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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-16411
NORTHROP GRUMMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 80-0640649
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
2980 Fairview Park Drive
Falls Church,Virginia22042
(Address of principal executive offices)(Zip Code)
(703) 280-2900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockNOCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
    Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
    Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer ☒     Accelerated Filer ☐
Non-accelerated Filer ☐    Smaller Reporting Company                 
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
    Yes     No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of October 21, 2024, 145,695,342 shares of common stock were outstanding.



NORTHROP GRUMMAN CORPORATION                        
TABLE OF CONTENTS
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Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

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NORTHROP GRUMMAN CORPORATION                        
PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended September 30Nine Months Ended September 30
$ in millions, except per share amounts2024202320242023
Sales
Product$7,939 $7,678 $24,117 $22,390 
Service2,057 2,097 6,230 6,262 
Total sales9,996 9,775 30,347 28,652 
Operating costs and expenses
Product6,280 6,135 19,079 17,738 
Service1,610 1,599 4,838 4,848 
General and administrative expenses986 1,025 3,149 3,136 
Total operating costs and expenses8,876 8,759 27,066 25,722 
Operating income1,120 1,016 3,281 2,930 
Other (expense) income
Interest expense(161)(141)(461)(417)
Non-operating FAS pension benefit168 132 503 397 
Other, net61 111 142 193 
Earnings before income taxes1,188 1,118 3,465 3,103 
Federal and foreign income tax expense162 181 555 512 
Net earnings$1,026 $937 $2,910 $2,591 
Basic earnings per share$7.02 $6.20 $19.73 $17.07 
Weighted-average common shares outstanding, in millions146.2 151.2 147.5 151.8 
Diluted earnings per share$7.00 $6.18 $19.69 $17.00 
Weighted-average diluted shares outstanding, in millions146.5 151.7 147.8 152.4 
Net earnings (from above)$1,026 $937 $2,910 $2,591 
Other comprehensive income (loss), net of tax
Change in cumulative translation adjustment2 6 2 11 
Change in other, net8 (3)(10)(5)
Other comprehensive income (loss), net of tax10 3 (8)6 
Comprehensive income$1,036 $940 $2,902 $2,597 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NORTHROP GRUMMAN CORPORATION                        
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
$ in millions, except par valueSeptember 30, 2024December 31, 2023
Assets
Cash and cash equivalents$3,326 $3,109 
Accounts receivable, net1,609 1,454 
Unbilled receivables, net6,518 5,693 
Inventoried costs, net1,646 1,109 
Prepaid expenses and other current assets1,233 2,341 
Total current assets14,332 13,706 
Property, plant and equipment, net of accumulated depreciation of $8,517 for 2024 and $7,964 for 2023
10,078 9,653 
Operating lease right-of-use assets1,779 1,818 
Goodwill17,517 17,517 
Intangible assets, net268 305 
Deferred tax assets1,407 1,020 
Other non-current assets2,908 2,525 
Total assets$48,289 $46,544 
Liabilities
Trade accounts payable$2,518 $2,110 
Accrued employee compensation1,924 2,251 
Advance payments and billings in excess of costs incurred3,157 4,193 
Other current liabilities5,502 3,388 
Total current liabilities13,101 11,942 
Long-term debt, net of current portion of $1,589 for 2024 and $70 for 2023
14,689 13,786 
Pension and other postretirement benefit plan liabilities1,186 1,290 
Operating lease liabilities1,821 1,892 
Other non-current liabilities2,744 2,839 
Total liabilities33,541 31,749 
Commitments and contingencies (Note 7)
Shareholders’ equity
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued and outstanding
  
Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2024—145,813,599 and 2023—150,109,271
146 150 
Paid-in capital  
Retained earnings14,738 14,773 
Accumulated other comprehensive loss(136)(128)
Total shareholders’ equity14,748 14,795 
Total liabilities and shareholders’ equity$48,289 $46,544 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NORTHROP GRUMMAN CORPORATION                        
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended September 30
$ in millions20242023
Operating activities
Net earnings$2,910 $2,591 
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization956 938 
Stock-based compensation72 64 
Deferred income taxes(387)(298)
Net periodic pension and OPB income(339)(230)
Pension and OPB contributions(93)(108)
Changes in assets and liabilities:
Accounts receivable, net(155)(256)
Unbilled receivables, net(825)(287)
Inventoried costs, net(542)(396)
Prepaid expenses and other assets(15)(127)
Accounts payable and other liabilities(915)(443)
Income taxes payable, net1,106 40 
Other, net37 (43)
Net cash provided by operating activities1,810 1,445 
