FORM
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10-Q
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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☐
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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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2980 Fairview Park Drive
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Falls Church,
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Virginia
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22042
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
|
Trading Symbol(s)
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Name of each exchange on which registered
|
Common Stock
|
NOC
|
New York Stock Exchange
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Page
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Item 1.
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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 6.
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Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions, except per share amounts
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Sales
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product
|
$
|
5,997
|
|
|
$
|
5,614
|
|
|
$
|
17,605
|
|
|
$
|
14,693
|
|
Service
|
2,478
|
|
|
2,471
|
|
|
7,515
|
|
|
7,246
|
|
||||
Total sales
|
8,475
|
|
|
8,085
|
|
|
25,120
|
|
|
21,939
|
|
||||
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product
|
4,777
|
|
|
4,233
|
|
|
13,955
|
|
|
11,200
|
|
||||
Service
|
1,971
|
|
|
1,863
|
|
|
6,012
|
|
|
5,635
|
|
||||
General and administrative expenses
|
776
|
|
|
817
|
|
|
2,320
|
|
|
2,267
|
|
||||
Operating income
|
951
|
|
|
1,172
|
|
|
2,833
|
|
|
2,837
|
|
||||
Other (expense) income
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense
|
(123
|
)
|
|
(133
|
)
|
|
(398
|
)
|
|
(420
|
)
|
||||
FAS (non-service) pension benefit
|
200
|
|
|
270
|
|
|
600
|
|
|
782
|
|
||||
Other, net
|
27
|
|
|
55
|
|
|
82
|
|
|
140
|
|
||||
Earnings before income taxes
|
1,055
|
|
|
1,364
|
|
|
3,117
|
|
|
3,339
|
|
||||
Federal and foreign income tax expense
|
122
|
|
|
120
|
|
|
460
|
|
|
466
|
|
||||
Net earnings
|
$
|
933
|
|
|
$
|
1,244
|
|
|
$
|
2,657
|
|
|
$
|
2,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per share
|
$
|
5.52
|
|
|
$
|
7.15
|
|
|
$
|
15.67
|
|
|
$
|
16.48
|
|
Weighted-average common shares outstanding, in millions
|
169.1
|
|
|
174.1
|
|
|
169.6
|
|
|
174.3
|
|
||||
Diluted earnings per share
|
$
|
5.49
|
|
|
$
|
7.11
|
|
|
$
|
15.60
|
|
|
$
|
16.40
|
|
Weighted-average diluted shares outstanding, in millions
|
169.9
|
|
|
174.9
|
|
|
170.3
|
|
|
175.2
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings (from above)
|
$
|
933
|
|
|
$
|
1,244
|
|
|
$
|
2,657
|
|
|
$
|
2,873
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
||||||||
Change in unamortized prior service credit, net of tax
|
(12
|
)
|
|
(15
|
)
|
|
(35
|
)
|
|
(45
|
)
|
||||
Change in cumulative translation adjustment and other, net
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(9
|
)
|
||||
Other comprehensive loss, net of tax
|
(12
|
)
|
|
(18
|
)
|
|
(35
|
)
|
|
(54
|
)
|
||||
Comprehensive income
|
$
|
921
|
|
|
$
|
1,226
|
|
|
$
|
2,622
|
|
|
$
|
2,819
|
|
$ in millions, except par value
|
September 30,
2019 |
|
December 31,
2018 |
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,127
|
|
|
$
|
1,579
|
|
Accounts receivable, net
|
2,111
|
|
|
1,448
|
|
||
Unbilled receivables, net
|
5,777
|
|
|
5,026
|
|
||
Inventoried costs, net
|
810
|
|
|
654
|
|
||
Prepaid expenses and other current assets
|
1,011
|
|
|
973
|
|
||
Total current assets
|
10,836
|
|
|
9,680
|
|
||
Property, plant and equipment, net of accumulated depreciation of $5,709 for 2019 and $5,369 for 2018
|
6,611
|
|
|
6,372
|
|
||
Operating lease right-of-use assets
|
1,511
|
|
|
—
|
|
||
Goodwill
|
18,707
|
|
|
18,672
|
|
||
Intangible assets, net
|
1,123
|
|
|
1,372
|
|
||
Deferred tax assets
|
83
|
|
|
94
|
|
||
Other non-current assets
|
1,682
|
|
|
1,463
|
|
||
Total assets
|
$
|
40,553
|
|
|
$
|
37,653
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Trade accounts payable
|
$
|
2,021
|
|
|
$
|
2,182
|
|
Accrued employee compensation
|
1,744
|
|
|
1,676
|
|
||
Advance payments and billings in excess of costs incurred
|
2,127
|
|
|
1,917
|
|
||
Other current liabilities
|
2,524
|
|
|
2,499
|
|
||
Total current liabilities
|
8,416
|
|
|
8,274
|
|
||
Long-term debt, net of current portion of $45 for 2019 and $517 for 2018
|
13,826
|
|
|
13,883
|
|
||
Pension and other postretirement benefit plan liabilities
|
5,431
|
|
|
5,755
|
|
||
Operating lease liabilities
|
1,304
|
|
|
—
|
|
||
Deferred tax liabilities
|
111
|
|
|
108
|
|
||
Other non-current liabilities
|
1,734
|
|
|
1,446
|
|
||
Total liabilities
|
30,822
|
|
|
29,466
|
|
||
|
|
|
|
||||
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: 2019—168,701,653 and 2018—170,607,336
|
169
|
|
|
171
|
|
||
Paid-in capital
|
—
|
|
|
—
|
|
||
Retained earnings
|
9,649
|
|
|
8,068
|
|
||
Accumulated other comprehensive loss
|
(87
|
)
|
|
(52
|
)
|
||
Total shareholders’ equity
|
9,731
|
|
|
8,187
|
|
||
Total liabilities and shareholders’ equity
|
$
|
40,553
|
|
|
$
|
37,653
|
|
|
Nine Months Ended September 30
|
||||||
$ in millions
|
2019
|
|
2018
|
||||
Operating activities
|
|
|
|
||||
Net earnings
|
$
|
2,657
|
|
|
$
|
2,873
|
|
Adjustments to reconcile to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
737
|
|
|
534
|
|
||
Non-cash lease expense
|
187
|
|
|
—
|
|
||
Stock-based compensation
|
93
|
|
|
82
|
|
||
Deferred income taxes
|
24
|
|
|
275
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(663
|
)
|
|
(52
|
)
|
||
Unbilled receivables, net
|
(778
|
)
|
|
(898
|
)
|
||
Inventoried costs, net
|
(156
|
)
|
|
(102
