x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DELAWARE
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80-0640649
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Yes
x
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No
*
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Yes
x
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No
*
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Large accelerated filer
x
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Accelerated filer
*
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||||
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Non-accelerated filer
*
(Do not check if a smaller reporting company)
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Smaller reporting company
*
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Yes
*
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No
x
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Page
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Item 1.
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6
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Investigations, Claims and Litigation
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Three Months Ended September 30
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Nine Months Ended September 30
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||||||||||||
$ in millions, except per share amounts
|
2015
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2014
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2015
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2014
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||||||||
Sales
|
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||||||||
Product
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$
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3,615
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|
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$
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3,494
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|
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$
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10,553
|
|
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$
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10,466
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Service
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2,364
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2,490
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7,279
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7,405
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Total sales
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5,979
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5,984
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17,832
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17,871
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Operating costs and expenses
|
|
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||||||||
Product
|
2,633
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|
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2,614
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7,743
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7,815
|
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||||
Service
|
1,889
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|
|
2,021
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|
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5,763
|
|
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5,910
|
|
||||
General and administrative expenses
|
663
|
|
|
580
|
|
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1,939
|
|
|
1,712
|
|
||||
Operating income
|
794
|
|
|
769
|
|
|
2,387
|
|
|
2,434
|
|
||||
Other (expense) income
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(75
|
)
|
|
(69
|
)
|
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(226
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)
|
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(208
|
)
|
||||
Other, net
|
10
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|
|
(6
|
)
|
|
8
|
|
|
10
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|
||||
