What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-01-30 compared with 2024-01-25 · 273 added, 265 removed, 1109 unchanged (33% of the section changed)

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit and risk committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition - Cost and Revenue Estimates for Development Contracts - Refer to Note 1 to the financial statements

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit and risk committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimates of Revenue and Cost at Completion for Select Long-Term Contracts - Refer to Note 1 to the financial statements

Critical Audit Matter Description

As more fully described in Note 1 to the financial statements, the Company recognizes substantially all revenue as control is transferred to the customer on their long-term contracts over time using the cost-to-cost method (cost incurred relative to total cost estimated at completion).

As further described in Note 1 to the financial statements, the Company recognizes revenue as control is transferred to the customer, which for long-term contracts is generally over-time using the cost-to-cost method (cost incurred relative to total cost estimated at completion).

Use of the cost-to-cost-method requires the Company to make reasonably dependable estimates regarding the revenue and costs associated with the design, manufacture and delivery of their products or services.

The Company estimates profit on these contracts as the difference between total estimated sales and total estimated costs at completion and recognizes that profit as costs are incurred.

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estimates on contracts requiring development work are inherently more uncertain as to future events than production contracts, and, as a result, there is typically more variability in those estimates.

Certain of these contracts are fixed price in nature, which results in greater financial risk associated with unanticipated cost growth.

Alternatively, cost-type contracts may have award or incentive fees that are subject to uncertainty and may be earned over extended periods or towards the end of the contract.

As a result, the estimation of costs required to complete these contracts and the expected revenues that will be earned is complex and requires significant judgment.

Given the judgment necessary to make reasonably dependable estimates regarding the revenue and costs associated with such contracts, auditing these estimates required extensive audit effort due to the complexity of the underlying programs and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our auditing procedures related to the cost and revenue estimates for these development contracts included the following, among others:

• We tested the effectiveness of controls over the estimates of total costs and revenues on such contracts, including development costs and any related award or incentive fee estimates for the relevant performance obligations.

• We selected certain long-term contracts for testing and performed the following procedures:

– Evaluated whether the recognition of revenue over time on such contracts was appropriate based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation.

– Tested management’s identification of distinct performance obligations by evaluating whether the underlying goods and services were highly interdependent and interrelated.

– Tested management’s determination of the transaction price, including any award or incentive fees, based on the consideration expected to be received in accordance with the rights and obligations established under the contracts and any contractual modifications.

– Evaluated the estimates of total cost and revenue for the performance obligation by:

▪ Conducting inquiries of relevant program teams regarding any challenges related to the program.

▪ Comparing costs incurred to date to the costs management estimated to be incurred to date.

▪ Evaluating management’s ability to achieve the estimates of cost and revenue by performing corroborating inquiries with the Company’s program and business management, and testing management’s process used to develop the estimates based on their work plans, engineering specifications, program labor, and supplier contracts.

This includes management’s process to identify macroeconomic impacts to certain programs, which could include forecasted cost impacts and assumptions on the ability to recover those costs.

▪ Evaluating selected changes to the estimates of costs and obtaining supporting documentation on timing and amounts of these changes in estimates.

– Tested the mathematical accuracy of management’s calculation of revenue recognized during the period for the performance obligations.

Income Taxes - Uncertain Tax Positions - Refer to Notes 1 and 7 to the financial statements

Critical Audit Matter Description

The Company files income tax returns in the U.S.

federal jurisdiction and in various state and foreign jurisdictions.

Uncertain tax positions reflect the Company’s expected treatment of tax positions taken in a filed tax return, or planned to be taken in a future tax return or claim, which have not been reflected in measuring income tax expense or taxes payable for financial reporting purposes.

Until these positions are sustained by the taxing authorities or the statute of limitations concerning such issues lapses, the Company does not generally recognize the tax benefits resulting from such positions and reports the tax effects as a liability for uncertain tax positions in its consolidated statements of financial position.

The Company has recognized increased uncertain tax positions in recent years

The Company estimates profit on these contracts as the difference between total estimated revenue and total estimated costs at completion and recognizes that profit as costs are incurred.

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principally related to state apportionment, the methods of accounting associated with the timing of revenue recognition and related costs, and the 2017 Tax Act.

Until the matters are resolved, the outcome is inherently uncertain.

Auditing certain assumptions associated with the Company’s uncertain tax positions involved especially challenging judgments given the complexity and inherent subjectivity involved in evaluating the potential outcomes of these matters.

analyzed the Company’s contract portfolio to identify contracts that we believe had elevated financial or performance risk.

For those contracts identified, the evaluation of one or more of the assumptions used to recognize revenue required extensive audit effort due to the complexity of the contracts and a high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to certain assumptions used in determining uncertain tax positions included the following, among others:

• We tested the effectiveness of controls relating to the identification and completeness of, and recognition for, uncertain tax positions, including management’s controls over the underlying key assumptions and inputs used to derive the estimates.

• With the assistance of our income tax specialists, we selected specific uncertain tax positions for testing and performed the following procedures:

– Inquired of the Company’s tax department, financial reporting department, and other personnel directly involved in the development of the estimates.

– Obtained supporting documentation and evaluated how the Company supported the position, including the assumptions and estimates used for measurement, and how the taxing authorities have historically challenged the tax position, if applicable.

– Evaluated whether the uncertain tax position met the “more likely than not” recognition threshold.

– Evaluated the appropriateness and consistency of the methodologies and assumptions used by management when developing these estimates.

• We tested the mathematical accuracy of management’s calculations.

Our audit procedures related to the revenue and cost estimates for these contracts identified included the following, among others:

• We tested the operating effectiveness of controls over the significant assumptions and judgments underlying the estimates of revenues and costs to completion associated with these long-term contracts.

• Based on the risk characteristic identified on an individual contract, we evaluated certain revenue and cost assumptions by:

– Reading the underlying contract and any amendments or modifications to understand the contractual requirements and performance obligations.

– Assessing the timing of recognition of any incentive fees or award fees based on contract terms and relevant historical trends.

– Evaluating management’s ability to achieve the estimates of remaining revenue and costs by performing inquiries with the Company’s program and business management regarding their basis of estimates including work plans, engineering specifications, program labor and suppliers, challenges or opportunities related to the program, actual performance to date compared to plan, and any recent correspondence between the Company and the customer on changes in scope or contractual terms.

– Evaluating selected changes to the estimates of costs to completion and obtaining supporting documentation on the appropriateness of the timing and amounts of these changes in estimates.

– Testing the accuracy and completeness of the information used in developing estimates, as well as the mathematical accuracy of management’s calculation of revenue recognized during the period for the performance obligations.

/s/ Deloitte & Touche LLP

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Total operating costs and expenses 36,663 36,753 33,001

Gain on sale of business — — 1,980

Operating income 4,370 2,537 3,601

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Non-operating FAS pension benefit 656 530 1,505

Mark-to-market pension and OPB (expense) benefit ( 422 ) 1,232 2,355

Mark-to-market pension and OPB benefit (expense) 443 ( 422 ) 1,232

Other, net 168 246 4

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Net earnings (from above) $ 4,174 $ 2,056 $ 4,896

Other comprehensive income (loss), net of tax

Other comprehensive (loss) income, net of tax

Change in cumulative translation adjustment ( 2 ) 23 ( 16 )

Change in other, net ( 22 ) 2 6

Other comprehensive income (loss), net of tax 25 ( 10 ) ( 15 )

Other comprehensive (loss) income, net of tax ( 24 ) 25 ( 10 )

Comprehensive income $ 4,150 $ 2,081 $ 4,886

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Deferred tax assets 1,599 1,020

Pension and other postretirement benefit plan assets 2,184 1,331

Other non-current assets 1,230 1,194

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Depreciation and amortization 1,370 1,338 1,342

Mark-to-market pension and OPB expense (benefit) 422 ( 1,232 ) ( 2,355 )

Mark-to-market pension and OPB (benefit) expense ( 443 ) 422 ( 1,232 )

Stock-based compensation 101 87 99

Deferred income taxes ( 582 ) ( 988 ) ( 321 )

Gain on sale of business — — ( 1,980 )

B-21 charge — 1,559 —

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Investing activities

Divestiture of IT services business — — 3,400

Capital expenditures ( 1,767 ) ( 1,775 ) ( 1,435 )

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Other, net 18 ( 4 ) 39

Net cash (used in) provided by investing activities ( 1,582 ) ( 1,241 ) 2,058

Net cash used in investing activities ( 1,749 ) ( 1,582 ) ( 1,241 )

Financing activities

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Cash and cash equivalents, beginning of year 3,109 2,577 3,530

Cash and cash equivalents, end of year $ 3,109 $ 2,577 $ 3,530

Cash and cash equivalents, end of period $ 4,353 $ 3,109 $ 2,577

The accompanying notes are an integral part of these consolidated financial statements.

