Northrop Grumman(NOC) - 2025 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including statements of earnings and comprehensive income, financial position, cash flows, and changes in shareholders' equity, along with detailed notes explaining significant accounting policies, earnings per share, share repurchases, dividends, inventoried costs, income taxes, fair value of financial instruments, investigations, commitments, retirement benefits, stock compensation, and segment information. It concludes with the report of the independent registered public accounting firm Condensed Consolidated Statements of Earnings and Comprehensive Income This statement provides a detailed overview of the company's financial performance, including sales, operating income, net earnings, and earnings per share Condensed Consolidated Statements of Earnings and Comprehensive Income | Metric | Three Months Ended Sep 30, 2025 ($M) | Three Months Ended Sep 30, 2024 ($M) | Nine Months Ended Sep 30, 2025 ($M) | Nine Months Ended Sep 30, 2024 ($M) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Sales | 10,423 | 9,996 | 30,242 | 30,347 | | Operating income | 1,242 | 1,120 | 3,240 | 3,281 | | Net earnings | 1,100 | 1,026 | 2,755 | 2,910 | | Basic earnings per share | 7.69 | 7.02 | 19.16 | 19.73 | | Diluted earnings per share | 7.67 | 7.00 | 19.12 | 19.69 | Condensed Consolidated Statements of Financial Position This statement presents the company's assets, liabilities, and shareholders' equity at specific points in time, reflecting its financial health Condensed Consolidated Statements of Financial Position | Metric | September 30, 2025 ($M) | December 31, 2024 ($M) | | :-------------------------------- | :---------------------- | :--------------------- | | Total current assets | 14,105 | 14,274 | | Total assets | 49,300 | 49,359 | | Total current liabilities | 12,718 | 14,128 | | Total liabilities | 33,312 | 34,069 | | Total shareholders' equity | 15,988 | 15,290 | Condensed Consolidated Statements of Cash Flows This statement details the cash inflows and outflows from operating, investing, and financing activities, illustrating changes in liquidity Condensed Consolidated Statements of Cash Flows | Metric | Nine Months Ended Sep 30, 2025 ($M) | Nine Months Ended Sep 30, 2024 ($M) | Change (%) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :--------- | | Net cash provided by operating activities | 860 | 1,810 | (52.5)% | | Net cash used in investing activities | (491) | (951) | (48.4)% | | Net cash used in financing activities | (2,765) | (642) | 330.7% | | Cash and cash equivalents, end of period | 1,957 | 3,326 | (41.1)% | Condensed Consolidated Statements of Changes in Shareholders' Equity This statement outlines the changes in the company's equity accounts, including total shareholders' equity and cash dividends declared per share Condensed Consolidated Statements of Changes in Shareholders' Equity | Metric | Three Months Ended Sep 30, 2025 ($M) | Three Months Ended Sep 30, 2024 ($M) | Nine Months Ended Sep 30, 2025 ($M) | Nine Months Ended Sep 30, 2024 ($M) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Total shareholders' equity | 15,988 | 14,748 | 15,988 | 14,748 | | Cash dividends declared per share | 2.31 | 2.06 | 6.68 | 5.99 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and supplementary information for the condensed consolidated financial statements 1. Summary of Significant Accounting Policies This note outlines the company's accounting principles, including consolidation, revenue recognition, and the impact of estimates. It details recent business realignments, the divestiture of the training services business, and significant EAC adjustments, particularly for the B-21 program. It also provides backlog information and discusses recent accounting standards updates - The company realigned its Strategic Deterrent Systems (SDS) division from Space Systems to Defense Systems effective July 1, 2024, and the Strike and Surveillance Aircraft Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems effective January 1, 2025[16] - On May 24, 2025, the company completed the sale of its Immersive Mission Solutions (IMS) operating unit (training services business) for $333 million in cash, recording a pre-tax gain on sale of $231 million[17] - An additional $477 million loss was recognized in the first quarter of 2025 across the five low-rate initial production (LRIP) options on the B-21 program, bringing