What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-07 compared with 2024-02-08 · 153 added, 141 removed, 355 unchanged (45% of the section changed)

6 unchanged sentences

The coronavirus (COVID-19) pandemic caused significant disruptions to national and global economies and government activities, including supply chain and staffing challenges.

Additionally, in response to the Russian invasion of Ukraine, the United States and several other countries imposed economic and trade sanctions, export controls and other restrictions (collectively, global sanctions) targeting Russia and Belarus.

The conflict and these sanctions have caused some disruptions to global economies and some global businesses, including heightened cybersecurity risks, increased energy costs and foreign currency exchange rate fluctuations, as well as exacerbated existing supply chain challenges and inflationary pressures.

Lastly, the impact of the war between Israel and Hamas continues to evolve.

The disruptions caused by these events continue to impact global economies and businesses.

The primary impact to our business is supply chain challenges, including inflationary pressures.

In our Aerospace segment, supply chain challenges have paced our ability to ramp up production in response to strong customer demand for our aircraft and have caused out-of-sequence manufacturing, which increases costs and decreases operational efficiency.

This includes the Israel-Hamas war’s impact on our Israel-based supplier of mid-cabin aircraft.

Within our defense segments, the COVID-19 pandemic resulted in supply chain challenges and impacted the regional availability of skilled labor, which we continue to experience, particularly in our Marine Systems segment.

The Russia-Ukraine conflict and increased threat environment has created additional demand for our products and services, particularly in our Combat Systems segment.

Lastly, the impact of the conflict in the Middle East continues to evolve.

The disruptions caused by these events continue to impact global economies and businesses, including ours.

The primary impact to our business is supply chain challenges, including availability of parts, quality escapes and inflationary pressures.

In our Aerospace segment, supply chain challenges paced our ability to ramp up production at the rate we like in response to strong customer demand for our aircraft, causing out-of-sequence manufacturing that increased costs and decreased operational efficiency.

In addition, the conflict in the Middle East impacted the delivery schedule for our Israel-based supplier of mid-cabin aircraft.

Within our defense segments, the COVID-19 pandemic resulted in supply chain challenges that continue to impact our Marine Systems segment.

The Russia-Ukraine conflict and increased threat environment have created additional demand for certain of our products and services, particularly in our Combat Systems segment.

Any longer-term impact of these global events to our business is currently unknown due to the uncertainty around duration and their broader impact.

3 unchanged sentences

The Congress has not yet passed a defense appropriations bill for the government’s current fiscal year.

However, the government has been operating under a continuing resolution (CR) that provides funding for some federal agencies through March 1, 2024, and other federal agencies through March 8, 2024.

However, the government has been operating under a continuing resolution (CR) that provides funding for some federal agencies through March 14, 2025.

When the government operates under a CR, all programs of record are funded at the prior year’s appropriated levels until the current year appropriations bill is signed into law.

Therefore, the U.S.

Department of Defense (DoD) is prohibited

from starting new programs or increasing funding on existing programs unless there is an exception for the program included in the CR.

The current CR included an exception allowing the DoD to obligate funds for the construction of the second submarine under the existing Columbia-class submarine program.

Department of Defense (DoD) is prohibited from starting new programs or increasing funding on existing programs unless there is an exception for the program included in the CR.

The current CR included exceptions allowing the DoD to obligate additional funds for two fiscal year 2024 and one fiscal year 2025 Virginia-class submarines, and for non-executive pay improvements and infrastructure

investments to support the submarine industrial base.

In addition, the CR included an exception allowing the DoD to obligate funds for the construction of the second submarine under the existing Columbia-class submarine contract.

We do not anticipate the current CR having a material impact on our results of operations, financial condition or cash flows.

20 unchanged sentences

A new aircraft model typically has lower margins in its initial production lots, and then margins generally increase as we realize efficiencies in the production process.

Additional factors affecting the segment’s earnings and margin include the volume, mix and profitability of services work performed, the market for pre-owned aircraft, and the level of general and administrative (G&A) and net research and development (R&D) costs incurred by the segment.

Additional factors affecting the segment’s earnings and margin include the volume, mix and profitability

of services work performed, the market for pre-owned aircraft, and the level of general and administrative (G&A) and net research and development (R&D) costs incurred by the segment.

In the defense segments, revenue on long-term government contracts is recognized generally over time as the work progresses, either as products are produced or as services are rendered.