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Beginning of year — — —

Common stock repurchased — — ( 60 )

Stock compensation — — 2

End of year — — —

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Beginning of year ( 128 ) ( 153 ) ( 143 )

Other comprehensive income (loss), net of tax 25 ( 10 ) ( 15 )

Other comprehensive (loss) income, net of tax ( 24 ) 25 ( 10 )

End of year ( 152 ) ( 128 ) ( 153 )

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With the investments we've made in advanced technologies, combined with our talented workforce and digital transformation capabilities, Northrop Grumman is well positioned to meet our customers' needs today and in the future.

Principles of Consolidation

The consolidated financial statements include the accounts of Northrop Grumman and its subsidiaries and joint ventures or other investments for which we consolidate the financial results.

Principles of Consolidation and Reporting

The consolidated financial statements (the “financial statements”) include the accounts of Northrop Grumman and its subsidiaries and joint ventures or other investments for which we consolidate the financial results.

Intercompany accounts, transactions and profits are eliminated in consolidation.

Investments in equity securities and joint ventures where the company has significant influence, but not control, are accounted for using the equity method.

Basis of Presentation

During the first quarter of 2023, we changed the presentation of the components of other comprehensive income (loss), net of tax in the consolidated statement of earnings and comprehensive income.

Prior period amounts have been recast to conform to current period presentation.

This change in presentation had no impact on our previously reported comprehensive income in total.

The financial statements are prepared in conformity with U.S.

GAAP and in accordance with the rules of the SEC.

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

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

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

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

Subsequent Realignment - Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems.

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

it will be reflected in the company’s operating results beginning in the first quarter of 2025.

Accounting Estimates

The company’s consolidated financial statements are prepared in conformity with U.S.

The preparation thereof requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of sales and expenses during the reporting period.

Preparation of the financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of sales and expenses during the reporting period.

Estimates have been prepared using the most current and best available information;

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Assets recognized from the costs to obtain or fulfill a contract are not material.

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The company recognizes revenue as control is transferred to the customer, either over time or at a point in time.

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For most of our contracts, control is effectively transferred during the period of performance, so we generally recognize revenue over time using the cost-to-cost method (cost incurred relative to total cost estimated at completion).

The company believes this represents the most appropriate

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measurement towards satisfaction of its performance obligations.

The company believes this represents the most appropriate measurement towards satisfaction of its performance obligations.

Revenue for contracts in which the control of goods produced does not transfer until delivery to the customer is recognized at a point in time (i.e., typically upon delivery).

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We estimate variable consideration as the most likely amount to which we expect to be entitled.

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

The ECP addresses both work performed and work expected to be performed by the company resulting from scope changes previously approved by NASA, as well as changes NASA has requested the company to propose but has not yet directed the company to perform.

The company has begun negotiating with NASA on these various changes and other aspects of the HALO contract.

The company’s 2023 results include $ 100 million of unfavorable EAC adjustments on the HALO contract and reflect our current best estimate of the outcome of the ECP negotiations assuming the terms of the current contract;

however, if the outcome is less favorable than what we have assumed, it could have an adverse effect on our financial position, results of operations and/or cash flows.

We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis.

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If it is determined that a loss is expected to result on an individual performance obligation, the entire amount of the estimable future loss, including an allocation of G&A costs, is charged against income in the period the loss is identified.

B-21 Low-Rate Initial Production Options

In 2015, the U.S.

Air Force awarded Northrop Grumman the B-21 contract, which includes a base contract for engineering, manufacturing, and design (EMD) and five low-rate initial production (LRIP) options in varying quantities.

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 be awarded and executed through approximately the end of the decade.

During the fourth quarter of 2023, the B-21 program entered flight testing and the company received an award for the first LRIP lot.

We previously disclosed it was reasonably possible one or more of the LRIP options could be performed at a loss principally due to the company’s estimate of the impact macroeconomic factors may have on our cost to complete the LRIP options, as well as ongoing discussions with our suppliers and our customer.

During the fourth quarter of 2023, we again reviewed our estimated profitability on the LRIP phase of the program, and we now believe it is probable each of the first five LRIP lots will be performed at a loss.

The loss is largely driven by a change in our assumptions regarding funding to mitigate the impact of macroeconomic disruptions on the LRIP phase of the program and higher projected manufacturing costs that reflect recent supplier negotiations and our experience in completing the first aircraft.

The projected loss across the five LRIP lots, which we recognized during the fourth quarter of 2023, is $ 1.56 billion.

The loss comprises a $ 143 million unfavorable EAC adjustment for the first LRIP lot and a $ 1.37 billion loss contingency accrual and $ 45 million reduction of inventoried costs for the unexercised LRIP lots.

As of December 31, 2023, $ 631 million of the loss contingency accrual is included in Other current liabilities and $ 740 million is included in Other non-current liabilities in the consolidated statement of financial position.

NORTHROP GRUMMAN CORPORATION

If our estimated cost to complete the LRIP phase of the program 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.

During the fourth quarter of 2023, we recognized a projected loss of $ 1.56 billion across the five LRIP options of the B-21 program.

As of December 31, 2024, the remaining loss accrual is $ 1.3 billion, which is included in Other current liabilities.

Net EAC Adjustments

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

During the fourth quarter of 2023, we recorded a $ 143 million unfavorable EAC adjustment on the first LRIP lot of the B-21 program at Aeronautics Systems as described above.

During 2023, we recorded $ 100 million of unfavorable EAC adjustments on the HALO program at Space Systems largely due to cost growth stemming from evolving Lunar Gateway architecture and mission requirements combined with macroeconomic challenges.

During 2022, we recorded $ 133 million of favorable EAC adjustments on the EMD phase of the B-21 program at Aeronautics Systems.

During 2021, we recorded $ 135 million of unfavorable EAC adjustments on the F-35 program at Aeronautics Systems.

During the third quarter of 2024, we recorded a $ 39 million favorable EAC adjustment on the HALO program at Space Systems related to the resolution of an engineering change proposal (ECP) as previously disclosed.

During 2023, we recorded a $ 143 million unfavorable EAC adjustment on the first LRIP lot of the B-21 program at Aeronautics Systems and $ 100 million of unfavorable EAC adjustments on the HALO program at Space Systems.

During 2022, we recorded $ 133 million of favorable EAC adjustments on the EMD phase of the

NORTHROP GRUMMAN CORPORATION

B-21 program at Aeronautics Systems.

No other such adjustments were significant to the financial statements during the years ended December 31, 2024, 2023 and 2022.

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Of our December 31, 2024 backlog, we expect to recognize approximately 40 percent as revenue over the next 12 months and 65 percent as revenue over the next 24 months, with the remainder to be recognized thereafter.

Subsequent Event – In January 2024, the company received a termination for convenience in our restricted Space business.

The company expects to reduce backlog by approximately $ 2 billion during the first quarter of 2024 related to the termination.

During 2024, the company reduced unfunded backlog by $ 1.6 billion and $ 0.7 billion related to terminations for convenience in our restricted space business and on the NGI program at Space Systems, respectively.

Contract Assets and Liabilities

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These contract assets are not considered a significant financing component of the company’s contracts as the payment terms are intended to protect the customer in the event the company does not perform on its obligations under the contract.

NORTHROP GRUMMAN CORPORATION

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

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Net contract assets $ 1,838 $ 1,500 $ 338 23 %

The change in the balances of the company’s contract assets and liabilities primarily results from timing differences between revenue recognition and customer billings and/or payments.

Net contract assets as of December 31, 2023 decreased 37 percent from the prior year, primarily due to decreases in net contracts assets at Space Systems, Missions Systems and Aeronautics Systems.

Changes in the company’s contract assets and liabilities primarily result from timing differences between revenue recognition and customer billings and/or payments.

Net contract assets as of December 31, 2024 increased 23 percent from the prior year, primarily due to the burn down of advances on certain Aeronautics Systems programs and an increase in unbilled receivables on several programs at Space Systems.

The amount of revenue recognized for the years ended December 31, 2024, 2023 and 2022 that was included in the contract liability balance at the beginning of each year was $ 3.6 billion, $ 3.1 billion and $ 2.4 billion, respectively.

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We believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

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General and Administrative Expenses

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Until these positions are sustained by the taxing authorities or the statute of limitations concerning such issues lapses, the company does not generally recognize the tax benefits resulting from such positions and reports the tax effects as a liability for uncertain tax positions in its consolidated statements of financial position.

NORTHROP GRUMMAN CORPORATION

Cash and Cash Equivalents

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Derivative financial instruments are recognized as assets or liabilities in the financial statements and measured at fair value on a recurring basis.

