Northrop Grumman Corp. (NYSE:NOC)

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Northrop Grumman Corp., adjusted total assets

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Total assets	43,755)	42,579)	44,469)	41,089)	37,653)
Adjustments
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)¹	—)	—)	—)	—)	1,724)
Add: Allowance for expected credit losses	8)	34)	33)	33)	34)
Less: Deferred tax assets²	162)	200)	311)	508)	94)
After Adjustment
Adjusted total assets	43,601)	42,413)	44,191)	40,614)	39,317)

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).

¹ Operating lease right-of-use asset (before adoption of FASB Topic 842). See details »

² Deferred tax assets. See details »

An examination of the financial figures from 2018 to 2022 reveals a period of growth followed by a moderate correction and subsequent recovery in the asset base. Total assets experienced a consistent upward trajectory through 2020, peaking at 44,469 million US dollars before experiencing a decline in 2021 and a partial recovery in 2022.

Total Asset Trajectory: A significant increase is observed between 2018 and 2020, with total assets rising from 37,653 million US dollars to 44,469 million US dollars. A contraction occurred in 2021, where assets fell to 42,579 million US dollars, representing a decrease of approximately 4.2% from the 2020 peak, followed by an increase to 43,755 million US dollars by the end of 2022.
Adjusted Asset Variance: Adjusted total assets followed a similar directional trend but exhibited different variance patterns relative to total assets. In 2018, adjusted total assets were higher than total assets by 1,664 million US dollars. However, from 2019 through 2022, adjusted total assets remained consistently lower than the reported total assets.
Convergence of Asset Metrics: The gap between total assets and adjusted total assets narrowed considerably over the five-year period. While the variance was positive in 2018, it shifted to a negative variance of 475 million US dollars in 2019. This negative delta continued to compress, reaching 154 million US dollars by December 31, 2022, indicating a growing alignment between the reported and adjusted asset valuations.

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Northrop Grumman Corp., adjusted total liabilities

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Total liabilities	28,443)	29,653)	33,890)	32,270)	29,466)
Adjustments
Add: Operating lease liability (before adoption of FASB Topic 842)¹	—)	—)	—)	—)	1,724)
Less: Deferred tax liabilities²	132)	490)	—)	—)	108)
After Adjustment
Adjusted total liabilities	28,311)	29,163)	33,890)	32,270)	31,082)

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).

¹ Operating lease liability (before adoption of FASB Topic 842). See details »

² Deferred tax liabilities. See details »

The liability profile demonstrates a period of expansion followed by a contraction between 2018 and 2022. Both total and adjusted liabilities peaked in 2020 before trending downward over the subsequent two fiscal years.

Liability Trend Analysis: Total liabilities increased from 29,466 million USD in 2018 to a peak of 33,890 million USD in 2020. Following this peak, a consistent reduction is observed, with liabilities falling to 29,653 million USD in 2021 and further decreasing to 28,443 million USD by the end of 2022.
Adjusted Liability Variance: Analysis of the adjustments reveals varying relationships between reported total liabilities and adjusted figures across the five-year period. In 2018, an upward adjustment was applied, resulting in adjusted total liabilities that were 1,616 million USD higher than the reported total. For the 2019 and 2020 fiscal years, no adjustments were made, as the figures remained identical.; A shift in the adjustment pattern occurred in 2021 and 2022, where adjusted total liabilities were recorded lower than the reported total liabilities. Specifically, the adjusted figure was 490 million USD lower in 2021 and 132 million USD lower in 2022.
Comparative Volatility: The adjusted total liabilities mirrored the trajectory of the total liabilities, peaking at 33,890 million USD in 2020. The overall reduction from the 2020 peak to the 2022 year-end represents a decrease of approximately 16.4% in adjusted liabilities.

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Northrop Grumman Corp., adjusted shareholders’ equity

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Shareholders’ equity	15,312)	12,926)	10,579)	8,819)	8,187)
Adjustments
Less: Net deferred tax assets (liabilities)¹	30)	(290)	311)	508)	(14)
Add: Allowance for expected credit losses	8)	34)	33)	33)	34)
After Adjustment
Adjusted shareholders’ equity	15,290)	13,250)	10,301)	8,344)	8,235)

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).

¹ Net deferred tax assets (liabilities). See details »

A consistent upward trajectory in both shareholders' equity and adjusted shareholders' equity is observed from 2018 through 2022. Total shareholders' equity grew from 8,187 million USD in 2018 to 15,312 million USD by 2022, indicating a significant expansion of the company's net asset base over the five-year period.

Growth Acceleration: The expansion of shareholders' equity demonstrated an accelerating pace. The increase between 2018 and 2019 was relatively modest, whereas the period from 2020 to 2022 saw annual growth increments exceeding 1.7 billion USD, with the largest single-year increase occurring between 2021 and 2022.
Analysis of Equity Adjustments: The variance between reported shareholders' equity and adjusted shareholders' equity remained relatively small in proportion to the total equity. The direction of these adjustments fluctuated over the period; adjusted equity exceeded reported equity in 2018 and 2021, while it was lower than reported equity in 2019, 2020, and 2022.
Correlation of Metrics: A strong positive correlation exists between the reported and adjusted equity figures. Adjusted shareholders' equity rose from 8,235 million USD in 2018 to 15,290 million USD in 2022, mirroring the growth pattern of the standard equity metric. This indicates that the adjustments applied did not materially deviate from the overall trend of capital accumulation.