16 unchanged sentences

• Strong operating performance:

◦ Record-high revenue of $42.3 billion, an increase of 7.3% from 2022

◦ Operating earnings of $4.2 billion with sequential growth throughout the year

◦ Record-high cash provided by operating activities of $4.7 billion, or 142% of net earnings

• Record-high year-end backlog of $93.6 billion increased $2.5 billion, or 2.7%, from 2022, driven by significant order activity during the year supporting our long-term growth expectations:

◦ Revenue of $47.7 billion, an increase of 12.9% from 2023

◦ Operating earnings of $4.8 billion, an increase of 13% from 2023, with sequential growth throughout the year

◦ Diluted earnings per share of $13.63, up 13.4% from 2023

◦ Cash provided by operating activities of $4.1 billion, or 109% of net earnings

• Backlog of $90.6 billion, supporting our long-term growth expectations:

◦ Strong Gulfstream aircraft order activity, including orders across all aircraft models

6 unchanged sentences

Operating margin 10.1 % 10.0 %

Our consolidated revenue increased in 2023 driven by growth in each of our defense segments, particularly submarine construction and engineering in our Marine Systems segment.

Operating margin decreased in 2023 due primarily to supply-chain cost pressure in our Marine Systems segment and lower-margin artillery facilities expansion work in our Combat Systems segment.

Our consolidated revenue increased in 2024 driven by growth across all segments, including double digit percentage growth in our Aerospace and Marine Systems segments.

Operating margin increased 10 basis points.

REVIEW OF OPERATING SEGMENTS

10 unchanged sentences

The increase in the Aerospace segment’s revenue in 2024 consisted of the following:

Aircraft services $ 220

Aircraft manufacturing $ 2,101

Aircraft services 527

Total increase $ 2,628

Aircraft services revenue was higher in 2023 due to an increase in demand for maintenance work based on established maintenance cycles, a larger installed base of aircraft, and strong customer flight activity.

Aircraft manufacturing revenue decreased in 2023 due primarily to fewer deliveries of our large-cabin aircraft resulting from supply chain constraints.

Aircraft manufacturing revenue increased in 2024 due primarily to the number and mix of aircraft deliveries, including our ultra-long-range, ultra-large-cabin G700 aircraft, which began deliveries in the second quarter of 2024 following U.S.

Federal Aviation Administration (FAA) and European Union Aviation Safety Agency (EASA) certification.

The number of G700 deliveries in 2024 was impacted by supplier quality escapes, late delivery of components and out of station work.

Aircraft services revenue was higher in 2024 due to increased customer demand for aircraft maintenance based on established maintenance cycles, a larger installed base and customer flight activity.

The increase in the segment’s operating earnings in 2024 consisted of the following:

Aircraft services $ 36

Aircraft manufacturing $ 213

Aircraft services 129

G&A/other expenses (60)

Total increase $ 282

Aircraft services operating earnings were up in 2023 due to higher volume and a favorable mix of services.

While aircraft manufacturing operating earnings in 2023 reflected the impact of higher production costs resulting from supply chain challenges, 2022 earnings were impacted to a greater extent by customer accommodation costs associated with a G500/G600 airworthiness directive.

G&A expenses decreased in 2023, offset partially by increased R&D expenses associated with ongoing product development efforts, particularly those related to the G700 certification.

In total, the Aerospace segment’s operating margin increased 50 basis points in 2023 to 13.7%.

We expect the Aerospace segment’s 2024 revenue to increase to approximately $12 billion due to an increase in new aircraft deliveries to approximately 160, including the entry into service of the new G700 aircraft.

We expect the segment’s operating margin to be approximately 15%.

Aircraft manufacturing operating earnings increased in 2024 but not at the same rate as revenue, reflecting additional costs associated with the initial deliveries of G700 aircraft due to out of station work caused by supplier quality escapes and late delivery of components.

Aircraft services operating earnings were higher in 2024 due to higher volume.

G&A/other expenses increased in 2024 consistent with the growth in the business.

In total, the Aerospace segment’s operating margin decreased 70 basis points in 2024.

We expect the Aerospace segment’s 2025 revenue to increase to approximately $12.7 billion with operating margin of approximately 13.7%.

MARINE SYSTEMS

5 unchanged sentences

The increase in the Marine Systems segment’s revenue in 2024 consisted of the following:

Navy ship engineering, repair and other services $ 784

Navy ship construction $ 1,525

Navy ship engineering, repair and other services 357

Total increase $ 1,882

Revenue from U.S.

Navy ship construction and engineering was up in 2023 due primarily to increased volume on the Columbia-class submarine program.

The Marine Systems segment’s operating margin decreased 110 basis points in 2023 due to supply chain impacts to the Virginia-class submarine schedule and cost growth on the Arleigh Burke-class (DDG-51) guided-missile destroyer program.

Navy ship construction and engineering was up in 2024 due primarily to increased volume on the Columbia-class and Virginia-class submarine programs.

The Marine Systems segment’s operating margin decreased 50 basis points in 2024 due to a $123 unfavorable profit adjustment in the fourth quarter of 2024 on the Virginia-class Block IV contract as it approaches completion in 2026.

