What changed in this filing

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Item 1A. Risk Factors

2024-01-25 compared with 2023-01-26 · 131 added, 173 removed, 320 unchanged (49% of the section changed)

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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 environment, defense spending levels, government priorities, political leadership, procurement practices and strategy, inflation and other macroeconomic trends, military strategy;

or broader changes in social, economic or political demands and priorities.

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.

government has the ability to terminate contracts, in whole or in part, for its convenience or for default based on performance.

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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 Ground Based Strategic Deterrent (“Sentinel”) program is currently under a Nunn-McCurdy breach review.

government also has the ability to stop work under a contract for a limited period of time for its convenience.

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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 starts) and the federal debt limit (including a breach), 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

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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.

continues to face an uncertain and changing political environment, along with substantial fiscal and economic challenges, which affect funding.

The budget and macroeconomic environment, political instability, and uncertainty surrounding the appropriations processes and the debt ceiling, remain significant short and long-term risks.

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 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.

continues to face an uncertain and changing political 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, restricting new contract or program starts, presenting resource allocation challenges and placing limitations on budgets, and we 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 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.

A prolonged breach could have far-reaching adverse consequences.

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 current macroeconomic pressures (especially from inflation and labor and supply chain challenges) are prolonged or worsen, and increased costs continue, then existing or anticipated appropriated and contracted funds may not be sufficient to cover costs incurred on existing or future programs.

The National Defense Authorization Act for FY 2023 grants DoD discretionary authority under limited circumstances to provide extraordinary relief to contractors to address certain inflationary impacts under the current macroeconomic environment for FY 2023.

This or other relief may not be available or adequate to address the significant impacts of the broader macroeconomic environment.

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 year-long continuing resolution and breach of the debt ceiling, ongoing fiscal debates and the global economic environment increase uncertainties and risk.

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.

Significant delays or reductions in appropriations for our current and future programs;

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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.

They include:

macroeconomic trends (including inflation, labor shortages and supply chain challenges);

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;

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actions necessary for long-term customer satisfaction;

global pandemics, such as COVID-19;

challenges caused by the global health environment;

and natural disasters or environmental matters.

For example, as discussed in greater detail in Note 12 to the consolidated financial statements, our latest estimated cost to complete the low-rate initial production (LRIP) phase of the B-21 program reflects updated estimates for adverse impacts from these macroeconomic factors, as well as potential opportunities to address them.

We aim to mitigate this risk through contract terms, and we have filed and may file requests for equitable adjustment or claims to seek recovery in whole or in part for our increased costs.

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.

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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 may also seek fixed-price contracts for development programs, combined development and production programs, or low-rate initial production programs, where the risks are greater.

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.

In addition, our contracts contain provisions relating to cost controls and audit rights.

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We often enter into cost-type contracts for development programs with complex design and technical challenges.

These cost-type programs typically have award or incentive fees that are uncertain and may be earned over extended periods or towards the end of the contract.

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.

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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 prevail on 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, Estimates and Judgments” in MD&A and Note 12 to the consolidated financial statements.

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 12 to the consolidated financial statements.

• The global macroeconomic environment could negatively impact our business and our financial position, results of operations and/or cash flows could be materially adversely affected.

Our business, financial position, results of operations and/or cash flows have been and may continue to be adversely impacted by the global macroeconomic environment.

The global macroeconomic environment has experienced, and continues to experience, extraordinary challenges, including high rates of inflation;

Our business, financial position, results of operations and/or cash flows have been and may continue to be adversely impacted by the global macroeconomic environment, which has experienced extraordinary challenges, including high rates of inflation;

increased interest rates;

widespread disruptions in supply chains;

workforce challenges, including labor shortages;

and market volatility.

and market volatility, including exchange rate volatility.

These challenges have, among other things, led to increased costs, labor and supply shortages, and delays and disruption in performance, as well as competing demands for scarce resources.

Those challenges have adversely impacted our customers, our industry, our company, our suppliers and others with whom we do business.

While some aspects of the macroeconomic environment appear to be improving, and we have been able to mitigate some of the challenges (especially with respect to labor shortages), other challenges persist.

We cannot predict the future trajectory of this risk, including how the macroeconomic environment will evolve or how it will continue to impact us.

We (including our suppliers and other partners) have and may continue to experience inflationary pressures, supply chain disruption and labor and material cost increases at a rate higher than anticipated.