Earnings before income taxes
|
729
|
|
|
694
|
|
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2,169
|
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2,236
|
|
||||
Federal and foreign income tax expense
|
213
|
|
|
221
|
|
|
638
|
|
|
673
|
|
||||
Net earnings
|
$
|
516
|
|
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$
|
473
|
|
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$
|
1,531
|
|
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$
|
1,563
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||||||||
Basic earnings per share
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$
|
2.78
|
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$
|
2.29
|
|
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$
|
7.98
|
|
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$
|
7.39
|
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Weighted-average common shares outstanding, in millions
|
185.8
|
|
|
206.2
|
|
|
191.8
|
|
|
211.6
|
|
||||
Diluted earnings per share
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$
|
2.75
|
|
|
$
|
2.26
|
|
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$
|
7.89
|
|
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$
|
7.28
|
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Weighted-average diluted shares outstanding, in millions
|
187.9
|
|
|
209.2
|
|
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194.0
|
|
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214.8
|
|
||||
|
|
|
|
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|
||||||||
Net earnings (from above)
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$
|
516
|
|
|
$
|
473
|
|
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$
|
1,531
|
|
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$
|
1,563
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
||||||||
Change in unamortized benefit plan costs, net of tax
|
96
|
|
|
31
|
|
|
288
|
|
|
127
|
|
||||
Change in cumulative translation adjustment
|
(15
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)
|
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(26
|
)
|
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(31
|
)
|
|
(24
|
)
|
||||
Other, net
|
1
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||
Other comprehensive income, net of tax
|
82
|
|
|
8
|
|
|
257
|
|
|
106
|
|
||||
Comprehensive income
|
$
|
598
|
|
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$
|
481
|
|
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$
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1,788
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$
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1,669
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$ in millions
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September 30,
2015 |
|
December 31,
2014 |
||||
Assets
|
|
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Cash and cash equivalents
|
$
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1,292
|
|
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$
|
3,863
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Accounts receivable, net
|
3,268
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|
|
2,806
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Inventoried costs, net
|
856
|
|
|
742
|
|
||
Deferred tax assets
|
336
|
|
|
404
|
|
||
Prepaid expenses and other current assets
|
199
|
|
|
369
|
|
||
Total current assets
|
5,951
|
|
|
8,184
|
|
||
Property, plant and equipment, net of accumulated depreciation of $4,804 in 2015 and $4,611 in 2014
|
3,005
|
|
|
2,991
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Goodwill
|
12,458
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|
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12,466
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Non-current deferred tax assets
|
1,352
|
|
|
1,622
|
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Other non-current assets
|
1,200
|
|
|
1,309
|
|
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Total assets
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$
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23,966
|
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$
|
26,572
|
|
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Liabilities
