Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Northrop Grumman Corp., income tax expense (benefit), continuing operations

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Federal income tax expense	1,289)	1,398)	246)	758)	292)
Foreign income tax expense	3)	6)	3)	10)	7)
Current	1,292)	1,404)	249)	768)	299)
Federal income tax expense	(353)	518)	288)	(474)	213)
Foreign income tax expense	1)	11)	2)	6)	1)
Deferred	(352)	529)	290)	(468)	214)
Federal and foreign income tax expense	940)	1,933)	539)	300)	513)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

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Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Northrop Grumman Corp. current increased from 2020 to 2021 but then slightly decreased from 2021 to 2022.
Deferred	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Northrop Grumman Corp. deferred increased from 2020 to 2021 but then decreased significantly from 2021 to 2022.
Federal and foreign income tax expense	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Northrop Grumman Corp. federal and foreign income tax expense increased from 2020 to 2021 but then slightly decreased from 2021 to 2022 not reaching 2020 level.

Northrop Grumman Corp., effective income tax rate (EITR) reconciliation

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Statutory federal income tax rate	21.00%	21.00%	21.00%	21.00%	21.00%
Research credit	-3.00%	-2.20%	-5.50%	-8.50%	-5.00%
Foreign derived intangible income	-1.10%	-0.60%	-1.50%	-1.10%	-0.40%
IT services divestiture nondeductible goodwill	0.00%	2.80%	0.00%	0.00%	0.00%
Settlements with taxing authorities	-1.50%	0.00%	0.00%	0.00%	0.00%
Other, net	0.70%	0.60%	0.50%	0.40%	0.30%
Effective tax rate, before impacts related to the 2017 Tax Act	16.10%	21.60%	14.50%	11.80%	15.90%
Impacts related to the 2017 Tax Act	0.00%	0.00%	0.00%	0.00%	-2.20%
Effective tax rate	16.10%	21.60%	14.50%	11.80%	13.70%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

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Item	Description	The company
Effective tax rate, before impacts related to the 2017 Tax Act	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Northrop Grumman Corp. effective tax rate, before impacts related to the 2017 Tax Act increased from 2020 to 2021 but then slightly decreased from 2021 to 2022 not reaching 2020 level.

Northrop Grumman Corp., components of deferred tax assets and liabilities

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Retiree benefits	117)	804)	1,738)	1,827)	1,541)
Capitalized research and experimental expenditures	1,671)	—)	—)	—)	—)
Accrued employee compensation	378)	371)	360)	336)	308)
Provisions for accrued liabilities	65)	156)	232)	166)	139)
Inventory	484)	649)	849)	684)	650)
Stock-based compensation	37)	39)	40)	38)	42)
Operating lease liabilities	556)	493)	435)	411)	—)
Tax credits	464)	431)	343)	166)	174)
Other	144)	135)	112)	73)	59)
Gross deferred tax assets	3,916)	3,078)	4,109)	3,701)	2,913)
Valuation allowance	(428)	(349)	(307)	(160)	(142)
Net deferred tax assets	3,488)	2,729)	3,802)	3,541)	2,771)
Goodwill	(534)	(533)	(533)	(515)	(511)
Purchased intangibles	(98)	(148)	(201)	(262)	(346)
Property, plant and equipment, net	(854)	(755)	(737)	(584)	(518)
Operating lease right-of-use assets	(545)	(444)	(423)	(404)	—)
Contract accounting differences	(1,348)	(1,036)	(1,513)	(1,225)	(1,381)
Other	(79)	(103)	(84)	(43)	(29)
Deferred tax liabilities	(3,458)	(3,019)	(3,491)	(3,033)	(2,785)
Net deferred tax assets (liabilities)	30)	(290)	311)	508)	(14)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

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Item	Description	The company
Gross deferred tax assets	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Northrop Grumman Corp. gross deferred tax assets decreased from 2020 to 2021 but then increased from 2021 to 2022 not reaching 2020 level.
Net deferred tax assets	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Northrop Grumman Corp. net deferred tax assets decreased from 2020 to 2021 but then increased from 2021 to 2022 not reaching 2020 level.
Net deferred tax assets (liabilities)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Northrop Grumman Corp. net deferred tax assets (liabilities) decreased from 2020 to 2021 but then increased from 2021 to 2022 not reaching 2020 level.