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Northrop Grumman Corp., adjusted capitalization table

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Current portion of long-term debt	1,072)	6)	742)	1,109)	517)
Long-term debt, net of current portion	11,805)	12,777)	14,261)	12,770)	13,883)
Total reported debt	12,877)	12,783)	15,003)	13,879)	14,400)
Shareholders’ equity	15,312)	12,926)	10,579)	8,819)	8,187)
Total reported capital	28,189)	25,709)	25,582)	22,698)	22,587)
Adjustments to Debt
Add: Operating lease liability (before adoption of FASB Topic 842)¹	—)	—)	—)	—)	1,724)
Add: Current operating lease liabilities (included in Other current liabilities)²	299)	284)	263)	261)	—)
Add: Non-current operating lease liabilities³	1,824)	1,590)	1,343)	1,308)	—)
Adjusted total debt	15,000)	14,657)	16,609)	15,448)	16,124)
Adjustments to Equity
Less: Net deferred tax assets (liabilities)⁴	30)	(290)	311)	508)	(14)
Add: Allowance for expected credit losses	8)	34)	33)	33)	34)
Adjusted shareholders’ equity	15,290)	13,250)	10,301)	8,344)	8,235)
After Adjustment
Adjusted total capital	30,290)	27,907)	26,910)	23,792)	24,359)

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).

¹ Operating lease liability (before adoption of FASB Topic 842). See details »

² Current operating lease liabilities (included in Other current liabilities). See details »

³ Non-current operating lease liabilities. See details »

⁴ Net deferred tax assets (liabilities). See details »

The capital structure demonstrates a consistent shift toward a more equity-weighted composition over the five-year period from 2018 to 2022. While total capital has expanded, this growth has been primarily driven by a significant increase in shareholders' equity rather than an accumulation of debt.

Debt Profile and Adjustments: Reported debt exhibited volatility, peaking in 2020 at 15,003 million US$ before declining to 12,877 million US$ by 2022. A consistent discrepancy exists between reported debt and adjusted total debt, with adjusted figures remaining higher throughout the period. This gap suggests the systematic inclusion of additional liabilities in the adjusted calculations. Despite these adjustments, the adjusted total debt trended downward from a high of 16,609 million US$ in 2020 to 15,000 million US$ in 2022, indicating a reduction in total leverage.
Shareholders' Equity Growth: A strong and uninterrupted upward trend is observed in shareholders' equity, which grew from 8,187 million US$ in 2018 to 15,312 million US$ in 2022. This represents nearly a twofold increase in the equity base. Adjusted shareholders' equity followed a near-identical trajectory, starting at 8,235 million US$ and reaching 15,290 million US$ by the end of the period, confirming that adjustments to equity were minimal relative to the overall growth.
Total Capitalization Trends: Total reported capital increased from 22,587 million US$ in 2018 to 28,189 million US$ in 2022. The adjusted total capital followed a similar growth path, rising from 24,359 million US$ to 30,290 million US$. The widening gap between reported and adjusted capital is primarily attributable to the adjustments made to the debt component. The overall trajectory indicates a strengthening of the balance sheet, characterized by an increasing proportion of equity relative to total capital.

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Northrop Grumman Corp., adjusted net earnings

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Net earnings	4,896)	7,005)	3,189)	2,248)	3,229)
Adjustments
Add: Deferred income tax expense (benefit)¹	(352)	529)	290)	(468)	214)
Add: Increase (decrease) in allowance for expected credit losses	(26)	1)	—)	(1)	(5)
Add: Other comprehensive loss, net of tax	(10)	(15)	(31)	(45)	(74)
After Adjustment
Adjusted net earnings	4,508)	7,520)	3,448)	1,734)	3,364)

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).

¹ Deferred income tax expense (benefit). See details »

The financial results from 2018 to 2022 exhibit significant volatility in both reported and adjusted net earnings, characterized by a pronounced peak in 2021 followed by a contraction in 2022.

Earnings Volatility and Trajectory: Net earnings experienced a notable decrease between 2018 and 2019, falling from 3,229 million to 2,248 million. A recovery followed in 2020, leading to a substantial surge in 2021, where net earnings reached a five-year peak of 7,005 million. By 2022, a downward correction occurred, with earnings settling at 4,896 million.
Comparative Analysis of Adjusted Net Earnings: Adjusted net earnings mirrored the overall trend of reported earnings but exhibited higher volatility. A significant trough was observed in 2019, with adjusted earnings dropping to 1,734 million, the lowest point in the analyzed period. This was followed by a sharp increase to 7,520 million in 2021, aligning with the peak observed in reported net earnings.
Evaluation of Earnings Adjustments: The relationship between reported and adjusted net earnings varies annually, indicating the presence of non-recurring items. In 2018, 2020, and 2021, adjusted net earnings exceeded reported net earnings, with the largest positive variance occurring in 2021 at 515 million. Conversely, in 2019 and 2022, adjusted net earnings were lower than reported figures, with a notable negative variance of 388 million in 2022. These fluctuations suggest alternating periods where non-operating gains or losses influenced the final reported income.

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