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8-K - FORM 8-K - NORTHROP GRUMMAN CORP /DE/ | v57449e8vk.htm |
News Release |
Contact: | Dan McClain (Media) (310) 201-3335 |
|
Paul Gregory (Investors) | ||
(310) 201-1634 |
Northrop Grumman Reports Third Quarter 2010 Financial Results |
| Q3 EPS from Continuing Operations Increase 13 Percent to $1.64 |
| Sales Increase 4 Percent to $8.7 Billion |
| Cash from Operations Totals $978 Million; Free Cash Flow Totals $817 Million |
| Approximately 3 Million Shares Repurchased |
| 2010 Guidance for EPS from Continuing Operations Increased to $6.85 $7.00 |
| Conference Call Scheduled for 10:30 a.m. ET at www.northropgrumman.com |
LOS ANGELES Oct. 27, 2010 Northrop Grumman Corporation (NYSE: NOC) reported that third
quarter 2010 earnings from continuing operations increased to $489 million, or $1.64 per diluted
share, from $464 million, or $1.45 per diluted share, in the third quarter of 2009. Net earnings
for the 2010 third quarter increased to $497 million, or $1.67 per diluted share, from $490
million, or $1.53 per diluted share, in the prior year period. The 2009 third quarter included a
net tax benefit of $75 million, or $0.23 per diluted share. Third quarter 2010 sales increased 4
percent to $8.7 billion from $8.35 billion.
Cash provided by operations totaled $978 million in the third quarter of 2010 compared with
$544 million in the third quarter of 2009. New business awards for the 2010 third quarter totaled
$7.4 billion, bringing total backlog to $64.6 billion as of Sept. 30, 2010.
This was a strong quarter for Northrop Grumman. Third quarter results demonstrate that our
focus on sustainable performance improvement continues to gain traction across the corporation.
All our businesses performed well, and based on year-to-date results, we are raising our 2010 EPS
guidance to $6.85 to $7.00 per share. We are also confirming our guidance for cash from operations
and free cash flow. Looking ahead, we continue to position the company to generate value for
shareholders, customers and employees, said Wes Bush, chief executive officer and president.
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Northrop Grumman Reports Third Quarter 2010 Financial Results | 2 |
Table 1 - Financial Highlights
Third Quarter | Nine Months | |||||||||||||||
($ in millions, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Sales |
$ | 8,714 | $ | 8,350 | $ | 26,150 | $ | 24,830 | ||||||||
Operating income |
801 | 619 | 2,282 | 1,852 | ||||||||||||
as % of sales |
9.2% | 7.4% | 8.7% | 7.5% | ||||||||||||
Earnings from continuing operations |
$ | 489 | $ | 464 | $ | 1,662 | $ | 1,198 | ||||||||
Diluted EPS from continuing operations |
1.64 | 1.45 | 5.49 | 3.67 | ||||||||||||
Net earnings |
497 | 490 | 1,677 | 1,273 | ||||||||||||
Diluted EPS |
1.67 | 1.53 | 5.54 | 3.90 | ||||||||||||
Cash provided by operations |
978 | 544 | 1,066 | 1,202 | ||||||||||||
Free cash flow1 |
817 | 384 | 663 | 708 | ||||||||||||
Pension-adjusted Operating Highlights |
||||||||||||||||
Operating income |
$ | 801 | $ | 619 | $ | 2,282 | $ | 1,852 | ||||||||
Net pension adjustment1 |
8 | 72 | 24 | 224 | ||||||||||||
Pension-adjusted operating income1 |
809 | 691 | 2,306 | 2,076 | ||||||||||||
as % of sales1 |
9.3% | 8.3% | 8.8% | 8.4% | ||||||||||||
Pension-adjusted Per Share Data |
||||||||||||||||
Diluted EPS from continuing operations |
$ | 1.64 | $ | 1.45 | $ | 5.49 | $ | 3.67 | ||||||||
After-tax net pension adjustment per share1 |
0.02 | 0.14 | 0.06 | 0.45 | ||||||||||||
