Northrop Grumman (NOC) 10-K risk factor changes: FY2022 vs FY2021

Our primary customer is the U.S. government, from which we derived [removed: 85] [added: 86] percent of our sales in [removed: 2021;] [added: 2022;] we have a number of large programs with the U.S. Department of the Air Force, in particular.

We cannot predict the impact on existing, follow-on, replacement or future programs from potential changes in the threat environment, defense spending levels, government priorities, political leadership, procurement practices and strategy, [removed: military strategy] [added: inflation] and [removed: planning;] [added: other macroeconomic trends, military strategy;] or broader changes in social, economic or political demands and priorities.

The U.S. government [removed: generally] has the ability to terminate contracts, in whole or in part, for its convenience or for default based on performance.

Termination due to our default [added: (or that of a teammate)] could have a material adverse effect on our reputation, our ability to compete for other contracts and our financial position, results of operations and/or cash flows.

A significant shift in government priorities, programs or [removed: acquisition] strategies could have a material adverse effect on our financial position, results of operations and/or cash flows.

▪Significant delays or reductions in appropriations for our programs and U.S. government funding more [removed: broadly] [added: broadly, including a prolonged continuing resolution or breach of the debt ceiling,] can negatively impact our business and programs and could have a material adverse effect on our financial position, results of operations and/or cash flows.

For many programs, Congress appropriates funds [removed: on an annual fiscal year basis] [added: annually] even though the program performance period may extend over several years.

Programs are often partially funded [removed: initially and] [added: initially, with] additional funds [removed: are] committed only as Congress makes further appropriations.

When we [added: or our subcontractors] incur costs in excess of funds obligated on a contract, we are generally at risk for reimbursement [removed: of those costs] unless and until additional funds are obligated to the contract.

[removed: Laws] [added: In addition, pressures on, as well as laws] and plans [removed: adopted by the U.S. government] relating [removed: to, along with pressures on] [added: to] the federal budget, potential changes in priorities and defense [removed: spending levels,] [added: spending,] the [added: timing and substance of the] appropriations process, use of continuing resolutions (with restrictions, e.g., on new starts) and the federal debt [removed: limit,] [added: limit (including a breach),] have adversely affected and could adversely affect the [added: amount and timing of] funding for individual programs and delay purchasing or [removed: payment decisions] [added: payments] by our customers.

[removed: In the event government] funding for our significant programs [removed: becomes unavailable, or] is [removed: reduced] [added: reduced, delayed] or [removed: delayed,] [added: unavailable,] or [removed: planned] orders are reduced, our [removed: contract] [added: contracts] or [removed: subcontract] [added: subcontracts, or competitions] for such programs [removed: has] [added: have] at times been, and in the future may be, terminated or [removed: adjusted by the government or prime contractor.][added: changed.]

The U.S. continues to face an uncertain and changing political [removed: environment and] [added: environment, along with] substantial fiscal and economic challenges, which affect funding.

The budget [removed: environment] and [added: macroeconomic environment, political instability, and] uncertainty surrounding the appropriations processes [added: and the debt ceiling, remain significant short and long-term risks.]

Considerable uncertainty exists regarding how future budget and program decisions will [removed: unfold, including the defense spending priorities.][added: unfold.]

If annual appropriations bills are not timely enacted, the U.S. government may continue to operate under a continuing resolution, restricting new contract or program starts, presenting resource allocation challenges and placing limitations on [removed: some planned program] budgets, and we may face a [added: prolonged] government shutdown [removed: of unknown duration.][added: that could lead to program cancellations, disruptions and/or stop work orders and could limit the U.S. government’s ability to progress programs and make timely payments.]

[removed: If a] [added: A] prolonged [removed: government] shutdown [removed: of the DoD were to occur, it] could [removed: result in program cancellations, disruptions and/or stop work orders and could] limit [removed: the U.S. government’s ability to progress programs and make timely payments, and] our ability to perform on our [removed: U.S. government] contracts and successfully compete for new work.

[removed: In addition, budget] [added: Budget] cuts globally could [removed: continue to] adversely affect the viability of our subcontractors and [removed: suppliers, and our employee base.][added: suppliers.]

While we believe that our business is well-positioned in areas for future defense spending, changing priorities, budget pressures, defense spending cuts, challenges in the appropriations process, the [removed: debt ceiling] [added: possibility of a year-long continuing resolution] and [added: breach of the debt ceiling,] ongoing fiscal debates [removed: remain uncertain.][added: and the global economic environment increase uncertainties and risk.]

Contract accounting requires [removed: judgment relative to] [added: judgment, including in] assessing risks, estimating contract revenues and costs, and [removed: assumptions regarding] [added: predicting future] performance.

[removed: Due to] [added: Given] the size and nature of [removed: many of] our [added: many] contracts, [removed: the estimation of] [added: estimating] total revenues and costs at completion is complex and subject to many variables.

[removed: Incentives, awards and/or penalties related] [added: When there is sufficient information] to [added: assess expected future performance, we consider] performance [removed: on contracts are considered] [added: related incentives, awards and penalties] in estimating revenue and profit [removed: rates when there is sufficient information to assess anticipated performance.][added: rates.]

Our operating income can be adversely affected when estimated contract costs [removed: increase.][added: increase, especially without comparable increases in revenue.]

We [added: aim to mitigate this risk through contract terms, and we] have filed and may file requests for equitable adjustment or claims to seek recovery in whole or in part for our increased [removed: costs and aim to protect against these risks through contract terms and conditions when practical, but the government may disagree with our requests and may not have funding to cover them.][added: costs.]

[removed: Due to their nature, fixed-price] [added: Fixed-price] contracts inherently tend to have more financial risk than cost-type contracts, including as a result of inflationary pressures, labor [added: rates and] shortages, and [removed: increased labor rates.][added: supplier challenges.]

In [removed: 2021,] [added: 2022,] approximately half of our sales were derived from fixed-price contracts.

We have [removed: typically looked to] [added: more often entered into] fixed-price contracts where costs can be more reasonably estimated based on actual experience, such as for [added: mature] production programs.

However, our customers may also seek fixed-price contracts for development programs, [added: combined development and production programs, or low-rate initial production programs,] where the risks are greater.

If we do not achieve our estimates or meet terms [removed: specified] in our contracts, our profitability has at times been and may be reduced, and we have incurred and may incur losses.

As work progresses into production, the risks associated with estimating [removed: the] total costs are typically reduced.

While management uses its best judgment to estimate costs associated with fixed-price [removed: development] contracts, future events could result in [added: significant] adjustments.

Under cost-type contracts, allowable costs [removed: incurred by the contractor] are generally subject to reimbursement plus a fee.

[added: In these cases, the financial risks are typically] in recognizing profit, which ultimately may not be earned, or program cancellation if cost, schedule, or technical performance issues arise.

We also face additional financial risk [removed: due to the number of contract] [added: when] solicitations [removed: requiring the contractor] [added: require us] to bid on cost-type development work and [removed: related] fixed-price production lots and/or options in one submission, or cost-type development work requiring [removed: the contractor] [added: us] to provide certain items [removed: to the customer] at [removed: the contractor’s] [added: our] expense or [removed: at] [added: with] little or no fee.

Because of the significance of management’s judgments and the estimation processes, [added: and the difficulties inherent in estimating future costs, particularly in a challenging macroeconomic environment,] it is possible that [removed: materially different amounts] [added: we] could [removed: be obtained if] [added: see materially] different [removed: assumptions were used or if the underlying circumstances were to change.][added: results.]

Changes in underlying assumptions, circumstances or estimates, and the failure to prevail on claims [removed: for equitable adjustments] could have a material adverse effect on the profitability of one or more of our contracts and on our overall financial position, results of operations and/or cash flows.

See “Critical Accounting Policies, Estimates and Judgments” in [removed: MD&A.][added: MD&A and Note 12 to the consolidated financial statements.]

We operate in highly competitive markets and our competitors may have more financial [removed: capacity,] [added: capacity or] more extensive or specialized engineering, manufacturing, or marketing [removed: capabilities in some areas, or be willing to accept more risk or lower profitability in competing for contracts.][added: capabilities.]

[removed: We have seen, and anticipate we will continue to see, increased] competition in some of our core markets, especially as a result of [added: our customers’] budget [removed: pressures for many customers, a continued] [added: pressures, their] focus on affordability and competition, and our own success in winning business.

We are also facing increasing competition for, and more limited access to various critical products, services and other [removed: supplies, including related to scarcity of resources, and mergers and acquisitions.][added: supplies.]

In some [removed: instances outside the U.S.,] [added: instances,] foreign companies may receive loans, subsidies and other assistance from their governments that may not be available to U.S. companies and foreign companies may be subject to fewer restrictions on technology transfer.

We cannot predict what funding will ultimately be approved for individual programs.

In the event government

See “Overview” in MD&A.

A prolonged breach could have far-reaching adverse consequences.

If current macroeconomic pressures (especially from inflation and labor and supply chain challenges) are prolonged or worsen, and increased costs continue, then existing or anticipated appropriated and contracted funds may not be sufficient to cover costs incurred on existing or future programs.

The National Defense Authorization Act for FY 2023 grants DoD discretionary authority under limited circumstances to provide extraordinary relief to contractors to address certain inflationary impacts under the current macroeconomic environment for FY 2023.

This or other relief may not be available or adequate to address the significant impacts of the broader macroeconomic environment.

Suppliers’ expected performance, and the availability and costs of labor, materials and components, are also considered.

There are many reasons estimated contract costs can increase.

They include: macroeconomic trends (including inflation, labor shortages and supply chain challenges); delays or limitations in customer funding; design or other development challenges; production challenges (including from technical or quality issues and other performance concerns); inability to realize learning curves or other cost savings; changes in laws or regulations; actions necessary for long-term customer satisfaction; global pandemics, such as COVID-19; and natural disasters or environmental matters.

For example, as discussed in greater detail in Note 12 to the consolidated financial statements, our latest estimated cost to complete the low-rate initial production (LRIP) phase of the B-21 program reflects updated estimates for adverse impacts from these macroeconomic factors, as well as potential opportunities to address them.

We have also sought, and will seek, other avenues, as appropriate, to compensate the company for certain unexpected cost increases.

However, our contracts may not enable full recovery, and/or the government may disagree with our requests and may not have funding to cover them.

Ongoing macroeconomic challenges increase these risks.

▪The global macroeconomic environment could negatively impact our business and our financial position, results of operations and/or cash flows could be materially adversely affected.

Our business, financial position, results of operations and/or cash flows have been and may continue to be adversely impacted by the global macroeconomic environment.

The global macroeconomic environment has experienced, and continues to experience, extraordinary challenges, including high rates of inflation; widespread disruptions in supply chains; workforce challenges, including labor shortages; and market volatility.

These challenges have, among other things, led to increased costs, labor and supply shortages, and delays and disruption in performance, as well as competing demands for scarce resources.

Those challenges have adversely impacted our customers, our industry, our company, our suppliers and others with whom we do business.

While some aspects of the macroeconomic environment appear to be improving, and we have been able to mitigate some of the challenges (especially with respect to labor shortages), other challenges persist.

We cannot predict the future trajectory of this risk, including how the macroeconomic environment will evolve or how it will continue to impact us.

We (including our suppliers and other partners) have and may continue to experience inflationary pressures, supply chain disruption and labor and material cost increases at a rate higher than anticipated.

Given the nature of our business and our contracts (many of which are fixed price and of long duration), we may be unable to recover some of these increased costs or to offset such costs with greater than expected efficiencies.

Our government customers are likely to continue to face competing priorities and increased demands for their limited resources.

We cannot predict how long these challenges will persist or how they will change over time.

We continue to work proactively to mitigate these challenges.

However, if we are unable to do so successfully, our financial position, results of operations and/or cash flows could be materially adversely affected.

They may be willing to accept more risk or lower profitability in competing for contracts.

We have seen, and anticipate we will continue to see, increased

contract terms.

They have been and are evolving at a significant pace.

These laws and regulations include, but are not

In 2022, the company entered into a consent decree with the State of New York and reached agreements with the Department of Defense and Bethpage and South Farmingdale Water Districts to resolve claims involving these parties.

These rights may not be sufficient to protect us.

could affect our tax expense.

However, the company has worked hard to address and mitigate adverse impacts from COVID-19, and we do not currently anticipate significant additional direct impacts from the pandemic itself on our operations.

Nonetheless, we cannot predict the future course of events.

If, for example, the COVID-19 pandemic worsens, due to spread, new or additional variants, or if a new health epidemic or outbreak were to occur, we likely would experience broad and varied impacts, including potentially to our workforce and supply chain, with inflationary pressures and increased costs (which may or may not be fully recoverable or insured), schedule or production delays, market volatility and other financial impacts.

If any or all of these items were to occur, we could experience adverse impacts on our overall performance, operations and financial results.

As a defense contractor, we face significant cyber and other security threats.

We cannot predict the extent to which funding for individual programs will be included, increased or reduced as part of the annual appropriations ultimately approved or in separate supplemental appropriations or continuing resolutions.

and the debt ceiling, remain significant short and long-term risks.

See “Overview – U.S. Political and Economic Environment” in MD&A.

Suppliers’ expected performance is also considered.

Reasons for increased estimated contract costs include: design issues; changes in estimates of the nature and complexity of the work, including technical or quality issues or requests for additional work; production challenges, including those resulting from the timeliness of customer funding, unavailability or reduced productivity of qualified and timely cleared labor; the availability, performance, and quality of significant subcontractors; supplier issues, including the costs, timeliness and availability of materials and components; changes in laws or regulations; actions necessary for long-term customer satisfaction; and natural disasters or environmental matters.

In these cases, the associated financial risks are primarily

We also face the risk that contracts do not or will not enable full recovery of costs incurred as a result of or related to the COVID-19 pandemic.

ATK FTC decision and order and subsequent interactions with FTC staff.

Whether or not illegal

damages); a determination that certain remediation or other environmental costs are unallowable; rulings on allocation or insurance coverage; and/or the insolvency or other inability or unwillingness of other parties to pay their share of such costs could require us to incur material additional costs in excess of those anticipated.