The Virginia-class program has been impacted by supplier quality issues and late supply chain deliveries causing cost growth and schedule delays.

We expect the Marine Systems segment’s 2025 revenue to increase to approximately $15 billion with operating margin of approximately 6.8%.

6 unchanged sentences

The increase in the Combat Systems segment’s revenue in 2024 consisted of the following:

International military vehicles $ 474

Weapons systems and munitions $ 509

military vehicles 218

International military vehicles 2

Total increase $ 729

Revenue from international military vehicles increased in 2023 due to higher volume on several wheeled and tracked vehicle contracts, including the sale of the Abrams main battle tank to U.S.

allies and partners.

Weapons systems and munitions revenue was up due to increased demand and facility expansion efforts associated with increased artillery production.

Weapons systems and munitions revenue increased in 2024 due to heightened demand for artillery products.

Revenue from U.S.

military vehicles increased due primarily to higher volume on the U.S.

Army’s M10 Booker combat vehicle program (formerly known as Mobile Protected Firepower).

The Combat Systems segment’s operating margin decreased 80 basis points compared with 2022 driven primarily by lower-margin artillery facilities expansion work.

military vehicles was up in 2024 due primarily to higher volume on the U.S.

Army’s M10 Booker combat vehicle program.

The Combat Systems segment’s operating margin increased 30 basis points compared with 2023 driven by favorable contract mix.

We expect the Combat Systems segment’s 2025 revenue to increase to approximately $9.1 billion with operating margin of approximately 14.5%.

9 unchanged sentences

* Command, control, communications, computers, cyber, intelligence, surveillance and reconnaissance

The Technologies segment’s revenue was up due primarily to strong demand for IT services and the acquisition of a C5ISR solutions business in 2022.

Overall, the segment’s margin decreased 50 basis points compared with 2022 due to program mix.

We expect the Technologies segment’s 2024 revenue to increase to $13 billion with operating margin of around 9.5%.

The Technologies segment’s revenue increased in 2024 due primarily to strong demand for IT services, including the ramp-up of new programs, offset partially by C5ISR solutions program timing and the ramp-down of legacy programs.

Overall, the segment’s margin increased 30 basis points compared with 2023 due to strong operating performance.

We expect the Technologies segment’s 2025 revenue to increase to approximately $13.5 billion with operating margin of approximately 9.2%.

Corporate operating costs totaled $139 in 2024 and $160 in 2023 and consisted primarily of equity-based compensation expense.

9 unchanged sentences

The increase in product revenue in 2024 consisted of the following:

Aircraft manufacturing $ 2,101

Ship construction 1,525

Military vehicle production 503

Weapons systems and munitions 509

Other, net (95)

Total increase $ 4,040

Ship construction revenue increased due primarily to higher volume on the Columbia-class submarine program.

Military vehicle production revenue was up due primarily to higher volume on several international wheeled and tracked vehicle contracts.

Weapons systems and munitions revenue was up due to increased demand and facility expansion efforts associated with increased artillery

In 2023, product operating costs increased at a higher rate than revenue due to supply chain impacts and cost growth within our Marine Systems segment.

Aircraft manufacturing revenue increased due to additional aircraft deliveries.

Ship construction revenue was up due primarily to higher volume on the Columbia-class and Virginia-class submarine programs.

Weapons systems and munitions revenue increased due to heightened demand for artillery products.

In 2024, product operating costs increased at a higher rate than revenue due to supplier quality issues and late supply chain deliveries on the Virginia-class Block IV contract within our Marine Systems segment and additional costs associated with initial deliveries of G700 aircraft due to out of station work caused by supplier quality escapes and late delivery of components in our Aerospace segment.

The increase in service revenue in 2024 consisted of the following:

Ship services $ 784

IT services 264

Aircraft services $ 527

C5ISR solutions/IT services 493

Ship services 357

Other, net 27

Total increase $ 1,404

Services revenue increased in 2023 due to a higher volume of engineering work on the Columbia-class submarine program, increased demand for IT services and additional aircraft maintenance work.

In 2023, the primary driver of the increase in service operating costs was the change in volume described above.

Aircraft services revenue increased due to additional maintenance work.

C5ISR solutions and IT services revenue was up due to higher volume, including the ramp-up of new programs.

Ship services revenue increased due to higher volume on the Columbia-class submarine program.

The primary drivers of the increase in service operating costs were the changes in volume on the programs described above.

As a percentage of revenue, G&A expenses decreased to 5.4% in 2024 compared with 5.7% in 2023 due to growth in revenue.

1 unchanged sentence

Net other income was $68 in 2024 and $82 in 2023 and represents primarily the non-service components of pension and other post-retirement benefits.

The decrease in pension income was driven primarily by higher interest rates and a change in investment mix in one of our plans due to its improved funded status.