the remaining loss accrual to $1.6 billion as of September 30, 2025[25] Net Estimate-at-Completion (EAC) Adjustments (Operating Income Impact) | Period | 2025 ($M) | 2024 ($M) | | :----- | :-------- | :-------- | | Q3 | 81 | 136 | | YTD | 107 | 268 | - Company backlog as of September 30, 2025, was $91.4 billion, reflecting a $150 million reduction due to the training services divestiture, with approximately 40% expected to be recognized as revenue over the next 12 months[29] - The company is evaluating the disclosure impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Disaggregation of Income Statement Expenses), and the potential impact of ASU 2025-06 (Internal-Use Software) on its consolidated financial position, results of operations, and cash flows[36][37][38] 2. Earnings Per Share, Share Repurchases and Dividends on Common Stock This note details the calculation of basic and diluted earnings per share, summarizes the company's share repurchase programs, and reports on dividend declarations, including a recent increase in the quarterly common stock dividend Diluted Earnings Per Share | Period | 2025 ($) | 2024 ($) | | :----- | :------- | :------- | | Q3 | 7.67 | 7.00 | | YTD | 19.12 | 19.69 | - The 2023 Repurchase Program ($2.5 billion authorized) was completed in September 2025, with 5.2 million shares repurchased at an average price of $482.41; the 2024 Repurchase Program ($3.0 billion authorized) commenced in September 2025, with $2.99 billion remaining under authorization[43][44][46] - In May 2025, the company increased its quarterly common stock dividend by 12% to $2.31 per share from the previous $2.06 per share[47] 3. Inventoried Costs, Net This note provides a breakdown of the company's inventoried costs, net, categorized into raw materials, work in process, and finished goods, as of September 30, 2025, and December 31, 2024 Inventoried Costs, Net | Category | September 30, 2025 ($M) | December 31, 2024 ($M) | | :--------------- | :---------------------- | :--------------------- | | Raw materials | 340 | 293 | | Work in process | 1,203 | 1,118 | | Finished goods | 72 | 44 | | Total | 1,615 | 1,455 | 4. Income Taxes This note details the company's income tax expense and effective tax rates, highlighting the impact of the One Big Beautiful Bill Act (OBBBA) on research and development expenditures and tax reserves. It also discusses changes in taxes receivable and unrecognized tax benefits - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, reinstating full expensing of R&D expenditures (IRC Section 174) beginning in 2025, extending bonus depreciation, and revising international tax regimes, with effects recognized in Q3 2025 financial statements[49][131] Effective Income Tax Rate (ETR) | Period | 2025 ETR | 2024 ETR | Change (pp) | | :----- | :------- | :------- | :---------- | | Q3 | 16.9% | 13.6% | +3.3 | | YTD | 17.2% | 16.0% | +1.2 | - Third quarter 2025 ETR increased primarily due to a prior year net reduction in tax reserves (federal court decision in 2024) and a reduction in research credits in the current year due to OBBBA, partially offset by lower interest expense on unrecognized tax benefits[51] - Taxes receivable increased to $786 million as of September 30, 2025, from $517 million as of December 31, 2024, with OBBBA contributing a $346 million increase[53] - Unrecognized tax benefits increased by approximately $180 million in 2025, mainly due to state apportionment matters and research credits, with a reasonable possibility of an additional $90 million increase within the next 12 months[54] 5. Fair Value of Financial Instruments This note details the fair value measurement of the company's financial instruments, including marketable securities and derivatives, and provides information on long-term debt issuances and repayments Marketable Securities at Fair Value | Category | September 30, 2025 ($M) | December 31, 2024 ($M) | | :-------------------------------- | :---------------------- | :--------------------- | | Level 1 | 496 | 325 | | Level 3 | 14 | 14 | | Valued using NAV | 6 | 8 | | Total marketable securities | 516 | 347 | - Unrealized gains and losses from marketable securities were $82 million for the three months ended September 30, 2025, and $92 million for the nine months ended September 30, 2025[59] - The estimated fair value of the company's long-term debt was $15.1 billion as of September 30, 2025, compared to $15.3 billion as of December 31, 