Given the nature of our business and our contracts (many of which are fixed price and of long duration), we may be unable to recover some of these increased costs or to offset such costs with greater than expected efficiencies.

Our government customers are likely to continue to face competing priorities and increased demands for their limited resources.

We cannot predict how long these challenges will persist or how they will change over time.

We continue to work proactively to mitigate these challenges.

While some aspects of the macroeconomic environment have improved, and we have been able to mitigate some of the challenges (especially with respect to labor shortages), other challenges persist.

We cannot predict the future trajectory or duration of this risk, including how the macroeconomic environment will evolve or how it will continue to impact us.

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.

However, if we are unable to do so successfully, our financial position, results of operations and/or cash flows could be materially adversely affected.

• Competition within our markets and bid protests may affect our ability to win new contracts and result in reduced revenues and market share.

We operate in highly competitive markets and our competitors may have more financial capacity or more extensive or specialized engineering, manufacturing, or marketing capabilities.

We operate in highly competitive markets and our competitors may have more financial capacity or more extensive or specialized engineering, 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

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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 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.

We are also facing increasing competition for, and more limited access to various critical products, services and other supplies.

from U.S., foreign and multinational firms, including new entrants, and anticipate that acquisitions within our industry could further increase competition.

We are also facing increasing competition for,

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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.

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Some customers, including the DoD, are turning to commercial contractors, rather than traditional defense contractors, for some products and services, and continue to utilize small business contractors or determine to source work internally.

In addition, our success in competing and remaining cost-competitive depends, in part, on our ability successfully to effect our digital transformation strategy and to adopt and integrate new digital manufacturing and operating technologies into our products and services.

Our success in competing depends, in part, on our ability to remain cost-competitive, accurately anticipate our customers’ needs and successfully to effect our digital transformation strategy and adopt and integrate new digital manufacturing and operating technologies into our products and services.

Bid protests can result in contract modifications or the award decision being reversed and loss of the contract award.

Even where a bid protest does not result in such a loss, it can delay execution and earnings.

Even where a bid protest does not result in such a loss, it can delay the start of contract activities and earnings.

If we are unable to continue to compete successfully against our current or future competitors, or prevail in protests, or to prevail against other attempts to interfere with our ability to obtain and retain awards, we may experience declines in future revenues and market share, which could have a material adverse effect on our financial position, results of operations and/or cash flows.

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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 have at times been, and may continue to be, increasingly aggressive.

We are and 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 or reporting, commercial transactions, false statements or claims, pension accounting, antitrust, compliance with government orders, mischarging, security (cyber and physical), performance, fraud, procurement integrity, securities laws and requirements, products liability, warranties, hazardous materials, personal injury claims, environmental (including remediation and toxic torts), shareholder derivative actions, M&A, intellectual property, tax, corporate law, employees, export/import, anti-corruption, debt and equity, labor, health and safety, the COVID-19 pandemic and the company’s response to it, accidents, launch failures, employee benefits and plans, including pension plans and plan administration, improper payments, and privacy, as well as matters relating to the Orbital ATK Federal Trade Commission (FTC) decision and order.

These matters can divert resources;

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• The improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we participate can impact our reputation, our ability to do business and our financial position, results of operations and/or cash flows.

We have implemented policies, training and other compliance controls, and have negotiated terms designed to prevent misconduct by employees, agents or others working with us or on our behalf that would violate the applicable laws of the jurisdictions in which we operate, including laws governing improper payments to government officials, the protection of export controlled or classified information, false claims, procurement integrity, cost accounting and billing, competition, information security and data privacy, intellectual property and

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contract terms.

We have implemented policies, training and other compliance controls, and have negotiated contractual terms designed to prevent misconduct by employees, agents or others working with us or on our behalf that would violate the applicable laws of the jurisdictions in which we operate, including laws governing improper payments to government officials, the protection of export controlled or classified information, false claims, procurement integrity, cost accounting and billing, competition, information security and data privacy, intellectual property and contract terms.

However, we cannot ensure that we will prevent all such misconduct committed by our employees, agents, suppliers, partners or others working with us or on our behalf.

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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 (with that term used throughout to refer to joint efforts or business arrangements of any type).

Notwithstanding our robust processes, we are unable to prevent any and all misconduct or violations of applicable laws by these joint ventures (including their officers, directors and employees) or our partners.

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.

