What changed in this filing

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Item 1. Financial Statements

2024-10-24 compared with 2024-07-25 · 93 added, 87 removed, 581 unchanged (24% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

Three Months Ended June 30 Six Months Ended June 30

Three Months Ended September 30 Nine Months Ended September 30

$ in millions, except per share amounts 2024 2023 2024 2023

20 unchanged sentences

Net earnings (from above) $ 1,026 $ 937 $ 2,910 $ 2,591

Other comprehensive (loss) income, net of tax

Other comprehensive income (loss), net of tax

Change in cumulative translation adjustment 2 6 2 11

Change in other, net 8 ( 3 ) ( 10 ) ( 5 )

Other comprehensive (loss) income, net of tax ( 3 ) 1 ( 18 ) 3

Other comprehensive income (loss), net of tax 10 3 ( 8 ) 6

Comprehensive income $ 1,036 $ 940 $ 2,902 $ 2,597

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

$ in millions, except par value June 30, 2024 December 31, 2023

$ in millions, except par value September 30, 2024 December 31, 2023

Cash and cash equivalents $ 3,326 $ 3,109

39 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30

Nine Months Ended September 30

$ in millions 2024 2023

18 unchanged sentences

Capital expenditures ( 951 ) ( 972 )

Proceeds from sale of minority investment — 157

Other, net — 3

2 unchanged sentences

Net proceeds from issuance of long-term debt 2,495 1,995

Net borrowings on commercial paper — 768

Payments of long-term debt — ( 1,050 )

Common stock repurchases ( 2,073 ) ( 1,154 )

2 unchanged sentences

Other, net ( 120 ) ( 34 )

Net cash provided by financing activities 34 1,202

Increase in cash and cash equivalents 163 807

Net cash used in financing activities ( 642 ) ( 1,128 )

Increase (decrease) in cash and cash equivalents 217 ( 495 )

Cash and cash equivalents, beginning of year 3,109 2,577

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended June 30 Six Months Ended June 30

Three Months Ended September 30 Nine Months Ended September 30

$ in millions, except per share amounts 2024 2023 2024 2023

14 unchanged sentences

Beginning of period ( 146 ) ( 150 ) ( 128 ) ( 153 )

Other comprehensive (loss) income, net of tax ( 3 ) 1 ( 18 ) 3

Other comprehensive income (loss), net of tax 10 3 ( 8 ) 6

End of period ( 136 ) ( 147 ) ( 136 ) ( 147 )

10 unchanged sentences

Effective July 1, 2024, the company realigned the Strategic Deterrent Systems (SDS) division, which includes the Ground-Based Strategic Deterrent (“Sentinel”) program, from Space Systems to Defense Systems.

The realignment is not reflected in the financial information contained in this report;

it will be reflected in the company’s operating results beginning in the third quarter of 2024.

These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”) and in accordance with the rules of the Securities and Exchange Commission (SEC) for interim reporting.

This realignment is reflected in the financial information contained in this report.

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”) and in accordance with the rules of the Securities and Exchange Commission (SEC) for interim reporting.

The financial statements include adjustments of a normal recurring nature considered necessary by management for a fair presentation of the company’s unaudited condensed consolidated financial position, results of operations and cash flows.

For classification of certain current assets and liabilities, we consider the duration of our customer contracts when defining our operating cycle, which is generally longer than one year.

Results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year.

These financial statements should be read in conjunction with the information contained in the company’s 2023 Annual Report on Form 10-K.

Results reported in the financial statements are not necessarily indicative of results that may be expected for the entire year.

The financial statements should be read in conjunction with the information contained in the company’s 2023 Annual Report on Form 10-K.

Quarterly information is labeled using a calendar convention;

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The EMD phase of the program is largely cost type and began at contract award.

The LRIP options are largely fixed price and are expected to continue to be awarded and executed through

NORTHROP GRUMMAN CORPORATION

approximately the end of the decade.

The LRIP options are largely fixed price and are expected to continue to be awarded and executed through approximately the end of the decade.