Pension-adjusted diluted EPS from continuing
operations1 |
1.66 | 1.59 | 5.55 | 4.12 | ||||||||||||
Weighted
average shares outstanding - Basic |
293.5 | 317.1 | 298.6 | 322.0 | ||||||||||||
Dilutive effect of stock options and stock awards |
4.1 | 3.5 | 3.9 | 4.1 | ||||||||||||
Weighted
average shares outstanding - Diluted |
297.6 | 320.6 | 302.5 | 326.1 |
1 Non-GAAP metric - see definitions and reconciliations at the end of this press release. |
Third quarter 2010 operating income increased 29 percent to $801 million from $619 million in
the prior year period, and as a percent of sales increased 180 basis points to 9.2 percent from 7.4
percent. The improvement principally reflects higher segment operating income and lower net
pension adjustment. Third quarter 2010 segment operating income increased $107 million, or 14
percent, driven by double-digit increases in operating income for four of five businesses. As a
percent of sales, third quarter 2010 segment operating income improved 80 basis points to 9.8
percent from 9 percent. Net pension adjustment improved to an expense of $8 million from an
expense of $72 million in the prior year period. Unallocated corporate expenses totaled $46
million in the 2010 third quarter and $55 million in the 2009 third quarter.
Federal and foreign income taxes increased to $257 million from $120 million in the third
quarter of 2009. Third quarter 2009 earnings included a net tax benefit of $75 million, primarily
for final settlement of the Internal Revenue Services examination of the companys 2001, 2002 and
2003 tax returns. The effective tax rate for the 2010 third quarter was 34.5 percent compared with
20.5 percent in the 2009 third quarter.
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Northrop Grumman Reports Third Quarter 2010 Financial Results | 3 |
Third quarter 2010 diluted earnings per share are based on 297.6 million weighted average
shares outstanding compared with 320.6 million shares in the third quarter of 2009.
Table 2 - Cash Flow Highlights
Third Quarter | Nine Months | |||||||||||||||||||||||
($ millions) | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
Cash provided by operations before discretionary pension contributions1 |
$ | 1,013 | $ | 1,021 | $ | (8 | ) | $ | 1,407 | $ | 1,805 | $ | (398 | ) | ||||||||||
Discretionary pension pre-funding impact, net of tax |
(35 | ) | (477 | ) | 442 | (341 | ) | (603 | ) | 262 | ||||||||||||||
Cash provided by operations |
978 | 544 | 434 | 1,066 | 1,202 | (136 | ) | |||||||||||||||||
Less: |
||||||||||||||||||||||||
Capital expenditures |
(160 | ) | (139 | ) | (21 | ) | (398 | ) | (436 | ) | 38 | |||||||||||||
Outsourcing contract & related
software costs |
(1 | ) | (21 | ) | 20 | (5 | ) | (58 | ) | 53 | ||||||||||||||
Free cash flow1 |
$ | 817 | $ | 384 | $ | 433 | $ | 663 | $ | 708 | $ | (45 | ) |
1 | Non-GAAP metric - see definitions and reconciliations at the end of this press release. |
Free cash flow totaled $817 million in the 2010 third quarter compared with $384 million
in the prior year period. The improvement in 2010 third quarter free cash flow reflects lower
pension pre-funding and improved working capital. Third quarter 2010 cash from operations included
a $60 million discretionary contribution to the companys pension plans. Third quarter 2009 cash
from operations included discretionary pension contributions of $586 million and $47 million from
discontinued operations, principally for the Advisory Services business (TASC), which was divested
in December of 2009.