2024[62] - In May 2025, the company issued $1.0 billion of unsecured senior notes for general corporate purposes; in January 2025, $1.5 billion of 2.93% unsecured senior notes were repaid upon maturity[64][65] 6. Investigations, Claims and Litigation This note outlines the company's involvement in various legal proceedings, including environmental remediation at Bethpage, New York, and government investigations concerning Cost Accounting Standards (CAS) pension expense assumptions. The outcomes and potential liabilities for these matters are currently unpredictable - The company continues to incur substantial remediation costs related to historic operations at former U.S. Navy and Grumman facilities in Bethpage, New York, and is involved in lawsuits alleging personal injury and property damage, with potential outcomes and liability ranges not currently estimable[66] - The U.S. Department of Justice (DOJ) issued a criminal subpoena and civil investigative demand regarding the interest rate assumptions used to determine the company's U.S. Government Cost Accounting Standards (CAS) pension expense; the outcome of these matters cannot be predicted[67] 7. Commitments and Contingencies This note details the company's commitments and contingencies, including U.S. government cost claims, environmental remediation accruals, and financial arrangements such as commercial paper and credit facilities. It highlights a dispute with DCMA regarding CAS pension expense assumptions - The Defense Contract Management Agency (DCMA) determined noncompliance with Cost Accounting Standards (CAS) regarding interest rate assumptions used for pension expense during 2013-2019, with potential material effects on financial position, results of operations, and/or cash flows, though a range of potential loss is not currently estimable[72] Environmental Remediation Costs | Category | September 30, 2025 ($M) | December 31, 2024 ($M) | | :------------------------------------------- | :---------------------- | :--------------------- | | Accrued Costs | 567 | 546 | | Reasonably Possible Future Costs in Excess of Accrued Costs | 387 | 377 | | Deferred Costs (expected to be recoverable) | 522 | 507 | - The company increased its commercial paper program capacity from $2.5 billion to $3.0 billion in September 2025, with no outstanding borrowings as of September 30, 2025[75] - A new five-year senior unsecured revolving credit facility of $3.0 billion was entered into in September 2025, replacing a prior $2.5 billion facility, with no outstanding borrowings as of September 30, 2025[76] 8. Retirement Benefits This note provides a summary of the costs associated with the company's pension and other postretirement benefit (OPB) plans, as well as employer contributions to these plans and defined contribution plans Net Periodic Benefit Cost (Benefit) | Plan Type | Period | 2025 ($M) | 2024 ($M) | | :-------- | :----- | :-------- | :-------- | | Pension | Q3 | (81) | (108) | | OPB | Q3 | (6) | (5) | | Pension | YTD | (240) | (324) | | OPB | YTD | (16) | (15) | Employer Contributions to Retirement Plans | Plan Type | Period | 2025 ($M) | 2024 ($M) | | :------------------------ | :----- | :-------- | :-------- | | Defined benefit pension plans | Q3 | 25 | 17 | | OPB plans | Q3 | 7 | 7 | | Defined contribution plans | Q3 | 133 | 136 | | Defined benefit pension plans | YTD | 67 | 66 | | OPB plans | YTD | 27 | 27 | | Defined contribution plans | YTD | 517 | 517 | 9. Stock Compensation Plans and Other Compensation Arrangements This note outlines the types and aggregate fair values of stock awards (RSRs and RPSRs) and the minimum and maximum payout amounts for cash awards (CUs and CPUs) granted to employees under the company's long-term incentive plans Stock Awards Granted (Nine Months Ended September 30) | Award Type | 2025 (M shares) | 2024 (M shares) | | :--------- | :-------------- | :-------------- | | RSRs granted | 0.1 | 0.1 | | RPSRs granted | 0.1 | 0.2 | | Grant date aggregate fair value | $104M | $109M | Cash Awards (Nine Months Ended September 30) | Metric | 2025 ($M) | 2024 ($M) | | :------------------------ | :-------- | :-------- | | Minimum aggregate payout amount | 35 | 35 | | Maximum aggregate payout amount | 199 | 200 | 10. Segment Information This note provides detailed financial performance for each of the company's four reportable segments: Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems. It includes sales, operating