In addition to the five LRIP options, Northrop Grumman and the U.S.

Air Force have established not to exceed (NTE) pricing for additional aircraft up to unit 40.

The average NTE value for these subsequent lots is above the average unit price of the five LRIP lots, and the NTE lots include an economic price adjustment clause to protect against certain inflationary pressures.

NORTHROP GRUMMAN CORPORATION

Force have established not to exceed (NTE) pricing for additional aircraft up to unit 40.

The average NTE value for these subsequent lots is above the average unit price of the five LRIP lots, and the NTE lots include an economic price adjustment clause to help protect against certain inflationary pressures.

Final terms, quantity, and pricing for these subsequent lots are not fully negotiated.

During the fourth quarter of 2023, we recognized a projected loss of $ 1.56 billion across the five LRIP options.

During the second quarter of 2024, we again reviewed our estimated profitability on the program and made no significant changes to the previously recognized loss.

The company’s second quarter 2024 results reflect our current best estimate of our cost to complete the LRIP and NTE aircraft, as well as the outcome of ongoing discussions with our suppliers and our customer.

During the third quarter of 2024, we again reviewed our estimated profitability on the program and made no significant changes to the previously recognized loss.

The company’s third quarter 2024 results reflect our current best estimate of our cost to complete the LRIP and NTE aircraft, as well as the outcome of ongoing discussions with our suppliers and our customer.

If our estimated cost to complete the aircraft changes or our assumptions regarding contract performance, quantities, or funding to mitigate the impact of macroeconomic disruptions are resolved more or less favorably than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.

As of June 30, 2024, the remaining loss accrual is $ 1.5 billion, of which $ 972 million is included in Other current liabilities with the remainder included in Other non-current liabilities.

As of September 30, 2024, the remaining loss accrual is $ 1.4 billion, of which $ 946 million is included in Other current liabilities with the remainder included in Other non-current liabilities.

Sentinel Program

8 unchanged sentences

We are partnering with our customer to establish a new program baseline as part of the restructuring activities.

During the second quarter of 2024, we reviewed our estimated profitability on the Sentinel program and made no significant changes.

During the third quarter of 2024, we reviewed our estimated profitability on the Sentinel program and made no significant changes.

The Sentinel EAC incorporates our best estimate of costs to complete the restructured EMD effort;

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At the request of NASA, Space Systems submitted an engineering change proposal (ECP) during the fourth quarter of 2023 for scope increases and other aspects of the HALO contract largely stemming from evolving Lunar Gateway architecture and mission requirements.

During the second quarter of 2024, the company and NASA made significant progress toward ECP resolution, and we updated our profitability estimate for the HALO contract accordingly.

We currently expect negotiations to be completed by the end of the year .

During the third quarter of 2024, the company completed its negotiations with NASA and resolved the ECP .

The following table presents the effect of aggregate net EAC adjustments:

Three Months Ended June 30 Six Months Ended June 30

Three Months Ended September 30 Nine Months Ended September 30

$ in millions, except per share data 2024 2023 2024 2023

2 unchanged sentences

Net earnings (1)

107 46 212 142

Diluted earnings per share (1)

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When such adjustments occur, we generally disclose the nature, underlying conditions and financial impact of the adjustments.

No EAC adjustments on a single performance obligation had a significant impact on the

During the three months ended September 30, 2024, we recorded a $ 39 million favorable EAC adjustment on the HALO program at Space Systems related to the ECP resolution noted above.

During the three months ended June 30, 2023, we recorded a $ 36 million unfavorable EAC adjustment on the HALO program.

NORTHROP GRUMMAN CORPORATION

financial statements during the six months ended June 30, 2024.

During the three months ended June 30, 2023, we recorded a $ 36 million unfavorable EAC adjustment on the HALO program at Space Systems.

Backlog represents the future sales we expect to recognize on firm orders received by the company and is equivalent to the company’s remaining performance obligations at the end of each period.

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Backlog is converted into sales as costs are incurred or deliveries are made.

Company backlog as of June 30, 2024 was $ 83.1 billion.