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Northrop Grumman Reports Third Quarter 2010 Financial Results | 4 |
Table 3 2010 Guidance Updated
($ in millions, except per share amounts) | Prior | Current | ||||||
Sales | ~$34,800 | ~$34,900 | ||||||
Segment operating margin %1 | Low 9% | Low to mid 9% | ||||||
Operating margin % | Mid 8% | Mid 8% | ||||||
Diluted EPS from continuing operations | $6.60 - $6.80 | $6.85 - $7.00 | ||||||
Cash
provided by operations before discretionary pension contributions1 |
2,300 - 2,800 | 2,300 - 2,800 | ||||||
Free
cash flow before discretionary pension contributions1 |
1,500 - 2,000 | 1,500 - 2,000 |
1 Non-GAAP metric - see definitions and reconciliations at the end of this press release. | ||
Table
4 - Cash Measurements, Debt and Capital Deployment
($ millions) | 9/30/2010 | 12/31/2009 | ||||||
Cash & cash equivalents |
$ | 2,528 | $ | 3,275 | ||||
Total debt |
4,209 | 4,294 | ||||||
Net debt1 |
1,681 | 1,019 | ||||||
Net debt to total capital
ratio2 |
10% | 6% |
1Total debt less cash and cash equivalents. | ||
2 Net debt divided by the sum of shareholders equity and total debt. |
Changes in cash and cash equivalents include the following items for cash from
operations, investing and financing through Sept. 30, 2010:
Operations
| $390 million discretionary pension contributions |
| $1.1 billion provided by operations after discretionary pension contributions above |
Investing
| $398 million for capital expenditures and $5 million for outsourcing contract and related software costs |
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Northrop Grumman Reports Third Quarter 2010 Financial Results | 5 |
Financing
| $1.1 billion for repurchase of approximately 17.8 million shares of common stock |
| $112 million proceeds from exercises of stock options and issuance of common stock |
| $91 million principal payments of long term debt |
| $408 million for dividends |
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Northrop Grumman Reports Third Quarter 2010 Financial Results | 6 |
Table 5 - Business Results
Consolidated Sales & Segment Operating Income1
Third Quarter | Nine Months | ||||||||||||||||||||||||
($ millions) | 2010 | 2009 | Change | 2010 | 2009 | Change | |||||||||||||||||||
Sales |
|||||||||||||||||||||||||
Aerospace Systems |
$ | 2,706 | $ | 2,527 | 7 | % | $ | 8,244 | $ | 7,656 | 8 | % | |||||||||||||
Electronic Systems |
1,874 | 1,839 | 2 | % | 5,740 | 5,594 | 3 | % | |||||||||||||||||
Information Systems |
2,123 | 2,118 | 0 | % | 6,310 | 6,362 | (1 | %) | |||||||||||||||||
Shipbuilding |
1,670 | 1,650 | 1 | % | 4,989 | 4,549 | 10 | % | |||||||||||||||||
Technical Services |
871 | 692 | 26 | % | 2,435 | 2,026 | 20 | % | |||||||||||||||||
Intersegment eliminations |
(530 | ) | (476 | ) | (1,568 | ) | (1,357 | ) | |||||||||||||||||
$ | 8,714 | $ | 8,350 | 4 | % | $ | 26,150 | $ | 24,830 | 5 | % | ||||||||||||||
Segment operating income 1 |
|||||||||||||||||||||||||
Aerospace Systems |
$ | 303 | $ | 265 | 14 | % | $ | 934 | $ | 780 | 20 | % | |||||||||||||
Electronic Systems |
261 | 215 | 21 | % | 751 | 695 | 8 | % | |||||||||||||||||
Information Systems |
190 | 168 | 13 | % | 578 | 517 | 12 | % | |||||||||||||||||
Shipbuilding |
101 | 113 | (11 | %) | 191 | 211 | (9 | %) | |||||||||||||||||
Technical Services |
56 | 41 | 37 | % | 157 | 121 | 30 | % | |||||||||||||||||
Intersegment eliminations |
(54 | ) | (52 | ) | (172 | ) | (139 | ) | |||||||||||||||||
Segment operating income1 |
