What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-04-22 compared with 2024-10-24 · 171 added, 195 removed, 479 unchanged (43% of the section changed)

Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

Three Months Ended September 30 Nine Months Ended September 30

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (Unaudited)

Three Months Ended March 31

$ in millions, except per share amounts 2025 2024

28 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

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

$ in millions, except par value March 31, 2025 December 31, 2024

Cash and cash equivalents $ 1,685 $ 4,353

5 unchanged sentences

Property, plant and equipment, net of accumulated depreciation of $ 8,998 for 2025 and $ 8,733 for 2024

10,522 10,536

Operating lease right-of-use assets 1,826 1,770

2 unchanged sentences

Deferred tax assets 1,633 1,599

Pension and other postretirement benefit plan assets 2,285 2,184

Other non-current assets 1,259 1,230

28 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30

Three Months Ended March 31

$ in millions 2025 2024

1 unchanged sentence

Net earnings $ 481 $ 944

Adjustments to reconcile to net cash provided by operating activities:

Adjustments to reconcile to net cash used in operating activities:

Depreciation and amortization 337 299

1 unchanged sentence

Deferred income taxes ( 34 ) ( 103 )

B-21 loss provision 477 —

Net periodic pension and OPB income ( 81 ) ( 113 )

8 unchanged sentences

Other, net ( 3 ) ( 7 )

Net cash provided by operating activities 1,810 1,445

Net cash used in operating activities ( 1,565 ) ( 706 )

Investing activities

Capital expenditures ( 256 ) ( 270 )

Proceeds from sale of minority investment — 157

Other, net 4 1

3 unchanged sentences

Payments of long-term debt ( 1,500 ) —

Net borrowings on commercial paper 1,474 —

Common stock repurchases ( 480 ) ( 1,190 )

2 unchanged sentences

Other, net ( 5 ) ( 40 )

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

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

Net cash (used in) provided by financing activities ( 851 ) 927

Decrease in cash and cash equivalents ( 2,668 ) ( 48 )

Cash and cash equivalents, beginning of year 4,353 3,109

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended September 30 Nine Months Ended September 30

Three Months Ended March 31

$ in millions, except per share amounts 2025 2024

21 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

BASIS OF PRESENTATION

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Reporting

3 unchanged sentences

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

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

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

These realignments are reflected in the financial information contained in this report.

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

20 unchanged sentences

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 general and administrative expense, is charged against income in the period the loss is identified.

In 2015, the U.S.

Air Force awarded Northrop Grumman the B-21 contract, which includes a base contract for engineering and manufacturing development (EMD) and five low-rate initial production (LRIP) options for a baseline total of 21 aircraft.

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

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

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

During the fourth quarter of 2023, we recognized a projected loss of $ 1.56 billion across the five low-rate initial production (LRIP) options on the B-21 program.

During the first quarter of 2025, we recognized an additional $ 477 million loss across the five LRIP options.

This additional loss largely relates to higher manufacturing costs

NORTHROP GRUMMAN CORPORATION

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

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

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

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

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

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

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

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

Sentinel Program

In 2020, the U.S.

Air Force awarded Northrop Grumman a $ 13.3 billion contract for the EMD phase of the Sentinel program.

In January 2024, the U.S.

Air Force provided congressional notification that the Sentinel program was under a Nunn-McCurdy breach review, which is required when total program cost estimates exceed certain defined thresholds.

This notification, which had been driven primarily by increases in cost estimates for the Production and Deployment phases, commenced the process to achieve recertification for continuance of the program and update its baseline cost estimates.

We are currently executing under a cost-type contract for the EMD phase, and the Production and Deployment phases are yet to be priced and negotiated.

In July 2024, the Sentinel program was recertified for continuation by the DoD upon completion of the Nunn-McCurdy breach review.

In connection with the recertification, the DoD directed that the program be restructured, including plans for infrastructure related to the command and launch segment, which was the main driver of the increased cost estimates for the Production and Deployment phases.

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

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

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

however, if the outcome is more or less favorable than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.

Habitation and Logistics Outpost (HALO) Program

In 2021, the National Aeronautics and Space Administration (NASA) awarded Northrop Grumman Phase 5 of the HALO program to complete the design and development of HALO for NASA’s Gateway program.

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

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

primarily resulting from a process change made by the company to enable an accelerated production ramp, as well as increases in the projected cost and quantity of general procurement materials.

The additional loss comprises $ 226 million of unfavorable EAC adjustments on the first and second LRIP lots and a $ 251 million loss contingency accrual for lots 3-5, which have not yet been exercised.