Of our June 30, 2024 backlog, we expect to recognize approximately 40 percent as revenue over the next 12 months and 65 percent as revenue over the next 24 months, with the remainder to be recognized thereafter.

Company backlog as of September 30, 2024 was $ 84.8 billion.

Of our September 30, 2024 backlog, we expect to recognize approximately 40 percent as revenue over the next 12 months and 65 percent as revenue over the next 24 months, with the remainder to be recognized thereafter.

During the first quarter of 2024, the company reduced unfunded backlog by $ 1.6 billion related to a termination for convenience in our restricted space business.

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Contract liabilities are equivalent to and reflected as Advance payments and billings in excess of costs incurred in the unaudited condensed consolidated statements of financial position.

The amount of revenue recognized for the three and six months ended June 30, 2024 that was included in the December 31, 2023 contract liability balance was $ 1.1 billion and $ 3.0 billion, respectively.

The amount of revenue recognized for the three and six months ended June 30, 2023 that was included in the December 31, 2022 contract liability balance was $ 899 million and $ 2.6 billion, respectively.

The amount of revenue recognized for the three and nine months ended September 30, 2024 that was included in the December 31, 2023 contract liability balance was $ 354 million and $ 3.4 billion, respectively.

The amount of revenue recognized for the three and nine months ended September 30, 2023 that was included in the December 31, 2022 contract liability balance was $ 358 million and $ 2.9 billion, respectively.

Disaggregation of Revenue

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Property, Plant, and Equipment

Non-cash investing activities include capital expenditures incurred but not yet paid of $ 77 million and $ 62 million as of June 30, 2024 and 2023, respectively.

Non-cash investing activities include capital expenditures incurred but not yet paid of $ 251 million and $ 134 million as of September 30, 2024 and 2023, respectively.

Sale of Minority Investment

In July 2023, the company sold its minority investment in an Australian business for AUD $ 235 million (the

equivalent of $ 157 million upon settlement).

The sale resulted in a pre-tax gain of $ 97 million, which is reflected in

Other, net on the unaudited condensed consolidated statements of earnings and comprehensive income for the three

and nine months ended September 30, 2023.

Proceeds from the sale are included in investing activities on the

unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2023.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax, are as follows:

$ in millions June 30, 2024 December 31, 2023

$ in millions September 30, 2024 December 31, 2023

Cumulative translation adjustment $ ( 136 ) $ ( 138 )

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We are continuing to evaluate the disclosure impact of the final rule.

Other accounting standards updates adopted and/or issued, but not effective until after June 30, 2024, are not expected to have a material effect on the company’s consolidated financial position, results of operations and/or cash flows.

Other accounting standards updates adopted and/or issued, but not effective until after September 30, 2024, are not expected to have a material effect on the company’s consolidated financial position, results of operations and/or cash flows.

EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK

3 unchanged sentences

Diluted earnings per share include the dilutive effect of awards granted to employees under stock-based compensation plans.

The dilutive effect of these securities totaled 0.2 million shares and 0.4 million shares for the three and six months ended June 30, 2024, respectively.

The dilutive effect of these securities totaled 0.5 million shares and 0.6 million shares for the three and six months ended June 30, 2023, respectively.

The dilutive effect of these securities totaled 0.3 million shares for each of the three and nine months ended September 30, 2024.

The dilutive effect of these securities totaled 0.5 million shares and 0.6 million shares for the three and nine months ended September 30, 2023, respectively.

Share Repurchases

6 unchanged sentences

Repurchases under the 2023 Repurchase Program commenced in February 2024 upon completion of the 2022 Repurchase Program.

As of June 30, 2024, repurchases under the 2023 Repurchase Program totaled $ 0.6 billion;

As of September 30, 2024, repurchases under the 2023 Repurchase Program totaled $ 0.9 billion;

$ 1.6 billion remained under this share repurchase authorization.