Investing activities
Capital expenditures(951)(972)
Proceeds from sale of minority investment 157 
Other, net 3 
Net cash used in investing activities(951)(812)
Financing activities
Net proceeds from issuance of long-term debt2,495 1,995 
Payments of long-term debt (1,050)
Common stock repurchases(2,073)(1,154)
Cash dividends paid(887)(834)
Payments of employee taxes withheld from share-based awards(57)(51)
Other, net(120)(34)
Net cash used in financing activities(642)(1,128)
Increase (decrease) in cash and cash equivalents217 (495)
Cash and cash equivalents, beginning of year3,109 2,577 
Cash and cash equivalents, end of period$3,326 $2,082 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NORTHROP GRUMMAN CORPORATION                        
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
 Three Months Ended September 30Nine Months Ended September 30
$ in millions, except per share amounts2024202320242023
Common stock
Beginning of period$146 $151 $150 $153 
Common stock repurchased  (4)(2)
End of period146 151 146 151 
Paid-in capital
Beginning of period    
End of period    
Retained earnings
Beginning of period14,301 15,485 14,773 15,312 
Common stock repurchased(313)(232)(2,076)(1,162)
Net earnings1,026 937 2,910 2,591 
Dividends declared(302)(283)(885)(832)
Stock compensation26 17 16 15 
End of period14,738 15,924 14,738 15,924 
Accumulated other comprehensive loss
Beginning of period(146)(150)(128)(153)
Other comprehensive income (loss), net of tax10 3 (8)6 
End of period(136)(147)(136)(147)
Total shareholders’ equity$14,748 $15,928 $14,748 $15,928 
Cash dividends declared per share$2.06 $1.87 $5.99 $5.47 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NORTHROP GRUMMAN CORPORATION                        
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1.    BASIS OF PRESENTATION
Principles of Consolidation and Reporting
These unaudited condensed consolidated financial statements (the “financial statements”) include the accounts of Northrop Grumman Corporation and its subsidiaries and joint ventures or other investments for which we consolidate the financial results (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”). 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.
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.
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”) and in accordance with the rules of the Securities and Exchange Commission (SEC) for interim reporting. The financial statements include adjustments of a normal recurring nature considered necessary by management for a fair presentation of the company’s unaudited condensed consolidated financial position, results of operations and cash flows. For classification of certain current assets and liabilities, we consider the duration of our customer contracts when defining our operating cycle, which is generally longer than one year.
Results reported in the financial statements are not necessarily indicative of results that may be expected for the entire year. The financial statements should be read in conjunction with the information contained in the company’s 2023 Annual Report on Form 10-K.
Quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30 and third quarter as ending on September 30. It is the company’s long-standing practice to establish actual interim closing dates using a “fiscal” calendar, in which we close our books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. This practice is only used at interim periods within a reporting year.
Accounting Estimates
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; however, actual results could differ materially from those estimates.
Revenue Recognition
Contract Estimates
Contract sales may include estimates of variable consideration, including cost or performance incentives (such as award and incentive fees), un-priced change orders, requests for equitable adjustment (REAs) and contract claims. Variable consideration is included in total estimated sales to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We estimate variable consideration as the most likely amount to which we expect to be entitled.
We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis. Net estimate-at-completion (EAC) adjustments represent the cumulative effect of the changes on current and prior periods; sales and operating margins in future periods are recognized as if the revised estimates had been used since contract inception. 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.
B-21 Program
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. Air
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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.
The following table presents the effect of aggregate net EAC adjustments:
 Three Months Ended September 30Nine Months Ended September 30
$ in millions, except per share data2024202320242023
Revenue$131 $95 $242 $252 
Operating income136 58 268 180 
Net earnings(1)
107 46 212 142 
Diluted earnings per share(1)
0.73 0.30 1.43 0.93 
(1)Based on a 21 percent federal statutory tax rate.