As of March 31, 2025, the remaining loss accrual on the B-21 program totaled $ 1.7 billion, which is included in Other current liabilities.

Net EAC Adjustments

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

Three Months Ended September 30 Nine Months Ended September 30

Three Months Ended March 31

$ in millions, except per share data 2025 2024

2 unchanged sentences

Net earnings (1)

107 46 212 142

Diluted earnings per share (1)

3 unchanged sentences

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

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

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

NORTHROP GRUMMAN CORPORATION

During the first quarter of 2025, the company recorded a $ 226 million unfavorable EAC adjustment on the first and second LRIP lots of the B-21 program at Aeronautics Systems, as described above.

No EAC adjustments on a single performance obligation had a significant impact on the financial statements during the three months ended March 31, 2024.

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

2 unchanged sentences

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

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

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

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

During the second quarter of 2024, the company reduced unfunded backlog by $ 0.7 billion related to a termination for convenience on the Next Generation Interceptor (NGI) program at Space Systems.

Company backlog as of March 31, 2025 was $ 92.8 billion.

Of our March 31, 2025 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.

Contract Assets and Liabilities

2 unchanged sentences

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

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

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

The amount of revenue recognized for each of the three months ended March 31, 2025 and 2024 that was included in the contract liability balances at the beginning of each year was $ 1.9 billion.

Disaggregation of Revenue

2 unchanged sentences

Property, Plant, and Equipment

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

Sale of Minority Investment

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

equivalent of $ 157 million upon settlement).

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

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

and nine months ended September 30, 2023.

Proceeds from the sale are included in investing activities on the

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

Non-cash investing activities for the three months ended March 31, 2025 and 2024 include capital expenditures incurred but not yet paid of $ 44 million and $ 63 million, respectively.

NORTHROP GRUMMAN CORPORATION

Pending Divestiture of Training Services Business

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.

The carrying amounts of the major classes of assets and liabilities of the IMS business were classified as held for sale and included in Prepaid and other current assets and Other current liabilities, respectively, in the condensed consolidated statement of financial position as of March 31, 2025.

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

Accumulated Other Comprehensive Loss

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

$ in millions September 30, 2024 December 31, 2023

$ in millions March 31, 2025 December 31, 2024

Cumulative translation adjustment $ ( 138 ) $ ( 140 )

3 unchanged sentences

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

NORTHROP GRUMMAN CORPORATION

Accounting Standards Updates

On November 27, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

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

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 continuing to evaluate 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.

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

4 unchanged sentences

ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively.

We are continuing to evaluate the disclosure impact of ASU 2023-09;

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

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

On March 6, 2024, the SEC issued its final climate disclosure rule, which requires registrants to include climate-related disclosures in registration statements and annual reports.

The final rule requires registrants to provide information about the financial statement impacts of severe weather events and other natural conditions.

The final rule also requires certain disclosures related to risk management and governance over climate-related risks, material climate targets and goals, and material Scope 1 and Scope 2 greenhouse gas emissions.

The requirements would be phased in beginning with fiscal year 2025.

On April 4, 2024, the SEC voluntarily stayed the final rule pending the completion of judicial review of cases pending in the Eighth Circuit.

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

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

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 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 March 31, 2025, are not expected to have a material effect on the company’s consolidated financial position, results of operations and/or cash flows.

EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK

3 unchanged sentences

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

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

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

The dilutive effect of these securities totaled 0.3 million shares and 0.4 million shares for the three months ended March 31, 2025 and 2024, respectively.

Share Repurchases

Share Repurchase Programs

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

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

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

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

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

NORTHROP GRUMMAN CORPORATION

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

As of March 31, 2025, repurchases under the 2023 Repurchase Program totaled $ 1.8 billion ;

$ 0.7 billion remained under this share repurchase authorization.

By its terms, the 2023 Repurchase Program will expire when we have used all authorized funds for repurchases.

NORTHROP GRUMMAN CORPORATION

On December 11, 2024, the company’s board of directors authorized a new share repurchase program of up to an additional $ 3.0 billion in share repurchases of the company’s common stock (the “2024 Repurchase Program”).

Repurchases under the 2024 R epurchase Program will commence upon completion of the 2023 Repurchase Program and will expire when we have used all authorized funds for repurchases.

As of March 31, 2025, there have been no repurchases under the 2024 Repurchase Program and the company’s total outstanding share repurchase authorization was $ 3.7 billion .

Accelerated Share Repurchase Agreements

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

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

Under the agreement, we made a payment of $ 500 million to Bank of America and received an initial delivery of 0.9 million shares valued at $ 400 million that were immediately canceled by the company.