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Per Share (1)

Date Completed Six Months Ended June 30

Date Completed Nine Months Ended September 30

January 25, 2021 $ 3,000 7.0 $ 431.05 April 2023 — 1.4

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Inventoried costs, net consist of the following:

$ in millions June 30, 2024 December 31, 2023

$ in millions September 30, 2024 December 31, 2023

Contracts in process $ 1,076 $ 647

6 unchanged sentences

NORTHROP GRUMMAN CORPORATION

Three Months Ended June 30 Six Months Ended June 30

Three Months Ended September 30 Nine Months Ended September 30

$ in millions 2024 2023 2024 2023

2 unchanged sentences

Current Quarter

The company’s second quarter 2024 effective tax rate (ETR) increased to 18.0 percent from 17.7 percent in the prior year period principally due to higher interest expense on unrecognized tax benefits.

The second quarter 2024 ETR includes benefits of $ 46 million for research credits and $ 15 million for foreign derived intangible income (FDII), partially offset by $ 25 million of interest expense on unrecognized tax benefits.

The second quarter 2023 ETR included benefits of $ 38 million for research credits and $ 14 million for FDII, partially offset by $ 14 million of interest expense on unrecognized tax benefits.

The company’s year to date 2024 ETR increased to 17.3 percent from 16.7 percent in the prior year period principally due to higher interest expense on unrecognized tax benefits.

The year to date 2024 ETR includes benefits of $ 90 million for research credits and $ 30 million for FDII, partially offset by $ 46 million of interest expense on unrecognized tax benefits.

The company’s third quarter 2024 effective tax rate (ETR) decreased to 13.6 percent from 16.2 percent in the prior year period principally driven by a net reduction in tax reserves largely due to a recent federal court decision, partially offset by higher interest expense on unrecognized tax benefits.

The third quarter 2024 ETR includes benefits of $ 191 million for research credits, partially offset by $ 64 million of interest expense on unrecognized tax benefits and $ 41 million in tax expense related to foreign-derived intangible income (FDII).

The third quarter 2023 ETR included benefits of $ 62 million for research credits and $ 19 million for FDII, partially offset by $ 21 million of interest expense on unrecognized tax benefits.

The company’s year to date 2024 ETR decreased to 16.0 percent from 16.5 percent in the prior year period principally driven by a net reduction in tax reserves largely due to a recent federal court decision, partially offset by higher interest expense on unrecognized tax benefits.

The year to date 2024 ETR includes benefits of $ 280 million for research credits, partially offset by $ 110 million of interest expense on unrecognized tax benefits and $ 11 million in tax expense related to FDII.

The year to date 2023 ETR included benefits of $ 140 million for research credits and $ 48 million for FDII, partially offset by $ 48 million of interest expense on unrecognized tax benefits.

Taxes receivable, which are included in Prepaid expenses and other current assets in the unaudited condensed consolidated statements of financial position, were $ 583 million as of June 30, 2024 and $ 1.5 billion as of December 31, 2023.

Taxes receivable, which are included in Prepaid expenses and other current assets in the unaudited condensed consolidated statements of financial position, were $ 402 million as of September 30, 2024 and $ 1.5 billion as of December 31, 2023.

The company has recorded unrecognized tax benefits related to our methods of accounting associated with the timing of revenue recognition and related costs and the 2017 Tax Cuts and Jobs Act, which includes related final revenue recognition regulations issued in December 2020 under IRC Section 451(b) and procedural guidance issued in August 2021.

As of June 30, 2024, we have approximately $ 2.1 billion in unrecognized tax benefits, including $ 901 million related to our position on IRC Section 451(b).

As of September 30, 2024, we have approximately $ 2.1 billion in unrecognized tax benefits, including $ 938 million related to our position on IRC Section 451(b).

If these matters, including our position on IRC Section 451(b), are unfavorably resolved, there could be a material impact on our future cash flows.

It is reasonably possible that within the next 12 months our unrecognized tax benefits related to these matters may increase by approximately $ 60 million.

Our current unrecognized tax benefits, which are included in Other current liabilities in the unaudited condensed consolidated statements of financial position, were $ 1.1 billion and $ 964 million as of June 30, 2024 and December 31, 2023, respectively, with the remainder of our unrecognized tax benefits included within Other non-current liabilities.