In December 2020, the parties reached a tentative agreement with the State of New York regarding the steps the company will take to implement the State’s Amended Record of Decision and to resolve certain other potential claims, including for natural resource damages.

We understand that the State will next seek court approval of the consent decree.

We are also in discussions with the DoD (Navy and DCMA) and the Bethpage and South Farmingdale Water Districts to explore whether claims involving these parties can be resolved at this stage.

The indemnity related rights we have may not be sufficient to protect us against such liabilities.

OATK entered into a tax matters agreement with Vista, pursuant to which, in certain circumstances and subject to certain limitations, Vista is required to indemnify OATK against taxes on the spinoff.

However, there are circumstances pursuant to which we may be unable to obtain an indemnification payment or we may be required to indemnify Vista.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to amortize them over five years pursuant to IRC Section 174.

Although Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified.

If the requirement is not modified, it will materially reduce our cash flows beginning in 2022.

Although we have, to date, managed to continue most of our operations, we cannot predict the future course of events nor can we assure that this global pandemic, including its economic impact, will not have a material adverse impact on our business, financial position, results of operations and/or cash flows.

(For further information relating to the evolving environment, our experience to date, and various steps taken related to the COVID-19 pandemic, see MD&A).

The pandemic likely will continue to impact our workforce, including staffing levels (as a result of illnesses, quarantine, isolation and absenteeism) and adjusted work locations and schedules; our facilities and access to them; those with whom we do business and on whom we rely to continue our operations; travel restrictions; and, overall, our ability to perform as required, at cost and on schedule, and to achieve and increase efficiencies.

The pandemic may require us to continue to take extraordinary measures to protect the health and well-being of our employees.

We have incurred and will continue to incur additional costs which may not be fully recoverable.

If, going forward, significant portions of our workforce are unable to work effectively, or we are otherwise unable to maintain our level of operations, staffing and performance, we can expect facility closures, work slowdowns or stoppages, and adverse impacts on our overall performance, operations and financial results.

The macroeconomic impacts of the pandemic, including a tightened labor market and government requirements, including those related to vaccinations, will also likely continue to affect our company.

We expect to continue to incur additional costs as a result of the COVID-19 outbreak, including to protect the health and well-being of our employees, to respond to government requirements, and as a result of impacts on operations and performance, including staffing and schedule, which costs we may not be fully able to recover.

We are and may be subject to additional regulatory requirements, enforcement actions and litigation, again with costs and liabilities that are not fully recoverable or insured.

The continued global pandemic has impacted and may continue to impact the company’s supply chains.

If our suppliers have increased challenges with their workforce (including as a result of illness, absenteeism, reactions to health and safety or government requirements), facility closures, timely access to necessary components, materials and other supplies at reasonable prices, access to capital, and access to fundamental support services (such as shipping and transportation), they may be unable to provide the agreed-upon goods and services in a timely, compliant and cost-effective manner.

We have incurred and may in the future incur additional costs and delays in our business, including as a result of higher prices, schedule delays or the need to identify and develop alternative suppliers, and we may need to provide additional resources to support our suppliers or otherwise continue performance under our contracts.

The global COVID-19 crisis has put extraordinary pressures on the U.S. government and governments around the world.

In some cases, it has caused delays or limits in the ability of the government and other customers (including other prime contractors) to perform, including making timely payments and awards to us, negotiating contracts and agreeing on appropriate costs for recovery, performing quality inspections, supporting testing, accepting delivery, approving security clearances (for individuals and facilities), and providing necessary personnel, equipment and facilities.

In addition, as a result of the COVID-19 crisis, we expect continued changes in our customers’ priorities and practices, as our customers in both the U.S. and globally confront competing budget priorities, staffing challenges and limited resources.

These changes may impact current and future programs, customer priorities, government payments and other practices, procurements, and funding decisions.

While we have significant sources of cash and liquidity and access to committed and uncommitted credit lines, a prolonged period of generating lower cash from operations could adversely affect both our financial condition and the achievement of our strategic objectives.

Additionally, there can be no assurance that we will not face credit rating downgrades, and such downgrades could adversely affect our cost of funds, liquidity and access to capital markets.

Market volatility may also impact investment performance and our expected asset valuations and returns,

which could materially impact the calculation of long-term liabilities such as our pension obligations.

And inflationary pressures related to COVID-19 could adversely affect our business further, including through increased cost of labor and materials on our contracts.

Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended December 31, [removed: 2020 (“2020] [added: 2021 (“2021] Annual Report on Form 10-K”).

Operating results include sales and operating income for the IT and mission support services business prior to the Divestiture [removed: date.][added: date; therefore, no sales and operating income were recognized for this business during the year ended December 31, 2022.]

[removed: COVID-19][added: *COVID-19*]

[removed: In the almost two years since then, the pandemic] [added: Since at least March 2020, when it was first characterized as a global pandemic, COVID-19] has dramatically impacted [added: and continues to impact] the global health and economic [removed: environment,] [added: environments,] including millions of confirmed cases and deaths, business slowdowns or shutdowns, labor shortfalls, supply chain challenges, regulatory challenges, [added: inflationary pressures] and market volatility.

We discussed in some detail in our Annual [removed: Report] [added: Reports] on Form 10-K for the fiscal [removed: year] [added: years] ended December 31, [removed: 2020,] [added: 2020] and [added: 2021, and] subsequent SEC [removed: filings in 2021,] [added: filings,] the pandemic, its impacts and risks, and actions taken up to the time of each filing.

The [removed: company’s leadership, our crisis management and business resumption teams, and local site leadership continue closely] [added: company continues] to [added: work to] monitor and address the [removed: pandemic and related developments,] [added: pandemic,] including [removed: the] [added: its] impact on our company, our employees, our customers, our suppliers and our communities.

Our goals have been, and continue to [removed: be] [added: be,] to [added: keep our employees safe, to] lessen the potential adverse impacts, both health and economic, and to continue to position the company for long-term success.

Like the communities in which we operate, our actions have [removed: varied] [added: varied, and will continue to vary,] depending on the spread of COVID-19 and [added: other illnesses,] applicable government requirements, [removed: the needs of our employees, the needs of our customers] and the needs of our [removed: business.][added: stakeholders.]

For further information on the [removed: pandemic and the potential impact to] [added: global security environment, including] the [removed: company of COVID-19,] [added: risks related thereto,] see “Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations” and] [added: Operations,”] “Liquidity and Capital [removed: Resources” below] [added: Resources,” “Quantitative] and [added: Qualitative Disclosures About Market Risks” and] “Risk Factors.”

Global [removed: Security] [added: Health] and Economic Environment

The U.S. and its allies continue to face a global security environment of heightened tensions and instability, threats from state and non-state actors, including [added: in particular] major global powers, as well as terrorist organizations, [removed: emerging] [added: increasing] nuclear tensions, diverse regional security concerns and political instability.

The market for defense products, services and solutions globally is driven by these complex and evolving security challenges, considered in the broader context of political and socioeconomic [added: circumstances and] priorities.

[removed: Additionally, economic] [added: Economic] tensions and changes in international trade policies, including higher tariffs on imported goods and materials and renegotiation of free trade agreements, could [added: also further] impact the global market for defense products, services and solutions.

U.S. [removed: Political] [added: Political, Budget] and [removed: Economic] [added: Regulatory] Environment

We believe that our capabilities, particularly in space, [removed: missiles,] [added: C4ISR,] missile defense, [removed: hypersonics, counter-hypersonics,] [added: battle management, advanced weapons,] survivable aircraft and mission systems should help our customers [added: in the U.S. and globally] defend against [added: current and] future threats and, as a result, continue to allow for long-term profitable [removed: growth in our business.][added: business growth.]

In October 2021, the statutory debt limit was increased by $480 billion and, in December 2021, [added: it] was further increased by $2.5 trillion, which is [removed: currently expected to allow the Treasury Department to finance the government into 2023.]

The [removed: political environment, federal budget and debt ceiling are expected to continue to be the subject] [added: results] of [removed: considerable debate, which] [added: those debates] could have material impacts on defense spending broadly and the company’s programs in particular.

For purposes of this discussion, volume generally refers to increases or decreases in sales or cost from production/service activity levels and performance generally refers to [removed: non-volume related] [added: non-volume-related] changes in [removed: profitability.][added: profitability, which are typically described in terms of changes in net EAC adjustments.]

| *$ in millions, except per share amounts* | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | |

| Sales | | | $ | [removed: 35,667] [added: 36,602] | | | | | $ | [removed: 36,799] [added: 35,667] | | | | | $ | [removed: 33,841] [added: 36,799] | | | | | [removed: (3)] [added: 3] | | % | | | | [removed: 9] [added: (3)] | | % |

| Operating costs and expenses | | | [removed: 31,996] [added: 33,001] | | | | | | [removed: 32,734] [added: 31,996] | | | | | | [removed: 29,872] [added: 32,734] | | | | | | [removed: (2)] [added: 3] | | % | | | | [removed: 10] [added: (2)] | | % |

| *Operating costs and expenses as a % of sales* | | | [removed: 89.7] [added: 90.2] | | % | | | | [removed: 89.0] [added: *89.7*] | | [removed: %] [added: *%*] | | | | [removed: 88.3] [added: *89.0*] | | [removed: %] [added: *%*] | | | | | | | | | | | | |

| Gain on sale of business | | | [removed: 1,980] [added: —] | | | | | | [removed: —] [added: 1,980] | | | | | | — | | | | | | NM | | | | | | NM | | |

| Operating income | | | [removed: 5,651] [added: 3,601] | | | | | | [removed: 4,065] [added: 5,651] | | | | | | [removed: 3,969] [added: 4,065] | | | | | | [removed: 39] [added: (36)] | | % | | | | [removed: 2] [added: 39] | | % |

| *Operating margin rate* | | | [removed: 15.8] [added: 9.8] | | % | | | | [removed: *11.0*] [added: *15.8*] | | *%* | | | | [removed: *11.7*] [added: *11.0*] | | *%* | | | | | | | | | | | | |

| Mark-to-market pension and OPB benefit (expense) | | | [removed: 2,355] [added: 1,232] | | | | | | [removed: (1,034)] [added: 2,355] | | | | | | [removed: (1,800)] [added: (1,034)] | | | | | | [removed: (328)] [added: (48)] | | % | | | | [removed: (43)] [added: (328)] | | % |

| Federal and foreign income tax expense | | | [removed: 1,933] [added: 940] | | | | | | [removed: 539] [added: 1,933] | | | | | | [removed: 300] [added: 539] | | | | | | [removed: 259] [added: (51)] | | % | | | | [removed: 80] [added: 259] | | % |

| *Effective income tax rate* | | | [removed: 21.6] [added: 16.1] | | % | | | | [removed: *14.5*] [added: *21.6*] | | *%* | | | | [removed: *11.8*] [added: *14.5*] | | *%* | | | | | | | | | | | | |

| Net earnings | | | [removed: 7,005] [added: 4,896] | | | | | | [removed: 3,189] [added: 7,005] | | | | | | [removed: 2,248] [added: 3,189] | | | | | | [removed: 120] [added: (30)] | | % | | | | [removed: 42] [added: 120] | | % |

| Diluted earnings per share | | | [removed: 43.54] [added: $] | [added: 31.47] | | | | | [removed: 19.03] [added: $] | [added: 43.54] | | | | | [removed: 13.22] [added: $] | [added: 19.03] | | | | | [removed: 129] [added: (28)] | | % | | | | [removed: 44] [added: 129] | | % |

| Aeronautics Systems | | | [removed: | | | | | | | | | | | | | | | | | |] $ | [removed: 12,169 | | $ | — | | $ | 12,169] [added: 174] | | | | | $ | [removed: 11,116] [added: 25] | | [removed: $] | [removed: —] | | $ | [removed: 11,116 | | | | | 9 |] [added: 77] | [removed: %] |

[removed: 2021] [added: 2022] sales decreased [removed: $1.1 billion,] [added: $197 million,] or 3 percent, [removed: due] [added: due, in part,] to a [removed: $2.2 billion] [added: $106 million] reduction in sales related to the IT services divestiture.

[removed: 2021] [added: 2022 sales increased $935 million and 2022] organic sales increased [removed: $1.0] [added: $1.1] billion, or 3 [removed: percent] [added: percent,] due to higher sales at Space [added: Systems] and Mission Systems, partially offset by lower sales at Aeronautics Systems and Defense Systems.

[removed: 2021 operating income increased $1.6 billion, or 39 percent,] [added: The change in 2022 unallocated corporate expense (income) is] primarily due to the [removed: IT services divestiture, including the] [added: prior year] $2.0 billion pre-tax gain on sale and $192 million of [removed: unallocated corporate expense for] unallowable state taxes and transaction [removed: costs, partially offset by a $288 million reduction in] [added: costs associated with] the [removed: FAS/CAS operating adjustment.][added: IT services divestiture.]

[removed: 2021] [added: 2022] operating margin rate [removed: increased] [added: declined] to [removed: 15.8] [added: 9.8] percent from [removed: 11.0] [added: 15.8] percent reflecting the items above.

[removed: 2021] [added: 2022] G&A costs as a percentage of sales increased to [removed: 10.1] [added: 10.6] percent from [removed: 9.3] [added: 10.1] percent, primarily due to an increase in investments for future business [removed: opportunities and a lower G&A cost mix in the divested IT services business.][added: opportunities.]

| *$ in millions* | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Actuarial gains (losses) on projected benefit obligation | | | $ | [removed: 1,163] [added: 9,662] | | | | | $ | [removed: (3,570)] [added: 1,163] | | | | | $ | [removed: (4,866)] [added: (3,570)] | |

| Actuarial [added: (losses)] gains on plan assets | | | [removed: 1,192] [added: (8,430)] | | | | | | [removed: 2,536] [added: 1,192] | | | | | | [removed: 3,066] [added: 2,536] | | |

| MTM benefit (expense) | | | $ | [removed: 2,355] [added: 1,232] | | | | | $ | [removed: (1,034)] [added: 2,355] | | | | | $ | [removed: (1,800)] [added: (1,034)] | |

Global Security Environment

Our operations and financial performance, as well as demand for our products and services, are impacted by global events, including violence and unrest.

The same is true for our suppliers and other business partners.