The remaining balance of $ 100 million was settled on April 27, 2023 with a final delivery of 0.2 million shares from Bank of America.

The final average purchase price was $ 458.28 per share.

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

During the first quarter of 2024, the company entered into an accelerated share repurchase (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.

2 unchanged sentences

The final average purchase price was $ 455.73 per share.

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

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.

8 unchanged sentences

Per Share (1)

Date Completed Nine Months Ended September 30

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

January 24, 2022 (2)

$ 2,000 4.4 $ 455.01 February 2024 2.5 1.1

Date Completed Three Months Ended March 31

January 24, 2022 $ 2,000 4.4 $ 455.01 February 2024 — 2.1

December 6, 2023 $ 2,500 3.9 $ 471.83 1.0 0.1

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

December 11, 2024 $ 3,000 — $ — — —

(1) Excludes brokerage commissions and other costs of execution, including taxes.

Dividends on Common Stock

2 unchanged sentences

Inventoried costs, net consist of the following:

$ in millions September 30, 2024 December 31, 2023

Contracts in process $ 1,076 $ 647

Product inventory:

$ in millions March 31, 2025 December 31, 2024

Raw materials $ 307 $ 293

1 unchanged sentence

Finished goods 54 44

Total product inventory 570 462

Inventoried costs, net $ 1,578 $ 1,455

NORTHROP GRUMMAN CORPORATION

Three Months Ended September 30 Nine Months Ended September 30

Three Months Ended March 31

$ in millions 2025 2024

1 unchanged sentence

Effective income tax rate 16.8 % 16.5 %

Current Quarter

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

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

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

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

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

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

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

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

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

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

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

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

The company’s first quarter 2025 effective tax rate (ETR) increased to 16.8 percent from 16.5 percent in the prior year period.

The increase in our ETR was driven by interest expense on unrecognized tax benefits and excess tax benefits for employee share-based compensation, partially offset by research credits.

The first quarter 2025 ETR includes benefits of $ 34 million for research credits and $ 6 million for foreign derived intangible income (FDII), partially offset by $ 16 million of interest expense on unrecognized tax benefits.

The first quarter 2024 ETR included benefits of $ 44 million for research credits and $ 15 million for FDII, partially offset by $ 21 million of interest expense on unrecognized tax benefits.

During the first quarter of 2025, we increased our unrecognized tax benefits by approximately $ 100 million principally in connection with state apportionment matters 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.

We file income tax returns in the U.S.

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.

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.

The Organization for Economic Co-operation and Development has issued Pillar Two model rules for a new 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 third quarter or year to date 2024 effective tax rate, and we do not currently expect Pillar Two to significantly impact our effective tax rate going forward.

During the fourth quarter of 2024, the company entered into an agreed Revenue Agent’s Report (“RAR”) for certain matters related to the company’s 2018-2020 federal income tax returns, 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 income tax returns are currently under Internal Revenue Service (IRS) examination.

Certain matters related to the 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.

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

Pillar Two had no impact on our first quarter 2025 or 2024 ETR, and we do not currently expect Pillar Two to significantly impact our ETR going forward.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

NORTHROP GRUMMAN CORPORATION

value (NAV) per share as a practical expedient;

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

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

3 unchanged sentences

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

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

4 unchanged sentences

Derivatives — ( 2 ) — ( 2 ) — ( 11 ) — ( 11 )

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

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

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

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

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

The notional value of the company’s foreign currency forward contracts at March 31, 2025 and December 31, 2024 was $ 408 million and $ 399 million, respectively.

The portion of notional value designated as a cash flow hedge at March 31, 2025 and December 31, 2024 was $ 256 million and $ 273 million, respectively.

NORTHROP GRUMMAN CORPORATION

The derivative fair values and related unrealized gains/losses at March 31, 2025 and December 31, 2024 were not material.

There were no transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the three months ended March 31, 2025.

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

Long-term Debt

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

The estimated fair value of the company’s long-term debt was $ 13.9 billion and $ 15.3 billion as of March 31, 2025 and December 31, 2024, respectively.

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

The current portion of long-term debt is recorded in Other current liabilities in the unaudited condensed consolidated statements of financial position.

Unsecured Senior Notes

Issuance of Senior Notes

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

2 unchanged sentences

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

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

• $ 1.0 billion of 4.70 % senior notes due 2033 (the “2033 Notes”) and

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

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

We refer to the 2029 Notes, 2034 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

Repayment of Senior Notes

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

INVESTIGATIONS, CLAIMS AND LITIGATION

4 unchanged sentences

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

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

The 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.

