Document
false--12-31Q220200001133421NORTHROP GRUMMAN CORP /DE/1700000010000000585000000061030000001180000000080000000016784842416670820716784842416670820713000000600000110900000018030000001110000000100000000000P3YP3YP3YP3Y0000 0001133421 2020-01-01 2020-06-30 0001133421 2020-07-27 0001133421 us-gaap:ServiceMember 2019-04-01 2019-06-30 0001133421 2019-01-01 2019-06-30 0001133421 us-gaap:ServiceMember 2019-01-01 2019-06-30 0001133421 2020-04-01 2020-06-30 0001133421 us-gaap:ProductMember 2019-04-01 2019-06-30 0001133421 us-gaap:ProductMember 2020-01-01 2020-06-30 0001133421 2019-04-01 2019-06-30 0001133421 us-gaap:ProductMember 2019-01-01 2019-06-30 0001133421 us-gaap:ServiceMember 2020-01-01 2020-06-30 0001133421 us-gaap:ProductMember 2020-04-01 2020-06-30 0001133421 us-gaap:ServiceMember 2020-04-01 2020-06-30 0001133421 2019-12-31 0001133421 2020-06-30 0001133421 2018-12-31 0001133421 2019-06-30 0001133421 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001133421 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001133421 us-gaap:RetainedEarningsMember 2019-06-30 0001133421 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001133421 us-gaap:RetainedEarningsMember 2019-01-01 2019-06-30 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001133421 us-gaap:CommonStockMember 2019-06-30 0001133421 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-06-30 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-06-30 0001133421 us-gaap:RetainedEarningsMember 2020-06-30 0001133421 us-gaap:RetainedEarningsMember 2020-03-31 0001133421 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0001133421 us-gaap:CommonStockMember 2019-01-01 2019-06-30 0001133421 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0001133421 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001133421 us-gaap:CommonStockMember 2020-06-30 0001133421 us-gaap:RetainedEarningsMember 2020-01-01 2020-06-30 0001133421 us-gaap:RetainedEarningsMember 2019-03-31 0001133421 us-gaap:CommonStockMember 2018-12-31 0001133421 us-gaap:CommonStockMember 2019-03-31 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001133421 us-gaap:RetainedEarningsMember 2019-12-31 0001133421 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-06-30 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0001133421 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001133421 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-06-30 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001133421 us-gaap:CommonStockMember 2020-03-31 0001133421 us-gaap:RetainedEarningsMember 2018-12-31 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0001133421 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001133421 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001133421 us-gaap:CommonStockMember 2019-12-31 0001133421 us-gaap:CommonStockMember 2020-01-01 2020-06-30 0001133421 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001133421 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001133421 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001133421 us-gaap:ContractsAccountedForUnderPercentageOfCompletionMember 2019-01-01 2019-06-30 0001133421 us-gaap:ContractsAccountedForUnderPercentageOfCompletionMember 2020-04-01 2020-06-30 0001133421 us-gaap:ContractsAccountedForUnderPercentageOfCompletionMember 2020-01-01 2020-06-30 0001133421 us-gaap:ContractsAccountedForUnderPercentageOfCompletionMember 2019-04-01 2019-06-30 0001133421 2020-05-01 2020-05-31 0001133421 2019-05-01 2019-05-31 0001133421 noc:December2018ShareRepurchaseOriginalAuthorizationMember 2018-12-04 0001133421 noc:December2018ShareRepurchaseOriginalAuthorizationMember 2020-03-01 2020-06-30 0001133421 noc:December2018ShareRepurchaseOriginalAuthorizationMember 2020-06-30 0001133421 noc:September2015ShareRepurchaseOriginalAuthorizationMember 2015-09-16 0001133421 2018-05-01 2018-05-31 0001133421 noc:September2015ShareRepurchaseOriginalAuthorizationMember 2016-04-01 2020-02-29 0001133421 noc:December2018ShareRepurchaseOriginalAuthorizationMember 2020-01-01 2020-06-30 0001133421 noc:September2015ShareRepurchaseOriginalAuthorizationMember 2020-01-01 2020-06-30 0001133421 noc:September2015ShareRepurchaseOriginalAuthorizationMember 2019-01-01 2019-06-30 0001133421 noc:TwoThousandThirtyMember 2020-03-23 0001133421 noc:TwoThousandFiftyMember 2020-03-23 0001133421 noc:TwoThousandForty2Member 2020-03-23 0001133421 2020-03-23 0001133421 us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001133421 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001133421 us-gaap:FairValueMeasurementsNonrecurringMember 2020-06-30 0001133421 us-gaap:FairValueInputsLevel2Member 2019-12-31 0001133421 us-gaap:FairValueInputsLevel1Member 2020-06-30 0001133421 us-gaap:FairValueMeasurementsRecurringMember 2020-06-30 0001133421 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-06-30 0001133421 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001133421 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-06-30 0001133421 us-gaap:FairValueInputsLevel2Member 2020-06-30 0001133421 us-gaap:FairValueInputsLevel1Member 2019-12-31 0001133421 us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0001133421 noc:IncrementalclaimMember noc:SolysticMatterMember 2013-10-01 2020-06-30 0001133421 noc:SolysticMatterMember 2013-10-01 2020-06-30 0001133421 noc:SolysticMatterMember 2013-08-08 2020-06-30 0001133421 noc:UnitedStatesPostalServiceMember srt:MaximumMember 2020-06-30 0001133421 noc:FalseClaimsActMember us-gaap:ThreatenedLitigationMember noc:UnitedStatesPostalServiceMember 2013-06-03 2020-06-30 0001133421 noc:InitialClaimMember noc:SolysticMatterMember 2013-08-08 2020-06-30 0001133421 noc:SolysticMatterMember noc:SolysticMatterMember 2013-08-08 2020-06-30 0001133421 noc:UnitedStatesPostalServiceMember noc:ActsAndOmissionsWithAdverseAffectsOnPerformanceAndObligationsMember 2012-05-04 0001133421 noc:UnitedStatesPostalServiceMember 2007-01-01 2007-12-31 0001133421 noc:UnitedStatesPostalServiceMember 2018-02-16 0001133421 noc:SolysticMatterMember 2013-08-08 2018-11-13 0001133421 noc:UnitedStatesPostalServiceMember noc:UnpaidPortionsOfContractPriceAndDirectCostsIncurredMember 2012-05-04 0001133421 noc:TwoYearTermMemberDomain 2020-06-30 0001133421 us-gaap:OtherNoncurrentLiabilitiesMember 2020-06-30 0001133421 us-gaap:OtherCurrentLiabilitiesMember 2020-06-30 0001133421 us-gaap:OtherCurrentAssetsMember 2020-06-30 0001133421 us-gaap:CommercialPaperMember 2020-06-30 0001133421 noc:TwoYearTermMemberDomain us-gaap:LondonInterbankOfferedRateLIBORMember 2020-01-01 2020-06-30 0001133421 noc:FiveYearTermMemberDomain 2020-06-30 0001133421 us-gaap:OtherNoncurrentAssetsMember 2020-06-30 0001133421 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-04-01 2019-06-30 0001133421 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-01-01 2019-06-30 0001133421 us-gaap:PensionPlansDefinedBenefitMember 2020-01-01 2020-06-30 0001133421 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2020-04-01 2020-06-30 0001133421 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2020-01-01 2020-06-30 0001133421 us-gaap:PensionPlansDefinedBenefitMember 2020-04-01 2020-06-30 0001133421 us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-06-30 0001133421 us-gaap:PensionPlansDefinedBenefitMember 2019-04-01 2019-06-30 0001133421 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-06-30 0001133421 us-gaap:PerformanceSharesMember 2020-01-01 2020-06-30 0001133421 us-gaap:PerformanceSharesMember 2019-01-01 2019-06-30 0001133421 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-06-30 0001133421 srt:MaximumMember noc:CashUnitsAndCashPerformanceUnitsMember 2019-06-30 0001133421 srt:MinimumMember noc:CashUnitsAndCashPerformanceUnitsMember 2019-06-30 0001133421 srt:MinimumMember noc:CashUnitsAndCashPerformanceUnitsMember 2020-06-30 0001133421 srt:MaximumMember noc:CashUnitsAndCashPerformanceUnitsMember 2020-06-30 0001133421 noc:CashPerformanceUnitsMember 2020-01-01 2020-06-30 0001133421 noc:CashUnitsMember 2020-01-01 2020-06-30 0001133421 country:US noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 country:US noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 country:US 2019-04-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 country:US noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain 2019-04-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 country:US noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 srt:AsiaPacificMember 2019-01-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 country:US noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 srt:AsiaPacificMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 srt:AsiaPacificMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 srt:AsiaPacificMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 srt:AsiaPacificMember 2020-04-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 country:US noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 country:US noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 srt:AsiaPacificMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 country:US 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 country:US noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain 2019-01-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 country:US noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 srt:AsiaPacificMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 country:US noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 srt:AsiaPacificMember 2020-01-01 2020-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain 2020-01-01 2020-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 country:US noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 srt:AsiaPacificMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 country:US noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 country:US noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 country:US noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 country:US 2019-01-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 srt:AsiaPacificMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 srt:AsiaPacificMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 country:US 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 country:US noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 country:US noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 noc:AllOtherGeographicRegionDomain noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember 2019-04-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember 2020-04-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:FixedPriceContractMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember 2019-01-01 2019-06-30 0001133421 us-gaap:FixedPriceContractMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:FixedPriceContractMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:FixedPriceContractMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember 2019-04-01 2019-06-30 0001133421 us-gaap:FixedPriceContractMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:FixedPriceContractMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:TimeAndMaterialsContractMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 us-gaap:FixedPriceContractMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 noc:USGovernmentMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 noc:OtherCustomersMember 2020-04-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 noc:USGovernmentMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 noc:InternationalMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 noc:InternationalMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 noc:USGovernmentMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 noc:USGovernmentMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 noc:USGovernmentMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 noc:OtherCustomersMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 noc:USGovernmentMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 noc:InternationalMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 noc:InternationalMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 noc:InternationalMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 noc:OtherCustomersMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 noc:USGovernmentMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 noc:OtherCustomersMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 noc:USGovernmentMember 2019-01-01 2019-06-30 0001133421 noc:USGovernmentMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 noc:InternationalMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 noc:InternationalMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 noc:InternationalMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2020-01-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 noc:InternationalMember 2019-04-01 2019-06-30 0001133421 noc:USGovernmentMember 2020-04-01 2020-06-30 0001133421 noc:USGovernmentMember noc:DefenseSystemsMember 2020-04-01 2020-06-30 0001133421 noc:InternationalMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 noc:InternationalMember noc:AeronauticsSystemsMember 2019-04-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 noc:USGovernmentMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 noc:OtherCustomersMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 noc:InternationalMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 noc:OtherCustomersMember 2020-01-01 2020-06-30 0001133421 noc:InternationalMember 2019-01-01 2019-06-30 0001133421 noc:IntersegmentSalesMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 noc:OtherCustomersMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 noc:InternationalMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 noc:USGovernmentMember noc:DefenseSystemsMember 2019-01-01 2019-06-30 0001133421 noc:InternationalMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 noc:USGovernmentMember noc:MissionSystemsMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 noc:OtherCustomersMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 noc:InternationalMember 2020-01-01 2020-06-30 0001133421 noc:USGovernmentMember noc:SpaceSystemsMember 2020-04-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:AeronauticsSystemsMember 2019-01-01 2019-06-30 0001133421 noc:USGovernmentMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:SpaceSystemsMember 2019-01-01 2019-06-30 0001133421 noc:InternationalMember noc:AeronauticsSystemsMember 2020-01-01 2020-06-30 0001133421 noc:IntersegmentSalesMember noc:DefenseSystemsMember 2020-01-01 2020-06-30 0001133421 noc:OtherCustomersMember 2019-04-01 2019-06-30 0001133421 noc:InternationalMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 noc:USGovernmentMember 2019-04-01 2019-06-30 0001133421 noc:USGovernmentMember noc:MissionSystemsMember 2019-01-01 2019-06-30 0001133421 noc:InternationalMember noc:AeronauticsSystemsMember 2020-04-01 2020-06-30 0001133421 noc:USGovernmentMember noc:MissionSystemsMember 2020-01-01 2020-06-30 0001133421 noc:InternationalMember noc:DefenseSystemsMember 2019-04-01 2019-06-30 0001133421 noc:OtherCustomersMember 2019-01-01 2019-06-30 0001133421 noc:USGovernmentMember noc:SpaceSystemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:CorporateNonSegmentMember 2020-04-01 2020-06-30 0001133421 us-gaap:IntersegmentEliminationMember 2020-01-01 2020-06-30 0001133421 us-gaap:CorporateNonSegmentMember 2020-01-01 2020-06-30 0001133421 us-gaap:IntersegmentEliminationMember 2019-04-01 2019-06-30 0001133421 us-gaap:MaterialReconcilingItemsMember 2019-01-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember 2020-04-01 2020-06-30 0001133421 us-gaap:MaterialReconcilingItemsMember 2020-04-01 2020-06-30 0001133421 us-gaap:OperatingSegmentsMember 2020-01-01 2020-06-30 0001133421 us-gaap:IntersegmentEliminationMember 2020-04-01 2020-06-30 0001133421 us-gaap:MaterialReconcilingItemsMember 2019-04-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember 2019-01-01 2019-06-30 0001133421 us-gaap:CorporateNonSegmentMember 2019-04-01 2019-06-30 0001133421 us-gaap:OperatingSegmentsMember 2019-04-01 2019-06-30 0001133421 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-06-30 0001133421 us-gaap:IntersegmentEliminationMember 2019-01-01 2019-06-30 0001133421 us-gaap:MaterialReconcilingItemsMember 2020-01-01 2020-06-30 utreg:Rate iso4217:EUR iso4217:BRL xbrli:pure noc:Defendant iso4217:USD xbrli:shares iso4217:GBP iso4217:USD xbrli:shares noc:segment
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2020
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-16411
NORTHROP GRUMMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
80-0640649
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
2980 Fairview Park Drive
 