It is also reasonably possible that within the next 12 months our unrecognized tax benefits related to these matters may decrease by approximately $ 700 million, reflecting our best estimate of the most likely outcome of ongoing IRS negotiations.

Our current unrecognized tax benefits, which are included in Other current liabilities in the unaudited condensed consolidated statements of financial position, were $ 1.2 billion and $ 964 million as of September 30, 2024 and December 31, 2023, respectively, with the remainder of our unrecognized tax benefits included within Other non-current liabilities.

We file income tax returns in the U.S.

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While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two.

Pillar Two had no impact on our second quarter or year to date 2024 effective tax rate, and we do not currently expect Pillar Two to significantly impact our effective tax rate going forward.

Pillar Two had no impact on our third quarter or year to date 2024 effective tax rate, and we do not currently expect Pillar Two to significantly impact our effective tax rate going forward.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The company holds a portfolio of marketable securities to partially fund non-qualified employee benefit plans.

A portion of these securities are held in common/collective trust funds and are measured at fair value using net asset value (NAV) per share as a practical expedient;

A portion of these securities are held in common/collective trust funds and are measured at fair value using net asset

NORTHROP GRUMMAN CORPORATION

value (NAV) per share as a practical expedient;

therefore, they are not categorized in the fair value hierarchy table below.

Marketable securities are included in Other non-current assets in the unaudited condensed consolidated statements of financial position.

NORTHROP GRUMMAN CORPORATION

The company’s derivative portfolio consists primarily of foreign currency forward contracts.

1 unchanged sentence

The following table presents the financial assets and liabilities the company records at fair value on a recurring basis identified by the level of inputs used to determine fair value:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

$ in millions Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

4 unchanged sentences

Derivatives — 3 — 3 — 5 — 5

The notional value of the company’s foreign currency forward contracts at June 30, 2024 and December 31, 2023 was $ 379 million and $ 286 million, respectively.

The portion of notional value designated as a cash flow hedge at June 30, 2024 and December 31, 2023 was $ 245 million and $ 162 million, respectively.

The derivative fair values and related unrealized gains/losses at June 30, 2024 and December 31, 2023 were not material.

There were no transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the six months ended June 30, 2024.

The notional value of the company’s foreign currency forward contracts at September 30, 2024 and December 31, 2023 was $ 399 million and $ 286 million, respectively.

The portion of notional value designated as a cash flow hedge at September 30, 2024 and December 31, 2023 was $ 269 million and $ 162 million, respectively.

The derivative fair values and related unrealized gains/losses at September 30, 2024 and December 31, 2023 were not material.

There were no transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the nine months ended September 30, 2024.

The carrying value of cash and cash equivalents approximates fair value.

Long-term Debt

The estimated fair value of the company’s long-term debt was $ 15.3 billion and $ 13.4 billion as of June 30, 2024 and December 31, 2023, respectively.

The estimated fair value of the company’s long-term debt was $ 16.1 billion and $ 13.4 billion as of September 30, 2024 and December 31, 2023, respectively.

We calculated the fair value of long-term debt using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the company’s existing debt arrangements.

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The nature of legal proceedings is such that we cannot assure the outcome of any particular matter.

However, based on information available to the company to date, the company does not believe that the outcome of any of these other matters pending against the company is likely to have a material adverse effect on the company’s unaudited condensed consolidated financial position as of June 30, 2024, or its annual results of operations and/or cash flows.

However, based on information available to the company to date, the company does not believe that the outcome of any of these other matters pending against the company is likely to have a material adverse effect on the company’s unaudited condensed consolidated financial position as of September 30, 2024, or its annual results of operations and/or cash flows.

COMMITMENTS AND CONTINGENCIES

6 unchanged sentences

Such provisions are reviewed periodically using the most recent information available.

The company believes it has adequately reserved for disputed amounts that are probable and reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its unaudited condensed consolidated financial position as of June 30, 2024, or its annual results of operations and/or cash flows.