Northrop Grumman Corp., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
	Deferred tax assets	162)	200)	311)	508)	94)
	Deferred tax liabilities	132)	490)	—)	—)	108)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

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Item	Description	The company
Deferred tax assets	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Northrop Grumman Corp. deferred tax assets decreased from 2020 to 2021 and from 2021 to 2022.
Deferred tax liabilities	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	Northrop Grumman Corp. deferred tax liabilities increased from 2020 to 2021 but then slightly decreased from 2021 to 2022 not reaching 2020 level.

Northrop Grumman Corp., adjustments to financial statements

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Adjustment to Total Assets
Total assets (as reported)	43,755)	42,579)	44,469)	41,089)	37,653)
Less: Noncurrent deferred tax assets, net	162)	200)	311)	508)	94)
Total assets (adjusted)	43,593)	42,379)	44,158)	40,581)	37,559)
Adjustment to Total Liabilities
Total liabilities (as reported)	28,443)	29,653)	33,890)	32,270)	29,466)
Less: Noncurrent deferred tax liabilities, net	132)	490)	—)	—)	108)
Total liabilities (adjusted)	28,311)	29,163)	33,890)	32,270)	29,358)
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported)	15,312)	12,926)	10,579)	8,819)	8,187)
Less: Net deferred tax assets (liabilities)	30)	(290)	311)	508)	(14)
Shareholders’ equity (adjusted)	15,282)	13,216)	10,268)	8,311)	8,201)
Adjustment to Net Earnings
Net earnings (as reported)	4,896)	7,005)	3,189)	2,248)	3,229)
Add: Deferred income tax expense (benefit)	(352)	529)	290)	(468)	214)
Net earnings (adjusted)	4,544)	7,534)	3,479)	1,780)	3,443)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

Northrop Grumman Corp., Financial Data: Reported vs. Adjusted

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Northrop Grumman Corp., adjusted financial ratios

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net Profit Margin
Reported net profit margin	13.38%	19.64%	8.67%	6.64%	10.73%
Adjusted net profit margin	12.41%	21.12%	9.45%	5.26%	11.44%
Total Asset Turnover
Reported total asset turnover	0.84	0.84	0.83	0.82	0.80
Adjusted total asset turnover	0.84	0.84	0.83	0.83	0.80
Financial Leverage
Reported financial leverage	2.86	3.29	4.20	4.66	4.60
Adjusted financial leverage	2.85	3.21	4.30	4.88	4.58
Return on Equity (ROE)
Reported ROE	31.97%	54.19%	30.14%	25.49%	39.44%
Adjusted ROE	29.73%	57.01%	33.88%	21.42%	41.98%
Return on Assets (ROA)
Reported ROA	11.19%	16.45%	7.17%	5.47%	8.58%
Adjusted ROA	10.42%	17.78%	7.88%	4.39%	9.17%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Northrop Grumman Corp. adjusted net profit margin ratio improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022 not reaching 2020 level.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Northrop Grumman Corp. adjusted total asset turnover ratio improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Northrop Grumman Corp. adjusted financial leverage ratio decreased from 2020 to 2021 and from 2021 to 2022.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Northrop Grumman Corp. adjusted ROE improved from 2020 to 2021 but then deteriorated significantly from 2021 to 2022.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Northrop Grumman Corp. adjusted ROA improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022 not reaching 2020 level.

Northrop Grumman Corp., Financial Ratios: Reported vs. Adjusted

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net earnings	4,896)	7,005)	3,189)	2,248)	3,229)
Sales	36,602)	35,667)	36,799)	33,841)	30,095)
Profitability Ratio
Net profit margin¹	13.38%	19.64%	8.67%	6.64%	10.73%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings	4,544)	7,534)	3,479)	1,780)	3,443)
Sales	36,602)	35,667)	36,799)	33,841)	30,095)
Profitability Ratio
Adjusted net profit margin²	12.41%	21.12%	9.45%	5.26%	11.44%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ Net profit margin = 100 × Net earnings ÷ Sales
= 100 × 4,896 ÷ 36,602 = 13.38%

² Adjusted net profit margin = 100 × Adjusted net earnings ÷ Sales
= 100 × 4,544 ÷ 36,602 = 12.41%

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Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Northrop Grumman Corp. adjusted net profit margin ratio improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022 not reaching 2020 level.