costs, operating income, and disaggregation of revenue by customer type, contract type, and geographic region, along with capital expenditures and depreciation/amortization Segment Sales and Operating Income (Q3 2025 vs Q3 2024) | Segment | Sales 2025 ($M) | Sales 2024 ($M) | Sales Change (%) | Op Income 2025 ($M) | Op Income 2024 ($M) | Op Income Change (%) | | :------------------ | :-------------- | :-------------- | :--------------- | :------------------ | :------------------ | :------------------- | | Aeronautics Systems | 3,142 | 2,961 | 6% | 305 | 309 | (1)% | | Defense Systems | 2,059 | 1,800 | 14% | 234 | 160 | 46% | | Mission Systems | 3,093 | 2,823 | 10% | 515 | 390 | 32% | | Space Systems | 2,698 | 2,870 | (6)% | 298 | 345 | (14)% | | Total Segment | 10,423 | 9,996 | 4% | 1,277 | 1,146 | 11% | Segment Sales and Operating Income (YTD 2025 vs YTD 2024) | Segment | Sales 2025 ($M) | Sales 2024 ($M) | Sales Change (%) | Op Income 2025 ($M) | Op Income 2024 ($M) | Op Income Change (%) | | :------------------ | :-------------- | :-------------- | :--------------- | :------------------ | :------------------ | :------------------- | | Aeronautics Systems | 9,070 | 9,065 | 0% | 443 | 927 | (52)% | | Defense Systems | 5,855 | 5,396 | 9% | 666 | 507 | 31% | | Mission Systems | 9,057 | 8,255 | 10% | 1,317 | 1,129 | 17% | | Space Systems | 7,912 | 9,021 | (12)% | 861 | 979 | (12)% | | Total Segment | 30,242 | 30,347 | 0% | 3,064 | 3,351 | (9)% | Sales by Customer Type (Nine Months Ended September 30, 2025) | Customer Type | Sales ($M) | % of Total Sales | | :-------------- | :--------- | :--------------- | | U.S. government | 25,423 | 84% | | International | 4,290 | 14% | | Other customers | 529 | 2% | Capital Expenditures (Nine Months Ended September 30) | Segment | 2025 ($M) | 2024 ($M) | Change (%) | | :------------------ | :-------- | :-------- | :--------- | | Aeronautics Systems | 250 | 339 | (26)% | | Defense Systems | 44 | 46 | (4)% | | Mission Systems | 152 | 143 | 6% | | Space Systems | 251 | 401 | (37)% | | Corporate | 91 | 22 | 314% | | Total | 788 | 951 | (17)% | Report of Independent Registered Public Accounting Firm This report presents the independent auditor's opinion on the fairness of the interim financial information and the consolidated financial statements - Deloitte & Touche LLP, the independent registered public accounting firm, concluded that no material modifications are needed for the accompanying interim financial information to be in conformity with GAAP[92] - An unqualified opinion was previously expressed on the consolidated financial statements as of December 31, 2024, and the information in the condensed consolidated statement of financial position as of that date is fairly stated[93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operating results, covering an overview of the business, consolidated and segment operating results, product and service analysis, backlog, liquidity, capital resources, critical accounting policies, and forward-looking statements. It highlights the impact of the global security and economic environments, U.S. political and budget dynamics, and key program updates Overview This section provides a high-level summary of key business events, market conditions, and significant program updates impacting the company's financial performance - The company completed the sale of its training services business on May 24, 2025, for $333 million in cash, recording a pre-tax gain of $231 million[100] - The global security environment, marked by heightened tensions in Ukraine, the Middle East, and the Pacific region, is increasing demand for defense products and services[101][102] - The U.S. government enacted the Full-Year Continuing Appropriations and Extensions Act, 2025, increasing defense spending by $6 billion for FY 2025, and the FY 2026 budget request includes approximately $962 billion for the Department of War, an 11.8% increase[108][109] - A U.S. government shutdown, ongoing since October 1, 2025, could lead to program disruptions, delayed payments, and material adverse effects on the company's financials[110][111] - The B-21 program recognized an additional $477 million loss provision in Q1 2025, with a $122 million unfavorable EAC adjustment in Q3 2025 largely offset by a contract restructure[27][115] - The Sentinel program was certified for continuation by the Department of War in July 2024 after a Nunn-McCurdy breach review and recognized