Notwithstanding our robust processes, we may be unable to prevent misconduct or violations of applicable laws by these joint ventures (including their officers, directors and employees) or our

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Improper actions by our employees or those with whom or through whom we do business subjects us to risk of administrative, civil or criminal investigations and enforcement actions;

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The costs are not always fully recoverable.

New laws or other requirements, or changes to existing ones (including, for example, related to cyber, information protection, cost accounting, climate, environment, COVID-19, securities, competition, compensation costs, taxes, counterfeit parts, pensions, and use of certain non-US equipment) or changes in how government agencies interpret existing ones, can significantly increase our costs and risks and reduce our profitability.

New laws or other requirements, or changes to existing ones (including, for example, related to cyber, information 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.

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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.

For example, the thresholds for certain allowable costs have been reduced;

and the allowability of other costs and how the company treated them, including certain costs related to pensions, and certain assumptions used by the company to determine pension expense, are being challenged and investigated, all with risks and costs to the company.

government is also pursuing alternatives to shift additional responsibility and performance risks to the contractor.

government has been pursuing and may continue to pursue policies that could negatively impact our profitability.

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 incentive-based fee arrangements;

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and contract negotiation offers that indicate what our costs should be, have affected and may in the future affect our profitability and predictability.

We (again, including our subcontractors and others with whom we do business) also are subject to, and expected to perform in compliance with, a vast array of federal, state and local laws, regulations, contract terms and requirements related to our industry, our products and the businesses we operate, as well as those more broadly applicable to industry, such as securities laws and regulations.

These laws and regulations include, but are not

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limited to, the Truthful Cost or Pricing Data Act, False Claims Act, Procurement Integrity Act, CAS, FAR/DFAR, export controls and international sanctions, FCPA (and similar anti-corruption provisions) and SEC rules and regulations, as well as those related to pandemics.

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, may limit our ability to achieve our goals.

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If we or those with whom we do business do not comply with the laws, regulations, rules, contract terms and processes to which we are subject or if customer business practices or requirements change significantly, including with respect to allowable costs, it could affect our ability to compete and have a material adverse effect on our financial position, results of operations and/or cash flows.

▪ Environmental matters, including 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.

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• 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.

We may be subject to substantial administrative, civil or criminal fines, penalties or other sanctions (including suspension and debarment) for violations.

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 may require us to identify alternate sources, result in additional costs and/or otherwise impact our business and operations.

New and evolving laws, regulations and rule makings globally are expected to impose different and more restrictive standards and require greater disclosures.

They could also require capital investments, could adversely impact our ongoing operations, and could require changes on a more accelerated time frame.

Our suppliers are expected to face similar challenges and incur additional compliance costs that may be passed on to us.

These direct and indirect costs may 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.

For example, in 2022, the SEC and FAR council issued proposed rule-makings on climate change.

The proposed rules, depending on how they are finally adopted, as well as other changes the government might implement, could impose significant new burdens on the company and our suppliers, with significant potential costs and operational impacts, and adversely impact our ability to win business and operate successfully.

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 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, and there can be no assurance the company will achieve its objectives, or meet the evolving sustainability expectations and standards of our investors and other external stakeholders.

We may be subject to substantial administrative, civil or criminal fines, penalties or other sanctions (including suspension and debarment) 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.

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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.

The company is engaged in remediation activities relating to environmental conditions allegedly resulting from historic operations at the former United States Navy and Grumman facilities in Bethpage, New York.

We have incurred, and expect to continue to incur, as included in Note 12, substantial remediation costs related to the legacy Bethpage environmental conditions.

It is also possible that applicable remediation standards and other requirements to which we are subject may continue to change, and our costs may increase materially.

In 2022, the company entered into a consent decree with the State of New York and reached agreements with the Department of Defense and Bethpage and South Farmingdale Water Districts to resolve claims involving these parties.

In addition, we are a party to, and may become a party to, various legal proceedings with individual and class action plaintiffs alleging personal injury and property damage, as well as with insurance carriers and other parties.

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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.

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and foreign jurisdictions.

Changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, have affected and

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could affect our tax expense.

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 and timing of revenue recognition under IRC Section 451(b), could be materially different from our historical income tax provisions and accruals.

As a result of our acquisition of OATK in 2018, we may be subject to future tax audits and legal challenges involving OATK (including its subsidiaries and their successors) 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.

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.

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.

Business and Operational Risks

▪ We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows.