|
)
|
||
Prepaid expenses and other assets
|
(81
|
)
|
|
(109
|
)
|
||
Accounts payable and other liabilities
|
320
|
|
|
(125
|
)
|
||
Income taxes payable, net
|
(34
|
)
|
|
(114
|
)
|
||
Retiree benefits
|
(422
|
)
|
|
(847
|
)
|
||
Other, net
|
(51
|
)
|
|
(67
|
)
|
||
Net cash provided by operating activities
|
1,833
|
|
|
1,450
|
|
||
|
|
|
|
||||
Investing activities
|
|
|
|
||||
Acquisition of Orbital ATK, net of cash acquired
|
—
|
|
|
(7,657
|
)
|
||
Capital expenditures
|
(793
|
)
|
|
(786
|
)
|
||
Other, net
|
8
|
|
|
23
|
|
||
Net cash used in investing activities
|
(785
|
)
|
|
(8,420
|
)
|
||
|
|
|
|
||||
Financing activities
|
|
|
|
||||
Payments of long-term debt
|
(500
|
)
|
|
(2,276
|
)
|
||
Net payments to credit facilities
|
(31
|
)
|
|
(314
|
)
|
||
Net borrowings on commercial paper
|
201
|
|
|
499
|
|
||
Common stock repurchases
|
(444
|
)
|
|
(209
|
)
|
||
Cash dividends paid
|
(658
|
)
|
|
(616
|
)
|
||
Payments of employee taxes withheld from share-based awards
|
(63
|
)
|
|
(84
|
)
|
||
Other, net
|
(5
|
)
|
|
(27
|
)
|
||
Net cash used in financing activities
|
(1,500
|
)
|
|
(3,027
|
)
|
||
Decrease in cash and cash equivalents
|
(452
|
)
|
|
(9,997
|
)
|
||
Cash and cash equivalents, beginning of year
|
1,579
|
|
|
11,225
|
|
||
Cash and cash equivalents, end of period
|
$
|
1,127
|
|
|
$
|
1,228
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions, except per share amounts
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Common stock
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
$
|
169
|
|
|
$
|
174
|
|
|
$
|
171
|
|
|
$
|
174
|
|
Common stock repurchased
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
|
(1
|
)
|
||||
Shares issued for employee stock awards and options
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
End of period
|
169
|
|
|
174
|
|
|
169
|
|
|
174
|
|
||||
Paid-in capital
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
||||
Common stock repurchased
|
—
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
||||
Stock compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
||||
End of period
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Retained earnings
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
9,120
|
|
|
8,066
|
|
|
8,068
|
|
|
6,913
|
|
||||
Impact from adoption of ASU 2018-02 and ASU 2016-01
|
—
|
|
|
—
|
|
|
—
|
|
|
(21
|
)
|
||||
Common stock repurchased
|
(215
|
)
|
|
(164
|
)
|
|
(449
|
)
|
|
(179
|
)
|
||||
Net earnings
|
933
|
|
|
1,244
|
|
|
2,657
|
|
|
2,873
|
|
||||
Dividends declared
|
(226
|
)
|
|
(211
|
)
|
|
(658
|
)
|
|
(616
|
)
|
||||
Stock compensation
|
37
|
|
|
26
|
|
|
31
|
|
|
(9
|
)
|
||||
End of period
|
9,649
|
|
|
8,961
|
|
|
9,649
|
|
|
8,961
|
|
||||
Accumulated other comprehensive (loss) income
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
(75
|
)
|
|
(14
|
)
|
|
(52
|
)
|
|
1
|
|
||||
Impact from adoption of ASU 2018-02 and ASU 2016-01
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
||||
Other comprehensive loss, net of tax
|
(12
|
)
|
|
(18
|
)
|
|
(35
|
)
|
|
(54
|
)
|
||||
End of period
|
(87
|
)
|
|
(32
|
)
|
|
(87
|
)
|
|
(32
|
)
|
||||
Total shareholders’ equity
|
$
|
9,731
|
|
|
$
|
9,103
|
|
|
$
|
9,731
|
|
|
$
|
9,103
|
|
Cash dividends declared per share
|
$
|
1.32
|
|
|
$
|
1.20
|
|
|
$
|
3.84
|
|
|
$
|
3.50
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions, except per share data
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenue
|
$
|
142
|
|
|
$
|
149
|
|
|
$
|
462
|
|
|
$
|
438
|
|
Operating income
|
125
|
|
|
149
|
|
|
421
|
|
|
408
|
|
||||
Net earnings(1)
|
99
|
|
|
117
|
|
|
333
|
|
|
322
|
|
||||
Diluted earnings per share(1)
|
0.58
|
|
|
0.67
|
|
|
1.96
|
|
|
1.84
|
|
(1)
|
Based on a 21 percent statutory tax rate.
|
$ in millions
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
Unamortized prior service credit, net of tax expense of $21 for 2019 and $32 for 2018
|
|
$
|
63
|
|
|
$
|
98
|
|
Cumulative translation adjustment
|
|
(148
|
)
|
|
(144
|
)
|
||
Other, net
|
|
(2
|
)
|
|
(6
|
)
|
||
Total accumulated other comprehensive loss
|
|
$
|
(87
|
)
|
|
$
|
(52
|
)
|
$ in millions, except per share amounts
|
|
Purchase price
|
||
Shares of Orbital ATK common stock outstanding as of the Merger date
|
|
57,562,152
|
|
|
Cash consideration per share of Orbital ATK common stock
|
|
$
|
134.50
|
|
Total purchase price
|
|
$
|
7,742
|
|
$ in millions
|
|
As of
June 6, 2018
|
||
Cash and cash equivalents
|
|
$
|
85
|
|
Accounts receivable
|
|
596
|
|
|
Unbilled receivables
|
|
1,237
|
|
|
Inventoried costs
|
|
220
|
|
|
Other current assets
|
|
237
|
|
|
Property, plant and equipment
|
|
1,509
|
|
|
Goodwill
|
|
6,259
|
|
|
Intangible assets
|
|
1,525
|
|
|
Other non-current assets
|
|
151
|
|
|
Total assets acquired
|
|
11,819
|
|
|
Trade accounts payable
|
|
(397
|
)
|
|
Accrued employee compensation
|
|
(158
|
)
|
|
Advance payments and billings in excess of costs incurred
|
|
(222
|
)
|
|
Below market contracts(1)
|
|
(151
|
)
|
|
Other current liabilities
|
|
(412
|
)
|
|
Long-term debt
|
|
(1,687
|
)
|
|
Pension and OPB plan liabilities
|
|
(613
|
)
|
|
Deferred tax liabilities
|
|
(248
|
)
|
|
Other non-current liabilities
|
|
(189
|
)
|
|
Total liabilities assumed
|
|
(4,077
|
)
|
|
Total purchase price
|
|
$
|
7,742
|
|
(1)
|
Included in Other current liabilities in the unaudited condensed consolidated statements of financial position.
|
|
|
Fair Value
(in millions)
|
|
Estimated Useful Life in Years
|
||
Customer contracts
|
|
$
|
1,245
|
|
|
9
|
Commercial customer relationships
|
|
280
|
|
|
13
|
|
Total customer-related intangible assets
|
|
$
|
1,525
|
|
|
|
$ in millions, except per share amounts
|
|
Nine Months Ended September 30, 2018
|
||
Sales
|
|
$
|
24,163
|
|
Net earnings
|
|
3,050
|
|
|
Diluted earnings per share
|
|
17.41
|
|
1.
