024,
File No. 001-16411)
‘+10(l)
Non-Employee Director Compensation Term Sheet, effective May 17, 2023 (incorporated by
reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2023, filed July 26, 2023,
File No. 001-16411)
‘+10(m)
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)
+10(n)
Northrop Grumman 2006 Annual Incentive Plan and Incentive Compensation Plan, as amended
and restated effective January 1, 2024 (incorporated by reference to Exhibit 10.3 to Form 10-Q
for the quarter ended March 31, 2024, filed April 25, 2024, File No. 001-16411)
‘+10(o)
Northrop Grumman Savings Excess Plan (Amended and Restated Effective as of July 1, 2023)
(incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended June 30, 2023,
filed July 26, 2023, File No. 001-16411)
‘+10(p)
Northrop Grumman Officers 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)
‘+10(q)
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)
‘+10(r)
Executive Long-Term Disability Insurance Policy dated January 1, 2019 (incorporated by
reference to Exhibit 10.5 to Form 10-Q for the quarter ended March 31, 2019, filed April 24,
2019, File No. 001-16411)
‘*+10(s)
Executive Supplemental Individual Disability Insurance Plan dated June 10, 2022
‘*+10(t)
Group Personal Excess Liability Policy effective as of January 1, 2024
‘+10(u)
Letter dated February 3, 2020 from Northrop Grumman Corporation to David Keffer regarding
compensation effective February 17, 2020 (incorporated by reference to Exhibit 10.4 to Form
10-Q for the quarter ended March 31, 2020, filed April 29, 2020, File No. 001-16411)
*19
Insider Trading Policy and Procedure regarding Securities Trading for Designated Persons
*21
Subsidiaries
*23
Consent of Independent Registered Public Accounting Firm
*24
Power of Attorney
*31.1
Certification of Kathy J. Warden pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2
Certification of Kenneth B. Crews pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
**32.1
Certification of Kathy J. Warden pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**32.2
Certification of Kenneth B. Crews pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
NORTHROP GRUMMAN CORPORATION
-99-
97
Northrop Grumman Policy Regarding the Recoupment of Certain Incentive Compensation
Payments (incorporated by reference to Exhibit 97 to Form 10-K for the year ended December
31, 2023, filed January 25, 2024, File No. 001-16411)
*101
Northrop Grumman Corporation Annual Report on Form 10-K for the fiscal year ended
December 31, 2024, formatted as inline XBRL (Extensible Business Reporting Language); (i)
the Cover Page, (ii) Cybersecurity (iii) 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
(vi) Notes to Consolidated Financial Statements, and (vii) Certain Trading Agreements. 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.
NORTHROP GRUMMAN CORPORATION
-100-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th day of
January 2025.
NORTHROP GRUMMAN CORPORATION
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 29th day of January 2025, by the following persons and in the capacities indicated.
Signature
Title
Kathy J. Warden*
Chair, Chief Executive Officer and President (Principal
Executive Officer), and Director
Kenneth B. Crews*
Corporate Vice President and Chief Financial Officer (Principal
Financial Officer)
Michael A. Hardesty
Corporate Vice President, Controller and Chief Accounting
Officer (Principal Accounting Officer)
David P. Abney*
Director
Marianne C. Brown*
Director
Ann M. Fudge*
Director
Madeleine A. Kleiner*
Director
Arvind Krishna*
Director
Graham N. Robinson*
Director
Kimberly A. Ross*
Director
Gary Roughead*
Director
Thomas M. Schoewe*
Director
James S. Turley*
Director
Mark A. Welsh III*
Director
Mary A. Winston*
Director
*By:
/s/ Jennifer C. McGarey
Jennifer C. McGarey
Corporate Vice President and Secretary
Attorney-in-Fact
pursuant to a power of attorney
NORTHROP GRUMMAN CORPORATION
-101-
Use of Non-GAAP Financial Measures
This Annual Report contains non-GAAP (accounting principles generally accepted in the United States of
America) financial measures, as defined by Securities and Exchange Commission (SEC) Regulation G.
While we believe investors and other users of our financial statements may find these non-GAAP financial
measures useful in evaluating our financial performance and operational trends, they should be considered
as supplemental in nature and therefore, should not be considered in isolation or as a substitute for
financial information prepared in accordance with GAAP. Definitions and reconciliations for the non-GAAP
financial measures contained in this Annual Report are provided below. Other companies may define these
measures differently or may utilize different non-GAAP financial measures.
Adjusted Free Cash Flow:
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, if any. 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. We use adjusted free cash flow as a key factor in our 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
available for discretionary purposes, or as an alternative to operating cash flows presented in accordance
with GAAP.
$ in millions
2024
2023
2022
Net cash provided by operating activities
$
4,388
$
3,875
$
2,901
Capital expenditures
(1,767)
(1,775)
(1,435)
Proceeds from sale of equipment to a customer
—
—
155
Adjusted free cash flow
$
2,621
$
2,100
$
1,621
NORTHROP GRUMMAN 2024 ANNUAL REPORT
General Information
Northrop Grumman
Corporation on the Internet
Information on Northrop Grumman and its
sectors, including press releases, this Annual
Report and other reports, can be found at
www.northropgrumman.com
Annual Meeting of
Shareholders
Wednesday, May 21, 2025
8 a.m. EDT
The 2025 Annual Meeting of Shareholders of
Northrop Grumman Corporation will be held
virtually on Wednesday, May 21, 2025 at 8
a.m. Eastern Daylight Time. Details are
available in our Notice of 2025 Annual
Meeting and Proxy Statement.
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 43006
Providence, RI 02940-3006
(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 payments of up
to a specified amount 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 (410) 832-6792 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 2024 ANNUAL REPORT
NORTHROP GRUMMAN 2024 ANNUAL REPORT