Item 1. Financial Statements

87K characters. Original on sec.gov · Markdown

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (Unaudited)


	Three Months Ended March 31
$ in millions, except per share amounts		2026		2025
Sales
Product		$	7,958	$	7,521
Service		1,923		1,947
Total sales		9,881		9,468
Operating costs and expenses
Product		6,433		6,366
Service		1,488		1,522
General and administrative expenses		971		1,007
Total operating costs and expenses		8,892		8,895

Operating income		989		573
Other (expense) income
Interest expense		(162)		(156)
Non-operating FAS pension benefit		166		130
Other, net		37		31
Earnings before income taxes		1,030		578
Federal and foreign income tax expense		155		97
Net earnings		$	875	$	481

Basic earnings per share		$	6.16	$	3.33
Weighted-average common shares outstanding, in millions		142.1		144.6
Diluted earnings per share		$	6.14	$	3.32
Weighted-average diluted shares outstanding, in millions		142.5		144.9

Net earnings (from above)		$	875	$	481
Other comprehensive (loss) income, net of tax
Change in cumulative translation adjustment		(2)		2
Change in other, net		(3)		8
Other comprehensive (loss) income, net of tax		(5)		10
Comprehensive income		$	870	$	491

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-1-

Table of Contents

NORTHROP GRUMMAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)


$ in millions, except par value	March 31, 2026		December 31, 2025
Assets
Cash and cash equivalents	$	2,090	$	4,403
Accounts receivable, net	1,806		1,375
Unbilled receivables, net	7,556		6,544
Inventoried costs, net	1,450		1,309
Prepaid expenses and other current assets	1,868		1,656
Total current assets	14,770		15,287
Property, plant and equipment, net of accumulated depreciation of $9,854 for 2026 and $9,648 for 2025	10,243		10,972
Operating lease right-of-use assets	1,925		1,859
Goodwill	17,439		17,437
Deferred tax assets	743		1,051
Pension and other postretirement benefit plan assets	3,307		3,167
Other non-current assets	1,580		1,604
Total assets	$	50,007	$	51,377

Liabilities
Trade accounts payable	$	2,681	$	3,240
Accrued employee compensation	1,732		2,309
Advance payments and billings in excess of costs incurred	3,697		4,086
Other current liabilities	4,711		4,247
Total current liabilities	12,821		13,882
Long-term debt, net of current portion of $758 for 2026 and $534 for 2025	14,411		15,162
Pension and other postretirement benefit plan liabilities	1,095		1,110
Operating lease liabilities	1,905		1,857
Other non-current liabilities	2,660		2,692
Total liabilities	32,892		34,703

Commitments and contingencies (Note 7)

Shareholders’ equity
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued and outstanding	—		—
Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2026—142,033,476 and 2025—141,997,194	142		142
Paid-in capital	8		—
Retained earnings	17,096		16,658
Accumulated other comprehensive loss	(131)		(126)
Total shareholders’ equity	17,115		16,674
Total liabilities and shareholders’ equity	$	50,007	$	51,377

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-2-

Table of Contents

NORTHROP GRUMMAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31
$ in millions	2026		2025
Operating activities
Net earnings	$	875	$	481
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization	372		337
Stock-based compensation	20		20
Deferred income taxes	308		(34)
B-21 loss provision	—		477

Net periodic pension and OPB income	(120)		(81)
Pension and OPB contributions	(33)		(28)
Changes in assets and liabilities:
Accounts receivable, net	(431)		(542)
Unbilled receivables, net	(551)		(1,069)
Inventoried costs, net	(144)		(125)
Prepaid expenses and other assets	(37)		(42)
Trade accounts payable	(559)		(93)
Advance payments and billings in excess of costs incurred	(389)		(358)
Other liabilities	(802)		(563)
Income taxes payable, net	(164)		58
Other operating activities	(1)		(3)
Net cash used in operating activities	(1,656)		(1,565)

Investing activities
Capital expenditures	(167)		(256)

Other investing activities	(1)		4
Net cash used in investing activities	(168)		(252)

Financing activities
Payments of long-term debt	(527)		(1,500)
Net borrowings on commercial paper	498		1,474
Common stock repurchases	(68)		(480)
Cash dividends paid	(333)		(302)
Payments of employee taxes withheld from share-based awards	(57)		(38)
Other financing activities	(2)		(5)
Net cash used in financing activities	(489)		(851)
Decrease in cash and cash equivalents	(2,313)		(2,668)
Cash and cash equivalents, beginning of year	4,403		4,353
Cash and cash equivalents, end of period	$	2,090	$	1,685