We face a wide variety of risks related to health epidemics, pandemics and similar outbreaks, especially of infectious diseases, including COVID-19.

Since first reported in late 2019, the COVID-19 pandemic has dramatically impacted the global health and economic environment, including millions of confirmed cases and deaths, business slowdowns or shutdowns, labor shortages, supply chain challenges, changes in government spending and requirements, regulatory challenges, inflationary pressures and market volatility.

As discussed in our prior and current Form 10-K and 10-Q filings, our operations have been and we expect will continue to be impacted by the COVID-19 pandemic and its related economic challenges.

However, the company has worked hard to address and mitigate adverse impacts from COVID-19, and we do not currently anticipate significant additional direct impacts from the pandemic itself on our operations.

Nonetheless, we cannot predict the future course of events.

If, for example, the COVID-19 pandemic worsens, due to spread, new or additional variants, or if a new health epidemic or outbreak were to occur, we likely would experience broad and varied impacts, including potentially to our workforce and supply chain, with inflationary pressures and increased costs (which may or may not be fully recoverable or insured), schedule or production delays, market volatility and other financial impacts.

If any or all of these items were to occur, we could experience adverse impacts on our overall performance, operations and financial results.

Given the tremendous uncertainties and variables, we cannot at this time predict the impact of the global COVID-19 pandemic, or any future health epidemics, pandemics or similar outbreaks, but any one could have a material adverse effect on our business, financial position, results of operations and/or cash flows.

• Our business could be negatively impacted by cyber and other security threats or disruptions.

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We have robust measures in place to address and mitigate cyber-related risks.

However, we have experienced cyber attacks and expect we will continue to experience additional attacks in the future, including from nation states and criminal actors.

However, we have experienced cyber attacks and expect we will continue to experience additional attacks in the future, including from nation states and non-state actors.

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 systems and infrastructure, and the information they contain.

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We also partner with the government and others in our industry to help protect national security.

However, given the complex and evolving nature of cyber and other security threats, including threats from targeting by more advanced and persistent adversaries, including nation states, these efforts may not be fully effective, particularly against previously unknown vulnerabilities that could go undetected for an extended period.

However, given the complex, continuing and evolving nature of cyber and other security threats, including threats from targeting by more advanced and persistent adversaries, including nation states and other actors, these efforts may not be fully effective, particularly against previously unknown vulnerabilities that could go undetected for an extended period.

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 adequate controls and safeguards to protect against and report cyber incidents.

If they fail to deter, detect

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or report cyber incidents in a timely manner, we may suffer financial and other harm, including to our information, operations, performance, employees and reputation.

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 or report cyber incidents in a timely manner, we may suffer financial and other harm, including to our information, operations, performance, employees and reputation.

Although we implement various measures and controls to monitor and mitigate risks associated with these threats and to increase the cyber resiliency of our infrastructure and products, there can be no assurance that these processes will be sufficient.

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Cyber threats, both on premises and in the cloud, are evolving and include, but are not limited to:

malicious software, destructive malware, ransomware, attempts to gain unauthorized access to systems or data, disruption to operations, critical systems or denial of service attacks;

malicious software, destructive malware, ransomware, attempts to gain unauthorized access to systems or data, disruption to

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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);

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They could also damage our reputation, disrupt performance, impact our ability to obtain future insurance coverage, and lead to loss of business, regulatory actions, liabilities or other financial losses, for which we do not have adequate sources of recovery.

We provide systems, products and services to various customers who also face cyber threats.

Our systems, products and services 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.

Despite rigorous processes, we risk 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.

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We could also incur unanticipated costs to remediate impacts and lost business.

We provide systems, products and services to various customers who also face cyber threats.

Our systems, products and services 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.

Despite rigorous processes, we risk failing to meet all of our existing or future disclosure obligations and/or having our disclosures misinterpreted.

The occurrence and impact of these various risks are difficult to predict, but one or more of them could have a material adverse effect on our financial position, results of operations and/or cash flows.

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We continue to face increased competition for talent, both with traditional defense companies and commercial companies, globally, and with increasing wage rates.

In addition, during the COVID-19 pandemic, we have faced labor shortages, as a result of both absenteeism among our workforce and a tight labor market more broadly, among other factors.

While we continue to have labor challenges, they seem to be lessening, as we are realizing benefits from extensive hiring and retention programs.

Of course the risk of insufficient personnel may again increase, either broadly or with respect to select critical staffing requirements.

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.