Changes in the fair value of derivative financial instruments that are designated as fair value hedges are recorded in Other, net in the consolidated statements of earnings and comprehensive income, while changes in the fair value of derivative financial instruments that are designated as cash flow hedges are recorded as a component of other comprehensive income until settlement.

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component of other comprehensive income until the hedged transaction is recognized in earnings.

For derivative financial instruments not designated as hedging instruments, gains or losses resulting from changes in the fair value are reported in Other, net in the consolidated statements of earnings and comprehensive income.

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Inventoried Costs

Inventoried costs generally comprise costs associated with unsatisfied performance obligations on contracts accounted for using point in time revenue recognition, costs incurred in excess of existing contract requirements that are probable of recovery and other accrued contract costs that are expected to be recoverable when allocated to specific contracts.

Product inventory primarily consists of raw materials and is stated at the lower of cost or net realizable value, generally using the average cost method.

The company records inventoried costs at the lower of cost or net realizable value.

Inventoried costs are categorized into raw materials, work in process, and finished goods.

Raw materials are recognized using the average cost method and are generally included in contract cost when allocated to specific contracts.

Work in process primarily consists of a) costs associated with specific anticipated contracts or costs incurred in excess of existing contract requirements, which are probable of recovery, and b) costs associated with unsatisfied performance obligations on contracts accounted for using point in time revenue recognition.

Finished goods primarily consists of inventory maintained in support of sustainment contracts.

Inventoried costs include direct production costs, factory and engineering overhead, production tooling costs, and allowable G&A.

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Cash Surrender Value of Life Insurance Policies

The company maintains whole life insurance policies on a group of executives, which are recorded at their cash surrender value as determined by the insurance carrier.

The company also has split-dollar life insurance policies on former officers and executives from acquired businesses, which are recorded at the lesser of their cash surrender value or premiums paid.

These policies are utilized as a partial funding source for deferred compensation and other

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non-qualified employee retirement plans.

The company maintains whole life and split-dollar life insurance policies primarily on former officers and executives.

Whole life insurance policies are recorded at their cash surrender value as determined by the insurance carrier, and split-dollar life insurance policies are recorded at the lesser of their cash surrender value or premiums paid.

These policies are utilized as a partial funding source for deferred compensation and other non-qualified employee retirement plans.

As of December 31, 2024 and 2023, the carrying values associated with these policies were $ 416 million and $ 399 million, respectively, and are recorded in Other non-current assets in the consolidated statements of financial position.

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Major classes of PP&E and their useful lives are as follows:

NORTHROP GRUMMAN CORPORATION

Useful life in years, $ in millions Useful Life 2024 2023

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Although we generally classify proceeds from revenue transactions as cash inflows from operating activities, we recognized the proceeds from this transaction as cash inflows from investing activities, consistent with our prior recognition of the cost to acquire the equipment as capital expenditures.

The company received cash payments of $ 155 million and $ 84 million related to the equipment sale during 2022 and 2021, respectively, and included it in Proceeds from sale of equipment to a customer in the consolidated statements of cash flows.

The company received no cash payments in 2023 related to the equipment sale.

The company received the final cash payment of $ 155 million related to the equipment sale during 2022 and included it in Proceeds from sale of equipment to a customer in the consolidated statements of cash flows.

During the year ended December 31, 2022, the company acquired $ 46 million of internal use software through long-term financing directly with the supplier.

The software was recorded in PP&E as a non-cash investing activity and the related liability was recorded in long-term debt as a non-cash financing activity.

During the years ended December 31, 2023 and 2022, the company received lease incentives for landlord funded leasehold improvements of $ 55 million and $ 96 million, respectively, related to Space Systems real estate leases, which were recorded in PP&E and included in non-cash investing activities.

During the year ended December 31, 2023, the company received lease incentives for landlord funded leasehold improvements of $ 55 million related to Space Systems real estate leases, which were recorded in PP&E and included in non-cash investing activities.

On December 28, 2022 the company acquired certain leased land in exchange for company-owned land, which had been used previously for production-related activities at Space Systems.

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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

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Other, net on the consolidated statements of earnings and comprehensive income for the year ended December 31, 2023.

The sale resulted in a pre-tax gain of $ 97 million, which is reflected in Other, net on the consolidated statements of earnings and comprehensive income for the year ended December 31, 2023.

Proceeds from the sale are included in investing activities on the consolidated statement of cash flows for the year ended December 31, 2023.

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Other intangible assets are generally amortized on a straight-line basis over their estimated useful lives.

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The company leases certain buildings, land and equipment.

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Many of the company’s real property lease agreements contain incentives for tenant improvements, rent holidays or rent escalation clauses.

For tenant improvement incentives received, if the incentive is determined to be a leasehold improvement owned by the lessee, the company generally records the incentives as a reduction to the right-of-use asset, which reduces rent expense over the lease term.

For tenant improvement incentives received, if the incentive is determined to be a leasehold improvement owned by the company, we generally record the incentives as a reduction to the right-of-use asset, which reduces rent expense over the lease term.

For rent holidays and rent escalation clauses during the lease term, the company records rental expense on a straight-line basis over the term of the lease.

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The company typically projects environmental costs for up to 30 years, records environmental liabilities on an undiscounted basis, and excludes asset retirement obligations and certain legal costs.

At sites involving multiple parties, we accrue environmental liabilities based upon our expected share of liability, taking into account the financial viability of other liable parties.

At sites involving multiple parties, we accrue environmental liabilities based upon our expected share of liability, considering the financial viability of other liable parties.

Retirement Benefits

The company sponsors various defined benefit pension plans and defined contribution retirement plans covering substantially all of its employees.

In most cases, our defined contribution plans provide for a company match of

NORTHROP GRUMMAN CORPORATION

employee contributions.

The company sponsors various defined benefit pension plans and defined contribution retirement plans covering substantially all employees.

In most cases, our defined contribution plans provide for a company match of employee contributions.

The company also provides postretirement benefits other than pensions to eligible retirees and qualifying dependents, consisting principally of health care and life insurance benefits.

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While both FAS and CAS recognize a normal service cost component in measuring periodic pension cost, there are differences in the way the components of annual pension costs are calculated under each method.

Measuring plan obligations under FAS and CAS includes different assumptions and models, such as in estimating returns on plan assets, calculating interest expense and the periods over which gains/losses related to pension assets and actuarial changes are recognized.

As a result, annual retiree benefit plan expense amounts for FAS are different from the amounts for CAS in any given reporting period even though the ultimate cost of providing benefits over the life of the plans is the same under either method.

Measuring plan obligations under FAS and CAS also includes different assumptions and models, such as in estimating returns on plan assets, calculating interest expense and the periods over which gains/losses related to pension assets and actuarial changes are recognized.

As a result, annual retiree benefit plan expense amounts for

NORTHROP GRUMMAN CORPORATION

FAS are different from the amounts for CAS in any given reporting period even though the ultimate cost of providing benefits over the life of the plans is the same under each method.

CAS retiree benefit plan costs are charged to contracts and are included in segment operating income, and the difference between the service cost component of FAS expense and total CAS expense (the “FAS/CAS operating adjustment”) is recorded in operating income at the consolidated company level.

Not all net periodic pension expense is recognized in net earnings in the year incurred because it is allocated as production costs and a portion remains in inventory at the end of any given reporting period.

Actuarial gains and losses are immediately recognized in net periodic benefit cost for FAS through MTM (expense) benefit upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.

Actuarial gains and losses are immediately recognized in net periodic benefit cost for FAS through MTM benefit (expense) upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.

Prior service credits are recognized as a component of Accumulated other comprehensive loss and amortized into earnings in future periods.

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For all periods presented, the company had no material related party transactions.

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Accounting Standards Updates

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Among other new disclosure requirements, ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker.

ASU 2023-07 will be effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025.

ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements.

We are evaluating the disclosure impact of ASU 2023-07;

however, the standard will not have an impact on the company’s consolidated financial position, results of operations and/ or cash flows.

We adopted the standard effective January 1, 2024 and applied the disclosure requirements retrospectively to all prior periods presented in the financial statements.

Adoption of ASU 2023-07 did not have an impact on the company’s consolidated financial position, results of operations and/or cash flows.

On December 14, 2023, the FASB issued ASU No.

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however, the standard will not have an impact on the company’s consolidated financial position, results of operations and/or cash flows.

On November 4, 2024, the FASB issued ASU No.

2024-03 Disaggregation of Income Statement Expenses (Subtopic 220-40).

ASU 2024-03 requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements.

ASU 2024-03 will be effective for annual periods beginning January 1, 2027 and interim periods beginning January 1, 2028 and will be applied on a prospective basis with the option to apply the standard retrospectively.

We are evaluating the disclosure impact of ASU 2023-09;

however, we do not

NORTHROP GRUMMAN CORPORATION

expect the standard will have a material impact on the company’s consolidated financial position, results of operations and/or cash flows.