3 unchanged sentences

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

NORTHROP GRUMMAN CORPORATION

The company is a party to various other investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, including government investigations and claims, that arise in the ordinary course of our business.

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

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

However, based on information available to the company to date, the company does not believe that the outcome of any of these other matters pending against the company is likely to have a material adverse effect on the company’s unaudited condensed consolidated financial position as of March 31, 2025, or its annual results of operations and/or cash flows.

COMMITMENTS AND CONTINGENCIES

6 unchanged sentences

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

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

The company believes it has adequately reserved for disputed amounts that are probable and reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its unaudited condensed consolidated financial position as of March 31, 2025, or its annual results of operations and/or cash flows.

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

4 unchanged sentences

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

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

NORTHROP GRUMMAN CORPORATION

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

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

In addition, as noted in Note 6 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on February 2, 2023, both seeking information that appears related to the interest rate assumptions at issue in our discussions with DCMA.

The company has responded to requests and expects to continue discussions with the DOJ and DCMA as these matters progress.

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

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

1 unchanged sentence

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

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

government contracts as of March 31, 2025 and December 31, 2024:

$ in millions Accrued Costs (1)(2)

1 unchanged sentence

Deferred Costs (3)

September 30, 2024 $ 568 $ 380 $ 530

March 31, 2025 $ 554 $ 388 $ 515

December 31, 2024 546 377 507

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

(1) As of March 31, 2025, $ 180 million is recorded in Other current liabilities and $ 374 million is recorded in Other non-current liabilities.

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

1 unchanged sentence

government contracts.

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

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

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

(3) As of March 31, 2025, $ 169 million is deferred in Prepaid expenses and other current assets and $ 346 million is deferred in Other non-current assets.

These amounts are evaluated for recoverability on a routine basis.

NORTHROP GRUMMAN CORPORATION

remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s unaudited condensed consolidated financial position as of March 31, 2025, or its annual results of operations and/or cash flows.

Financial Arrangements

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

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

At March 31, 2025, there were $ 565 million of stand-by letters of credit and guarantees and $ 277 million of surety bonds outstanding.

Commercial Paper

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

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

At March 31, 2025, the company had $ 1.5 billion of outstanding commercial paper borrowings at a weighted-average interest rate of 4.69 %, with original maturities of three months or less from the date of issuance.

The outstanding balance of commercial paper borrowings is recorded in Other current liabilities in the unaudited condensed consolidated statements of financial position.

Credit Facilities

1 unchanged sentence

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

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

At March 31, 2025, there were no borrowings outstanding under this facility;

however, the amount available for borrowing was reduced by the $ 1.5 billion of commercial paper borrowings described above.

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

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

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

NORTHROP GRUMMAN CORPORATION

At March 31, 2025, the company was in compliance with all covenants under its credit agreements.

RETIREMENT BENEFITS

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

Three Months Ended September 30 Nine Months Ended September 30

Benefits OPB Pension

Three Months Ended March 31

$ in millions 2025 2024 2025 2024

3 unchanged sentences

Expected return on plan assets ( 540 ) ( 549 ) ( 21 ) ( 21 )

Amortization of prior service credit — — ( 1 ) —

Other 7 — — —

Net periodic benefit cost (benefit) $ ( 76 ) $ ( 108 ) $ ( 5 ) $ ( 5 )

2 unchanged sentences

We fund our defined benefit pension plans annually in a manner consistent with the Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006 .

NORTHROP GRUMMAN CORPORATION

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

Three Months Ended September 30 Nine Months Ended September 30

Three Months Ended March 31

$ in millions 2025 2024

4 unchanged sentences

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

Nine Months Ended September 30

Three Months Ended March 31

in millions 2025 2024

4 unchanged sentences

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

Nine Months Ended September 30

Three Months Ended March 31

$ in millions 2025 2024

4 unchanged sentences

SEGMENT INFORMATION

The following table presents sales and operating income by segment:

Three Months Ended September 30 Nine Months Ended September 30

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

Three Months Ended March 31

$ in millions 2025 2024

Aeronautics Systems

Defense Systems 2,084 2,050 6,227 6,058

Mission Systems 2,823 2,628 8,255 7,832

Space Systems 2,870 2,953 9,021 8,775

Intersegment eliminations ( 659 ) ( 622 ) ( 1,966 ) ( 1,889 )