 
Falls Church,
Virginia
 
22042
(Address of principal executive offices)
 
(Zip Code)
(703) 280-2900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
NOC
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer ☒     Accelerated Filer ☐
Non-accelerated Filer ☐    Smaller Reporting Company                 
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of July 27, 2020, 166,714,063 shares of common stock were outstanding.



NORTHROP GRUMMAN CORPORATION                        

TABLE OF CONTENTS
 
 
Page
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
 
 
 
 
Item 3.
Item 4.
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.
 

i


NORTHROP GRUMMAN CORPORATION                        

PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended June 30

Six Months Ended June 30
$ in millions, except per share amounts
2020

2019

2020

2019
Sales











Product
$
6,482


$
5,880


$
12,658


$
11,608

Service
2,402


2,576


4,846


5,037

Total sales
8,884


8,456


17,504


16,645

Operating costs and expenses











Product
5,127


4,661


10,079


9,178

Service
1,931


2,065


3,877


4,041

General and administrative expenses
832


784


1,620


1,544

Operating income
994


946


1,928


1,882

Other (expense) income











Interest expense
(154
)

(137
)

(279
)

(275
)
FAS (non-service) pension benefit
303


200


605


400

Other, net
60


19


2


55

Earnings before income taxes
1,203


1,028


2,256


2,062

Federal and foreign income tax expense
198


167


383


338

Net earnings
$
1,005


$
861


$
1,873


$
1,724













Basic earnings per share
$
6.02


$
5.07


$
11.20


$
10.15

Weighted-average common shares outstanding, in millions
166.9


169.7


167.3


169.9

Diluted earnings per share
$
6.01


$
5.06


$
11.16


$
10.11

Weighted-average diluted shares outstanding, in millions
167.3


170.3


167.9


170.5













Net earnings (from above)
$
1,005


$
861


$
1,873


$
1,724

Other comprehensive loss
 
 
 
 
 
 
 
Change in unamortized prior service credit, net of tax
(11
)
 
(12
)
 
(21
)
 
(23
)
Change in cumulative translation adjustment and other, net
10

 
(4
)
 
1

 

Other comprehensive loss, net of tax
(1
)
 
(16
)
 
(20
)
 
(23
)
Comprehensive income
$
1,004

 
$
845

 
$
1,853

 
$
1,701

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

-1-


NORTHROP GRUMMAN CORPORATION                        

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
$ in millions, except par value
June 30,
2020
 
December 31,
2019
Assets
 
 
 
Cash and cash equivalents
$
4,178

 
$
2,245

Accounts receivable, net
1,989

 
1,326

Unbilled receivables, net
5,460

 
5,334

Inventoried costs, net
832

 
783

Prepaid expenses and other current assets
720

 
997

Total current assets
13,179

 
10,685

Property, plant and equipment, net of accumulated depreciation of $6,103 for 2020 and $5,850 for 2019
7,063

 
6,912

Operating lease right-of-use assets
1,528

 
1,511

Goodwill
18,707

 
18,708

Intangible assets, net
909

 
1,040

Deferred tax assets
346

 
508

Other non-current assets
1,743

 
1,725

Total assets
$
43,475

 
$
41,089

 
 
 
 
Liabilities
 
 
 
Trade accounts payable
$
2,006

 
$
2,226

Accrued employee compensation
1,614

 
1,865

Advance payments and billings in excess of costs incurred
2,179

 
2,237

Other current liabilities
3,928

 
3,106

Total current liabilities
9,727

 
9,434

Long-term debt, net of current portion of $1,803 for 2020 and $1,109 for 2019
14,259

 
12,770

Pension and other postretirement benefit plan liabilities
6,582

 
6,979

Operating lease liabilities
1,333

 
1,308

Other non-current liabilities
1,862

 
1,779

Total liabilities
33,763

 
32,270

 
 
 
 
Commitments and contingencies (Note 6)

 

 
 
 
 
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: 2020—166,708,207 and 2019—167,848,424
167

 
168

Paid-in capital
10

 

Retained earnings
9,652

 
8,748

Accumulated other comprehensive loss
(117
)
 
(97
)
Total shareholders’ equity
9,712

 
8,819

Total liabilities and shareholders’ equity
$
43,475

 
$
41,089

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

-2-


NORTHROP GRUMMAN CORPORATION                        

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30
$ in millions
2020
 
2019
Operating activities
 
 
 
Net earnings
$
1,873

 
$
1,724

Adjustments to reconcile to net cash provided by operating activities:
 
 
 
Depreciation and amortization
605

 
606

Stock-based compensation
36

 
55

Deferred income taxes
169

 
48

Changes in assets and liabilities:
 
 
 
Accounts receivable, net
(663
)
 
(384
)
Unbilled receivables, net
(126
)
 
(658
)
Inventoried costs, net
(49
)
 
(156
)
Prepaid expenses and other assets
(16
)
 
(48
)
Accounts payable and other liabilities
(374
)
 
(367
)
Income taxes payable, net
330

 
194

Retiree benefits
(473
)
 
(285
)
Other, net
32

 
(35
)
Net cash provided by operating activities
1,344

 
694

 
 
 
 
Investing activities
 
 
 
Capital expenditures
(541
)
 
(536
)
Other, net
2

 
1

Net cash used in investing activities
(539
)
 
(535
)
 
 
 
 
Financing activities
 
 
 
Net proceeds from issuance of long-term debt
2,239

 

Payments to credit facilities
(13
)
 
(20
)
Net borrowings on commercial paper

 
101

Common stock repurchases
(490
)
 
(231
)
Cash dividends paid
(469
)
 
(435
)
Payments of employee taxes withheld from share-based awards
(64
)
 
(63
)
Other, net
(75
)
 