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-3-

Table of Contents

NORTHROP GRUMMAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


	Three Months Ended March 31
$ in millions, except per share amounts		2026		2025
Common stock
Beginning of period		$	142	$	145
Common stock repurchased		—		(1)
End of period		142		144
Paid-in capital
Beginning of period		—		—
Stock compensation		8		—
End of period		8		—
Retained earnings
Beginning of period		16,658		15,297
Common stock repurchased		(63)		(481)
Net earnings		875		481
Dividends declared		(330)		(299)
Stock compensation		(44)		(16)
End of period		17,096		14,982
Accumulated other comprehensive loss
Beginning of period		(126)		(152)
Other comprehensive (loss) income, net of tax		(5)		10
End of period		(131)		(142)
Total shareholders’ equity		$	17,115	$	14,984
Cash dividends declared per share		$	2.31	$	2.06

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-4-

Table of Contents

NORTHROP GRUMMAN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Reporting

These unaudited condensed consolidated financial statements (the “financial statements”) include the accounts of Northrop Grumman Corporation and its subsidiaries and joint ventures or other investments for which we consolidate the financial results (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”). Intercompany accounts, transactions and profits are eliminated in consolidation. Investments in equity securities and joint ventures where the company has significant influence, but not control, are accounted for using the equity method.

On May 24, 2025 (the “Divestiture date”), the company completed its previously announced sale of substantially all of the Immersive Mission Solutions (IMS) operating unit of Defense Systems (the “training services” business or “divestiture”) for $333 million in cash and recorded a pre-tax gain on sale of $231 million. IMS is a provider of mission training and satellite ground network communications software for U.S. government customers. 2025 operating results include sales and operating income for the training services business prior to the Divestiture date.

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”) and in accordance with the rules of the Securities and Exchange Commission (SEC) for interim reporting. The financial statements include adjustments of a normal recurring nature considered necessary by management for a fair presentation of the company’s unaudited condensed consolidated financial position, results of operations and cash flows. For classification of certain current assets and liabilities, we consider the duration of our customer contracts when defining our operating cycle, which is generally longer than one year.

During the fourth quarter of 2025, we modified our presentation of the changes in liabilities in the operating cash flow section of the consolidated statement of cash flows by disaggregating Accounts payable and other liabilities into three separate line items: Accounts payable, Advance payments and billings in excess of costs incurred, and Other liabilities. Prior period amounts have been conformed to the current period presentation. The modified presentation does not impact previously reported cash provided by operating activities.

Results reported in the financial statements are not necessarily indicative of results that may be expected for the entire year. The financial statements should be read in conjunction with the information contained in the company’s 2025 Annual Report on Form 10-K.

Quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30 and third quarter as ending on September 30. It is the company’s long-standing practice to establish actual interim closing dates using a “fiscal” calendar, in which we close our books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. This practice is only used at interim periods within a reporting year.

Accounting Estimates

Preparation of the financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of sales and expenses during the reporting period. Estimates have been prepared using the most current and best available information; however, actual results could differ materially from those estimates.

Revenue Recognition

Contract Estimates

Contract sales may include estimates of variable consideration, including cost or performance incentives (such as award and incentive fees), un-priced change orders, requests for equitable adjustment (REAs) and contract claims. Variable consideration is included in total estimated sales to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We estimate variable consideration as the most likely amount to which we expect to be entitled.

We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis. Net estimate-at-completion (EAC) adjustments represent the cumulative effect of the changes on current and prior periods; sales and operating margins in future periods are recognized as if the revised estimates had been used since contract inception. If it is determined that a loss is expected to result on an individual performance

-5-

Table of Contents

NORTHROP GRUMMAN CORPORATION

obligation, the entire amount of the estimable future loss, including an allocation of general and administrative (G&A) cost, is charged against income in the period the loss is identified.

B-21 Program

During the fourth quarter of 2023, we recognized a projected loss of $1.56 billion across the five low-rate initial production (LRIP) options of the B-21 program. During the first quarter of 2025, we recognized an additional $477 million loss across the five LRIP options. As of March 31, 2026, the remaining loss accrual on the B-21 program totaled $1.0 billion, which is included in Other current liabilities.

Net EAC Adjustments

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


	Three Months Ended March 31
$ in millions, except per share data		2026		2025
Revenue		$	(8)	$	38
Operating income		(80)		(100)
Net earnings(1)		(63)		(79)
Diluted earnings per share(1)		(0.44)		(0.55)

**(1)**Based on a 21 percent federal statutory tax rate.

EAC adjustments can have a significant effect on the company’s financial statements. When such adjustments occur, we generally disclose the nature, underlying conditions and financial impact of the adjustments. In most cases, EAC adjustments have an equal impact on both revenue and operating income. However, for contracts in a forward loss position, the impact of EAC adjustments on revenue is different than the impact on operating income because changes in reach forward losses also impact cost of sales.

2026 – During the first quarter of 2026, the company reached an agreement with the U.S. Air Force to expand production capacity and increase the aircraft production rate for the B-21 program at Aeronautics Systems. We made no significant changes to the previously recognized loss on the program; however, impacts from the agreement and higher estimated production costs resulted in a $157 million net unfavorable EAC adjustment on the first four LRIP lots, which was offset by a net reduction in the loss contingency accrual on the remainder of the program. The company also recorded a $71 million unfavorable EAC adjustment on the Graphite Epoxy Motor (GEM) 63XL program at Space Systems associated with the evaluation and implementation of corrective actions for a solid rocket motor anomaly that occurred during a Q1 2026 launch.