In 2025, we expect net other income to be approximately $50.

INTEREST, NET

Net interest expense was $343 in 2023 and $364 in 2022, reflecting the repayment of our scheduled debt maturities in 2023 and 2022.

Net interest expense was $324 in 2024 and $343 in 2023.

See Note K to the Consolidated Financial Statements in Item 8 for additional information regarding our debt obligations, including interest rates.

We expect 2024 net interest expense to be approximately $320.

We expect 2025 net interest expense to be consistent with 2024.

PROVISION FOR INCOME TAX, NET

Our effective tax rate increased to 16.8% in 2023 from 16% in 2022.

Our effective tax rate was 16.7% in 2024 and 16.8% in 2023.

For further discussion, including a reconciliation of our effective tax rate from the statutory federal rate, see Note D to the Consolidated Financial Statements in Item 8.

For 2024, we anticipate a slightly higher full-year effective tax rate of approximately 17.5%.

The increase in our effective tax rate in 2023 and the expected increase in 2024 are due principally to higher taxes on foreign earnings.

For 2025, we expect a full-year effective tax rate of approximately 17.5%, generally consistent with our original expectations for 2024 before declining due to certain U.S.

and foreign tax credits and benefits and other timing items.

BACKLOG AND ESTIMATED POTENTIAL CONTRACT VALUE

Our total backlog, including funded and unfunded portions, was $90.6 billion on December 31, 2024, compared to $93.6 billion at the end of 2023.

Our total backlog is equal to our remaining performance obligations under contracts with customers as discussed in Note B to the Consolidated Financial

Statements in Item 8.

Our total backlog is equal to our remaining performance obligations under contracts with customers as discussed in Note B to the Consolidated Financial Statements in Item 8.

Our total estimated contract value, which combines total backlog with estimated potential contract value, was $144 billion on December 31, 2024.

17 unchanged sentences

Unfunded backlog consists of agreements to provide future aircraft maintenance and support services.

The Aerospace segment ended 2023 with backlog of $20.5 billion, up 4.8% from $19.5 billion at year-end 2022.

The Aerospace segment ended 2024 with backlog of $19.7 billion.

Orders in 2024 reflected strong demand across our portfolio of products and services, including orders for all models of Gulfstream aircraft.

The segment’s book-to-bill ratio (orders divided by revenue) was 1.2-to-1 in 2023.

The segment’s book-to-bill ratio (orders divided by revenue) was 1-to-1 in 2024, even as revenue grew by more than 30% year over year.

Beyond total backlog, estimated potential contract value represents primarily options and other agreements with existing customers to purchase new aircraft and long-term aircraft services agreements.

On December 31, 2023, estimated potential contract value in the Aerospace segment was $451.

On December 31, 2024, estimated potential contract value in the Aerospace segment was $1.1 billion.

Demand for Gulfstream aircraft remains strong across customer types and geographic regions, generating orders from public and privately held companies, individuals, and governments around the world.

13 unchanged sentences

Total backlog in our defense segments was $70.9 billion on December 31, 2024, compared with $73.2 billion at year-end 2023.

In 2023, the total book-to-bill ratio in our defense segments was slightly above 1-to-1.

Estimated potential contract value in our defense segments was $37.9 billion on December 31, 2023, compared with $35.9 billion at year-end 2022.

In 2024, the total book-to-bill ratio in our defense segments was 1-to-1.

Estimated potential contract value in our defense segments was $52.2 billion on December 31, 2024, up 37.8% compared with $37.9 billion at year-end 2023.

MARINE SYSTEMS

The Marine Systems segment’s backlog consists of very long-term submarine and surface ship construction programs, as well as numerous engineering and repair contracts.

The segment’s backlog and estimated potential contract value remained steady compared with year-end 2022.

The segment’s total estimated contract value remained steady compared with year-end 2023.

Significant contract awards in the Marine Systems segment during 2024 include:

• $1.7 billion from the U.S.

Navy for lead yard services, development studies and design efforts, procurement and delivery of initial spare parts to support maintenance availabilities for Virginia-class submarines.

• $780 from the U.S.

Navy for the construction of an additional John Lewis-class (T-AO-205) fleet replenishment oiler.

The contract including options for an additional seven T-AO-205 oilers has a maximum potential value of more than $6.7 billion.

• $2.9 billion from the Navy for long-lead materials for Block V and Block VI Virginia-class submarines.

• $205 from the Navy for planning yard services for the Arleigh Burke-class (DDG-51) guided-missile destroyer program.

The contract including options has a maximum potential value of $1.1 billion.

• $770 from the Navy for lead yard services, development studies, design and engineering efforts, procurement and delivery of initial spare parts to support maintenance availabilities for Virginia-class submarines.