(2
)
Net cash provided by (used in) financing activities
1,128

 
(650
)
Increase (decrease) in cash and cash equivalents
1,933

 
(491
)
Cash and cash equivalents, beginning of year
2,245

 
1,579

Cash and cash equivalents, end of period
$
4,178

 
$
1,088

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

-3-


NORTHROP GRUMMAN CORPORATION                        

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
 
Three Months Ended June 30
 
Six Months Ended June 30
$ in millions, except per share amounts
2020
 
2019
 
2020
 
2019
Common stock
 
 
 
 
 
 
 
Beginning of period
$
167

 
$
170

 
$
168

 
$
171

Common stock repurchased

 
(1
)
 
(1
)
 
(2
)
End of period
167

 
169

 
167

 
169

Paid-in capital
 
 
 
 
 
 
 
Beginning of period

 

 

 

Stock compensation
10

 

 
10

 

End of period
10

 

 
10

 

Retained earnings
 
 
 
 
 
 
 
Beginning of period
9,011

 
8,628

 
8,748

 
8,068

Common stock repurchased
(131
)
 
(172
)
 
(479
)
 
(234
)
Net earnings
1,005

 
861

 
1,873

 
1,724

Dividends declared
(242
)
 
(226
)
 
(465
)
 
(432
)
Stock compensation
9

 
29

 
(36
)
 
(6
)
Other

 

 
11

 

End of period
9,652

 
9,120

 
9,652

 
9,120

Accumulated other comprehensive loss
 
 
 
 
 
 
 
Beginning of period
(116
)
 
(59
)
 
(97
)
 
(52
)
Other comprehensive loss, net of tax
(1
)
 
(16
)
 
(20
)
 
(23
)
End of period
(117
)
 
(75
)
 
(117
)
 
(75
)
Total shareholders’ equity
$
9,712

 
$
9,214

 
$
9,712

 
$
9,214

Cash dividends declared per share
$
1.45

 
$
1.32

 
$
2.77

 
$
2.52

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

-4-


NORTHROP GRUMMAN CORPORATION                        

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1.    BASIS OF PRESENTATION
Principles of Consolidation and Reporting
These unaudited condensed consolidated financial statements (the “financial statements”) include the accounts of Northrop Grumman Corporation and its subsidiaries and joint ventures or other investments for which we consolidate the financial results (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”). Intercompany accounts, transactions and profits are eliminated in consolidation. Investments in equity securities and joint ventures where the company has significant influence, but not control, are accounted for using the equity method.
These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”) and in accordance with the rules of the Securities and Exchange Commission (SEC) for interim reporting. The financial statements include adjustments of a normal recurring nature considered necessary by management for a fair presentation of the company’s unaudited condensed consolidated financial position, results of operations and cash flows.
Effective January 1, 2020, the company reorganized its operating sectors to better align the company’s broad portfolio to serve its customers’ needs. The four new sectors, which also comprise our reportable segments, are Aeronautics Systems, Defense Systems, Mission Systems and Space Systems.
Beginning in the second quarter of 2020, the company no longer considers certain unallowable costs and environmental matters that are principally managed at the corporate office as part of management’s evaluation of segment operating performance. As a result, certain unallowable compensation and other costs, which were previously included in segment operating results, are now reported in Unallocated corporate expense within operating income. In addition, certain accrued and deferred costs, as well as unallowable costs, if any, associated with certain environmental matters that were previously reflected in segment assets and operating results are now reflected in corporate assets and Unallocated corporate expense within operating income. The impact of these changes are reflected in the amounts in this Form 10-Q. See Note 9 and Part II, Item 5 for further information regarding the impact of these changes on the company’s current and prior period segment operating income.
The results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year. These financial statements should be read in conjunction with the information contained in the company’s 2019 Annual Report on Form 10-K, the Form 8-K that we filed with the SEC on April 29, 2020, which recasts the disclosures in certain portions of the 2019 Annual Report on Form 10-K to reflect changes in the company’s reportable segments, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
The quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30 and third quarter as ending on September 30. It is the company’s long-standing practice to establish actual interim closing dates using a “fiscal” calendar, in which we close our books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. This practice is only used at interim periods within a reporting year.
Accounting Estimates
Preparation of the financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of sales and expenses during the reporting period. Estimates have been prepared using the most current and best available information; however, actual results could differ materially from those estimates.
Revenue Recognition
The majority of our sales are derived from long-term contracts with the U.S. government for the production of goods, the provision of services, or a combination of both. We recognize revenue as control is transferred to the customer, either over time or at a point in time. As control is effectively transferred while we perform on our contracts, we generally recognize revenue over time using the cost-to-cost method (cost incurred relative to total cost estimated at completion) as the company believes this represents the most appropriate measurement towards satisfaction of our performance obligations. Revenue for contracts in which the control of goods produced does not transfer until delivery to the customer is recognized at a point in time (i.e., typically upon delivery).
Contract Estimates
Use of the cost-to-cost method requires us to make reasonably dependable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services. The company estimates profit on

-5-


NORTHROP GRUMMAN CORPORATION                        

these contracts as the difference between total estimated sales and total estimated cost at completion and recognizes that profit as costs are incurred. Significant judgment is used to estimate total sales and cost at completion.
Contract sales may include estimates of variable consideration, including cost or performance incentives (such as award and incentive fees), contract claims and requests for equitable adjustment (REAs). Variable consideration is included in total estimated sales to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We estimate variable consideration as the most likely amount to which we expect to be entitled.
We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis. Cumulative EAC adjustments represent the cumulative effect of the changes on current and prior periods; sales and operating margins in future periods are recognized as if the revised estimates had been used since contract inception. If it is determined that a loss is expected to result on an individual performance obligation, the entire amount of the estimable future loss, including an allocation of general and administrative (G&A) costs, is charged against income in the period the loss is identified.
The following table presents the effect of aggregate net EAC adjustments:
 
Three Months Ended June 30
 
Six Months Ended June 30
$ in millions, except per share data
2020
 
2019
 
2020
 
2019
Revenue
$
125

 
$
154

 
$
261

 
$
320

Operating income
112

 
158

 
236

 
296

Net earnings(1)
88

 
125

 
186

 
234

Diluted earnings per share(1)
0.53

 
0.73

 
1.11

 
1.37

(1) 
Based on a 21 percent statutory tax rate.
EAC adjustments on a single performance obligation can have a material effect on the company’s financial statements. When such adjustments occur, we generally disclose the nature, underlying conditions and financial impact of the adjustments. No such adjustments were material to the financial statements during the three months ended June 30, 2020 and 2019.
Backlog
Backlog represents the future sales we expect to recognize on firm orders received by the company and is equivalent to the company’s remaining performance obligations at the end of each period. It comprises both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (IDIQ) contracts are not included in backlog until the time an option or IDIQ task order is exercised or awarded.
Company backlog as of June 30, 2020 was $70.0 billion. We expect to recognize approximately 40 percent and 65 percent of our June 30, 2020 backlog as revenue over the next 12 and 24 months, respectively, with the remainder to be recognized thereafter.
Contract Assets and Liabilities
For each of the company’s contracts, the timing of revenue recognition, customer billings, and cash collections results in a net contract asset or liability at the end of each reporting period. Contract assets are equivalent to and reflected as Unbilled receivables in the unaudited condensed consolidated statements of financial position and are primarily related to long-term contracts where revenue recognized under the cost-to-cost method exceeds amounts billed to customers. Contract liabilities are equivalent to and reflected as Advance payments and billings in excess of costs incurred in the unaudited condensed consolidated statements of financial position. The amount of revenue recognized for the three and six months ended June 30, 2020 that was included in the December 31, 2019 contract liability balance was $442 million and $1.2 billion, respectively. The amount of revenue recognized for the three and six months ended June 30, 2019 that was included in the December 31, 2018 contract liability balance was $333 million and $1.0 billion, respectively.
Disaggregation of Revenue
See Note 9 for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments. We believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