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

Backlog

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

Company backlog as of March 31, 2026 was $95.6 billion. Of our March 31, 2026 backlog, we expect to recognize approximately 35 percent as revenue over the next 12 months and 60 percent as revenue over the next 24 months, with the remainder to be recognized thereafter.

Contract Assets and Liabilities

For each of the company’s contracts, the timing of revenue recognition, customer billings, and cash collections results in a net contract asset or liability at the end of each reporting period. Contract assets are equivalent to and reflected as Unbilled receivables in the unaudited condensed consolidated statements of financial position and are primarily related to long-term contracts where revenue recognized under the cost-to-cost method exceeds amounts billed to customers. Contract liabilities are equivalent to and reflected as Advance payments and billings in excess of costs incurred in the unaudited condensed consolidated statements of financial position. The amount of revenue recognized for the three months ended March 31, 2026 that was included in the December 31, 2025 contract liability balance was $1.8 billion. The amount of revenue recognized for the three months ended March 31, 2025 that was included in the December 31, 2024 contract liability balance was $1.9 billion.

-6-

Table of Contents

NORTHROP GRUMMAN CORPORATION

Disaggregation of Revenue

See Note 10 for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments. We believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Property, Plant, and Equipment

In connection with the company’s first quarter 2026 agreement with the U.S. Air Force to expand production capacity and increase the aircraft production rate for the B-21 program, we agreed to sell an aircraft to the U.S. Air Force that we had previously planned to utilize as a company-owned test asset. While the sale of this asset accelerates the LRIP aircraft delivery schedule, it does not change the number of aircraft we expect to deliver under the LRIP phase of the program. The test asset was under construction at the time of sale, and our construction costs prior to the agreement were recognized as capital expenditures and included in property, plant and equipment. The agreement to sell the asset resulted in a reduction of PP&E during the first quarter of 2026; we had no material cash inflows related to the sale during the quarter.

Non-cash investing activities for the three months ended March 31, 2026 and 2025 include capital expenditures incurred but not yet paid of $42 million and $44 million, respectively.

Accumulated Other Comprehensive Loss

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


$ in millions	March 31, 2026		December 31, 2025
Cumulative translation adjustment	$	(133)	$	(131)
Other, net	2		5
Total accumulated other comprehensive loss	$	(131)	$	(126)

Related Party Transactions

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

Accounting Standards Updates

On November 4, 2024, the FASB issued ASU No. 2024-03 Disaggregation of Income Statement Expenses (Subtopic 220-40). ASU 2024-03 requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 will be effective for annual periods beginning January 1, 2027 and interim periods beginning January 1, 2028 and will be applied on a prospective basis with the option to apply the standard retrospectively. We are evaluating the disclosure impact of ASU 2024-03; however, the standard will not have an impact on the company’s consolidated financial position, results of operations or cash flows.

On September 18, 2025, the FASB issued ASU No. 2025-06 Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40). ASU 2025-06 removes references to prescriptive and sequential software development stages, requiring companies to capitalize internal-use software costs when management commits to funding the software project and it is probable the project will be completed. ASU 2025-06 will be effective for annual and interim periods beginning January 1, 2028, and can be applied on a prospective, modified prospective, or retrospective basis. We do not currently expect the standard will have a material impact on the company’s consolidated financial position, results of operations or cash flows.

On December 8, 2025, the FASB issued ASU No. 2025-11 Interim Reporting (Topic 270): Narrow-Scope Improvements. ASU 2025-11 clarifies the applicability of Topic 270 and the form and content of interim financial statements. In addition, ASU 2025-11 requires entities to disclose material events occurring since the last annual reporting period. ASU 2025-11 will be effective for interim periods beginning January 1, 2028, and can be applied on a prospective or retrospective basis. We are evaluating the disclosure impact of ASU 2025-11; however, the standard will not have an impact on the company’s consolidated financial position, results of operations or cash flows.

Other accounting standards updates adopted and/or issued, but not effective until after March 31, 2026, are not expected to have a material effect on the company’s consolidated financial position, results of operations and/or cash flows.

-7-

Table of Contents

NORTHROP GRUMMAN CORPORATION

2. EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK

Basic Earnings Per Share

We calculate basic earnings per share by dividing net earnings by the weighted-average number of shares of common stock outstanding during each period.

Diluted Earnings Per Share

Diluted earnings per share include the dilutive effect of awards granted to employees under stock-based compensation plans. The dilutive effect of these securities totaled 0.4 million shares and 0.3 million shares for the three months ended March 31, 2026 and 2025, respectively.

Share Repurchases

Share Repurchase Programs

On December 6, 2023, the company’s board of directors authorized a share repurchase program of up to $2.5 billion in share repurchases of the company’s common stock (the “2023 Repurchase Program”). Repurchases under the 2023 Repurchase Program commenced in February 2024 and were completed in September 2025.

