NORTHROP GRUMMAN CORP /DE/

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The company holds a portfolio of marketable securities including investments to partially fund non-qualified employee benefit plans as well as investments in companies that are advancing or developing technologies applicable to our business. 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; therefore, they are not 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 using internal models based on observable market inputs.

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:

During the third quarter of 2025, the company transferred $50 million of securities from Level 3 to Level 1 in connection with the initial public offering (“IPO”) of a company in which we hold an investment. As of September 30, 2025, the company’s investment was valued at $115 million. The company is prohibited from selling this investment until the first quarter of 2026. There were no other transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the nine months ended September 30, 2025.

Unrealized gains and losses from marketable securities, which are reflected in Other, net on the unaudited condensed consolidated statement of earnings and comprehensive income, were $82 million and $92 million for the three and nine months ended September 30, 2025, respectively. Unrealized gains and losses from marketable securities were not material for the three and nine months ended September 30, 2024.

The notional value of the company’s foreign currency forward contracts at September 30, 2025 and December 31, 2024 was $334 million and $399 million, respectively. The portion of notional value designated as a cash flow hedge at September 30, 2025 and December 31, 2024 was $241 million and $273 million, respectively.

The derivative fair values and related unrealized gains/losses at September 30, 2025 and December 31, 2024 were not material.

The carrying value of cash and cash equivalents approximates fair value.

Long-term Debt

The estimated fair value of the company’s long-term debt was $15.1 billion and $15.3 billion as of September 30, 2025 and December 31, 2024, 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

-10- arrangements. The current portion of long-term debt is recorded in Other current liabilities in the unaudited condensed consolidated statements of financial position.

Issuance of Senior Notes

In May 2025, the company issued $1.0 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:

•$500 million of 4.65% senior notes due 2030 (the “2030 Notes”) and

•$500 million of 5.25% senior notes due 2035 (the “2035 Notes”).

In January 2024, the company issued $2.5 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:

•$500 million of 4.60% senior notes due 2029 (the “2029 Notes”),

•$850 million of 4.90% senior notes due 2034 (the “2034 Notes”), and

•$1.15 billion of 5.20% senior notes due 2054 (the “2054 Notes”).

We refer to the 2029 Notes, 2030 Notes, 2034 Notes, 2035 Notes, and 2054 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.

Repayment of Senior Notes

In January 2025, the company repaid $1.5 billion of 2.93% unsecured senior notes upon maturity.