-6-


NORTHROP GRUMMAN CORPORATION                        

Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
$ in millions
June 30,
2020
December 31,
2019
Unamortized prior service credit, net of tax expense of $10 for 2020 and $17 for 2019
$
30

$
51

Cumulative translation adjustment and other, net
(147
)
(148
)
Total accumulated other comprehensive loss
$
(117
)
$
(97
)

Related Party Transactions
For all periods presented, the company had no material related party transactions.
Accounting Standards Updates
Accounting standards updates adopted and/or issued, but not effective until after June 30, 2020, are not expected to have a material effect on the company’s unaudited condensed consolidated financial position, annual results of operations and/or cash flows.
2.    EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK
Basic Earnings Per Share
We calculate basic earnings per share by dividing net earnings by the weighted-average number of shares of common stock outstanding during each period.
Diluted Earnings Per Share
Diluted earnings per share include the dilutive effect of awards granted to employees under stock-based compensation plans. The dilutive effect of these securities totaled 0.4 million shares and 0.6 million shares for the three and six months ended June 30, 2020, respectively. The dilutive effect of these securities totaled 0.6 million shares for the three and six months ended June 30, 2019.
Share Repurchases
On September 16, 2015, the company’s board of directors authorized a share repurchase program of up to $4.0 billion of the company’s common stock (the “2015 Repurchase Program”). Repurchases under the 2015 Repurchase Program commenced in March 2016 and were completed in March 2020.
On December 4, 2018, the company’s board of directors authorized a new share repurchase program of up to an additional $3.0 billion in share repurchases of the company’s common stock (the “2018 Repurchase Program”). Repurchases under the 2018 Repurchase Program commenced in March 2020 upon the completion of the company’s 2015 Repurchase Program. As of June 30, 2020, repurchases under the 2018 Repurchase Program totaled $0.2 billion; $2.8 billion remained under this share repurchase authorization. By its terms, the 2018 Repurchase Program is set to expire when all authorized funds for repurchases have been used.
Share repurchases take place from time to time, subject to market conditions and management’s discretion, in the open market or in privately negotiated transactions. The company retires its common stock upon repurchase and, in the periods presented, has not made any purchases of common stock other than in connection with these publicly announced repurchase programs.
The table below summarizes the company’s share repurchases to date under the authorizations described above:
 
 
 
 
 
 
 
 
 
 
Shares Repurchased
(in millions)
Repurchase Program
Authorization Date
 
Amount
Authorized
(in millions)
 
Total
Shares Retired
(in millions)
 
Average 
Price
Per Share
(1)
 
Date Completed
 
Six Months Ended June 30
 
2020
 
2019
September 16, 2015
 
$
4,000

 
15.4

 
$
260.33

 
March 2020
 
0.9

 
1.7

December 4, 2018
 
$
3,000

 
0.5

 
326.20

 

 
0.5

 


(1) 
Includes commissions paid.
Dividends on Common Stock
In May 2020, the company increased the quarterly common stock dividend 10 percent to $1.45 per share from the previous amount of $1.32 per share.

-7-


NORTHROP GRUMMAN CORPORATION                        

In May 2019, the company increased the quarterly common stock dividend 10 percent to $1.32 per share from the previous amount of $1.20 per share.
3.    INCOME TAXES
 
Three Months Ended June 30
 
Six Months Ended June 30
$ in millions
2020
 
2019
 
2020

2019
Federal and foreign income tax expense
$
198

 
$
167

 
$
383

 
$
338

Effective income tax rate
16.5
%
 
16.2
%
 
17.0
%
 
16.4
%

Current Quarter
The second quarter 2020 effective tax rate of 16.5 percent was generally comparable to the prior year period. The company’s second quarter 2020 effective tax rate includes $48 million of research credits, as compared to $51 million in the prior year period.
Year to Date
The year to date 2020 effective tax rate increased to 17.0 percent from 16.4 percent in the prior period primarily due to an increase in reserves for uncertain tax positions. The company’s year to date 2020 effective tax rate includes $90 million of research credits, as compared to $82 million in the prior year period. Both periods benefited from $13 million of excess tax benefits for employee share-based compensation.
In March 2020, the CARES Act was enacted. The CARES Act includes certain changes to U.S. tax law that impact the company, including a technical correction to the 2017 Tax Cuts and Jobs Act, which makes certain qualified improvement property eligible for bonus depreciation. The CARES Act did not have a significant impact on the company’s second quarter and year to date 2020 effective tax rate.
The company has recorded unrecognized tax benefits related to our methods of accounting associated with the timing of revenue recognition and related costs, and the 2017 Tax Act. It is reasonably possible that within the next 12 months our unrecognized tax benefits related to these matters may decrease by up to $70 million. Since enactment of the 2017 Tax Act, the Internal Revenue Service (IRS) and U.S. Treasury Department have issued and are expected to further issue interpretive guidance that impacts taxpayers. We will continue to evaluate such guidance as it is issued.
We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. The Northrop Grumman 2014-2017 federal tax returns and refund claims related to its 2007-2016 federal tax returns are currently under IRS examination. In addition, legacy Orbital ATK federal tax returns for the year ended March 31, 2015, the nine-month transition period ended December 31, 2015 and calendar years 2016-2017 are currently under appeal with the IRS.
4.    FAIR VALUE OF FINANCIAL INSTRUMENTS
The company holds a portfolio of marketable securities consisting of securities to partially fund non-qualified employee benefit plans. A portion of these securities are held in common/collective trust funds and are measured at fair value using net asset value (NAV) per share as a practical expedient; and therefore are not required to be categorized in the fair value hierarchy table below. Marketable securities are included in Other non-current assets in the unaudited condensed consolidated statements of financial position.
The company’s derivative portfolio consists primarily of foreign currency forward contracts. Where model-derived valuations are appropriate, the company utilizes the income approach to determine the fair value and uses the applicable London Interbank Offered Rate (LIBOR) swap rates.