|
The elimination of intercompany sales and costs of sales between the company and Orbital ATK of $80 million for the nine months ended September 30, 2018.
|
2.
|
The elimination of nonrecurring transaction costs incurred by the company and Orbital ATK in connection with the Merger of $71 million for the nine months ended September 30, 2018.
|
3.
|
The recognition of additional depreciation expense, net of removal of historical depreciation expense, of $10 million for the nine months ended September 30, 2018 related to the step-up in fair value of acquired property, plant and equipment.
|
4.
|
The recognition of additional amortization expense, net of removal of historical amortization expense, of $101 million for the nine months ended September 30, 2018 related to the fair value of acquired intangible assets.
|
5.
|
The elimination of Orbital ATK’s historical amortization of net actuarial losses and prior service credits and impact of the revised pension and OPB net periodic benefit cost as determined under the company’s plan assumptions of $51 million for the nine months ended September 30, 2018.
|
6.
|
The income tax effect on the pro forma adjustments, which was calculated using the federal statutory tax rate, of $(2) million for the nine months ended September 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
Shares Repurchased
(in millions) |
|||||||||
Repurchase Program
Authorization Date |
|
Amount
Authorized (in millions) |
|
Total
Shares Retired (in millions) |
|
Average
Price Per Share(1) |
|
Date Completed
|
|
Nine Months Ended September 30
|
|||||||||
|
2019
|
|
2018
|
||||||||||||||||
September 16, 2015
|
|
$
|
4,000
|
|
|
13.6
|
|
|
$
|
248.91
|
|
|
|
|
2.3
|
|
|
0.7
|
|
December 4, 2018
|
|
$
|
3,000
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
(1)
|
Includes commissions paid.
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Federal and foreign income tax expense
|
$
|
122
|
|
|
$
|
120
|
|
|
$
|
460
|
|
|
$
|
466
|
|
Effective income tax rate
|
11.6
|
%
|
|
8.8
|
%
|
|
14.8
|
%
|
|
14.0
|
%
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
$ in millions
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||||||||
Financial Assets (Liabilities)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketable securities
|
|
$
|
351
|
|
|
$
|
—
|
|
|
$
|
351
|
|
|
$
|
319
|
|
|
$
|
1
|
|
|
$
|
320
|
|
Marketable securities valued using NAV
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
15
|
|
|||||||||
Total marketable securities
|
|
351
|
|
|
—
|
|
|
367
|
|
|
319
|
|
|
1
|
|
|
335
|
|
||||||
Derivatives
|
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
$ in millions
|
|
Range of Reasonably Possible Future Costs(1)
|
|
Accrued Costs(2)
|
|
Deferred Costs(3)
|
||||
September 30, 2019
|
|
$528 - $997
|
|
$
|
543
|
|
|
$
|
423
|
|
December 31, 2018
|
|
447 - 835
|
|
461
|
|
|
343
|
|
(1)
|
Estimated remediation costs are not discounted to present value. The range of reasonably possible future costs does not take into consideration amounts expected to be recoverable through overhead charges on U.S. government contracts.
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||||||||||||||||||
|
Pension
Benefits |
|
OPB
|
|
Pension
Benefits |
|
OPB
|
||||||||||||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
Components of net periodic benefit cost (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Service cost
|
$
|
92
|
|
|
$
|
102
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
276
|
|
|
$
|
301
|
|
|
$
|
12
|
|
|
$
|
15
|
|
Interest cost
|
340
|
|
|
316
|
|
|
20
|
|
|
20
|
|
|
1,020
|
|
|
906
|
|
|
60
|
|
|
58
|
|
||||||||
Expected return on plan assets
|
(525
|
)
|
|
(571
|
)
|
|
(23
|
)
|
|
(26
|
)
|
|
(1,576
|
)
|
|
(1,644
|
)
|
|
(69
|
)
|
|
(75
|
)
|
||||||||
Amortization of prior service credit
|
(15
|
)
|
|
(15
|
)
|
|
(1
|
)
|
|
(5
|
)
|
|
(44
|
)
|
|
(44
|
)
|
|
(2
|
)
|
|
(16
|
)
|
||||||||
Net periodic benefit cost (benefit)
|
$
|
(108
|
)
|
|
$
|
(168
|
)
|
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
$
|
(324
|
)
|
|
$
|
(481
|
)
|
|
$
|
1
|
|
|
$
|
(18
|
)
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Defined benefit pension plans
|
$
|
18
|
|
|
$
|
273
|
|
|
$
|
64
|
|
|
$
|
318
|
|
OPB plans
|
10
|
|
|
10
|
|
|
34
|
|
|
32
|
|
||||
Defined contribution plans
|
98
|
|
|
104
|
|
|
377
|
|
|
296
|
|
|
|
Nine Months Ended September 30
|
||||||
in millions
|
|
2019
|
|
2018
|
||||
RSRs granted
|
|
0.1
|
|
|
0.1
|
|
||
RPSRs granted
|
|
0.2
|
|
|
0.2
|
|
||
Grant date aggregate fair value
|
|
$
|
92
|
|
|
$
|
119
|
|
|
|
Nine Months Ended September 30
|
||||||
$ in millions
|
|
2019
|
|
2018
|
||||
Minimum aggregate payout amount
|
|
$
|
36
|
|
|
$
|
36
|
|
Maximum aggregate payout amount
|
|
203
|
|
|
205
|
|
$ in millions
|
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
||||
Operating lease cost
|
|
$
|
78
|
|
|
$
|
237
|
|
Variable lease cost
|
|
3
|
|
|
7
|
|
||
Short-term lease cost
|
|
25
|
|
|
54
|
|
||
Total lease cost
|
|
$
|
106
|
|
|
$
|
298
|
|
$ in millions
|
|
September 30, 2019
|
||
Operating lease right-of-use assets
|
|
$
|
1,511
|
|
|
|
|
||
Other current liabilities
|
|
260
|
|
|
Operating lease liabilities
|
|
1,304
|
|
|
Total operating lease liabilities
|
|
$
|
1,564
|
|
$ in millions
|
|
Nine Months Ended September 30, 2019
|
||
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
$
|
223
|
|
Right-of-use assets obtained in exchange for new lease liabilities
|
|
397
|
|
|
|
|
|
||
Weighted average remaining lease term
|
|
11.7 years
|
|
|
Weighted average discount rate
|
|
3.8
|
%
|
$ in millions
|
|
|
||
Year Ending December 31
|
|
|
||
2019 (1)
|
|
$
|
74
|
|
2020
|
|
298
|
|
|
2021
|
|
249
|
|
|
2022
|
|
212
|
|
|
2023
|
|
175
|
|
|
Thereafter
|
|
986
|
|
|
Total lease payments
|
|
1,994
|
|
|
Less: imputed interest
|
|
(430
|
)
|
|
Present value of operating lease liabilities
|
|
$
|
1,564
|
|
(1)
|
Excludes the nine months ended September 30, 2019.