The conflict in Ukraine has increased global tensions and instability, highlighted threats and increased global demand, as well as further disrupted global supply chains and added costs.

We have experienced a modest increase in demand for certain of our goods and services directly and indirectly related to the conflict in the Ukraine.

We also have experienced a slight disruption to some of our programs and supply chain, including unanticipated cost growth, as a result of the conflict in Ukraine and economic sanctions.

However, we do not have sizable business dealings in Russia or Ukraine, and do not anticipate significant adverse impacts from the ongoing conflict.

More broadly, the conflict in Ukraine and threats elsewhere have heightened tensions and highlighted security requirements globally, especially in Europe and the Pacific region, as well as the U.S. We have started to see, and expect to continue to see, increased demand for defense products and services from allies and partner nations, particularly in those areas.

We are actively exploring both opportunities and risks.

In 2022, the pandemic continued to have significant adverse impacts on the global health and macroeconomic environments, particularly with the spread of new variants and other viruses and illnesses, ongoing disruption of the labor force and supply chains, continued inflation, and market volatility and uncertainties.

We expect such adverse impacts to continue.

However, with extraordinary efforts by our employees, our governments and customers, our partners and our company, direct COVID-19-related impacts on our business generally declined in 2022.

While we cannot predict the future course of the pandemic or its consequences, we are not currently assuming significant additional direct COVID-19 related impacts on our business.

*Global Economic Environment*

In part as a result of the COVID-19 pandemic, the global economic environment has experienced, and continues to experience, extraordinary challenges, including high rates of inflation and inflationary pressures; widespread delays and disruptions in supply chains; workforce challenges, including labor shortages (especially in critical skill areas); and market volatility.

These macroeconomic factors have contributed, and we expect will continue to contribute, to increased costs, delays and other performance challenges, as well as increased competing demands for limited

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resources to address such increased costs and other challenges, for our company, our suppliers and partners, and our customers.

For example, as discussed in greater detail in Note 12 to the consolidated financial statements, our latest estimated cost to complete the low-rate initial production (LRIP) phase of the B-21 program reflects updated estimates for adverse impacts from these macroeconomic factors, as well as potential opportunities to address them.

We continue to work hard to mitigate some of the challenges caused by the current macroeconomic environment on our business, including by taking steps to support our suppliers and small businesses and enhancing our workforce through extensive hiring, development and retention efforts.

However, the broader macroeconomic environment, including inflationary pressures and supply chain challenges, continued adversely to affect the company’s results for the year ended December 31, 2022.

We cannot clearly predict how long these macroeconomic challenges will continue, or how they will change over time, or what additional resources will be available, but we expect to see this challenging macroeconomic environment continue adversely to impact the global economy, our customers, our industry and our company in 2023.

In addition, increased interest rates, raising the cost of borrowing for governments, could further impact government spending priorities (in the U.S. and allied countries, in particular), including their demand for defense products.

On March 15, 2022, the President signed into law the Consolidated Appropriations Act for FY 2022, which provided full-year funding for federal agencies, including $782 billion for national defense.

This represented an approximately $42 billion or 6 percent increase above the budget for FY 2021, approximately $30 billion more than the Administration had initially requested.

The Pentagon’s portion of the overall national defense budget for FY 2022 was $743 billion.

On March 28, 2022, the President proposed his budget for FY 2023, which included $813 billion for national defense programs, approximately $31 billion or 4 percent higher than what was appropriated in FY 2022.

The Pentagon’s portion of the overall requested national defense budget was $773 billion.

On December 23, 2022, the President signed the National Defense Authorization Act (NDAA) for FY 2023, which supports approximately $858 billion in FY 2023 funding for national defense, $817 billion of which is for the DoD.

In addition, the FY 2023 NDAA grants DoD discretionary authority under limited circumstances to provide extraordinary relief to contractors to address certain inflationary impacts.

Although discussions have occurred, DoD has not yet issued written guidance for how it intends to exercise this authority.

On December 29, 2022, the President signed an Omnibus appropriations act for FY 2023 that provided $858 billion for national defense programs, approximately $45 billion more than the Administration initially requested for FY 2023 and approximately $76 billion or 10 percent higher than what was appropriated in FY 2022.

The Pentagon’s portion of the overall national defense budget for FY 2023 is $817 billion.

It includes up to $1 billion for extraordinary relief in FY 2023.

In addition to the U.S. national security spending detailed above, the U.S. has pledged over $100 billion in security assistance to address the ongoing conflict in Ukraine across FY 2022 and FY 2023, including approximately $50 billion in DoD spending.

Assistance includes transfers of weapons systems from U.S. inventories, orders for production of additional weapons systems, both to backfill U.S. stockpiles and for Ukraine directly, and assistance from U.S. capabilities.

Current and future requirements related to the conflict in Ukraine, threats in the Pacific regions and other security priorities, as well as global inflation, the national debt, the costs of the pandemic and other domestic priorities, among other things, in the U.S. and globally, will continue to impact our customers’ budgets and priorities, and our industry.

Current tensions within Congress and the wider U.S. political environment may also impact defense budgets and government spending more broadly.

We believe the current global security environment highlights the significant national security threats to our nation and our allies, and the need for strong deterrence and a robust defense capability.

currently expected to allow the Treasury Department to finance the government into 2023.

See Note 2 to the consolidated financial statements for further information regarding the disposition.

COVID-19 was first reported in late 2019.

In March 2020, the World Health Organization characterized COVID-19 as a global pandemic, and the President declared a national emergency concerning the COVID-19 outbreak.

The company has considered and continues to consider and be guided by health data and evolving guidance from the Centers for Disease Control and Prevention (CDC), in particular, as well as other health organizations globally, federal, state and local governmental authorities, and our customers, among others.

We have taken, and continue to take, robust actions to help protect the health, safety and well-being of our employees, to support continued performance, to support our suppliers and local communities, and to continue to serve our customers.

Over the course of 2021, COVID-19 case rates and the health and economic impacts of the pandemic fluctuated dramatically in different communities in the U.S. and globally, particularly with the spread of new variants.

But we continued to see a prolonged impact on the economy, our industry, and our company, with increased challenges for customers and suppliers, labor shortages, supply chain challenges, and increasing inflation, among other impacts.

We expect these and other impacts to continue and they could worsen, depending on the future course of the pandemic and actions taken in connection with it.

In the U.S., the Food and Drug Administration issued emergency use authorization for COVID-19 vaccines and the government began extensive efforts to administer them.

The company also has taken various steps to encourage and facilitate vaccination access for our employees, in accordance with federal guidance.

We have provided paid leave and flexibility for employees to get vaccinated, and strongly encouraged our workforce to take care of themselves and their colleagues.

In September 2021, the White House issued an executive order and guidance from the Safer Federal Workforce Task Force broadly requiring many U.S.-based federal contractors to be fully vaccinated by December 8, 2021 (or to have an approved accommodation).

In early November 2021, the federal government extended that deadline to January 18, 2022.

On December 7, 2021, a federal district judge issued an order, temporarily suspending the government from enforcing the federal contractor mandate.

That order is on appeal.

State and local governments are also taking actions related to the pandemic, imposing additional and varying requirements on industry.

We have taken and are taking steps strongly to encourage our employees to be fully vaccinated (or to have an approved accommodation) to protect our workplace and to position the company to comply with the executive order, guidance, and related contract terms, if and as necessary, as we continue to evaluate the evolving situation and our customers’ requirements.

Evolving government requirements, including regarding a vaccine mandate, along with the broader impacts of the continuing pandemic, could significantly impact

our workforce and performance, as well as those of our suppliers, and result in costs that we may not be able to recover fully.

The company continues to take robust actions globally to protect the health, safety and well-being of our employees, and to serve our customers with continued performance.

We also continue to take steps to support our suppliers, with a particular focus on critical small and midsized business partners, including passing through increased progress payments from the DoD to our suppliers and accelerating payments to certain suppliers.

The company’s fourth quarter 2021 revenue and operating income were affected by the impact of the COVID-19 pandemic on the company and the broader economic environment, including through a tightened labor market, elevated levels of employee leave, evolving government requirements, and supply chain challenges.

These factors are expected to continue and could worsen and affect further our ability (and that of our suppliers) to maintain a qualified workforce and to perform fully for our customers (including with respect to cost and schedule), with delayed or reduced sales and additional liabilities, losses and costs, that we may not be able to recover fully.

Our employees, customers and suppliers, the company, our economy and our global community face both continuing and new or evolving challenges related to the pandemic, and we cannot predict how this dynamic situation will evolve or the impact it will have on the company, or our financial position, results of operations and/or cash flows.

Global threats persist across all domains, from undersea to space to cyber.

The global geopolitical and economic environments also continue to be impacted by uncertainty.

Geopolitical relationships are changing and global economic growth is expected to remain in the low single digits in 2022 reflecting the impact of and uncertainty surrounding geopolitical tensions globally and financial market volatility and the COVID-19 pandemic.

The global economy may also be affected by the residual legal, regulatory and economic impacts of Britain’s exit from the European Union, the full impacts of which are complex and gradually becoming evident.

Rising inflation also could lead to increased interest rates, raising the cost of borrowing for the federal government, which could impact other spending priorities.

On May 28, 2021, the Administration released its budget request for FY 2022.

The budget proposed $753 billion for national defense programs and $770 billion in non-defense discretionary funding.

It continues to be the subject of debate in Congress.

The Administration’s budget request included funding for an infrastructure and economic recovery plan and an education and economic support plan.

On November 15, 2021, the President signed into law the $1.2 trillion Infrastructure and Investment and Jobs Act.

Enactment of the infrastructure plan and any future spending plans, as well as the costs of the pandemic (as discussed more above), may have broader implications for the defense industry, our customers’ budgets and priorities, and the overall economic environment, including the national debt.

However, the threat to U.S. national security remains very substantial.

FY 2022 appropriations have not been enacted to date.

On September 30, 2021, a continuing resolution was enacted, providing funding generally at FY 2021 levels through December 3, 2021; the continuing resolution was further extended through February 18, 2022.

Congressional deliberations over FY 2022 appropriations have demonstrated broad support for national security, with increased funding proposed in certain areas for national defense above the Administration’s budget request.

It remains uncertain whether and, if so, when the government will approve FY 2022 appropriations, with which programs funded at what levels, and for how long the government will operate under a continuing resolution, with potential impacts on our programs and new starts, in particular.

We are exposed to market risk with respect to our portfolio of marketable securities with a fair value of [removed: $418] [added: $332] million at December 31, [removed: 2021.][added: 2022.]

We are exposed to interest rate risk on variable-rate short-term credit facilities for which there were no borrowings outstanding at December 31, [removed: 2021.][added: 2022.]

At December 31, [removed: 2021,] [added: 2022,] we have [removed: $12.8] [added: $12.9] billion of long-term debt, primarily consisting of fixed-rate debt, with a fair value of approximately [removed: $15.1] [added: $12.1] billion.

At December 31, [removed: 2021,] [added: 2022,] foreign currency forward contracts with a notional amount of [removed: $120] [added: $221] million were outstanding.

At December 31, [removed: 2021,] [added: 2022,] a 10 percent unfavorable foreign exchange rate movement would not have a material impact on our consolidated financial position, annual results of operations and/or cash flows.

[removed: Bids] [added: Historically, we generally have been able to anticipate such increases in costs when pricing our contracts, and our bids] for longer-term firm fixed-price contracts [added: have] typically [removed: include] [added: included] assumptions [removed: for labor and other] [added: regarding] cost escalations in amounts that [removed: historically] have been sufficient to cover [added: most] cost increases over the period of [removed: performance.][added: performance, including as offset by operational efficiencies.]

Additionally, if we were to refinance our long-term debt, it may be refinanced at higher interest rates.

The global macroeconomic environment has experienced, and continues to experience, extraordinary challenges, including the highest rates of inflation in 40 years.

These macroeconomic factors have contributed, and we expect will continue to contribute, to increased costs, among other concerns.

We cannot predict how long these inflationary pressures will continue, or how they may change over time, but we expect to see continued impacts on the global economy, our customers, our industry and our company.

However, the company, its subcontractors and other suppliers, have experienced, and continue to experience, increased pressures from recent heightened levels of inflation and the challenges of the current macroeconomic environment, which we have not been able to fully mitigate.

If inflationary pressures continue to persist, they may continue to have an adverse impact on our consolidated financial position, results of operations and/or cash flows.

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We have generally been able to anticipate increases in costs when pricing our contracts.

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Northrop Grumman Corporation (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”) is a leading global aerospace and defense [added: technology] company.

[removed: The company] [added: We] developed into one of the largest defense [removed: contractors] [added: companies] in the world through a series of acquisitions, as well as organic growth, including the following:

At December 31, [removed: 2021,] [added: 2022,] the company was aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems.

*Battle Management & Missile Systems* – designs, develops and integrates [removed: multi-domain] [added: all-domain] command and control (C2) and weapons systems, including munitions and missiles.

- Precision Guidance Kit (PGK), replaces conventional fuzes for artillery and mortar munitions and transforms them into Global Positioning System enabled precision guided weapons; [removed: and]

- Global system sustainment and operations support for the F-35, B-2, [removed: E-8C JSTARS surveillance aircraft,] P-3 Orion, [added: E-6B Mercury,] KC-30A multi-role tanker, C-27J transport, Global Hawk and Triton programs;

- Littoral Combat Ship Mission Module Integration, which provides engineering design, support and production of mission modules for U.S. Navy littoral combat ships; [added: and]

- DDG Modernization, which is comprised of several subsystems to support modernization of Arleigh Burke-class guided missile destroyers including Integrated Bridge and Navigation Systems (IBNS) and ship control [removed: systems; and][added: systems.]

*Networked Information Solutions* [removed: -] [added: –] delivers products, systems and services in the areas of advanced communications and network systems, full spectrum cyber solutions, secure processing, transformational computing, advanced technology development, and Signals Intelligence (SIGINT) mission systems.

- Exploitation and cyber programs, which provide cyber and intelligence domain support through unique intelligence and cyber [removed: capabilities, and;][added: capabilities; and]

The sector is reported in two business areas: [added: Space and] Launch & Strategic [removed: Missiles, and Space.][added: Missiles.]