-8-


NORTHROP GRUMMAN CORPORATION                        

The following table presents the financial assets and liabilities the company records at fair value on a recurring basis identified by the level of inputs used to determine fair value:
 
 
June 30, 2020
 
December 31, 2019
$ in millions
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
Financial Assets (Liabilities)
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities
 
$
331

 
$
1

 
$
332

 
$
364

 
$
1

 
$
365

Marketable securities valued using NAV
 
 
 
 
 
16

 
 
 
 
 
17

Total marketable securities
 
331

 
1

 
348

 
364

 
1

 
382

Derivatives
 

 
(1
)
 
(1
)
 

 
(3
)
 
(3
)

The notional value of the company’s foreign currency forward contracts at June 30, 2020 and December 31, 2019 was $71 million and $98 million, respectively. At June 30, 2020, no portion of the notional value was designated as a cash flow hedge. The portion of the notional value designated as a cash flow hedge at December 31, 2019 was $7 million.
The derivative fair values and related unrealized gains/losses at June 30, 2020 and December 31, 2019 were not material. There were no transfers of financial instruments between the three levels of the fair value hierarchy during the six months ended June 30, 2020.
The carrying value of cash and cash equivalents and commercial paper approximates fair value.
Long-term Debt
The estimated fair value of long-term debt was $19.0 billion and $15.1 billion as of June 30, 2020 and December 31, 2019, respectively. We calculated the fair value of long-term debt using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the company’s existing debt arrangements. The carrying value of long-term debt was $16.1 billion and $13.9 billion as of June 30, 2020 and December 31, 2019, respectively. The current portion of long-term debt is recorded in Other current liabilities in the unaudited condensed consolidated statements of financial position.
Unsecured Senior Notes
In March 2020, the company issued $2.25 billion of unsecured senior notes for general corporate purposes, including debt repayment and working capital, as follows:
$750 million of 4.40% senior notes due 2030 (the “2030 Notes”),
$500 million of 5.15% senior notes due 2040 (the “2040 Notes”) and
$1.0 billion of 5.25% senior notes due 2050 (the “2050 Notes”).
We refer to the 2030 Notes, the 2040 Notes and the 2050 Notes, together, as the “notes.” Interest on the notes is payable semi-annually in arrears. The notes are generally subject to redemption, in whole or in part, at the company’s discretion at any time, or from time to time, prior to maturity at a redemption price equal to the greater of 100% of the principal amount of the notes to be redeemed or an applicable “make-whole” amount, plus accrued and unpaid interest.
5.    INVESTIGATIONS, CLAIMS AND LITIGATION
On May 4, 2012, the company commenced an action, Northrop Grumman Systems Corp. v. United States, in the U.S. Court of Federal Claims. This lawsuit relates to an approximately $875 million firm fixed-price contract awarded to the company in 2007 by the U.S. Postal Service (USPS) for the construction and delivery of flats sequencing systems (FSS) as part of the postal automation program. The FSS have been delivered. The company’s lawsuit is based on various theories of liability. The complaint seeks approximately $63 million for unpaid portions of the contract price, and approximately $115 million based on the company’s assertions that, through various acts and omissions over the life of the contract, the USPS adversely affected the cost and schedule of performance and materially altered the company’s obligations under the contract. The United States responded to the company’s complaint with an answer, denying most of the company’s claims, and counterclaims seeking approximately $410 million, less certain amounts outstanding under the contract. The principal counterclaim alleges that the company delayed its performance and caused damages to the USPS because USPS did not realize certain costs savings as early as it had expected. On April 2, 2013, the U.S. Department of Justice informed the company of a False Claims Act complaint relating to the FSS contract that was filed under seal by a relator in June 2011 in the U.S. District

-9-


NORTHROP GRUMMAN CORPORATION                        

Court for the Eastern District of Virginia. On June 3, 2013, the United States filed a Notice informing the Court that the United States had decided not to intervene in this case. The relator alleged that the company violated the False Claims Act in a number of ways with respect to the FSS contract, alleged damage to the USPS in an amount of at least approximately $179 million annually, alleged that he was improperly discharged in retaliation, and sought an unspecified partial refund of the contract purchase price, penalties, attorney’s fees and other costs of suit. The relator later voluntarily dismissed his retaliation claim and reasserted it in a separate arbitration, which he also ultimately voluntarily dismissed. On September 5, 2014, the court granted the company’s motion for summary judgment and ordered the relator’s False Claims Act case be dismissed with prejudice. On February 16, 2018, both the company and the United States filed motions to dismiss many of the claims and counterclaims referenced above, in whole or in part. The United States also filed a motion seeking to amend its answer and counterclaim, including to reduce its counterclaim to approximately $193 million, which the court granted on June 11, 2018. On October 17, 2018, the court granted in part and denied in part the parties’ motions to dismiss. On February 3, 2020, the parties commenced what was expected to be a seven-week trial. The first four weeks of trial concluded, but the court postponed the remaining estimated three weeks as a result of COVID-19-related concerns. Trial is currently scheduled to resume in October 2020. Although the ultimate outcome of these matters (“the FSS matters,” collectively), including any possible loss, cannot be predicted or reasonably estimated at this time, the company intends vigorously to pursue and defend the FSS matters.
On August 8, 2013, the company received a court-appointed expert’s report in litigation pending in the Second Federal Court of the Federal District in Brazil brought by the Brazilian Post and Telegraph Corporation (ECT), a Brazilian state-owned entity, against Solystic SAS (Solystic), a French subsidiary of the company, and two of its consortium partners. In this suit, commenced on December 17, 2004, ECT alleges the consortium breached its contract with ECT and seeks damages of approximately R$111 million (the equivalent of approximately $20 million as of June 30, 2020), plus interest, inflation adjustments and attorneys’ fees, as authorized by Brazilian law, which amounts could be significant over time. The original suit sought R$89 million (the equivalent of approximately $16 million as of June 30, 2020) in damages. In October 2013, ECT asserted an additional damage claim of R$22 million (the equivalent of approximately $4 million as of June 30, 2020). In its counterclaim, Solystic alleges ECT breached the contract by wrongfully refusing to accept the equipment Solystic had designed and built and seeks damages of approximately 31 million (the equivalent of approximately $35 million as of June 30, 2020), plus interest, inflation adjustments and attorneys’ fees, as authorized by Brazilian law. The Brazilian court retained an expert to consider certain issues pending before it. On August 8, 2013 and September 10, 2014, the company received reports from the expert, which contain some recommended findings relating to liability and the damages calculations put forth by ECT. Some of the expert’s recommended findings were favorable to the company and others were favorable to ECT. In November 2014, the parties submitted comments on the expert’s most recent report. On June 16, 2015, the court published a decision denying the parties’ request to present oral testimony. In a decision dated November 13, 2018, the trial court ruled in ECT’s favor on one of its claims against Solystic, and awarded damages of R$41 million (the equivalent of approximately $8 million as of June 30, 2020) against Solystic and its consortium partners, with that amount to be adjusted for inflation and interest from November 2004 through any appeal, in accordance with the Manual of Calculations of the Federal Justice, as well as attorneys’ fees. On March 22, 2019, ECT appealed the trial court’s decision to the intermediate court of appeals. Solystic filed its appeal on April 11, 2019. The parties have executed a settlement agreement in this matter and have filed it with the court for approval.
We are engaged in remediation activities relating to environmental conditions allegedly resulting from historic operations at the former United States Navy and Grumman facilities in Bethpage, New York. For over 20 years, we have worked closely with the United States Navy, the United States Environmental Protection Agency, the New York State Department of Environmental Conservation, the New York State Department of Health and other federal, state and local governmental authorities, to address legacy environmental conditions in Bethpage. We have incurred, and expect to continue to incur, as included in Note 6, substantial remediation costs related to these environmental conditions. The remediation standards or requirements to which we are subject are being reconsidered and are changing and costs may increase materially. As discussed in Note 6, the State of New York issued a Feasibility Study and an Amended Record of Decision, seeking to impose additional remedial requirements. The company is engaged in discussions with the State of New York and certain other potentially responsible parties. The State of New York has said that, among other things, it is also evaluating potential natural resource damages. In addition, we are a party to various, and expect to become a party to additional, legal proceedings and disputes related to remediation, costs, allowability and/or alleged environmental impacts in Bethpage, including with federal and state entities (including the Navy, Defense Contract Management Agency, the state, local municipalities and water districts) and insurance carriers, as well as class action and individual plaintiffs alleging personal injury and property