On December 11, 2024, the company’s board of directors authorized a new share repurchase program of up to an additional $3.0 billion in share repurchases of the company’s common stock (the “2024 Repurchase Program”). Repurchases under the 2024 Repurchase Program commenced in September 2025 upon completion of the 2023 Repurchase Program. As of March 31, 2026, repurchases under the 2024 Repurchase Program totaled $0.5 billion; $2.5 billion remained under this share repurchase authorization.

Share repurchases take place from time to time, subject to market and regulatory conditions and management’s discretion, in the open market or in privately negotiated transactions. The company retires its common stock upon repurchase and, in the periods presented, has not made any purchases of common stock other than in connection with these publicly announced repurchase programs.

The table below summarizes the company’s share repurchases to date under the authorizations described above:


									Shares Repurchased (in millions)
Repurchase Program Authorization Date		Amount Authorized (in millions)			Total Shares Retired (in millions)	Average Price Per Share(1)		Date Completed	Three Months Ended March 31
	2026			2025
December 6, 2023		$	2,500		5.2	$	482.41	September 2025	—	1.0
December 11, 2024		$	3,000		0.9	$	581.87		0.1	—
									0.1	1.0

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

Dividends on Common Stock

In May 2025, the company increased the quarterly common stock dividend 12 percent to $2.31 per share from the previous amount of $2.06 per share.

3. INVENTORIED COSTS, NET

Inventoried costs, net consisted of the following:


$ in millions	March 31, 2026		December 31, 2025
Raw materials	$	318	$	306
Work in process	1,062		945
Finished goods	70		58
Inventoried costs, net	$	1,450	$	1,309

-8-

Table of Contents

NORTHROP GRUMMAN CORPORATION

4. INCOME TAXES

In July 2025, the One Big Beautiful Bill Act (OBBBA) was enacted. Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of research and development expenditures under Internal Revenue Code (IRC) Section 174 (reinstating full expensing beginning in 2025), extension of bonus depreciation, and revisions to international tax regimes. As part of the enactment of the OBBBA, the company became subject to the corporate alternative minimum tax (CAMT) and recorded CAMT credit carryforwards of $187 million during 2025. In February 2026, the Internal Revenue Service (IRS) issued Notice 2026-7, providing interim relief for the CAMT through a favorable adjustment related to the amortization of research and development expenditures under IRC Section 174. The company recognized the impacts of Notice 2026-7 during the first quarter of 2026, resulting in a $187 million decrease in CAMT credit carryforwards and a corresponding increase in Taxes receivable, as well as a $19 million reduction to federal income tax expense.


	Three Months Ended March 31
$ in millions		2026			2025
Federal and foreign income tax expense		$	155		$	97
Effective income tax rate		15.0		%	16.8		%

First quarter 2026 income tax expense increased $58 million, or 60 percent, due to $452 million of higher earnings before income taxes, partially offset by a lower effective tax rate (ETR). The first quarter 2026 ETR decreased to 15.0 percent from 16.8 percent primarily due to higher research credits, including a $19 million benefit related to the CAMT guidance discussed above. The first quarter 2026 ETR includes benefits of $68 million for research credits and $9 million for foreign-derived deduction-eligible income (FDDEI), partially offset by $19 million of interest expense on unrecognized tax benefits. The first quarter 2025 ETR included benefits of $34 million for research credits and $6 million for foreign derived intangible income (FDII), partially offset by $16 million of interest expense on unrecognized tax benefits.

Taxes receivable, which are included in Prepaid expenses and other current assets in the unaudited condensed consolidated statements of financial position, were $1.1 billion as of March 31, 2026 and $924 million as of December 31, 2025. Non-current unrecognized tax benefits, which are included in Other non-current liabilities, were $1.7 billion and $1.6 billion as of March 31, 2026 and December 31, 2025, respectively, with the remainder of our unrecognized tax benefits included within Other current liabilities.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. Certain matters related to the company’s 2018-2024 federal income tax returns are currently under IRS examination. Certain matters related to the company’s 2014-2017 federal income tax returns and refund claims related to its 2007-2016 federal tax returns are currently under review by the IRS Appeals Office.

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The company holds a portfolio of marketable securities including investments to partially fund non-qualified employee benefit plans as well as investments in companies that are advancing or developing technologies applicable to our business. A portion of these securities are held in common/collective trust funds and are measured at fair value using net asset value (NAV) per share as a practical expedient; therefore, they are not categorized in the fair value hierarchy table below. Marketable securities are included in Other non-current assets in the unaudited condensed consolidated statements of financial position.

The company’s derivative portfolio consists primarily of foreign currency forward contracts. Where model-derived valuations are appropriate, the company utilizes the income approach to determine the fair value using internal models based on observable market inputs.

-9-

Table of Contents

NORTHROP GRUMMAN CORPORATION

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


	March 31, 2026								December 31, 2025
$ in millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial Assets
Marketable securities	$	463	$	—	$	24	$	487	$	454	$	—	$	24	$	478
Marketable securities valued using NAV							5								5
Total marketable securities	463		—		24		492		454		—		24		483
Derivatives	—		—		—		—		—		2		—		2

There were no transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the three months ended March 31, 2026.