- Missile defense systems, interceptors, targets, mission processing and boosters for the Missile Defense Agency's (MDA) Next-Generation Interceptor (NGI), Ground-based Midcourse Defense [removed: (GMD) system and Ground Based Interceptor (GBI);][added: Weapon Systems (GWS);]

- [removed: Advanced Extremely High Frequency (AEHF), Enhanced Polar System (EPS),] Evolved Strategic SATCOM [removed: (ESS),] [added: (ESS)] and Protected Tactical SATCOM (PTS) satellites and payloads providing survivable, protected communications to U.S. forces;

Sales to the U.S. government accounted for [removed: 85] [added: 86] percent, [removed: 84] [added: 85] percent and [removed: 83] [added: 84] percent of sales during the years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019,] [added: 2020,] respectively.

At December 31, [removed: 2021,] [added: 2022,] total backlog, which is equivalent to the company’s remaining performance obligations, was [removed: $76.0] [added: $78.7] billion as compared with [removed: $81.0] [added: $76.0] billion at December 31, [removed: 2020.][added: 2021.]

We have experienced challenges with access to certain raw materials due to [added: macroeconomic factors and] several global events such as microelectronics [removed: shortages] [added: shortages, COVID-19] and [removed: COVID-19.][added: geopolitical conflicts.]

Our culture [removed: is an important factor in our ability] [added: and values enable us] to continue attracting [removed: and retaining] qualified [removed: employees,] [added: talent,] particularly those with security clearances and requisite skills in multiple areas, including science, technology, engineering and math.

[removed: This] [added: During 2022, despite facing a tight labor market, this] focus [added: on our culture and workforce] was a factor in our ability to hire approximately [removed: 9,500] [added: 16,000] new [removed: employees in 2021] [added: employees,] and as of December 31, [removed: 2021,] [added: 2022,] we have approximately [removed: 88,000] [added: 95,000] employees.

Additional information regarding our human capital strategy is available in our [removed: Sustainability] [added: Environmental, Social, and Governance (ESG)] Report and Proxy Statement, which can be found on our company website.

Information on our website, including our [added: ESG Report (formerly our] Sustainability [removed: Report,] [added: Report),] is not incorporated by reference into this Annual Report.

We believe our [added: culture and] values are vital to the [removed: continued and future] [added: ongoing] success of the company, [removed: and in] [added: including] our ability to attract and retain a [added: talented and] diverse workforce.

Our values are also integral to our commitment to long-term sustainability, with robust [removed: environmental, social and governance (ESG)] [added: ESG] practices across our company.

[removed: All] [added: Our] employees are empowered to raise concerns without fear of reprisal.

[removed: We employ] [added: In addition to full-time ethics professionals, we also have over] 140 business conduct advisors [removed: whose job is to] [added: who] promote values and an ethical culture within the company.

Our annual [removed: employee] [added: engagement] survey gives employees [removed: the opportunity] [added: a voice and a mechanism] to provide feedback on our culture.

This survey is managed by a third-party vendor to encourage [added: employee] candor [removed: and solicit feedback] on [removed: many aspects of engagement,] [added: key engagement drivers,] including company leadership, culture, inclusion and career development.

In [removed: 2021, our employee response rate was 82 percent,] [added: 2022, 79 percent of employees responded to the survey,] an indication that our employees believe their feedback [removed: is important,] [added: matters,] and we were named a “High Performing [removed: Company” by the third-party vendor based on our strong survey results.]

Our leaders review the survey [removed: feedback] [added: responses] and work [added: collaboratively] with their teams to take [removed: action] [added: meaningful actions] based on survey results.

Diversity, equity and inclusion (DE&I) [removed: are, and have long been, critical] [added: is vital] to our culture and our company’s success.

Across our [removed: total] [added: U.S.] employee population, as of December 31, [removed: 2021,] [added: 2022,] 25 percent are female, [removed: 36] [added: 37] percent are people of color, 18 percent are veterans and [removed: 9] [added: 8] percent are persons with disabilities.

*Talent [removed: Acquisition, Management and Development*][added: Management*]

We hold regular talent review discussions to ensure [removed: insight into] [added: line of sight to] talent at various levels of the organization.

[removed: We design our] [added: Our] employee development programs [added: are designed] to strengthen employee skills [removed: aligned] [added: that align] to our current and future business needs, encourage knowledge [removed: transfer] [added: sharing] and support career [removed: growth] [added: progression] and [removed: progression.][added: growth.]

[removed: In late 2020, we launched] [added: We utilize] My Learning Experience, a machine learning enabled content aggregator designed to create a unique and personalized learning experience for each employee.

Our technical cohort programs are [added: uniquely] designed to cultivate technical, domain expertise and collaborative thought leadership for early through advanced career levels.

As our company continues to grow, we rely on an integrated talent acquisition [removed: program.][added: approach.]

In order to accomplish our goals, we seek talent with [removed: different] [added: unique] perspectives, skills and experiences; maintain strategic relationships with colleges; offer a robust employee referral program; and partner with numerous diversity organizations, military organizations and [removed: our] trusted external [removed: partners.][added: partners, with a commitment to growing and supporting a diverse talent pipeline.]

[removed: The company continues to monitor] [added: Amidst] the evolving [added: and, at times, challenging] hiring environment, [removed: while applying] [added: we apply] agile recruiting methods [added: as we work] to [added: adapt to the changing labor marketplace and to] ensure employees and candidates have an exceptional experience.

During [removed: 2021,] [added: 2022,] we have taken, and continue to take, robust actions in response to the COVID-19 pandemic to help protect the health, safety and well-being of our employees and others.

Approximately [removed: 3,900] [added: 4,000] employees are covered by 15 collective agreements in the U.S., of which we negotiated [removed: five] [added: four] renewals in [removed: 2021] [added: 2022] and expect to negotiate [removed: four renewals] [added: one renewal] in [removed: 2022.][added: 2023.]

- Hypersonic Attack Cruise Missile (HACM) air-breathing, scramjet propulsion subsystem for the hypersonic air-launched cruise missile to travel at speeds of Mach 5 or greater; and

- Forward Area Air Defense Command and Control (FAAD C2), the Army’s long-standing program of record for short range air defense and Counter Rocket, Artillery and Mortar (C-RAM), as well as the interim C2 for Counter Unmanned Aircraft Systems (C-UAS).

- Space Development Agency Tracking and Transport layers providing missile warning/tracking and resilient, low-latency, high-volume data transport communication systems; and

- James Webb Space Telescope (JWST) operations and sustainment contract.

- 63-inch diameter Graphite Epoxy Motor (GEM 63) and the extended length variation (GEM 63XL) solid rocket boosters used to provide lift capability for the ATLAS V and Vulcan launch vehicles;

In some cases, these challenges have significantly increased the cost and/or lead time required to obtain certain raw materials.

Nonetheless, these challenges have not to date materially impacted our ability to perform on our contracts.

Fostering a culture that offers employees opportunities to live our values, deliver for our customers, and act responsibly and sustainably is central to our diverse and talented workforce.

Company” by the third party vendor based on our survey results.

Our ability to leverage the power of our diverse workforce enhances employee engagement and enables us to innovate, perform and deliver on quality, which results in value for our shareholders, customers, and employees.

At the vice president level, 34 percent are female and 19 percent are people of color.

Northrop Grumman’s talent strategy is designed to maximize the full potential of our people and our business.

We are focused on providing an end-to-end experience from pre-hire to retirement.

This includes creating inclusive, employee-centric experiences, cultivating leadership, offering multiple development pathways and expanding the talent pipeline into and through the company.

We focus on accelerating learning and development of our leaders by providing a combination of experiences and education.

Our Leading for Impact Program offers developmental paths for new and experienced managers seeking to refresh or build their leadership capabilities.

Nearly 3,000 leaders have honed their skills leveraging various learning modalities, including virtual and in-person instructor-led, web-based training and micro-courses to support our managers.

| Cost-type contracts | | | | | | $ | 18,110 | | | | | $ | 594 | | | | | $ | 7 | | | | | $ | 18,711 | | | | | 51 | | % |

| Fixed-price contracts | | | | | | 13,213 | | | | | | 4,254 | | | | | | 424 | | | | | | 17,891 | | | | | | 49 | | % |

| Total sales | | | | | | $ | 31,323 | | | | | $ | 4,848 | | | | | $ | 431 | | | | | $ | 36,602 | | | | | 100 | | % |

In 2022, we announced our next generation environmental sustainability goals.

These goals focus on Northrop Grumman’s facilities in addition to supply chain partners and customers:

- Net zero greenhouse gas emissions in operations by 2035;

- Source 50 percent of total electricity from renewable sources by 2030;

- Strengthen leadership in operational footprint reduction through setting and achieving pioneering targets in environmental stewardship by 2025, including potable water use and solid waste to landfill;

- In collaboration with key customers, work to develop a pioneering product stewardship program focused on material efficiency, product design and life cycle assessment;

- Update the company’s "Standards of Business Conduct for Suppliers and Other Trading Partners" to incorporate industry-leading sustainability practices by 2023;

- Expand Technology for Conservation initiatives in proximity to Northrop Grumman's U.S. locations by 2030, in collaboration with external partners.

Additional information regarding our environmental sustainability goals is available in our ESG Report, which can be found on our company website.

- Counter Rocket, Artillery and Mortar (C-RAM), a set of systems used to detect and destroy incoming threats;

- U.S. Army’s Mission Command Training Program (MCTP), providing the design, development and support to train and exercise senior Army Commanders on modern warfighting operations.

- Offshore Patrol Cutter (OPC), the integrator for C5ISR systems on the U.S. Coast Guard OPC including integrated bridge, navigation, command and control, computing network, machinery and propulsion control.

- Space sustainability driven by on orbit servicing vehicles Mission Extension Vehicle (MEV) 1 and 2; and

- James Webb Space Telescope (JWST), a large infrared telescope built for NASA that was launched on December 25, 2021 to study the origins of the universe.

In connection with the IT services divestiture, the company reduced backlog by $1.4 billion during the first quarter of 2021 ($1.0 billion at Defense Systems, $0.2 billion at Mission Systems and $0.2 billion at Space Systems).

Nonetheless, these challenges have not to date led to significant cost increases or schedule delays.

Creating a diverse, talented and inclusive workplace is central to our culture, employee engagement, innovation and excellence, and in performing and delivering on our commitments.

Our focus on DE&I enhances engagement and increases innovation and quality, enabling us to deliver better performance for our shareholders, customers, and employees.

Over the past 10 years, at the vice president level, we have more than doubled the representation of females from 16 percent to 35 percent and increased the representation of people of color by approximately 65 percent, from 11 percent to 18 percent.

We execute our Talent Management strategy with the whole employee experience in mind.

We utilize an employee experience continuum that focuses on key career milestones and aligns our employee development, engagement and retention efforts with the specific needs of our employees throughout their careers.

We believe this holistic approach to talent management results in a better experience for our employees, from recruiting to retirement.

| Cost-type contracts | | | | | | $ | 17,357 | | | | | $ | 653 | | | | | $ | 18 | | | | | $ | 18,028 | | | | | 51 | | % |

| Fixed-price contracts | | | | | | 12,977 | | | | | | 4,329 | | | | | | 333 | | | | | | 17,639 | | | | | | 49 | | % |

| Total sales | | | | | | $ | 30,334 | | | | | $ | 4,982 | | | | | $ | 351 | | | | | $ | 35,667 | | | | | 100 | | % |

In 2015, we announced our 2020 environmental sustainability goals: to reduce absolute greenhouse gas emissions by 30 percent from 2010 levels; to reduce potable water use by 20 percent from 2014 levels; and to achieve a 70 percent solid waste diversion rate (away from landfills).

In 2021, we measured our performance against these goals and exceeded our greenhouse gas goal by reducing emissions 44 percent and met our potable water reduction goal of 20 percent.

We made strong progress in increasing our solid waste diversion from landfills, achieving a 69 percent diversion rate, falling just short of our goal.

We were challenged by changes in collection methods and waste haulers at some sites, related, in some cases, to COVID-19.

We are continuing our commitment to climate and environmental sustainability and are in the process of finalizing the next generation of goals for 2022 and beyond.

For the fiscal year ended December 31, [removed: 2021][added: 2022]

For the transition period from [added: _____] to [removed: Commission file number 1-16411][added: _____]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the [removed: Act][added: Act.]

As of June 30, [removed: 2021,] [added: 2022,] the aggregate market value of the common stock (based upon the closing price of the stock on the New York Stock Exchange) of the registrant held by non-affiliates was approximately [removed: $58.2] [added: $74.0] billion.

As of January [removed: 24, 2022, 156,101,934] [added: 23, 2023, 153,053,371] shares of common stock were outstanding.