|
$ in millions
|
|
|
||
Year Ending December 31
|
|
|
||
2019
|
|
$
|
312
|
|
2020
|
|
270
|
|
|
2021
|
|
221
|
|
|
2022
|
|
186
|
|
|
2023
|
|
152
|
|
|
Thereafter
|
|
939
|
|
|
Total minimum lease payments
|
|
$
|
2,080
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Sales
|
|
|
|
|
|
|
|
||||||||
Aerospace Systems
|
$
|
3,458
|
|
|
$
|
3,282
|
|
|
$
|
10,344
|
|
|
$
|
9,899
|
|
Innovation Systems
|
1,584
|
|
|
1,415
|
|
|
4,520
|
|
|
1,815
|
|
||||
Mission Systems
|
3,029
|
|
|
2,911
|
|
|
9,043
|
|
|
8,668
|
|
||||
Technology Services
|
1,067
|
|
|
1,040
|
|
|
3,088
|
|
|
3,232
|
|
||||
Intersegment eliminations
|
(663
|
)
|
|
(563
|
)
|
|
(1,875
|
)
|
|
(1,675
|
)
|
||||
Total sales
|
8,475
|
|
|
8,085
|
|
|
25,120
|
|
|
21,939
|
|
||||
Operating income
|
|
|
|
|
|
|
|
||||||||
Aerospace Systems
|
324
|
|
|
376
|
|
|
1,067
|
|
|
1,074
|
|
||||
Innovation Systems
|
164
|
|
|
161
|
|
|
500
|
|
|
200
|
|
||||
Mission Systems
|
398
|
|
|
399
|
|
|
1,189
|
|
|
1,122
|
|
||||
Technology Services
|
136
|
|
|
111
|
|
|
351
|
|
|
328
|
|
||||
Intersegment eliminations
|
(82
|
)
|
|
(68
|
)
|
|
(222
|
)
|
|
(204
|
)
|
||||
Total segment operating income
|
940
|
|
|
979
|
|
|
2,885
|
|
|
2,520
|
|
||||
Net FAS (service)/CAS pension adjustment
|
131
|
|
|
176
|
|
|
346
|
|
|
440
|
|
||||
Unallocated corporate (expense) income
|
(120
|
)
|
|
17
|
|
|
(398
|
)
|
|
(123
|
)
|
||||
Total operating income
|
$
|
951
|
|
|
$
|
1,172
|
|
|
$
|
2,833
|
|
|
$
|
2,837
|
|
Sales by Customer Type
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
$ in millions
|
$
|
%(3)
|
|
$
|
%(3)
|
|
$
|
%(3)
|
|
$
|
%(3)
|
||||||||||||
Aerospace Systems
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government (1)
|
$
|
3,014
|
|
87
|
%
|
|
$
|
2,926
|
|
89
|
%
|
|
$
|
8,954
|
|
87
|
%
|
|
$
|
8,633
|
|
87
|
%
|
International (2)
|
353
|
|
10
|
%
|
|
270
|
|
8
|
%
|
|
1,137
|
|
11
|
%
|
|
990
|
|
10
|
%
|
||||
Other customers
|
36
|
|
1
|
%
|
|
44
|
|
2
|
%
|
|
100
|
|
1
|
%
|
|
124
|
|
1
|
%
|
||||
Intersegment sales
|
55
|
|
2
|
%
|
|
42
|
|
1
|
%
|
|
153
|
|
1
|
%
|
|
152
|
|
2
|
%
|
||||
Aerospace Systems sales
|
3,458
|
|
100
|
%
|
|
3,282
|
|
100
|
%
|
|
10,344
|
|
100
|
%
|
|
9,899
|
|
100
|
%
|
||||
Innovation Systems
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government (1)
|
1,163
|
|
74
|
%
|
|
972
|
|
69
|
%
|
|
3,239
|
|
72
|
%
|
|
1,237
|
|
68
|
%
|
||||
International (2)
|
228
|
|
14
|
%
|
|
272
|
|
19
|
%
|
|
702
|
|
16
|
%
|
|
364
|
|
20
|
%
|
||||
Other customers
|
99
|
|
6
|
%
|
|
134
|
|
9
|
%
|
|
331
|
|
7
|
%
|
|
164
|
|
9
|
%
|
||||
Intersegment sales
|
94
|
|
6
|
%
|
|
37
|
|
3
|
%
|
|
248
|
|
5
|
%
|
|
50
|
|
3
|
%
|
||||
Innovation Systems sales
|
1,584
|
|
100
|
%
|
|
1,415
|
|
100
|
%
|
|
4,520
|
|
100
|
%
|
|
1,815
|
|
100
|
%
|
||||
Mission Systems
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government (1)
|
2,260
|
|
75
|
%
|
|
2,232
|
|
77
|
%
|
|
6,775
|
|
75
|
%
|
|
6,577
|
|
76
|
%
|
||||
International (2)
|
416
|
|
14
|
%
|
|
374
|
|
12
|
%
|
|
1,242
|
|
14
|
%
|
|
1,144
|
|
13
|
%
|
||||
Other customers
|
32
|
|
1
|
%
|
|
25
|
|
1
|
%
|
|
105
|
|
1
|
%
|
|
89
|
|
1
|
%
|
||||
Intersegment sales
|
321
|
|
10
|
%
|
|
280
|
|
10
|
%
|
|
921
|
|
10
|
%
|
|
858
|
|
10
|
%
|
||||
Mission Systems sales
|
3,029
|
|
100
|
%
|
|
2,911
|
|
100
|
%
|
|
9,043
|
|
100
|
%
|
|
8,668
|
|
100
|
%
|
||||
Technology Services
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government (1)
|
629
|
|
59
|
%
|
|
581
|
|
56
|
%
|
|
1,799
|
|
58
|
%
|
|
1,780
|
|
55
|
%
|
||||
International (2)
|
208
|
|
19
|
%
|
|
183
|
|
17
|
%
|
|
642
|
|
21
|
%
|
|
596
|
|
18
|
%
|
||||
Other customers
|
37
|
|
4
|
%
|
|
72
|
|
7
|
%
|
|
94
|
|
3
|
%
|
|
241
|
|
8
|
%
|
||||
Intersegment sales
|
193
|
|
18
|
%
|
|
204
|
|
20
|
%
|
|
553
|
|
18
|
%
|
|
615
|
|
19
|
%
|
||||
Technology Services sales
|
1,067
|
|
100
|
%
|
|
1,040
|
|
100
|
%
|
|
3,088
|
|
100
|
%
|
|
3,232
|
|
100
|
%
|
||||
Total
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government (1)
|
7,066
|
|
83
|
%
|
|
6,711
|
|
83
|
%
|
|
20,767
|
|
83
|
%
|
|
18,227
|
|
83
|
%
|
||||
International (2)
|
1,205
|
|
14
|
%
|
|
1,099
|
|
14
|
%
|
|
3,723
|
|
15
|
%
|
|
3,094
|
|
14
|
%
|
||||
Other customers
|
204
|
|
3
|
%
|
|
275
|
|
3
|
%
|
|
630
|
|
2
|
%
|
|
618
|
|
3
|
%
|
||||
Total Sales
|
$
|
8,475
|
|
100
|
%
|
|
$
|
8,085
|
|
100
|
%
|
|
$
|
25,120
|
|
100
|
%
|
|
$
|
21,939
|
|
100
|
%
|
(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 substantial revenue from the U.S. government.