a $76 million favorable EAC adjustment in Q2 2025 due to expectations for achieving contract incentives[27][119][120] Consolidated Operating Results This section analyzes the company's overall sales, operating income, net earnings, and diluted earnings per share, highlighting key drivers and changes Consolidated Sales Performance | Metric | Q3 2025 ($M) | Q3 2024 ($M) | Q3 Change (%) | YTD 2025 ($M) | YTD 2024 ($M) | YTD Change (%) | | :------------ | :----------- | :----------- | :------------ | :------------ | :------------ | :------------- | | Total Sales | 10,423 | 9,996 | 4% | 30,242 | 30,347 | 0% | | Organic Sales | 10,423 | 9,926 | 5% | 30,130 | 30,121 | 0% | Consolidated Operating Income and Margin Rate | Metric | Q3 2025 ($M) | Q3 2024 ($M) | Q3 Change (%) | YTD 2025 ($M) | YTD 2024 ($M) | YTD Change (%) | | :------------------ | :----------- | :----------- | :------------ | :------------ | :------------ | :------------- | | Operating Income | 1,242 | 1,120 | 11% | 3,240 | 3,281 | (1)% | | Operating Margin Rate | 11.9% | 11.2% | +0.7pp | 10.7% | 10.8% | (0.1)pp | - Year-to-date 2025 operating income decreased 1% due to a $287 million decrease in segment operating income (primarily from the B-21 loss provision) and a $128 million increase in non-divestiture-related unallocated corporate expense, partially offset by a $231 million pre-tax gain on the training services divestiture[129] Consolidated Net Earnings and Diluted EPS | Metric | Q3 2025 ($M) | Q3 2024 ($M) | Q3 Change (%) | YTD 2025 ($M) | YTD 2024 ($M) | YTD Change (%) | | :---------- | :----------- | :----------- | :------------ | :------------ | :------------ | :------------- | | Net Earnings| 1,100 | 1,026 | 7% | 2,755 | 2,910 | (5)% | | Diluted EPS | 7.67 | 7.00 | 10% | 19.12 | 19.69 | (3)% | - Year-to-date 2025 net earnings decreased 5% primarily due to a $100 million reduction in non-operating FAS pension benefit, lower interest income on short-term investments, and the decrease in operating income, partially offset by a $78 million increase in returns on marketable securities[136] Segment Operating Results This section analyzes the financial performance of each reportable segment, detailing sales, operating income, and key drivers of change Segment Operating Income and Margin Rate (Q3 vs. Prior Year) | Metric | Q3 2025 ($M) | Q3 2024 ($M) | Change (%) | | :------------------------ | :----------- | :----------- | :--------- | | Segment Operating Income | 1,277 | 1,146 | 11% | | Segment Operating Margin Rate | 12.3% | 11.5% | +0.8pp | Segment Operating Income and Margin Rate (YTD vs. Prior Year) | Metric | YTD 2025 ($M) | YTD 2024 ($M) | Change (%) | | :------------------------ | :------------ | :------------ | :--------- | | Segment Operating Income | 3,064 | 3,351 | (9)% | | Segment Operating Margin Rate | 10.1% | 11.0% | (0.9)pp | - Year-to-date 2025 segment operating income decreased 9% primarily due to lower operating income at Aeronautics Systems (driven by a $477 million B-21 loss provision in Q1 2025) and Space Systems, partially offset by higher operating income at Mission Systems and Defense Systems[145] Net EAC Adjustments by Segment (YTD) | Segment | 2025 ($M) | 2024 ($M) | | :------------------ | :-------- | :-------- | | Aeronautics Systems | (225) | 165 | | Defense Systems | 141 | 45 | | Mission Systems | 163 | 11 | | Space Systems | 37 | 50 | | Eliminations | (9) | (3) | | Net EAC adjustments | 107 | 268 | - Aeronautics Systems' year-to-date 2025 operating income decreased 52% to $443 million, primarily due to the $477 million loss provision recorded on the B-21 program in the first quarter of 2025[153] - Defense Systems' year-to-date 2025 operating income increased 31% to $666 million, driven by higher sales and operating margin rate, including a $76 million favorable EAC adjustment on the Sentinel program during Q2 2025[158] - Mission Systems' year-to-date 2025 operating income increased 17% to $1,317 million, primarily due to higher sales and a higher operating margin rate, including a $68 million favorable EAC adjustment in the restricted advanced microelectronics portfolio[163] - Space Systems' year-to-date 2025 sales decreased 12% to $7,912 million, primarily due to the wind-down of work on restricted space and Next Generation Interceptor (NGI) programs, which reduced sales by $635 million[166] Product and Service Analysis This section provides a detailed breakdown of the company's sales and costs by