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,

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develop and retain the necessary talented and diverse workforce, and to maintain performance levels and our corporate culture.

These challenges may be further compounded by a significant element of remote work.

There is also the risk that we are unable to achieve our diversity, equity and inclusion objectives or, more broadly, to meet sustainability goals increasingly required by our shareholders, employees, the government and other stakeholders.

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 talented and diverse workforce, and to maintain performance levels and our corporate culture.

There is also the risk that we are unable to achieve our environmental, social and governance (ESG) goals which may be required by certain of our shareholders, employees, the government and other stakeholders, which could adversely impact our reputation, business and ability to hire and retain talent.

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, the environment appears to be shifting, and if, for example, we experience difficulties with renewals and renegotiations of existing collective agreements, or if our employees pursue new collective representation, we could incur additional expenses and may be subject to work stoppages or other labor-related disruptions.

However, the environment appears to be shifting, and if, for example, we 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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If we are unable to attract and retain a qualified workforce, we may be unable to maintain our competitive position or achieve our results, and it could have a material adverse effect on our financial position, results of operations and/or cash flows.

• Our earnings and profitability depend, in part, on subcontractor and supplier performance and financial viability as well as raw material and component availability and pricing.

We rely on other companies to provide raw materials, chemicals 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.

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 behavior, or a misalignment between our contractual obligations to our customers and our agreement with our suppliers, have had and may continue to have various adverse impacts on the company, including on our ability to meet our commitments to customers 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 significantly heightened globally, in the current macroeconomic environment.

This risk of delays and disruptions in the supply chain, and supply chain challenges more broadly, has been and continues to be heightened globally, in the current macroeconomic environment.

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.

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 export/import restrictions, 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.

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 and 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, 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.

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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.

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 regulatory requirements globally.

We may be held responsible not only for our compliance, but that of our suppliers.

For some components, there has been or may be only one supplier, or one domestic supplier.

If that supplier cannot meet our needs, we may be unable to find a suitable alternative and to meet our obligations.

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 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 our suppliers are not financially viable, incur increased costs of delays, fail to comply with legal requirements, or otherwise fail to address these risks and meet their obligations to us, it could have a material adverse effect on our financial position, results of operations and/or cash flows.

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• Risks associated with environmental, social and governance matters (ESG), including especially climate change and other environmental impacts, and increased focus and evolving views of our customers, shareholders and other stakeholders on these issues, could negatively affect our business and operations.

Environmental, social and governance matters 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.

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, and/or poor water quality).

Some of our facilities are, for example, engaged in manufacturing processes that produce greenhouse gas emissions, including carbon dioxide, or rely on products from others that do so.

However, new and evolving laws, regulations and rule makings globally are expected to impose different and more restrictive standards, and require greater disclosures.

They could also require capital investments, including to transition to low emission technologies, could adversely impact our ongoing operations, and could require changes on a more accelerated time frame.

In the U.S., both the SEC and DoD are actively engaged in climate-related rule-makings.

Our suppliers are expected to face similar challenges and incur additional compliance costs that may be passed on to us.

These direct and indirect costs may adversely impact our results of operations and financial condition.

And non-compliance with legislative and regulatory requirements could also negatively impact our reputation and ability to do business.

In 2022, the SEC and FAR council issued proposed rule-makings on climate change.

The new proposed rules, depending on how they are finally adopted, as well as other changes the government might implement, could impose significant new burdens on the company and our suppliers, with significant costs and operational impacts, and adversely impact our ability to win business and operate successfully.

Changes in our customers’ requirements, priorities, and ways of doing business are also likely to have an impact on our business, operations, and financial success.

These changes create opportunities and risks.

If, for example, our customers develop requirements and adopt policies that place further emphasis on social and environmental objectives, and we are unable to meet those evolving demands, we will be less successful in selling our products, winning new business, and growing our revenues.

The company is building on its strong environmental record, with a particular focus on the reduction of greenhouse gas emissions from our operations, and has set a goal to achieve net zero greenhouse gas emissions in our operations by 2035.

The company is committed to working to achieve its climate change related objectives.

Any failure to achieve our goals, a perception that we are not responsible stewards, or failure effectively to respond to new or evolving legal and regulatory requirements or other sustainability concerns could adversely affect our business, reputation or financial position.

The company also has a strong record and is deeply committed to maintaining robust social and governance practices consistent with our values.

