Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Northrop Grumman Corporation (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”) is a leading global aerospace and defense company. We deliver a broad range of products, services and solutions to United States (U.S.) and international customers, and principally to the U.S Department of Defense (DoD) and intelligence community. Our broad portfolio is aligned to support national security priorities and our solutions equip our customers with capabilities they need to connect, protect and advance humanity.

The company is a leading provider of space systems, advanced aircraft, missile defense, advanced weapons and long-range fires capabilities, mission systems, networking and communications, strategic deterrence systems, and breakthrough technologies, such as artificial intelligence, advanced computing and cyber. We are focused on competing and winning programs that enable continued growth, performing on our commitments and affordably delivering capability our customers need. With the investments we've made in advanced technologies, combined with our talented workforce and digital transformation capabilities, Northrop Grumman is well positioned to meet our customers' needs today and in the future.

The following discussion should be read along with the financial statements included in this Form 10-Q, as well as our 2021 Annual Report on Form 10-K, which provides additional information on our business and the environment in which we operate and our operating results.

Disposition of IT and Mission Support Services Business

Effective January 30, 2021 (the “Divestiture date”), we completed the sale of our IT and mission support services business (the “IT services divestiture”) for $3.4 billion in cash and recorded a pre-tax gain of $2.0 billion. The IT and mission support services business was comprised of the majority of the former IS&S division of Defense Systems (excluding the Vinnell Arabia business); select cyber, intelligence and missions support programs, which were part of the former CIMS division of Mission Systems; and the former Space Technical Services business unit of Space Systems. Operating results include sales and operating income for the IT and mission support services business prior to the Divestiture date.

COVID-19

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. In the more than two years since then, the pandemic (including the first and subsequent variants of COVID-19) has dramatically impacted the global health and economic environments, including millions of confirmed cases and deaths, business slowdowns or shutdowns, labor shortfalls, supply chain challenges, regulatory challenges, inflationary pressures and market volatility. We discussed in some detail in our Annual Report on Form 10-K for the fiscal years ended December 31, 2020 and 2021, as well as interim Form 10-Qs, the pandemic, its impacts and risks, and actions taken up to the time of each filing. In this Form 10-Q, we provide a further update.

At a macro level, the number of hospitalizations and deaths, in the U.S. in particular, have generally eased in 2022, as more people are fully vaccinated, and communities have continued to open up. While it, of course, remains unclear whether that trajectory will continue, there is reason for optimism. The company continues to work to monitor and address the pandemic and related developments, including the impact on our company, our employees, our customers, our suppliers and our communities. Our goals have been, and continue to be, 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 varied, and will continue to vary, depending on the spread of COVID-19 and applicable government requirements, and the needs of our stakeholders.

During the third quarter of 2022, COVID-19 case rates and the health and economic impacts of the pandemic continued to fluctuate in different communities in the U.S. and globally, particularly with the spread of new variants. However, direct COVID-19-related impacts on our business continued generally to decline, including in the areas of employee absenteeism and leave-taking. While we cannot predict the future course of the pandemic, we are not currently assuming significant additional direct COVID-19-related impacts on our 2022 financial results.

During the third quarter of 2022, we continued to see a prolonged impact on the economy, our industry, and our company, with ongoing labor challenges, supply chain disruption, and inflation, among other impacts. Although we are working actively to address and mitigate these impacts, the broader macroeconomic environment, including, in particular, inflationary pressures and extended material lead times, continued adversely to affect the company’s third quarter results (including sales, net earnings and cash).

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For further information on the pandemic and the potential impact to the company of COVID-19, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Liquidity and Capital Resources” below and “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Annual Report on Form 10-K.

Global Security 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 major global powers, as well as terrorist organizations, emerging nuclear tensions, diverse regional security concerns and political instability. The conflict in Ukraine has increased those tensions and instability, highlighted threats and increased demand, as well as further disrupted global supply chains and added costs. 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 circumstances and priorities.

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. We continue to experience an increased demand for certain of our goods and services directly related to the conflict in the Ukraine, in particular, but we have not seen a significant increase in those demands to date. We also continue to experience modest disruption to some of our programs and supply chain, including unanticipated cost growth, as a result of the conflict, particularly with respect to our Commercial Resupply Services contract. But we do not have sizable business dealings in Russia or Ukraine, and do not anticipate significant adverse impacts. We are actively monitoring the situation and exploring both opportunities and risks, including measures to mitigate the risk of future disruption and costs to our programs.

The global geopolitical and economic environments continue to be impacted by uncertainty and stress, and global inflationary pressures. Geopolitical relationships have changed and are continuing to change. Global inflationary pressures are increasing costs, including for various commodities and supplier products. Global economic growth is expected to remain in the low single digits in 2022, reflecting, among other things, the continued impact of and uncertainty surrounding geopolitical tensions globally, financial market volatility, inflation and the COVID-19 pandemic. We expect still further impacts related to the conflict in Ukraine and economic sanctions imposed on Russia. The global economy may also be affected by the residual legal, regulatory and economic impacts of Britain’s exit from the European Union. Increased interest rates, raising the cost of borrowing for the government, could impact government spending priorities (in the U.S. and allied countries, in particular), including their demand for defense products. Economic tensions and changes in international trade policies, including higher tariffs on imported goods and materials and renegotiation of free trade agreements, could also impact the global market for defense products, services and solutions.

U.S. Political and Economic Environment

On March 15, 2022, the President signed into law the Consolidated Appropriations Act for FY 2022, which provided full-year funding through September 30, including $782 billion for national defense. This represented nearly $30 billion more than the Administration initially requested for FY 2022, and approximately 6 percent, or $42 billion higher than it was in FY 2021. The Pentagon’s portion of the overall national defense budget was $743 billion. In March 2022, Congress also approved $14 billion in emergency aid to support security, economic, and humanitarian assistance for Ukraine and Central European partners. An additional $40 billion in emergency supplemental appropriations was approved by Congress in May 2022. Current and future spending in connection with the conflict in Ukraine and other priorities, global inflation, the national debt and the costs of the pandemic, among other things, in the U.S. and globally, will continue to impact our customers’ budgets and priorities, and our industry. We expect the government, our customers and our industry will also continue to face challenges from the macroeconomic environment, including a tight labor market and supply chain disruptions.