Portions of Northrop Grumman Corporation’s Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.

| Item 1. | | | [removed: [Business](#i0f90a9f5f44046e1b24d871e2f754fd8_13)] [added: [Business](#i39e0046739014822b32f7ec429e2eba7_13)] | | | [removed: [1](#i0f90a9f5f44046e1b24d871e2f754fd8_13)] [added: [1](#i39e0046739014822b32f7ec429e2eba7_13)] | | |

| Item 1A. | | | [Risk [removed: Factors](#i0f90a9f5f44046e1b24d871e2f754fd8_25)] [added: Factors](#i39e0046739014822b32f7ec429e2eba7_25)] | | | [removed: [10](#i0f90a9f5f44046e1b24d871e2f754fd8_25)] [added: [10](#i39e0046739014822b32f7ec429e2eba7_25)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#i0f90a9f5f44046e1b24d871e2f754fd8_28)] [added: Comments](#i39e0046739014822b32f7ec429e2eba7_28)] | | | [removed: [24](#i0f90a9f5f44046e1b24d871e2f754fd8_28)] [added: [24](#i39e0046739014822b32f7ec429e2eba7_28)] | | |

| Item 2. | | | [removed: [Properties](#i0f90a9f5f44046e1b24d871e2f754fd8_31)] [added: [Properties](#i39e0046739014822b32f7ec429e2eba7_31)] | | | [removed: [26](#i0f90a9f5f44046e1b24d871e2f754fd8_31)] [added: [26](#i39e0046739014822b32f7ec429e2eba7_31)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#i0f90a9f5f44046e1b24d871e2f754fd8_34)] [added: Proceedings](#i39e0046739014822b32f7ec429e2eba7_34)] | | | [removed: [27](#i0f90a9f5f44046e1b24d871e2f754fd8_34)] [added: [27](#i39e0046739014822b32f7ec429e2eba7_34)] | | |

| Item 4. | | | [Mine Safety [removed: Disclosures](#i0f90a9f5f44046e1b24d871e2f754fd8_37)] [added: Disclosures](#i39e0046739014822b32f7ec429e2eba7_37)] | | | [removed: [27](#i0f90a9f5f44046e1b24d871e2f754fd8_37)] [added: [27](#i39e0046739014822b32f7ec429e2eba7_37)] | | |

| Item 5. | | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#i0f90a9f5f44046e1b24d871e2f754fd8_43)] [added: Securities](#i39e0046739014822b32f7ec429e2eba7_43)] | | | [removed: [28](#i0f90a9f5f44046e1b24d871e2f754fd8_43)] [added: [28](#i39e0046739014822b32f7ec429e2eba7_43)] | | |

| Item 6. | | | [removed: [\[Reserved\]](#i0f90a9f5f44046e1b24d871e2f754fd8_46)] [added: \[Reserved\]] | | | [removed: [30](#i0f90a9f5f44046e1b24d871e2f754fd8_46)] [added: [29](#i39e0046739014822b32f7ec429e2eba7_1724)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i0f90a9f5f44046e1b24d871e2f754fd8_49)] [added: Operations](#i39e0046739014822b32f7ec429e2eba7_49)] | | | [removed: [31](#i0f90a9f5f44046e1b24d871e2f754fd8_49)] [added: [30](#i39e0046739014822b32f7ec429e2eba7_49)] | | |

| | | | [Consolidated Operating [removed: Results](#i0f90a9f5f44046e1b24d871e2f754fd8_55)] [added: Results](#i39e0046739014822b32f7ec429e2eba7_55)] | | | [removed: [33](#i0f90a9f5f44046e1b24d871e2f754fd8_55)] [added: [33](#i39e0046739014822b32f7ec429e2eba7_55)] | | |

| | | | [Segment Operating [removed: Results](#i0f90a9f5f44046e1b24d871e2f754fd8_58)] [added: Results](#i39e0046739014822b32f7ec429e2eba7_58)] | | | [removed: [37](#i0f90a9f5f44046e1b24d871e2f754fd8_58)] [added: [36](#i39e0046739014822b32f7ec429e2eba7_58)] | | |

| | | | [Product and Service [removed: Analysis](#i0f90a9f5f44046e1b24d871e2f754fd8_61)] [added: Analysis](#i39e0046739014822b32f7ec429e2eba7_61)] | | | [removed: [41](#i0f90a9f5f44046e1b24d871e2f754fd8_61)] [added: [41](#i39e0046739014822b32f7ec429e2eba7_61)] | | |

| | | | [Liquidity and Capital [removed: Resources](#i0f90a9f5f44046e1b24d871e2f754fd8_67)] [added: Resources](#i39e0046739014822b32f7ec429e2eba7_67)] | | | [removed: [42](#i0f90a9f5f44046e1b24d871e2f754fd8_67)] [added: [42](#i39e0046739014822b32f7ec429e2eba7_67)] | | |

| | | | [Critical Accounting Policies, Estimates and [removed: Judgments](#i0f90a9f5f44046e1b24d871e2f754fd8_70)] [added: Judgments](#i39e0046739014822b32f7ec429e2eba7_70)] | | | [removed: [44](#i0f90a9f5f44046e1b24d871e2f754fd8_70)] [added: [44](#i39e0046739014822b32f7ec429e2eba7_70)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i0f90a9f5f44046e1b24d871e2f754fd8_76)] [added: Risk](#i39e0046739014822b32f7ec429e2eba7_73)] | | | [removed: [49](#i0f90a9f5f44046e1b24d871e2f754fd8_76)] [added: [50](#i39e0046739014822b32f7ec429e2eba7_73)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#i0f90a9f5f44046e1b24d871e2f754fd8_79)] [added: Data](#i39e0046739014822b32f7ec429e2eba7_76)] | | | [removed: [50](#i0f90a9f5f44046e1b24d871e2f754fd8_79)] [added: [51](#i39e0046739014822b32f7ec429e2eba7_76)] | | |

| | | | [Consolidated Statements of Earnings and Comprehensive [removed: Income](#i0f90a9f5f44046e1b24d871e2f754fd8_85)] [added: Income](#i39e0046739014822b32f7ec429e2eba7_82)] | | | [removed: [53](#i0f90a9f5f44046e1b24d871e2f754fd8_85)] [added: [54](#i39e0046739014822b32f7ec429e2eba7_82)] | | |

| | | | [Consolidated Statements of Financial [removed: Position](#i0f90a9f5f44046e1b24d871e2f754fd8_88)] [added: Position](#i39e0046739014822b32f7ec429e2eba7_85)] | | | [removed: [54](#i0f90a9f5f44046e1b24d871e2f754fd8_88)] [added: [55](#i39e0046739014822b32f7ec429e2eba7_85)] | | |

| | | | [Consolidated Statements of Cash [removed: Flows](#i0f90a9f5f44046e1b24d871e2f754fd8_91)] [added: Flows](#i39e0046739014822b32f7ec429e2eba7_88)] | | | [removed: [55](#i0f90a9f5f44046e1b24d871e2f754fd8_91)] [added: [56](#i39e0046739014822b32f7ec429e2eba7_88)] | | |

| | | | [Consolidated Statements of Changes in Shareholders’ [removed: Equity](#i0f90a9f5f44046e1b24d871e2f754fd8_94)] [added: Equity](#i39e0046739014822b32f7ec429e2eba7_91)] | | | [removed: [56](#i0f90a9f5f44046e1b24d871e2f754fd8_94)] [added: [57](#i39e0046739014822b32f7ec429e2eba7_91)] | | |

| | | | [Notes to Consolidated Financial [removed: Statements](#i0f90a9f5f44046e1b24d871e2f754fd8_97)] [added: Statements](#i39e0046739014822b32f7ec429e2eba7_94)] | | | [removed: [57](#i0f90a9f5f44046e1b24d871e2f754fd8_97)] [added: [58](#i39e0046739014822b32f7ec429e2eba7_94)] | | |

| | | | [1. Summary of Significant Accounting [removed: Policies](#i0f90a9f5f44046e1b24d871e2f754fd8_100)] [added: Policies](#i39e0046739014822b32f7ec429e2eba7_97)] | | | [removed: [57](#i0f90a9f5f44046e1b24d871e2f754fd8_100)] [added: [58](#i39e0046739014822b32f7ec429e2eba7_97)] | | |

| | | | [3. Earnings Per Share, Share Repurchases and Dividends on Common [removed: Stock](#i0f90a9f5f44046e1b24d871e2f754fd8_106)] [added: Stock](#i39e0046739014822b32f7ec429e2eba7_103)] | | | [removed: [65](#i0f90a9f5f44046e1b24d871e2f754fd8_106)] [added: [65](#i39e0046739014822b32f7ec429e2eba7_103)] | | |

| | | | [4. Accounts Receivable, [removed: Net](#i0f90a9f5f44046e1b24d871e2f754fd8_109)] [added: Net](#i39e0046739014822b32f7ec429e2eba7_106)] | | | [removed: [66](#i0f90a9f5f44046e1b24d871e2f754fd8_109)] [added: [66](#i39e0046739014822b32f7ec429e2eba7_106)] | | |

| | | | [5. Unbilled Receivables, [removed: Net](#i0f90a9f5f44046e1b24d871e2f754fd8_112)] [added: Net](#i39e0046739014822b32f7ec429e2eba7_109)] | | | [removed: [66](#i0f90a9f5f44046e1b24d871e2f754fd8_112)] [added: [67](#i39e0046739014822b32f7ec429e2eba7_109)] | | |

| | | | [6. Inventoried Costs, [removed: Net](#i0f90a9f5f44046e1b24d871e2f754fd8_115)] [added: Net](#i39e0046739014822b32f7ec429e2eba7_112)] | | | [removed: [67](#i0f90a9f5f44046e1b24d871e2f754fd8_115)] [added: [67](#i39e0046739014822b32f7ec429e2eba7_112)] | | |

| | | | [8. Goodwill and Other Purchased Intangible [removed: Assets](#i0f90a9f5f44046e1b24d871e2f754fd8_121)] [added: Assets](#i39e0046739014822b32f7ec429e2eba7_118)] | | | [removed: [70](#i0f90a9f5f44046e1b24d871e2f754fd8_121)] [added: [71](#i39e0046739014822b32f7ec429e2eba7_118)] | | |

| | | | [9. Fair Value of Financial [removed: Instruments](#i0f90a9f5f44046e1b24d871e2f754fd8_124)] [added: Instruments](#i39e0046739014822b32f7ec429e2eba7_121)] | | | [removed: [71](#i0f90a9f5f44046e1b24d871e2f754fd8_124)] [added: [71](#i39e0046739014822b32f7ec429e2eba7_121)] | | |

| | | | [11. Investigations, Claims and [removed: Litigation](#i0f90a9f5f44046e1b24d871e2f754fd8_130)] [added: Litigation](#i39e0046739014822b32f7ec429e2eba7_127)] | | | [removed: [73](#i0f90a9f5f44046e1b24d871e2f754fd8_130)] [added: [74](#i39e0046739014822b32f7ec429e2eba7_127)] | | |

| | | | [12. Commitments and [removed: Contingencies](#i0f90a9f5f44046e1b24d871e2f754fd8_133)] [added: Contingencies](#i39e0046739014822b32f7ec429e2eba7_130)] | | | [removed: [74](#i0f90a9f5f44046e1b24d871e2f754fd8_133)] [added: [75](#i39e0046739014822b32f7ec429e2eba7_130)] | | |

| | | | [13. Retirement [removed: Benefits](#i0f90a9f5f44046e1b24d871e2f754fd8_136)] [added: Benefits](#i39e0046739014822b32f7ec429e2eba7_133)] | | | [removed: [75](#i0f90a9f5f44046e1b24d871e2f754fd8_136)] [added: [76](#i39e0046739014822b32f7ec429e2eba7_133)] | | |

| | | | [14. Stock Compensation Plans and Other Compensation [removed: Arrangements](#i0f90a9f5f44046e1b24d871e2f754fd8_139)] [added: Arrangements](#i39e0046739014822b32f7ec429e2eba7_136)] | | | [removed: [80](#i0f90a9f5f44046e1b24d871e2f754fd8_139)] [added: [81](#i39e0046739014822b32f7ec429e2eba7_136)] | | |

| | | | [16. Segment [removed: Information](#i0f90a9f5f44046e1b24d871e2f754fd8_145)] [added: Information](#i39e0046739014822b32f7ec429e2eba7_142)] | | | [removed: [84](#i0f90a9f5f44046e1b24d871e2f754fd8_145)] [added: [85](#i39e0046739014822b32f7ec429e2eba7_142)] | | |

| Item 9. | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#i0f90a9f5f44046e1b24d871e2f754fd8_151)] [added: Disclosure](#i39e0046739014822b32f7ec429e2eba7_145)] | | | [removed: [89](#i0f90a9f5f44046e1b24d871e2f754fd8_151)] [added: [90](#i39e0046739014822b32f7ec429e2eba7_145)] | | |

Commission file number 1-16411

| | | | [PART I](#i39e0046739014822b32f7ec429e2eba7_10) | | | | | |

| | | | [PART II](#i39e0046739014822b32f7ec429e2eba7_40) | | | | | |

| | | | [Overview](#i39e0046739014822b32f7ec429e2eba7_52) | | | [30](#i39e0046739014822b32f7ec429e2eba7_52) | | |

| | | | [Backlog](#i39e0046739014822b32f7ec429e2eba7_64) | | | [42](#i39e0046739014822b32f7ec429e2eba7_64) | | |

| | | | [Report of Independent Registered Public Accounting Firm](#i39e0046739014822b32f7ec429e2eba7_79) | | | [51](#i39e0046739014822b32f7ec429e2eba7_79) | | |

| | | | [2. Dispositions](#i39e0046739014822b32f7ec429e2eba7_100) | | | [65](#i39e0046739014822b32f7ec429e2eba7_100) | | |

| | | | [7. Income Taxes](#i39e0046739014822b32f7ec429e2eba7_115) | | | [68](#i39e0046739014822b32f7ec429e2eba7_115) | | |

| | | | [10. Debt](#i39e0046739014822b32f7ec429e2eba7_124) | | | [72](#i39e0046739014822b32f7ec429e2eba7_124) | | |

| | | | [15. Leases](#i39e0046739014822b32f7ec429e2eba7_139) | | | [84](#i39e0046739014822b32f7ec429e2eba7_139) | | |

| | | | [PART III](#i39e0046739014822b32f7ec429e2eba7_163) | | | | | |

| | | | [PART IV](#i39e0046739014822b32f7ec429e2eba7_181) | | | | | |

| | | | [Signatures](#i39e0046739014822b32f7ec429e2eba7_190) | | | [104](#i39e0046739014822b32f7ec429e2eba7_190) | | |

| | | | [PART I](#i0f90a9f5f44046e1b24d871e2f754fd8_10) | | | | | |

| | | | [PART II](#i0f90a9f5f44046e1b24d871e2f754fd8_40) | | | | | |

| | | | [Overview](#i0f90a9f5f44046e1b24d871e2f754fd8_52) | | | [31](#i0f90a9f5f44046e1b24d871e2f754fd8_52) | | |

| | | | [Backlog](#i0f90a9f5f44046e1b24d871e2f754fd8_64) | | | [41](#i0f90a9f5f44046e1b24d871e2f754fd8_64) | | |

| | | | [Report of](#i0f90a9f5f44046e1b24d871e2f754fd8_82) [Indep](#i0f90a9f5f44046e1b24d871e2f754fd8_82)[endent](#i0f90a9f5f44046e1b24d871e2f754fd8_82) [Regist](#i0f90a9f5f44046e1b24d871e2f754fd8_82)[ered](#i0f90a9f5f44046e1b24d871e2f754fd8_82) [P](#i0f90a9f5f44046e1b24d871e2f754fd8_82)[ub](#i0f90a9f5f44046e1b24d871e2f754fd8_82)[lic A](#i0f90a9f5f44046e1b24d871e2f754fd8_82)[ccounting Fir](#i0f90a9f5f44046e1b24d871e2f754fd8_82)[m](#i0f90a9f5f44046e1b24d871e2f754fd8_82) | | | [50](#i0f90a9f5f44046e1b24d871e2f754fd8_82) | | |

| | | | [2. Dispositions](#i0f90a9f5f44046e1b24d871e2f754fd8_103) | | | [64](#i0f90a9f5f44046e1b24d871e2f754fd8_103) | | |

| | | | [7. Income Taxes](#i0f90a9f5f44046e1b24d871e2f754fd8_118) | | | [67](#i0f90a9f5f44046e1b24d871e2f754fd8_118) | | |

| | | | [10. Debt](#i0f90a9f5f44046e1b24d871e2f754fd8_127) | | | [71](#i0f90a9f5f44046e1b24d871e2f754fd8_127) | | |

| | | | [15. Leases](#i0f90a9f5f44046e1b24d871e2f754fd8_142) | | | [83](#i0f90a9f5f44046e1b24d871e2f754fd8_142) | | |

| | | | [PART III](#i0f90a9f5f44046e1b24d871e2f754fd8_166) | | | | | |

| | | | [PART IV](#i0f90a9f5f44046e1b24d871e2f754fd8_184) | | | | | |

| | | | [Signatures](#i0f90a9f5f44046e1b24d871e2f754fd8_193) | | | [104](#i0f90a9f5f44046e1b24d871e2f754fd8_193) | | |

Words such as “will,” “expect,” “anticipate,” “intend,” “may,” “could,” “should,” “plan,” “project,” “forecast,” “believe,” “estimate,” [added: “guidance,”] “outlook,” “trends,” “goals” and similar expressions generally identify these forward-looking statements.