$ | 857 | $ | 750 | 14 | % | $ | 2,439 | $ | 2,185 | 12 | % | |||||||||||||
as a % of sales1 |
9.8 | % | 9.0 | % | 80 bps | 9.3 | % | 8.8 | % | 50 bps | |||||||||||||||
Reconciliation to operating income |
|||||||||||||||||||||||||
Unallocated corporate expenses |
$ | (46 | ) | $ | (55 | ) | 16 | % | $ | (125 | ) | $ | (87 | ) | (44 | %) | |||||||||
Net pension adjustment1 |
(8 | ) | (72 | ) | 89 | % | (24 | ) | (224 | ) | 89 | % | |||||||||||||
Reversal of royalty income included above |
(2 | ) | (4 | ) | 50 | % | (8 | ) | (22 | ) | 64 | % | |||||||||||||
Operating income |
801 | 619 | 29 | % | 2,282 | 1,852 | 23 | % | |||||||||||||||||
as a % of sales |
9.2 | % | 7.4 | % | 180 bps | 8.7 | % | 7.5 | % | 120 bps | |||||||||||||||
Net interest expense |
(68 | ) | (76 | ) | 11 | % | (216 | ) | (219 | ) | 1 | % | |||||||||||||
Other, net |
13 | 41 | (68 | %) | 10 | 62 | (84 | %) | |||||||||||||||||
Earnings from continuing operations before
income taxes |
746 | 584 | 28 | % | 2,076 | 1,695 | 22 | % | |||||||||||||||||
Federal and foreign income taxes |
(257 | ) | (120 | ) | (114 | %) | (414 | ) | (497 | ) | 17 | % | |||||||||||||
Earnings from continuing operations |
489 | 464 | 5 | % | 1,662 | 1,198 | 39 | % | |||||||||||||||||
Earnings from discontinued operations |
8 | 26 | (69 | %) | 15 | 75 | (80 | %) | |||||||||||||||||
Net earnings |
$ | 497 | $ | 490 | 1 | % | $ | 1,677 | $ | 1,273 | 32 | % |
1 Non-GAAP metric - see definitions and reconciliations at the end of this press release. |
Results for TASC, divested in December 2009, are reported as discontinued operations for all periods presented.
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Northrop Grumman Reports Third Quarter 2010 Financial Results | 7 |
Aerospace
Systems ($ millions)
Third Quarter | Nine Months | |||||||||||||||||||||||
2010 | 2009 | % Change | 2010 | 2009 | % Change | |||||||||||||||||||
Sales |
$ | 2,706 | $ | 2,527 | 7.1% | $ | 8,244 | $ | 7,656 | 7.7% | ||||||||||||||
Operating income |
303 | 265 | 14.3% | 934 | 780 | 19.7% | ||||||||||||||||||
as % of sales |
11.2% | 10.5% | 11.3% | 10.2% |
Aerospace Systems third quarter 2010 sales increased 7 percent, principally due to higher
volume for manned and unmanned aircraft programs. Higher volume for these programs was partially
offset by lower volume for civil space and missile defense programs. Aerospace Systems third
quarter 2010 operating income increased 14 percent, and as a percent of sales increased to 11.2
percent from 10.5 percent in the prior year period. Higher operating income and margin rate are
due to higher volume and improved program performance primarily in manned aircraft programs.
Electronic Systems ($ millions)
Third Quarter | Nine Months | |||||||||||||||||||||||
2010 | 2009 | % Change | 2010 | 2009 | % Change | |||||||||||||||||||
Sales |
$ | 1,874 | $ | 1,839 | 1.9% | $ | 5,740 | $ | 5,594 | 2.6% | ||||||||||||||
Operating income |
261 | 215 | 21.4% | 751 | 695 | 8.1% | ||||||||||||||||||
as a % of sales |
13.9% | 11.7% | 13.1% | 12.4% |
Electronic Systems third quarter 2010 sales increased 2 percent due to higher sales of
targeting and postal automation systems, partially offset by lower sales of land and self
protection systems. Electronic Systems third quarter 2010 operating income increased 21 percent,
and as a percent of sales increased to 13.9 percent from 11.7 percent. Higher operating income and
margin rate are primarily due to improved program performance for postal automation and land and
self protection systems programs.