As with environmental sustainability matters, shareholders and other stakeholders are increasingly interested in these social and governance practices, including, for example, with respect to values, risk management oversight, responsible business practices, and diversity, equity and inclusion.

Shareholders and others have increasingly looked to a company’s ESG practices, disclosures and performance when making investment or other financial decisions.

Customers, regulators and oversight agencies have been increasing requirements and enforcement activities.

And employees increasingly look to ESG practices in considering where to work.

We believe our ESG practices, disclosures and performance are strong and growing.

However, if they do not meet the evolving expectations of our stakeholders, we can expect to experience adverse impacts on our reputation and our ability to win programs, to employ and retain talent, to remain in compliance, and to continue to enjoy

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access to capital.

A failure to meet expectations may materially negatively affect our results of operations, ability to manage our liquidity, or implement our strategies.

The effects and costs of environmental, social and governance concerns or any failure to meet related requirements or expectations could have a material adverse effect on our financial position, results of operations and/or cash flows.

If our suppliers are not financially viable, incur increased costs of delays, fail to comply with legal requirements, or otherwise fail to address these risks or meet their obligations to us, it could have a material adverse effect on our financial position, results of operations and/or cash flows.

• Our international business exposes us to additional risks, including risks related to geopolitical and economic factors, laws and regulations.

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These risks differ in some respects from those associated with our U.S.

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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, including, without limitation, ones relating to export/import controls, sanctions, technology transfers, government contracts and procurement, local participation, data privacy and protection, exchange rates and controls, the FCPA and other anti-corruption laws, anti-boycott provisions, securities laws, labor and employment, works councils and other labor groups, taxes, environment, security restrictions and intellectual property.

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.

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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.

New regulations and requirements, or changes to existing ones in countries in which we operate can significantly increase our costs and risks of doing business internationally.

Despite robust processes, we also face risks related to the unintended or unauthorized use of our products and resources.

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Our international business is impacted by changes in U.S.

national policies and priorities, and geopolitical relationships, any of which may be influenced by changes in the threat environment, political leadership, geopolitical and economic uncertainties, world events, government budgets, inflationary pressures and economic and political factors more generally.

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.

and its allies 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.

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They may also require us to enter into letters of credit, performance bonds, bank guarantees or other financial arrangements.

If we are dependent on in-country suppliers, we face risks related to their failure to perform in accordance with legal requirements, particularly where we rely on a sole source supplier.

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.

government can deny, change or revoke for reasons outside our control.

Our business outside of the U.S.

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This risk is complicated further when we partner with government-affiliated entities.

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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.

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The occurrence and impact of these factors is difficult to predict, but one or more of them could have a material adverse effect on our financial position, results of operations and/or cash flows.

▪ Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise or are dependent upon factors not wholly within our control.

Failure to meet our contractual obligations could adversely affect our profitability, reputation and future prospects.

• We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows.

We face a wide variety of risks related to health epidemics, pandemics and similar outbreaks, especially of infectious diseases.

The global health environment has contributed to business slowdowns or shutdowns, labor shortages, supply chain challenges, changes in government spending and requirements, regulatory challenges, inflationary pressures and market volatility.

Although we aim to mitigate impacts of adverse changes in the global health environment, these changes can be unpredictable and we may be unable to effectively mitigate them.

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epidemic, pandemic or similar outbreak were to occur or worsen, we likely would experience broad and varied impacts, including potentially to our workforce and supply chain, with inflationary pressures and increased costs (which may or may not be fully recoverable or insured), schedule and/or production delays, market volatility and other financial impacts.

If any or all of these items were to occur, we could experience material adverse impacts on our business, financial position, results of operations and/or cash flows.

• 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.

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.

It is increasingly necessary to meet evolving customer requirements, to differentiate our offerings, and to achieve efficiencies that we and our suppliers/partners successfully develop digital based solutions and transform our operations.

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 our 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.

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Under such terms, we are generally required to forfeit fees previously recognized and/or collected.

If we are unable to meet our obligations, including due to issues regarding the design, development or manufacture of our products or services, or we experience launch, platform or satellite system failures, it could have a material adverse effect on our reputation, our ability to compete for other contracts and our financial position, results of operations and/or cash flows.

If we are unable to meet our obligations, including due to issues regarding the design, development or manufacture of our products or services, or we experience launch, platform, satellite system or other failures, it could have a material adverse effect on our reputation, our ability to compete for other contracts and our financial position, results of operations and/or cash flows.