Unrealized gains and losses from marketable securities, which are reflected in Other, net on the unaudited condensed consolidated statement of earnings and comprehensive income, were not material for the three months ended March 31, 2026 and 2025.

The notional value of the company’s foreign currency forward contracts at March 31, 2026 and December 31, 2025 was $318 million and $308 million, respectively. The portion of notional value designated as a cash flow hedge at March 31, 2026 and December 31, 2025 was $149 million and $167 million, respectively.

The derivative fair values and related unrealized gains/losses at March 31, 2026 and December 31, 2025 were not material.

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

Long-term Debt

The estimated fair value of the company’s long-term debt was $14.2 billion and $15.1 billion as of March 31, 2026 and December 31, 2025, respectively. We calculated the fair value of long-term debt using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the company’s existing debt arrangements. The current portion of long-term debt is recorded in Other current liabilities in the unaudited condensed consolidated statements of financial position.

Issuance of Senior Notes

In May 2025, the company issued $1.0 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:

$500 million of 4.65% senior notes due 2030 (the “2030 Notes”) and
$500 million of 5.25% senior notes due 2035 (the “2035 Notes”).

We refer to the 2030 Notes and 2035 Notes together, as the “notes.” Interest on the notes is payable semi-annually in arrears. The notes are generally subject to redemption, in whole or in part, at the company’s discretion at any time, or from time to time, prior to maturity at a redemption price equal to the greater of 100% of the principal amount of the notes to be redeemed or an applicable “make-whole” amount, plus accrued and unpaid interest.

Repayment of Senior Notes

In March 2026, the company repaid $270 million of 7.875% unsecured senior notes and $257 million of 7.75% unsecured senior notes upon maturity.

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

-10-

Table of Contents

NORTHROP GRUMMAN CORPORATION

6. INVESTIGATIONS, CLAIMS AND LITIGATION

For over 25 years, the company has worked closely with the United States Navy, the United States Environmental Protection Agency, the New York State Department of Environmental Conservation, the New York State Department of Health and other federal, state and local governmental authorities, to address environmental conditions allegedly resulting from historic operations at the former United States Navy and Grumman facilities in Bethpage, New York. We have incurred, and expect to continue to incur, as included in Note 7, substantial remediation costs related to these Bethpage environmental conditions, including potential costs relating to unanticipated developments such as new discoveries of potential contaminants. It is also possible that applicable remediation standards and other requirements to which we are subject may continue to change, and that our costs may increase materially. In 2022, we resolved several disputes and regulatory proceedings concerning the scope and allocation of remediation responsibilities and costs related to this site and we continue remediation consistent with agreements through which those disputes were resolved. The company continues to be involved in other remediation-related disputes, none of which are material individually or in the aggregate. We are also a party to various individual lawsuits and a putative class action in the Eastern District of New York alleging personal injury and property damage related to the legacy Bethpage environmental conditions (the “Bethpage EDNY cases”). The court had previously stayed the filed individual lawsuits and recently set an April 24 hearing on plaintiffs’ motion to lift that stay as to a subset of plaintiffs. Although the court has ordered, and the parties have submitted, supplemental briefing on pending class certification and expert motions in the putative class action, the parties remain engaged in a mediation. We are also a party, and may become a party, to other lawsuits brought by or against insurance carriers, and by other individual plaintiffs and/or putative classes, as well as other parties. We cannot at this time predict or reasonably estimate the potential outcomes or ranges of possible liability of the Bethpage EDNY cases.

The company received from the U.S. Department of Justice (DOJ) a criminal subpoena on December 9, 2022, and a civil investigative demand (CID) on February 2, 2023, both seeking information regarding financial and cost accounting and controls focused on the interest rate assumptions the company used to determine our U.S. Government Cost Accounting Standards (CAS) pension expense, which we discuss in Note 7 below. The company has responded to requests and expects to continue to engage with the government as these matters progress. We cannot at this point predict the outcome of these matters.

The company is a party to various other investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, including government investigations and claims, that arise in the ordinary course of our business. The nature of legal proceedings is such that we cannot assure the outcome of any particular matter. However, based on information available to the company to date, the company does not believe that the outcome of any of these other matters pending against the company is likely to have a material adverse effect on the company’s unaudited condensed consolidated financial position as of March 31, 2026, or its annual results of operations and/or cash flows.

7. COMMITMENTS AND CONTINGENCIES

U.S. Government Cost Claims and Contingencies

From time to time, the company is advised of claims by the U.S. government concerning certain potential disallowed costs, plus, at times, penalties and interest. When such findings are presented, the company and U.S. government representatives engage in discussions to enable the company to evaluate the merits of these claims, as well as to assess the amounts being claimed. Where appropriate, provisions are made to reflect the company’s estimated exposure for such potential disallowed costs. Such provisions are reviewed periodically using the most recent information available. The company believes it has adequately reserved for disputed amounts that are probable and reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its unaudited condensed consolidated financial position as of March 31, 2026, or its annual results of operations and/or cash flows.