EAC adjustments on a single performance obligation can have a significant effect on the company’s financial statements. 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.
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NORTHROP GRUMMAN CORPORATION                        
Backlog
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. It comprises both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (IDIQ) contracts are not included in backlog until the time an option or IDIQ task order is exercised or awarded. 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.
Contract Assets and Liabilities
For each of the company’s contracts, the timing of revenue recognition, customer billings, and cash collections results in a net contract asset or liability at the end of each reporting period. Contract assets are equivalent to and reflected as Unbilled receivables in the unaudited condensed consolidated statements of financial position and are primarily related to long-term contracts where revenue recognized under the cost-to-cost method exceeds amounts billed to customers. 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.
Disaggregation of Revenue
See Note 10 for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments. We believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
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.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, are as follows:
$ in millionsSeptember 30, 2024December 31, 2023
Cumulative translation adjustment$(136)$(138)
Other, net 10 
Total accumulated other comprehensive loss$(136)$(128)
Related Party Transactions
For all periods presented, the company had no material related party transactions.
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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. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. 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; 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.
2.    EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK
Basic Earnings Per Share
We calculate basic earnings per share by dividing net earnings by the weighted-average number of shares of common stock outstanding during each period.
Diluted Earnings Per Share
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.
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”). 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 September 30, 2024, repurchases under the 2023 Repurchase Program totaled $0.9 billion; $1.6 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.
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NORTHROP GRUMMAN CORPORATION                        
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. 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 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.
The table below summarizes the company’s share repurchases to date under the authorizations described above:
Shares Repurchased
(in millions)
Repurchase Program
Authorization Date
Amount
Authorized
(in millions)
Total
Shares Retired
(in millions)
Average 
Price
Per Share
(1)
Date CompletedNine Months Ended September 30
20242023
January 25, 2021$3,000 7.0 $431.05 April 2023 1.4 
January 24, 2022(2)
$2,000 4.4 $455.01 February 20242.5 1.1 
December 6, 2023$2,500 2.0 $461.06 2.0  
(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.
Dividends on Common Stock
In May 2024, the company increased the quarterly common stock dividend 10 percent to $2.06 per share from the previous amount of $1.87 per share.
3.    INVENTORIED COSTS, NET
Inventoried costs, net consist of the following:
$ in millionsSeptember 30, 2024December 31, 2023
Contracts in process$1,076 $647 
Product inventory:
Raw materials388338
Work in process11572
Finished goods6752
Total product inventory570462
Inventoried costs, net$1,646 $1,109 
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NORTHROP GRUMMAN CORPORATION                        
4.    INCOME TAXES
 Three Months Ended September 30Nine Months Ended September 30
$ in millions2024202320242023
Federal and foreign income tax expense$162 $181 $555 $512 
Effective income tax rate13.6 %16.2 %16.0 %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.
Year to Date
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.
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.
5.    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
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NORTHROP GRUMMAN CORPORATION                        
value (NAV) per share as a practical expedient; therefore, they are not categorized in the fair value hierarchy table below. Marketable securities are included in Other non-current assets in the unaudited condensed consolidated statements of financial position.
The company’s derivative portfolio consists primarily of foreign currency forward contracts. Where model-derived valuations are appropriate, the company utilizes the income approach to determine the fair value using internal models based on observable market inputs.
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, 2024December 31, 2023
$ in millionsLevel 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Financial Assets
Marketable securities$339 $ $14 $353 $321 $1 $8 $330 
Marketable securities valued using NAV8 9 
Total marketable securities339  14 361 321 1 8 339 
Derivatives 3  3  5  5 
The notional value of the company’s foreign currency forward contracts at September 30, 2024 and December 31, 2023 was $399 million and $286 million, respectively. The portion of notional value designated as a cash flow hedge at September 30, 2024 and December 31, 2023 was $269 million and $162 million, respectively.
The derivative fair values and related unrealized gains/losses at September 30, 2024 and December 31, 2023 were not material.
There were no transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the nine months ended September 30, 2024.
The carrying value of cash and cash equivalents approximates fair value.
Long-term Debt
The estimated fair value of the company’s long-term debt was $16.1 billion and $13.4 billion as of September 30, 2024 and December 31, 2023, respectively. We calculated the fair value of long-term debt using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the company’s existing debt arrangements. 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
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:
$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. 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.