The company believes it has adequately reserved for disputed amounts that are probable and reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its unaudited condensed consolidated financial position as of September 30, 2024, or its annual results of operations and/or cash flows.

In 2019, the Defense Contract Management Agency (DCMA) raised questions about an interest rate assumption used by the company to determine our CAS pension expense.

3 unchanged sentences

We subsequently continued to exchange correspondence and engage with DCMA on this matter, including responding to requests for and providing additional information.

On February 15, 2024, DCMA sent to the company a Contracting Officer’s determination of noncompliance with CAS, which is an interim, non-final determination, and the parties are engaged in ongoing discussions.

As noted in Note 6 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on February 2, 2023, both seeking information that appears related to the interest rate assumptions

On February 15, 2024, DCMA sent to the company a Contracting Officer’s determination of noncompliance with CAS, which is an interim, non-final determination, and the parties engaged in discussions.

As noted in Note 6 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on

NORTHROP GRUMMAN CORPORATION

at issue in our discussions with DCMA.

The company is engaging with the government and responding to the requests.

We cannot at this point predict the outcome of these matters.

February 2, 2023, both seeking information that appears related to the interest rate assumptions at issue in our discussions with DCMA.

The company has responded to requests and expects to continue discussions with the DOJ and DCMA as these matters progress.We cannot at this point predict the outcome of these matters.

The sensitivity to changes in interest rate assumptions makes it reasonably possible the outcome of the DCMA matter could have a material adverse effect on our financial position, results of operations and/or cash flows, although we are not currently able to estimate a range of any potential loss.

1 unchanged sentence

The table below summarizes the amount accrued for environmental remediation costs, management’s estimate of the amount of reasonably possible future costs in excess of accrued costs and the deferred costs expected to be recoverable through overhead charges on U.S.

government contracts as of June 30, 2024 and December 31, 2023:

government contracts as of September 30, 2024 and December 31, 2023:

$ in millions Accrued Costs (1)(2)

1 unchanged sentence

Deferred Costs (3)

June 30, 2024 $ 574 $ 382 $ 535

September 30, 2024 $ 568 $ 380 $ 530

December 31, 2023 584 387 518

(1) As of June 30, 2024, $ 223 million is recorded in Other current liabilities and $ 351 million is recorded in Other non-current liabilities.

(1) As of September 30, 2024, $ 213 million is recorded in Other current liabilities and $ 355 million is recorded in Other non-current liabilities.

(2) Estimated remediation costs are not discounted to present value.

1 unchanged sentence

government contracts.

(3) As of June 30, 2024, $ 212 million is deferred in Prepaid expenses and other current assets and $ 323 million is deferred in Other non-current assets.

(3) As of September 30, 2024, $ 203 million is deferred in Prepaid expenses and other current assets and $ 327 million is deferred in Other non-current assets.

These amounts reflect a $ 26 million increase during the second quarter of 2024 in our estimated recovery of certain environmental remediation costs and are evaluated for recoverability on a routine basis.

Although management cannot predict whether (i) new information gained as our environmental remediation projects progress, (ii) changes in remediation standards or other requirements to which we are subject, or (iii) other changes in facts and circumstances will materially affect the estimated liability accrued, we do not anticipate that future remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s unaudited condensed consolidated financial position as of June 30, 2024, or its annual results of operations and/or cash flows.

Although management cannot predict whether (i) new information gained as our environmental remediation projects progress, (ii) changes in remediation standards or other requirements to which we are subject, or (iii) other changes in facts and circumstances will materially affect the estimated liability accrued, we do not anticipate that future remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s unaudited condensed consolidated financial position as of September 30, 2024, or its annual results of operations and/or cash flows.

Financial Arrangements

In the ordinary course of business, the company uses standby letters of credit and guarantees issued by commercial banks and surety bonds issued principally by insurance companies to guarantee the performance on certain obligations.

At June 30, 2024, there were $ 365 million of stand-by letters of credit and guarantees and $ 272 million of surety bonds outstanding.