These risks and uncertainties are amplified by the global [added: macroeconomic, health, security and political environments, including inflationary pressures, labor and supply chain challenges and the] COVID-19 pandemic, which [removed: has] [added: have] caused and will continue to cause significant challenges, instability and uncertainty.

- significant delays or reductions in appropriations [added: and/or] for our programs, and U.S. government funding and program support more [removed: broadly][added: broadly, including as a result of a prolonged continuing resolution and/or government shutdown, and/or related to hostilities and other global events]

- investigations, claims, disputes, enforcement actions, litigation [added: (including criminal, civil and administrative)] and/or other legal proceedings

- the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we [removed: participate and] [added: participate, including] the impact on our reputation and our ability to do business

- changes in procurement and other laws, [added: SEC, DoD and other rules and] regulations, contract terms and practices applicable to our industry, findings by the U.S. government as to our compliance with such requirements, [added: more aggressive enforcement of such requirements] and changes in our customers’ business practices globally

- cyber and other security threats or disruptions faced by us, our customers or our suppliers and other [removed: partners][added: partners, and changes in related regulations]

- the performance and [removed: financial] viability of our subcontractors and suppliers and the availability and pricing of raw materials and [removed: components][added: components, particularly with inflationary pressures, increased costs, shortages in labor and financial resources, supply chain disruptions, and extended material lead times]

- [added: environmental, social and governance matters, including especially] climate change, [removed: its] [added: their] impacts on our company, our operations and our stakeholders (employees, suppliers, customers, shareholders and regulators), and changes in laws, regulations and priorities related to [removed: greenhouse gas emissions and other climate change related concerns][added: these issues]

- our exposure to additional risks as a result of our international business, including risks related to [added: global security,] geopolitical and economic factors, [added: misconduct,] suppliers, laws and regulations

- our ability to develop new products and [removed: technologies] [added: technologies, progress digital transformation,] and maintain technologies, facilities, and equipment to win new competitions and meet the needs of our customers

- the adequacy and availability [removed: of our] [added: of, and ability to obtain,] insurance coverage, customer indemnifications or other liability protections

- the future investment performance of plan assets, [added: gains or losses associated with] changes in [added: valuation of marketable securities related to our non-qualified benefit plans, changes in] actuarial assumptions associated with our pension and other postretirement benefit plans and legislative or other regulatory actions impacting our pension and postretirement benefit obligations

- changes in business conditions that could impact business investments and/or recorded goodwill or the value of other long-lived [removed: assets][added: assets, and other potential future liabilities]

- significant delays or reductions in payments as a result of or related to a breach of the debt ceiling

- the use of estimates when accounting for our contracts and the effect of contract cost growth and our efforts to recover or offset such costs and/or changes in estimated contract costs and revenues, including as a result of inflationary pressures, labor shortages, supply chain challenges and/or other macroeconomic factors, and risks related to management’s judgments and assumptions in estimating and/or projecting contract revenue and performance which may be inaccurate

- continued pressures from macroeconomic trends, including inflation, supply chain delays and disruptions, and labor challenges, including on costs, schedules, performance and ability to meet expectations

- impacts related to health epidemics, pandemics, including the COVID-19 pandemic, such as labor, supply chain or financial, schedule or cost impacts (without corresponding recovery), among other impacts

- our ability to attract and retain a qualified, talented and diverse workforce with the necessary security clearances to meet our performance obligations

- the use of estimates when accounting for our contracts and the effect of contract cost growth and/or changes in estimated contract revenues and costs

- impacts of the COVID-19 pandemic (or future health epidemics, pandemics or similar outbreaks), including potential new variants, case surges or prolonged recovery periods, their effects on the broader environment, and varying related government requirements, on: our business, our ability to maintain a qualified and productive workforce, work slowdowns or stoppages, labor shortages, supply chain and logistics challenges, costs we cannot recover and liabilities for which we are not compensated, performance challenges (including cost and schedule), government funding, changes in government acquisition priorities and processes, government payment rules and practices, insurance challenges, and potential impacts on access to capital, the markets and the fair value of our assets

- the ability to maintain a qualified workforce with the required security clearances and requisite skills

At December 31, [removed: 2021,] [added: 2022,] we had approximately [removed: 51] [added: 52] million square feet of floor space at [removed: 489] [added: 473] separate locations, primarily in the U.S., for manufacturing, warehousing, research and testing, administration and various other uses.

We leased to third parties approximately [removed: 232,000] [added: 255,000] square feet of our owned and leased facilities.

Huntsville, AL; Mesa and Sierra Vista, AZ; Los Angeles, CA; Warner Robins, GA; Lake Charles, LA; [removed: Cumberland and] Elkton, MD; Elk River and Plymouth, MN; Dulles, McLean and Radford, VA; and Keyser, WV.

Huntsville, AL; [removed: Chandler, Gilbert] [added: Chandler] and [removed: Tempe,] [added: Gilbert,] AZ; Azusa, Carson, Los Angeles, Manhattan Beach, Oxnard, Redondo Beach and San Diego, CA; Aurora and Colorado Springs, CO; [added: Beltsville, MD;] Devens, MA; [removed: Eden Prairie, MN;] Brigham City, Clearfield, Magna, Ogden, Roy and Tremonton, UT; and Dulles and Sterling, VA.

Falls Church, [removed: VA.][added: VA]

The following is a summary of our floor space at December 31, [removed: 2021:][added: 2022:]

| Space Systems | | | | | | 9,350 | | | | | | [removed: 7,819] [added: 8,659] | | | | | | 548 | | | | | | [removed: 17,717] [added: 18,557] | | |

| Aeronautics Systems | | | | | | 3,170 | | | | | | 6,427 | | | | | | 3,302 | | | | | | 12,899 | | |

| Defense Systems | | | | | | 1,367 | | | | | | 3,397 | | | | | | 2,285 | | | | | | 7,049 | | |

| Mission Systems | | | | | | 7,995 | | | | | | 4,331 | | | | | | — | | | | | | 12,326 | | |

| Corporate | | | | | | 372 | | | | | | 305 | | | | | | — | | | | | | 677 | | |

| Total | | | | | | 22,254 | | | | | | 23,119 | | | | | | 6,135 | | | | | | 51,508 | | |

| Aeronautics Systems | | | | | | 3,415 | | | | | | 6,386 | | | | | | 3,336 | | | | | | 13,137 | | |

| Defense Systems | | | | | | 1,367 | | | | | | 3,497 | | | | | | 2,286 | | | | | | 7,150 | | |

| Mission Systems | | | | | | 7,933 | | | | | | 4,397 | | | | | | — | | | | | | 12,330 | | |

| Corporate | | | | | | 372 | | | | | | 398 | | | | | | — | | | | | | 770 | | |

| Total | | | | | | 22,437 | | | | | | 22,497 | | | | | | 6,170 | | | | | | 51,104 | | |

We have 800,000,000 shares authorized at a $1 par value per share, of which [removed: 156,284,423] [added: 153,157,924] shares and [removed: 166,717,179] [added: 156,284,423] shares were issued and outstanding as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively.

We have 10,000,000 shares authorized at a $1 par value per share, of which no shares were issued and outstanding as of December 31, [removed: 2021] [added: 2022] and [removed: 2020.][added: 2021.]

As of January [removed: 24, 2022,] [added: 23, 2023,] there were [removed: 19,801] [added: 19,192] common shareholders of record.

The table below summarizes our repurchases of common stock during the three months ended December 31, [removed: 2021:][added: 2022:]

[removed: ][added: ]

- Assumes $100 invested at the close of business on December 31, [removed: 2016,] [added: 2017,] in Northrop Grumman Corporation common stock, the S&P 500 Index and the S&P A&D Index.

| October 1, 2022 - October 28, 2022 | | | 235,900 | | | | | | $ | 503.31 | | | | | 235,900 | | | | | | $ | | | 3,000 | | |

| October 29, 2022 - November 25, 2022 | | | 485,309 | | | | | | 519.87 | | | | | | 485,309 | | | | | | | | | 2,748 | | |

| November 26, 2022 - December 31, 2022 | | | 215,725 | | | | | | 532.61 | | | | | | 215,725 | | | | | | | | | 2,633 | | |

| Total | | | 936,934 | | | | | | $ | 518.63 | | | | | 936,934 | | | | | | $ | | | 2,633 | | |

| October 2, 2021 - October 29, 2021 | | | 324,809 | | | | | | $ | 381.98 | | | | | 324,809 | | | | | | $ | | | 2,981 | | |

| October 30, 2021 - November 26, 2021(2) | | | 1,697,050 | | | | | | 355.80 | | | | | | 1,697,050 | | | | | | | | | 2,377 | | |

| November 27, 2021 - December 31, 2021 | | | 458,499 | | | | | | 367.94 | | | | | | 458,499 | | | | | | | | | 2,209 | | |

| Total | | | 2,480,358 | | | | | | $ | 361.47 | | | | | 2,480,358 | | | | | | $ | | | 2,209 | | |

(2)The company entered into an accelerated share repurchase agreement with Goldman Sachs & Co. LLC to repurchase $500 million of the company’s common stock and received an initial delivery of shares representing approximately 85 percent of the share repurchase agreement.

NORTHROP GRUMMAN CORPORATION

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We have audited the accompanying consolidated statements of financial position of Northrop Grumman Corporation and subsidiaries (the “Company”) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] the related consolidated statements of earnings and comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on the criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January [removed: 26, 2022] [added: 25, 2023] expressed an unqualified opinion on the Company’s internal control over financial reporting.

▪Conducting inquiries [removed: at the] [added: of] relevant program [removed: locations, or virtually, (as a result of the COVID-19 pandemic and remote working environment)] [added: teams] regarding any challenges related to the program.

This includes management’s process to identify [removed: COVID-19] [added: macroeconomic] impacts to programs, which could include forecasted cost impacts and assumptions on the ability to recover those costs.

–Inquired [removed: both in-person and virtually (as a result] of the [removed: COVID-19 pandemic and the remote working environment) of the] Company’s tax department, financial reporting department, and other personnel directly involved in the development of the estimates.