The Administration’s current budget for FY 2023 proposes $813 billion for national defense programs, and the Pentagon’s portion of the overall requested defense budget is $773 billion. On September 30, 2022, Congress enacted a continuing resolution (CR) to carry forward FY 2022 funding levels into FY 2023 while negotiations continue regarding full-year appropriations. The CR also included an additional $12 billion in aid to Ukraine, bringing total appropriations for Ukraine assistance to $39 billion. The CR runs through December 16, 2022, and generally limits U.S. government spending to FY 2022 levels, which for DOD is around 4 percent lower than the amount requested for FY 2023.

It is difficult to predict the specific course of future defense budgets. However, we believe the ongoing conflict in Ukraine, as well as actions in the Pacific region, have highlighted some of the national security threats to our nation

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and our allies, and the need for strong deterrence and a robust defense capability, as well as impacting our political and economic environment. More generally, the threat to U.S. national security remains very substantial and we believe that our capabilities, particularly in space, C4ISR, missile defense, battle management, hypersonics, counter-hypersonics, survivable aircraft and mission systems should help our customers defend against current and future threats and, as a result, continue to allow for long-term profitable business growth.

The Bipartisan Budget Act of 2019 suspended the debt ceiling through July 31, 2021. In October 2021, the statutory debt limit was increased by $480 billion and, in December 2021, was further increased by $2.5 trillion, which is currently expected to allow the Treasury Department to finance the government into 2023.

During the third quarter of 2022, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022, which includes an advanced manufacturing investment tax credit, among other provisions, and the Inflation Reduction Act of 2022, which includes implementation of a new alternative minimum tax and and a one percent excise tax on share repurchases, among other provisions, were signed into law. We expect the excise tax on share repurchases to impact us beginning in 2023; we are currently evaluating other provisions of the legislation to determine any potentially favorable and/or unfavorable impacts on the company.

The political environment, federal budget and debt ceiling are expected to continue to be the subject of considerable debate, especially in light of the ongoing conflict in Ukraine and the inflationary environment, which could have material impacts on defense spending broadly and the company’s programs in particular.

For further information on the risks we face from the current political and economic environment, see “Risk Factors” in our 2021 Annual Report on Form 10-K.

CONSOLIDATED OPERATING RESULTS

For purposes of the operating results discussion below, we assess our performance using certain financial measures that are not calculated in accordance with GAAP. Organic sales is defined as total sales excluding sales attributable to the company's IT services divestiture. This measure may be useful to investors and other users of our financial statements as a supplemental measure in evaluating the company’s underlying sales growth as well as in providing an understanding of our ongoing business and future sales trends by presenting the company’s sales before the impact of divestiture activity.

Transaction-adjusted net earnings and transaction-adjusted earnings per share (transaction-adjusted EPS) exclude impacts related to the IT services divestiture, including the gain on sale of the business, associated federal and state income tax expenses, transaction costs, and the make-whole premium for early debt redemption. They also exclude the impact of mark-to-market pension and OPB (“MTM”) benefit/(expense) and related tax impacts, which are generally only recognized during the fourth quarter. These non-GAAP measures may be useful to investors and other users of our financial statements as supplemental measures in evaluating the company’s underlying financial performance by presenting the company’s operating results before the non-operational impact of divestiture activity and pension and OPB actuarial gains and losses. These measures are also consistent with how management views the underlying performance of the business as the impact of the IT services divestiture and MTM accounting are not considered in management’s assessment of the company’s operating performance or in its determination of incentive compensation awards.

We reconcile these non-GAAP financial measures to their most directly comparable GAAP financial measures below. These non-GAAP measures may not be defined and calculated by other companies in the same manner and should not be considered in isolation or as an alternative to operating results presented in accordance with GAAP.

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Selected financial highlights are presented in the table below:

			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions, except per share amounts			2022						2021						Change						2022						2021						Change
Sales			$	8,971					$	8,720					3		%				$	26,569					$	27,028					(2)		%
Operating costs and expenses			8,127						7,677						6		%				23,874						24,099						(1)		%
Operating costs and expenses as a % of sales			90.6		%				88.0		%										89.9		%				89.2		%
Gain on sale of business			—						—						NM						—						1,980						NM
Operating income			844						1,043						(19)		%				2,695						4,909						(45)		%
Operating margin rate			9.4		%				12.0		%										10.1		%				18.2		%
Federal and foreign income tax expense			175						212						(17)		%				568						1,298						(56)		%
Effective income tax rate			16.1		%				16.6		%										16.8		%				23.2		%
Net earnings			915						1,063						(14)		%				2,816						4,295						(34)		%
Diluted earnings per share			$	5.89					$	6.63					(11)		%				$	18.06					$	26.55					(32)		%

Sales

The table below reconciles sales to organic sales for the nine months ended September 30, 2022 and 2021. Sales for the three months ended September 30, 2022 and 2021 were not impacted by the sale of the company's IT services business:

			Nine Months Ended September 30
			2022												2021
$ in millions			Sales			IT services sales			Organic sales						Sales			IT services sales			Organic sales						Organic sales % change
Aeronautics Systems			$	7,774		$	—		$	7,774					$	8,628		$	—		$	8,628					(10)		%
Defense Systems			3,922			—			3,922						4,398			(106)			4,292						(9)		%
Mission Systems			7,469			—			7,469						7,613			(42)			7,571						(1)		%
Space Systems			8,997			—			8,997						7,950			(16)			7,934						13		%
Intersegment eliminations			(1,593)			—			(1,593)						(1,561)			2			(1,559)
Total			$	26,569		$	—		$	26,569					$	27,028		$	(162)		$	26,866					(1)		%

Current Quarter

Third quarter 2022 sales increased $251 million, or 3 percent , primarily due to 18 percent growth at Space Systems, partially offset by lower sales at Aeronautics Systems and Defense Systems. Third quarter 2022 sales reflect strong demand and improving trends in labor availability, partially offset by supply chain delays.

Year to Date

Year to date 2022 sales decreased $459 million, or 2 percent, due, in part, to a $162 million reduction in sales related to the IT services divestiture. Year to date 2022 organic sales decreased $297 million, or 1 percent, primarily due to lower sales at Aeronautics Systems and Defense Systems, partially offset by 13 percent growth at Space Systems.

See “Segment Operating Results” below for further information by segment and “Product and Service Analysis” for product and service detail. See Note 9 to the financial statements for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments.

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Operating Income and Margin Rate

Current Quarter

Third quarter 2022 operating income decreased $199 million, or 19 percent, primarily due to a $116 million reduction in the FAS/CAS operating adjustment and $55 million in higher unallocated corporate expense due to a $60 million benefit for insurance settlements recognized in the prior year. Third quarter 2022 operating margin rate declined to 9.4 percent primarily due to the lower FAS/CAS operating adjustment and higher unallocated corporate expense, as well as a lower segment operating margin rate.

Third quarter 2022 general and administrative (G&A) costs as a percentage of sales increased to 10.9 percent from 10.2 percent in the prior year period primarily due to an increase in investments for future business opportunities.

Year to date

Year to date 2022 operating income decreased $2.2 billion, or 45 percent, primarily due to a $2.0 billion pre-tax gain on sale and $192 million of unallocated corporate expenses recognized in the prior year associated with the IT services divestiture. Operating income also decreased due to a $250 million reduction in the FAS/CAS operating adjustment and $130 million of lower segment operating income. Year to date 2022 operating margin rate declined to 10.1 percent, largely due to the prior year gain on sale of the IT services business and the lower FAS/CAS operating adjustment.

Year to date 2022 G&A costs as a percentage of sales increased to 11.1 percent from 10.3 percent in the prior year period primarily due to an increase in investments for future business opportunities.

See “Segment Operating Results” below for further information by segment. For information regarding product and service operating costs and expenses, see “Product and Service Analysis” below.

Federal and Foreign Income Taxes

Current Quarter

The third quarter 2022 ETR decreased to 16.1 percent from 16.6 percent in the prior year period principally due to higher benefits from foreign-derived intangible income. See Note 3 to the financial statements for additional information.

Year to Date

The year to date 2022 ETR decreased to 16.8 percent from 23.2 percent in the prior year period. The year to date 2021 ETR was impacted by additional federal income taxes resulting from the IT services divestiture, as well as a change in tax revenue recognition on certain long-term contracts, which increased taxable income in years prior to the 2017 Tax Cuts and Jobs Act at a rate above the current statutory rate. See Note 3 to the financial statements for additional information.

Net Earnings

The table below reconciles net earnings to transaction-adjusted net earnings:

			Three Months Ended September 30												%			Nine Months Ended September 30												%
$ in millions			2022						2021						Change			2022						2021						Change
Net earnings			$	915					$	1,063					(14)		%	$	2,816					$	4,295					(34)		%
Gain on sale of business			—						—						NM			—						(1,980)						NM
State tax impact1			—						—						NM			—						160						NM
Transaction costs			—						—						NM			—						32						NM
Make-whole premium			—						—						NM			—						54						NM
Federal tax impact of items above2			—						—						NM			—						614						NM
Transaction adjustment, net of tax			$	—					$	—					NM			$	—					$	(1,120)					NM
Transaction-adjusted net earnings			$	915					$	1,063					(14)		%	$	2,816					$	3,175					(11)		%

**(1)**The state tax impact includes $62 million of incremental tax expense related to $1.2 billion of nondeductible goodwill in the divested business.

**(2)**The federal tax impact was calculated by applying the 21 percent federal statutory rate to the adjustment items and also includes $250 million of incremental tax expense related to $1.2 billion of nondeductible goodwill in the divested business.

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Current Quarter

Third quarter 2022 net earnings decreased $148 million, or 14 percent, primarily due to the lower operating income described above, partially offset by a lower effective tax rate.

Year to date 2022 net earnings decreased $1.5 billion, or 34 percent, primarily due to a $1.1 billion after-tax decline associated with the IT services divestiture. Transaction-adjusted net earnings decreased $359 million, or 11 percent, primarily due to the lower operating income described above and $108 million of lower returns on marketable securities related to our non-qualified benefit plans and other non-operating assets, partially offset by a lower effective tax rate.

Diluted Earnings Per Share

The table below reconciles diluted earnings per share to transaction-adjusted EPS:

			Three Months Ended September 30												%			Nine Months Ended September 30												%
			2022						2021						Change			2022						2021						Change
Diluted EPS			$	5.89					$	6.63					(11)		%	$	18.06					$	26.55					(32)		%
Gain on sale of business per share			—						—						NM			—						(12.24)						NM
State tax impact per share1			—						—						NM			—						0.99						NM
Transaction costs per share			—						—						NM			—						0.20						NM
Make-whole premium per share			—						—						NM			—						0.33						NM
Federal tax impact of line items above per share2			—						—						NM			—						3.79						NM
Transaction adjustment per share, net of tax			$	—					$	—					NM			$	—					$	(6.93)					NM
Transaction-adjusted EPS			$	5.89					$	6.63					(11)		%	$	18.06					$	19.62					(8)		%

**(1)**The state tax impact includes $62 million of incremental tax expense related to $1.2 billion of nondeductible goodwill in the divested business.

**(2)**The federal tax impact was calculated by applying the 21 percent federal statutory rate to the adjustment items and also includes $250 million of incremental tax expense related to $1.2 billion of nondeductible goodwill in the divested business.

Current Quarter

Third quarter 2022 diluted earnings per share decreased 11 percent, reflecting a 14 percent decrease in net earnings and a 3 percent reduction in weighted-average diluted shares outstanding.

Year to Date

Year to date 2022 diluted earnings per share decreased 32 percent, principally due to a $6.93 after-tax decrease associated with the IT services divestiture. Transaction-adjusted earnings per share decreased $1.56, or 8 percent, reflecting an 11 percent decrease in transaction-adjusted net earnings and a 4 percent reduction in weighted-average diluted shares outstanding.

SEGMENT OPERATING RESULTS

Basis of Presentation

The company is aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems. We present our sectors in the following business areas, which are reported in a manner reflecting core capabilities:

Aeronautics Systems						Defense Systems						Mission Systems						Space Systems
Autonomous Systems						Battle Management & Missile Systems						Airborne Multifunction Sensors						Launch & Strategic Missiles
Manned Aircraft						Mission Readiness						Maritime/Land Systems & Sensors						Space
												Navigation, Targeting & Survivability
												Networked Information Solutions

This section discusses segment sales, operating income and operating margin rates. In evaluating segment operating performance, we look primarily at changes in sales and operating income. Where applicable, significant fluctuations in operating performance attributable to individual contracts or programs, or changes in a specific cost element

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across multiple contracts, are described in our analysis. Based on this approach and the nature of our operations, the discussion of results of operations below first focuses on our four segments before distinguishing between products and services. Changes in sales are generally described in terms of volume, while changes in margin rates are generally described in terms of performance and/or contract mix. 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 non-volume related changes in profitability. Contract mix generally refers to changes in the ratio of contract type and/or lifecycle (e.g., cost-type, fixed-price, development, production, and/or sustainment).

Segment Operating Income and Margin Rate

Segment operating income, as reconciled in the table below, and segment operating margin rate (segment operating income divided by sales) are non-GAAP measures that reflect the combined operating income of our four segments less the operating income associated with intersegment sales. Segment operating income includes pension expense allocated to our sectors under FAR and CAS and excludes FAS pension service expense and unallocated corporate items (certain corporate-level expenses, which are not considered allowable or allocable under applicable FAR and CAS requirements, and costs not considered part of management’s evaluation of segment operating performance). These non-GAAP measures may be useful to investors and other users of our financial statements as supplemental measures in evaluating the financial performance and operational trends of our sectors. These measures may not be defined and calculated by other companies in the same manner and should not be considered in isolation or as alternatives to operating results presented in accordance with GAAP.

			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2022						2021						Change						2022						2021						Change
Operating income			$	844					$	1,043					(19)		%				$	2,695					$	4,909					(45)		%
Reconciliation to segment operating income:
CAS pension expense			$	(37)					$	(165)					(78)		%				$	(124)					$	(409)					(70)		%
FAS pension service expense			92						104						(12)		%				276						311						(11)		%
FAS/CAS operating adjustment			55						(61)						(190)		%				152						(98)						(255)		%
Gain on sale of business			—						—						—		%				—						(1,980)						NM
IT services divestiture – unallowable state taxes and transaction costs			—						—						—		%				—						192						NM
Intangible asset amortization and PP&E step-up depreciation			60						62						(3)		%				181						191						(5)		%
Other unallocated corporate expense (income)			48						(9)						(633)		%				89						33						170		%
Unallocated corporate expense (income)			108						53						104		%				270						(1,564)						NM
Segment operating income			$	1,007					$	1,035					(3)		%				$	3,117					$	3,247					(4)		%
Segment operating margin rate			11.2		%				11.9		%										11.7		%				12.0		%

Current Quarter

Third quarter 2022 segment operating income decreased $28 million, or 3 percent due to a lower segment operating margin rate, partially offset by higher sales. Third quarter 2022 segment operating margin rate decreased to 11.2 percent from 11.9 percent principally due to lower net EAC adjustments due, in part, to inflationary pressures.

Year to Date

Year to date 2022 segment operating income decreased $130 million, or 4 percent. Year to date 2021 segment operating income included $20 million from the IT services business, as well as a benefit of approximately $100 million due to the impact of lower overhead rates on the company’s fixed price contracts. Year to date 2022 segment operating margin rate decreased to 11.7 percent from 12.0 percent principally due to lower net EAC adjustments, including the prior year overhead rate benefit to fixed price contracts noted above.

FAS/CAS Operating Adjustment

Third quarter 2022 and year to date 2022 FAS/CAS operating adjustment decreased primarily due to lower CAS pension expense resulting from favorable plan asset returns in 2021 and changes in certain CAS actuarial assumptions as of December 31, 2021. Third quarter 2021 CAS pension expense also included a $44 million benefit from updated demographic information.

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Unallocated Corporate Expense (Income)

Current Quarter

The increase in third quarter 2022 unallocated corporate expense is primarily due to a $60 million benefit recognized in the prior year for insurance settlements related to shareholder litigation involving the former Orbital ATK.

Year to Date

The change in year to date 2022 unallocated corporate expense (income) is primarily due to the $2.0 billion pre-tax gain on sale and $192 million of unallowable state taxes and transaction costs recognized in the prior year associated with the IT services divestiture. The prior year also benefited from the $60 million of insurance settlements noted above.

Net EAC Adjustments - We record changes in estimated contract earnings at completion (net EAC adjustments) using the cumulative catch-up method of accounting. Net EAC adjustments can have a significant effect on reported sales and operating income and the aggregate amounts are presented in the table below:

			Three Months Ended September 30												Nine Months Ended September 30
$ in millions			2022						2021						2022						2021
Favorable EAC adjustments			$	306					$	273					$	980					$	930
Unfavorable EAC adjustments			(261)						(164)						(670)						(477)
Net EAC adjustments			$	45					$	109					$	310					$	453

Net EAC adjustments by segment are presented in the table below:

			Three Months Ended September 30												Nine Months Ended September 30
$ in millions			2022						2021						2022						2021
Aeronautics Systems			$	27					$	(2)					$	121					$	67
Defense Systems			23						37						98						95
Mission Systems			14						43						100						192
Space Systems			(13)						33						10						103
Eliminations			(6)						(2)						(19)						(4)
Net EAC adjustments			$	45					$	109					$	310					$	453

For purposes of the discussion in the remainder of this Segment Operating Results section, references to operating income and operating margin rate reflect segment operating income and segment operating margin rate, respectively.