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NORTHROP GRUMMAN CORPORATION                        
6.    INVESTIGATIONS, CLAIMS AND LITIGATION
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 7, 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 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. 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.
The company received from the U.S. 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 7 below. The company is engaging with the government and responding to the requests. We cannot at this point predict the outcome of these matters.
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.
7.    COMMITMENTS AND CONTINGENCIES
U.S. Government Cost Claims and Contingencies
From time to time, the company is advised of claims by the U.S. government concerning certain potential disallowed costs, plus, at times, penalties and interest. 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. Where appropriate, provisions are made to reflect the company’s estimated exposure for such potential disallowed costs. 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.
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. On June 1, 2020, DCMA provided written notice that the assumptions the company used during the period 2013-2019 were potentially noncompliant with CAS. We submitted a formal response on July 31, 2020, which we believed demonstrates the appropriateness of the assumptions used. 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 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 6 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on
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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. 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
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:
$ in millions
Accrued Costs(1)(2)
Reasonably Possible Future Costs in Excess of Accrued Costs(2)
Deferred Costs(3)
September 30, 2024$568 $380 $530 
December 31, 2023584 387 518 
(1) As of September 30, 2024, $213 million is recorded in Other current liabilities and $355 million is recorded in Other non-current liabilities.
(2) Estimated remediation costs are not discounted to present value. The reasonably possible future costs in excess of accrued costs do not take into consideration amounts expected to be recoverable through overhead charges on U.S. 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.
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.
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.
Credit Facilities
The company maintains a five-year senior unsecured credit facility in an aggregate principal amount of $2.5 billion (the “2022 Credit Agreement”) that matures in August 2027 and is intended to support the company's commercial paper program and other general corporate purposes. 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.
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.
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NORTHROP GRUMMAN CORPORATION                        
8.    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 30Nine Months Ended September 30
Pension
Benefits
OPBPension
Benefits
OPB
$ in millions20242023202420232024202320242023
Components of net periodic benefit cost (benefit)
Service cost$60 $59 $1 $2 $179 $177 $3 $4 
Interest cost381 392 15 17 1,144 1,176 46 50 
Expected return on plan assets(549)(524)(21)(22)(1,647)(1,573)(64)(64)
Net periodic benefit cost (benefit)$(108)$(73)$(5)$(3)$(324)$(220)$(15)$(10)
Employer Contributions
The company sponsors defined benefit pension and OPB plans, as well as defined contribution plans. 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.
Contributions made by the company to its retirement plans are as follows:
 Three Months Ended September 30Nine Months Ended September 30
$ in millions2024202320242023
Defined benefit pension plans$17 $26 $66 $80 
OPB plans7 7 27 28 
Defined contribution plans136 126 517 487 
9.    STOCK COMPENSATION PLANS AND OTHER COMPENSATION ARRANGEMENTS
Stock Awards
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
in millions20242023
RSRs granted0.1 0.1 
RPSRs granted0.2 0.1 
Grant date aggregate fair value$109 $102 
RSRs typically vest on the third anniversary of the grant date, while RPSRs generally vest and pay out based on the achievement of certain performance metrics and market conditions over a three-year period.
Cash Awards
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
$ in millions20242023
Minimum aggregate payout amount$35 $34 
Maximum aggregate payout amount200 192 
CUs typically vest and settle in cash on the third anniversary of the grant date, while CPUs generally vest and pay out in cash based on the achievement of certain performance metrics over a three-year period.