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Sales	36,602)	35,667)	36,799)	33,841)	30,095)
Total assets	43,755)	42,579)	44,469)	41,089)	37,653)
Activity Ratio
Total asset turnover¹	0.84	0.84	0.83	0.82	0.80
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Sales	36,602)	35,667)	36,799)	33,841)	30,095)
Adjusted total assets	43,593)	42,379)	44,158)	40,581)	37,559)
Activity Ratio
Adjusted total asset turnover²	0.84	0.84	0.83	0.83	0.80

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ Total asset turnover = Sales ÷ Total assets
= 36,602 ÷ 43,755 = 0.84

² Adjusted total asset turnover = Sales ÷ Adjusted total assets
= 36,602 ÷ 43,593 = 0.84

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Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Northrop Grumman Corp. adjusted total asset turnover ratio improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022.

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Total assets	43,755)	42,579)	44,469)	41,089)	37,653)
Shareholders’ equity	15,312)	12,926)	10,579)	8,819)	8,187)
Solvency Ratio
Financial leverage¹	2.86	3.29	4.20	4.66	4.60
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	43,593)	42,379)	44,158)	40,581)	37,559)
Adjusted shareholders’ equity	15,282)	13,216)	10,268)	8,311)	8,201)
Solvency Ratio
Adjusted financial leverage²	2.85	3.21	4.30	4.88	4.58

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ Financial leverage = Total assets ÷ Shareholders’ equity
= 43,755 ÷ 15,312 = 2.86

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= 43,593 ÷ 15,282 = 2.85

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Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Northrop Grumman Corp. adjusted financial leverage ratio decreased from 2020 to 2021 and from 2021 to 2022.

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net earnings	4,896)	7,005)	3,189)	2,248)	3,229)
Shareholders’ equity	15,312)	12,926)	10,579)	8,819)	8,187)
Profitability Ratio
ROE¹	31.97%	54.19%	30.14%	25.49%	39.44%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings	4,544)	7,534)	3,479)	1,780)	3,443)
Adjusted shareholders’ equity	15,282)	13,216)	10,268)	8,311)	8,201)
Profitability Ratio
Adjusted ROE²	29.73%	57.01%	33.88%	21.42%	41.98%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × 4,896 ÷ 15,312 = 31.97%

² Adjusted ROE = 100 × Adjusted net earnings ÷ Adjusted shareholders’ equity
= 100 × 4,544 ÷ 15,282 = 29.73%

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Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Northrop Grumman Corp. adjusted ROE improved from 2020 to 2021 but then deteriorated significantly from 2021 to 2022.

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net earnings	4,896)	7,005)	3,189)	2,248)	3,229)
Total assets	43,755)	42,579)	44,469)	41,089)	37,653)
Profitability Ratio
ROA¹	11.19%	16.45%	7.17%	5.47%	8.58%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings	4,544)	7,534)	3,479)	1,780)	3,443)
Adjusted total assets	43,593)	42,379)	44,158)	40,581)	37,559)
Profitability Ratio
Adjusted ROA²	10.42%	17.78%	7.88%	4.39%	9.17%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ ROA = 100 × Net earnings ÷ Total assets
= 100 × 4,896 ÷ 43,755 = 11.19%

² Adjusted ROA = 100 × Adjusted net earnings ÷ Adjusted total assets
= 100 × 4,544 ÷ 43,593 = 10.42%

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Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Northrop Grumman Corp. adjusted ROA improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022 not reaching 2020 level.

Northrop Grumman Corp. (NYSE:NOC)

Analysis of Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Adjustments to Financial Statements: Removal of Deferred Taxes

Northrop Grumman Corp., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Northrop Grumman Corp., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)