• $530 from the Navy to provide maintenance, modernization and repair services for the DDG-51 destroyer, USS Hartford Los Angeles-class submarine and Wasp-class amphibious assault ship programs.

• $455 from the Navy to provide engineering, technical, design and planning yard support services for operational strategic and attack submarines.

• $255 for future technology development on the next-generation attack submarine, SSN(X), program for the Navy.

• $115 for advanced nuclear plant studies (ANPS) in support of the Columbia-class submarine program.

The contracts, including options, have a maximum potential value of $1.5 billion.

• $1.3 billion from the Navy for long-lead materials and advance construction for Block V and long-lead materials for Block VI Virginia-class submarines.

• $720 from the Navy to provide maintenance and modernization services for the DDG-51 destroyer, San Antonio-class amphibious transport dock and Wasp-class amphibious assault ship programs.

The awards including options have a maximum potential value of $1.2 billion.

• $735 from the Navy for construction of an additional John Lewis-class (T-AO-205) fleet replenishment oiler.

• $95 from the Navy to provide maintenance and support non-nuclear maintenance on submarines based at the New London Naval Submarine Support Facility in Connecticut.

The awards have a maximum potential value of $460.

• A contract from the Navy to provide ongoing lead yard services for the DDG-51 program.

The contract including options has a maximum potential value of $420.

• $220 from the Navy to provide in-service support of systems and components on the USS Jimmy Carter (SSN 23).

• A contract from the Navy for the construction of three Flight III DDG-51 destroyers.

• $55 from the Navy to support non-nuclear maintenance on submarines based at the New England Naval Submarine Support Facility.

The following represents the Marine Systems segment’s total estimated contract value by major program on December 31, 2024:

7 unchanged sentences

• $2 billion for various munitions and ordnance.

The awards have a maximum potential value of $3.2 billion.

• $1 billion from the U.S.

Army to establish additional capacity for 155mm projectile metal parts and M795 load, assemble and pack (LAP) production and artillery propellant.

The contracts, including follow-on production, have a maximum potential value of $2.4 billion.

• $920 from the Army for Stryker vehicle upgrades, spare parts, and inventory management and support services.

• $695 from the Army to advance to the detailed design and prototype build and test phases of the XM30 Mechanized Infantry Combat Vehicle (MICV) competition, formerly known as the Optionally Manned Fighting Vehicle (OMFV).

The award including options has a maximum potential value of $770.

• $755 from the Army to upgrade Abrams main battle tanks to the system enhancement package version 3 (SEPv3) configuration and provide system and sustainment technical support services for the Abrams program.

• $305 to produce light armored vehicles (LAVs) and provide the associated spares and logistics support services for Colombia.

• $260 from the Army for the second phase of low-rate initial production (LRIP) of the M10 Booker Combat Vehicle.

• $230 to provide maintenance and modernization for the Leopard fleet of vehicles for the Spanish Ministry of Defence.

• $205 to produce Abrams main battle tanks in the SEPv3 configuration for Poland, bringing the total firm backlog for the program to $1.1 billion.

These contracts have a maximum potential value of $3.2 billion.

• An IDIQ contract to provide medium-caliber ammunition cartridges for the U.S.

The contract has a maximum potential value of $3 billion among two awardees.

• $1.6 billion from the Army to produce 155mm artillery projectile metal parts and propelling bag charges and establish additional capacity for artillery propellant.

The contracts have a maximum potential value of $2.5 billion.

• $1.3 billion for the production of Pandur 6x6 wheeled combat vehicles from the Austrian Federal Ministry of Defense.

The contract including options has a maximum potential value of $2 billion.

• Two contracts from the Canadian government for the Logistics Vehicle Modernization (LVM) program to provide a new fleet of light and heavy armored vehicles and logistics support services for the Canadian Army.

These contracts including options have a maximum potential value of $1.9 billion.

The scope of the work is shared with an industry partner.

• $605 from the Army for Stryker vehicle upgrades, systems technical support and inventory management.

The contracts have a maximum potential value of $1.1 billion.

• $350 from the Army for Abrams main battle tank upgrades, engineering and logistics support services, and system and sustainment technical support services.

• $325 from the Army for the third phase of the low-rate initial production (LRIP) of the M10 Booker Combat Vehicle.

• $325 from the Canadian government to produce armored combat support vehicles (ACSVs).

• $285 to produce Abrams main battle tanks in the system enhancement package version 3 (SEPv3) configuration for Romania.

• $280 from the Army to produce Stryker Sgt.

Stout vehicles and provide long-lead materials to support the future retrofit of the vehicles to a dual Stinger Vehicle Universal Launcher (SVUL) configuration.

The following represents the Combat Systems segment’s total estimated contract value by market on December 31, 2024:

1 unchanged sentence

government and commercial customers.

These contracts can be shorter-cycle or span multiple years, but commonly include a small, initially funded order.