In 2019, the Defense Contract Management Agency (DCMA) raised questions about an interest rate assumption used by the company to determine our CAS pension expense. On June 1, 2020, DCMA provided written notice that the assumptions the company used during the period 2013-2019 were potentially noncompliant with CAS. We submitted a formal response on July 31, 2020, which we believed demonstrates the appropriateness of the assumptions used. On November 24, 2020, DCMA replied to the company’s response, disagreeing with our position and requesting additional input, which we provided on February 22, 2021. We subsequently continued to exchange correspondence and engage with DCMA on this matter, including responding to requests for and providing additional information. On February 15, 2024, DCMA sent to the company a Contracting Officer’s determination of noncompliance with CAS, which is an interim, non-final determination, and the parties engaged in discussions. In

-11-

Table of Contents

NORTHROP GRUMMAN CORPORATION

addition, as noted in Note 6 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on February 2, 2023, both seeking information related to the interest rate assumptions at issue in our discussions with DCMA. The company has responded to requests and expects to continue to engage with the government as these matters progress. We cannot at this point predict the outcome of these matters. The sensitivity to changes in interest rate assumptions makes it reasonably possible the outcome of these matters could have a material adverse effect on our financial position, results of operations and/or cash flows, although we are not currently able to estimate a range of any potential loss.

Environmental Matters

The table below summarizes the amount of accrued and deferred costs associated with the company’s environmental remediation liabilities as of March 31, 2026 and December 31, 2025:


$ in millions	March 31, 2026		December 31, 2025
Accrued costs(1)	$	561	$	547
Deferred costs(2)	514		502

(1) As of March 31, 2026, $213 million is recorded in Other current liabilities and $348 million is recorded in Other non-current liabilities in the unaudited condensed consolidated statements of financial position. Estimated remediation costs are not discounted to present value.

(2) The company defers the portion of environmental remediation costs we expect to be recoverable through overhead charges on U.S. government contracts. As of March 31, 2026, $197 million is deferred in Prepaid expenses and other current assets and $317 million is deferred in Other non-current assets in the unaudited condensed consolidated statements of financial position. These amounts are routinely evaluated for recoverability.

Reasonably possible future costs in excess of accrued costs were $402 million and $380 million as of March 31, 2026 and December 31, 2025, respectively. We currently expect any such future costs would be recoverable through overhead charges on our U.S. government contracts in a similar proportion as the amounts deferred in the table above.

Although we cannot predict whether (i) new information gained as our environmental remediation projects progress, (ii) changes in remediation standards or other requirements to which we are subject, or (iii) other changes in facts and circumstances will materially affect the estimated liability accrued, we do not anticipate that future remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s unaudited condensed consolidated financial position as of March 31, 2026, or its annual results of operations and/or cash flows.

Financial Arrangements

In the ordinary course of business, the company uses standby letters of credit and guarantees issued by commercial banks and surety bonds issued principally by insurance companies to guarantee the performance on certain obligations. At March 31, 2026, there were $597 million of stand-by letters of credit and guarantees and $271 million of surety bonds outstanding.

Commercial Paper

The company maintains a commercial paper program that serves as a source of short-term financing with capacity to issue unsecured commercial paper notes up to $3.0 billion. At March 31, 2026, the company had $500 million of outstanding commercial paper borrowings at a weighted-average interest rate of 3.96%, with original maturities of three months or less from the date of issuance. The outstanding balance of commercial paper borrowings is recorded in Other current liabilities in the unaudited condensed consolidated statements of financial position.

Credit Facilities

The company maintains a five-year senior unsecured revolving credit facility in an aggregate principal amount of $3.0 billion (the “2025 Credit Agreement”) that matures in September 2030 and is intended to support the company's commercial paper program and other general corporate purposes. Commercial paper borrowings reduce the amount available for borrowing under the 2025 Credit Agreement. At March 31, 2026, there were no borrowings outstanding under this facility; however, the amount available for borrowing was reduced by the $500 million of commercial paper borrowings described above.

The 2025 Credit Agreement contains generally customary terms and conditions, including covenants restricting the company’s ability to sell all or substantially all of its assets, merge or consolidate with another entity or undertake other fundamental changes and incur liens. The company also cannot permit the ratio of its debt to capitalization (as set forth in the credit agreement) to exceed 65 percent.

-12-

Table of Contents

NORTHROP GRUMMAN CORPORATION

At March 31, 2026, the company was in compliance with all covenants under its credit agreements.