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NORTHROP GRUMMAN CORPORATION                        
10.    SEGMENT INFORMATION
The following table presents sales and operating income by segment:
Three Months Ended September 30Nine Months Ended September 30
$ in millions2024202320242023
Sales
Aeronautics Systems$2,878 $2,766 $8,810 $7,876 
Defense Systems2,084 2,050 6,227 6,058 
Mission Systems2,823 2,628 8,255 7,832 
Space Systems2,870 2,953 9,021 8,775 
Intersegment eliminations(659)(622)(1,966)(1,889)
Total sales9,996 9,775 30,347 28,652 
Operating income
Aeronautics Systems298 283 890 798 
Defense Systems196 201 614 605 
Mission Systems390 386 1,129 1,147 
Space Systems345 302 979 840 
Intersegment eliminations(83)(83)(261)(247)
Total segment operating income1,146 1,089 3,351 3,143 
FAS/CAS operating adjustment20 (20)32 (62)
Unallocated corporate expense(46)(53)(102)(151)
Total operating income$1,120 $1,016 $3,281 $2,930 
Other (expense) income
Interest expense(161)(141)(461)(417)
Non-operating FAS pension benefit168 132 503 397 
Other, net61 111 142 193 
Earnings before income taxes$1,188 $1,118 $3,465 $3,103 
FAS/CAS Operating Adjustment
For financial statement purposes, we account for our employee pension plans in accordance with FAS. However, the cost of these plans is charged to our contracts in accordance with applicable Federal Acquisition Regulation (FAR) and CAS requirements. 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.
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 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.
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NORTHROP GRUMMAN CORPORATION                        
Disaggregation of Revenue
Sales by Customer TypeThree Months Ended September 30Nine Months Ended September 30
2024202320242023
$ in millions$
%(3)
$
%(3)
$
%(3)
$
%(3)
Aeronautics Systems
U.S. government(1)
$2,382 83 %$2,331 84 %$7,443 85 %$6,654 85 %
International(2)
430 15 %377 14 %1,174 13 %1,016 13 %
Other customers6  %4  %15  %23  %
Intersegment sales60 2 %54 2 %178 2 %183 2 %
Aeronautics Systems sales2,878 100 %2,766 100 %8,810 100 %7,876 100 %
Defense Systems
U.S. government(1)
1,541 74 %1,476 72 %4,633 74 %4,351 72 %
International(2)
311 15 %358 17 %912 15 %1,103 18 %
Other customers15 1 %19 1 %55 1 %55 1 %
Intersegment sales217 10 %197 10 %627 10 %549 9 %
Defense Systems sales2,084 100 %2,050 100 %6,227 100 %6,058 100 %
Mission Systems
U.S. government(1)
2,093 74 %1,917 73 %6,033 73 %5,729 73 %
International(2)
427 15 %432 16 %1,308 16 %1,262 16 %
Other customers28 1 %16 1 %65 1 %58 1 %
Intersegment sales275 10 %263 10 %849 10 %783 10 %
Mission Systems sales2,823 100 %2,628 100 %8,255 100 %7,832 100 %
Space Systems
U.S. government(1)
2,606 91 %2,707 92 %8,245 92 %7,963 91 %
International(2)
50 2 %72 2 %171 2 %226 3 %
Other customers107 3 %66 2 %293 3 %212 2 %
Intersegment sales107 4 %108 4 %312 3 %374 4 %
Space Systems sales2,870 100 %2,953 100 %9,021 100 %8,775 100 %
Total
U.S. government(1)
8,622 86 %8,431 86 %26,354 87 %24,697 86 %
International(2)
1,218 12 %1,239 13 %3,565 12 %3,607 13 %
Other customers156 2 %105 1 %428 1 %348 1 %
Total Sales$9,996 100 %$9,775 100 %$30,347 100 %$28,652 100 %
(1) Sales to the U.S. 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. government. Each of the company’s segments derives substantial revenue from the U.S. government.
(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. government.
(3) Percentages calculated based on total segment sales.
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NORTHROP GRUMMAN CORPORATION                        
Sales by Contract TypeThree Months Ended September 30Nine Months Ended September 30
2024 20232024 2023
$ in millions$
%(1)
$
%(1)
$
%(1)
$
%(1)
Aeronautics Systems
Cost-type$1,296 46 %$1,370 51 %$3,990 46 %$3,920 51 %
Fixed-price1,522 54 %1,342 49 %4,642 54 %3,773 49 %
Intersegment sales60 54 178 183 
Aeronautics Systems sales2,878 2,766 8,810 7,876 
Defense Systems
Cost-type990 53 %1,007 54 %2,933 52 %3,017 55 %
Fixed-price877 47 %846 46 %2,667 48 %2,492 45 %
Intersegment sales217 197 627 549 
Defense Systems sales2,084 2,050 6,227 6,058 
Mission Systems
Cost-type1,216 48 %1,002 42 %3,390 46 %2,920 41 %
Fixed-price1,332