|
|
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Trade accounts payable
|
$
|
1,194
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|
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$
|
1,305
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Accrued employee compensation
|
1,208
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|
|
1,441
|
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Advance payments and amounts in excess of costs incurred
|
1,299
|
|
|
1,713
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Other current liabilities
|
1,432
|
|
|
1,433
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Total current liabilities
|
5,133
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|
5,892
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Long-term debt, net of current portion
|
6,417
|
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|
5,925
|
|
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Pension and other post-retirement benefit plan liabilities
|
5,778
|
|
|
6,555
|
|
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Other non-current liabilities
|
941
|
|
|
965
|
|
||
Total liabilities
|
18,269
|
|
|
19,337
|
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Commitments and contingencies (Note 7)
|
|
|
|
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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: 2015—182,822,662 and 2014—198,930,240
|
183
|
|
|
199
|
|
||
Paid-in capital
|
—
|
|
|
—
|
|
||
Retained earnings
|
10,613
|
|
|
12,392
|
|
||
Accumulated other comprehensive loss
|
(5,099
|
)
|
|
(5,356
|
)
|
||
Total shareholders’ equity
|
5,697
|
|
|
7,235
|
|
||
Total liabilities and shareholders’ equity
|
$
|
23,966
|
|
|
$
|
26,572
|
|
|
Nine Months Ended September 30
|
||||||
$ in millions
|
2015
|
|
2014
|
||||
Operating activities
|
|
|
|
||||
Net earnings
|
$
|
1,531
|
|
|
$
|
1,563
|
|
Adjustments to reconcile to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
329
|
|
|
322
|
|
||
Stock-based compensation
|
70
|
|
|
93
|
|
||
Excess tax benefits from stock-based compensation
|
(111
|
)
|
|
(75
|
)
|
||
Deferred income taxes
|
165
|
|
|
76
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(463
|
)
|
|
(531
|
)
|
||
Inventoried costs, net
|
(130
|
)
|
|
43
|
|
||
Prepaid expenses and other assets
|
27
|
|
|
(30
|
)
|
||
Accounts payable and other liabilities
|
(958
|
)
|
|
(514
|
)
|
||
Income taxes payable
|
403
|
|
|
201
|
|
||
Retiree benefits
|
(318
|
)
|
|
5
|
|
||
Other, net
|
(16
|
)
|
|
(50
|
)
|
||
Net cash provided by operating activities
|
$
|
529
|
|
|
$
|
1,103
|
|
|
|
|
|
||||
Investing activities
|
|
|
|
||||
Capital expenditures
|
(334
|
)
|
|
(285
|
)
|
||
Other investing activities, net
|
36
|
|
|
(72
|
)
|
||
Net cash used in investing activities
|
(298
|
)
|
|
(357
|
)
|
||
|
|
|
|
||||
Financing activities
|
|
|
|
||||
Common stock repurchases
|
(2,864
|
)
|
|
(2,058
|
)
|
||
Net proceeds from issuance of long-term debt
|
600
|
|
|
—
|
|
||
Cash dividends paid
|
(458
|
)
|
|
(423
|
)
|
||
Other financing activities, net
|
(80
|
)
|
|
(13
|
)
|
||
Net cash used in financing activities
|
(2,802
|
)
|
|
(2,494
|
)
|
||
Decrease in cash and cash equivalents
|
(2,571
|
)
|
|
(1,748
|
)
|
||
Cash and cash equivalents, beginning of year
|
3,863
|
|
|
5,150
|
|
||
Cash and cash equivalents, end of period
|
$
|
1,292
|
|
|
$
|
3,402
|
|
|
Nine Months Ended September 30
|
||||||
$ in millions, except per share amounts
|
2015
|
|
2014
|
||||
Common stock
|
|
|
|
||||
Beginning of year
|
$
|
199
|
|
|
$
|
218
|
|
Common stock repurchased
|
(18
|
)
|
|
(17
|
)
|
||
Shares issued for employee stock awards and options
|
2
|
|
|
2
|
|
||
End of period
|
183
|
|
|
203
|
|
||
Paid-in capital
|
|
|
|
||||
Beginning of year
|
—
|
|
|
848
|
|
||
Common stock repurchased
|
—
|
|
|
(943
|
)
|
||
Stock compensation
|
—
|
|
|
83
|
|
||
Other
|
—
|
|
|
12
|
|
||
End of period
|
—
|
|
|
—
|
|
||
Retained earnings
|
|
|
|
||||
Beginning of year
|
12,392
|
|
|
12,538
|
|
||
Common stock repurchased
|
(2,872
|
)
|
|
(1,099
|
)
|
||
Net earnings
|
1,531
|
|
|
1,563
|
|
||
Dividends declared
|
(447
|
)
|
|
(434
|
)
|
||
Stock compensation
|
9
|
|
|
—
|
|
||
End of period
|
10,613
|
|
|
12,568
|
|
||
Accumulated other comprehensive loss