8. RETIREMENT BENEFITS

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


	Three Months Ended March 31
		Pension Benefits	OPB
$ in millions			2026		2025		2026		2025
Components of net periodic benefit cost (benefit)
Service cost			$	53	$	54	$	1	$	1
Interest cost			399		403		15		16
Expected return on plan assets			(565)		(540)		(22)		(21)
Amortization of prior service credit			—		—		(1)		(1)
Other			—		7		—		—
Net periodic benefit cost (benefit)			$	(113)	$	(76)	$	(7)	$	(5)

Employer Contributions

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

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


	Three Months Ended March 31
$ in millions		2026		2025
Defined benefit pension plans		$	22	$	18
OPB plans		11		10
Defined contribution plans		229		229

9. STOCK COMPENSATION PLANS AND OTHER COMPENSATION ARRANGEMENTS

Stock Awards

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


	Three Months Ended March 31
in millions	2026		2025
RSRs granted	0.1		0.1
RPSRs granted	0.1		0.1
Grant date aggregate fair value	$	139	$	100

RSRs typically vest on the third anniversary of the grant date, while RPSRs generally vest and pay out based on the achievement of certain performance metrics and market conditions over a three-year period.

-13-

Table of Contents

NORTHROP GRUMMAN CORPORATION

Cash Awards

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


	Three Months Ended March 31
$ in millions	2026		2025
Minimum aggregate payout amount	$	—	$	35
Maximum aggregate payout amount	163		198

CUs typically vest and settle in cash on the third anniversary of the grant date, while CPUs generally vest and pay out in cash based on the achievement of certain performance metrics over a three-year period. During the three months ended March 31, 2026, there were no CUs granted to employees.

-14-

Table of Contents

NORTHROP GRUMMAN CORPORATION

10. SEGMENT INFORMATION

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


	Three Months Ended March 31
$ in millions		2026		2025
Aeronautics Systems
Sales		$	3,283	$	2,814
Operating costs and expenses:
Product		2,294		2,358
Service		653		601
Intersegment		31		38
Aeronautics Systems operating income (loss)		305		(183)
Defense Systems
Sales		1,899		1,805
Operating costs and expenses:
Product		1,375		1,262
Service		294		324
Intersegment		46		40
Defense Systems operating income		184		179
Mission Systems
Sales		2,861		2,807
Operating costs and expenses:
Product		1,682		1,730
Service		419		434
Intersegment		327		282
Mission Systems operating income		433		361
Space Systems
Sales		2,480		2,568
Operating costs and expenses:
Product		1,811		1,829
Service		281		362
Intersegment		153		94
Space Systems operating income		235		283
Intersegment profit eliminations		(85)		(72)
Total segment operating income		1,072		568
FAS/CAS operating adjustment		7		63
Unallocated corporate expense		(90)		(58)
Total operating income		$	989	$	573
Other (expense) income
Interest expense		(162)		(156)
Non-operating FAS pension benefit		166		130
Other, net		37		31
Earnings before income taxes		$	1,030	$	578

-15-

Table of Contents

NORTHROP GRUMMAN CORPORATION

FAS/CAS Operating Adjustment

For financial statement purposes, we account for our employee pension plans in accordance with FAS. However, the cost of these plans is charged to our contracts in accordance with applicable Federal Acquisition Regulation (FAR) and CAS requirements. The FAS/CAS operating adjustment reflects the difference between CAS pension expense included as cost in segment operating income and the service cost component of FAS expense included in total operating income.

Unallocated Corporate Expense

Unallocated corporate expense includes the portion of corporate costs not considered allowable or allocable under applicable FAR and CAS requirements, and therefore not allocated to the segments, such as changes in deferred state income taxes and a portion of management and administration, legal, environmental, compensation, retiree benefits, advertising and other corporate unallowable costs. Unallocated corporate expense also includes costs not considered part of management’s evaluation of segment operating performance, such as amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of property, plant and equipment acquired through business combinations, as well as certain compensation and other costs.

-16-

Table of Contents

NORTHROP GRUMMAN CORPORATION

Disaggregation of Revenue


Sales by Customer Type	Three Months Ended March 31
		2026			2025
$ in millions			$		%(3)		$		%(3)
Aeronautics Systems
U.S. government(1)			$	2,694	83	%	$	2,290	83	%
International(2)			540		17	%	478		17	%
Other customers			15		—	%	5		—	%
Intersegment sales			34				41
Aeronautics Systems sales			3,283				2,814
Defense Systems
U.S. government(1)			1,591		86	%	1,451		83	%
International(2)			235		13	%	289		16	%
Other customers			21		1	%	20		1	%
Intersegment sales			52				45
Defense Systems sales			1,899				1,805
Mission Systems
U.S. government(1)			1,979		80	%	1,973		80	%
International(2)			464		19	%	475		19	%
Other customers			33		1	%	24		1	%
Intersegment sales			385				335
Mission Systems sales			2,861				2,807
Space Systems
U.S. government(1)			2,200		95	%	2,309		94	%
International(2)			42		2	%	44		2	%
Other customers			67		3	%	110		4	%
Intersegment sales			171				105
Space Systems sales			2,480				2,568
Total
U.S. government(1)			8,464		86	%	8,023		84	%
International(2)			1,281		13	%	1,286		14	%
Other customers			136		1	%	159		2	%
Total Sales			$	9,881			$	9,468

(1) Sales to the U.S. government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S. government. Each of the company’s segments derives a substantial percentage of its revenue from the U.S. government.