| [added: January 24, 2022] | | | [removed: January 26, 2022] | | | [added: $ | 2,000 | | | | | — | | | | | | $ | — | | | | | | | | | | | — | | | | | | — | | | | | | — | | |]

| *$ in millions, except per share amounts* | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Product | | | | | | $ | [removed: 27,868] [added: 28,522] | | | | | $ | [removed: 27,015] [added: 27,868] | | | | | $ | [removed: 23,852] [added: 27,015] | |

| Service | | | | | | [removed: 7,799] [added: 8,080] | | | | | | [removed: 9,784] [added: 7,799] | | | | | | [removed: 9,989] [added: 9,784] | | |

| Total sales | | | | | | [removed: 35,667] [added: 36,602] | | | | | | [removed: 36,799] [added: 35,667] | | | | | | [removed: 33,841] [added: 36,799] | | |

| Product | | | | | | [removed: 22,309] [added: 22,761] | | | | | | [removed: 21,559] [added: 22,309] | | | | | | [removed: 18,675] [added: 21,559] | | |

| Service | | | | | | [removed: 6,090] [added: 6,367] | | | | | | [removed: 7,762] [added: 6,090] | | | | | | [removed: 7,907] [added: 7,762] | | |

| General and administrative expenses | | | | | | [removed: 3,597] [added: 3,873] | | | | | | [removed: 3,413] [added: 3,597] | | | | | | [removed: 3,290] [added: 3,413] | | |

| Total operating costs and expenses | | | | | | [removed: 31,996] [added: 33,001] | | | | | | [removed: 32,734] [added: 31,996] | | | | | | [removed: 29,872] [added: 32,734] | | |

| Gain on sale of business | | | | | | [removed: 1,980] [added: —] | | | | | | [removed: —] [added: 1,980] | | | | | | — | | |

| Operating income | | | | | | [removed: 5,651] [added: 3,601] | | | | | | [removed: 4,065] [added: 5,651] | | | | | | [removed: 3,969] [added: 4,065] | | |

| Interest expense | | | | | | [removed: (556)] [added: (506)] | | | | | | [removed: (593)] [added: (556)] | | | | | | [removed: (528)] [added: (593)] | | |

| Non-operating FAS pension benefit | | | | | | [removed: 1,469] [added: 1,505] | | | | | | [removed: 1,198] [added: 1,469] | | | | | | [removed: 800] [added: 1,198] | | |

| Mark-to-market pension and OPB benefit (expense) | | | | | | [removed: 2,355] [added: 1,232] | | | | | | [removed: (1,034)] [added: 2,355] | | | | | | [removed: (1,800)] [added: (1,034)] | | |

| Other, net | | | | | | [removed: 19] [added: 4] | | | | | | [removed: 92] [added: 19] | | | | | | [removed: 107] [added: 92] | | |

| Earnings before income taxes | | | | | | [removed: 8,938] [added: 5,836] | | | | | | [removed: 3,728] [added: 8,938] | | | | | | [removed: 2,548] [added: 3,728] | | |

| Federal and foreign income tax expense | | | | | | [removed: 1,933] [added: 940] | | | | | | [removed: 539] [added: 1,933] | | | | | | [removed: 300] [added: 539] | | |

| Net earnings | | | | | | $ | [removed: 7,005] [added: 4,896] | | | | | $ | [removed: 3,189] [added: 7,005] | | | | | $ | [removed: 2,248] [added: 3,189] | |

| Basic earnings per share | | | | | | $ | [removed: 43.70] [added: 31.61] | | | | | $ | [removed: 19.08] [added: 43.70] | | | | | $ | [removed: 13.28] [added: 19.08] | |

| Weighted-average common shares outstanding, in millions | | | | | | [removed: 160.3] [added: 154.9] | | | | | | [removed: 167.1] [added: 160.3] | | | | | | [removed: 169.3] [added: 167.1] | | |

| Diluted earnings per share | | | | | | $ | [removed: 43.54] [added: 31.47] | | | | | $ | [removed: 19.03] [added: 43.54] | | | | | $ | [removed: 13.22] [added: 19.03] | |

| Weighted-average diluted shares outstanding, in millions | | | | | | [removed: 160.9] [added: 155.6] | | | | | | [removed: 167.6] [added: 160.9] | | | | | | [removed: 170.0] [added: 167.6] | | |

| Net earnings (from above) | | | | | | $ | [removed: 7,005] [added: 4,896] | | | | | $ | [removed: 3,189] [added: 7,005] | | | | | $ | [removed: 2,248] [added: 3,189] | |

| Other comprehensive [removed: loss] [added: loss, net of tax] | | | | | | | | | | | | | | | | | | | | |

| Change in unamortized prior service [removed: credit, net of tax expense of $2 in 2021, $14 in 2020 and $15 in 2019] [added: credit (cost) – 2021] | | | | | | [removed: (8)] [added: 7] | | | | | | [removed: (41)] [added: 1] | | | | | | [removed: (47)] [added: 8] | | |

| Change in cumulative translation adjustment and other, net | | | | | | [removed: (7)] [added: (9)] | | | | | | [removed: 10] [added: (7)] | | | | | | [removed: 2] [added: 10] | | |

| Other comprehensive loss, net of tax | | | | | | [removed: (15)] [added: (10)] | | | | | | [removed: (31)] [added: (15)] | | | | | | [removed: (45)] [added: (31)] | | |

| Comprehensive income | | | | | | $ | [removed: 6,990] [added: 4,886] | | | | | $ | [removed: 3,158] [added: 6,990] | | | | | $ | [removed: 2,203] [added: 3,158] | |

| *$ in millions, except par value* | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | |

| Cash and cash equivalents | | | | | | $ | [removed: 3,530] [added: 2,577] | | | | | $ | [removed: 4,907] [added: 3,530] | |

| Accounts receivable, net | | | | | | [removed: 1,467] [added: 1,511] | | | | | | [removed: 1,501] [added: 1,467] | | |

| Unbilled receivables, net | | | | | | [removed: 5,492] [added: 5,983] | | | | | | [removed: 5,140] [added: 5,492] | | |

| Inventoried costs, net | | | | | | [removed: 811] [added: 978] | | | | | | [removed: 759] [added: 811] | | |

| Prepaid expenses and other current assets | | | | | | [removed: 1,126] [added: 1,439] | | | | | | [removed: 1,402] [added: 1,126] | | |

| | | | January 25, 2023 | | |

| *$ in millions, except per share amounts* | | | | | | 2022 | | | | | | 2021 | | | | | | 2020 | | |

| Other comprehensive loss, net of tax | | | | | | (10) | | | | | | (15) | | | | | | (31) | | |

goods and services that do not have an alternative use.

During the first and fourth quarters of 2022, we recorded favorable EAC adjustments of $67 million and $66 million, respectively, on the engineering, manufacturing and development (EMD) phase of the B-21 program at Aeronautics Systems largely related to an increase in the amount of performance incentives we expect to earn.

See Note 12 for a discussion of reasonably possible losses we may incur on the low-rate initial production (LRIP) phase of B-21.

Company-sponsored IR&D expenses totaled $1.2 billion, $1.1 billion and $1.1 billion in 2022, 2021 and 2020,

The company received cash

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

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

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

The exchange was accounted for as a nonmonetary transaction, and the acquired land, valued at approximately $155 million, was recorded in PP&E as a non-cash investing activity.

The transaction resulted in a $96 million gain, which was reflected in operating costs and expenses in the consolidated statements of earnings and comprehensive income.

| *$ in millions* | | | | | | 2022 | | | | | | 2021 | | |

| Unamortized prior service credit | | | | | | $ | 1 | | | | | $ | 2 | |

As of December 31, 2022, there have been no repurchases under the 2022 Repurchase Program and the company’s total outstanding share repurchase authorization was $2.6 billion.

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

The final average purchase price was $374.79 per share.

| *$ in millions* | | | | | | 2022 | | | | | | 2021 | | |

| $ in millions | | | | | | 2022 | | | | | | 2021 | | |

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

During the year ended December 31, 2022, the company recorded a $45 million write-down of commercial business inventory at Space Systems for which its cost exceeded net realizable value.

| *$ in millions* | | | | | | 2022 | | | | | | 2021 | | |

| Product inventory | | | | | | 404 | | | | | | 333 | | |

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

The company’s 2022 MTM benefit increased the 2022 ETR by 1.2 percentage points; however, the MTM benefit in 2021 did not significantly impact the 2021 ETR.

| Settlements with taxing authorities | | | | | | (110) | | | | | | (1) | | | | | | (7) | | |

| *$ in millions* | | | | | | 2022 | | | | | | 2021 | | |

| Capitalized research and experimental expenditures | | | | | | 1,671 | | | | | | — | | |

| Balance as of December 31, 2022 | | | | | | $ | 3,467 | | | | | $ | 3,413 | | | | | $ | 5,881 | | | | | $ | 4,755 | | | | | $ | 17,516 | |

| *$ in millions* | | | | | | 2022 | | | | | | 2021 | | |

| 2027 | | | | | | 31 | | |

The portion of notional value designated as a cash flow hedge at December

31, 2022, was $87 million.

In December 2022, the company amended its commercial paper program to increase its capacity to issue unsecured commercial paper notes from $2.0 billion to $2.5 billion.

The 2022 Credit Agreement replaced the company’s prior five-year, $2.0 billion revolving credit facility entered into on August 17, 2018 and as amended on October 17, 2019.

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

| 2022 | | | | | | 2021 | | | | | | | | | | | | | | |

| 2023 | | | $ | 1,072 | |

| 2025 | | | 1,521 | | |

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| Assets of disposal group held for sale | | | | | | — | | | | | | 1,635 | | |

| Liabilities of disposal group held for sale | | | | | | — | | | | | | 258 | | |

| Net repayments of commercial paper | | | | | | — | | | | | | — | | | | | | (198) | | |

The assets and liabilities of the IT and mission support services business were classified as held for sale in the consolidated statement of financial position as of December 31, 2020.

During the first quarter of 2021, we changed the naming convention for our FAS/CAS pension accounts.

The Net FAS (service)/CAS pension adjustment is now referred to as the FAS/CAS operating adjustment and the FAS (non-service) pension benefit is now referred to as the Non-operating FAS pension benefit.

This change does not impact any current or previously reported amounts.

During the second quarter of 2021, we changed the presentation of the retiree benefits components in the operating cash flow section of the consolidated statements of cash flows.

Prior period amounts have been conformed to current period presentation and this change does not impact previously reported cash provided by operating activities.

In those cases, the company accounts for the distinct contract deliverables as separate

During the fourth quarter of 2021, we recorded an additional $93 million unfavorable EAC adjustment on the F-35 program at Aeronautics Systems related to continued labor-related production impacts largely driven by COVID-19.

During the fourth quarter of 2021, we modified our F-35 production plan to support a more consistent flow on the program and expect gradually to

increase production rate over time as COVID-19-related impacts subside.

designated as cash flow hedges are recorded as a component of other comprehensive income until settlement.

The remaining $155 million is expected to be collected in 2022.

| Unamortized prior service credit, net of tax expense of $1 for 2021 and $3 for 2020 | | | | | | $ | 2 | | | | | $ | 10 | |

The carrying amounts of the major classes of assets and liabilities of the IT and mission support services business classified as held for sale as of December 31, 2020 were as follows:

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| *$ in millions* | | | | | | | | |

| Goodwill(1) | | | | | | 1,195 | | |

| Total assets of disposal group held for sale | | | | | | $ | 1,635 | |

| Trade accounts payable | | | | | | (99) | | |

| Advance payments and billings in excess of costs incurred | | | | | | (31) | | |

| Total liabilities of disposal group held for sale | | | | | | $ | (258) | |

(1) See Note 8 for a summary by reportable segment of Goodwill reclassified to Assets of disposal group held for sale as of December 31, 2020.

The remaining balance of $75 million is included as a reduction to Retained earnings on the consolidated statement of financial position.

The final number of shares to be repurchased will be based on the company’s daily volume-weighted average share price during the term of the transaction, less a discount, and is expected to be completed in the first quarter of 2022.

Goldman Sachs may be required to deliver additional shares of common stock to the company at final settlement or, under certain circumstances, the company may be required to either, at the company’s election, deliver shares or make a cash payment to Goldman Sachs.

| Accounts receivable, net | | | | | | $ | 1,467 | | | | | $ | 1,501 | |

| Unbilled receivables, net | | | | | | $ | 5,492 | | | | | $ | 5,140 | |

| Product inventory and raw material | | | | | | 333 | | | | | | 329 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

The year to date 2020 ETR increased to 14.5 percent from 11.8 percent in the same period of 2019.

MTM expense reduced the 2020 ETR by 1.3 percentage points and the 2019 ETR by 3.7 percentage points.

| Accrued employee compensation | | | | | | 371 | | | | | | 360 | | |

| Property, plant and equipment, net | | | | | | 755 | | | | | | 737 | | |

The majority of tax credits and net

| Balance as of December 31, 2019 | | | | | | $ | 3,467 | | | | | $ | 4,376 | | | | | $ | 6,062 | | | | | $ | 4,803 | | | | | $ | 18,708 | |

Our principal executive officer [removed: (Chairman,] [added: (Chair,] Chief Executive Officer and President) and principal financial officer (Corporate Vice President and Chief Financial Officer) have evaluated the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)) as of December 31, [removed: 2021,] [added: 2022,] and have concluded that these controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

During the three months ended December 31, [removed: 2021,] [added: 2022,] no change occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Based on its assessment, management has concluded that the company’s internal control over financial reporting was effective as of December 31, [removed: 2021.][added: 2022.]

Deloitte & Touche LLP issued an attestation report dated January [removed: 26, 2022,] [added: 25, 2023,] concerning the company’s internal control over financial reporting, which is contained in this Annual Report.

The company’s consolidated financial statements as of and for the year ended December 31, [removed: 2021,] [added: 2022,] have been audited by the independent registered public accounting firm of Deloitte & Touche LLP in accordance with the standards of the Public Company Accounting Oversight Board (United States).

[removed: Chairman,] [added: Chair,] Chief Executive Officer and President

We have audited the internal control over financial reporting of Northrop Grumman Corporation and subsidiaries (the “Company”) as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on the criteria established in *Internal Control - Integrated Framework (2013)* issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, [removed: 2021] [added: 2022] of the Company and our report dated January [removed: 26, 2022] [added: 25, 2023] expressed an unqualified opinion on those financial statements.

January 25, 2023

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January 25, 2023

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January 26, 2022

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Information about our Directors will be incorporated herein by reference to the Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders, to be filed with the SEC within 120 days after the end of the company’s fiscal year.