|
Sales by Contract Type
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
$ in millions
|
$
|
%(1)
|
|
$
|
%(1)
|
|
$
|
%(1)
|
|
$
|
%(1)
|
||||||||||||
Aerospace Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost-type
|
$
|
1,995
|
|
59
|
%
|
|
$
|
1,953
|
|
60
|
%
|
|
$
|
5,976
|
|
59
|
%
|
|
$
|
5,789
|
|
59
|
%
|
Fixed-price
|
1,408
|
|
41
|
%
|
|
1,287
|
|
40
|
%
|
|
4,215
|
|
41
|
%
|
|
3,958
|
|
41
|
%
|
||||
Intersegment sales
|
55
|
|
|
|
42
|
|
|
|
153
|
|
|
|
152
|
|
|
||||||||
Aerospace Systems sales
|
3,458
|
|
|
|
3,282
|
|
|
|
10,344
|
|
|
|
9,899
|
|
|
||||||||
Innovation Systems
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost-type
|
419
|
|
28
|
%
|
|
373
|
|
27
|
%
|
|
1,232
|
|
29
|
%
|
|
472
|
|
27
|
%
|
||||
Fixed-price
|
1,071
|
|
72
|
%
|
|
1,005
|
|
73
|
%
|
|
3,040
|
|
71
|
%
|
|
1,293
|
|
73
|
%
|
||||
Intersegment sales
|
94
|
|
|
|
37
|
|
|
|
248
|
|
|
|
50
|
|
|
||||||||
Innovation Systems sales
|
1,584
|
|
|
|
1,415
|
|
|
|
4,520
|
|
|
|
1,815
|
|
|
||||||||
Mission Systems
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost-type
|
1,264
|
|
47
|
%
|
|
1,259
|
|
48
|
%
|
|
3,854
|
|
47
|
%
|
|
3,745
|
|
48
|
%
|
||||
Fixed-price
|
1,444
|
|
53
|
%
|
|
1,372
|
|
52
|
%
|
|
4,268
|
|
53
|
%
|
|
4,065
|
|
52
|
%
|
||||
Intersegment sales
|
321
|
|
|
|
280
|
|
|
|
921
|
|
|
|
858
|
|
|
||||||||
Mission Systems sales
|
3,029
|
|
|
|
2,911
|
|
|
|
9,043
|
|
|
|
8,668
|
|
|
||||||||
Technology Services
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost-type
|
398
|
|
46
|
%
|
|
373
|
|
45
|
%
|
|
1,202
|
|
47
|
%
|
|
1,195
|
|
46
|
%
|
||||
Fixed-price
|
476
|
|
54
|
%
|
|
463
|
|
55
|
%
|
|
1,333
|
|
53
|
%
|
|
1,422
|
|
54
|
%
|
||||
Intersegment sales
|
193
|
|
|
|
204
|
|
|
|
553
|
|
|
|
615
|
|
|
||||||||
Technology Services sales
|
1,067
|
|
|
|
1,040
|
|
|
|
3,088
|
|
|
|
3,232
|
|
|
||||||||
Total
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost-type
|
4,076
|
|
48
|
%
|
|
3,958
|
|
49
|
%
|
|
12,264
|
|
49
|
%
|
|
11,201
|
|
51
|
%
|
||||
Fixed-price
|
4,399
|
|
52
|
%
|
|
4,127
|
|
51
|
%
|
|
12,856
|
|
51
|
%
|
|
10,738
|
|
49
|
%
|
||||
Total Sales
|
$
|
8,475
|
|
|
|
$
|
8,085
|
|
|
|
$
|
25,120
|
|
|
|
$
|
21,939
|
|
|
(1)
|
Percentages calculated based on external customer sales.
|
Sales by Geographic Region
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||||||||||
|
2019
|
2018
|
|
2019
|
|
2018
|
|||||||||||||||||
$ in millions
|
$
|
%(2)
|
|
$
|
%(2)
|
|
$
|
%(2)
|
|
$
|
%(2)
|
||||||||||||
Aerospace Systems
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
$
|
3,050
|
|
90
|
%
|
|
$
|
2,970
|
|
92
|
%
|
|
$
|
9,054
|
|
89
|
%
|
|
$
|
8,757
|
|
90
|
%
|
Asia/Pacific
|
173
|
|
5
|
%
|
|
121
|
|
4
|
%
|
|
632
|
|
6
|
%
|
|
499
|
|
5
|
%
|
||||
All other (1)
|
180
|
|
5
|
%
|
|
149
|
|
4
|
%
|
|
505
|
|
5
|
%
|
|
491
|
|
5
|
%
|
||||
Intersegment sales
|
55
|
|
|
|
42
|
|
|
|
153
|
|
|
|
152
|
|
|
||||||||
Aerospace Systems sales
|
3,458
|
|
|
|
3,282
|
|
|
|
10,344
|
|
|
|
9,899
|
|
|
||||||||
Innovation Systems
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
1,262
|
|
85
|
%
|
|
1,105
|
|
80
|
%
|
|
3,570
|
|
84
|
%
|
|
1,401
|
|
79
|
%
|
||||
Asia/Pacific
|
30
|
|
2
|
%
|
|
72
|
|
5
|
%
|
|
123
|
|
3
|
%
|
|
96
|
|
6
|
%
|
||||
All other (1)
|
198
|
|
13
|
%
|
|
201
|
|
15
|
%
|
|
579
|
|
13
|
%
|
|
268
|
|
15
|
%
|
||||
Intersegment sales
|
94
|
|
|
|
37
|
|
|
|
248
|
|
|
|
50
|
|
|
||||||||
Innovation Systems sales
|
1,584
|
|
|
|
1,415
|
|
|
|
4,520
|
|
|
|
1,815
|
|
|
||||||||
Mission Systems
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
2,292
|
|
85
|
%
|
|
2,253
|
|
86
|
%
|
|
6,880
|
|
85
|
%
|
|
6,666
|
|
85
|
%
|
||||
Asia/Pacific
|
143
|
|
5
|
%
|
|
208
|
|
8
|
%
|
|
443
|
|
5
|
%
|
|
521
|
|
7
|
%
|
||||
All other (1)
|
273
|
|
10
|
%
|
|
170
|
|
6
|
%
|
|
799
|
|
10
|
%
|
|
623
|
|
8
|
%
|
||||
Intersegment sales
|
321
|
|
|
|
280
|
|
|
|
921
|
|
|
|
858
|
|
|
||||||||
Mission Systems sales
|
3,029
|
|
|
|
2,911
|
|
|
|
9,043
|
|
|
|
8,668
|
|
|
||||||||
Technology Services
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
666
|
|
76
|
%
|
|
653
|
|
78
|
%
|
|
1,893
|
|
75
|
%
|
|
2,021
|
|
77
|
%
|
||||
Asia/Pacific
|
44
|
|
5
|
%
|
|
45
|
|
5
|
%
|
|
144
|
|
6
|
%
|
|
113
|
|
4
|
%
|
||||
All other (1)
|
164
|
|
19
|
%
|
|
138
|
|
17
|
%
|
|
498
|
|
19
|
%
|
|
483
|
|
19
|
%
|
||||
Intersegment sales
|
193
|
|
|
|
204
|
|
|
|
553
|
|
|
|
615
|
|
|
||||||||
Technology Services sales
|
1,067
|
|
|
|
1,040
|
|
|
|
3,088
|
|
|
|
3,232
|
|
|
||||||||
Total
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
7,270
|
|
86
|
%
|
|
6,981
|
|
86
|
%
|
|
21,397
|
|
85
|
%
|
|
18,845
|
|
86
|
%
|
||||
Asia/Pacific
|
390
|
|
5
|
%
|
|
446
|
|
6
|
%
|
|
1,342
|
|
5
|
%
|
|
1,229
|
|
6
|
%
|
||||
All other (1)
|
815
|
|
9
|
%
|
|
658
|
|
8
|
%
|
|
2,381
|
|
10
|
%
|
|
1,865
|
|
8
|
%
|
||||
Total Sales
|
$
|
8,475
|
|
|
|
$
|
8,085
|
|
|
|
$
|
25,120
|
|
|
|
$
|
21,939
|
|
|
(1)
|
All other is principally comprised of Europe and the Middle East.