Other accounting standards updates adopted and/or issued, but not effective until after December 31, 2024, are not expected to have a material effect on the company’s consolidated financial position, annual results of operations and/or cash flows.

Disposition of IT and Mission Support Services Business

Effective January 30, 2021, we completed the IT services divestiture for $ 3.4 billion in cash and recorded a pre-tax gain of $ 2.0 billion.

The IT and mission support services business was comprised of the majority of the former Information Solutions and Services (IS&S) division of Defense Systems (excluding the Vinnell Arabia business);

select cyber, intelligence and missions support programs, which were part of the former Cyber and Intelligence Mission Solutions (CIMS) division of Mission Systems;

and the former Space Technical Services business unit of Space Systems.

Operating results include sales and operating income for the IT and mission support services business prior to the Divestiture date;

therefore, no sales and operating income were recognized for this business during the years ended December 31, 2023 and 2022.

The company recorded sales of $ 162 million and pre-tax profit of $ 20 million for the IT and mission support services business during the year ended December 31, 2021.

EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK

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Share Repurchase Programs

On December 4, 2018, the company’s board of directors authorized a share repurchase program of up to $ 3.0 billion in share repurchases of the company’s common stock (the “2018 Repurchase Program”).

Repurchases under the 2018 Repurchase Program commenced in March 2020 and were completed in October 2021.

On January 25, 2021, the company’s board of directors authorized a new share repurchase program of up to an additional $ 3.0 billion in share repurchases of the company’s common stock (the “2021 Repurchase Program”).

On January 25, 2021, the company’s board of directors authorized a share repurchase program of up to $ 3.0 billion in share repurchases of the company’s common stock (the “2021 Repurchase Program”).

Repurchases under the 2021 Repurchase Program commenced in October 2021 and were completed in April 2023.

NORTHROP GRUMMAN CORPORATION

On January 24, 2022, the company’s board of directors authorized a new share repurchase program of up to an additional $ 2.0 billion in share repurchases of the company’s common stock (the “2022 Repurchase Program”).

Repurchases under the 2022 Repurchase Program commenced in April 2023 upon completion of the 2021 Repurchase Program.

Repurchases under the 2022 Repurchase Program commenced in April 2023 and were completed in February 2024.

On December 6, 2023, the company’s board of directors authorized a new share repurchase program of up to an additional $ 2.5 billion in share repurchases of the company’s common stock (the “2023 Repurchase Program”).

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

As of December 31, 2024, repurchases under the 2023 Repurchase Program totaled $ 1.4 billion;

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Accelerated Share Repurchase Agreements

During the first quarter of 2021, the company entered into an accelerated share repurchase (ASR) agreement with Goldman Sachs & Co.

LLC (Goldman Sachs) to repurchase $ 2.0 billion of the company’s common stock as part of the 2018 Repurchase Program.

Under the agreement, we made a payment of $ 2.0 billion to Goldman Sachs and received an initial delivery of 5.9 million shares valued at $ 1.7 billion that were immediately canceled by the company.

The remaining balance of $ 300 million was settled on June 1, 2021 with a final delivery of 0.2 million shares from Goldman Sachs.

The final average purchase price was $ 327.29 per share.

During the fourth quarter of 2021, the company entered into an ASR agreement with Goldman Sachs to repurchase $ 500 million of the company’s common stock as part of the 2021 Repurchase Program.

Under the agreement, we made a payment of $ 500 million to Goldman Sachs and received an initial delivery of 1.2 million shares valued at $ 425 million that were immediately canceled by the company.

The remaining balance of $ 75 million was settled on February 1, 2022 with a final delivery of 0.1 million shares from Goldman Sachs.

The final average purchase price was $ 374.79 per share.

During the first quarter of 2023, the company entered into an ASR agreement with Bank of America, N.A.

During the first quarter of 2023, the company entered into an accelerated share repurchase (ASR) agreement with Bank of America, N.A.

(Bank of America) to repurchase $ 500 million of the company’s common stock as part of the 2021 and 2022 Repurchase Programs.

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The final average purchase price was $ 458.28 per share.

During the first quarter of 2024, the company entered into an ASR agreement with Morgan Stanley & Co.

LLC (Morgan Stanley) to repurchase $ 1.0 billion of the company’s common stock as part of the 2022 Repurchase Program.

Under the agreement, we made a payment of $ 1.0 billion to Morgan Stanley and received an initial delivery of 1.8 million shares valued at $ 800 million that were immediately canceled by the company.

The remaining balance of $ 200 million was settled on May 1, 2024 with a final delivery of 0.4 million shares from Morgan Stanley.

The final average purchase price was $ 455.73 per share.

Share repurchases take place from time to time, subject to market and regulatory conditions and management’s discretion, in the open market or in privately negotiated transactions.

The company retires its common stock upon repurchase and, in the periods presented, has not made any purchases of common stock other than in connection with these publicly announced repurchase programs.

NORTHROP GRUMMAN CORPORATION

The table below summarizes the company’s share repurchases to date under the authorizations described above:

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2024 2023 2022

December 4, 2018 $ 3,000 8.9 $ 337.18 October 2021 — — 8.4

January 25, 2021 $ 3,000 7.0 $ 431.05 April 2023 — 1.4 3.3

January 24, 2022 (2)

$ 2,000 4.4 $ 455.01 February 2024 2.5 1.9 —

December 6, 2023 $ 2,500 2.9 $ 472.26 2.9 — —

(1) As a part of the 2023 Repurchase Program, the board of directors approved that the purchases under this program, and the authorization remaining under the 2022 program, be exclusive of brokerage commissions.

Commissions paid are included for the 2018 and 2021 Repurchase Programs.

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December 11, 2024 $ 3,000 — $ — — — —

(1) Beginning with the 2022 Repurchase Program, the board of directors has approved that the purchases and authorizations under our repurchase programs be exclusive of brokerage commissions and other costs of execution, including taxes.

Commissions paid are included for the 2021 Repurchase Program.

(2) The 2022 Repurchase Program completed in February 2024;

however, it included the $ 1.0 billion ASR for which the final delivery of shares was outstanding at the end of the first quarter of 2024.

On May 1, 2024, the company received a final delivery of 0.4 million shares for that ASR, which are included in the 2022 Repurchase Program authorization.

Dividends on Common Stock

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Progress and performance-based payments are reflected as an offset to the related unbilled receivable balances.

NORTHROP GRUMMAN CORPORATION

Unbilled receivables, net consisted of the following:

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government associated with foreign military sales, which are contracted with and paid by the U.S.

NORTHROP GRUMMAN CORPORATION

INVENTORIED COSTS, NET

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Inventoried costs associated with our commercial businesses, while less significant in total, are subject to a greater level of recoverability risk.

The company recorded write-downs of commercial business inventory at Space Systems for which its cost exceeded net realizable value of $ 43 million and $ 45 million during the years ended December 31, 2023 and 2022, respectively.

As discussed in Note 1, the company recognized a $ 45 million reduction of inventoried costs related to the B-21 program at Aeronautics Systems during the year ended December 31, 2023.

Inventoried costs, net consisted of the following:

$ in millions 2024 2023

Contracts in process $ 647 $ 574

Product inventory:

Raw materials $ 293 $ 338

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Finished goods 44 52

Total product inventory $ 462 $ 404

Inventoried costs, net $ 1,455 $ 1,109

Inventoried costs, net increased $ 346 million, or 31 percent, largely due to an increase in costs incurred for specific anticipated contracts to reduce customer delivery lead times.

The company recorded write-downs of commercial business inventory at Space Systems for which its cost exceeded net realizable value of $ 43 million during the year ended December 31, 2023.

In addition, the company recognized a $ 45 million reduction of inventoried costs related to the B-21 program at Aeronautics Systems during the year ended December 31, 2023.

NORTHROP GRUMMAN CORPORATION

Federal and foreign income tax expense consisted of the following:

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Earnings before income taxes associated with the company’s foreign operations are not material in the periods presented.

NORTHROP GRUMMAN CORPORATION

Income tax expense differs from the amount computed by multiplying earnings before income taxes by the statutory federal income tax rate due to the following:

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Foreign derived intangible income 13 0.3 ( 63 ) ( 2.7 ) ( 66 ) ( 1.1 )

IT services divestiture nondeductible goodwill — — — — 250 2.8

Settlements with taxing authorities — — ( 1 ) — ( 86 ) ( 1.5 )

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Total federal and foreign income taxes $ 842 16.8 % $ 290 12.4 % $ 940 16.1 %

The 2024 ETR increased to 16.8 percent from 12.4 percent in 2023 primarily due to the impact of the prior year B-21 charge and the MTM adjustment on our ETR.