These contracts can be shorter-cycle or span multiple years, but commonly include a smaller, initially funded order.

Therefore, our estimated potential contract value of $34 billion is an important indicator of future orders and revenue.

In 2024, approximately 75% of the segment’s orders were from additional work on IDIQ contracts or the exercise of options.

The segment’s total estimated contract value was $40.8 billion on December 31, 2023, compared with $39.6 billion at year-end 2022.

The segment’s total estimated contract value was $48.1 billion on December 31, 2024, up 18.1% compared with $40.8 billion at year-end 2023.

Significant contract awards in the Technologies segment during 2024 include:

• An IDIQ contract to provide full spectrum security support services to protect mission critical infrastructure for the U.S.

The contract has a maximum potential value of $4.5 billion between two awardees.

• $1.4 billion for several key classified contracts.

The contracts have a maximum potential value of $3.1 billion.

• An IDIQ contract from the Indian Health Service (IHS) to modernize its electronic health record (EHR) system.

• $50 from the U.S.

Air Force to modernize, integrate and operate the DoD’s Mission Partner Environments (MPEs), enabling the military and its partners to securely communicate and share real-time information at multiple levels of classification.

The contract has a maximum potential value of $5.6 billion.

• $130 to provide flight simulation and training services for the Army.

• $2.2 billion for several key classified contracts.

These contracts have a maximum potential value of $4.4 billion.

• A contract from the U.S.

Space Force to provide sustainment services for the Mobile User Objective System (MUOS) satellite communications system.

The contract has a maximum potential value of $2.2 billion.

• An IDIQ contract to provide mission command training and technical support services for the Army.

The contract has a maximum potential value of $975 among multiple awardees.

• $55 to continue infrastructure modernization of the U.S.

Department of Homeland Security’s (DHS) St.

Elizabeth’s Campus in Washington, D.C.

• Four IDIQ contracts from the Canadian government to support the Land Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) system for the Canadian Army.

The contracts have a maximum potential value of $1.3 billion.

• $125 to modernize the U.S.

Central Command’s (CENTCOM) enterprise IT infrastructure.

The contract including options has a maximum potential value of $920.

• $95 from U.S.

Special Operations Command (USSOCOM) to provide a full range of activities to support USSOCOM operations, including program management, mission infrastructure and training services.

• $140 from the Navy to manufacture and test various components for MK54 torpedoes and for general engineering services.

The contract including options has a maximum potential value of $810.

• An IDIQ contract to provide sustainment services, spare parts and obsolescence risk management services, and system readiness for the Army’s Prophet Enhanced sensor systems.

The contract has a maximum potential value of $480.

• A contract from the Centers for Medicare and Medicaid Services (CMS) to continue operating and modernizing the agency’s Healthcare Integrated General Ledger Accounting System (HIGLAS) application.

• $340 from the Navy to provide full life cycle and operational support for the Trident II Fire Control System (FCS) onboard Ohio-class submarines and continue the development, production and installation of FCS for all new Columbia-class submarines.

The contract including options has a maximum potential value of $620.

• $605 for multiple awards from the U.S.

Space Development Agency (SDA) to develop and integrate ground systems for the low-Earth orbit (LEO) satellite network.

• $205 from the North Carolina Department of Health and Human Services to operate its Medicaid Management Information System.

The contract including options has a maximum potential value of $525.

• $515 from the National Geospatial-Intelligence Agency (NGA) to provide hybrid cloud services and IT design, engineering, and operations and sustainment services.

• $280 for two awards from the New York State Department of Health to operate and modernize the state’s health insurance exchange and to support and enhance the state’s Medicaid Management Information System.

These contracts including options have a maximum potential value of $480.

• $235 from the Centers for Medicare and Medicaid Services (CMS) to provide cloud services and software tools and to support the Benefits Coordination & Recovery Center.

The contracts including options have a maximum potential value of $470.

• $115 from the Department of Veteran Affairs (VA) under the Veterans Intake, Conversion and Communications Services (VICCS) program to digitally convert historical veteran records and automate data extraction of existing records.

The contract including options has a maximum potential value of $345.

The following represents the Technologies segment’s total estimated contract value by customer on December 31, 2024:

1 unchanged sentence

We place a strong emphasis on cash flow generation, which is underpinned by an operating discipline focused on cost control and working capital management.

This emphasis gives us the flexibility for prudent capital deployment, while allowing us to step down debt over time, and preserves a strong balance sheet for future opportunities.

This emphasis gives us the flexibility for prudent capital deployment, while allowing us to maintain an appropriate debt level, and preserves a strong balance sheet for future opportunities.

We evaluate a variety of capital deployment options based on current market conditions and our long-term outlook, and we believe agility is a key component of our capital deployment strategy as market conditions change over time.