|
(2)
|
Percentages calculated based on external customer sales.
|
|
Three Months Ended September 30
|
|
%
|
|
Nine Months Ended September 30
|
|
%
|
||||||||||||||
$ in millions, except per share amounts
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||
Sales
|
$
|
8,475
|
|
|
$
|
8,085
|
|
|
5
|
%
|
|
$
|
25,120
|
|
|
$
|
21,939
|
|
|
14
|
%
|
Operating costs and expenses
|
7,524
|
|
|
6,913
|
|
|
9
|
%
|
|
22,287
|
|
|
19,102
|
|
|
17
|
%
|
||||
Operating costs and expenses as a % of sales
|
88.8
|
%
|
|
85.5
|
%
|
|
|
|
88.7
|
%
|
|
87.1
|
%
|
|
|
||||||
Operating income
|
951
|
|
|
1,172
|
|
|
(19
|
)%
|
|
2,833
|
|
|
2,837
|
|
|
—
|
%
|
||||
Operating margin rate
|
11.2
|
%
|
|
14.5
|
%
|
|
|
|
11.3
|
%
|
|
12.9
|
%
|
|
|
||||||
Federal and foreign income tax expense
|
122
|
|
|
120
|
|
|
2
|
%
|
|
460
|
|
|
466
|
|
|
(1
|
)%
|
||||
Effective income tax rate
|
11.6
|
%
|
|
8.8
|
%
|
|
|
|
14.8
|
%
|
|
14.0
|
%
|
|
|
||||||
Net earnings
|
933
|
|
|
1,244
|
|
|
(25
|
)%
|
|
2,657
|
|
|
2,873
|
|
|
(8
|
)%
|
||||
Diluted earnings per share
|
$
|
5.49
|
|
|
$
|
7.11
|
|
|
(23
|
)%
|
|
$
|
15.60
|
|
|
$
|
16.40
|
|
|
(5
|
)%
|
Aerospace Systems
|
|
Innovation Systems
|
|
Mission Systems
|
|
Technology Services
|
Autonomous Systems
|
|
Defense Systems
|
|
Advanced Capabilities
|
|
Global Logistics and Modernization
|
Manned Aircraft
|
|
Flight Systems
|
|
Cyber and ISR
|
|
Global Services
|
Space
|
|
Space Systems
|
|
Sensors and Processing
|
|
|
|
Three Months Ended September 30
|
|
%
|
|
Nine Months Ended September 30
|
|
%
|
||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||
Segment operating income
|
$
|
940
|
|
|
$
|
979
|
|
|
(4
|
)%
|
|
$
|
2,885
|
|
|
$
|
2,520
|
|
|
14
|
%
|
Segment operating margin rate
|
11.1
|
%
|
|
12.1
|
%
|
|
|
|
11.5
|
%
|
|
11.5
|
%
|
|
|
||||||
CAS pension expense
|
223
|
|
|
278
|
|
|
(20
|
)%
|
|
622
|
|
|
741
|
|
|
(16
|
)%
|
||||
Less: FAS (service) pension expense
|
(92
|
)
|
|
(102
|
)
|
|
(10
|
)%
|
|
(276
|
)
|
|
(301
|
)
|
|
(8
|
)%
|
||||
Net FAS (service)/CAS pension adjustment
|
131
|
|
|
176
|
|
|
(26
|
)%
|
|
346
|
|
|
440
|
|
|
(21
|
)%
|
||||
Intangible asset amortization and PP&E step-up depreciation
|
(98
|
)
|
|
(97
|
)
|
|
1
|
%
|
|
(292
|
)
|
|
(127
|
)
|
|
NM
|
|
||||
Other unallocated corporate (expense) income
|
(22
|
)
|
|
114
|
|
|
NM
|
|
|
(106
|
)
|
|
4
|
|
|
NM
|
|
||||
Unallocated corporate (expense) income
|
(120
|
)
|
|
17
|
|
|
NM
|
|
|
(398
|
)
|
|
(123
|
)
|
|
NM
|
|
||||
Operating income
|
$
|
951
|
|
|
$
|
1,172
|
|
|
(19
|
)%
|
|
$
|
2,833
|
|
|
$
|
2,837
|
|
|
—
|
%
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Favorable EAC adjustments
|
$
|
285
|
|
|
$
|
296
|
|
|
$
|
803
|
|
|
$
|
740
|
|
Unfavorable EAC adjustments
|
(160
|
)
|
|
(147
|
)
|
|
(382
|
)
|
|
(332
|
)
|
||||
Net EAC adjustments
|
$
|
125
|
|
|
$
|
149
|
|
|
$
|
421
|
|
|
$
|
408
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Aerospace Systems
|
$
|
13
|
|
|
$
|
80
|
|
|
$
|
117
|
|
|
$
|
229
|
|
Innovation Systems(1)
|
33
|
|
|
16
|
|
|
114
|
|
|
16
|
|
||||
Mission Systems
|
46
|
|
|
37
|
|
|
134
|
|
|
132
|
|
||||
Technology Services
|
40
|
|
|
22
|
|
|
71
|
|
|
42
|
|
||||
Eliminations
|
(7
|
)
|
|
(6
|
)
|
|
(15
|
)
|
|
(11
|
)
|
||||
Net EAC adjustments
|
$
|
125
|
|
|
$
|
149
|
|
|
$
|
421
|
|
|
$
|
408
|
|
(1)
|
Amounts reflect EAC adjustments after the percent complete on Innovation Systems contracts was reset to zero as of the Merger date.