Our executive officers as of January [removed: 26, 2022,] [added: 25, 2023,] are listed below, along with their ages on that date, positions and offices held with the company, and principal occupations and employment, focused primarily on the past five years.

| Kathy J. Warden | | | | | | [removed: 50] [added: 51] | | | | | | [removed: Chairman,] [added: Chair,] Chief Executive Officer and President | | | | | | 2019 | | | | | | Chief Executive Officer and President (2019); President and Chief Operating Officer [removed: (2018); Corporate Vice President and President, Mission Systems Sector (2016-2017)] [added: (2018)] | | |

| Ann M. Addison | | | | | | [removed: 60] [added: 61] | | | | | | Corporate Vice President and Chief Human Resources Officer | | | | | | 2019 | | | | | | Corporate Vice President (2018); Executive Vice President and Chief Human Resources Officer, Leidos [removed: (2016-2018); Vice President, Human Resources, Lockheed Martin (2010-2016)] [added: (2016-2018)] | | |

| Mark A. Caylor | | | | | | [removed: 57] [added: 58] | | | | | | Corporate Vice President and President, Mission Systems Sector | | | | | | 2018 | | | | | | [removed: Corporate Vice President and President, Enterprise Services and Chief Strategy Officer (2014-2017)] | | |

| Sheila C. Cheston | | | | | | [removed: 63] [added: 64] | | | | | | Corporate Vice President and General Counsel | | | | | | 2010 | | | | | | | | |

| Michael A. Hardesty | | | | | | [removed: 50] [added: 51] | | | | | | Corporate Vice President, Controller, and Chief Accounting Officer | | | | | | 2013 | | | | | | | | |

| Thomas H. Jones | | | | | | [removed: 55] [added: 56] | | | | | | Corporate Vice President and President, Aeronautics Systems Sector | | | | | | 2021 | | | | | | Vice President and General Manager, Airborne C4ISR Division, Mission Systems Sector [removed: (2017-2020); Vice President and General Manager, Advanced Concepts & Technologies Division, Mission Systems Sector (2015-2017)] [added: (2017-2020)] | | |

| Lesley A. Kalan | | | | | | [removed: 48] [added: 49] | | | | | | Corporate Vice President and Chief Strategy and Development Officer | | | | | | 2020 | | | | | | Corporate Vice President, Government Relations [removed: (2018-2019); Vice President, Legislative Affairs (2010-2017)] [added: (2018-2019)] | | |

| David F. Keffer | | | | | | [removed: 44] [added: 45] | | | | | | Corporate Vice President and Chief Financial Officer | | | | | | 2020 | | | | | | General Partner, Blue Delta Capital Partners (2018-2020); Chief Financial Officer and Executive Vice President, CSRA, Inc. (2015-2018) | | |

| [removed: Blake E. Larson] [added: Thomas L. Wilson] | | | | | | [removed: 62] [added: 54] | | | | | | Corporate Vice President [added: and President, Space Systems Sector] | | | | | | 2022 | | | | | | [removed: Corporate] Vice President and [removed: President,] [added: General Manager, Strategic] Space Systems [added: Division, Space Systems] Sector (2020-2021); [removed: Corporate] Vice President [added: of Strategy] and [removed: President,] [added: Business Development, Space Systems Sector (2020); Vice President of Business Development,] Former Innovation Systems Sector (2018-2020); [removed: Chief Operating Officer,] [added: Vice President of Strategy and Business Development, Space Systems Group,] Orbital ATK, Inc. (2015-2018) | | |

| David T. Perry | | | | | | [removed: 57] [added: 58] | | | | | | Corporate Vice President and Chief Global Business Officer | | | | | | 2019 | | | | | | Corporate Vice President and Chief Global Business Development Officer (2012-2019) | | |

| Mary D. Petryszyn | | | | | | [removed: 60] [added: 61] | | | | | | Corporate Vice President [removed: and President, Defense Systems Sector] | | | | | | [removed: 2020] [added: 2022] | | | | | | [added: Corporate] Vice President and [added: President, Defense Systems Sector (2020-2022); Vice President and] General Manager, Land and Avionics C4ISR Division, Mission Systems Sector [removed: (2016-2019), Vice President, Global Strategy and Mission Solutions, Aerospace Systems Sector (2015-2016)] [added: (2016-2019)] | | |

| Lucy C. Ryan | | | | | | [removed: 48] [added: 49] | | | | | | Corporate Vice President, Communications | | | | | | 2019 | | | | | | Vice President, Enterprise Communications (2018); Director of Communications, General Dynamics (2010-2018) | | |

The information as to the Audit and Risk Committee and the Audit and Risk Committee Financial Expert will be incorporated herein by reference to the Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders.

Other disclosures required by this Item will be incorporated herein by reference to the Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders.

| Matthew Bromberg | | | | | | 52 | | | | | | Corporate Vice President, Global Operations | | | | | | 2022 | | | | | | President, Military Engines, Pratt & Whitney (2017-2021) | | |

\-93-

| Roshan Roeder | | | | | | 43 | | | | | | Corporate Vice President and President, Defense Systems Sector | | | | | | 2022 | | | | | | Vice President and General Manager, Airborne Multifunction Sensors, Mission Systems Sector (2020-2022); Vice President Program Management, Communications Business Unit, Mission Systems Sector (2018-2020); Vice President Program Management, Advanced Ground Sensors, Mission Systems Sector (2016-2018) | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

\-92-

| Shawn N. Purvis | | | | | | 48 | | | | | | Corporate Vice President and President, Enterprise Services | | | | | | 2018 | | | | | | Vice President and Chief Information Officer (2016-2017); Vice President and General Manager, Cyber Division, Former Information Systems Sector (2014-2016) | | |

| Thomas L. Wilson | | | | | | 53 | | | | | | Corporate Vice President and President, Space Systems Sector | | | | | | 2022 | | | | | | Vice President and General Manager, Strategic Space Systems Division, Space Systems Sector (2020-2021); Vice President of Strategy and Business Development, Space Systems Sector (2020); Vice President of Business Development, Former Innovation Systems Sector (2018-2020); Vice President of Strategy and Business Development, Space Systems Group, Orbital ATK, Inc. (2015-2018) | | |

Information concerning Executive [removed: Compensation,] [added: Compensation required by this Item 11,] including information concerning Compensation Committee Interlocks and Insider Participation and the Compensation Committee Report, will be incorporated herein by reference to the Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders.

The information as to Securities Authorized for Issuance Under Equity Compensation Plans and Security Ownership of Certain Beneficial Owners and Management will be incorporated herein by reference to the Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders.

\-94-

NORTHROP GRUMMAN CORPORATION

The information as to Certain Relationships and Related Transactions and Director Independence will be incorporated herein by reference to the Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders.

\-93-

NORTHROP GRUMMAN CORPORATION

The information as to Principal Accounting Fees and Services will be incorporated herein by reference to the Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders.

\-95-

\-94-

[Consolidated Statements of Earnings and Comprehensive [removed: Income](#i0f90a9f5f44046e1b24d871e2f754fd8_85)][added: Income](#i39e0046739014822b32f7ec429e2eba7_82)]

[Consolidated Statements of Financial [removed: Position](#i0f90a9f5f44046e1b24d871e2f754fd8_88)][added: Position](#i39e0046739014822b32f7ec429e2eba7_85)]

[Consolidated Statements of Cash [removed: Flows](#i0f90a9f5f44046e1b24d871e2f754fd8_91)][added: Flows](#i39e0046739014822b32f7ec429e2eba7_88)]

[Consolidated Statements of Changes in Shareholders’ [removed: Equity](#i0f90a9f5f44046e1b24d871e2f754fd8_94)][added: Equity](#i39e0046739014822b32f7ec429e2eba7_91)]

[Notes to Consolidated Financial [removed: Statements](#i0f90a9f5f44046e1b24d871e2f754fd8_97)][added: Statements](#i39e0046739014822b32f7ec429e2eba7_94)]

| | | | 2(a) | | | [Agreement and Plan of Merger [added: dated as of September 17, 2017,] among [removed: Titan II, Inc. (formerly] Northrop Grumman [removed: Corporation), Northrop Grumman Corporation (formerly New P, Inc.)] [added: Corporation, Neptune Merger, Inc.] and [removed: Titan Merger Sub Inc., dated March 30, 2011] [added: Orbital ATK, Inc.] (incorporated by reference to Exhibit [removed: 10.1] [added: 2.1] to Form 8-K filed [removed: April 4, 2011,] [added: September 18, 2017,] File No. [removed: 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000095012311032455/v59140exv10w1.htm)] [added: 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000095015717001300/ex2-1.htm)] | | |

| | | | [removed: 2(b)] [added: 10(d)] | | | [removed: [Separation and Distribution Agreement] [added: [Form of Guarantee] dated as of [removed: March 29, 2011, among Titan II, Inc. (formerly Northrop Grumman Corporation),] [added: April 3, 2001, by] Northrop Grumman Corporation [removed: (formerly New P, Inc.), Huntington Ingalls Industries, Inc., Northrop Grumman Shipbuilding, Inc. and] [added: of] Northrop Grumman Systems Corporation [added: indenture indebtedness] (incorporated by reference to Exhibit [removed: 10.2] [added: 10.11] to Form 8-K [added: and] filed April [removed: 4, 2011,] [added: 17, 2001,] File No. [removed: 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000095012311032455/v59140exv10w2.htm)] [added: 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000089843001500160/dex1011.txt)] | | |

| | | | [removed: 2(c)] [added: 2(b)] | | | [removed: [Agreement and Plan of Merger] [added: [Transaction Agreement] dated as of [removed: September 17, 2017,] [added: April 28, 2014,] among [removed: Northrop Grumman Corporation, Neptune Merger,] [added: Alliant Techsystems Inc., Vista Spinco Inc., Vista Merger Sub] Inc. and Orbital [removed: ATK, Inc.] [added: Sciences Corporation] (incorporated by reference to Exhibit 2.1 to [added: Alliant Techsystems Inc. (now known as Northrop Grumman Innovation Systems, Inc.)] Form 8-K filed [removed: September 18, 2017,] [added: May 2, 2014,] File No. [removed: 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000095015717001300/ex2-1.htm)] [added: 001-16411)](http://www.sec.gov/Archives/edgar/data/866121/000095015714000426/ex2-1.htm)] | | |

| | | | [removed: 4(b)] [added: 4(a)] | | | [Indenture dated as of October 15, 1994, between Northrop Grumman Corporation (now Northrop Grumman Systems Corporation) and The Chase Manhattan Bank (National Association), Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed October 25, 1994, File No. 001-3229)](http://www.sec.gov/Archives/edgar/data/72945/0000912057-94-003514.txt) | | |

| | | | [removed: 4(c)] [added: 4(b)] | | | [First Supplemental Indenture dated as of March 30, 2011 by and among Northrop Grumman Systems Corporation, The Bank of New York Mellon (successor trustee to JPMorgan Chase Bank and The Chase Manhattan Bank, N.A.), Titan II, Inc. (formerly known as Northrop Grumman Corporation), and Titan Holdings II, L.P., to Indenture dated as of October 15, 1994, between Northrop Grumman Corporation (now Northrop Grumman Systems Corporation) and The Chase Manhattan Bank, N.A., Trustee (incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000095012311039852/v58707exv4w1.htm) | | |

| | | | [removed: 4(d)] [added: 4(c)] | | | [Second Supplemental Indenture dated as of March 30, 2011 by and among Northrop Grumman Systems Corporation, The Bank of New York Mellon (successor trustee to JPMorgan Chase Bank and The Chase Manhattan Bank, N.A.), Titan Holdings II, L.P., and Northrop Grumman Corporation (formerly known as New P, Inc.), to Indenture dated as of October 15, 1994, between Northrop Grumman Corporation (now Northrop Grumman Systems Corporation) and The Chase Manhattan Bank, N.A., Trustee (incorporated by reference to Exhibit 4.2 to Form 10-Q for the quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000095012311039852/v58707exv4w2.htm) | | |

| | | | [removed: 4(e)] [added: 4(d)] | | | [Form of Officers’ Certificate (without exhibits) establishing the terms of Northrop Grumman Corporation’s (now Northrop Grumman Systems Corporation’s) 7.875% Debentures due 2026 (incorporated by reference to Exhibit 4.3 to Form S-4 Registration Statement No. 333-02653 filed April 19, 1996)](http://www.sec.gov/Archives/edgar/data/72945/0000912057-96-006729.txt) | | |

| | | | [removed: 4(f)] [added: 4(e)] | | | [Form of Northrop Grumman Corporation’s (now Northrop Grumman Systems Corporation’s) 7.875% Debentures due 2026 (incorporated by reference to Exhibit 4.6 to Form S-4 Registration Statement No. 333-02653 filed April 19, 1996)](http://www.sec.gov/Archives/edgar/data/72945/0000912057-96-006729.txt) | | |

| | | | [removed: 4(g)] [added: 4(f)] | | | [Form of Officers’ Certificate establishing the terms of Northrop Grumman Corporation’s (now Northrop Grumman Systems Corporation’s) 7.75% Debentures due 2031 (incorporated by reference to Exhibit 10.9 to Form 8-K filed April 17, 2001, File No. 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000089843001500160/dex109.txt) | | |

| | | | [removed: 4(h)] [added: 4(g)] | | | [Senior Indenture dated as of December 15, 1991, between Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and The Bank of New York, as trustee, under which its 7.75% and 6.98% debentures due 2026 and 2036 were issued, and specimens of such debentures (incorporated by reference to Exhibit 4.1 to the Form 10-Q of Litton Industries, Inc. for the quarter ended April 30, 1996, filed June 11, 1996, File No. 001-3998)](http://www.sec.gov/Archives/edgar/data/59880/0000950148-96-001149.txt) | | |

| | | | [removed: 4(i)] [added: 4(h)] | | | [Supplemental Indenture with respect to Senior Indenture dated December 15, 1991, dated as of April 3, 2001, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation), Northrop Grumman Corporation, Northrop Grumman Systems Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.7 to Form 10-Q for the quarter ended March 31, 2001, filed May 10, 2001, File No. 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000102140801500799/dex47.txt) | | |

| | | | [removed: 4(j)] [added: 4(i)] | | | [Supplemental Indenture with respect to Senior Indenture dated December 15, 1991, dated as of December 20, 2002, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation), Northrop Grumman Corporation, Northrop Grumman Systems Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4(t) to Form 10-K for the year ended December 31, 2002, filed March 24, 2003, File No. 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000089843003002012/dex4t.htm) | | |

| | | | [removed: 4(k)] [added: 4(j)] | | | [Third Supplemental Indenture dated as of March 30, 2011 by and among Northrop Grumman Systems Corporation (successor-in-interest to Litton Industries, Inc.), The Bank of New York Mellon (formerly known as The Bank of New York), as trustee, Titan II, Inc. (formerly known as Northrop Grumman Corporation), and Titan Holdings II, L.P., to Senior Indenture dated December 15, 1991, between Litton Industries, Inc. and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.5 to Form 10-Q for the quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000095012311039852/v58707exv4w5.htm) | | |

| | | | [removed: 4(l)] [added: 4(k)] | | | [Fourth Supplemental Indenture dated as of March 30, 2011 by and among Northrop Grumman Systems Corporation (successor-in-interest to Litton Industries, Inc.), The Bank of New York Mellon (formerly known as The Bank of New York) as trustee, Titan Holdings II, L.P., and Northrop Grumman Corporation (formerly known as New P, Inc.), to Senior Indenture dated December 15, 1991, between Litton Industries, Inc. and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.6 to Form 10-Q for the quarter ended March 31, 2011, filed April 27, 2011, File No. 001-16411)](http://www.sec.gov/Archives/edgar/data/1133421/000095012311039852/v58707exv4w6.htm) | | |