|
|
|
|
||||
Beginning of year
|
(5,356
|
)
|
|
(2,984
|
)
|
||
Other comprehensive income, net of tax
|
257
|
|
|
106
|
|
||
End of period
|
(5,099
|
)
|
|
(2,878
|
)
|
||
Total shareholders’ equity
|
$
|
5,697
|
|
|
$
|
9,893
|
|
Cash dividends declared per share
|
$
|
2.30
|
|
|
$
|
2.01
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions, except per share data
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Operating Income
|
$
|
112
|
|
|
$
|
194
|
|
|
$
|
461
|
|
|
$
|
556
|
|
Net Earnings
(1)
|
73
|
|
|
126
|
|
|
300
|
|
|
361
|
|
||||
Diluted earnings per share
(1)
|
0.39
|
|
|
0.60
|
|
|
1.55
|
|
|
1.68
|
|
$ in millions
|
September 30,
2015 |
|
December 31,
2014 |
||||
Unamortized benefit plan costs, net of tax benefit of $3,217 as of September 30, 2015 and $3,395 as of December 31, 2014
|
$
|
(5,028
|
)
|
|
$
|
(5,316
|
)
|
Cumulative translation adjustment
|
(72
|
)
|
|
(41
|
)
|
||
Net unrealized gain on marketable securities and cash flow hedges, net of tax
|
1
|
|
|
1
|
|
||
Total accumulated other comprehensive loss
|
$
|
(5,099
|
)
|
|
$
|
(5,356
|
)
|
|
|
|
|
|
|
|
|
|
|
Shares Repurchased
(in millions) |
|||||||||
Repurchase Program
Authorization Date |
|
Amount
Authorized (in millions) |
|
Total
Shares Retired (in millions) |
|
Average
Price Per Share (4) |
|
Date Completed
|
|
Nine Months Ended September 30
|
|||||||||
|
2015
|
|
2014
|
||||||||||||||||
May 15, 2013
(1)
|
|
$
|
4,000
|
|
|
32.8
|
|
|
$
|
121.97
|
|
|
March 2015
|
|
2.7
|
|
|
16.9
|
|
December 4, 2014
(2)
|
|
$
|
3,000
|
|
|
15.0
|
|
|
$
|
162.89
|
|
|
|
|
15.0
|
|
|
—
|
|
September 16, 2015
(3)
|
|
$
|
4,000
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
—
|
|
|
—
|
|
(1)
|
On May 15, 2013, the company's board of directors authorized a share repurchase program of up to
$4.0 billion
of the company's common stock (2013 Repurchase Program). Repurchases under the 2013 Repurchase Program commenced in September 2013 and were completed in March 2015.
|
(2)
|
On December 4, 2014, the company's board of directors authorized a share repurchase program of up to
$3.0 billion
of the company's common stock (2014 Repurchase Program). Repurchases under the 2014 Repurchase Program commenced in March 2015
upon the completion of the company's 2013 Repurchase Program.
As of
September 30, 2015
,
repurchases under the 2014 Repurchase Program totaled
$2.4 billion
and
$0.6 billion
remained under this share repurchase authorization.
By its terms, the 2014 Repurchase Program will expire when we have used all authorized funds for repurchases.
|
(3)
|
On September 16, 2015, the company's board of directors authorized a new share repurchase program of up to
$4.0 billion
of the company's common stock (2015 Repurchase Program). By its terms, repurchases under the 2015 Repurchase Program will commence upon completion of the 2014 Repurchase Program and will expire when we have used all authorized funds for repurchases.
|
(4)
|
Includes commissions paid.
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Sales
|
|
|
|
|
|
|
|
||||||||
Aerospace Systems
|
$
|
2,563
|
|
|
$
|
2,543
|
|
|
$
|
7,573
|
|
|
$
|
7,465
|
|
Electronic Systems
|
1,767
|
|
|
1,733
|
|
|
5,131
|
|
|
5,121
|
|
||||
Information Systems
|
1,472
|
|
|
1,511
|
|
|
4,531
|
|
|
4,650
|
|
||||
Technical Services
|
695
|
|
|
691
|
|
|
2,185
|
|
|
2,120
|
|
||||
Intersegment eliminations
|
(518
|
)
|
|
(494
|
)
|
|
(1,588
|
)
|
|
(1,485
|
)
|
||||
Total sales
|
5,979
|
|
|
5,984
|
|
|
17,832
|
|
|
17,871
|
|
||||
Operating income
|
|
|
|
|
|
|
|
||||||||
Aerospace Systems
|
303
|
|
|
402
|
|
|
940
|
|
|
1,016
|
|
||||
Electronic Systems
|
275
|
|
|
274
|
|
|
787
|
|
|
833
|
|
||||
Information Systems
|
146
|
|
|
150
|
|
|
462
|
|
|
465
|
|
||||
Technical Services
|
64
|
|
|
66
|
|
|
199
|
|
|
202
|
|
||||
Intersegment eliminations
|
(62
|
)
|
|
(52
|
)
|
|
(185
|
)
|
|
(177
|
)
|
||||
Total segment operating income
|
726
|
|
|
840
|
|
|
2,203
|
|
|
2,339
|
|
||||
Reconciliation to total operating income:
|
|
|
|
|
|
|
|
||||||||
Net FAS/CAS pension adjustment
|
97
|
|
|
(20
|
)
|
|
261
|
|
|
200
|
|
||||
Unallocated corporate expenses
|
(29
|
)
|
|
(50
|
)
|
|
(76
|
)
|
|
(103
|
)
|
||||
Other
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
||||
Total operating income