The 2024 MTM benefit increased the 2024 ETR by 0.4 percentage points, whereas the prior year B-21 charge and MTM expense collectively reduced the 2023 ETR by 3.8 percentage points.

The 2024 ETR also reflects a net reduction in tax reserves largely due to a recent federal court decision, partially offset by higher interest expense on unrecognized tax benefits.

The 2023 ETR decreased to 12.4 percent from 16.1 percent in 2022 primarily due to lower earnings before income taxes as a result of the B-21 charge and MTM expense, which collectively reduced the 2023 ETR by 3.8 percentage points.

The 2022 MTM benefit increased the 2022 ETR by 1.2 percentage points.

The 2022 ETR decreased to 16.1 percent from 21.6 percent in 2021 primarily due to an $ 86 million benefit resulting from the resolution of the IRS examination of certain legacy OATK tax returns, as well as additional federal income taxes in the prior year resulting from the IT services divestiture.

The company’s 2022 MTM benefit increased the 2022 ETR by 1.2 percentage points;

however, the MTM benefit in 2021 did not significantly impact the 2021 ETR.

Income tax payments, net of refunds received, were $ 1.2 billion, $ 1.5 billion and $ 1.3 billion for the years ended December 31, 2023, 2022 and 2021, respectively.

Taxes receivable, which are included in Prepaid expenses and other current assets in the consolidated statements of financial position, were $ 1.5 billion and $ 850 million as of December 31, 2023 and 2022, respectively.

Income tax payments, net of refunds received, were $ 880 million, $ 1.2 billion and $ 1.5 billion for the years ended December 31, 2024, 2023 and 2022, respectively.

Taxes receivable, which are included in Prepaid expenses and other current assets in the consolidated statements of financial position, were $ 517 million and $ 1.5 billion as of December 31, 2024 and 2023, respectively.

Net interest expense within the company’s federal, foreign and state income tax provisions was $ 164 million, $ 62 million, and $ 29 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The Organization for Economic Co-operation and Development issued Pillar Two model rules for a global minimum tax of 15% effective January 1, 2024.

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

Pillar Two had no impact on our 2024 ETR, and we do not currently expect Pillar Two to significantly impact our ETR going forward.

NORTHROP GRUMMAN CORPORATION

Uncertain Tax Positions

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federal jurisdiction and in various state and foreign jurisdictions.

The Northrop Grumman 2018-2020 federal tax returns are currently under Internal Revenue Service (IRS) examination.

During the second quarter of 2023, the company entered into an agreed Revenue Agent’s Report (“RAR”) for certain matters related to the company’s 2014-2017 federal income tax returns, resulting in a $ 90 million reduction to our unrecognized tax benefits and an immaterial impact to income tax expense.

During the fourth quarter of 2024, the company entered into an agreed RAR for certain matters related to the company’s 2018-2020 federal income tax returns, largely related to our methods of accounting associated with the timing of revenue recognition and related costs under IRC Section 451(b), resulting in a $ 766 million reduction to our unrecognized tax benefits and an immaterial impact to income tax expense.

The matters not addressed by the agreed RAR related to the company’s 2018-2020 federal tax returns are currently under Internal Revenue Service (IRS) examination.

During the second quarter of 2023, the company entered into an agreed RAR for certain matters related to the company’s 2014-2017 federal income tax returns, resulting in a $ 90 million reduction to our unrecognized tax benefits and an immaterial impact to income tax expense.

The matters not addressed by the agreed RAR related to the company’s 2014-2017 federal income tax returns and refund claims related to its 2007-2016 federal tax returns are currently under review by the IRS Appeals Office.

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Amounts currently subject to examination related to foreign jurisdictions are not material.

NORTHROP GRUMMAN CORPORATION

The change in unrecognized tax benefits during 2023, 2022 and 2021, excluding interest, is as follows:

The company’s unrecognized tax benefits, excluding accrued interest and penalties of $ 373 million, $ 305 million and $ 216 million as of December 31, 2024, 2023 and 2022, respectively, are presented below:

$ in millions 2024 2023 2022

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Unrecognized tax benefits at end of the year $ 1,447 $ 1,994 $ 1,663

Our 2023 increase in unrecognized tax benefits was primarily related to our methods of accounting associated with the timing of revenue recognition and related costs and the 2017 Tax Cuts and Jobs Act, which includes related final revenue recognition regulations issued in December 2020 under IRC Section 451(b) and procedural guidance issued in August 2021.

As of December 31, 2023, we have approximately $ 2.0 billion in unrecognized tax benefits, including $ 843 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 $ 120 million.

Our current unrecognized tax benefits, which are included in Other current liabilities in the consolidated statements of financial position, were $ 964 million and $ 728 million as of December 31, 2023 and 2022, respectively, with the remainder of our unrecognized tax benefits included within Other non-current liabilities.

These liabilities include $ 305 million and $ 216 million of accrued interest and penalties as of December 31, 2023 and 2022, respectively.

The 2024 decrease in unrecognized tax benefits was primarily related to the settlement of certain matters related to the company’s methods of accounting associated with the timing of revenue recognition under IRC Section 451(b) as discussed above, partially offset by additional reserves on current year tax positions related to 451(b) (prior to settlement) and research credits.

It is reasonably possible that within the next 12 months the company’s unrecognized tax benefits may increase by approximately $ 100 million.

If the income tax benefits from these tax positions are ultimately realized, $ 914 million of federal and foreign tax benefits would reduce the company’s ETR.

Net interest expense within the company’s federal, foreign and state income tax provisions was $ 62 million, $ 29 million, and $ 25 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Inclusive of accrued interest and penalties, the company’s current unrecognized tax benefits of $ 345 million and $ 964 million as of December 31, 2024 and 2023, respectively, are included in Other current liabilities in the consolidated statements of financial position.

NORTHROP GRUMMAN CORPORATION

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Deferred Tax Liabilities

Retiree benefits 153 —

Goodwill 534 534

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Contract accounting differences 2,714 2,437

Other 127 106

Deferred tax liabilities 4,978 4,528

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At December 31, 2024, the company has available tax credits and unused net operating losses of $ 627 million and $ 318 million, respectively, that may be applied against future taxable income.

The majority of tax credits and net operating losses expire in 2024 through 2046, however, some may be carried forward indefinitely.

The majority of tax credits and net operating losses expire between 2025 and 2047, however, some may be carried forward indefinitely.

Due to the uncertainty of the realization of the tax credits and net operating losses, the company has recorded valuation allowances of $ 343 million and $ 42 million, respectively, as of December 31, 2024.

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Balance as of December 31, 2023 $ 3,467 $ 4,229 $ 5,881 $ 3,940 $ 17,517

— ( 5 ) — — ( 5 )

Balance as of December 31, 2024 $ 3,467 $ 4,224 $ 5,881 $ 3,940 $ 17,512

(1) Other consists primarily of adjustments for foreign currency translation.

At December 31, 2023 and 2022, accumulated goodwill impairment losses totaled $ 417 million and $ 153 million at Aeronautics Systems and Space Systems, respectively.

At December 31, 2024 and 2023, accumulated goodwill impairment losses totaled $ 417 million at Aeronautics Systems, $ 121 million at Space Systems, and $ 32 million at Defense Systems.

Other Purchased Intangible Assets

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There were no transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2024 and 2023.

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

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

Commercial Paper

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Issuance of Senior Notes

In January 2024, the company issued $ 2.5 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:

• $ 500 million of 4.60 % senior notes due 2029 (the “2029 Notes”),

• $ 850 million of 4.90 % senior notes due 2034 (the “2034 Notes”), and

• $ 1.15 billion of 5.20 % senior notes due 2054 (the “2054 Notes”).

In February 2023, the company issued $ 2.0 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:

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• $ 1.0 billion of 4.95 % senior notes due 2053 (the “2053 Notes”).

We refer to the 2033 Notes and the 2053 Notes, together, as the “notes.” Interest on the notes is payable semi-annually in arrears.

We refer to the 2029 Notes, 2033 Notes, 2034 Notes, 2053 Notes and 2054 Notes, together, as the “notes.” Interest on the notes is payable semi-annually in arrears.

The notes are generally subject to redemption, in whole or in part, at the company’s discretion at any time, or from time to time, prior to maturity at a redemption price equal to the greater of 100% of the principal amount of the notes to be redeemed or an applicable “make-whole” amount, plus accrued and unpaid interest.

NORTHROP GRUMMAN CORPORATION

Repayments of Senior Notes

In August 2023, the company repaid $ 1.05 billion of 3.25 percent unsecured senior notes upon maturity.

In March 2021, the company repaid $ 700 million of 3.50 percent unsecured notes upon maturity.

In March 2021, the company redeemed $ 1.5 billion of 2.55 percent unsecured notes due October 2022.

