Company: NOC
Filing Date: 2025-07-22
Form Type: 10-Q
Source: 0001133421-25-000049
Chunk: 16

Company: NORTHROP GRUMMAN CORP /DE/
Filing Date: 2025-07-22
Form: 10-Q
Item: Part I, Item 1
Chunk 16
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 0.15 0.70 (1)Based on a 21 percent federal statutory tax rate.EAC adjustments on a single performance obligation can have a significant effect on the company’s financial statements. When such adjustments occur, we generally disclose the nature, underlying conditions and financial impact of the adjustments. During the second quarter of 2025, the company recorded a $76 million favorable EAC adjustment on the EMD phase of the Sentinel program at Defense Systems largely related to our expectations for achieving certain contract incentives. During the first quarter of 2025, the company recorded a $226 million unfavorable EAC adjustment on the first and second LRIP lots of the B-21 program at Aeronautics Systems. No EAC adjustments on a single performance obligation had a significant impact on the financial statements during the six months ended June 30, 2024.BacklogBacklog 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. Backlog is converted into sales as costs are incurred or deliveries are made. Company backlog as of June 30, 2025 was $89.7 billion and reflects a $150 million reduction of backlog in connection with the training services divestiture. Of our June 30, 2025 backlog, we expect to recognize approximately 40 percent as revenue over the next 12 months and 65 percent as revenue over the next 24 months, with the remainder to be recognized thereafter.Contract Assets and LiabilitiesFor 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, 2025 that was included in