|
$
|
794
|
|
|
$
|
769
|
|
|
$
|
2,387
|
|
|
$
|
2,434
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Federal and foreign income tax expense
|
$
|
213
|
|
|
$
|
221
|
|
|
$
|
638
|
|
|
$
|
673
|
|
Effective income tax rate
|
29.2
|
%
|
|
31.8
|
%
|
|
29.4
|
%
|
|
30.1
|
%
|
|
September 30, 2015
|
|
December 31, 2014
|
||||||||||||
$ in millions
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
Financial Assets (Liabilities)
|
|
|
|
|
|
|
|
||||||||
Marketable securities
|
|
|
|
|
|
|
|
||||||||
Trading
|
$
|
295
|
|
|
$
|
295
|
|
|
$
|
331
|
|
|
$
|
331
|
|
Available-for-sale
|
5
|
|
|
5
|
|
|
5
|
|
|
5
|
|
||||
Derivatives
|
4
|
|
|
4
|
|
|
1
|
|
|
1
|
|
||||
Long-term debt, including current portion
|
$
|
(6,527
|
)
|
|
$
|
(7,041
|
)
|
|
$
|
(5,928
|
)
|
|
$
|
(6,726
|
)
|
|
Three Months Ended September 30
|
Nine Months Ended September 30
|
||||||||||||||||||||||||||||
|
Pension
Benefits |
|
Medical and
Life Benefits |
Pension
Benefits |
|
Medical and
Life Benefits |
||||||||||||||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||||||
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Service cost
|
$
|
121
|
|
|
$
|
114
|
|
|
$
|
8
|
|
|
$
|
8
|
|
$
|
363
|
|
|
$
|
343
|
|
|
$
|
26
|
|
|
$
|
25
|
|
Interest cost
|
306
|
|
|
314
|
|
|
24
|
|
|
25
|
|
918
|
|
|
944
|
|
|
71
|
|
|
75
|
|
||||||||
Expected return on plan assets
|
(494
|
)
|
|
(467
|
)
|
|
(22
|
)
|
|
(21
|
)
|
(1,481
|
)
|
|
(1,402
|
)
|
|
(67
|
)
|
|
(63
|
)
|
||||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Prior service credit
|
(15
|
)
|
|
(14
|
)
|
|
(7
|
)
|
|
(12
|
)
|
(45
|
)
|
|
(44
|
)
|
|
(21
|
)
|
|
(32
|
)
|
||||||||
Net loss from previous years
|
170
|
|
|
81
|
|
|
6
|
|
|
3
|
|
511
|
|
|
245
|
|
|
20
|
|
|
9
|
|
||||||||
Other
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||||||
Net periodic benefit cost
|
$
|
88
|
|
|
$
|
29
|
|
|
$
|
9
|
|
|
$
|
3
|
|
$
|
266
|
|
|
$
|
87
|
|
|
$
|
29
|
|
|
$
|
14
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Defined benefit pension plans
|
$
|
20
|
|
|
$
|
20
|
|
|
$
|
564
|
|
|
$
|
59
|
|
Post-retirement benefit plans
|
19
|
|
|
17
|
|
|
44
|
|
|
43
|
|
||||
Defined contribution plans
|
77
|
|
|
63
|
|
|
227
|
|
|
210
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions, except per share amounts
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Sales
|
$
|
5,979
|
|
|
$
|
5,984
|
|
|
$
|
17,832
|
|
|
$
|
17,871
|
|
Operating costs and expenses
|
5,185
|
|
|
5,215
|
|
|
15,445
|
|
|
15,437
|
|
||||
Operating income
|
794
|
|
|
769
|
|
|
2,387
|
|
|
2,434
|
|
||||
Operating margin rate
|
13.3
|
%
|
|
12.9
|
%
|
|
13.4
|
%
|
|
13.6
|
%
|
||||
Federal and foreign income tax expense
|
213
|
|
|
221
|
|
|
638
|
|
|
673
|
|
||||
Effective income tax rate
|
29.2
|
%
|
|
31.8
|
%
|
|
29.4
|
%
|
|
30.1
|
%
|
||||
Net earnings
|
516
|
|
|
473
|
|
|
1,531
|
|
|
1,563
|
|
||||
Diluted earnings per share
|
2.75
|
|
|
2.26
|
|
|
7.89
|
|
|
7.28
|
|
||||
Net cash provided by operating activities
|
$
|
557
|
|
|
$
|
933
|
|
|
$
|
529
|
|
|
$
|
1,103
|
|
$ in millions
|
Three Month Variance
|
|
Nine Month Variance
|
||||||||||
Aerospace Systems
|
$
|
20
|
|
|
1
|
%
|
|
$
|
108
|
|
|
1
|
%
|
Electronic Systems
|
34
|
|
|
2
|
%
|
|
10
|
|
|
—
|
|
||
Information Systems
|
(39
|
)
|
|
(3
|
%)
|
|
(119
|
)
|
|
(3
|
%)
|
||
Technical Services
|
4
|
|
|
1
|
%
|
|
65
|
|
|
3
|
%
|
||
Intersegment sales elimination
|
(24
|
)
|
|
5
|
%
|
|
(103
|
)
|
|
7
|
%
|
||
Total sales variance
|
$
|
(5
|
)
|
|
—
|
|
|
$
|
(39
|
)
|
|
—
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Product costs
|
$
|
2,633
|
|
|
$
|
2,614
|
|
|
$
|
7,743
|
|
|
$
|
7,815
|
|
Service costs
|
1,889
|
|
|
2,021
|
|
|
5,763
|
|
|
5,910
|
|
||||
General and administrative expenses
|
663
|
|
|
580
|
|
|
1,939
|
|
|
1,712
|
|
||||
Operating costs and expenses
|
$
|
5,185
|
|
|
$
|
5,215
|
|
|
$
|
15,445
|
|
|
$
|
15,437
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Favorable adjustments
|
$
|
189
|
|
|
$
|
254
|
|
|
$
|
707
|
|
|
$
|
736
|
|
Unfavorable adjustments
|
(77
|
)
|
|
(60
|
)
|
|
(246
|
)
|
|
(180
|
)
|
||||
Net favorable adjustments
|
$
|
112
|
|
|
$
|
194
|
|
|
$
|
461
|
|
|
$
|
556
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Aerospace Systems
|
$
|
66
|
|
|
$
|
114
|
|
|
$
|
288