At September 30, 2024, there were $ 469 million of stand-by letters of credit and guarantees and $ 272 million of surety bonds outstanding.

Commercial Paper

The company maintains a commercial paper program that serves as a source of short-term financing with capacity to issue unsecured commercial paper notes up to $ 2.5 billion.

At June 30, 2024, there were no commercial paper borrowings outstanding.

At September 30, 2024, there were no commercial paper borrowings outstanding.

Credit Facilities

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Commercial paper borrowings reduce the amount available for borrowing under the 2022 Credit Agreement.

At June 30, 2024, there were no borrowings outstanding under this facility.

At September 30, 2024, there were no borrowings outstanding under this facility.

The 2022 Credit Agreement contains generally customary terms and conditions, including covenants restricting the company’s ability to sell all or substantially all of its assets, merge or consolidate with another entity or undertake other fundamental changes and incur liens.

The company also cannot permit the ratio of its debt to capitalization (as set forth in the credit agreement) to exceed 65 percent.

At June 30, 2024, the company was in compliance with all covenants under its credit agreements.

At September 30, 2024, the company was in compliance with all covenants under its credit agreements.

NORTHROP GRUMMAN CORPORATION

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The cost to the company of its pension and other postretirement benefit (OPB) plans is shown in the following table:

Three Months Ended June 30 Six Months Ended June 30

Three Months Ended September 30 Nine Months Ended September 30

Benefits OPB Pension

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Contributions made by the company to its retirement plans are as follows:

Three Months Ended June 30 Six Months Ended June 30

Three Months Ended September 30 Nine Months Ended September 30

$ in millions 2024 2023 2024 2023

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The following table presents the number of restricted stock rights (RSRs) and restricted performance stock rights (RPSRs) granted to employees under the company’s long-term incentive stock plan and the grant date aggregate fair value of those stock awards for the periods presented:

Six Months Ended June 30

Nine Months Ended September 30

in millions 2024 2023

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The following table presents the minimum and maximum aggregate payout amounts related to cash units (CUs) and cash performance units (CPUs) granted to employees in the periods presented:

Six Months Ended June 30

Nine Months Ended September 30

$ in millions 2024 2023

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The following table presents sales and operating income by segment:

Three Months Ended June 30 Six Months Ended June 30

Three Months Ended September 30 Nine Months Ended September 30

$ in millions 2024 2023 2024 2023

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Disaggregation of Revenue

Sales by Customer Type Three Months Ended June 30 Six Months Ended June 30

Sales by Customer Type Three Months Ended September 30 Nine Months Ended September 30

2024 2023 2024 2023

45 unchanged sentences

NORTHROP GRUMMAN CORPORATION

Sales by Contract Type Three Months Ended June 30 Six Months Ended June 30

Sales by Contract Type Three Months Ended September 30 Nine Months Ended September 30

2024 2023 2024 2023

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NORTHROP GRUMMAN CORPORATION

Sales by Geographic Region Three Months Ended June 30 Six Months Ended June 30

Sales by Geographic Region Three Months Ended September 30 Nine Months Ended September 30

2024 2023 2024 2023

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Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries (the “Company”) as of June 30, 2024, and the related condensed consolidated statements of earnings and comprehensive income and changes in shareholders’ equity for the three-month and six-month periods ended June 30, 2024 and 2023, and of cash flows for the six-month periods ended June 30, 2024 and 2023 and the related notes (collectively referred to as the “interim financial information”).

We have reviewed the accompanying condensed consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries (the “Company”) as of September 30, 2024, and the related condensed consolidated statements of earnings and comprehensive income and changes in shareholders’ equity for the three-month and nine-month periods ended September 30, 2024 and 2023, and of cash flows for the nine-month periods ended September 30, 2024 and 2023 and the related notes (collectively referred to as the “interim financial information”).

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

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McLean, Virginia

July 24, 2024

October 23, 2024

NORTHROP GRUMMAN CORPORATION

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-Q

Item 1. Financial Statements