|
AEROSPACE SYSTEMS
|
Three Months Ended September 30
|
|
%
|
|
Nine Months Ended September 30
|
|
%
|
||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||
Sales
|
$
|
3,458
|
|
|
$
|
3,282
|
|
|
5
|
%
|
|
$
|
10,344
|
|
|
$
|
9,899
|
|
|
4
|
%
|
Operating income
|
324
|
|
|
376
|
|
|
(14
|
)%
|
|
1,067
|
|
|
1,074
|
|
|
(1
|
)%
|
||||
Operating margin rate
|
9.4
|
%
|
|
11.5
|
%
|
|
|
|
10.3
|
%
|
|
10.8
|
%
|
|
|
INNOVATION SYSTEMS
|
Three Months Ended September 30
|
|
%
|
|
Nine Months Ended September 30
|
|
%
|
|||||||||||||
$ in millions
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|||||||||
Sales
|
$
|
1,584
|
|
|
$
|
1,415
|
|
|
12
|
%
|
|
$
|
4,520
|
|
|
$
|
1,815
|
|
|
NM
|
Operating income
|
164
|
|
|
161
|
|
|
2
|
%
|
|
500
|
|
|
200
|
|
|
NM
|
||||
Operating margin rate
|
10.4
|
%
|
|
11.4
|
%
|
|
|
|
11.1
|
%
|
|
11.0
|
%
|
|
|
MISSION SYSTEMS
|
Three Months Ended September 30
|
|
%
|
|
Nine Months Ended September 30
|
|
%
|
||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||
Sales
|
$
|
3,029
|
|
|
$
|
2,911
|
|
|
4
|
%
|
|
$
|
9,043
|
|
|
$
|
8,668
|
|
|
4
|
%
|
Operating income
|
398
|
|
|
399
|
|
|
—
|
%
|
|
1,189
|
|
|
1,122
|
|
|
6
|
%
|
||||
Operating margin rate
|
13.1
|
%
|
|
13.7
|
%
|
|
|
|
13.1
|
%
|
|
12.9
|
%
|
|
|
TECHNOLOGY SERVICES
|
Three Months Ended September 30
|
|
%
|
|
Nine Months Ended September 30
|
|
%
|
||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||
Sales
|
$
|
1,067
|
|
|
$
|
1,040
|
|
|
3
|
%
|
|
$
|
3,088
|
|
|
$
|
3,232
|
|
|
(4
|
)%
|
Operating income
|
136
|
|
|
111
|
|
|
23
|
%
|
|
351
|
|
|
328
|
|
|
7
|
%
|
||||
Operating margin rate
|
12.7
|
%
|
|
10.7
|
%
|
|
|
|
11.4
|
%
|
|
10.1
|
%
|
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
||||||||||||||||||||||
$ in millions
|
2019
|
2018
|
|
2019
|
2018
|
||||||||||||||||||||
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
|
$
|
2,956
|
|
$
|
2,691
|
|
$
|
2,775
|
|
$
|
2,457
|
|
|
$
|
8,783
|
|
$
|
7,915
|
|
$
|
8,339
|
|
$
|
7,436
|
|
Service
|
502
|
|
443
|
|
507
|
|
449
|
|
|
1,561
|
|
1,362
|
|
1,560
|
|
1,389
|
|
||||||||
Innovation Systems
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Product
|
1,451
|
|
1,304
|
|
1,246
|
|
1,101
|
|
|
4,019
|
|
3,577
|
|
1,600
|
|
1,418
|
|
||||||||
Service
|
133
|
|
116
|
|
169
|
|
153
|
|
|
501
|
|
443
|
|
215
|
|
197
|
|
||||||||
Mission Systems
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Product
|
1,887
|
|
1,625
|
|
1,818
|
|
1,582
|
|
|
5,631
|
|
4,826
|
|
5,349
|
|
4,624
|
|
||||||||
Service
|
1,142
|
|
1,006
|
|
1,093
|
|
930
|
|
|
3,412
|
|
3,028
|
|
3,319
|
|
2,922
|
|
||||||||
Technology Services
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Product
|
143
|
|
131
|
|
132
|
|
119
|
|
|
406
|
|
373
|
|
356
|
|
325
|
|
||||||||
Service
|
924
|
|
800
|
|
908
|
|
810
|
|
|
2,682
|
|
2,364
|
|
2,876
|
|
2,579
|
|
||||||||
Segment Totals
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total Product
|
$
|
6,437
|
|
$
|
5,751
|
|
$
|
5,971
|
|
$
|
5,259
|
|
|
$
|
18,839
|
|
$
|
16,691
|
|
$
|
15,644
|
|
$
|
13,803
|
|
Total Service
|
2,701
|
|
2,365
|
|
2,677
|
|
2,342
|
|
|
8,156
|
|
7,197
|
|
7,970
|
|
7,087
|
|
||||||||
Intersegment eliminations
|
(663
|
)
|
(581
|
)
|
(563
|
)
|
(495
|
)
|
|
(1,875
|
)
|
(1,653
|
)
|
(1,675
|
)
|
(1,471
|
)
|
||||||||
Total segment(1)
|
$
|
8,475
|
|
$
|
7,535
|
|
$
|
8,085
|
|
$
|
7,106
|
|
|
$
|
25,120
|
|
$
|
22,235
|
|
$
|
21,939
|
|
$
|
19,419
|
|
(1)
|
A reconciliation of segment operating income to total operating income is included in “Segment Operating Results.”