|
|
|
$
|
309
|
|
Electronic Systems
|
27
|
|
|
54
|
|
|
106
|
|
|
188
|
|
||||
Information Systems
|
12
|
|
|
20
|
|
|
50
|
|
|
54
|
|
||||
Technical Services
|
10
|
|
|
12
|
|
|
33
|
|
|
33
|
|
||||
Eliminations
|
(3
|
)
|
|
(6
|
)
|
|
(16
|
)
|
|
(28
|
)
|
||||
Net favorable adjustments
|
$
|
112
|
|
|
$
|
194
|
|
|
$
|
461
|
|
|
$
|
556
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Segment operating income
|
$
|
726
|
|
|
$
|
840
|
|
|
$
|
2,203
|
|
|
$
|
2,339
|
|
Segment operating margin rate
|
12.1
|
%
|
|
14.0
|
%
|
|
12.4
|
%
|
|
13.1
|
%
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Segment operating income
|
$
|
726
|
|
|
$
|
840
|
|
|
$
|
2,203
|
|
|
$
|
2,339
|
|
CAS pension expense
|
185
|
|
|
9
|
|
|
527
|
|
|
287
|
|
||||
Less: FAS pension expense
|
(88
|
)
|
|
(29
|
)
|
|
(266
|
)
|
|
(87
|
)
|
||||
Net FAS/CAS pension adjustment
|
97
|
|
|
(20
|
)
|
|
261
|
|
|
200
|
|
||||
Unallocated corporate expenses
|
(29
|
)
|
|
(50
|
)
|
|
(76
|
)
|
|
(103
|
)
|
||||
Other
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
||||
Total operating income
|
$
|
794
|
|
|
$
|
769
|
|
|
$
|
2,387
|
|
|
$
|
2,434
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Sales
|
$
|
2,563
|
|
|
$
|
2,543
|
|
|
$
|
7,573
|
|
|
$
|
7,465
|
|
Operating income
|
303
|
|
|
402
|
|
|
940
|
|
|
1,016
|
|
||||
Operating margin rate
|
11.8
|
%
|
|
15.8
|
%
|
|
12.4
|
%
|
|
13.6
|
%
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Sales
|
$
|
1,767
|
|
|
$
|
1,733
|
|
|
$
|
5,131
|
|
|
$
|
5,121
|
|
Operating income
|
275
|
|
|
274
|
|
|
787
|
|
|
833
|
|
||||
Operating margin rate
|
15.6
|
%
|
|
15.8
|
%
|
|
15.3
|
%
|
|
16.3
|
%
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Sales
|
$
|
1,472
|
|
|
$
|
1,511
|
|
|
$
|
4,531
|
|
|
$
|
4,650
|
|
Operating income
|
146
|
|
|
150
|
|
|
462
|
|
|
465
|
|
||||
Operating margin rate
|
9.9
|
%
|
|
9.9
|
%
|
|
10.2
|
%
|
|
10.0
|
%
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Sales
|
$
|
695
|
|
|
$
|
691
|
|
|
$
|
2,185
|
|
|
$
|
2,120
|
|
Operating income
|
64
|
|
|
66
|
|
|
199
|
|
|
202
|
|
||||
Operating margin rate
|
9.2
|
%
|
|
9.6
|
%
|
|
9.1
|
%
|
|
9.5
|
%
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||||||||||||
$ in millions
|
2015
|
2014
|
|
2015
|
2014
|
||||||||||||||||||||
Segment Information:
|
Sales
|
Operating Costs and Expenses
|
Sales
|
Operating Costs and Expenses
|
|
Sales
|
Operating Costs and Expenses
|
Sales
|
Operating Costs and Expenses
|
||||||||||||||||
Aerospace Systems
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Product
|
$
|
2,067
|
|
$
|
1,824
|
|
$
|
2,014
|
|
$
|
1,671
|
|
|
$
|
6,046
|
|
$
|
5,301
|
|
$
|
5,995
|
|
$
|
5,147
|
|
Service
|
496
|
|
436
|
|
529
|
|
470
|
|
|
1,527
|
|
1,332
|
|
1,470
|
|
1,302
|
|
||||||||
Electronic Systems
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Product
|
1,441
|
|
1,227
|
|
1,338
|
|
1,118
|
|
|
4,170
|
|
3,567
|
|
4,088
|
|
3,415
|
|
||||||||
Service
|
326
|
|
265
|
|
395
|
|
341
|
|
|
961
|
|
777
|
|
1,033
|
|
873
|
|
||||||||
Information Systems
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Product
|
327
|
|
280
|
|
346
|
|
332
|
|
|
989
|
|
869
|
|
1,006
|
|
953
|
|
||||||||
Service
|
1,145
|
|
1,046
|
|
1,165
|
|
1,029
|
|
|
3,542
|
|
3,200
|
|
3,644
|
|
3,232
|
|
||||||||
Technical Services
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Product
|
56
|
|
52
|
|
46
|
|
39
|
|
|
176
|
|
169
|
|
144
|
|
130
|
|
||||||||
Service
|
639
|
|
579
|
|
645
|
|
586
|
|
|
2,009
|
|
1,817
|
|
1,976
|
|
1,788
|
|
||||||||
Segment Totals
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total Product
|
$
|
3,891
|
|
$
|
3,383
|
|
$
|
3,744
|
|
$
|
3,160
|
|
|
$
|
11,381
|
|
$
|
9,906
|
|
$
|
11,233
|
|
$
|
9,645
|
|
Total Service
|
2,606
|
|
2,326
|
|
2,734
|
|
2,426
|
|
|
8,039
|
|
7,126
|
|
8,123
|
|
7,195
|
|
||||||||
Intersegment eliminations
|
(518
|
)
|
(456
|
)
|
(494
|
)
|
(442
|
)
|
|
(1,588
|
)
|
(1,403
|
)
|
(1,485
|
)
|
(1,308
|
)
|
||||||||
Total segment
(1)
|
$
|
5,979
|
|
$
|
5,253
|
|
$
|
5,984
|
|
$
|
5,144
|
|
|
$
|
17,832
|
|
$
|
15,629
|
|
$
|
17,871
|
|
$
|
15,532
|
|
|
September 30,
2015 |
|
December 31,
2014 |
||||||||||||
$ in millions
|
Funded
|
|
Unfunded
|
|
Total
Backlog |
|
Total
Backlog |
||||||||
Aerospace Systems
|
$