Our capital deployment priorities include investments in our products and services to drive long-term growth, a predictable dividend, strategic acquisitions and opportunistic share repurchases.

Our capital deployment priorities include investments in our business infrastructure, products and services to drive long-term growth, a predictable dividend, strategic acquisitions and opportunistic share repurchases.

We believe cash generated by operating activities, supplemented by commercial paper issuances, is sufficient to satisfy our short- and long-term liquidity needs.

8 unchanged sentences

Cash provided by operating activities was $4.1 billion in 2024 compared with $4.7 billion in 2023 .

The primary driver of cash inflows in both years was net earnings.

Cash flows in both periods were affected positively by an increase in customer deposits driven by Gulfstream aircraft orders, offset partially by an increase in inventory due primarily to new aircraft models awaiting certification from the U.S.

Federal Aviation Administration (FAA).

Cash flows in 2023 were also affected positively by a decrease in unbilled receivables due to the receipt of progress payments on large international vehicle contracts in our Combat Systems segment.

The primary driver of cash flows in both years was net earnings.

Cash flows in 2024 were affected negatively by growth in operating working capital, particularly driven by the ramp-up in production of new Gulfstream aircraft models, offset partially by an increase in customer deposits driven by Gulfstream aircraft orders in our Aerospace segment.

Cash flows in 2023 were affected positively by a decrease in unbilled receivables due to the receipt of progress payments on large international vehicle contracts in our Combat Systems segment and an increase in customer deposits driven by Gulfstream aircraft orders, offset partially by an increase in inventory due primarily to the ramp-up in production of new Gulfstream aircraft models.

INVESTING ACTIVITIES

Cash used by investing activities was $941 in 2023 and $1.5 billion in 2022.

Cash used by investing activities was $953 in 2024 and $941 in 2023.

Our investing activities include cash paid for capital expenditures and business acquisitions;

3 unchanged sentences

The primary use of cash for investing activities in both years was capital expenditures.

Capital expenditures were $904 in 2023 and $1.1 billion in 2022.

Capital expenditures were $916 in 2024 and $904 in 2023.

Capital expenditures include equipment and facility enhancements to support new and existing programs across our businesses.

5 unchanged sentences

Previously, the Board had increased the quarterly dividend to $1.32 per share in March 2023.

Cash dividends paid were $1.4 billion in 2023 and 2022.

Cash dividends paid were $1.5 billion in 2024 and $1.4 billion in 2023.

Share Repurchases.

Our Board from time to time authorizes management to repurchase outstanding shares of our common stock on the open market.

We paid $434 and $1.2 billion in 2023 and 2022, respectively, to repurchase our outstanding shares.

Our Board from time to time authorizes management’s repurchase of outstanding shares of our common stock on the open market.

On December 4, 2024, the Board authorized management to repurchase up to 10 million additional shares of the company’s outstanding stock.

We paid $1.5 billion and $434 in 2024 and 2023, respectively, to repurchase our outstanding

On December 31, 2024, 9.2 million shares remained authorized by our Board for repurchase, representing 3.4% of our total shares outstanding.

Debt Issuances and Repayments.

In May and August 2023, we repaid fixed-rate notes of $750 and $500, respectively, and in November 2022, we repaid fixed-rate notes of $1 billion, all at their respective scheduled maturities using cash on hand.

Fixed-rate notes of $500 mature in November 2024.

In November 2024, we repaid fixed-rate notes of $500, and in May and August 2023, we repaid fixed-rate notes of $750 and $500, respectively, all at their respective scheduled maturities using cash on hand.

Fixed-rate notes of $750 mature in both April and May 2025.

We currently plan to repay these notes at maturity using cash on hand, potentially supplemented by commercial paper or other borrowings.

14 unchanged sentences

We use free cash flow to assess the quality of our earnings and as a key performance measure in evaluating management.

The following table reconciles the free cash flow with net cash provided by operating activities, as classified on the Consolidated Statement of Cash Flows in Item 8:

The following table reconciles free cash flow with net cash from operating activities, as classified on the Consolidated Statement of Cash Flows in Item 8:

Year Ended December 31 2024 2023 2022

9 unchanged sentences

We define ROIC as net operating profit after taxes divided by average invested capital.

Net operating profit after taxes is defined as net earnings plus after-tax interest and amortization expense, calculated using the statutory federal income tax rate.

Net operating profit after taxes is defined as net earnings plus after-tax interest and amortization expense, calculated using the

statutory federal income tax rate.

Average invested capital is defined as the sum of the average debt and average shareholders’ equity excluding accumulated other comprehensive loss.

Average debt and average shareholders’ equity excluding accumulated other comprehensive loss are calculated using the

respective balances at the end of the preceding year and the respective balances at the end of each of the four quarters of the year presented.