-10-


NORTHROP GRUMMAN CORPORATION                        

damage and seeking both monetary and non-monetary relief. These Bethpage matters could result in additional costs, fines, penalties, sanctions, compensatory or other damages (including natural resource damages), determinations on allocation, allowability and coverage, and non-monetary relief. We cannot at this time predict or reasonably estimate the potential cumulative outcomes or ranges of possible liability of these aggregate Bethpage matters.
The company is a party to various other investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, including government investigations and claims, that arise in the ordinary course of our business. The nature of legal proceedings is such that we cannot assure the outcome of any particular matter. However, based on information available to the company to date, the company does not believe that the outcome of any of these other matters pending against the company is likely to have a material adverse effect on the company’s unaudited condensed consolidated financial position as of June 30, 2020, or its annual results of operations and/or cash flows.
6.    COMMITMENTS AND CONTINGENCIES
U.S. Government Cost Claims and Contingencies
From time to time, the company is advised of claims by the U.S. government concerning certain potential disallowed costs, plus, at times, penalties and interest. When such findings are presented, the company and U.S. government representatives engage in discussions to enable the company to evaluate the merits of these claims, as well as to assess the amounts being claimed. Where appropriate, provisions are made to reflect the company’s estimated exposure for such potential disallowed costs. Such provisions are reviewed periodically using the most recent information available. The company believes it has adequately reserved for disputed amounts that are probable and reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its unaudited condensed consolidated financial position as of June 30, 2020, or its annual results of operations and/or cash flows.
Recently, the U.S. government has raised questions about an interest rate assumption used by the company to determine our CAS pension expense in previous years and in our current forward pricing rate proposal. On June 1, 2020, the government provided written notice that the assumptions the company used during the period 2013-2019 were potentially noncompliant with CAS. We are engaging with the government to address their questions, and are preparing our formal response, which we believe demonstrates the appropriateness of the assumptions used. However, the sensitivity to changes in interest rate assumptions makes it reasonably possible the outcome of this matter could have a material adverse effect on our financial position, results of operations and/or cash flows, although we are not currently able to estimate a range of any potential loss.
Environmental Matters
The table below summarizes the amount accrued for environmental remediation costs, management’s estimate of the amount of reasonably possible future costs in excess of accrued costs and the deferred costs expected to be recoverable through overhead charges on U.S. government contracts as of June 30, 2020 and December 31, 2019:
$ in millions
 
Accrued Costs(1)(2)
 
Reasonably Possible Future Costs in Excess of Accrued Costs(2)
 
Deferred Costs(3)
June 30, 2020
 
$
570

 
$
452

 
$
478

December 31, 2019
 
531

 
448

 
436

(1) As of June 30, 2020, $173 million is recorded in Other current liabilities and $397 million is recorded in Other non-current liabilities.
(2) Estimated remediation costs are not discounted to present value. The reasonably possible future costs in excess of accrued costs do not take into consideration amounts expected to be recoverable through overhead charges on U.S. government contracts.
(3) As of June 30, 2020, $144 million is deferred in Prepaid expenses and other current assets and $334 million is deferred in Other non-current assets. These amounts are evaluated for recoverability on a routine basis.
Although management cannot predict whether new information gained as our environmental remediation projects progress, or as changes in facts and circumstances occur, will materially affect the estimated liability accrued, except with respect to Bethpage, we do not anticipate that future remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s unaudited condensed consolidated financial position as of June 30, 2020, or its annual results of operations and/or cash flows. With respect to Bethpage, the State of New York issued a Feasibility Study and an Amended Record of Decision, proposing to impose additional remedial requirements. The company is engaged in discussions with the State of New York and other potentially

-11-


NORTHROP GRUMMAN CORPORATION                        

responsible parties. As discussed in Note 5, the remediation standards or requirements to which we are subject are being reconsidered and are changing and costs may increase materially.
Financial Arrangements
In the ordinary course of business, the company uses standby letters of credit and guarantees issued by commercial banks and surety bonds issued principally by insurance companies to guarantee the performance on certain obligations. At June 30, 2020, there were $460 million of stand-by letters of credit and guarantees and $79 million of surety bonds outstanding.
Commercial Paper
The company maintains a commercial paper program that serves as a source of short-term financing with capacity to issue unsecured commercial paper notes up to $2.0 billion. At June 30, 2020, there were no commercial paper borrowings outstanding.
Credit Facilities
The company maintains a five-year senior unsecured credit facility in an aggregate principal amount of $2.0 billion (the “2018 Credit Agreement”) that matures in August 2024 and is intended to support the company’s commercial paper program and other general corporate purposes. Commercial paper borrowings reduce the amount available for borrowing under the 2018 Credit Agreement. At June 30, 2020, there was no balance outstanding under this facility.
In December 2016, a subsidiary of the company entered into a two-year credit facility, with two additional one-year option periods, in an aggregate principal amount of £120 million (the equivalent of approximately $148 million as of June 30, 2020) (the “2016 Credit Agreement”). The company exercised the second option to extend the maturity to December 2020. The 2016 Credit Agreement is guaranteed by the company. At June 30, 2020, there was £50 million (the equivalent of approximately $62 million) outstanding under this facility, which bears interest at a rate of LIBOR plus 1.10 percent. All of the borrowings outstanding under this facility are recorded in Other current liabilities in the unaudited condensed consolidated statement of financial position.
At June 30, 2020, the company was in compliance with all covenants under its credit agreements.
7.    RETIREMENT BENEFITS
The cost to the company of its pension and other postretirement benefit (OPB) plans is shown in the following table:
 