|
8,742
|
|
|
$
|
8,999
|
|
|
$
|
17,741
|
|
|
$
|
20,063
|
|
Electronic Systems
|
7,471
|
|
|
2,101
|
|
|
9,572
|
|
|
9,715
|
|
||||
Information Systems
|
3,185
|
|
|
2,794
|
|
|
5,979
|
|
|
6,115
|
|
||||
Technical Services
|
2,393
|
|
|
205
|
|
|
2,598
|
|
|
2,306
|
|
||||
Total backlog
|
$
|
21,791
|
|
|
$
|
14,099
|
|
|
$
|
35,890
|
|
|
$
|
38,199
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net earnings
|
$
|
516
|
|
|
$
|
473
|
|
|
$
|
1,531
|
|
|
$
|
1,563
|
|
Non-cash items
(1)
|
157
|
|
|
201
|
|
|
453
|
|
|
416
|
|
||||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
||||||||
Trade working capital
|
(152
|
)
|
|
287
|
|
|
(1,121
|
)
|
|
(831
|
)
|
||||
Retiree benefits
|
60
|
|
|
(3
|
)
|
|
(318
|
)
|
|
5
|
|
||||
Other, net
|
(24
|
)
|
|
(25
|
)
|
|
(16
|
)
|
|
(50
|
)
|
||||
Net cash provided by operating activities
|
$
|
557
|
|
|
$
|
933
|
|
|
$
|
529
|
|
|
$
|
1,103
|
|
(1)
|
Includes depreciation and amortization, stock-based compensation (including related excess tax benefits) and deferred income taxes
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net cash provided by operating activities
|
$
|
557
|
|
|
$
|
933
|
|
|
$
|
529
|
|
|
$
|
1,103
|
|
Less: capital expenditures
|
(102
|
)
|
|
(109
|
)
|
|
(334
|
)
|
|
(285
|
)
|
||||
Free cash flow
|
$
|
455
|
|
|
$
|
824
|
|
|
$
|
195
|
|
|
$
|
818
|
|
•
|
our dependence on a single customer, the U.S. Government
|
•
|
delays or reductions in appropriations for our programs and U.S. Government funding
|
•
|
investigations, claims and/or litigation
|
•
|
our international business
|
•
|
the improper conduct of employees, agents, business partners or joint ventures in which we participate
|
•
|
the use of accounting estimates for our contracts
|
•
|
cyber and other security threats or disruptions
|
•
|
changes in actuarial assumptions associated with our pension and other post-retirement benefit plans
|
•
|
the performance and financial viability of our suppliers and the availability and pricing of raw materials and components
|
•
|
competition within our markets
|
•
|
changes in procurement and other laws and regulations applicable to our industry
|
•
|
natural and/or environmental disasters
|
•
|
the adequacy of our insurance coverage, customer indemnifications or other liability protections
|
•
|
the products and services we provide related to nuclear operations
|
•
|
changes in business conditions that could impact recorded goodwill or the value of other long-lived assets
|
•
|
our ability to develop new products and technologies and maintain technologies, facilities, equipment and a qualified workforce
|
•
|
our ability to meet performance obligations under our contracts
|
•
|
unforeseen environmental costs
|
•
|
our ability to protect our intellectual property rights
|
•
|
changes in our tax provisions or exposure to additional tax liabilities
|
•
|
the spin-off of our former Shipbuilding business
|
Significant delays or reductions in appropriations for our programs and U.S. Government funding more broadly may negatively impact our business and programs and could have a material adverse effect on our financial position, results of operations or cash flows.
|
Period
|
Total Number
of Shares
Purchased
(1)
|
|
Average
Price
Paid per
Share
(2)
|
|
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
|
|
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
under the
Plans or Programs
($ in millions)
|
|||||||
July
|
1,781,400
|
|
|
$
|
166.35
|
|
|
1,781,400
|
|
|
|
$
|
1,206
|
|
August
|
1,622,650
|
|
|
169.57
|
|
|
1,622,650
|
|
|
|
930
|
|
||
September
|
2,245,529
|
|
|
165.97
|
|
|
2,245,529
|
|
|
|
4,558
|
|
||
Total
|
5,649,579
|
|
|
$
|
167.12
|
|
|
5,649,579
|
|
|
|
$
|
4,558
|
|
(1)
|
On December 4, 2014, the company's board of directors authorized a share repurchase program of up to
$3.0 billion
of the company's common stock (2014 Repurchase Program). Repurchases under the 2014 Repurchase Program commenced in March 2015
.
As of
September 30, 2015
,
repurchases under the 2014 Repurchase Program totaled
$2.4 billion
and
$0.6 billion
remained under this share repurchase authorization.
By its terms, the 2014 Repurchase Program will expire when we have used all authorized funds for repurchases.
|
(2)
|
Includes commissions paid.