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|||||||||||||
$ in millions
|
|
Funded
|
|
Unfunded
|
|
Total
Backlog |
|
Total
Backlog
|
|
% Change in 2019
|
|||||||||
Aerospace Systems
|
|
$
|
12,310
|
|
|
$
|
21,601
|
|
|
$
|
33,911
|
|
|
$
|
26,440
|
|
|
28
|
%
|
Innovation Systems
|
|
5,835
|
|
|
3,758
|
|
|
9,593
|
|
|
8,207
|
|
|
17
|
%
|
||||
Mission Systems
|
|
10,952
|
|
|
7,112
|
|
|
18,064
|
|
|
15,408
|
|
|
17
|
%
|
||||
Technology Services
|
|
2,862
|
|
|
574
|
|
|
3,436
|
|
|
3,445
|
|
|
—
|
%
|
||||
Total backlog
|
|
$
|
31,959
|
|
|
$
|
33,045
|
|
|
$
|
65,004
|
|
|
$
|
53,500
|
|
|
22
|
%
|
|
Nine Months Ended September 30
|
|
%
|
|||||||
$ in millions
|
2019
|
|
2018
|
|
Change
|
|||||
Net earnings
|
$
|
2,657
|
|
|
$
|
2,873
|
|
|
(8
|
)%
|
Non-cash items(1)
|
1,041
|
|
|
891
|
|
|
17
|
%
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
|||||
Trade working capital
|
(1,392
|
)
|
|
(1,400
|
)
|
|
(1
|
)%
|
||
Retiree benefits
|
(422
|
)
|
|
(847
|
)
|
|
(50
|
)%
|
||
Other, net
|
(51
|
)
|
|
(67
|
)
|
|
(24
|
)%
|
||
Net cash provided by operating activities
|
$
|
1,833
|
|
|
$
|
1,450
|
|
|
26
|
%
|
(1)
|
Includes depreciation and amortization, non-cash lease expense, stock based compensation expense and deferred income taxes.
|
|
Nine Months Ended September 30
|
|
%
|
|||||||
$ in millions
|
2019
|
|
2018
|
|
Change
|
|||||
Net cash provided by operating activities
|
$
|
1,833
|
|
|
$
|
1,450
|
|
|
26
|
%
|
Less: capital expenditures
|
(793
|
)
|
|
(786
|
)
|
|
1
|
%
|
||
Free cash flow
|
$
|
1,040
|
|
|
$
|
664
|
|
|
57
|
%
|
•
|
our dependence on the U.S. government for a substantial portion of our business
|
•
|
significant delays or reductions in appropriations for our programs and U.S. government funding more broadly
|
•
|
investigations, claims, disputes, enforcement actions and/or litigation
|
•
|
the use of estimates when accounting for our contracts and the effect of contract cost growth and/or changes in estimated contract revenues and costs
|
•
|
our exposure to additional risks as a result of our international business, including risks related to geopolitical and economic factors, laws and regulations
|
•
|
the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we participate and the impact on our reputation, our ability to do business, and our financial position, results of operations and/or cash flows
|
•
|
cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners
|
•
|
the performance and financial viability of our subcontractors and suppliers and the availability and pricing of raw materials, chemicals and components
|
•
|
changes in procurement and other laws, regulations and practices applicable to our industry, findings by the U.S. government as to our compliance with such laws and regulations, and changes in our customers’ business practices globally
|
•
|
increased competition within our markets and bid protests
|
•
|
the ability to maintain a qualified workforce
|
•
|
our ability to meet performance obligations under our contracts, including obligations that are technologically complex, require certain manufacturing expertise or are dependent on factors not wholly within our control
|
•
|
environmental matters, including unforeseen environmental costs and government and third party claims
|
•
|
natural disasters
|
•
|
the adequacy and availability of our insurance coverage, customer indemnifications or other liability protections
|
•
|
products and services we provide related to hazardous and high risk operations, including the production and use of such products, which subject us to various environmental, regulatory, financial, reputational and other risks
|
•
|
the future investment performance of plan assets, changes in actuarial assumptions associated with our pension and other postretirement benefit plans and legislative or other regulatory actions impacting our pension, postretirement and health and welfare plans
|
•
|
our ability successfully to integrate the Orbital ATK business and realize fully the anticipated benefits of the acquisition, without adverse consequences
|
•
|
our ability to exploit or protect intellectual property rights
|
•
|
our ability to develop new products and technologies and maintain technologies, facilities, and equipment to win new competitions and meet the needs of our customers
|
•
|
changes in business conditions that could impact business investments and/or recorded goodwill or the value of other long-lived assets
|
•
|
unanticipated changes in our tax provisions or exposure to additional tax liabilities, including qualification of the Alliant Techsystems Inc. spin-off of Vista Outdoor Inc. as a tax-free transaction
|
Period
|
Number
of Shares Purchased |
|
Average Price
Paid per Share(1) |
|
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) |
|||||||
June 29, 2019 - July 26, 2019
|
143,800
|
|
|
$
|
327.10
|
|
|
143,800
|
|
|
|
$
|
3,801
|
|
July 27, 2019 - August 23, 2019
|
219,700
|
|
|
360.17
|
|
|
219,700
|
|
|
|
3,722
|
|
||
August 24, 2019 - September 27, 2019
|
244,200
|
|
|
367.81
|
|
|
244,200
|
|
|
|
3,632
|
|
||
Total
|
607,700
|
|
|
$
|
355.41
|
|
|
607,700
|
|
|
|
$
|
3,632
|
|
(1)
|
Includes commissions paid.
|
2.1
|
|
|
|
2.2
|
|
|
|
2.3
|
|
|
|
2.4
|
|
|
|
+*10.1
|
|
|
|
*15
|
|
|
|
*31.1
|
|
|
|
*31.2
|
|
|
|
**32.1
|
|
|
|
**32.2
|
|
|
|
*101
|
Northrop Grumman Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Cover Page, (ii) Condensed Consolidated Statements of Earnings and Comprehensive Income, (iii) Condensed Consolidated Statements of Financial Position, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Changes in Shareholders’ Equity, and (vi) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
*104
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
+
|
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)
|
I.
|
ENGAGEMENT
|
II.
|
PLACE OF ENGAGEMENT
|
III.
|
TERM OF ENGAGEMENT
|
IV.
|
COMPENSATION
|
V.
|
PROTECTION OF INFORMATION
|
VI.
|
TRADE SECRETS AND THIRD PARTY PROPRIETARY INFORMATION
|
VII.
|
PRESERVATION OF TRADE NAMES, TRADEMARKS AND PATENT_RIGHTS
|
VIII.
|
COOPERATION WITH NGSC
|
IX.
|
INDEPENDENT CONTRACTOR
|
X.
|
TAXES
|
XI.
|
OBSERVANCE OF APPLICABLE LAWS AND REGULATIONS
|
XIII.
|
MODIFICATION
|
XIV.
|
USE OR EMPLOYMENT OF THIRD PARTIES
|
XV.
|
CONFLICTS OF INTEREST
|
XVI.
|
EXCLUSIVITY OF CONSULTING ARRANGEMENT
|
XVII.
|
TERMINATION
|
XVIII.
|
SEVERABILITY OF PROVISIONS
|
XIX.
|
AVAILABILITY OF EQUITABLE REMEDIES
|
XX.
|
GOVERNING LAW
|
XXI.
|
SETTLEMENT OF DISPUTES
|
XXII.
|
NOTICE
|
XXIII.
|
COMPLETE AGREEMENT
|
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:
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a)
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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;
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b)
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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;
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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
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d)
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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
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5.
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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):
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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
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b)
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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.
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/s/ Kathy J. Warden
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Kathy J. Warden
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Chairman, Chief Executive Officer and President
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1.
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I have reviewed this report on Form 10-Q of Northrop Grumman Corporation (“company”);
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2.
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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;
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3.
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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;
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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
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(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
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(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.
|
/s/ Kathy J. Warden
|
Kathy J. Warden
|
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
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