Three Months Ended June 30
 
Six Months Ended June 30
 
Pension
Benefits
 
OPB
 
Pension
Benefits
 
OPB
$ in millions
2020
 
2019
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
Components of net periodic benefit cost (benefit)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
102

 
$
92

 
$
5

 
$
4

 
$
204

 
$
184

 
$
9

 
$
8

Interest cost
306

 
340

 
16

 
20

 
613

 
680

 
33

 
40

Expected return on plan assets
(594
)
 
(526
)
 
(25
)
 
(23
)
 
(1,188
)
 
(1,051
)
 
(51
)
 
(46
)
Amortization of prior service credit
(15
)
 
(14
)
 
1

 

 
(30
)
 
(29
)
 
2

 
(1
)
Net periodic benefit cost (benefit)
$
(201
)
 
$
(108
)
 
$
(3
)
 
$
1

 
$
(401
)
 
$
(216
)
 
$
(7
)
 
$
1


Employer Contributions
The company sponsors defined benefit pension and OPB plans, as well as defined contribution plans. We fund our defined benefit pension plans annually in a manner consistent with the Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006.
Contributions made by the company to its retirement plans are as follows:
 
Three Months Ended June 30
 
Six Months Ended June 30
$ in millions
2020
 
2019
 
2020
 
2019
Defined benefit pension plans
$
26

 
$
23

 
$
46

 
$
46

OPB plans
11

 
12

 
23

 
24

Defined contribution plans
100

 
88

 
356

 
279



-12-


NORTHROP GRUMMAN CORPORATION                        

8.    STOCK COMPENSATION PLANS AND OTHER COMPENSATION ARRANGEMENTS
Stock Awards
The following table presents the number of restricted stock rights (RSRs) and restricted performance stock rights (RPSRs) granted to employees under the company’s long-term incentive stock plan and the grant date aggregate fair value of those stock awards for the periods presented:
 
 
Six Months Ended June 30
in millions
 
2020
 
2019
RSRs granted
 
0.1

 
0.1

RPSRs granted
 
0.2

 
0.2

Grant date aggregate fair value
 
$
91

 
$
92


RSRs typically vest on the third anniversary of the grant date, while RPSRs generally vest and pay out based on the achievement of financial metrics over a three-year period.
Cash Awards
The following table presents the minimum and maximum aggregate payout amounts related to cash units (CUs) and cash performance units (CPUs) granted to employees in the periods presented:
 
 
Six Months Ended June 30
$ in millions
 
2020
 
2019
Minimum aggregate payout amount
 
$
31

 
$
36

Maximum aggregate payout amount
 
175

 
203


CUs typically vest and settle in cash on the third anniversary of the grant date, while CPUs generally vest and pay out in cash based on the achievement of financial metrics over a three-year period.

-13-


NORTHROP GRUMMAN CORPORATION                        

9.    SEGMENT INFORMATION
Effective January 1, 2020, the company reorganized its operating sectors to better align the company’s broad portfolio to serve its customers’ needs. The four new sectors, which also comprise our reportable segments, are Aeronautics Systems, Defense Systems, Mission Systems and Space Systems.
As discussed in Note 1, beginning in the second quarter of 2020, the company no longer considers certain unallowable costs as part of management’s evaluation of segment operating performance. As a result, certain unallowable costs, which were previously included in segment operating results, are now reported in Unallocated corporate expense within operating income. This change has been applied retrospectively in the amounts below. See Part II, Item 5 for further information regarding the impact of this change on the company’s current and prior period segment information.
The following table presents sales and operating income by segment:
 
Three Months Ended June 30
 
Six Months Ended June 30
$ in millions
2020
 
2019
 
2020
 
2019
Sales
 
 
 
 
 
 
 
Aeronautics Systems
$
2,925

 
$
2,721

 
$
5,768

 
$
5,539

Defense Systems
1,886

 
1,916

 
3,767

 
3,684

Mission Systems
2,446

 
2,404

 
4,793

 
4,614

Space Systems
2,048

 
1,788

 
3,996

 
3,589

Intersegment eliminations
(421
)
 
(373
)
 
(820
)
 
(781
)
Total sales
8,884

 
8,456

 
17,504

 
16,645

Operating income
 
 
 
 
 
 
 
Aeronautics Systems
310

 
299

 
573

 
610

Defense Systems
217

 
212

 
415

 
416

Mission Systems
347

 
338

 
700

 
661

Space Systems
209

 
193

 
411

 
383

Intersegment eliminations
(52
)
 
(49
)
 
(101
)
 
(99
)
Total segment operating income
1,031


993

 
1,998

 
1,971

Net FAS (service)/CAS pension adjustment
103

 
107

 
208

 
215

Unallocated corporate expense
(140
)
 
(154
)
 
(278
)
 
(304
)
Total operating income
$
994

 
$
946

 
$
1,928

 
$
1,882


Net FAS (Service)/CAS Pension Adjustment
For financial statement purposes, we account for our employee pension plans in accordance with FAS. However, the cost of these plans is charged to our contracts in accordance with the Federal Acquisition Regulation (FAR) and the related U.S. Government Cost Accounting Standards (CAS). The net FAS (service)/CAS pension adjustment reflects the difference between CAS pension expense included as cost in segment operating income and the service cost component of FAS expense included in total operating income.
Unallocated Corporate Expense
Unallocated corporate expense includes the portion of corporate costs not considered allowable or allocable under applicable CAS or FAR, and therefore not allocated to the segments, such as a portion of management and administration, legal, environmental, compensation, retiree benefits, advertising and other corporate unallowable costs. Unallocated corporate expense also includes costs not considered part of management’s evaluation of segment operating performance, such as amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of property, plant and equipment acquired through business combinations, as well as certain compensation and other costs.

-14-


NORTHROP GRUMMAN CORPORATION                        

Disaggregation of Revenue
Sales by Customer Type
Three Months Ended June 30
 
Six Months Ended June 30
 
2020
 
2019
 
2020
 
2019
$ in millions
$
%(3)
 
$
%(3)
 
$
%(3)
 
$
%(3)