product and service categories, highlighting key drivers of change Product Sales and Costs (Q3 vs. Prior Year) | Metric | Q3 2025 ($M) | Q3 2024 ($M) | Change (%) | | :------------ | :----------- | :----------- | :--------- | | Product Sales | 8,369 | 7,939 | 5% | | Product Costs | 7,396 | 7,049 | 5% | - Third quarter 2025 product sales increased 5% due to higher volume on military ammunition, IBCS, Sentinel, restricted advanced microelectronics, marine systems, international ground-based radar, TACAMO, and F-35 programs[170] Service Sales and Costs (YTD vs. Prior Year) | Metric | YTD 2025 ($M) | YTD 2024 ($M) | Change (%) | | :------------ | :------------ | :------------ | :--------- | | Service Sales | 6,094 | 6,230 | (2)% | | Service Costs | 5,284 | 5,446 | (3)% | - Year-to-date 2025 service sales decreased 2% primarily due to lower service volume at Defense Systems (training services divestiture) and lower restricted sales at Aeronautics Systems[175] Backlog This section provides an overview of the company's total backlog, including funded and unfunded components, and details significant new contract awards Total Backlog | Metric | September 30, 2025 ($M) | December 31, 2024 ($M) | Change (%) | | :------------ | :---------------------- | :--------------------- | :--------- | | Funded | 38,966 | | | | Unfunded | 52,482 | | | | Total backlog | 91,448 | 91,468 | 0% | - Third quarter and year-to-date 2025 net awards totaled $12.2 billion and $30.4 billion, respectively, with significant Q3 new awards including $4.5 billion for restricted programs, $1.8 billion for Ground-Based Midcourse Defense Weapon System (GWS), $0.5 billion for F-35, and $0.4 billion for Virginia Class submarines[176] Liquidity and Capital Resources This section discusses the company's cash position, operating cash flow, investing activities, and financing activities, assessing its ability to meet short-term and long-term obligations - As of September 30, 2025, the company had $2.0 billion in cash and cash equivalents and expects sufficient liquidity from operating activities, supplemented by borrowings if needed[178] Operating Cash Flow (YTD vs. Prior Year) | Metric | YTD 2025 ($M) | YTD 2024 ($M) | Change (%) | | :----------------------------------- | :------------ | :------------ | :--------- | | Net cash provided by operating activities | 860 | 1,810 | (52)% | - The decrease in operating cash flow was primarily due to $1.0 billion higher net cash taxes (partially from a prior year federal tax refund) and increased trade working capital[181] Free Cash Flow (YTD vs. Prior Year) | Metric | YTD 2025 ($M) | YTD 2024 ($M) | Change (%) | | :------------ | :------------ | :------------ | :--------- | | Free Cash Flow| 72 | 859 | (92)% | - Net cash used in investing activities decreased 48% year-over-year, primarily due to $333 million in proceeds from the sale of the training services business and lower capital expenditures[184] - Net cash used in financing activities increased 331% year-over-year, primarily due to a $3.0 billion net decrease in cash from long-term debt, partially offset by a $905 million decrease in share repurchases[185] Critical Accounting Policies, Estimates and Judgments This section confirms that there have been no material changes to the company's critical accounting policies and estimates since its last annual report - There have been no material changes to the company's critical accounting policies and estimates from those discussed in its 2024 Annual Report on Form 10-K[187] Accounting Standards Updates This section directs readers to Note 1 for further information regarding recent accounting standards updates - Refer to Note 1 to the financial statements for further information on accounting standards updates[188] Forward-Looking Statements and Projections This section discusses the inherent risks and uncertainties associated with forward-looking statements and the company's policy on updating such projections - Forward-looking statements are based on assumptions and expectations but inherently involve a wide range of risks and uncertainties that are difficult to predict[189] - Key risks include dependence on the U.S. government, delays or reductions in appropriations (e.g., government shutdown), contract cost growth, macroeconomic pressures, investigations, regulatory changes, and cyber threats[190][194] - The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by applicable