Total sales 9,996 9,775 30,347 28,652

Operating income

Aeronautics Systems 298 283 890 798

$ 2,814 $ 3,044

Operating costs and expenses:

Aeronautics Systems operating (loss) income

Defense Systems

Operating costs and expenses:

Defense Systems operating income

Mission Systems

Operating costs and expenses:

Mission Systems operating income

Space Systems

Intersegment eliminations ( 83 ) ( 83 ) ( 261 ) ( 247 )

Operating costs and expenses:

Space Systems operating income

Intersegment profit eliminations

( 72 ) ( 66 )

Total segment operating income 568 1,104

7 unchanged sentences

Earnings before income taxes $ 578 $ 1,131

NORTHROP GRUMMAN CORPORATION

FAS/CAS Operating Adjustment

3 unchanged sentences

Unallocated Corporate Expense

Unallocated corporate expense includes the portion of corporate costs not considered allowable or allocable under the applicable FAR and CAS requirements, and therefore not allocated to the segments, such as changes in deferred state income taxes and a portion of management and administration, legal, environmental, compensation, retiree benefits, advertising and other corporate unallowable costs.

Unallocated corporate expense includes the portion of corporate costs not considered allowable or allocable under applicable FAR and CAS requirements, and therefore not allocated to the segments, such as changes in deferred state income taxes and a portion of management and administration, legal, environmental, compensation, retiree benefits, advertising and other corporate unallowable costs.

Unallocated corporate expense 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 property, plant and equipment acquired through business combinations, as well as certain compensation and other costs.

1 unchanged sentence

Disaggregation of Revenue

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

2024 2023 2024 2023

Sales by Customer Type Three Months Ended March 31

$ in millions $ % (3)

39 unchanged sentences

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

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

2024 2023 2024 2023

Sales by Contract Type Three Months Ended March 31

$ in millions $ % (1)

24 unchanged sentences

NORTHROP GRUMMAN CORPORATION

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

2024 2023 2024 2023

Sales by Geographic Region Three Months Ended March 31

$ in millions $ % (3)

1 unchanged sentence

United States (1)

$ 2,295 83 % $ 2,588 86 %

Asia/Pacific 200 7 % 170 6 %

Europe 269 10 % 247 8 %

All other (1)

11 — % 10 — % 26 — % 25 — %

Other geographic regions (2)

Intersegment sales 41 32

2 unchanged sentences

United States (1)

1,471 84 % 1,476 87 %

Asia/Pacific 81 5 % 50 3 %

Europe 170 9 % 132 8 %

All other (1)

Other geographic regions (2)

38 2 % 37 2 %

3 unchanged sentences

United States (1)

1,997 81 % 1,928 81 %

Asia/Pacific 128 5 % 126 5 %

Europe 239 10 % 255 11 %

All other (1)

Other geographic regions (2)

108 4 % 73 3 %

3 unchanged sentences

United States (1)

2,419 98 % 2,979 98 %

Asia/Pacific 8 — % 13 — %

Europe 26 2 % 42 2 %

All other (1)

Other geographic regions (2)

10 — % 10 — %

2 unchanged sentences

United States (1)

8,182 86 % 8,971 88 %

Asia/Pacific 417 4 % 359 4 %

Europe 704 8 % 676 7 %

All other (1)

Other geographic regions (2)

165 2 % 127 1 %

Total Sales $ 9,468 $ 10,133

(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

Capital Expenditures and Depreciation and Amortization

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

Three Months Ended March 31

$ in millions 2025 2024

Capital Expenditures

Aeronautics Systems $ 79 $ 84

Defense Systems 12 8

Mission Systems 39 43

Space Systems 110 127

Corporate (1)

Total $ 256 $ 270

Depreciation and Amortization

Aeronautics Systems $ 89 $ 75

Defense Systems 43 42

Mission Systems 67 62

Space Systems 79 79

Corporate (1)

Total $ 337 $ 299

(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 (“CODM”) does not use assets by segment to evaluate segment performance or allocate resources.

Therefore, we do not disclose assets by segment.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

3 unchanged sentences

Results of Review of Interim Financial Information

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

We have reviewed the accompanying condensed consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries (the “Company”) as of March 31, 2025, and the related condensed consolidated statements of earnings and comprehensive income, cash flows, and changes in shareholders’ equity for the three-month periods ended March 31, 2025 and 2024, and the related notes (collectively referred to as the “interim financial information”).

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

12 unchanged sentences

McLean, Virginia

October 23, 2024

April 21, 2025

NORTHROP GRUMMAN CORPORATION

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

What changed 10-Q

Item 1. Financial Statements