The company recorded a pre-tax charge of $ 54 million principally related to the premium paid on the redemption, which was recorded in Other, net in the consolidated statements of earnings and comprehensive income.

Debt Exchange

On September 2, 2021, the company completed an exchange offer to eligible holders of the outstanding notes of our direct wholly owned subsidiary, Northrop Grumman Systems Corporation (“NGSC”), maturing through 2036.

An aggregate principal amount of $ 422 million of the NGSC notes was exchanged for $ 422 million of unregistered Northrop Grumman Corporation notes (the “Unregistered Notes”) with the same interest rates and maturity dates as the NGSC notes exchanged.

On June 15, 2022, the company completed a registered exchange offer pursuant to which the company exchanged an aggregate principal amount of $ 414 million of the Unregistered Notes for $ 414 million of new notes registered under the Securities Act of 1933, as amended, (the “Registered Notes”) with the same interest rates and maturity dates as the Unregistered Notes.

NORTHROP GRUMMAN CORPORATION

Because the debt instruments were not substantially different in either of the exchange offers, both exchanges were treated as debt modifications for accounting purposes with no gain or loss recognized.

Subsequent Event - In January 2025, the company repaid $ 1.5 billion of 2.93 percent unsecured senior notes upon maturity.

Long-term debt consists of the following:

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2050 5.25 % 1,000 1,000

2053 4.95 % 1,000 1,000

2054 5.20 % 1,150 —

Other Various 264 332

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For over 25 years, the company has worked closely with the United States Navy, the United States Environmental Protection Agency, the New York State Department of Environmental Conservation, the New York State Department of Health and other federal, state and local governmental authorities, to address environmental conditions allegedly resulting from historic operations at the former United States Navy and Grumman facilities in Bethpage, New York.

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

We have incurred, and expect to continue to incur, as included in Note 11, substantial remediation costs related to these Bethpage environmental conditions, including potential costs relating to unanticipated developments such as new discoveries of potential contaminants.

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

In 2022, we resolved several disputes and regulatory proceedings concerning the scope and allocation of remediation responsibilities and costs related to this site.

The company continues to be involved in related disputes, none of which are material individually or in the aggregate.

We are also a party to various individual lawsuits and a putative class action in the Eastern District of New York alleging personal injury and property damage related to the legacy Bethpage environmental conditions.

The court has stayed the filed individual lawsuits, pending its decision on class certification.

In 2022, we resolved several disputes and regulatory proceedings concerning the scope and allocation of remediation responsibilities and costs related to this site and we continue remediation consistent with agreements through which those disputes were resolved.

The company continues to be involved in other remediation-related disputes, none of which are material individually or in the aggregate.

The court has stayed the filed individual lawsuits, pending its decision on class certification, which the court will undertake if an ongoing mediation between the parties is unsuccessful.

We are also a party, and may become a party, to other lawsuits brought by or against insurance carriers, and by other individual plaintiffs and/or putative classes, as well as other parties.

We cannot at this time predict or reasonably estimate the potential cumulative outcomes or ranges of possible liability of these Bethpage lawsuits .

We cannot at this time predict or reasonably estimate the potential outcomes or ranges of possible liability of the Bethpage EDNY cases .

The company received from the U.S.

Department of Justice (DOJ) a criminal subpoena on December 9, 2022, and a civil investigative demand on February 2, 2023, both seeking information regarding financial and cost accounting and controls that appears focused on the interest rate assumptions the company used to determine our CAS pension expense, which we discuss in Note 12 below.

Department of Justice (DOJ) a criminal subpoena on December 9, 2022, and a civil investigative demand (CID) on February 2, 2023, both seeking information regarding financial and cost accounting and controls that appears focused on the interest rate assumptions the company used to determine our U.S.

Government Cost Accounting Standards (CAS) pension expense, which we discuss in Note 11 below.

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

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When such findings are presented, the company and U.S.

government representatives engage in discussions to enable the company to evaluate the merits of these claims, as well as to assess the amounts being claimed.

government representatives engage in discussions to enable the company to evaluate the merits of these claims, as well as to

NORTHROP GRUMMAN CORPORATION

assess the amounts being claimed.

Where appropriate, provisions are made to reflect the company’s estimated exposure for such potential disallowed costs.

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The company believes it has adequately reserved for disputed amounts that are probable and reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its consolidated financial position as of December 31, 2024, or its annual results of operations and/or cash flows.

NORTHROP GRUMMAN CORPORATION

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.

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On November 24, 2020, DCMA replied to the company’s response, disagreeing with our position and requesting additional input, which we provided on February 22, 2021.

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

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

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

As noted in Note 10 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on February 2, 2023, both seeking information that appears related to the interest rate assumptions at issue in our discussions with DCMA.

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

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.

As previously described, 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.

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

Environmental Matters

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(3) As of December 31, 2024, $ 186 million is deferred in Prepaid expenses and other current assets and $ 321 million is deferred in Other non-current assets.

These amounts are evaluated for recoverability on a routine basis.

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

Although management cannot predict whether (i) new information gained as our environmental remediation projects progress, (ii) changes in remediation standards or other requirements to which we are subject, or (iii) other changes in facts and circumstances will materially affect the estimated liability accrued, we do not anticipate that future remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s consolidated financial position as of December 31, 2024, or its annual results of operations and/or cash flows.

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The company has provided indemnifications for certain environmental, income tax and other potential liabilities in connection with certain of its divestitures.

The settlement of these liabilities is not expected to have a material adverse effect on the company’s consolidated financial position as of December 31, 2023, or its annual results of operations and/or cash flows.

The settlement of these liabilities is not expected to have a material

NORTHROP GRUMMAN CORPORATION

adverse effect on the company’s consolidated financial position as of December 31, 2024, or its annual results of operations and/or cash flows.

RETIREMENT BENEFITS

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Pension benefits for most participants are based on years of service, age and compensation.

It is our policy to fund at

NORTHROP GRUMMAN CORPORATION

least the minimum amount required for qualified plans, using actuarial cost methods and assumptions acceptable under U.S.

It is our policy to fund at least the minimum amount required for qualified plans, using actuarial cost methods and assumptions acceptable under U.S.

government regulations, by making payments into benefit trusts separate from the company.

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The company provides subsidies to reimburse certain retirees for a portion of the cost of individual Medicare-supplemental coverage purchased directly by the retiree through a private insurance exchange.

The company has capped the amount of its contributions for substantially all of its remaining postretirement medical and life benefit plans.

The company has capped the amount of its contributions for substantially all its remaining postretirement medical and life benefit plans.

In addition, after January 1, 2005 (or earlier at some businesses), newly hired employees are not eligible for subsidized postretirement medical and life benefits.

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Amortization of prior service credit — — — — ( 1 ) ( 1 )

Mark-to-market expense (benefit) 442 ( 1,262 ) ( 1,921 ) ( 20 ) 30 ( 434 )

Mark-to-market (benefit) expense ( 450 ) 442 ( 1,262 ) 7 ( 20 ) 30

Other 15 — — — — —

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NORTHROP GRUMMAN CORPORATION

The table below summarizes the components of changes in unamortized prior service credit (cost) for the years ended December 31, 2021, 2022 and 2023:

The table below summarizes the changes in unamortized prior service credit for the years ended December 31, 2022, 2023 and 2024:

$ in millions Pension Benefits Medical and Life Benefits Total

Changes in unamortized prior service credit (cost)

Amortization of prior service credit (cost) $ 9 $ 1 $ 10

Changes in unamortized prior service credit

Amortization of prior service credit $ — $ 1 $ 1

Tax expense — — —

Change in unamortized prior service credit (cost) – 2021 7 1 8

Amortization of prior service credit (cost) — 1 1

Decrease (increase) in unamortized prior service credit – 2022 — 1 1

Amortization of prior service credit — 1 1

Tax expense — — —

Change in unamortized prior service credit (cost) – 2022 — 1 1

Amortization of prior service credit (cost) — 1 1

Decrease (increase) in unamortized prior service credit – 2023 — 1 1

(Increase) decrease in prior service credit — ( 12 ) ( 12 )

Amortization of prior service credit — — —

Tax expense — 3 3

Change in unamortized prior service credit (cost) – 2023 $ — $ 1 $ 1

(Increase) decrease in unamortized prior service credit – 2024 $ — $ ( 9 ) $ ( 9 )

The following table sets forth the funded status and amounts recognized in the consolidated statements of financial position for the company’s defined benefit retirement plans.