Average debt and average shareholders’ equity excluding accumulated other comprehensive loss are calculated using the respective balances at the end of the preceding year and the respective balances at the end of each of the four quarters of the year presented.

ROIC excludes goodwill impairments and non-economic accounting changes as they are not reflective of company performance.

20 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on the Consolidated Financial Statements, which have been prepared in accordance with GAAP.

The preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period.

and expenses during the reporting period.

We employ judgment in making our estimates, but they are based on historical experience, currently available information and various other assumptions that we believe to be reasonable under the circumstances.

Actual results may differ from these estimates.

believe our judgment is applied consistently and produces financial information that fairly depicts our results of operations for all periods presented.

We believe our judgment is applied consistently and produces financial information that fairly depicts our results of operations for all periods presented.

In our opinion, the following policies are critical and require the use of significant judgment in their application:

10 unchanged sentences

We estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract.

For discussion of our contract estimates, the assumptions used, and the impact of changes in estimates, see Footnote B to the Consolidated Financial Statements in Item 8.

For discussion of our contract estimates, the assumptions used, and the impact of changes in estimates, see Note B to the Consolidated Financial Statements in Item 8.

Consistent with industry practice, we classify assets and liabilities related to long-term contracts as current, even though some of these amounts may not be realized within one year.

8 unchanged sentences

Such circumstances include a significant adverse change in the business climate for one of our reporting units or a decision to dispose of a reporting unit or a significant portion of a reporting unit.

Our reporting units are consistent with our operating segments in Note O to the Consolidated Financial Statements in Item 8.

Our reporting

units are consistent with our operating segments in Note O to the Consolidated Financial Statements in Item 8.

We use both qualitative and quantitative approaches when testing goodwill for impairment.

When determining the approach to be used, we consider the current facts and circumstances of each

reporting unit as well as the excess of each reporting unit’s estimated fair value over its carrying value based on our most recent quantitative assessments.

When determining the approach to be used, we consider the current facts and circumstances of each reporting unit as well as the excess of each reporting unit’s estimated fair value over its carrying value based on our most recent quantitative assessments.

Our qualitative approach evaluates the business environment and various events impacting the reporting unit including, but not limited to, macroeconomic conditions, changes in the business environment and reporting unit-specific events.

6 unchanged sentences

Additionally, we evaluate the reasonableness of each reporting unit’s fair value by comparing the fair value to peer companies and recent relevant market transactions.

In the fourth quarter of 2023, we completed qualitative assessments for our Aerospace, Marine Systems and Combat Systems reporting units as the estimated fair values of each of the reporting units significantly exceeded the respective carrying values based on our most recent quantitative assessments, which were performed in the fourth quarter of 2018.

Our qualitative assessments did not present indicators of impairment for the reporting units.

In the fourth quarter of 2023, we also completed a qualitative assessment for our Technologies reporting unit as its estimated fair value exceeded its carrying value by approximately 25% at the time of our last quantitative assessment in the fourth quarter of 2022.

Interest rates rose over the last year, but the increase was within the tolerances established in our previous quantitative analysis.

Our qualitative assessment this year did not present any other indicators of impairment.

However, if interest rates were to continue to increase without an offsetting increase in future cash flow projections, the estimated fair value of the reporting unit would decrease and could put the reporting unit at risk of goodwill impairment.

In the fourth quarter of 2024, we completed qualitative assessments for each of our reporting units.

Our Aerospace, Marine Systems and Combat Systems reporting units’ estimated fair values significantly exceeded their respective carrying values based on our most recent quantitative assessments, which were performed in the fourth quarter of 2018.

Our Technologies reporting unit’s estimated fair value exceeded its carrying value by approximately 25% at the time of our last quantitative assessment in the fourth quarter of 2022.

Our qualitative assessments this year did not present indicators of impairment.

Commitments and Contingencies.

1 unchanged sentence

Estimating liabilities and costs associated with these matters requires the use of judgment.

We record a charge against earnings when a liability associated with claims or pending or threatened litigation is probable and when our exposure is reasonably estimable.

We record a liability associated with claims or pending or threatened litigation when it is probable a loss has been incurred and the amount is reasonably estimable.

The ultimate resolution of our exposure related to these matters may change as further facts and circumstances become known.

3 unchanged sentences

The key assumption is the interest rates used to discount estimated future pension benefits.

We base the discount rates on a current yield curve developed from a portfolio of high-quality,

fixed-income investments with maturities consistent with the projected benefit payout period.

We base the discount rates on a current yield curve developed from a portfolio of high-quality, fixed-income investments with maturities consistent with the projected benefit payout period.

The effect of a 25-basis-point increase or decrease in the discount rate assumption on the December 31, 2024, pension benefit obligation is ($261) or $272, respectively.

32 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis