Company: NOC
Filing Date: 2025-04-22
Form Type: 10-Q
Source: 0001133421-25-000023
Chunk: 78

Company: NORTHROP GRUMMAN CORP /DE/
Filing Date: 2025-04-22
Form: 10-Q
Item: Part I, Item 2
Chunk 78
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IBCS) program, $0.3 billion for Triton, and $0.3 billion for E-2.

LIQUIDITY AND CAPITAL RESOURCES

We are focused on the efficient conversion of operating income into cash to provide for the company’s material cash requirements, including working capital needs, satisfaction of contractual commitments, funding of our pension and OPB plans, investment in our business through capital expenditures, and shareholder return through dividend payments and share repurchases.

At March 31, 2025, we had $1.7 billion in cash and cash equivalents. We expect cash and cash equivalents and cash generated from operating activities, supplemented by borrowings under credit facilities, commercial paper and/or in the capital markets through our shelf registration with the SEC, if needed, to be sufficient to provide liquidity to the company in the short-term and long-term. The company has a five-year senior unsecured credit facility in an aggregate principal amount of $2.5 billion, and in April 2025, we renewed our one-year $500 million uncommitted credit facility. At March 31, 2025, there were no borrowings outstanding under these credit facilities; however, as of March 31, 2025, we had $1.5 billion in commercial paper outstanding, which reduced the amount available for borrowing under our unsecured credit facility.

IRC Section 174

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to amortize them over five years pursuant to IRC Section 174. Our 2024 cash from operations was reduced by approximately $350 million for federal estimated tax payments we made related to Section 174. In the future, Congress may consider legislation that would defer the amortization requirement to later years, possibly with retroactive effect. In the meantime, we expect to continue to make additional federal tax payments based on the current Section 174 tax law, which we estimate will reduce our 2025 cash from operations by approximately $230 million. The impact of Section 174 on our cash from operations depends on the amount of research and development expenditures incurred by the company and whether the IRS issues guidance on the provision which differs from our current interpretation, among other things.

Cash Flow Measures

In addition to our cash position, we consider various cash flow measures in capital deployment decision-making, including cash provided by operating activities and free cash flow, a non-GAAP measure