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Fair value of plan assets at beginning of year $ 30,251 $ 28,920 $ 1,274 $ 1,226

Net gain (loss) on plan assets 3,104 ( 5,422 ) 146 ( 257 )

Net gain on plan assets 1,358 3,104 61 146

Employer contributions 96 105 33 34

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Participant contributions 6 6 26 27

Actuarial loss (gain) 1,447 ( 9,325 ) 42 ( 337 )

Actuarial (gain) loss ( 1,295 ) 1,447 ( 19 ) 42

Benefits paid ( 1,942 ) ( 1,894 ) ( 157 ) ( 159 )

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Funded status $ 777 $ ( 192 ) $ 87 $ 28

The increase in the fair value of our plan assets for the year ended December 31, 2023 was principally driven by net plan asset returns of 11.1 percent, partially offset by $ 2.1 billion of benefit payments.

The increase in our projected benefit obligation for the year ended December 31, 2023, was primarily driven by $ 1.6 billion of interest cost and a 39 basis point decrease in the discount rate from year end 2022, partially offset by $ 2.1 billion of benefit payments.

The decrease in the fair value of plan assets for the year ended December 31, 2024 was principally driven by $ 2.1 billion of benefit payments, partially offset by net returns on plan assets of 4.7 percent.

The decrease in our projected benefit obligation for the year ended December 31, 2024, was primarily driven by $ 2.1 billion of benefit payments and a 58 basis point increase in the discount rate from year end 2023, partially offset by $ 1.6 billion of interest cost.

NORTHROP GRUMMAN CORPORATION

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Risk targets are established and monitored against acceptable ranges.

Our investment policies and procedures are designed to ensure the plans’ investments are in compliance with ERISA.

Our investment policies and procedures are designed to ensure the plans’ investments comply with ERISA.

Guidelines are established defining permitted investments within each asset class.

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Alternative investments 10 % - 30 %

Private credit 0 % - 15 %

The table below provides the fair values of the company’s pension and Voluntary Employees’ Beneficiary Association (VEBA) trust plan assets at December 31, 2024 and 2023, by asset category.

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Bank loans 16 15 16 15

Other assets 64 43 2 $ 2 $ 2 109 4

Derivatives and other assets ( 55 ) 64 99 43 $ 2 $ 2 46 109

Investments valued using NAV as a practical expedient

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Real estate funds 1,860 2,123

Private credit 1,779 —

Payables, net ( 541 ) ( 24 )

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There were no transfers of plan assets into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2024 and 2023.

NORTHROP GRUMMAN CORPORATION

Generally, investments are valued based on information in financial publications of general circulation, statistical and valuation services, records of security exchanges, appraisal by qualified persons, transactions and bona fide offers.

Cash and cash equivalents are predominantly held in money market or short-term investment funds.

NORTHROP GRUMMAN CORPORATION

international equities consist primarily of common stocks and institutional common trust funds.

and international equities consist primarily of common stocks and institutional common trust funds.

Investments in certain equity securities, which include domestic and international securities and registered investment companies, and exchange-traded funds with fixed income strategies are valued at the last reported sales or quoted price on the last business day of the reporting period.

Fair values for certain fixed-income securities, which are not exchange-traded, are valued using third-party pricing services.

Other assets include derivative assets with a fair value of $ 172 million and $ 71 million, derivative liabilities with a fair value of $ 101 million and $ 117 million, and net notional amounts of $ 4.9 billion and $ 3.2 billion, as of December 31, 2023 and 2022, respectively.

Derivatives and other assets include derivative assets with a fair value of $ 107 million and $ 172 million, derivative liabilities with a fair value of $ 123 million and $ 101 million, and net notional amounts of $ 9.2 billion and $ 4.9 billion, as of December 31, 2024 and 2023, respectively.

Derivative instruments may include exchange traded futures contracts, interest rate swaps, options on futures and swaps, currency contracts, total return swaps and credit default swaps.

Notional amounts do not quantify risk or represent assets or liabilities of the pension and VEBA trusts, but are used in the calculation of cash settlement under the contracts.

The volume of derivative activity is commensurate with the amounts disclosed at year-end.

Certain derivative financial instruments within the pension trust are subject to master netting agreements with certain counterparties.

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Opportunistic investments:

Primarily held in partnerships with a 5 - 10 year life.

Consist of closed-end funds with a 5 - 10 year life as well as funds that allow redemption requests subject to the liquidity limitations of the underlying investments.

As of December 31, 2024 and 2023, unfunded commitments were $ 1.3 billion and $ 1.6 billion, respectively.

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A s of December 31, 2024 and 2023, unfunded commitments were $ 24 million and $ 28 million, respectively.

For the years ended December 31, 2023 and 2022, the defined benefit pension and VEBA trusts did not hold any Northrop Grumman common stock.

Private credit:

Consist of closed-end funds with a 5 - 10 year life as well as funds that allow redemption requests subject to the liquidity limitations of the underlying investments.

As of December 31, 2024, unfunded commitments were $ 721 million.

At December 31, 2024 and 2023, the defined benefit pension trust held $ 1 million and $ 0 , respectively, of Northrop Grumman common stock.

At December 31, 2024 and 2023, the VEBA trust did not hold any Northrop Grumman common stock.

NORTHROP GRUMMAN CORPORATION

Benefit Payments

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During the year ended December 31, 2024, the company made no discretionary pension contributions.

NORTHROP GRUMMAN CORPORATION

STOCK COMPENSATION PLANS AND OTHER COMPENSATION ARRANGEMENTS

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At December 31, 2024, the company had stock-based compensation awards outstanding under the following shareholder-approved plans:

the 2011 Long-Term Incentive Stock Plan (2011 Plan), applicable to employees and non-employee directors, and the 1993 Stock Plan for Non-Employee Directors (1993 SPND).

Employee Plans – In May 2015, the company’s shareholders approved amendments to the 2011 Plan.

These amendments provided that shares issued under the plan would be counted against the aggregate share limit on a one-for-one basis.

As amended, 5.1 million shares plus 2.4 million of newly authorized shares were available for issuance under the 2011 Plan;

as of December 31, 2023, 4.4 million shares remain available for issuance.

The 2011 Plan provides for the following equity awards:

the 2024 Long-Term Incentive Stock Plan (2024 Plan) and the 2011 Long-Term Incentive Stock Plan (2011 Plan), both applicable to employees and non-employee directors, and the 1993 Stock Plan for Non-Employee Directors (1993 SPND).

Employee Plans – On May 15, 2024, the company’s shareholders approved the company’s new 2024 Plan, which replaced the 2011 Plan.

The 2024 Plan authorized 5.75 million new shares (less the number of shares subject to any new awards under the 2011 Plan between March 1 and May 15, 2024).

Under the terms of the 2024 Plan, in the event outstanding awards under the 2011 Plan expire or terminate without being exercised or paid, as the case may be, such forfeited shares will become available for award under the 2024 Plan and increase the authorization.

As of December 31, 2024, 5.8 million shares remain available for issuance under the 2024 Plan.

The 2011 Plan provided for and the 2024 Plan provides for the following equity awards:

stock options, stock appreciation rights (SARs) and stock awards.

Under the 2011 Plan, no SARs have been granted and there are no outstanding stock options.

Under the 2011 Plan and 2024 Plan, no SARs have been granted and there are no outstanding stock options.

Stock awards include restricted performance stock rights (RPSR) and restricted stock rights (RSR).

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Each includes dividend equivalents, which are paid concurrently with the RPSR or RSR.

The terms of equity awards granted under the 2011 Plan provide for accelerated vesting, and in some instances forfeiture, of all or a portion of an award upon termination of employment.

Non-Employee Director Plans – Awards to non-employee directors are made pursuant to the Northrop Grumman Corporation Equity Grant Program for Non-Employee Directors under the 2011 Plan (the Director Program), which was amended and restated effective January 1, 2016.

Under the amended Director Program, each non-employee director is awarded an annual equity grant in the form of Automatic Stock Units, which vest on the one-year anniversary of the grant date.

The terms of equity awards granted under the 2011 Plan and 2024 Plan provide for accelerated vesting, and in some instances forfeiture, of all or a portion of an award upon termination of employment.

Non-Employee Director Plans – Awards to non-employee directors are made pursuant to the Northrop Grumman Corporation Equity Grant Program for Non-Employee Directors (the Director Program).

The Director Program was amended and restated effective January 1, 2016 (the Amended Director Program).

The Director Program was again amended and restated effective May 15, 2024, consistent with the shareholder-approved 2024 Plan (the Restated Director Program).

Under the Restated Director Program, each non-employee director is awarded an annual equity grant in the form of Automatic Stock Units, which vest on the one-year anniversary of the annual shareholder meeting.

Directors may elect to have all or any portion of their Automatic Stock Units paid on (A) the earlier of (i) the beginning of a specified calendar year after the vesting date or (ii) their separation from service as a member of the Board, or (B) on the vesting date.

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Directors may elect to have all or a portion of their Elective Stock Units paid on the earlier of (i) the beginning of a specified calendar year or (ii) their separation from service as a member of the Board.

Stock units awarded under the Director Program are paid out in an equivalent number of shares of Northrop Grumman common stock.