|
2.1
|
Agreement and Plan of Merger among Titan II, Inc. (formerly Northrop Grumman Corporation), Northrop Grumman Corporation (formerly New P, Inc.) and Titan Merger Sub Inc., dated March 29, 2011 (incorporated by reference to Exhibit 10.1 to Form 8-K filed April 4, 2011, File No. 001-16411)
|
|
|
2.2
|
Separation and Distribution Agreement dated as of March 29, 2011, among Titan II, Inc. (formerly Northrop Grumman Corporation), Northrop Grumman Corporation (formerly New P, Inc.), Huntington Ingalls Industries, Inc., Northrop Grumman Shipbuilding, Inc. and Northrop Grumman Systems Corporation (incorporated by reference to Exhibit 10.2 to Form 8-K filed April 4, 2011, File No. 001-16411)
|
|
|
*+10.1
|
N
orthrop Grumman Corporation Equity Grant Program for Non-Employee Directors under the Northrop Grumman 2011 Long-Term Incentive Stock Plan, Amended and Restated Effective January 1, 2016
|
|
|
10.2
|
Amended and Restated Credit Agreement, dated as of July 8, 2015, among Northrop Grumman Corporation, as borrower, Northrop Grumman Systems Corporation, as guarantor, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to exhibit 10.1 to Form 8-K filed July 9, 2015, File No. 001-16411)
|
|
|
*12(a)
|
Computation of Ratio of Earnings to Fixed Charges
|
|
|
*15
|
Letter from Independent Registered Public Accounting Firm
|
|
|
*31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Wesley G. Bush (Section 302 of the Sarbanes-Oxley Act of 2002)
|
|
|
*31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Kenneth L. Bedingfield (Section 302 of the Sarbanes-Oxley Act of 2002)
|
|
|
**32.1
|
Certification of Wesley G. Bush pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
**32.2
|
Certification of Kenneth L. Bedingfield pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
*101
|
Northrop Grumman Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings and Comprehensive Income, (ii) Condensed Consolidated Statements of Financial Position, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity, and (v) Notes to Condensed Consolidated Financial Statements
|
+
|
Management contract or compensatory plan or arrangement
|
|
|
*
|
Filed with this report
|
|
|
**
|
Furnished with this report
|
NORTHROP GRUMMAN CORPORATION
(Registrant)
|
||
|
|
|
By:
|
|
/s/ Michael A. Hardesty
|
|
|
Michael A. Hardesty
Corporate Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer)
|
1.
|
Purpose
|
2.
|
Term
|
3.
|
Program Operation
|
4.
|
Eligibility
|
5.
|
Shares of Common Stock Subject to the Program
|
6.
|
Adjustments and Reorganizations
|
7.
|
Fair Market Value
|
8.
|
Annual Retainer; Grants of Stock Units
|
9.
|
Payment of Stock Units
|
10.
|
Elective Deferrals
|
11.
|
Payment of Elective Deferrals
|
12.
|
Dividend Equivalents
|
13.
|
Restrictions on Transfer
|
14.
|
Issuance of Certificates
|
15.
|
Program Amendment
|
16.
|
Unfunded Program
|
17.
|
Future Rights
|
18.
|
Governing Law
|
19.
|
Successors and Assigns
|
20.
|
Rights as a Stockholder
|
21.
|
Construction
|
$ in millions
|
Nine Months Ended
September 30
|
|
Year Ended December 31
|
|||||||||||||||||||
Earnings:
|
2015
|
2014
|
|
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||||||
Earnings from continuing operations before income taxes
|
$
|
2,169
|
|
$
|
2,236
|
|
|
$
|
2,937
|
|
$
|
2,863
|
|
$
|
2,965
|
|
$
|
3,083
|
|
$
|
2,366
|
|
Fixed Charges:
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest expense, including amortization of debt premium
|
226
|
|
208
|
|
|
282
|
|
257
|
|
212
|
|
221
|
|
269
|
|
|||||||
Portion of rental expenses on operating leases deemed to be representative of the interest factor
|
77
|
|
76
|
|
|
101
|
|
99
|
|
116
|
|
140
|
|
149
|
|
|||||||
Earnings from continuing operations before income taxes and fixed charges
|
$
|
2,472
|
|
$
|
2,520
|
|
|
$
|
3,320
|
|
$
|
3,219
|
|
$
|
3,293
|
|
$
|
3,444
|
|
$
|
2,784
|
|
Fixed Charges:
|
$
|
303
|
|
$
|
284
|
|
|
$
|
383
|
|
$
|
356
|
|
$
|
328
|
|
$
|
361
|
|
$
|
418
|
|
Ratio of earnings to fixed charges
|
8.2
|
|
8.9
|
|
|
8.7
|
|
9.0
|
|
10.0
|
|
9.5
|
|
6.7
|
|
1.
|
I have reviewed this report on Form 10-Q of Northrop Grumman Corporation (“company”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
|
4.
|
The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the company's internal control over financial reporting that occurred during the company's most recent fiscal quarter (the company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
|
5.
|
The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.
|
/s/ Wesley G. Bush
|
Wesley G. Bush
|
Chairman, Chief Executive Officer and President
|
1.
|
I have reviewed this report on Form 10-Q of Northrop Grumman Corporation (“company”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
|
4.
|
The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the company's internal control over financial reporting that occurred during the company's most recent fiscal quarter (the company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
|
5.
|
The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.
|
/s/ Kenneth L. Bedingfield
|
Kenneth L. Bedingfield
|
Corporate Vice President and Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.
|
/s/ Wesley G. Bush
|
Wesley G. Bush
|
Chairman, Chief Executive Officer and President
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.
|
/s/ Kenneth L. Bedingfield
|
Kenneth L. Bedingfield
|
Corporate Vice President and Chief Financial Officer
|