AERONAUTICS SYSTEMS			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2022						2021						Change						2022						2021						Change
Sales			$	2,537					$	2,725					(7)		%				$	7,774					$	8,628					(10)		%
Operating income			262						265						(1)		%				827						873						(5)		%
Operating margin rate			10.3		%				9.7		%										10.6		%				10.1		%

Sales

Current Quarter

Third quarter 2022 sales decreased $188 million, or 7 percent, due to lower volume in both Manned Aircraft and Autonomous Systems, including restricted programs, E-2, and the Joint Surveillance and Target Attack Radar System (JSTARS) program as it nears completion.

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Year to Date

Year to date 2022 sales decreased $854 million, or 10 percent, due to lower volume in both Manned Aircraft and Autonomous Systems, including restricted programs, a $134 million decrease on E-2, a $125 million decrease on Global Hawk and lower volume on JSTARS as it nears completion.

Operating Income

Current Quarter

Third quarter 2022 operating income decreased $3 million, or 1 percent, due to lower sales, partially offset by a higher operating margin rate. Operating margin rate increased to 10.3 percent from 9.7 percent primarily due to higher net favorable EAC adjustments in Manned Aircraft. Prior year results included a $42 million unfavorable EAC adjustment on F-35.

Year to Date

Year to date 2022 operating income decreased $46 million, or 5 percent, due to lower sales, partially offset by a higher operating margin rate. Operating margin rate increased to 10.6 percent from 10.1 percent primarily due to a $38 million gain on a property sale and higher net favorable EAC adjustments. Higher net favorable EAC adjustments reflect a $67 million favorable EAC adjustment on the engineering, manufacturing and development phase of the B-21 program largely related to performance incentives, partially offset by lower net EAC adjustments associated with other restricted work. Prior year results included the $42 million unfavorable EAC adjustment on F-35 noted above.

DEFENSE SYSTEMS			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2022						2021						Change						2022						2021						Change
Sales			$	1,345					$	1,409					(5)		%				$	3,922					$	4,398					(11)		%
Operating income			158						175						(10)		%				481						529						(9)		%
Operating margin rate			11.7		%				12.4		%										12.3		%				12.0		%

Sales

Current Quarter

Third quarter 2022 sales decreased $64 million, or 5 percent, primarily due to lower scope on an international training program, the completion of a Joint Services support program and wind down of the UKAWACS and JSTARS programs, partially offset by higher volume on the NATO Alliance Ground Surveillance In-Service Support (NATO AGS ISS) and advanced fuze programs.

Year to Date

Year to date 2022 sales decreased $476 million, or 11 percent, due, in part, to a $106 million reduction in sales related to the IT services divestiture. Year to date 2022 organic sales decreased $370 million, or 9 percent, principally due to a $155 million decrease from lower scope on an international training program, completion of a Joint Services support program, lower volume on the Advanced Anti-Radiation Guided Missile (AARGM) program and wind down of the UKAWACS program, partially offset by higher volume on NATO AGS ISS and advanced fuze programs.

Operating Income

Current Quarter

Third quarter 2022 operating income decreased $17 million, or 10 percent, primarily due to lower sales and a lower operating margin rate. Operating margin rate decreased to 11.7 percent from 12.4 percent primarily due to lower net favorable EAC adjustments at Battle Management and Missile Systems, partially offset by improved performance in the Mission Readiness business area.

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Year to Date

Year to date 2022 operating income decreased $48 million, or 9 percent, due, in part, to a $14 million reduction in operating income related to the IT services divestiture. Lower sales volume was partially offset by a higher operating margin rate, which increased to 12.3 percent from 12.0 percent primarily due to improved performance in the Mission Readiness business area.

MISSION SYSTEMS			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2022						2021						Change						2022						2021						Change
Sales			$	2,456					$	2,436					1		%				$	7,469					$	7,613					(2)		%
Operating income			368						372						(1)		%				1,166						1,177						(1)		%
Operating margin rate			15.0		%				15.3		%										15.6		%				15.5		%

Sales

Current Quarter

Third quarter 2022 sales increased $20 million, or 1 percent, primarily due to higher restricted sales in the Networked Information Solutions business area as well as higher Surface Electronic Warfare Improvement Program (SEWIP) volume. These increases were partially offset by lower volume on Navigation, Targeting and Survivability programs and the Joint Counter Radio-Controlled Improvised Explosive Device Electronic Warfare (JCREW) program.

Year to Date

Year to date 2022 sales decreased $144 million, or 2 percent, due, in part, to a $42 million reduction in sales related to the IT services divestiture. Year to date 2022 organic sales decreased $102 million, or 1 percent, primarily due to lower volume on Navigation, Targeting and Survivability programs and the JCREW program. These decreases were partially offset by an increase in restricted sales in the Networked Information Solutions business area.

Operating Income

Current Quarter

Third quarter 2022 operating income decreased $4 million, or 1 percent, due to a lower operating margin rate, partially offset by higher sales. Operating margin rate decreased to 15.0 percent from 15.3 percent principally due to lower net EAC adjustments, largely in the Maritime/Land Systems & Sensors and Navigation, Targeting & Survivability business areas, partially offset by improved performance on restricted programs at Networked Information Solutions.

Year to Date

Year to date 2022 operating income decreased $11 million, or 1 percent, due to lower sales, partially offset by a higher operating margin rate. Operating margin rate increased to 15.6 percent from 15.5 percent principally due to a $33 million benefit recognized in connection with a contract-related legal matter, partially offset by the previously described overhead rate benefit to fixed price contracts in the prior year.