(2) International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is an international customer to the extent that information is available to us or can be reasonably estimated. These sales include foreign military sales contracted through the U.S. government.

(3) Percentages calculated based on external customer sales.

-17-

Table of Contents

NORTHROP GRUMMAN CORPORATION


Sales by Contract Type	Three Months Ended March 31
		2026			2025
$ in millions			$		%(1)		$		%(1)
Aeronautics Systems
Cost-type			$	1,359	42	%	$	1,339	48	%
Fixed-price			1,890		58	%	1,434		52	%
Intersegment sales			34				41
Aeronautics Systems sales			3,283				2,814
Defense Systems
Cost-type			1,066		58	%	965		55	%
Fixed-price			781		42	%	795		45	%
Intersegment sales			52				45
Defense Systems sales			1,899				1,805
Mission Systems
Cost-type			1,181		48	%	1,163		47	%
Fixed-price			1,295		52	%	1,309		53	%
Intersegment sales			385				335
Mission Systems sales			2,861				2,807
Space Systems
Cost-type			1,330		58	%	1,540		63	%
Fixed-price			979		42	%	923		37	%
Intersegment sales			171				105
Space Systems sales			2,480				2,568
Total
Cost-type			4,936		50	%	5,007		53	%
Fixed-price			4,945		50	%	4,461		47	%
Total Sales			$	9,881			$	9,468

(1)Percentages calculated based on external customer sales.

-18-

Table of Contents

NORTHROP GRUMMAN CORPORATION


Sales by Geographic Region(1)	Three Months Ended March 31
		2026	2025
$ in millions			$		%(3)		$		%(3)
Aeronautics Systems
United States			$	2,709	83	%	$	2,295	83	%
Asia/Pacific			229		7	%	200		7	%
Europe			289		9	%	269		10	%
Other geographic regions			22		1	%	9		—	%
Intersegment sales			34				41
Aeronautics Systems sales			3,283				2,814
Defense Systems
United States			1,612		87	%	1,471		84	%
Asia/Pacific			81		4	%	81		5	%
Europe			125		7	%	170		9	%
Other geographic regions			29		2	%	38		2	%
Intersegment sales			52				45
Defense Systems sales			1,899				1,805
Mission Systems
United States			2,012		81	%	1,997		81	%
Asia/Pacific			114		5	%	128		5	%
Europe			252		10	%	239		10	%
Other geographic regions			98		4	%	108		4	%
Intersegment sales			385				335
Mission Systems sales			2,861				2,807
Space Systems
United States			2,267		98	%	2,419		98	%
Asia/Pacific			18		1	%	8		—	%
Europe			20		1	%	26		2	%
Other geographic regions			4		—	%	10		—	%
Intersegment sales			171				105
Space Systems sales			2,480				2,568
Total
United States			8,600		87	%	8,182		86	%
Asia/Pacific			442		4	%	417		4	%
Europe			686		7	%	704		8	%
Other geographic regions(2)			153		2	%	165		2	%
Total Sales			$	9,881			$	9,468

(1)Sales are attributed to countries based on the ultimate customer’s location to the extent that information is available to us or can be reasonably estimated. No country other than the United States represents greater than 10 percent of total company sales.

(2)Other geographic regions are principally comprised of the Middle East.

(3)Percentages calculated based on external customer sales.

-19-

Table of Contents

NORTHROP GRUMMAN CORPORATION

Capital Expenditures and Depreciation and Amortization

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


	Three Months Ended March 31
$ in millions		2026		2025
Capital Expenditures
Aeronautics Systems		$	34	$	79
Defense Systems		16		12
Mission Systems		45		39
Space Systems		43		110
Corporate(1)		29		16
Total capital expenditures		$	167	$	256
Depreciation and Amortization
Aeronautics Systems		$	91	$	89
Defense Systems		44		43
Mission Systems		69		67
Space Systems		96		79
Corporate(1)		72		59
Total depreciation and amortization		$	372	$	337

(1)Corporate amounts include the amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of PP&E acquired through business combinations as they are not considered part of management’s evaluation of segment operating performance.

AssetsOur chief operating decision maker (“CODM”) does not use assets by segment to evaluate segment performance or allocate resources. Therefore, we do not disclose assets by segment.

-20-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Northrop Grumman Corporation

Falls Church, Virginia

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries (the “Company”) as of March 31, 2026, and the related condensed consolidated statements of earnings and comprehensive income, cash flows, and changes in shareholders’ equity for the three-month periods ended March 31, 2026 and 2025, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries as of December 31, 2025, and the related consolidated statements of earnings and comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated January 26, 2026, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2025, is fairly stated, in all material respects, in relation to the audited consolidated statement of financial position from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/			Deloitte & Touche LLP
			McLean, Virginia
			April 20, 2026

-21-

Table of Contents

NORTHROP GRUMMAN CORPORATION

Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations