FORM
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10-K
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☒
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ANNUAL 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 Number)
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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
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock
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NOC
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New York Stock Exchange
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Page
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Item 1.
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Item 1A.
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Item 1B.
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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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Item 7.
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Item 7A.
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Item 8.
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Page
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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$ in millions
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U.S.
Government(1)
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International(2)
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Other Customers
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Total
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Percentage
of Total Sales
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|||||||||
Cost-type contracts
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$
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15,720
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|
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$
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683
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$
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76
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$
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16,479
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49
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%
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Fixed-price contracts
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12,214
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4,471
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677
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17,362
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51
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%
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||||
Total sales
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$
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27,934
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$
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5,154
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$
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753
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$
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33,841
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100
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%
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(1)
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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.
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▪
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We depend heavily on a single customer, the U.S. government, for a substantial portion of our business. Changes in this customer’s priorities and spending could have a material adverse effect on our financial position, results of operations and/or cash flows.
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▪
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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 and/or cash flows.
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▪
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We are subject to various investigations, claims, disputes, enforcement actions, litigation, arbitration and other legal proceedings that could ultimately be resolved against us.
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▪
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We use estimates when accounting for contracts. Contract cost growth or changes in estimated contract revenues and costs could affect our profitability and our overall financial position.
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▪
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Our international business exposes us to additional risks, including risks related to geopolitical and economic factors, laws and regulations.
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▪
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Our reputation, our ability to do business and our financial position, results of operations and/or cash flows may be impacted by the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we participate.
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▪
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Our business could be negatively impacted by cyber and other security threats or disruptions.
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▪
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Our earnings and profitability depend, in part, on subcontractor and supplier performance and financial viability as well as raw material and component availability and pricing.
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▪
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As a U.S. government contractor, we and our partners are subject to various procurement and other laws, regulations and contract terms applicable to our industry and we could be adversely affected by changes in such laws, regulations and terms, or any negative findings by the U.S. government as to our compliance with them. We also may be adversely affected by changes in our customers’ business practices globally.
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▪
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Competition within our markets and bid protests may affect our ability to win new contracts and result in reduced revenues and market share.
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▪
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Our ability to win new competitions and meet the needs of our customers depends, in part, on our ability to maintain a qualified workforce.
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▪
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Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise or are dependent upon factors not wholly within our control. Failure to meet our contractual obligations could adversely affect our profitability, reputation and future prospects.
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▪
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Environmental matters, including unforeseen costs associated with compliance and remediation efforts, and government and third party claims, could have a material adverse effect on our reputation and our financial position, results of operations and/or cash flows.
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▪
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Our business is subject to disruption caused by natural disasters that could adversely affect our profitability and our overall financial position.
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▪
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Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks or our insurers may deny coverage of or be unable to pay for material losses we incur, which could adversely affect our profitability and overall financial position.
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▪
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We provide products and services related to hazardous and high risk operations, which subjects us to various environmental, regulatory, financial, reputational and other risks.
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▪
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Pension and other postretirement benefit (OPB) obligations and related expenses recorded in our financial statements may fluctuate significantly depending upon investment performance of plan assets, changes in actuarial assumptions, and legislative or other regulatory actions.
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▪
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We may be unable fully to exploit or adequately to protect intellectual property rights, which could materially affect our ability to compete, our reputation and our financial position, results of operations and/or cash flows.
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▪
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Our future success depends, in part, on our ability to develop new products and new technologies and maintain technologies, facilities and equipment to win new competitions and meet the needs of our customers.
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▪
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Unanticipated changes in our tax provisions or exposure to additional tax liabilities could affect our profitability and cash flow.
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▪
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Changes in future business conditions could cause business investments and/or recorded goodwill and other long-lived assets to become impaired, resulting in substantial losses and write-downs that would reduce our operating income.
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•
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our dependence on the U.S. government for a substantial portion of our business
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•
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significant delays or reductions in appropriations for our programs, and U.S. government funding and program support more broadly
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•
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investigations, claims, disputes, enforcement actions, litigation and/or other legal proceedings
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•
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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
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•
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our exposure to additional risks as a result of our international business, including risks related to geopolitical and economic factors, suppliers, laws and regulations
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•
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the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we participate and the impact on our reputation and our ability to do business
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•
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cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners
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•
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the performance and financial viability of our subcontractors and suppliers and the availability and pricing of raw materials and components
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•
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changes in procurement and other laws, regulations, contract terms and practices applicable to our industry, findings by the U.S. government as to our compliance with such requirements, and changes in our customers’ business practices globally
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•
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increased competition within our markets and bid protests
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•
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the ability to maintain a qualified workforce with the required security clearances and requisite skills
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•
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our ability to meet performance obligations under our contracts, including obligations that require innovative design capabilities, are technologically complex, require certain manufacturing expertise or are dependent on factors not wholly within our control
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•
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environmental matters, including unforeseen environmental costs and government and third party claims
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•
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natural disasters
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•
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the adequacy and availability of our insurance coverage, customer indemnifications or other liability protections
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•
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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
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•
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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 and postretirement benefit obligations
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•
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our ability appropriately to exploit and/or protect intellectual property rights
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•
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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
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•
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unanticipated changes in our tax provisions or exposure to additional tax liabilities
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•
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changes in business conditions that could impact business investments and/or recorded goodwill or the value of other long-lived assets
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Square feet (in thousands)
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Owned
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Leased
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U.S. Government
Owned/Leased
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Total
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||||
Aerospace Systems
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6,884
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6,774
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3,255
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16,913
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Innovation Systems
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6,161
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6,748
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5,388
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18,297
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Mission Systems
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8,584
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5,757
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|
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—
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14,341
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Technology Services
|
|
434
|
|
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2,689
|
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—
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3,123
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Corporate
|
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614
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|
|
492
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—
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1,106
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Total
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22,677
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|
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22,460
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|
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8,643
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53,780
|
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Period
|
Total Number
of Shares Purchased |
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Average
Price Paid per Share(1) |
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Total Number
of Shares Purchased as Part of Publicly Announced Plans or Programs |
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Approximate
Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs ($ in millions) |
|||||||
September 28, 2019 - October 25, 2019
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216,962
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$
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361.84
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216,962
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$
|
3,553
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October 26, 2019 - November 22, 2019
|
286,241
|
|
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350.08
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286,241
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|
|
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3,453
|
|
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November 23, 2019 - December 31, 2019
|
356,900
|
|
|
346.23
|
|
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356,900
|
|
|
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3,330
|
|
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Total
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860,103
|
|
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$
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351.45
|
|
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860,103
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|
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$
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3,330
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(1)
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Includes commissions paid.
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•
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Assumes $100 invested at the close of business on December 31, 2014, in Northrop Grumman Corporation common stock, Standard & Poor’s (S&P) 500 Index and the S&P Aerospace & Defense Index.
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•
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The cumulative total return assumes reinvestment of dividends.
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•
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The S&P Aerospace & Defense Index is comprised of Arconic, Inc., The Boeing Company, General Dynamics Corporation, Huntington Ingalls Industries Inc., L3Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Company, Textron, Inc., TransDigm Group and United Technologies Corporation.
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•
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The total return is weighted according to market capitalization of each company at the beginning of each year.
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•
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This graph is not deemed to be “filed” with the U.S. Securities and Exchange Commission (SEC) or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act), and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Exchange Act.
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Year Ended December 31
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||||||||||||||||||
$ in millions, except per share amounts
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2019
|
|
2018(1)
|
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2017
|
|
2016
|
|
2015(2)
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||||||||||
Sales
|
|
$
|
33,841
|
|
|
$
|
30,095
|
|
|
$
|
26,004
|
|
|
$
|
24,706
|
|
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$
|
23,526
|
|
Operating income
|
|
3,969
|
|
|
3,780
|
|
|
3,218
|
|
|
3,277
|
|
|
2,984
|
|
|||||
Net earnings
|
|
2,248
|
|
|
3,229
|
|
|
2,869
|
|
|
2,043
|
|
|
2,119
|
|
|||||
Basic earnings per share
|
|
$
|
13.28
|
|
|
$
|
18.59
|
|
|
$
|
16.45
|
|
|
$
|
11.42
|
|
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$
|
11.19
|
|
Diluted earnings per share
|
|
13.22
|
|
|
18.49
|
|
|
16.34
|
|
|
11.32
|
|
|
11.06
|
|
|||||
Cash dividends declared per common share
|
|
5.16
|
|
|
4.70
|
|
|
3.90
|
|
|
3.50
|
|
|
3.10
|
|
|||||
Year-End Financial Position
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets(3)
|
|
$
|
41,089
|
|
|
$
|
37,653
|
|
|
$
|
35,128
|
|
|
$
|
25,815
|
|
|
$
|
24,424
|
|
Notes payable to banks and long-term debt
|
|
13,879
|
|
|
14,400
|
|
|
15,266
|
|
|
7,070
|
|
|
6,496
|
|
|||||
Other long-term obligations(3)(4)
|
|
10,066
|
|
|
7,309
|
|
|
6,505
|
|
|
7,667
|
|
|
7,059
|
|
|||||
Financial Metrics
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by operating activities
|
|
$
|
4,297
|
|
|
$
|
3,827
|
|
|
$
|
2,613
|
|
|
$
|
2,813
|
|
|
$
|
2,162
|
|
Free cash flow(5)
|
|
3,033
|
|
|
2,578
|
|
|
1,685
|
|
|
1,893
|
|
|
1,691
|
|
|||||
Other Information
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Company-sponsored research and development expenses
|
|
$
|
953
|
|
|
$
|
764
|
|
|
$
|
639
|
|
|
$
|
705
|
|
|
$
|
712
|
|
Total backlog(6)
|
|
64,840
|
|
|
53,500
|
|
|
42,629
|
|
|
45,339
|
|
|
35,923
|
|
|||||
Square footage at year-end (in thousands)
|
|
53,780
|
|
|
53,283
|
|
|
35,379
|
|
|
34,112
|
|
|
34,392
|
|
|||||
Number of employees at year-end
|
|
90,000
|
|
|
85,000
|
|
|
70,000
|
|
|
67,000
|
|
|
65,000
|
|
(1)
|
Selected financial data includes the operating results of Innovation Systems subsequent to the Merger date.
|
(2)
|
Years prior to 2016 do not reflect the effects from our January 1, 2018 adoption of ASC Topic 606, Revenue from Contracts with Customers.
|
(3)
|
We adopted ASC Topic 842, Leases, on January 1, 2019 using the optional transition method and, as a result, did not recast prior period consolidated comparative financial statements.
|
(4)
|
Other long-term obligations include pension and other postretirement benefit (OPB) plan liabilities, operating lease liabilities, deferred tax liabilities and other non-current liabilities, including unrecognized tax benefits, deferred compensation and environmental liabilities.
|
(5)
|
Free cash flow is a non-GAAP measure. See “Liquidity and Capital Resources” – “Free Cash Flow” in Management’s Discussion and Analysis of Financial Conditions and Results of Operations (MD&A) for our definition of this measure, including a reconciliation of free cash flow to net cash provided by operating activities.
|
(6)
|
We applied the ASC Topic 606 transition practical expedient related to remaining performance obligations for reporting periods presented before the date of initial application. As such, years prior to 2017 have not been restated for the adoption of ASC Topic 606. For comparative purposes, we have recast our backlog as of December 31, 2017 to reflect the impact of ASC Topic 606.
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions, except per share amounts
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||
Sales
|
$
|
33,841
|
|
|
$
|
30,095
|
|
|
$
|
26,004
|
|
|
12
|
%
|
|
16
|
%
|
Operating costs and expenses
|
29,872
|
|
|
26,315
|
|
|
22,786
|
|
|
14
|
%
|
|
15
|
%
|
|||
Operating costs and expenses as a % of sales
|
88.3
|
%
|
|
87.4
|
%
|
|
87.6
|
%
|
|
|
|
|
|||||
Operating income
|
3,969
|
|
|
3,780
|
|
|
3,218
|
|
|
5
|
%
|
|
17
|
%
|
|||
Operating margin rate
|
11.7
|
%
|
|
12.6
|
%
|
|
12.4
|
%
|
|
|
|
|
|||||
Mark-to-market pension and OPB (expense) benefit
|
(1,800
|
)
|
|
(655
|
)
|
|
536
|
|
|
175
|
%
|
|
NM
|
|
|||
Federal and foreign income tax expense
|
300
|
|
|
513
|
|
|
1,360
|
|
|
(42
|
)%
|
|
(62
|
)%
|
|||
Effective income tax rate
|
11.8
|
%
|
|
13.7
|
%
|
|
32.2
|
%
|
|
|
|
|
|||||
Net earnings
|
2,248
|
|
|
3,229
|
|
|
2,869
|
|
|
(30
|
)%
|
|
13
|
%
|
|||
Diluted earnings per share
|
13.22
|
|
|
18.49
|
|
|
16.34
|
|
|
(29
|
)%
|
|
13
|
%
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
2019
|
|
2018
|
|
2017
|
||||||
Actuarial (losses) gains on projected benefit obligation
|
$
|
(4,866
|
)
|
|
$
|
2,772
|
|
|
$
|
(1,570
|
)
|
Actuarial gains (losses) on plan assets
|
3,066
|
|
|
(3,426
|
)
|
|
2,119
|
|
|||
Other
|
—
|
|
|
(1
|
)
|
|
(13
|
)
|
|||
MTM (expense) benefit
|
$
|
(1,800
|
)
|
|
$
|
(655
|
)
|
|
$
|
536
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||
Net earnings
|
$
|
2,248
|
|
|
$
|
3,229
|
|
|
$
|
2,869
|
|
|
(30
|
)%
|
|
13
|
%
|
MTM expense (benefit)
|
1,800
|
|
|
655
|
|
|
(536
|
)
|
|
175
|
%
|
|
NM
|
|
|||
MTM-related deferred state tax (benefit) expense(1)
|
(81
|
)
|
|
(29
|
)
|
|
24
|
|
|
179
|
%
|
|
NM
|
|
|||
Federal tax (benefit) expense of items above(2)
|
(361
|
)
|
|
(131
|
)
|
|
108
|
|
|
176
|
%
|
|
NM
|
|
|||
MTM expense (benefit), net of tax
|
1,358
|
|
|
495
|
|
|
(404
|
)
|
|
174
|
%
|
|
NM
|
|
|||
MTM-adjusted net earnings
|
$
|
3,606
|
|
|
$
|
3,724
|
|
|
$
|
2,465
|
|
|
(3
|
)%
|
|
51
|
%
|
(1)
|
Deferred state taxes are recorded in unallocated corporate expense within operating income.
|
(2)
|
Based on a 21% federal statutory tax rate.
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||
Diluted earnings per share
|
$
|
13.22
|
|
|
$
|
18.49
|
|
|
$
|
16.34
|
|
|
(29
|
)%
|
|
13
|
%
|
MTM expense (benefit) per share
|
10.59
|
|
|
3.76
|
|
|
(3.06
|
)
|
|
182
|
%
|
|
NM
|
|
|||
MTM-related deferred state tax (benefit) expense per share(1)
|
(0.48
|
)
|
|
(0.17
|
)
|
|
0.14
|
|
|
182
|
%
|
|
NM
|
|
|||
Federal tax (benefit) expense of items above per share(2)
|
(2.12
|
)
|
|
(0.75
|
)
|
|
0.62
|
|
|
183
|
%
|
|
NM
|
|
|||
MTM expense (benefit) per share, net of tax
|
7.99
|
|
|
2.84
|
|
|
(2.30
|
)
|
|
181
|
%
|
|
NM
|
|
|||
MTM-adjusted diluted earnings per share
|
$
|
21.21
|
|
|
$
|
21.33
|
|
|
$
|
14.04
|
|
|
(1
|
)%
|
|
52
|
%
|
(1)
|
Deferred state taxes are recorded in unallocated corporate expense within operating income.
|
(2)
|
Based on a 21% federal statutory tax rate.
|
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
|
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||
Segment operating income
|
$
|
3,909
|
|
|
$
|
3,447
|
|
|
$
|
2,903
|
|
|
13
|
%
|
|
19
|
%
|
Segment operating margin rate
|
11.6
|
%
|
|
11.5
|
%
|
|
11.2
|
%
|
|
|
|
|
|||||
CAS pension expense
|
832
|
|
|
1,017
|
|
|
1,026
|
|
|
(18
|
)%
|
|
(1
|
)%
|
|||
Less: FAS (service) pension expense
|
(367
|
)
|
|
(404
|
)
|
|
(388
|
)
|
|
(9
|
)%
|
|
4
|
%
|
|||
Net FAS (service)/CAS pension adjustment
|
465
|
|
|
613
|
|
|
638
|
|
|
(24
|
)%
|
|
(4
|
)%
|
|||
Intangible asset amortization and PP&E step-up depreciation
|
(390
|
)
|
|
(220
|
)
|
|
—
|
|
|
NM
|
|
|
NM
|
|
|||
MTM-related deferred state tax benefit (expense)(1)
|
81
|
|
|
29
|
|
|
(24
|
)
|
|
179
|
%
|
|
NM
|
|
|||
Other unallocated corporate expense
|
(96
|
)
|
|
(89
|
)
|
|
(299
|
)
|
|
8
|
%
|
|
(70
|
)%
|
|||
Unallocated corporate expense
|
(405
|
)
|
|
(280
|
)
|
|
(323
|
)
|
|
45
|
%
|
|
(13
|
)%
|
|||
Total operating income
|
$
|
3,969
|
|
|
$
|
3,780
|
|
|
$
|
3,218
|
|
|
5
|
%
|
|
17
|
%
|
(1)
|
Represents the deferred state tax impact of MTM (expense) benefit, which is recorded in unallocated corporate expense consistent with other changes in deferred state taxes.
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
2019
|
|
2018
|
|
2017
|
||||||
Favorable EAC adjustments
|
$
|
1,040
|
|
|
$
|
1,019
|
|
|
$
|
717
|
|
Unfavorable EAC adjustments
|
(560
|
)
|
|
(442
|
)
|
|
(357
|
)
|
|||
Net EAC adjustments
|
$
|
480
|
|
|
$
|
577
|
|
|
$
|
360
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
2019
|
|
2018
|
|
2017
|
||||||
Aerospace Systems
|
$
|
135
|
|
|
$
|
309
|
|
|
$
|
250
|
|
Innovation Systems(1)
|
133
|
|
|
34
|
|
|
—
|
|
|||
Mission Systems
|
150
|
|
|
175
|
|
|
104
|
|
|||
Technology Services
|
77
|
|
|
76
|
|
|
19
|
|
|||
Eliminations
|
(15
|
)
|
|
(17
|
)
|
|
(13
|
)
|
|||
Net EAC adjustments
|
$
|
480
|
|
|
$
|
577
|
|
|
$
|
360
|
|
(1)
|
Amounts reflect EAC adjustments after the percent complete on Innovation Systems contracts was reset to zero as of the Merger date.
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||
Sales
|
$
|
13,862
|
|
|
$
|
13,096
|
|
|
$
|
12,131
|
|
|
6
|
%
|
|
8
|
%
|
Operating income
|
1,434
|
|
|
1,411
|
|
|
1,289
|
|
|
2
|
%
|
|
9
|
%
|
|||
Operating margin rate
|
10.3
|
%
|
|
10.8
|
%
|
|
10.6
|
%
|
|
|
|
|
|
Year Ended December 31
|
|
% Change in
|
|||||||||||
$ in millions
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|||||
Sales
|
$
|
6,119
|
|
|
$
|
3,276
|
|
|
—
|
|
|
NM
|
|
—
|
Operating income
|
671
|
|
|
343
|
|
|
—
|
|
|
NM
|
|
—
|
||
Operating margin rate
|
11.0
|
%
|
|
10.5
|
%
|
|
—
|
|
|
|
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||
Sales
|
$
|
12,263
|
|
|
$
|
11,709
|
|
|
$
|
11,470
|
|
|
5
|
%
|
|
2
|
%
|
Operating income
|
1,639
|
|
|
1,520
|
|
|
1,442
|
|
|
8
|
%
|
|
5
|
%
|
|||
Operating margin rate
|
13.4
|
%
|
|
13.0
|
%
|
|
12.6
|
%
|
|
|
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||
Sales
|
$
|
4,110
|
|
|
$
|
4,297
|
|
|
$
|
4,687
|
|
|
(4
|
)%
|
|
(8
|
)%
|
Operating income
|
457
|
|
|
443
|
|
|
449
|
|
|
3
|
%
|
|
(1
|
)%
|
|||
Operating margin rate
|
11.1
|
%
|
|
10.3
|
%
|
|
9.6
|
%
|
|
|
|
|
|
|
Year Ended December 31
|
||||||||||||||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||||||||
Segment Information:
|
|
Sales
|
|
Operating Costs and Expenses
|
|
Sales
|
|
Operating Costs and Expenses
|
|
Sales
|
|
Operating Costs and Expenses
|
||||||||||||
Aerospace Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
|
$
|
11,778
|
|
|
$
|
10,609
|
|
|
$
|
11,087
|
|
|
$
|
9,889
|
|
|
$
|
10,064
|
|
|
$
|
8,988
|
|
Service
|
|
2,084
|
|
|
1,819
|
|
|
2,009
|
|
|
1,796
|
|
|
2,067
|
|
|
1,854
|
|
||||||
Innovation Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
|
5,467
|
|
|
4,873
|
|
|
2,894
|
|
|
2,582
|
|
|
—
|
|
|
—
|
|
||||||
Service
|
|
652
|
|
|
575
|
|
|
382
|
|
|
351
|
|
|
—
|
|
|
—
|
|
||||||
Mission Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
|
7,711
|
|
|
6,632
|
|
|
7,329
|
|
|
6,335
|
|
|
7,012
|
|
|
6,088
|
|
||||||
Service
|
|
4,552
|
|
|
3,992
|
|
|
4,380
|
|
|
3,854
|
|
|
4,458
|
|
|
3,940
|
|
||||||
Technology Services
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
|
554
|
|
|
507
|
|
|
485
|
|
|
450
|
|
|
391
|
|
|
360
|
|
||||||
Service
|
|
3,556
|
|
|
3,146
|
|
|
3,812
|
|
|
3,404
|
|
|
4,296
|
|
|
3,878
|
|
||||||
Segment Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total Product
|
|
$
|
25,510
|
|
|
$
|
22,621
|
|
|
$
|
21,795
|
|
|
$
|
19,256
|
|
|
$
|
17,467
|
|
|
$
|
15,436
|
|
Total Service
|
|
10,844
|
|
|
9,532
|
|
|
10,583
|
|
|
9,405
|
|
|
10,821
|
|
|
9,672
|
|
||||||
Intersegment eliminations
|
|
(2,513
|
)
|
|
(2,221
|
)
|
|
(2,283
|
)
|
|
(2,013
|
)
|
|
(2,284
|
)
|
|
(2,007
|
)
|
||||||
Total Segment(1)
|
|
$
|
33,841
|
|
|
$
|
29,932
|
|
|
$
|
30,095
|
|
|
$
|
26,648
|
|
|
$
|
26,004
|
|
|
$
|
23,101
|
|
(1)
|
A reconciliation of segment operating income to total operating income is included in “Segment Operating Results.”
|
|
|
2019
|
|
2018
|
|
|
|||||||||||||
$ in millions
|
|
Funded
|
|
Unfunded
|
|
Total
Backlog
|
|
Total
Backlog
|
|
% Change in 2019
|
|||||||||
Aerospace Systems
|
|
$
|
11,587
|
|
|
$
|
21,875
|
|
|
$
|
33,462
|
|
|
$
|
26,440
|
|
|
27
|
%
|
Innovation Systems
|
|
5,575
|
|
|
3,905
|
|
|
9,480
|
|
|
8,207
|
|
|
16
|
%
|
||||
Mission Systems
|
|
10,317
|
|
|
7,806
|
|
|
18,123
|
|
|
15,408
|
|
|
18
|
%
|
||||
Technology Services
|
|
2,798
|
|
|
977
|
|
|
3,775
|
|
|
3,445
|
|
|
10
|
%
|
||||
Total backlog
|
|
$
|
30,277
|
|
|
$
|
34,563
|
|
|
$
|
64,840
|
|
|
$
|
53,500
|
|
|
21
|
%
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
||||||
Net earnings
|
|
$
|
2,248
|
|
|
$
|
3,229
|
|
|
$
|
2,869
|
|
Non-cash items(1)
|
|
2,683
|
|
|
1,775
|
|
|
1,018
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
||||||
Trade working capital
|
|
128
|
|
|
(65
|
)
|
|
(285
|
)
|
|||
Retiree benefits, excluding MTM (expense) benefit
|
|
(703
|
)
|
|
(1,083
|
)
|
|
(946
|
)
|
|||
Other, net
|
|
(59
|
)
|
|
(29
|
)
|
|
(43
|
)
|
|||
Net cash provided by operating activities
|
|
$
|
4,297
|
|
|
$
|
3,827
|
|
|
$
|
2,613
|
|
(1)
|
Includes depreciation and amortization, MTM (expense) benefit, non-cash lease expense, stock based compensation expense and deferred income taxes.
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||
Net cash provided by operating activities
|
|
$
|
4,297
|
|
|
$
|
3,827
|
|
|
$
|
2,613
|
|
|
12
|
%
|
|
46
|
%
|
Less: capital expenditures
|
|
(1,264
|
)
|
|
(1,249
|
)
|
|
(928
|
)
|
|
1
|
%
|
|
35
|
%
|
|||
Free cash flow
|
|
$
|
3,033
|
|
|
$
|
2,578
|
|
|
$
|
1,685
|
|
|
18
|
%
|
|
53
|
%
|
$ in millions
|
|
Total
|
|
2020
|
|
2021- 2022
|
|
2023- 2024
|
|
2025 and beyond
|
||||||||||
Long-term debt
|
|
$
|
13,945
|
|
|
$
|
1,110
|
|
|
$
|
2,247
|
|
|
$
|
1,056
|
|
|
$
|
9,532
|
|
Interest payments on long-term debt
|
|
6,632
|
|
|
524
|
|
|
956
|
|
|
830
|
|
|
4,322
|
|
|||||
Operating leases
|
|
1,992
|
|
|
300
|
|
|
486
|
|
|
331
|
|
|
875
|
|
|||||
Purchase obligations(1)
|
|
15,126
|
|
|
8,089
|
|
|
2,839
|
|
|
2,213
|
|
|
1,985
|
|
|||||
Other long-term liabilities(2)
|
|
1,516
|
|
|
490
|
|
|
341
|
|
|
176
|
|
|
509
|
|
|||||
Total contractual obligations
|
|
$
|
39,211
|
|
|
$
|
10,513
|
|
|
$
|
6,869
|
|
|
$
|
4,606
|
|
|
$
|
17,223
|
|
(1)
|
A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. These amounts are primarily comprised of open purchase order commitments to suppliers and subcontractors pertaining to funded contracts.
|
(2)
|
Other long-term liabilities, including their current portions, primarily consist of total accrued environmental reserves, deferred compensation, and other miscellaneous liabilities. It excludes obligations for uncertain tax positions of $1.2 billion as we are not able to reasonably estimate the timing of future cash flows related to such positions.
|
$ in millions
|
25 Basis Point Decrease in Rate
|
|
25 Basis Point Increase in Rate
|
||||
2020 pension and OPB (benefit) expense
|
$
|
(34
|
)
|
|
$
|
31
|
|
2019 pension and OPB obligation and MTM expense (benefit)
|
1,297
|
|
|
(1,230
|
)
|
$ in millions
|
25 Basis Point Decrease in Rate
|
|
25 Basis Point Increase in Rate
|
||||
2020 pension (benefit) expense
|
$
|
(11
|
)
|
|
$
|
12
|
|
2019 pension obligation and MTM expense (benefit)
|
(136
|
)
|
|
151
|
|
$ in millions
|
25 Basis Point Decrease
|
|
25 Basis Point Increase
|
||||
2020 pension and OPB expense (benefit)
|
$
|
78
|
|
|
$
|
(78
|
)
|
$ in millions
|
100 Basis Point Decrease
|
|
100 Basis Point Increase
|
||||
2020 MTM expense (benefit)
|
$
|
312
|
|
|
$
|
(312
|
)
|
•
|
We tested the effectiveness of controls over the estimates of total costs and revenues on such contracts, including development costs and any related award or incentive fee estimates for the relevant performance obligations.
|
•
|
We selected certain long-term contracts for testing and performed the following procedures:
|
–
|
Evaluated whether the recognition of revenue over time on such contracts was appropriate based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation.
|
–
|
Tested management’s identification of distinct performance obligations by evaluating whether the underlying goods and services were highly interdependent and interrelated.
|
–
|
Tested management’s determination of the transaction price, including any award or incentive fees, based on the consideration expected to be received in accordance with the rights and obligations established under the contracts and any contractual modifications.
|
–
|
Evaluated the estimates of total cost and revenue for the performance obligation by:
|
▪
|
Conducting site visits to the relevant program locations and directly observing the contract status, as well as making inquiries regarding any challenges related to the program.
|
▪
|
Comparing costs incurred to date to the costs management estimated to be incurred to date.
|
▪
|
Evaluating management’s ability to achieve the estimates of total cost and revenue by performing corroborating inquiries with the Company’s program and business management, and testing management’s process used to develop the estimates based on their work plans, engineering specifications, program labor, and supplier contracts.
|
▪
|
Comparing management’s estimates for the selected contracts to costs and revenues of similar performance obligations, when applicable.
|
–
|
Tested the mathematical accuracy of management’s calculation of revenue recognized during the period for the performance obligations.
|
•
|
We tested the effectiveness of internal controls relating to the identification and completeness of, and recognition for, uncertain tax positions, including management’s controls over the underlying key assumptions and inputs used to derive the estimates.
|
•
|
With the assistance of our income tax specialists, we selected specific uncertain tax positions for testing and performed the following procedures:
|
–
|
Performed inquiries of the Company’s tax department, financial reporting department, and other personnel directly involved in the development of the estimates.
|
–
|
Obtained supporting documentation and evaluated how the Company supported the position, including the assumptions and estimates used for measurement, and how the taxing authorities have historically challenged the tax position, if applicable.
|
–
|
Obtained and read opinions provided by external counsel, as applicable, regarding the tax position taken by the Company.
|
–
|
Evaluated whether the uncertain tax position met the “more likely than not” recognition threshold.
|
–
|
Evaluated the appropriateness and consistency of the methodologies and assumptions used by management when developing these estimates.
|
•
|
We tested the mathematical accuracy of management’s calculations.
|
/s/
|
Deloitte & Touche LLP
|
|
McLean, Virginia
|
|
January 29, 2020
|
|
We have served as the Company’s auditor since 1975.
|
|
|
Year Ended December 31
|
||||||||||
$ in millions, except per share amounts
|
|
2019
|
|
2018
|
|
2017
|
||||||
Sales
|
|
|
|
|
|
|
|
|
|
|||
Product
|
|
$
|
23,852
|
|
|
$
|
20,469
|
|
|
$
|
16,364
|
|
Service
|
|
9,989
|
|
|
9,626
|
|
|
9,640
|
|
|||
Total sales
|
|
33,841
|
|
|
30,095
|
|
|
26,004
|
|
|||
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|||
Product
|
|
18,675
|
|
|
15,785
|
|
|
12,527
|
|
|||
Service
|
|
7,907
|
|
|
7,519
|
|
|
7,547
|
|
|||
General and administrative expenses
|
|
3,290
|
|
|
3,011
|
|
|
2,712
|
|
|||
Operating income
|
|
3,969
|
|
|
3,780
|
|
|
3,218
|
|
|||
Other (expense) income
|
|
|
|
|
|
|
|
|
|
|||
Interest expense
|
|
(528
|
)
|
|
(562
|
)
|
|
(360
|
)
|
|||
FAS (non-service) pension benefit
|
|
800
|
|
|
1,049
|
|
|
699
|
|
|||
Mark-to-market pension and OPB (expense) benefit
|
|
(1,800
|
)
|
|
(655
|
)
|
|
536
|
|
|||
Other, net
|
|
107
|
|
|
130
|
|
|
136
|
|
|||
Earnings before income taxes
|
|
2,548
|
|
|
3,742
|
|
|
4,229
|
|
|||
Federal and foreign income tax expense
|
|
300
|
|
|
513
|
|
|
1,360
|
|
|||
Net earnings
|
|
$
|
2,248
|
|
|
$
|
3,229
|
|
|
$
|
2,869
|
|
|
|
|
|
|
|
|
|
|
|
|||
Basic earnings per share
|
|
$
|
13.28
|
|
|
$
|
18.59
|
|
|
$
|
16.45
|
|
Weighted-average common shares outstanding, in millions
|
|
169.3
|
|
|
173.7
|
|
|
174.4
|
|
|||
Diluted earnings per share
|
|
$
|
13.22
|
|
|
$
|
18.49
|
|
|
$
|
16.34
|
|
Weighted-average diluted shares outstanding, in millions
|
|
170.0
|
|
|
174.6
|
|
|
175.6
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Net earnings (from above)
|
|
$
|
2,248
|
|
|
$
|
3,229
|
|
|
$
|
2,869
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|||
Change in unamortized prior service credit, net of tax expense of $15 in 2019, $19 in 2018 and $35 in 2017
|
|
(47
|
)
|
|
(60
|
)
|
|
(44
|
)
|
|||
Change in cumulative translation adjustment and other, net
|
|
2
|
|
|
(14
|
)
|
|
(2
|
)
|
|||
Other comprehensive loss, net of tax
|
|
(45
|
)
|
|
(74
|
)
|
|
(46
|
)
|
|||
Comprehensive income
|
|
$
|
2,203
|
|
|
$
|
3,155
|
|
|
$
|
2,823
|
|
|
|
December 31
|
||||||
$ in millions, except par value
|
|
2019
|
|
2018
|
||||
Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
2,245
|
|
|
$
|
1,579
|
|
Accounts receivable, net
|
|
1,326
|
|
|
1,448
|
|
||
Unbilled receivables, net
|
|
5,334
|
|
|
5,026
|
|
||
Inventoried costs, net
|
|
783
|
|
|
654
|
|
||
Prepaid expenses and other current assets
|
|
997
|
|
|
973
|
|
||
Total current assets
|
|
10,685
|
|
|
9,680
|
|
||
Property, plant and equipment, net of accumulated depreciation of $5,850 for 2019 and $5,369 for 2018
|
|
6,912
|
|
|
6,372
|
|
||
Operating lease right-of-use assets
|
|
1,511
|
|
|
—
|
|
||
Goodwill
|
|
18,708
|
|
|
18,672
|
|
||
Intangible assets, net
|
|
1,040
|
|
|
1,372
|
|
||
Deferred tax assets
|
|
508
|
|
|
94
|
|
||
Other non-current assets
|
|
1,725
|
|
|
1,463
|
|
||
Total assets
|
|
$
|
41,089
|
|
|
$
|
37,653
|
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
||||
Trade accounts payable
|
|
$
|
2,226
|
|
|
$
|
2,182
|
|
Accrued employee compensation
|
|
1,865
|
|
|
1,676
|
|
||
Advance payments and billings in excess of costs incurred
|
|
2,237
|
|
|
1,917
|
|
||
Other current liabilities
|
|
3,106
|
|
|
2,499
|
|
||
Total current liabilities
|
|
9,434
|
|
|
8,274
|
|
||
Long-term debt, net of current portion of $1,109 for 2019 and $517 for 2018
|
|
12,770
|
|
|
13,883
|
|
||
Pension and other postretirement benefit plan liabilities
|
|
6,979
|
|
|
5,755
|
|
||
Operating lease liabilities
|
|
1,308
|
|
|
—
|
|
||
Deferred tax liabilities
|
|
—
|
|
|
108
|
|
||
Other non-current liabilities
|
|
1,779
|
|
|
1,446
|
|
||
Total liabilities
|
|
32,270
|
|
|
29,466
|
|
||
|
|
|
|
|
||||
Commitments and contingencies (Note 12)
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
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—167,848,424 and 2018—170,607,336
|
|
168
|
|
|
171
|
|
||
Paid-in capital
|
|
—
|
|
|
—
|
|
||
Retained earnings
|
|
8,748
|
|
|
8,068
|
|
||
Accumulated other comprehensive loss
|
|
(97
|
)
|
|
(52
|
)
|
||
Total shareholders’ equity
|
|
8,819
|
|
|
8,187
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
41,089
|
|
|
$
|
37,653
|
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
||||||
Operating activities
|
|
|
|
|
|
|
||||||
Net earnings
|
|
$
|
2,248
|
|
|
$
|
3,229
|
|
|
$
|
2,869
|
|
Adjustments to reconcile to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
1,018
|
|
|
800
|
|
|
475
|
|
|||
Mark-to-market pension and OPB expense (benefit)
|
|
1,800
|
|
|
655
|
|
|
(536
|
)
|
|||
Non-cash lease expense
|
|
247
|
|
|
—
|
|
|
—
|
|
|||
Stock-based compensation
|
|
127
|
|
|
86
|
|
|
94
|
|
|||
Deferred income taxes
|
|
(509
|
)
|
|
234
|
|
|
985
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts receivable, net
|
|
122
|
|
|
202
|
|
|
(209
|
)
|
|||
Unbilled receivables, net
|
|
(335
|
)
|
|
(297
|
)
|
|
(422
|
)
|
|||
Inventoried costs, net
|
|
(135
|
)
|
|
(37
|
)
|
|
25
|
|
|||
Prepaid expenses and other assets
|
|
(78
|
)
|
|
(56
|
)
|
|
(92
|
)
|
|||
Accounts payable and other liabilities
|
|
617
|
|
|
381
|
|
|
570
|
|
|||
Income taxes payable, net
|
|
(63
|
)
|
|
(258
|
)
|
|
(157
|
)
|
|||
Retiree benefits
|
|
(703
|
)
|
|
(1,083
|
)
|
|
(946
|
)
|
|||
Other, net
|
|
(59
|
)
|
|
(29
|
)
|
|
(43
|
)
|
|||
Net cash provided by operating activities
|
|
4,297
|
|
|
3,827
|
|
|
2,613
|
|
|||
|
|
|
|
|
|
|
||||||
Investing activities
|
|
|
|
|
|
|
||||||
Acquisition of Orbital ATK, net of cash acquired
|
|
—
|
|
|
(7,657
|
)
|
|
—
|
|
|||
Capital expenditures
|
|
(1,264
|
)
|
|
(1,249
|
)
|
|
(928
|
)
|
|||
Other, net
|
|
57
|
|
|
28
|
|
|
39
|
|
|||
Net cash used in investing activities
|
|
(1,207
|
)
|
|
(8,878
|
)
|
|
(889
|
)
|
|||
|
|
|
|
|
|
|
||||||
Financing activities
|
|
|
|
|
|
|
||||||
Payments of long-term debt
|
|
(500
|
)
|
|
(2,276
|
)
|
|
—
|
|
|||
Net proceeds from issuance of long-term debt
|
|
—
|
|
|
—
|
|
|
8,245
|
|
|||
Payments to credit facilities
|
|
(31
|
)
|
|
(320
|
)
|
|
(13
|
)
|
|||
Net (repayments of) borrowings on commercial paper
|
|
(198
|
)
|
|
198
|
|
|
—
|
|
|||
Common stock repurchases
|
|
(744
|
)
|
|
(1,263
|
)
|
|
(393
|
)
|
|||
Cash dividends paid
|
|
(880
|
)
|
|
(821
|
)
|
|
(689
|
)
|
|||
Payments of employee taxes withheld from share-based awards
|
|
(65
|
)
|
|
(85
|
)
|
|
(92
|
)
|
|||
Other, net
|
|
(6
|
)
|
|
(28
|
)
|
|
(98
|
)
|
|||
Net cash (used in) provided by financing activities
|
|
(2,424
|
)
|
|
(4,595
|
)
|
|
6,960
|
|
|||
Increase (decrease) in cash and cash equivalents
|
|
666
|
|
|
(9,646
|
)
|
|
8,684
|
|
|||
Cash and cash equivalents, beginning of year
|
|
1,579
|
|
|
11,225
|
|
|
2,541
|
|
|||
Cash and cash equivalents, end of year
|
|
$
|
2,245
|
|
|
$
|
1,579
|
|
|
$
|
11,225
|
|
|
|
Year Ended December 31
|
||||||||||
$ in millions, except per share amounts
|
|
2019
|
|
2018
|
|
2017
|
||||||
Common stock
|
|
|
|
|
|
|
||||||
Beginning of year
|
|
$
|
171
|
|
|
$
|
174
|
|
|
$
|
175
|
|
Common stock repurchased
|
|
(3
|
)
|
|
(4
|
)
|
|
(2
|
)
|
|||
Shares issued for employee stock awards and options
|
|
—
|
|
|
1
|
|
|
1
|
|
|||
End of year
|
|
168
|
|
|
171
|
|
|
174
|
|
|||
Paid-in capital
|
|
|
|
|
|
|
||||||
Beginning of year
|
|
—
|
|
|
44
|
|
|
—
|
|
|||
Common stock repurchased
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
|||
Stock compensation
|
|
—
|
|
|
(10
|
)
|
|
44
|
|
|||
End of year
|
|
—
|
|
|
—
|
|
|
44
|
|
|||
Retained earnings
|
|
|
|
|
|
|
||||||
Beginning of year
|
|
8,068
|
|
|
6,913
|
|
|
5,141
|
|
|||
Impact from adoption of ASU 2018-02 and ASU 2016-01
|
|
—
|
|
|
(21
|
)
|
|
—
|
|
|||
Common stock repurchased
|
|
(751
|
)
|
|
(1,225
|
)
|
|
(371
|
)
|
|||
Net earnings
|
|
2,248
|
|
|
3,229
|
|
|
2,869
|
|
|||
Dividends declared
|
|
(880
|
)
|
|
(822
|
)
|
|
(687
|
)
|
|||
Stock compensation
|
|
63
|
|
|
(6
|
)
|
|
(39
|
)
|
|||
End of year
|
|
8,748
|
|
|
8,068
|
|
|
6,913
|
|
|||
Accumulated other comprehensive (loss) income
|
|
|
|
|
|
|
||||||
Beginning of year
|
|
(52
|
)
|
|
1
|
|
|
47
|
|
|||
Impact from adoption of ASU 2018-02 and ASU 2016-01
|
|
—
|
|
|
21
|
|
|
—
|
|
|||
Other comprehensive income (loss), net of tax
|
|
(45
|
)
|
|
(74
|
)
|
|
(46
|
)
|
|||
End of year
|
|
(97
|
)
|
|
(52
|
)
|
|
1
|
|
|||
Total shareholders’ equity
|
|
$
|
8,819
|
|
|
$
|
8,187
|
|
|
$
|
7,132
|
|
Cash dividends declared per share
|
|
$
|
5.16
|
|
|
$
|
4.70
|
|
|
$
|
3.90
|
|
|
Year Ended December 31
|
||||||||||
$ in millions, except per share data
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue
|
$
|
538
|
|
|
$
|
631
|
|
|
$
|
374
|
|
Operating income
|
480
|
|
|
577
|
|
|
360
|
|
|||
Net earnings(1)
|
379
|
|
|
456
|
|
|
234
|
|
|||
Diluted earnings per share(1)
|
2.23
|
|
|
2.61
|
|
|
1.33
|
|
(1)
|
Based on a 21% federal statutory tax rate for the years ended December 31, 2019 and 2018 and a 35% federal statutory tax rate for the year ended December 31, 2017.
|
$ in millions
|
December 31,
2019 |
|
December 31,
2018 |
$ Change
|
% Change
|
|||||||
Unbilled receivables, net
|
$
|
5,334
|
|
|
$
|
5,026
|
|
$
|
308
|
|
6
|
%
|
Advance payments and amounts in excess of costs incurred
|
(2,237
|
)
|
|
(1,917
|
)
|
(320
|
)
|
17
|
%
|
|||
Net contract assets
|
$
|
3,097
|
|
|
$
|
3,109
|
|
$
|
(12
|
)
|
—
|
%
|
|
|
|
|
December 31
|
||||||
Useful life in years, $ in millions
|
|
Useful Life
|
|
2019
|
|
2018
|
||||
Land and land improvements
|
|
Up to 40(1)
|
|
$
|
619
|
|
|
$
|
636
|
|
Buildings and improvements
|
|
Up to 45
|
|
2,575
|
|
|
2,139
|
|
||
Machinery and other equipment
|
|
Up to 20
|
|
6,997
|
|
|
6,618
|
|
||
Capitalized software costs
|
|
3-5
|
|
606
|
|
|
603
|
|
||
Leasehold improvements
|
|
Length of Lease(2)
|
|
1,965
|
|
|
1,745
|
|
||
Property, plant and equipment, at cost
|
|
|
|
12,762
|
|
|
11,741
|
|
||
Accumulated depreciation
|
|
|
|
(5,850
|
)
|
|
(5,369
|
)
|
||
Property, plant and equipment, net
|
|
|
|
$
|
6,912
|
|
|
$
|
6,372
|
|
(1)
|
Land is not a depreciable asset.
|
(2)
|
Leasehold improvements are depreciated over the shorter of the useful life of the asset or the length of the lease.
|
|
|
December 31
|
||||||
$ in millions
|
|
2019
|
|
2018
|
||||
Unamortized prior service credit, net of tax expense of $17 for 2019 and $32 for 2018
|
|
$
|
51
|
|
|
$
|
98
|
|
Cumulative translation adjustment
|
|
(147
|
)
|
|
(144
|
)
|
||
Other, net
|
|
(1
|
)
|
|
(6
|
)
|
||
Total accumulated other comprehensive loss
|
|
$
|
(97
|
)
|
|
$
|
(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 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
|
|
|
|
|
Year Ended December 31
|
||||||||
$ in millions, except per share amounts
|
2018
|
|
2017
|
||||||
Sales
|
$
|
32,319
|
|
|
$
|
30,634
|
|
||
Net earnings
|
3,417
|
|
|
2,938
|
|
||||
Diluted earnings per share
|
19.57
|
|
|
16.73
|
|
1.
|
The impact of the adoption of ASC Topic 606 on Orbital ATK’s historical sales of $21 million and cost of sales of $21 million, for the year ended December 31, 2017.
|
2.
|
The elimination of intercompany sales and costs of sales between the company and Orbital ATK of $80 million and $155 million for the years ended December 31, 2018 and 2017, respectively.
|
3.
|
The elimination of nonrecurring transaction costs incurred by the company and Orbital ATK in connection with the Merger of $71 million and $57 million for the years ended December 31, 2018 and 2017, respectively.
|
4.
|
The recognition of additional depreciation expense, net of removal of historical depreciation expense, of $8 million and $40 million for the years ended December 31, 2018 and 2017, respectively, related to the step-up in fair value of acquired property, plant and equipment.
|
5.
|
Additional interest expense related to the debt issued to finance the Merger, including amortization of the debt issuance costs associated with the newly issued debt, of $208 million for the year ended December 31, 2017. Interest expense and amortization of debt issuance costs have been included in the company's historical financial statements since the date of issuance (October 12, 2017).
|
6.
|
The recognition of additional amortization expense, net of removal of historical amortization expense, of $90 million and $290 million for the years ended December 31, 2018 and 2017, respectively, related to the fair value of acquired intangible assets.
|
7.
|
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 and $110 million for the years ended December 31, 2018 and 2017, respectively.
|
8.
|
The income tax effect on the pro forma adjustments, which was calculated using the federal statutory tax rate in effect in each respective period, of $(5) million and $130 million for the years ended December 31, 2018 and 2017, respectively.
|
Repurchase Program
Authorization Date |
|
Amount
Authorized (in millions) |
|
Total
Shares Retired (in millions) |
|
Average
Price Per Share(1) |
|
Date Completed
|
|
Shares Repurchased
(in millions) |
||||||||||||
|
||||||||||||||||||||||
Year Ended December 31
|
||||||||||||||||||||||
2019
|
|
2018
|
|
2017
|
||||||||||||||||||
September 16, 2015
|
|
$
|
4,000
|
|
|
14.5
|
|
|
$
|
255.04
|
|
|
|
|
3.2
|
|
|
3.8
|
|
|
1.6
|
|
December 4, 2018
|
|
$
|
3,000
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
3.8
|
|
|
1.6
|
|
(1)
|
Includes commissions paid.
|
|
|
December 31
|
||||||
$ in millions
|
|
2019
|
|
2018
|
||||
Due from U.S. government (1)
|
|
$
|
1,030
|
|
|
$
|
1,164
|
|
Due from international and other customers
|
|
329
|
|
|
318
|
|
||
Accounts receivable, gross
|
|
1,359
|
|
|
1,482
|
|
||
Allowance for doubtful accounts
|
|
(33
|
)
|
|
(34
|
)
|
||
Accounts receivable, net
|
|
$
|
1,326
|
|
|
$
|
1,448
|
|
(1)
|
Includes receivables due from the U.S. government associated with foreign military sales (FMS). For FMS, we contract with and are paid by the U.S. government.
|
|
|
December 31
|
||||||
$ in millions
|
|
2019
|
|
2018
|
||||
Due from U.S. government (1)
|
|
|
|
|
||||
Unbilled receivables
|
|
$
|
17,347
|
|
|
$
|
16,823
|
|
Progress and performance-based payments received
|
|
(12,838
|
)
|
|
(12,539
|
)
|
||
Total due from U.S. government
|
|
4,509
|
|
|
4,284
|
|
||
Due from international and other customers
|
|
|
|
|
||||
Unbilled receivables
|
|
4,063
|
|
|
3,811
|
|
||
Progress and performance-based payments received
|
|
(3,193
|
)
|
|
(3,030
|
)
|
||
Total due from international and other customers
|
|
870
|
|
|
781
|
|
||
Unbilled receivables, net of progress and performance-based payments received
|
|
5,379
|
|
|
5,065
|
|
||
Allowance for doubtful accounts
|
|
(45
|
)
|
|
(39
|
)
|
||
Unbilled receivables, net
|
|
$
|
5,334
|
|
|
$
|
5,026
|
|
(1)
|
Includes unbilled receivables due from the U.S. government associated with FMS sales. For FMS, we contract with and are paid by the U.S. government.
|
|
|
December 31
|
||||||
$ in millions
|
|
2019
|
|
2018
|
||||
Production costs of contracts in process
|
|
$
|
476
|
|
|
$
|
402
|
|
G&A expenses
|
|
31
|
|
|
16
|
|
||
|
|
507
|
|
|
418
|
|
||
Progress and performance-based payments received
|
|
(41
|
)
|
|
(41
|
)
|
||
|
|
466
|
|
|
377
|
|
||
Product inventory and raw material
|
|
317
|
|
|
277
|
|
||
Inventoried costs, net
|
|
$
|
783
|
|
|
$
|
654
|
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
||||||
Federal income tax expense:
|
|
|
|
|
|
|
||||||
Current
|
|
$
|
758
|
|
|
$
|
292
|
|
|
$
|
449
|
|
Deferred
|
|
(474
|
)
|
|
213
|
|
|
907
|
|
|||
Total federal income tax expense
|
|
284
|
|
|
505
|
|
|
1,356
|
|
|||
Foreign income tax expense:
|
|
|
|
|
|
|
||||||
Current
|
|
10
|
|
|
7
|
|
|
8
|
|
|||
Deferred
|
|
6
|
|
|
1
|
|
|
(4
|
)
|
|||
Total foreign income tax expense
|
|
16
|
|
|
8
|
|
|
4
|
|
|||
Total federal and foreign income tax expense
|
|
$
|
300
|
|
|
$
|
513
|
|
|
$
|
1,360
|
|
|
|
Year Ended December 31
|
|||||||||||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
|||||||||||||||
Income tax expense at statutory rate
|
|
$
|
535
|
|
|
21.0
|
%
|
|
$
|
786
|
|
|
21.0
|
%
|
|
$
|
1,480
|
|
|
35.0
|
%
|
Stock compensation - excess tax benefits
|
|
(14
|
)
|
|
(0.5
|
)
|
|
(27
|
)
|
|
(0.7
|
)
|
|
(48
|
)
|
|
(1.1
|
)
|
|||
Research credit
|
|
(216
|
)
|
|
(8.5
|
)
|
|
(186
|
)
|
|
(5.0
|
)
|
|
(130
|
)
|
|
(3.1
|
)
|
|||
Foreign derived intangible income
|
|
(28
|
)
|
|
(1.1
|
)
|
|
(16
|
)
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|||
Manufacturing deduction
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(97
|
)
|
|
(2.3
|
)
|
|||
Settlements with taxing authorities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42
|
)
|
|
(1.0
|
)
|
|||
Impacts related to the 2017 Tax Act
|
|
—
|
|
|
—
|
|
|
(84
|
)
|
|
(2.2
|
)
|
|
285
|
|
|
6.8
|
|
|||
MTM benefit tax rate differential(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(72
|
)
|
|
(1.7
|
)
|
|||
Other, net
|
|
23
|
|
|
0.9
|
|
|
40
|
|
|
1.0
|
|
|
(16
|
)
|
|
(0.4
|
)
|
|||
Total federal and foreign income taxes
|
|
$
|
300
|
|
|
11.8
|
%
|
|
$
|
513
|
|
|
13.7
|
%
|
|
$
|
1,360
|
|
|
32.2
|
%
|
(1)
|
Impact of applying the 2017 Tax Act enacted statutory tax rate of 21 percent versus 35 percent.
|
|
|
December 31
|
||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
||||||
Unrecognized tax benefits at beginning of the year
|
|
$
|
748
|
|
|
$
|
283
|
|
|
$
|
135
|
|
Additions based on tax positions related to the current year
|
|
158
|
|
|
293
|
|
|
102
|
|
|||
Additions for tax positions of prior years
|
|
400
|
|
|
207
|
|
|
110
|
|
|||
Reductions for tax positions of prior years
|
|
(65
|
)
|
|
(23
|
)
|
|
(44
|
)
|
|||
Settlements with taxing authorities
|
|
(15
|
)
|
|
(7
|
)
|
|
(20
|
)
|
|||
Other, net
|
|
(3
|
)
|
|
(5
|
)
|
|
—
|
|
|||
Net change in unrecognized tax benefits
|
|
475
|
|
|
465
|
|
|
148
|
|
|||
Unrecognized tax benefits at end of the year
|
|
$
|
1,223
|
|
|
$
|
748
|
|
|
$
|
283
|
|
|
|
December 31
|
||||||
$ in millions
|
|
2019
|
|
2018
|
||||
Deferred Tax Assets
|
|
|
|
|
||||
Retiree benefits
|
|
$
|
1,827
|
|
|
$
|
1,541
|
|
Accrued employee compensation
|
|
336
|
|
|
308
|
|
||
Provisions for accrued liabilities
|
|
166
|
|
|
139
|
|
||
Inventory
|
|
684
|
|
|
650
|
|
||
Stock-based compensation
|
|
38
|
|
|
42
|
|
||
Operating lease liabilities
|
|
411
|
|
|
—
|
|
||
Tax credits
|
|
166
|
|
|
174
|
|
||
Other
|
|
73
|
|
|
59
|
|
||
Gross deferred tax assets
|
|
3,701
|
|
|
2,913
|
|
||
Less valuation allowance
|
|
(160
|
)
|
|
(142
|
)
|
||
Net deferred tax assets
|
|
3,541
|
|
|
2,771
|
|
||
Deferred Tax Liabilities
|
|
|
|
|
||||
Goodwill
|
|
515
|
|
|
511
|
|
||
Purchased intangibles
|
|
262
|
|
|
346
|
|
||
Property, plant and equipment, net
|
|
584
|
|
|
518
|
|
||
Operating lease right-of-use assets
|
|
404
|
|
|
—
|
|
||
Contract accounting differences
|
|
1,225
|
|
|
1,381
|
|
||
Other
|
|
43
|
|
|
29
|
|
||
Deferred tax liabilities
|
|
3,033
|
|
|
2,785
|
|
||
Total net deferred tax assets (liabilities)
|
|
$
|
508
|
|
|
$
|
(14
|
)
|
$ in millions
|
|
Aerospace Systems
|
|
Innovation Systems
|
|
Mission Systems
|
|
Technology Services
|
|
Total
|
||||||||||
Balance as of December 31, 2017
|
|
$
|
3,742
|
|
|
$
|
—
|
|
|
$
|
6,696
|
|
|
$
|
2,017
|
|
|
$
|
12,455
|
|
Acquisition of Orbital ATK
|
|
418
|
|
|
5,256
|
|
|
469
|
|
|
79
|
|
|
6,222
|
|
|||||
Other(1)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|||||
Balance as of December 31, 2018
|
|
$
|
4,160
|
|
|
$
|
5,256
|
|
|
$
|
7,163
|
|
|
$
|
2,093
|
|
|
$
|
18,672
|
|
Acquisition of Orbital ATK
|
|
—
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|||||
Other(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||
Balance as of December 31, 2019
|
|
$
|
4,160
|
|
|
$
|
5,293
|
|
|
$
|
7,163
|
|
|
$
|
2,092
|
|
|
$
|
18,708
|
|
(1)
|
Other consists primarily of adjustments for foreign currency translation.
|
|
|
December 31
|
||||||
$ in millions
|
|
2019
|
|
2018
|
||||
Gross customer-related and other intangible assets
|
|
$
|
3,356
|
|
|
$
|
3,356
|
|
Less accumulated amortization
|
|
(2,316
|
)
|
|
(1,984
|
)
|
||
Net customer-related and other intangible assets
|
|
$
|
1,040
|
|
|
$
|
1,372
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
$ in millions
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||||||||
Financial Assets (Liabilities)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketable securities
|
|
$
|
364
|
|
|
$
|
1
|
|
|
$
|
365
|
|
|
$
|
319
|
|
|
$
|
1
|
|
|
$
|
320
|
|
Marketable securities valued using NAV
|
|
|
|
|
|
17
|
|
|
|
|
|
|
15
|
|
||||||||||
Total marketable securities
|
|
364
|
|
|
1
|
|
|
382
|
|
|
319
|
|
|
1
|
|
|
335
|
|
||||||
Derivatives
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
$ in millions
|
|
|
|
December 31
|
||||||
2019
|
|
2018
|
||||||||
Fixed-rate notes and debentures, maturing in
|
|
Interest rate
|
|
|
|
|
||||
2019
|
|
5.05%
|
|
$
|
—
|
|
|
$
|
500
|
|
2020
|
|
2.08%
|
|
1,000
|
|
|
1,000
|
|
||
2021
|
|
3.50%
|
|
700
|
|
|
700
|
|
||
2022
|
|
2.55%
|
|
1,500
|
|
|
1,500
|
|
||
2023
|
|
3.25%
|
|
1,050
|
|
|
1,050
|
|
||
2025
|
|
2.93%
|
|
1,500
|
|
|
1,500
|
|
||
2026
|
|
7.75% - 7.88%
|
|
527
|
|
|
527
|
|
||
2027
|
|
3.20%
|
|
750
|
|
|
750
|
|
||
2028
|
|
3.25%
|
|
2,000
|
|
|
2,000
|
|
||
2031
|
|
7.75%
|
|
466
|
|
|
466
|
|
||
2040
|
|
5.05%
|
|
300
|
|
|
300
|
|
||
2043
|
|
4.75%
|
|
950
|
|
|
950
|
|
||
2045
|
|
3.85%
|
|
600
|
|
|
600
|
|
||
2047
|
|
4.03%
|
|
2,250
|
|
|
2,250
|
|
||
Credit facilities
|
|
1.89%
|
|
78
|
|
|
108
|
|
||
Other
|
|
Various
|
|
272
|
|
|
272
|
|
||
Debt issuance costs
|
|
|
|
(64
|
)
|
|
(73
|
)
|
||
Total long-term debt
|
|
|
|
13,879
|
|
|
14,400
|
|
||
Less: current portion(1)
|
|
|
|
1,109
|
|
|
517
|
|
||
Long-term debt, net of current portion
|
|
|
|
$
|
12,770
|
|
|
$
|
13,883
|
|
$ in millions
|
|
|
|
Year Ending December 31
|
|
||
2020
|
$
|
1,110
|
|
2021
|
742
|
|
|
2022
|
1,505
|
|
|
2023
|
1,053
|
|
|
2024
|
3
|
|
|
Thereafter
|
9,532
|
|
|
Total principal payments
|
13,945
|
|
|
Unamortized premium on long-term debt, net of discount
|
(2
|
)
|
|
Debt issuance costs
|
(64
|
)
|
|
Total long-term debt
|
$
|
13,879
|
|
$ in millions
|
|
Accrued Costs(1)(2)
|
|
Reasonably Possible Future Costs in excess of Accrued Costs(2)
|
|
Deferred Costs(3)
|
||||||
December 31, 2019
|
|
$
|
531
|
|
|
$
|
448
|
|
|
$
|
436
|
|
December 31, 2018
|
|
461
|
|
|
374
|
|
|
343
|
|
(1)
|
As of December 31, 2019, $148 million is recorded in Other current liabilities and $383 million is recorded in Other non-current liabilities.
|
(2)
|
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.
|
(3)
|
As of December 31, 2019, $119 million is deferred in Prepaid expenses and other current assets and $317 million is deferred in Other non-current assets. These amounts are evaluated for recoverability on a routine basis.
|
|
|
Year Ended December 31
|
||||||||||||||||||||||
|
|
Pension Benefits
|
|
Medical and Life Benefits
|
||||||||||||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||
Components of net periodic benefit cost (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
|
$
|
367
|
|
|
$
|
404
|
|
|
$
|
388
|
|
|
$
|
16
|
|
|
$
|
21
|
|
|
$
|
20
|
|
Interest cost
|
|
1,360
|
|
|
1,226
|
|
|
1,250
|
|
|
80
|
|
|
76
|
|
|
85
|
|
||||||
Expected return on plan assets
|
|
(2,101
|
)
|
|
(2,217
|
)
|
|
(1,885
|
)
|
|
(92
|
)
|
|
(101
|
)
|
|
(89
|
)
|
||||||
Amortization of prior service credit
|
|
(59
|
)
|
|
(58
|
)
|
|
(57
|
)
|
|
(3
|
)
|
|
(21
|
)
|
|
(22
|
)
|
||||||
Mark-to-market expense (benefit)
|
|
1,783
|
|
|
699
|
|
|
(445
|
)
|
|
17
|
|
|
(44
|
)
|
|
(91
|
)
|
||||||
Other
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit cost (benefit)
|
|
$
|
1,350
|
|
|
$
|
54
|
|
|
$
|
(756
|
)
|
|
$
|
18
|
|
|
$
|
(69
|
)
|
|
$
|
(97
|
)
|
$ in millions
|
|
Pension Benefits
|
|
Medical and Life Benefits
|
|
Total
|
||||||
Changes in unamortized prior service credit
|
|
|
|
|
|
|
||||||
Amortization of prior service credit
|
|
$
|
57
|
|
|
$
|
22
|
|
|
$
|
79
|
|
Tax expense
|
|
(26
|
)
|
|
(9
|
)
|
|
(35
|
)
|
|||
Change in unamortized prior service credit – 2017
|
|
31
|
|
|
13
|
|
|
44
|
|
|||
Amortization of prior service credit
|
|
58
|
|
|
21
|
|
|
79
|
|
|||
Tax expense
|
|
(14
|
)
|
|
(5
|
)
|
|
(19
|
)
|
|||
Change in unamortized prior service credit – 2018
|
|
44
|
|
|
16
|
|
|
60
|
|
|||
Amortization of prior service credit
|
|
59
|
|
|
3
|
|
|
62
|
|
|||
Tax expense
|
|
(14
|
)
|
|
(1
|
)
|
|
(15
|
)
|
|||
Change in unamortized prior service credit – 2019
|
|
$
|
45
|
|
|
$
|
2
|
|
|
$
|
47
|
|
|
|
Pension Benefits
|
|
Medical and Life Benefits
|
||||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Plan Assets
|
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at beginning of year
|
|
$
|
27,150
|
|
|
$
|
27,226
|
|
|
$
|
1,247
|
|
|
$
|
1,338
|
|
Net gain (loss) on plan assets
|
|
5,025
|
|
|
(1,043
|
)
|
|
234
|
|
|
(65
|
)
|
||||
Employer contributions
|
|
221
|
|
|
370
|
|
|
42
|
|
|
38
|
|
||||
Participant contributions
|
|
8
|
|
|
9
|
|
|
24
|
|
|
25
|
|
||||
Benefits paid
|
|
(1,763
|
)
|
|
(1,685
|
)
|
|
(156
|
)
|
|
(148
|
)
|
||||
Acquired plan assets
|
|
—
|
|
|
2,293
|
|
|
—
|
|
|
58
|
|
||||
Other
|
|
5
|
|
|
(20
|
)
|
|
1
|
|
|
1
|
|
||||
Fair value of plan assets at end of year
|
|
30,646
|
|
|
27,150
|
|
|
1,392
|
|
|
1,247
|
|
||||
Projected Benefit Obligation
|
|
|
|
|
|
|
|
|
||||||||
Projected benefit obligation at beginning of year
|
|
32,231
|
|
|
31,967
|
|
|
1,930
|
|
|
2,110
|
|
||||
Service cost
|
|
367
|
|
|
404
|
|
|
16
|
|
|
21
|
|
||||
Interest cost
|
|
1,360
|
|
|
1,226
|
|
|
80
|
|
|
76
|
|
||||
Participant contributions
|
|
8
|
|
|
9
|
|
|
24
|
|
|
25
|
|
||||
Actuarial loss (gain)
|
|
4,708
|
|
|
(2,561
|
)
|
|
159
|
|
|
(211
|
)
|
||||
Benefits paid
|
|
(1,763
|
)
|
|
(1,685
|
)
|
|
(156
|
)
|
|
(148
|
)
|
||||
Acquired benefit obligation
|
|
—
|
|
|
2,895
|
|
|
—
|
|
|
50
|
|
||||
Other
|
|
3
|
|
|
(24
|
)
|
|
(5
|
)
|
|
7
|
|
||||
Projected benefit obligation at end of year
|
|
36,914
|
|
|
32,231
|
|
|
2,048
|
|
|
1,930
|
|
||||
Funded status
|
|
$
|
(6,268
|
)
|
|
$
|
(5,081
|
)
|
|
$
|
(656
|
)
|
|
$
|
(683
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Classification of amounts recognized in the consolidated statements of financial position
|
|
|
|
|
|
|
|
|
||||||||
Non-current assets
|
|
$
|
124
|
|
|
$
|
77
|
|
|
$
|
151
|
|
|
$
|
124
|
|
Current liability
|
|
(173
|
)
|
|
(164
|
)
|
|
(47
|
)
|
|
(46
|
)
|
||||
Non-current liability
|
|
(6,219
|
)
|
|
(4,994
|
)
|
|
(760
|
)
|
|
(761
|
)
|
|
|
December 31
|
||||||
$ in millions
|
|
2019
|
|
2018
|
||||
Projected benefit obligation
|
|
$
|
34,715
|
|
|
$
|
30,259
|
|
Accumulated benefit obligation
|
|
34,305
|
|
|
29,961
|
|
||
Fair value of plan assets
|
|
28,324
|
|
|
25,101
|
|
|
|
Pension Benefits
|
|
Medical and Life Benefits
|
||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Assumptions used to determine benefit obligation at December 31
|
|
|
|
|
|
|
|
|
||||
Discount rate
|
|
3.39
|
%
|
|
4.31
|
%
|
|
3.35
|
%
|
|
4.30
|
%
|
Initial cash balance crediting rate assumed for the next year
|
|
2.39
|
%
|
|
3.00
|
%
|
|
|
|
|
||
Rate to which the cash balance crediting rate is assumed to increase (the ultimate rate)
|
|
2.64
|
%
|
|
3.25
|
%
|
|
|
|
|
||
Year that the cash balance crediting rate reaches the ultimate rate
|
|
2025
|
|
|
2024
|
|
|
|
|
|
||
Rate of compensation increase
|
|
3.00
|
%
|
|
3.00
|
%
|
|
|
|
|
||
Initial health care cost trend rate assumed for the next year
|
|
|
|
|
|
5.90
|
%
|
|
6.20
|
%
|
||
Rate to which the health care cost trend rate is assumed to decline (the ultimate trend rate)
|
|
|
|
|
|
5.00
|
%
|
|
5.00
|
%
|
||
Year that the health care cost trend rate reaches the ultimate trend rate
|
|
|
|
|
|
2023
|
|
|
2023
|
|
||
Assumptions used to determine benefit cost for the year ended December 31
|
|
|
|
|
|
|
|
|
||||
Discount rate
|
|
4.31
|
%
|
|
3.68
|
%
|
|
4.30
|
%
|
|
3.66
|
%
|
Initial cash balance crediting rate assumed for the next year
|
|
3.00
|
%
|
|
2.75
|
%
|
|
|
|
|
||
Rate to which the cash balance crediting rate is assumed to increase (the ultimate rate)
|
|
3.25
|
%
|
|
3.00
|
%
|
|
|
|
|
||
Year that the cash balance crediting rate reaches the ultimate rate
|
|
2024
|
|
|
2023
|
|
|
|
|
|
||
Expected long-term return on plan assets
|
|
8.00
|
%
|
|
8.00
|
%
|
|
7.67
|
%
|
|
7.65
|
%
|
Rate of compensation increase
|
|
3.00
|
%
|
|
3.00
|
%
|
|
|
|
|
||
Initial health care cost trend rate assumed for the next year
|
|
|
|
|
|
6.20
|
%
|
|
6.50
|
%
|
||
Rate to which the health care cost trend rate is assumed to decline (the ultimate trend rate)
|
|
|
|
|
|
5.00
|
%
|
|
5.00
|
%
|
||
Year that the health care cost trend rate reaches the ultimate trend rate
|
|
|
|
|
|
2023
|
|
|
2023
|
|
|
|
Asset Allocation Ranges
|
|||
Cash and cash equivalents
|
|
0% - 12%
|
|||
Global public equities
|
|
30% - 50%
|
|||
Fixed-income securities
|
|
20% - 40%
|
|||
Alternative investments
|
|
18% - 38%
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
Asset category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash and cash equivalents
|
|
$
|
233
|
|
|
$
|
209
|
|
|
$
|
2,572
|
|
|
$
|
2,655
|
|
|
|
|
|
|
$
|
2,805
|
|
|
$
|
2,864
|
|
||||
U.S. equities
|
|
3,341
|
|
|
2,859
|
|
|
|
|
|
|
|
|
|
|
3,341
|
|
|
2,859
|
|
||||||||||||
International equities
|
|
3,271
|
|
|
2,711
|
|
|
|
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
3,273
|
|
|
2,712
|
|
||||||||
Fixed-income securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. Treasuries
|
|
20
|
|
|
26
|
|
|
2,716
|
|
|
1,501
|
|
|
|
|
|
|
2,736
|
|
|
1,527
|
|
||||||||||
U.S. Government Agency
|
|
|
|
|
|
297
|
|
|
322
|
|
|
|
|
|
|
297
|
|
|
322
|
|
||||||||||||
Non-U.S. Government
|
|
|
|
|
|
194
|
|
|
206
|
|
|
|
|
|
|
194
|
|
|
206
|
|
||||||||||||
Corporate debt
|
|
28
|
|
|
34
|
|
|
4,513
|
|
|
4,141
|
|
|
|
|
|
|
4,541
|
|
|
4,175
|
|
||||||||||
Asset backed
|
|
|
|
|
|
892
|
|
|
297
|
|
|
|
|
|
|
892
|
|
|
297
|
|
||||||||||||
High yield debt
|
|
30
|
|
|
11
|
|
|
104
|
|
|
153
|
|
|
|
|
|
|
134
|
|
|
164
|
|
||||||||||
Bank loans
|
|
|
|
|
|
33
|
|
|
20
|
|
|
|
|
|
|
33
|
|
|
20
|
|
||||||||||||
Other assets
|
|
(9
|
)
|
|
15
|
|
|
59
|
|
|
51
|
|
|
2
|
|
|
2
|
|
|
52
|
|
|
68
|
|
||||||||
Investments valued using NAV as a practical expedient
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. equities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,131
|
|
|
1,170
|
|
||||||||||||||
International equities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,636
|
|
|
4,017
|
|
||||||||||||||
Fixed-income funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438
|
|
|
1,386
|
|
||||||||||||||
Hedge funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246
|
|
|
351
|
|
||||||||||||||
Opportunistic investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,459
|
|
|
1,367
|
|
||||||||||||||
Private equity funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,454
|
|
|
2,510
|
|
||||||||||||||
Real estate funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,376
|
|
|
2,382
|
|
||||||||||||||
Fair value of plan assets at the end of the year
|
|
$
|
6,914
|
|
|
$
|
5,865
|
|
|
$
|
11,380
|
|
|
$
|
9,346
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
32,038
|
|
|
$
|
28,397
|
|
|
|
Stock
Awards (in thousands) |
|
Weighted-
Average Grant Date Fair Value Per Share |
|
Weighted-
Average Remaining Contractual Term (in years) |
|||
Outstanding at January 1, 2017
|
|
1,148
|
|
|
$
|
167
|
|
|
1.3
|
Granted
|
|
397
|
|
|
233
|
|
|
|
|
Vested
|
|
(521
|
)
|
|
152
|
|
|
|
|
Forfeited
|
|
(86
|
)
|
|
198
|
|
|
|
|
Outstanding at December 31, 2017
|
|
938
|
|
|
$
|
192
|
|
|
1.0
|
Granted
|
|
376
|
|
|
321
|
|
|
|
|
Vested
|
|
(455
|
)
|
|
181
|
|
|
|
|
Forfeited
|
|
(63
|
)
|
|
250
|
|
|
|
|
Outstanding at December 31, 2018
|
|
796
|
|
|
$
|
244
|
|
|
0.8
|
Granted
|
|
339
|
|
|
274
|
|
|
|
|
Vested
|
|
(383
|
)
|
|
222
|
|
|
|
|
Forfeited
|
|
(51
|
)
|
|
280
|
|
|
|
|
Outstanding at December 31, 2019
|
|
701
|
|
|
$
|
278
|
|
|
0.9
|
|
|
Year Ended December 31
|
||||||||
$ in millions
|
|
2019
|
2018
|
2017
|
||||||
Minimum aggregate payout amount
|
|
$
|
36
|
|
$
|
36
|
|
$
|
38
|
|
Maximum aggregate payout amount
|
|
203
|
|
205
|
|
201
|
|
$ in millions
|
|
Year Ended December 31, 2019
|
||
Operating lease cost
|
|
$
|
318
|
|
Variable lease cost
|
|
11
|
|
|
Short-term lease cost
|
|
75
|
|
|
Total lease cost
|
|
$
|
404
|
|
$ in millions
|
|
December 31, 2019
|
||
Operating lease right-of-use assets
|
|
$
|
1,511
|
|
|
|
|
||
Other current liabilities
|
|
261
|
|
|
Operating lease liabilities
|
|
1,308
|
|
|
Total operating lease liabilities
|
|
$
|
1,569
|
|
$ in millions
|
|
Year Ended December 31, 2019
|
||
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
$
|
307
|
|
Right-of-use assets obtained in exchange for new lease liabilities
|
|
462
|
|
|
|
|
|
||
Weighted average remaining lease term
|
|
11.6 years
|
|
|
Weighted average discount rate
|
|
3.8
|
%
|
$ in millions
|
|
|
||
Year Ending December 31
|
|
|
||
2020
|
|
$
|
300
|
|
2021
|
|
262
|
|
|
2022
|
|
224
|
|
|
2023
|
|
185
|
|
|
2024
|
|
146
|
|
|
Thereafter
|
|
875
|
|
|
Total lease payments
|
|
1,992
|
|
|
Less: imputed interest
|
|
(423
|
)
|
|
Present value of operating lease liabilities
|
|
$
|
1,569
|
|
$ in millions
|
|
||
Year Ending December 31
|
|
||
2019
|
$
|
312
|
|
2020
|
270
|
|
|
2021
|
221
|
|
|
2022
|
186
|
|
|
2023
|
152
|
|
|
Thereafter
|
939
|
|
|
Total minimum lease payments
|
$
|
2,080
|
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
||||||
Sales
|
|
|
|
|
|
|
||||||
Aerospace Systems
|
|
$
|
13,862
|
|
|
$
|
13,096
|
|
|
$
|
12,131
|
|
Innovation Systems
|
|
6,119
|
|
|
3,276
|
|
|
—
|
|
|||
Mission Systems
|
|
12,263
|
|
|
11,709
|
|
|
11,470
|
|
|||
Technology Services
|
|
4,110
|
|
|
4,297
|
|
|
4,687
|
|
|||
Intersegment eliminations
|
|
(2,513
|
)
|
|
(2,283
|
)
|
|
(2,284
|
)
|
|||
Total sales
|
|
33,841
|
|
|
30,095
|
|
|
26,004
|
|
|||
Operating income
|
|
|
|
|
|
|
||||||
Aerospace Systems
|
|
1,434
|
|
|
1,411
|
|
|
1,289
|
|
|||
Innovation Systems
|
|
671
|
|
|
343
|
|
|
—
|
|
|||
Mission Systems
|
|
1,639
|
|
|
1,520
|
|
|
1,442
|
|
|||
Technology Services
|
|
457
|
|
|
443
|
|
|
449
|
|
|||
Intersegment eliminations
|
|
(292
|
)
|
|
(270
|
)
|
|
(277
|
)
|
|||
Total segment operating income
|
|
3,909
|
|
|
3,447
|
|
|
2,903
|
|
|||
Net FAS (service)/CAS pension adjustment
|
|
465
|
|
|
613
|
|
|
638
|
|
|||
Unallocated corporate expense
|
|
(405
|
)
|
|
(280
|
)
|
|
(323
|
)
|
|||
Total operating income
|
|
$
|
3,969
|
|
|
$
|
3,780
|
|
|
$
|
3,218
|
|
Sales by Customer Type
|
Year Ended December 31
|
||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||||||||
$ in millions
|
$
|
%(3)
|
|
$
|
%(3)
|
|
$
|
%(3)
|
|||||||||
Aerospace Systems
|
|
|
|
|
|
|
|
|
|||||||||
U.S. government (1)
|
$
|
12,044
|
|
87
|
%
|
|
$
|
11,380
|
|
87
|
%
|
|
$
|
10,521
|
|
87
|
%
|
International (2)
|
1,508
|
|
11
|
%
|
|
1,371
|
|
10
|
%
|
|
1,160
|
|
10
|
%
|
|||
Other customers
|
106
|
|
1
|
%
|
|
148
|
|
1
|
%
|
|
155
|
|
1
|
%
|
|||
Intersegment sales
|
204
|
|
1
|
%
|
|
197
|
|
2
|
%
|
|
295
|
|
2
|
%
|
|||
Aerospace Systems sales
|
13,862
|
|
100
|
%
|
|
13,096
|
|
100
|
%
|
|
12,131
|
|
100
|
%
|
|||
Innovation Systems
|
|
|
|
|
|
|
|
|
|||||||||
U.S. government (1)
|
4,419
|
|
72
|
%
|
|
2,241
|
|
68
|
%
|
|
—
|
|
—
|
|
|||
International (2)
|
960
|
|
16
|
%
|
|
615
|
|
19
|
%
|
|
—
|
|
—
|
|
|||
Other customers
|
409
|
|
7
|
%
|
|
293
|
|
9
|
%
|
|
—
|
|
—
|
|
|||
Intersegment sales
|
331
|
|
5
|
%
|
|
127
|
|
4
|
%
|
|
—
|
|
—
|
|
|||
Innovation Systems sales
|
6,119
|
|
100
|
%
|
|
3,276
|
|
100
|
%
|
|
—
|
|
—
|
|
|||
Mission Systems
|
|
|
|
|
|
|
|
|
|||||||||
U.S. government (1)
|
9,079
|
|
74
|
%
|
|
8,803
|
|
75
|
%
|
|
8,876
|
|
77
|
%
|
|||
International (2)
|
1,840
|
|
15
|
%
|
|
1,647
|
|
14
|
%
|
|
1,540
|
|
14
|
%
|
|||
Other customers
|
117
|
|
1
|
%
|
|
114
|
|
1
|
%
|
|
100
|
|
1
|
%
|
|||
Intersegment sales
|
1,227
|
|
10
|
%
|
|
1,145
|
|
10
|
%
|
|
954
|
|
8
|
%
|
|||
Mission Systems sales
|
12,263
|
|
100
|
%
|
|
11,709
|
|
100
|
%
|
|
11,470
|
|
100
|
%
|
|||
Technology Services
|
|
|
|
|
|
|
|
|
|||||||||
U.S. government (1)
|
2,392
|
|
58
|
%
|
|
2,372
|
|
55
|
%
|
|
2,572
|
|
55
|
%
|
|||
International (2)
|
846
|
|
21
|
%
|
|
801
|
|
19
|
%
|
|
752
|
|
16
|
%
|
|||
Other customers
|
121
|
|
3
|
%
|
|
310
|
|
7
|
%
|
|
328
|
|
7
|
%
|
|||
Intersegment sales
|
751
|
|
18
|
%
|
|
814
|
|
19
|
%
|
|
1,035
|
|
22
|
%
|
|||
Technology Services sales
|
4,110
|
|
100
|
%
|
|
4,297
|
|
100
|
%
|
|
4,687
|
|
100
|
%
|
|||
Total
|
|
|
|
|
|
|
|
|
|||||||||
U.S. government (1)
|
27,934
|
|
83
|
%
|
|
24,796
|
|
82
|
%
|
|
21,969
|
|
85
|
%
|
|||
International (2)
|
5,154
|
|
15
|
%
|
|
4,434
|
|
15
|
%
|
|
3,452
|
|
13
|
%
|
|||
Other customers
|
753
|
|
2
|
%
|
|
865
|
|
3
|
%
|
|
583
|
|
2
|
%
|
|||
Total Sales
|
$
|
33,841
|
|
100
|
%
|
|
$
|
30,095
|
|
100
|
%
|
|
$
|
26,004
|
|
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
|
Year Ended December 31
|
||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||||||||
$ in millions
|
$
|
%(1)
|
|
$
|
%(1)
|
|
$
|
%(1)
|
|||||||||
Aerospace Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Cost-type
|
$
|
8,049
|
|
59
|
%
|
|
$
|
7,634
|
|
59
|
%
|
|
$
|
7,193
|
|
61
|
%
|
Fixed-price
|
5,609
|
|
41
|
%
|
|
5,265
|
|
41
|
%
|
|
4,643
|
|
39
|
%
|
|||
Intersegment sales
|
204
|
|
|
|
197
|
|
|
|
295
|
|
|
||||||
Aerospace Systems sales
|
13,862
|
|
|
|
13,096
|
|
|
|
12,131
|
|
|
||||||
Innovation Systems
|
|
|
|
|
|
|
|
|
|||||||||
Cost-type
|
1,699
|
|
29
|
%
|
|
843
|
|
27
|
%
|
|
—
|
|
—
|
|
|||
Fixed-price
|
4,089
|
|
71
|
%
|
|
2,306
|
|
73
|
%
|
|
—
|
|
—
|
|
|||
Intersegment sales
|
331
|
|
|
|
127
|
|
|
|
—
|
|
|
||||||
Innovation Systems sales
|
6,119
|
|
|
|
3,276
|
|
|
|
—
|
|
|
||||||
Mission Systems
|
|
|
|
|
|
|
|
|
|||||||||
Cost-type
|
5,164
|
|
47
|
%
|
|
4,939
|
|
47
|
%
|
|
5,311
|
|
51
|
%
|
|||
Fixed-price
|
5,872
|
|
53
|
%
|
|
5,625
|
|
53
|
%
|
|
5,205
|
|
49
|
%
|
|||
Intersegment sales
|
1,227
|
|
|
|
1,145
|
|
|
|
954
|
|
|
||||||
Mission Systems sales
|
12,263
|
|
|
|
11,709
|
|
|
|
11,470
|
|
|
||||||
Technology Services
|
|
|
|
|
|
|
|
|
|||||||||
Cost-type
|
1,567
|
|
47
|
%
|
|
1,588
|
|
46
|
%
|
|
1,693
|
|
46
|
%
|
|||
Fixed-price
|
1,792
|
|
53
|
%
|
|
1,895
|
|
54
|
%
|
|
1,959
|
|
54
|
%
|
|||
Intersegment sales
|
751
|
|
|
|
814
|
|
|
|
1,035
|
|
|
||||||
Technology Services sales
|
4,110
|
|
|
|
4,297
|
|
|
|
4,687
|
|
|
||||||
Total
|
|
|
|
|
|
|
|
|
|||||||||
Cost-type
|
16,479
|
|
49
|
%
|
|
15,004
|
|
50
|
%
|
|
14,197
|
|
55
|
%
|
|||
Fixed-price
|
17,362
|
|
51
|
%
|
|
15,091
|
|
50
|
%
|
|
11,807
|
|
45
|
%
|
|||
Total Sales
|
$
|
33,841
|
|
|
|
$
|
30,095
|
|
|
|
$
|
26,004
|
|
|
(1)
|
Percentages calculated based on external customer sales.
|
Sales by Geographic Region
|
Year Ended December 31
|
||||||||||||||||
|
2019
|
2018
|
|
2017
|
|||||||||||||
$ in millions
|
$
|
%(2)
|
|
$
|
%(2)
|
|
$
|
%(2)
|
|||||||||
Aerospace Systems
|
|
|
|
|
|
|
|
|
|||||||||
United States
|
$
|
12,150
|
|
89
|
%
|
|
$
|
11,528
|
|
89
|
%
|
|
$
|
10,676
|
|
90
|
%
|
Asia/Pacific
|
822
|
|
6
|
%
|
|
705
|
|
6
|
%
|
|
649
|
|
6
|
%
|
|||
All other (1)
|
686
|
|
5
|
%
|
|
666
|
|
5
|
%
|
|
511
|
|
4
|
%
|
|||
Intersegment sales
|
204
|
|
|
|
197
|
|
|
|
295
|
|
|
||||||
Aerospace Systems sales
|
13,862
|
|
|
|
13,096
|
|
|
|
12,131
|
|
|
||||||
Innovation Systems
|
|
|
|
|
|
|
|
|
|||||||||
United States
|
4,828
|
|
83
|
%
|
|
2,534
|
|
80
|
%
|
|
—
|
|
—
|
|
|||
Asia/Pacific
|
156
|
|
3
|
%
|
|
151
|
|
5
|
%
|
|
—
|
|
—
|
|
|||
All other (1)
|
804
|
|
14
|
%
|
|
464
|
|
15
|
%
|
|
—
|
|
—
|
|
|||
Intersegment sales
|
331
|
|
|
|
127
|
|
|
|
—
|
|
|
||||||
Innovation Systems sales
|
6,119
|
|
|
|
3,276
|
|
|
|
—
|
|
|
||||||
Mission Systems
|
|
|
|
|
|
|
|
|
|||||||||
United States
|
9,196
|
|
83
|
%
|
|
8,917
|
|
85
|
%
|
|
8,976
|
|
86
|
%
|
|||
Asia/Pacific
|
676
|
|
6
|
%
|
|
659
|
|
6
|
%
|
|
671
|
|
6
|
%
|
|||
All other (1)
|
1,164
|
|
11
|
%
|
|
988
|
|
9
|
%
|
|
869
|
|
8
|
%
|
|||
Intersegment sales
|
1,227
|
|
|
|
1,145
|
|
|
|
954
|
|
|
||||||
Mission Systems sales
|
12,263
|
|
|
|
11,709
|
|
|
|
11,470
|
|
|
||||||
Technology Services
|
|
|
|
|
|
|
|
|
|||||||||
United States
|
2,513
|
|
75
|
%
|
|
2,682
|
|
77
|
%
|
|
2,900
|
|
79
|
%
|
|||
Asia/Pacific
|
182
|
|
5
|
%
|
|
151
|
|
4
|
%
|
|
141
|
|
4
|
%
|
|||
All other (1)
|
664
|
|
20
|
%
|
|
650
|
|
19
|
%
|
|
611
|
|
17
|
%
|
|||
Intersegment sales
|
751
|
|
|
|
814
|
|
|
|
1,035
|
|
|
||||||
Technology Services sales
|
4,110
|
|
|
|
4,297
|
|
|
|
4,687
|
|
|
||||||
Total
|
|
|
|
|
|
|
|
|
|||||||||
United States
|
28,687
|
|
85
|
%
|
|
25,661
|
|
85
|
%
|
|
22,552
|
|
87
|
%
|
|||
Asia/Pacific
|
1,836
|
|
5
|
%
|
|
1,666
|
|
6
|
%
|
|
1,461
|
|
5
|
%
|
|||
All other (1)
|
3,318
|
|
10
|
%
|
|
2,768
|
|
9
|
%
|
|
1,991
|
|
8
|
%
|
|||
Total Sales
|
$
|
33,841
|
|
|
|
$
|
30,095
|
|
|
|
$
|
26,004
|
|
|
(1)
|
All other is principally comprised of Europe and the Middle East.
|
(2)
|
Percentages calculated based on external customer sales.
|
|
|
Year Ended December 31
|
||||||||||||||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||||||||
|
|
Sales
|
Operating
Income
|
|
Sales
|
Operating
Income
|
|
Sales
|
Operating
Income
|
|||||||||||||||
Intersegment sales and operating income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Aerospace Systems
|
|
$
|
204
|
|
|
$
|
23
|
|
|
$
|
197
|
|
|
$
|
23
|
|
|
$
|
295
|
|
|
$
|
33
|
|
Innovation Systems
|
|
331
|
|
|
14
|
|
|
127
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||||
Mission Systems
|
|
1,227
|
|
|
177
|
|
|
1,145
|
|
|
165
|
|
|
954
|
|
|
141
|
|
||||||
Technology Services
|
|
751
|
|
|
78
|
|
|
814
|
|
|
81
|
|
|
1,035
|
|
|
103
|
|
||||||
Total
|
|
$
|
2,513
|
|
|
$
|
292
|
|
|
$
|
2,283
|
|
|
$
|
270
|
|
|
$
|
2,284
|
|
|
$
|
277
|
|
|
|
December 31
|
||||||
$ in millions
|
|
2019
|
|
2018
|
||||
Assets
|
|
|
|
|
||||
Aerospace Systems
|
|
$
|
10,772
|
|
|
$
|
9,750
|
|
Innovation Systems
|
|
11,551
|
|
|
10,368
|
|
||
Mission Systems
|
|
11,641
|
|
|
11,047
|
|
||
Technology Services
|
|
3,089
|
|
|
2,957
|
|
||
Corporate assets(1)
|
|
4,036
|
|
|
3,531
|
|
||
Total assets
|
|
$
|
41,089
|
|
|
$
|
37,653
|
|
(1)
|
Corporate assets principally consist of cash and cash equivalents, refundable taxes, deferred tax assets, property, plant and equipment and marketable securities.
|
|
|
Year Ended December 31
|
||||||||||||||||||||||
$ in millions
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||
|
|
Capital Expenditures
|
|
Depreciation and Amortization(1)
|
||||||||||||||||||||
Aerospace Systems
|
|
$
|
650
|
|
|
$
|
781
|
|
|
$
|
665
|
|
|
$
|
262
|
|
|
$
|
243
|
|
|
$
|
234
|
|
Innovation Systems
|
|
271
|
|
|
141
|
|
|
—
|
|
|
173
|
|
|
84
|
|
|
—
|
|
||||||
Mission Systems
|
|
244
|
|
|
206
|
|
|
164
|
|
|
146
|
|
|
134
|
|
|
131
|
|
||||||
Technology Services
|
|
15
|
|
|
18
|
|
|
15
|
|
|
9
|
|
|
45
|
|
|
40
|
|
||||||
Corporate
|
|
84
|
|
|
103
|
|
|
84
|
|
|
428
|
|
|
294
|
|
|
70
|
|
||||||
Total
|
|
$
|
1,264
|
|
|
$
|
1,249
|
|
|
$
|
928
|
|
|
$
|
1,018
|
|
|
$
|
800
|
|
|
$
|
475
|
|
(1)
|
Beginning in 2018, corporate amounts include the amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of property, plant and equipment acquired through business combinations as they are not considered part of management’s evaluation of segment operating performance.
|
2019
|
|
|
||||||||||||||
In millions, except per share amounts
|
|
1st Qtr
|
|
2nd Qtr
|
|
3rd Qtr
|
|
4th Qtr
|
||||||||
Sales
|
|
$
|
8,189
|
|
|
$
|
8,456
|
|
|
$
|
8,475
|
|
|
$
|
8,721
|
|
Operating income
|
|
936
|
|
|
946
|
|
|
951
|
|
|
1,136
|
|
||||
Net earnings (loss)
|
|
863
|
|
|
861
|
|
|
933
|
|
|
(409
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per share
|
|
5.08
|
|
|
5.07
|
|
|
5.52
|
|
|
(2.43
|
)
|
||||
Diluted earnings (loss) per share(1)
|
|
5.06
|
|
|
5.06
|
|
|
5.49
|
|
|
(2.43
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
|
170.0
|
|
|
169.7
|
|
|
169.1
|
|
|
168.4
|
|
||||
Weighted-average diluted shares outstanding(1)
|
|
170.7
|
|
|
170.3
|
|
|
169.9
|
|
|
168.4
|
|
2018
|
|
|
||||||||||||||
In millions, except per share amounts
|
|
1st Qtr
|
|
2nd Qtr
|
|
3rd Qtr
|
|
4th Qtr
|
||||||||
Sales
|
|
$
|
6,735
|
|
|
$
|
7,119
|
|
|
$
|
8,085
|
|
|
$
|
8,156
|
|
Operating income
|
|
848
|
|
|
817
|
|
|
1,172
|
|
|
943
|
|
||||
Net earnings
|
|
840
|
|
|
789
|
|
|
1,244
|
|
|
356
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share
|
|
4.82
|
|
|
4.52
|
|
|
7.15
|
|
|
2.07
|
|
||||
Diluted earnings per share
|
|
4.79
|
|
|
4.50
|
|
|
7.11
|
|
|
2.06
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
|
174.3
|
|
|
174.5
|
|
|
174.1
|
|
|
171.8
|
|
||||
Weighted-average diluted shares outstanding
|
|
175.4
|
|
|
175.4
|
|
|
174.9
|
|
|
172.6
|
|
(1)
|
Fourth quarter 2019 excludes the dilutive effect of awards granted to employees under stock-based compensation plans as such awards would be antidilutive.
|
Name
|
|
Age
|
|
Office Held
|
|
Since
|
|
Recent Business Experience
|
|
Kathy J. Warden
|
|
48
|
|
|
Chairman, Chief Executive Officer and President
|
|
2019
|
|
Chief Executive Officer and President (2019); President and Chief Operating Officer (2018); Corporate Vice President and President, Mission Systems Sector (2016-2017); Corporate Vice President and President, Former Information Systems Sector (2013-2015)
|
Ann M. Addison
|
|
58
|
|
|
Corporate Vice President and Chief Human Resources Officer
|
|
2019
|
|
Corporate Vice President (2018); Executive Vice President and Chief Human Resources Officer, Leidos (2016-2018); Vice President, Human Resources, Lockheed Martin (2010-2016)
|
Kenneth L. Bedingfield
|
|
47
|
|
|
Corporate Vice President and Chief Financial Officer
|
|
2015
|
|
Vice President, Finance (2014-2015)
|
Mark A. Caylor
|
|
55
|
|
|
Corporate Vice President and President, Mission Systems Sector
|
|
2018
|
|
Corporate Vice President and President, Enterprise Services and Chief Strategy Officer (2014-2017)
|
Sheila C. Cheston
|
|
61
|
|
|
Corporate Vice President and General Counsel
|
|
2010
|
|
|
Michael A. Hardesty
|
|
48
|
|
|
Corporate Vice President, Controller, and Chief Accounting Officer
|
|
2013
|
|
|
Lesley A. Kalan
|
|
46
|
|
|
Corporate Vice President and Chief Strategy and Development Officer
|
|
2020
|
|
Corporate Vice President, Government Relations (2018-2019); Vice President, Legislative Affairs (2010-2017)
|
Blake E. Larson
|
|
60
|
|
|
Corporate Vice President and President, Space Systems Sector
|
|
2020
|
|
Corporate Vice President and President, Former Innovation Systems Sector (2018-2020); Chief Operating Officer, Orbital ATK, Inc. (2015-2018); Senior Vice President and President, Aerospace Group, Alliant Techsystems, Inc. (2010-2015)
|
Janis G. Pamiljans
|
|
59
|
|
|
Corporate Vice President and President, Aeronautics Systems Sector
|
|
2020
|
|
Corporate Vice President and President, Former Aerospace Systems Sector (2017-2020); Vice President and General Manager, Strategic Systems Division, Former Aerospace Systems Sector (2015-2017)
|
Name
|
|
Age
|
|
Office Held
|
|
Since
|
|
Recent Business Experience
|
|
David T. Perry
|
|
55
|
|
|
Corporate Vice President and Chief Global Business Officer
|
|
2019
|
|
Corporate Vice President and Chief Global Business Development Officer (2012-2019)
|
Mary D. Petryszyn
|
|
58
|
|
|
Corporate Vice President and President, Defense Systems Sector
|
|
2020
|
|
Vice President and General Manager, Land and Avionics C4ISR Division, Mission Systems Sector (2016-2019), Vice President, Global Strategy and Mission Solutions, Aerospace Systems Sector (2015-2016), Vice President, International, Aerospace Systems Sector (2013-2015)
|
Shawn N. Purvis
|
|
46
|
|
|
Corporate Vice President and President, Enterprise Services
|
|
2018
|
|
Vice President and Chief Information Officer (2016-2017); Vice President and General Manager, Cyber Division, Former Information Systems Sector (2014-2016)
|
Lucy C. Ryan
|
|
46
|
|
|
Corporate Vice President, Communications
|
|
2019
|
|
Vice President, Enterprise Communications (2018); Director of Communications, General Dynamics (2010-2018)
|
(a)
|
1. Report of Independent Registered Public Accounting Firm
|
|
4(m)
|
Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and Mellon Bank, N.A., as trustee, dated as of May 1, 1986 (incorporated by reference to Exhibit 2 to the Form 8-A Registration Statement of TRW Inc. dated July 3, 1986, File No. 001-02384)
|
|
4(n)
|
First Supplemental Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and Mellon Bank, N.A., as trustee, dated as of August 24, 1989 (incorporated by reference to Exhibit 4(b) to Form S-3 Registration Statement No. 33-30350 of TRW Inc.)
|
|
*21
|
|
*31.2
|
|
**32.2
|
|
*101
|
Northrop Grumman Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2019, formatted in XBRL (Extensible Business Reporting Language); (i) the Cover Page, (ii) the Consolidated Statements of Earnings and Comprehensive Income, (iii) Consolidated Statements of Financial Position, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Changes in Shareholders’ Equity, and (vi) Notes to 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
|
|
|
|
|
|
By:
|
/s/ Michael A. Hardesty
|
|
|
Michael A. Hardesty
|
|
|
Corporate Vice President, Controller, and Chief Accounting Officer
|
|
|
(Principal Accounting Officer)
|
Signature
|
|
Title
|
|
|
|
Kathy J. Warden*
|
|
Chairman, Chief Executive Officer and President (Principal Executive Officer), and Director
|
|
|
|
Kenneth L. Bedingfield*
|
|
Corporate Vice President and Chief Financial Officer (Principal Financial Officer)
|
|
|
|
Michael A. Hardesty
|
|
Corporate Vice President, Controller and Chief Accounting Officer
|
|
|
|
Marianne C. Brown*
|
|
Director
|
|
|
|
Donald E. Felsinger*
|
|
Director
|
|
|
|
Ann M. Fudge*
|
|
Director
|
|
|
|
Bruce S. Gordon*
|
|
Director
|
|
|
|
William H. Hernandez*
|
|
Director
|
|
|
|
Madeleine A. Kleiner*
|
|
Director
|
|
|
|
Karl J. Krapek*
|
|
Director
|
|
|
|
Gary Roughead*
|
|
Director
|
|
|
|
Thomas M. Schoewe*
|
|
Director
|
|
|
|
James S. Turley*
|
|
Director
|
|
|
|
Mark A. Welsh III*
|
|
Director
|
*By:
|
/s/ Jennifer C. McGarey
|
|
Jennifer C. McGarey
|
|
Corporate Vice President and Secretary
|
|
Attorney-in-Fact
|
|
pursuant to a power of attorney
|
(a)
|
“Committee” means the Compensation Committee of the Board of Directors of the Company or any successor to the Committee.
|
(b)
|
“Code” means the Internal Revenue Code of 1986, as amended.
|
(c)
|
“Company” means Northrop Grumman Corporation.
|
(d)
|
“CPC” means the Corporate Policy Council.
|
(e)
|
“Disability” means any disability of an Officer recognized as a disability for purposes of the Company’s long-term disability plan, or similar plan later adopted by the Company in place of such plan.
|
(f)
|
“Key Employee” means an employee treated as a “specified employee” as of his Separation from Service under Code section 409A(a)(2)(B)(i) of the Company or its affiliate (i.e., a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)) if the Company’s stock is publicly traded on an established securities market or otherwise. The Company shall determine in accordance with a uniform Company policy which Officers are Key Employees as of each December 31 in accordance with IRS regulations or other guidance under Code section 409A, provided that in determining the compensation of individuals for this purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be used. Such determination shall be effective for the twelve (12) month period commencing on April 1 of the following year.
|
(g)
|
“Officer” means an elected or appointed officer of Northrop Grumman Corporation who resides and works in the United States.
|
(h)
|
“Plan” means this Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation, as it may be amended from time to time.
|
(i)
|
“Qualifying Termination” means any one of the following (i) an Officer’s involuntary termination of employment with the Company, other than Termination for Cause or mandatory retirement, or (ii) an Officer’s election to terminate employment with the Company in lieu of accepting a downgrade to a non-Officer position or status. “Qualifying Termination” does not include any change in the Officer’s employment status due to any transfer within the Company or to an affiliate, or to a purchaser of assets or a portion of the business of the Company or an affiliate in connection with the purchase, Disability, voluntary termination or normal retirement.
|
(j)
|
“Release” means the Separation Agreement and General Release prepared by the Company at the time of the Officer’s termination of employment, which may include such terms as the Company deems appropriate, including certain post-employment restrictions as a condition of receiving benefits under the Plan.
|
(k)
|
“Separation from Service” or “Separate from Service” means a “separation from service” within the meaning of Code section 409A.
|
(l)
|
“Termination for Cause” means an Officer’s termination of employment with the Company because of:
|
(i)
|
The continued failure by the Officer to devote reasonable time and effort to the performance of his duties (other than a failure resulting from the Officer’s incapacity due to physical or mental illness) after written demand for improved performance has been delivered to the Officer by the Company which specifically identifies how the Officer has not devoted reasonable time and effort to the performance of his duties;
|
(ii)
|
The willful engaging by Officer in misconduct which is substantially injurious to the Company, monetarily or otherwise; or
|
(iii)
|
The Officer’s conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses or as a result of vicarious liability).
|
(i)
|
Bad judgment or negligence on the part of the Officer other than habitual negligence; or
|
(ii)
|
An act or omission believed by the Officer in good faith to have been in or not opposed to the best interests of the Company and reasonably believed by the Officer to be lawful.
|
(a)
|
Benefits under the Plan are subject to the Company’s sole discretion and approval.
|
(b)
|
To be considered to receive benefits under the Plan an Officer must meet the following conditions:
|
(i)
|
The Officer must experience a Qualifying Termination that results in termination of employment. If, before termination of employment occurs due to the Qualifying Termination event, the Officer voluntarily quits, retires, or experiences a Termination for Cause, the Officer will not receive benefits under this Plan.
|
(ii)
|
The Officer must sign the Release.
|
(iii)
|
The Officer must not be in a class of employees eligible for another severance plan maintained by the Company or an affiliate, including, without limitation, the Northrop Grumman Innovation Systems Severance Benefit Plan - Grade 21 (formerly named the Orbital ATK Severance Benefit Plan - Grade 21) or the Northrop Grumman Innovation Systems Executive Severance Plan (formerly named the Orbital ATK Executive Severance Plan). This section 3(b)(iii) shall be inapplicable effective July 1, 2019, for Qualifying Terminations that occur on or after that date.
|
(a)
|
Lump-sum Cash Severance Payment. The designated Appendix describes the lump sum severance benefit available to the Officer.
|
(b)
|
Extension of Medical and Dental Benefits. The Company will continue to pay its portion of the Officer’s medical and dental benefits for the period of time following the Officer’s termination date that is specified in the designated Appendix, provided that for the balance of the month that includes the Officer’s termination date and for the immediately following month, the coverage will be at no cost to the Officer. Such continuation coverage shall run concurrently with COBRA continuation coverage (or similar state law). The Officer must continue to pay his portion of the cost of this coverage with after-tax dollars. If rates for active employees increase during this continuation period, the contribution amount will increase proportionately. Also, if medical and dental benefits are modified, terminated or changed in any way for active employees during this continuation period the Officer will also be subject to such modification, termination or change. Following the continuation period specified in the designated Appendix the Officer will be eligible to receive COBRA benefits for any remaining portion of the applicable COBRA period (typically 18 months) at normal COBRA rates. The unreimbursed COBRA period (e.g., the period when the Officer must pay full COBRA rates in order to receive COBRA benefits) starts the first day of the month following the end of the continuation period specified in the designated Appendix.
|
(i)
|
Officer’s eligibility for benefits in one year will not affect Officer’s eligibility for benefits in any other year;
|
(ii)
|
Any reimbursement of eligible expenses will be made on or before the last day of the year following the year in which the expense was incurred; and
|
(iii)
|
Officer’s right to benefits is not subject to liquidation or exchange for another benefit.
|
(c)
|
Company Performance Related Payment. The Officer will be eligible for a severance payment equal to a pro-rata portion of the bonus he or she would have received under the Company annual incentive plan in which he or she was a participant for the year in which the Qualifying Termination occurred, in addition to the lump-sum cash severance payment described in section 4(a). For this purpose, the pro-rated bonus (if any) will be based on the applicable annual incentive plan payout formula, with any applicable individual performance factor set at 1.00, prorated from the beginning of the performance period (January 1st) to the Officer’s date of termination. The severance payment contemplated by this Section 4(c) will be paid when the annual bonuses are paid to active employees between February 15 and March 15 of the year following termination. Notwithstanding anything to the contrary in this section 4(c), if the Officer’s bonus opportunity for the fiscal year in which his or her termination occurs is covered by the Company’s Incentive Compensation Plan (or similar successor bonus program designed to comply with the performance-based compensation exception under Section 162(m) of the Code), then the Officer’s severance payment pursuant to this section 4(c) shall not exceed the maximum bonus the Officer would have been entitled to receive under the Company’s Incentive Compensation Plan for that fiscal year, assuming the Officer had been employed through the date bonuses are paid under such plan for that year, and otherwise calculated under the terms of such plan based on actual performance for that fiscal year (but without giving effect to any discretion of the plan administrator to reduce the bonus amount from the maximum otherwise determined in accordance with such plan).
|
(d)
|
Other Fringe Benefits. All reimbursements will be within the limits established in the Executive Perquisite Program. These perquisites will cease as of the date of termination except for the following:
|
(i)
|
Financial Planning. If an Officer is eligible for financial planning reimbursement at the time of termination, the Officer will be reimbursed for any financial planning fees as specified in the designated Appendix. For these purposes, “financial planning reimbursement” includes any income tax preparation fee reimbursement the Officer may be entitled to under the financial planning reimbursement terms and conditions applicable to the Officer at the time of termination. The financial planning (including income tax preparation fee) reimbursements contemplated by the Appendices are subject to any other applicable limitations that may apply under the financial planning reimbursement terms and conditions applicable to the Officer at the time of termination (for example, and without limitation, annual caps on amounts that may be used in connection with income tax preparation). All such reimbursements pursuant to this section 4(d)(i) shall be administered consistent with the following additional requirements as set forth in Treas. Reg. § 1.409A-3(i)(1)(iv): (1) Officer’s eligibility for benefits in one year will not affect Officer’s eligibility for benefits in any other year; (2) any reimbursement of eligible expenses will be made on or before the last day of the year following the year in which the
|
(ii)
|
Outplacement Service. The Officer will be reimbursed for the cost of reasonable outplacement services provided by the Company’s outplacement service provider for services provided within one year after the Officer’s date of termination; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Officer’s base salary as of the date of termination. All services will be subject to the current contract with the provider, and all such expenses shall be reimbursed as soon as practicable, but in no event later than the end of the year following the year the Officer Separates from Service.
|
(e)
|
Time and Form of Payment. The severance benefits under section 4(a) will be paid to the eligible Officer in a lump sum as soon as practicable following the Officer’s Separation from Service, but in no event beyond thirty (30) days from such date, provided the Officer signs the Release within twenty one (21) days following the Officer’s Separation from Service. Notwithstanding the foregoing, if the Officer is a Key Employee, the lump sum payment shall be made on or within thirty (30) days after the first day of the seventh month following the Officer’s Separation from Service (or, if earlier, the first day of the month after the Officer’s death), provided the Officer signs the Release within twenty-one (21) days following the Officer’s Separation from Service. This amount will be paid after all regular taxes and withholdings have been deducted. No payment made pursuant to the Plan is eligible compensation under any of the Company’s benefit plans, including without limitation, pension, savings, or deferred compensation plans.
|
INTRODUCTION
|
1
|
ARTICLE I DEFINITIONS
|
1
|
1.1
|
Definitions 1
|
ARTICLE II PARTICIPATION
|
5
|
2.1
|
In General 5
|
2.2
|
Disputes as to Employment Status 5
|
ARTICLE III DEFERRAL ELECTIONS
|
5
|
3.1
|
Elections to Defer Eligible Compensation 5
|
3.2
|
Contribution Amounts 6
|
3.3
|
Crediting of Deferrals 7
|
3.4
|
Investment Elections 7
|
3.5
|
Investment Return Not Guaranteed 8
|
ARTICLE IV ACCOUNTS
|
8
|
4.1
|
Accounts 8
|
4.2
|
Valuation of Accounts 8
|
4.3
|
Use of a Trust 9
|
ARTICLE V VESTING AND FORFEITURES
|
9
|
5.1
|
In General 9
|
5.2
|
Exceptions 9
|
ARTICLE VI DISTRIBUTIONS
|
10
|
6.1
|
Distribution Rules for Non-RAC, Non-NEC and Non-CPSC Amounts 10
|
6.2
|
Distribution Rules for RAC Subaccount, NEC Subaccount and CPSC Subaccount 10
|
6.3
|
Effect of Taxation 11
|
6.4
|
Permitted Delays 11
|
6.5
|
Payments Not Received At Death 11
|
6.6
|
Inability to Locate Participant 11
|
6.7
|
Committee Rules 11
|
ARTICLE VII ADMINISTRATION
|
11
|
7.1
|
Committees 11
|
7.2
|
Committee Action 12
|
7.3
|
Powers and Duties of the Administrative Committee 12
|
7.4
|
Powers and Duties of the Investment Committee 13
|
7.5
|
Construction and Interpretation 13
|
7.6
|
Information 13
|
7.7
|
Committee Compensation, Expenses and Indemnity 13
|
7.8
|
Disputes 14
|
ARTICLE VIII MISCELLANEOUS
|
14
|
8.1
|
Unsecured General Creditor 14
|
8.2
|
Restriction Against Assignment 14
|
8.3
|
Restriction Against Double Payment 15
|
8.4
|
Withholding 15
|
8.5
|
Amendment, Modification, Suspension or Termination 15
|
8.6
|
Governing Law 15
|
8.7
|
Receipt and Release 15
|
8.8
|
Payments on Behalf of Persons Under Incapacity 15
|
8.9
|
Limitation of Rights and Employment Relationship 16
|
8.10
|
Headings 16
|
8.11
|
Liabilities Transferred to HII 16
|
APPENDIX A – 2005 TRANSITION RELIEF
|
A1
|
A.1
|
Cash-Out A1
|
A.2
|
Elections A1
|
A.3
|
Key Employees A1
|
APPENDIX B – DISTRIBUTION RULES FOR PRE-2005 AMOUNTS
|
B1
|
B.1
|
Distribution of Contributions B1
|
APPENDIX C – MERGED PLANS
|
C1
|
C.1
|
Plan Mergers C1
|
C.2
|
Merged Plans – General Rule C1
|
APPENDIX D – COMMITTEES AND APPOINTMENTS
|
D1
|
APPENDIX E – Eligible OADCP Participants
|
E1
|
1.1
|
Definitions
|
2.1
|
In General
|
2.2
|
Disputes as to Employment Status
|
3.1
|
Elections to Defer Eligible Compensation
|
3.2
|
Contribution Amounts
|
(i)
|
Two and one half percent if age and years of service are less than 40.
|
3.4
|
Investment Elections
|
3.5
|
Investment Return Not Guaranteed
|
4.1
|
Accounts
|
4.2
|
Valuation of Accounts
|
4.3
|
Use of a Trust
|
5.1
|
In General
|
5.2
|
Exceptions
|
6.1
|
Distribution Rules for Non-RAC, Non-NEC and Non-CPSC Amounts
|
6.2
|
Distribution Rules for RAC Subaccount, NEC Subaccount and CPSC Subaccount
|
6.3
|
Effect of Taxation
|
6.4
|
Permitted Delays
|
6.5
|
Payments Not Received At Death
|
6.6
|
Inability to Locate Participant
|
6.7
|
Committee Rules
|
7.1
|
Committees
|
7.2
|
Committee Action
|
7.3
|
Powers and Duties of the Administrative Committee
|
7.4
|
Powers and Duties of the Investment Committee
|
7.5
|
Construction and Interpretation
|
7.6
|
Information
|
7.7
|
Committee Compensation, Expenses and Indemnity
|
7.8
|
Disputes
|
8.1
|
Unsecured General Creditor
|
8.2
|
Restriction Against Assignment
|
8.3
|
Restriction Against Double Payment
|
8.4
|
Withholding
|
8.5
|
Amendment, Modification, Suspension or Termination
|
8.6
|
Governing Law
|
8.7
|
Receipt and Release
|
8.8
|
Payments on Behalf of Persons Under Incapacity
|
8.9
|
Limitation of Rights and Employment Relationship
|
8.10
|
Headings
|
8.11
|
Liabilities Transferred to HII
|
I.
|
Delay the distributions described above for six months from the date of Separation from Service. The delayed payments will be paid as a single sum with interest at the end of the six-month period, with the remaining payments resuming as scheduled.
|
II.
|
Accelerate the distributions described above into a payment in 2005 without interest adjustments.
|
III.
|
Key Employees must elect I or II during 2005.
|
|
|
|
|
|
|
|
|
|
Name of Merged Plans
|
Merger Effective Dates
|
Merged Account Names
|
Northrop Grumman Benefits Equalization Plan
|
December 10, 2004
|
NG BEP Account
|
Northrop Grumman Space & Mission Systems Corp. Deferred Compensation Plan
|
December 10, 2004
|
S & MS Deferred Compensation Account
|
BDM International, Inc. 1997
Executive Deferred Compensation Plan ("BDM Plan")
|
April 29, 2005
|
BDM Account
|
PRC Inc. Executive Deferred Compensation Plan ("PRC Plan")
|
November 9, 2012
|
PRC EDCP Account (or Sub-Account, as applicable)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Northrop Grumman Innovation Systems Pension and Retirement Plan, a sub-plan of the Northrop Grumman Pension Plan and including the benefit structures under such sub-plan known as the Alliant Techsystems Inc. Retirement Formula, the Alliant Techsystems Inc. Aerospace Pension Formula, the ATK SEG Retirement Formula, the Federal Cartridge Company Pension Formula, the ATK Pension Equity Formula, the Alliant Lake City Retirement Formula, the Alliant Techsystems Inc. Retirement Income Formula (GOCO), and the ATK Cash Balance Formula; and
|
(b)
|
Thiokol Propulsion Pension Plan, a sub-plan of the Northrop Grumman Space & Mission Systems Corp. Salaried Pension Plan and including the benefit structures known as the Former Thiokol Propulsion Pension Plan Formula, the Thiokol Pension Equity Formula, and the Thiokol Cash Balance Formula.
|
Name of Subsidiary
|
Jurisdiction of Incorporation
|
Ownership Percentage
|
Northrop Grumman Systems Corporation
|
Delaware
|
100%
|
Northrop Grumman Overseas Holdings, Inc.
|
Delaware
|
100%
|
Northrop Grumman Innovation Systems, Inc.
|
Delaware
|
100%
|
1.
|
I have reviewed this report on Form 10-K 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/ Kathy J. Warden
|
Kathy J. Warden
|
Chairman, Chief Executive Officer and President
|
1.
|
I have reviewed this report on Form 10-K 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/ 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
|