SPACE SYSTEMS			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2022						2021						Change						2022						2021						Change
Sales			$	3,163					$	2,681					18		%				$	8,997					$	7,950					13		%
Operating income			290						288						1		%				861						865						—		%
Operating margin rate			9.2		%				10.7		%										9.6		%				10.9		%

Sales

Current Quarter

Third quarter 2022 sales increased $482 million, or 18 percent, due to higher sales in both business areas. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, including a $115 million increase on the Ground Based Strategic Deterrent (GBSD) program and a $103 million increase on the Next Generation Interceptor (NGI) program, as well as higher volume on the GEM63 program in support of Amazon’s Project Kuiper. Sales in the Space business area were driven by a $129 million increase due to ramp-up on the Space Development Agency (SDA) Tranche 1 Transport Layer and Tranche 1 Tracking Layer programs awarded in 2022, as well as higher volume on restricted programs and the Commercial Resupply Services (CRS) program.

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Year to Date

Year to date 2022 sales increased $1.0 billion, or 13 percent, and includes a $16 million reduction in sales related to the IT services divestiture. Year to date 2022 organic sales increased $1.1 billion, or 13 percent, due to higher sales in both business areas. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, including a $356 million increase on NGI and a $327 million increase on GBSD. Sales in the Space business area were driven by a $208 million increase on the SDA Tranche 1 Transport Layer and Tranche 1 Tracking Layer programs awarded earlier this year, as well as higher volume on restricted programs and CRS, partially offset by a $116 million decrease in sales for the James Webb Space Telescope after its successful launch in December 2021.

Operating Income

Current Quarter

Third quarter 2022 operating income was comparable to the prior year period and reflects higher sales and a lower operating margin rate. Operating margin rate decreased to 9.2 percent from 10.7 percent primarily due to lower net EAC adjustments and higher volume on early-stage development programs, such as NGI and GBSD.

Year to Date

Year to date 2022 operating income was comparable to the prior period and reflects higher sales and a lower operating margin rate. Operating margin rate decreased to 9.6 percent from 10.9 percent primarily due to lower net EAC adjustments and higher volume on early-stage development programs, such as NGI and GBSD. Prior year results include the previously described overhead rate benefit to fixed price contracts.

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PRODUCT AND SERVICE ANALYSIS

The following table presents product and service sales and operating costs and expenses by segment:

			Three Months Ended September 30															Nine Months Ended September 30
$ in millions			2022						2021									2022						2021
Segment Information:			Sales			Operating Costs and Expenses			Sales			Operating Costs and Expenses						Sales			Operating Costs and Expenses			Sales			Operating Costs and Expenses
Aeronautics Systems
Product			$	1,936		$	1,752		$	2,233		$	2,023					$	5,897		$	5,289		$	7,241		$	6,527
Service			542			471			444			393						1,695			1,501			1,250			1,104
Intersegment eliminations			59			52			48			44						182			157			137			124
Total Aeronautics Systems			2,537			2,275			2,725			2,460						7,774			6,947			8,628			7,755
Defense Systems
Product			634			563			618			532						1,842			1,605			1,939			1,687
Service			517			452			585			523						1,513			1,334			1,873			1,664
Intersegment eliminations			194			172			206			179						567			502			586			518
Total Defense Systems			1,345			1,187			1,409			1,234						3,922			3,441			4,398			3,869
Mission Systems
Product			1,711			1,475			1,766			1,498						5,221			4,457			5,300			4,506
Service			496			402			426			354						1,494			1,210			1,578			1,302
Intersegment eliminations			249			211			244			212						754			636			735			628
Total Mission Systems			2,456			2,088			2,436			2,064						7,469			6,303			7,613			6,436
Space Systems
Product			2,698			2,453			2,228			1,991						7,639			6,898			6,580			5,865
Service			437			396			420			371						1,268			1,158			1,267			1,126
Intersegment eliminations			28			24			33			31						90			80			103			94
Total Space Systems			3,163			2,873			2,681			2,393						8,997			8,136			7,950			7,085
Segment Totals
Total Product			$	6,979		$	6,243		$	6,845		$	6,044					$	20,599		$	18,249		$	21,060		$	18,585
Total Service			1,992			1,721			1,875			1,641						5,970			5,203			5,968			5,196
Total Segment**(1)**			$	8,971		$	7,964		$	8,720		$	7,685					$	26,569		$	23,452		$	27,028		$	23,781

(1)A reconciliation of segment operating income to total operating income is included in “Segment Operating Results.”

Product Sales and Costs

Current Quarter

Third quarter 2022 product sales increased $134 million, or 2 percent, primarily due to an increase in product sales at Space Systems, partially offset by a decrease in product sales at Aeronautics Systems. The increase at Space Systems was driven by ramp-up on development programs including NGI and GBSD. The decrease at Aeronautics Systems was principally due to lower volume on restricted programs, as well as the E-2 program.

Third quarter 2022 product costs increased $199 million, or 3 percent, consistent with the higher product sales described above and reflect lower product margin rates at Space Systems, Mission Systems and Defense Systems principally due to lower net EAC adjustments.

Year to Date

Year to date 2022 product sales decreased $461 million, or 2 percent, primarily due to a decrease in product sales at Aeronautics Systems, partially offset by an increase in product sales at Space Systems. The decrease at Aeronautics Systems was principally due to lower volume on restricted programs, as well as the E-2 program. The increase at Space Systems is principally related to ramp-up on development programs including NGI and GBSD, as well as higher volume on the SDA Tranche 1 Transport Layer and Tranche 1 Tracking Layer programs.

Year to date 2022 product costs decreased $336 million, or 2 percent, consistent with the lower product sales.

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Service Sales and Costs

Current Quarter

Third quarter 2022 service sales increased $117 million, or 6 percent, primarily due to an increase in service sales at Aeronautics Systems, principally on restricted programs, and Mission Systems, partially offset by a decrease in service sales at Defense Systems. The decrease at Defense Systems was driven by lower scope on an international training program, the completion of a Joint Services support program and wind down of the UKAWACS program, partially offset by higher volume on the NATO AGS ISS programs.