• Our business is subject to disruption caused by natural disasters that could adversely affect our profitability and our overall financial position.

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, and other natural disasters.

For example, in recent years, our facilities in Lake Charles, LA, and Melbourne, FL, were damaged by hurricanes, which temporarily interrupted site operations and had significant adverse impacts on our employees, their families and the local communities, as well as our costs and performance.

We expect our facilities, operations, employees and communities in the future, particularly at facilities in coastal areas and areas prone to extreme weather events and water scarcity to continue to be at risk for future natural disasters or other weather events (which may be exacerbated by climate change).

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other weather events (which may be exacerbated by climate change).

If a natural disaster occurs, our operations could be interrupted, our employees could be impacted, we could incur significant costs and our performance could be adversely affected.

Our subcontractors and other suppliers have also been, and may in the future be, subject to natural disasters that could cause disruption and affect their ability to deliver or perform.

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If insurance or other sources are unavailable or insufficient to recover all costs or if we experience a significant disruption to our business due to a natural disaster, it could have a material adverse effect on our financial position, results of operations and/or cash flows.

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• 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.

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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.

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 mitigate some such incidents, as well as potentially insurance coverage and indemnification, but they may not be successful.

In addition, our customers may use or misuse our products and services in ways that can be unusually hazardous or risky, or in ways that are not intended, which may create potential liabilities for our company, as well as reputational harm.

In addition, our customers may use our products and services in ways that can be unusually hazardous or risky, or in ways that are not intended, which may create potential liabilities for our company, as well as reputational harm.

If any of these risks were to materialize (e.g.

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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 exploit, protect and access intellectual property.

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We own many forms of intellectual property, including U.S.

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These agreements and other measures may not provide adequate protection for our trade secrets and other proprietary information.

In the event of an infringement of such intellectual property rights, a breach of a confidentiality agreement, a misuse or theft of our intellectual property or

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divulgence of proprietary information, we may not have adequate legal remedies.

In the event of an infringement of such intellectual property rights, a breach of a confidentiality agreement, a misuse or theft of our intellectual property or divulgence of proprietary information, we may not have adequate legal remedies.

In addition, our trade secrets or other proprietary information may otherwise become known or be independently developed by competitors.

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If we are unable adequately to exploit our intellectual property rights, to protect our intellectual property rights, to obtain rights to intellectual property of others, it could have a material adverse effect on our reputation, ability to compete for and perform on contracts, financial position, results of operations and/or cash flows.

▪ Our future success depends, in part, on our ability to develop new products and new technologies, progress and benefit from digital transformation and maintain technologies, facilities and equipment to win new competitions and meet the needs of our customers.

Many of the markets in which we operate are characterized by rapidly changing technologies.

The product, program and service needs of our customers evolve regularly.

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 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.

While we are committing significant resources to these efforts, and are making good progress, our company and our suppliers/partners face various substantial challenges and we may not be fully successful with digital transformation.

Our customers increasingly require us to be agile and efficient, digitally enabled and able to harness integrated digital technologies and capabilities to deliver solutions with agility and affordability.

If we fail to maintain our competitive position, we could lose a significant amount of future business to our competitors, which also could have a material adverse effect on our ability to generate favorable financial results and maintain market share and on our financial position, results of operations and/or cash flows.

General and Other Risk Factors

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The policy limits and terms of coverage reasonably obtainable may not be sufficient to cover actual losses or liabilities.

For example, the space and property 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 may exit 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

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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.

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• 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.

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The company’s pension and OPB obligations and related expenses are dependent upon the investment performance of plan assets and various assumptions, including discount rates, mortality and the estimated long-term rates of return on plan assets.

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• Business investments and/or recorded goodwill and other long-lived assets may become impaired, resulting in substantial losses and write-downs that would reduce our operating income.

Goodwill is an intangible asset that we recognize in connection with acquisitions of third-party businesses.

Goodwill accounts for approximately 38 percent of our total assets as of December 31, 2023.

Although we currently have excess fair value of our reporting units over their respective carrying values, changes in business conditions or in the market-based inputs used in our goodwill impairment test, could result in significant write-offs of goodwill or other long-lived assets, which could have a material adverse effect on our financial condition and/or results of operations.

Other long-lived assets 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 $500 million of PP&E used 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, which could have a material adverse effect on our financial condition and/or results of operations.

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What changed 10-K

Item 1A. Risk Factors