law[192] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the company's market risks since the 2024 Annual Report on Form 10-K - There have been no material changes to the company's market risks from those discussed in its 2024 Annual Report on Form 10-K[193] Item 4. Controls and Procedures This section confirms that the company's disclosure controls and procedures were evaluated as effective as of September 30, 2025, and reports no material changes in internal control over financial reporting during the quarter - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of September 30, 2025[195] - No changes occurred in the company's internal control over financial reporting during the three months ended September 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[196] PART II – OTHER INFORMATION Item 1. Legal Proceedings This section refers to Notes 6 and 7 for details on legal proceedings, investigations, and claims, emphasizing potential administrative, civil, or criminal sanctions and the inherent uncertainty of outcomes. It also specifies the disclosure threshold for environmental proceedings - Information about certain legal proceedings is provided in Notes 6 and 7 to the financial statements[198] - Legal proceedings could result in administrative, civil, or criminal fines, penalties, damages, non-monetary relief, or other liabilities, including suspension or debarment from future government contracts[199] - Environmental proceedings with a governmental entity as a party are disclosed if the company reasonably believes such proceeding would result in monetary sanctions of $1.0 million or more[200] Item 1A. Risk Factors This section directs readers to the company's 2024 Annual Report on Form 10-K for a comprehensive discussion of its risk factors - For a discussion of the company's risk factors, refer to the section entitled 'Risk Factors' in its 2024 Annual Report on Form 10-K[201] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section summarizes the company's common stock repurchases during the third quarter of 2025, detailing the number of shares purchased, average price paid, and remaining authorized funds under publicly announced programs Common Stock Repurchases (Three Months Ended September 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | Approximate Dollar Value of Shares that May Yet Be Purchased ($M) | | :---------------------------- | :------------------------------- | :------------------------------- | :---------------------------------------------------------------- | | June 28, 2025 - July 25, 2025 | 131,870 | 520.37 | 3,198 | | July 26, 2025 - August 22, 2025 | 158,515 | 581.62 | 3,106 | | August 23, 2025 - September 26, 2025 | 196,899 | 580.88 | 2,992 | | Total | 487,284 | 564.74 | 2,992 | - Share repurchases occur from time to time, subject to market and regulatory conditions, and common stock is retired upon repurchase[203] Item 5. Other Information This section discloses Rule 10b5-1 and non-Rule 10b5-1 trading arrangements entered into by directors and officers during the quarter ended September 30, 2025 Director/Officer Trading Arrangements (Quarter Ended September 30, 2025) | Name (Title) | Type of Trading Arrangement | Date of Adoption | Expiration Date of Trading Arrangement | Aggregate Number of Securities to Be Purchased or Sold | | :-------------------------------- | :-------------------------- | :--------------- | :------------------------------------- | :----------------------------------------------------- | | Kathy J. Warden (Chair, CEO, President) | Rule 10b5-1 | September 2, 2025 | February 2, 2026 | Sale of 10,000 shares of common stock | | Mark A. Welsh III (Director) | Rule 10b5-1 | | August 7, 2026 | Sale of 382 shares of common stock | Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including interactive data files, credit agreements, and various certifications required by the Sarbanes-Oxley Act - Key exhibits filed include the Cover Page Interactive Data File (104), Credit Agreement (10.1), Letter from Independent Registered Public Accounting Firm (15), and Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act (31.1, 31.2, 32.1, 32.2)[209] Signatures This section contains the official signatures for the Form 10-Q, confirming its submission on behalf of Northrop Grumman Corporation - The report was signed on behalf of Northrop Grumman Corporation by Michael A. Hardesty, Corporate Vice President, Controller and Chief Accounting Officer, on October 20, 2025[212]