Third quarter 2022 service costs increased $80 million, or 5 percent, consistent with the higher service sales described above and reflects higher service margin rates at Mission Systems, Defense Systems and Aeronautics Systems.

Year to Date

Year to date 2022 service sales were comparable with the prior year period. Higher service sales at Aeronautics Systems were offset by the IT services divestiture as well as lower volume on an international training program and completion of a Joint Services support program at Defense Systems. Sales from the divested IT services business, which were largely included in service sales, were $162 million in the prior year period.

Year to date 2022 service costs were comparable with the prior year period, consistent with the service sales described above.

BACKLOG

Backlog represents the future sales we expect to recognize on firm orders received by the company and is equivalent to the company’s remaining performance obligations at the end of each period. It comprises both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (IDIQ) contracts are not included in backlog until the time an option or IDIQ task order is exercised or awarded. Backlog is converted into sales as costs are incurred or deliveries are made.

Backlog consisted of the following as of September 30, 2022 and December 31, 2021:

						September 30, 2022																		December 31, 2021
$ in millions						Funded						Unfunded						Total Backlog						Total Backlog						% Change in 2022
Aeronautics Systems						$	8,127					$	10,513					$	18,640					$	18,277					2		%
Defense Systems						5,908						789						6,697						6,349						5		%
Mission Systems						10,192						4,554						14,746						14,306						3		%
Space Systems						8,407						31,159						39,566						37,114						7		%
Total backlog						$	32,634					$	47,015					$	79,649					$	76,046					5		%

New Awards

Third quarter and year to date 2022 net awards totaled $8.7 billion and $30.2 billion, respectively, and backlog totaled $79.6 billion. Significant third quarter new awards include $2.8 billion for restricted programs (at Space Systems, Mission Systems and Aeronautics Systems), $1.3 billion for Ground-based Midcourse Defense (GMD) and $0.8 billion for SDA Tranche 1 Tracking Layer.

LIQUIDITY AND CAPITAL RESOURCES

We are focused on the efficient conversion of operating income into cash and to provide for the company’s material cash requirements, including working capital needs, satisfaction of contractual commitments, funding of our pension and OPB plans, investment in our business through capital expenditures, and shareholder return through dividend payments and share repurchases.

At September 30, 2022, we had $1.7 billion in cash and cash equivalents. We expect cash and cash equivalents and cash generated from operating activities, supplemented by borrowings under credit facilities, commercial paper and/or in the capital markets through our shelf registration with the SEC, if needed, to be sufficient to provide liquidity to the company in the short-term and long-term. In August 2022, the company entered into a new five-year senior unsecured credit facility in an aggregate principal amount of $2.5 billion. The 2022 Credit Agreement replaced the company’s prior five-year, $2.0 billion revolving credit facility entered into in August 2018. In April 2022, we

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renewed our one-year $500 million uncommitted credit facility. At September 30, 2022, there were no borrowings outstanding under these credit facilities.

Effective January 30, 2021, we completed the IT services divestiture for $3.4 billion cash. Proceeds were primarily used in the first quarter of 2021 for a $2.0 billion accelerated share repurchase and to fund redemption of $1.5 billion of the company’s 2.55 percent unsecured notes due October 2022.

COVID-19 and the CARES Act

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) established a program with provisions to allow U.S. companies to defer the employer’s portion of social security taxes between March 27, 2020 and December 31, 2020 and pay such taxes in two installments in 2021 and 2022. Our first installment of deferred social security taxes of $200 million was paid in the fourth quarter of 2021 and the second installment of $200 million is due in the fourth quarter of 2022. Under Section 3610, the CARES Act also authorized the government to reimburse qualifying contractors for certain costs of providing paid leave to employees as a result of COVID-19. The company has sought and may continue to seek recovery for certain COVID-19-related costs under Section 3610 of the CARES Act and through our contract provisions, though it is unclear how much we will be able to recover. In addition, the U.S. Department of Defense (DoD) has, to date, taken steps to increase the rate for certain progress payments from 80 percent to 90 percent for costs incurred and work performed on relevant contracts; it is unclear what steps the DoD will continue to take.

Internal Revenue Code (IRC) Section 174

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and development expenditures in the current year and requires taxpayers to amortize them over five years pursuant to IRC Section 174. We have made federal tax payments of approximately $670 million related to Section 174 during the first nine months of 2022 and expect our full year tax payments to approximate $1.0 billion. Congress is considering, but has not passed, legislation that would defer the amortization requirement to later years. If legislation is passed during the fourth quarter of 2022 and made effective retroactively to January 1, 2022, we expect to immediately file for a refund of taxes paid during 2022, but do not expect we would receive that refund until 2023. As such, we expect the impact of the current Section 174 legislation on our 2022 cash from operations to range between $670 million and $1.0 billion depending on if and when Congress passes additional legislation, whether such legislation is made effective retroactively, the amount of research and development expenditures incurred and paid by the company during 2022, and whether the IRS issues guidance on the provision which differs from our current interpretation.

Cash Flow Measures

In addition to our cash position, we consider various cash flow measures in capital deployment decision-making, including cash provided by operating activities and adjusted free cash flow, a non-GAAP measure described in more detail below.

Operating Cash Flow

The table below summarizes key components of cash provided by operating activities:

															Nine Months Ended September 30												%
$ in millions																					2022						2021						Change
Net earnings																					$	2,816					$	4,295					(34)		%
Gain on sale of business																					—						(1,980)						NM
Non-cash items(1)																					(301)						56						(638)		%
Pension and OPB contributions																					(106)						(108)						(2)		%
Changes in trade working capital																					(1,855)						(124)						1,396		%
Other, net																					96						(14)						(786)		%
Net cash provided by operating activities																					$	650					$	2,125					(69)		%

(1)Includes depreciation and amortization, non-cash lease expense, stock based compensation expense, deferred income taxes and net periodic pension and OPB income.

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Year to date 2022 net cash provided by operating activities decreased $1.5 billion as compared with the same period in 2021 principally due to increases in trade working capital. During the nine months ended September 30, 2022, the company made $670 million of federal tax payments related to the current provisions of IRC Section 174. During the nine months ended September 30, 2021, the company made $588 million of tax payments related to the IT services divestiture.