Directors are credited with dividend equivalents in connection with the accumulated stock units until the shares of common stock relating to such stock units are issued.

Stock units awarded under the Amended Director Program and Restated Director Program are paid out in an equivalent number of shares of Northrop Grumman common stock.

Directors are credited with dividend equivalents

NORTHROP GRUMMAN CORPORATION

in connection with the accumulated stock units until the shares of common stock relating to such stock units are issued.

Compensation Expense

Stock-based compensation expense for the years ended December 31, 2024, 2023 and 2022 was $ 101 million, $ 87 million and $ 99 million, respectively.

The related tax benefits (deficiencies) for stock-based compensation for the years ended December 31, 2023, 2022 and 2021 were $ 9 million, $ 10 million and $( 2 ) million, respectively.

The related tax benefits for stock-based compensation for the years ended December 31, 2024, 2023 and 2022 were $ 15 million, $ 9 million and $ 10 million, respectively.

At December 31, 2024, there was $ 102 million of unrecognized compensation expense related to unvested stock awards granted under the company’s stock-based compensation plans.

These amounts are expected to be charged to expense over a weighted-average period of 1.3 years.

NORTHROP GRUMMAN CORPORATION

Stock award activity for the years ended December 31, 2022, 2023 and 2024, is presented in the table below.

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Aeronautics Systems, Defense Systems, Mission Systems and Space Systems.

The following table presents sales and operating income by segment:

We generally organize our segments based on the nature of products and services offered.

The company’s chief operating decision maker (“CODM”) is the Chair, Chief Executive Officer and President .

The CODM is responsible for allocating resources and assessing performance of the consolidated enterprise and operating sectors.

The profitability measure the CODM uses to assess segment performance and allocate resources is segment operating income (and related margin rate, calculated as segment operating income divided by sales) by comparing historical, actual, and forecasted amounts on a regular basis.

NORTHROP GRUMMAN CORPORATION

The following table presents sales, operating costs and expenses, and operating income by segment:

Year Ended December 31

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Aeronautics Systems

Defense Systems 5,862 5,579 5,776

Mission Systems 10,895 10,396 10,134

Space Systems 13,946 12,275 10,608

Intersegment eliminations ( 2,199 ) ( 2,179 ) ( 2,110 )

Total sales 39,290 36,602 35,667

Operating income

Aeronautics Systems ( 473 ) 1,116 1,093

Sales $ 12,030 $ 10,786 $ 10,531

Operating costs and expenses:

Product 8,248 8,942 7,161

Service 2,382 2,099 2,042

Intersegment 218 218 212

Aeronautics Systems operating income (loss) 1,182 ( 473 ) 1,116

Defense Systems

Sales 8,560 8,289 7,629

Operating costs and expenses:

Product 5,304 4,819 4,163

Service 1,641 1,959 1,985

Intersegment 749 682 700

Defense Systems operating income 866 829 781

Mission Systems

Sales 11,399 10,895 10,396

Operating costs and expenses:

Product 7,000 6,669 6,291

Service 1,805 1,730 1,639

Intersegment 996 887 848

Mission Systems operating income 1,598 1,609 1,618

Space Systems

Intersegment eliminations ( 298 ) ( 303 ) ( 272 )

Sales 11,731 11,873 10,570

Operating costs and expenses:

Product 8,711 8,844 7,664

Service 1,398 1,468 1,404

Intersegment 368 431 424

Space Systems operating income 1,254 1,130 1,078

Intersegment profit eliminations

( 356 ) ( 335 ) ( 340 )

Total segment operating income 4,544 2,760 4,253

FAS/CAS operating adjustment 40 ( 82 ) ( 200 )

Unallocated corporate (expense) income ( 141 ) ( 452 ) 1,304

Unallocated corporate expense ( 214 ) ( 141 ) ( 452 )

Total operating income $ 4,370 $ 2,537 $ 3,601

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Non-operating FAS pension benefit 656 530 1,505

Mark-to-market pension and OPB (expense) benefit ( 422 ) 1,232 2,355

Mark-to-market pension and OPB benefit (expense) 443 ( 422 ) 1,232

Other, net 168 246 4

Earnings before income taxes $ 5,016 $ 2,346 $ 5,836

NORTHROP GRUMMAN CORPORATION

FAS/CAS Operating Adjustment

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The FAS/CAS operating adjustment reflects the difference between CAS pension expense included as cost in segment operating income and the service cost component of FAS expense included in total operating income.

NORTHROP GRUMMAN CORPORATION

Unallocated Corporate (Expense) Income

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Unallocated corporate (expense) income also includes costs not considered part of management’s evaluation of segment operating performance, such as amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of PP&E acquired through business combinations, as well as certain compensation and other costs.

During the first quarter of 2021, the $ 2.0 billion pre-tax gain on the sale of our IT services business and $ 192 million of unallowable state taxes and transaction costs associated with the divestiture were recorded in Unallocated corporate (expense) income.

NORTHROP GRUMMAN CORPORATION

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government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S.

Each of the company’s segments derives substantial revenue from the U.S.

Each of the company’s segments derives a substantial percentage of its revenue from the U.S.

(2) International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is an international customer.

These sales include foreign military sales contracted through the U.S.

(3) Percentages calculated based on total segment sales.

(3) Percentages calculated based on external customer sales.

NORTHROP GRUMMAN CORPORATION

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United States (1)

$ 10,109 86 % $ 9,167 87 % $ 8,948 87 %

Asia/Pacific 694 6 % 607 6 % 708 7 %

Europe 947 8 % 736 7 % 585 6 %

All other (1)

Other geographic regions (2)

37 — % 36 — % 51 — %

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United States (1)

6,404 83 % 6,022 80 % 5,477 80 %

Asia/Pacific 344 4 % 419 6 % 454 7 %

Europe 766 10 % 601 8 % 477 7 %

All other (1)

Other geographic regions (2)

191 3 % 471 6 % 427 6 %

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United States (1)

8,413 82 % 8,084 82 % 7,572 81 %

Asia/Pacific 472 5 % 460 5 % 531 6 %

Europe 990 10 % 959 10 % 977 10 %

All other (1)

Other geographic regions (2)

347 3 % 338 3 % 301 3 %

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United States (1)

11,107 98 % 11,112 98 % 9,757 97 %

Asia/Pacific 42 1 % 82 1 % 109 1 %

Europe 134 1 % 159 1 % 213 2 %

All other (1)

Other geographic regions (2)

36 — % 37 — % 15 — %

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United States (1)

36,033 88 % 34,385 88 % 31,754 87 %

Asia/Pacific 1,552 4 % 1,568 4 % 1,802 5 %

Europe 2,837 7 % 2,455 6 % 2,252 6 %

All other (1)

Other geographic regions (2)

611 1 % 882 2 % 794 2 %

Total Sales $ 41,033 $ 39,290 $ 36,602

(1) All other is principally comprised of the Middle East.

(1) No country other than the United States represents greater than 10% of total company sales.

(2) Other geographic regions are principally comprised of the Middle East.

(3) Percentages calculated based on external customer sales.

NORTHROP GRUMMAN CORPORATION

Segment Sales

The following table presents sales for each of our reportable segments and total intersegment eliminations:

Year Ended December 31

$ in millions 2024 2023 2022

Aeronautics Systems $ 12,030 $ 10,786 $ 10,531

Defense Systems 8,560 8,289 7,629

Mission Systems 11,399 10,895 10,396

Space Systems 11,731 11,873 10,570

Intersegment eliminations ( 2,687 ) ( 2,553 ) ( 2,524 )

Total sales $ 41,033 $ 39,290 $ 36,602

Intersegment Sales and Operating Income

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Capital Expenditures and Depreciation and Amortization

The following table presents capital expenditures and depreciation and amortization by segment:

The following table presents capital expenditures and depreciation and amortization for each of our reportable segments and for Corporate:

Year Ended December 31

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(1) Corporate amounts include the amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of PP&E acquired through business combinations as they are not considered part of management’s evaluation of segment operating performance.

Our chief operating decision maker does not use assets by segment to evaluate segment performance or allocate resources.

Our CODM does not use assets by segment to evaluate segment performance or allocate resources.

Therefore, we do not disclose assets by segment.

NORTHROP GRUMMAN CORPORATION

SUBSEQUENT EVENT

On January 29, 2025, the company entered into a definitive agreement to sell substantially all of the Immersive Mission Solutions (IMS) operating unit of Defense Systems for $ 327 million in cash.

IMS is a provider of mission training and satellite ground network communications software for U.S.

government customers.

The transaction, which is subject to final government approvals and closing conditions, is expected to be completed mid-year 2025.

We expect to recognize an after-tax gain of approximately $ 150 million when the transaction closes.

NORTHROP GRUMMAN CORPORATION

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data