Adjusted Free Cash Flow

Adjusted free cash flow, as reconciled in the table below, is a non-GAAP measure defined as net cash provided by or used in operating activities, less capital expenditures, plus proceeds from the sale of equipment to a customer (not otherwise included in net cash provided by or used in operating activities) and the after-tax impact of discretionary pension contributions. Adjusted free cash flow includes proceeds from the sale of equipment to a customer as such proceeds were generated in a customer sales transaction. It also includes the after-tax impact of discretionary pension contributions for consistency and comparability of financial performance. This measure may not be defined and calculated by other companies in the same manner. We use adjusted free cash flow as a key factor in our planning for, and consideration of, acquisitions, the payment of dividends and stock repurchases. This non-GAAP measure may be useful to investors and other users of our financial statements as a supplemental measure of our cash performance, but should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating cash flows presented in accordance with GAAP.

The table below reconciles net cash provided by operating activities to adjusted free cash flow:

															Nine Months Ended September 30												%
$ in millions																					2022						2021						Change
Net cash provided by operating activities																					$	650					$	2,125					(69)		%
Capital expenditures																					(803)						(682)						18		%
Proceeds from sale of equipment to a customer																					100						84						19		%
Adjusted free cash flow																					$	(53)					$	1,527					(103)		%

Year to date 2022 adjusted free cash flow decreased $1.6 billion as compared with the same period in 2021 principally due to lower net cash provided by operating activities and an increase in capital expenditures.

Investing Cash Flow

Year to date 2022 net cash used in investing activities was $663 million compared to net cash provided by investing activities of $2.8 billion in the prior year period principally due to $3.4 billion in cash received from the sale of our IT services business during the first quarter of 2021.

Financing Cash Flow

Year to date 2022 net cash used in financing activities decreased $3.9 billion as compared with the same period in 2021 principally due to a $2.2 billion decrease in debt repayments and a $1.7 billion reduction in share repurchases.

Credit Facilities, Commercial Paper and Financial Arrangements - See Note 6 to the financial statements for further information on our credit facilities, commercial paper and our use of standby letters of credit and guarantees.

Share Repurchases - See Note 2 to the financial statements for further information on our share repurchase programs.

Long-term Debt - See Note 4 to the financial statements for further information.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

There have been no material changes to our critical accounting policies, estimates or judgments from those discussed in our 2021 Annual Report on Form 10-K.

ACCOUNTING STANDARDS UPDATES

See Note 1 to our financial statements for further information on accounting standards updates.

FORWARD-LOOKING STATEMENTS AND PROJECTIONS

This Form 10-Q and the information we are incorporating by reference contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “will,” “expect,” “anticipate,” “intend,” “may,” “could,” “should,” “plan,” “project,” “forecast,” “believe,”

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“estimate,” “outlook,” “trends,” “goals” and similar expressions generally identify these forward-looking statements. Forward-looking statements include, among other things, statements relating to our future financial condition, results of operations and/or cash flows. Forward-looking statements are based upon assumptions, expectations, plans and projections that we believe to be reasonable when made, but which may change over time. These statements are not guarantees of future performance and inherently involve a wide range of risks and uncertainties that are difficult to predict. Specific risks that could cause actual results to differ materially from those expressed or implied in these forward-looking statements include, but are not limited to, those identified and discussed more fully in the section entitled “Risk Factors” in our 2021 Annual Report on Form 10-K and from time to time in our other filings with the Securities and Exchange Commission (SEC). These risks and uncertainties are amplified by the global COVID-19 pandemic and the broader economic environment, which have caused and will continue to cause significant challenges, instability and uncertainty. They include:

Industry and Economic Risks

• our dependence on the U.S. government for a substantial portion of our business

• significant delays or reductions in appropriations for our programs, and U.S. government funding and program support more broadly, including related to hostilities and other global events

• 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, including as a result of labor shortages and/or inflationary pressures

• increased competition within our markets and bid protests

Legal and Regulatory Risks

• investigations, claims, disputes, enforcement actions, litigation and/or other legal proceedings

• the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we participate and the impact on our reputation and our ability to do business

• changes in procurement and other laws, SEC and other regulations, contract terms and practices applicable to our industry, findings by the U.S. government as to our compliance with such requirements, and changes in our customers’ business practices globally

• environmental matters, including unforeseen environmental costs and government and third party claims

• unanticipated changes in our tax provisions or exposure to additional tax liabilities

Business and Operational Risks

• 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

• cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners, and changes in related regulations

• our ability to attract and retain a qualified workforce with the required security clearances and requisite skills to meet our performance obligations

• the performance and viability of our subcontractors and suppliers and the availability and pricing of raw materials and components, particularly with inflationary pressures, increased costs, supply chain disruptions, and extended material lead times

• climate change, its impacts on our company, our operations and our stakeholders (employees, suppliers, customers, shareholders and regulators), and changes in laws, regulations and priorities related to greenhouse gas emissions and other climate change related concerns

• our exposure to additional risks as a result of our international business, including risks related to geopolitical and economic factors, suppliers, laws and regulations

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• our ability to meet performance obligations under our contracts, including obligations that require innovative design capabilities, are technologically complex, require certain manufacturing expertise or are dependent on factors not wholly within our control

• natural disasters

• products and services we provide related to hazardous and high risk operations, including the production and use of such products, which subject us to various environmental, regulatory, financial, reputational and other risks

• our ability appropriately to exploit and/or protect intellectual property rights

• our ability to develop new products and technologies and maintain technologies, facilities, and equipment to win new competitions and meet the needs of our customers

General and Other Risk Factors

• the adequacy and availability of our insurance coverage, customer indemnifications or other liability protections

*•*the future investment performance of plan assets, gains or losses associated with changes in 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 assets

We urge you to consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of forward-looking statements. These forward-looking statements speak only as of the date this report is first filed or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.