Information Systems ($ millions)
Third Quarter | Nine Months | |||||||||||||||||||||||
2010 | 2009 | % Change | 2010 | 2009 | % Change | |||||||||||||||||||
Sales |
$ | 2,123 | $ | 2,118 | 0.2% | $ | 6,310 | $ | 6,362 | (0.8%) | ||||||||||||||
Operating income |
190 | 168 | 13.1% | 578 | 517 | 11.8% | ||||||||||||||||||
as a % of sales |
8.9% | 7.9% | 9.2% | 8.1% |
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Northrop Grumman Reports Third Quarter 2010 Financial Results | 8 |
Information Systems third quarter 2010 sales were comparable to the prior year period. Sales
in the period included higher volume for defense systems, which was largely offset by lower sales
for intelligence and civil systems programs. Third quarter 2010 operating income increased 13
percent and as a percent of sales totaled 8.9 percent compared with 7.9 percent in the prior year
period. Higher operating income and rate primarily reflect improved program performance for civil
systems.
Shipbuilding
($ millions)
Third Quarter | Nine Months | |||||||||||||||||||||||
2010 | 2009 | % Change | 2010 | 2009 | % Change | |||||||||||||||||||
Sales |
$ | 1,670 | $ | 1,650 | 1.2% | $ | 4,989 | $ | 4,549 | 9.7% | ||||||||||||||
Operating income |
101 | 113 | (10.6%) | 191 | 211 | (9.5%) | ||||||||||||||||||
as % of sales |
6.0% | 6.8% | 3.8% | 4.6% |
Shipbuilding third quarter 2010 sales increased 1 percent. Third quarter 2010 operating income
declined 11 percent, and as a percent of sales totaled 6 percent compared with 6.8 percent in the
third quarter of 2009. The declines in operating income and rate are primarily due to lower
performance for expeditionary warfare programs, partially offset by milestone incentives on the LPD
program.
Technical Services
($ millions)
Third Quarter | Nine Months | |||||||||||||||||||||||
2010 | 2009 | % Change | 2010 | 2009 | % Change | |||||||||||||||||||
Sales |
$ | 871 | $ | 692 | 25.9% | $ | 2,435 | $ | 2,026 | 20.2% | ||||||||||||||
Operating income |
56 | 41 | 36.6% | 157 | 121 | 29.8% | ||||||||||||||||||
as a % of Sales |
6.4% | 5.9% | 6.4% | 6.0% |
Technical Services third quarter 2010 sales increased 26 percent primarily due to higher
volume for integrated logistics and modernization programs. Technical Services third quarter 2010
operating income increased 37 percent, and as a percent of sales increased to 6.4 percent from 5.9
percent. The improvements in operating income and rate are due to higher volume, improved business
mix and improved performance.
# # #
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Northrop Grumman Reports Third Quarter 2010 Financial Results | 9 |
About Northrop Grumman
Northrop Grumman will webcast its earnings conference call at 10:30 a.m. ET on Oct. 27, 2010.
A live audio broadcast of the conference call along with a supplemental presentation will be
available on the investor relations page of the companys Website at
http://www.northropgrumman.com.
Northrop Grumman Corporation is a leading global security company whose 120,000 employees
provide innovative systems, products, and solutions in aerospace, electronics, information systems,
shipbuilding and technical services to government and commercial customers worldwide. Please visit
www.northropgrumman.com for more information.
Statements in this release and the attachments, other than statements of historical fact,
constitute forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Words such as anticipate, expect, intend, plan, project, forecast,
believe, estimate, outlook, guidance, and similar expressions generally identify these
forward-looking statements. Forward-looking statements in this release and the attachments
include, among other things, financial guidance regarding future sales, segment operating income,
pension expense, employer contributions under pension plans and medical and life benefits plans,
cash flow and earnings. These statements are not guarantees of future performance and involve
certain risks and uncertainties. Actual results could differ materially due to factors such as:
the effect of the governments newly announced plans to change its current procurement practices;
timing and execution of Shipbuildings Gulf Coast consolidation; execution of any strategic
alternative for the Shipbuilding business; the effects of changes to capital structure; the effect
of economic conditions in the United States and globally; access to capital; future sales and cash
flows; timing of cash receipts; effective tax rates and timing and amounts of tax payments; returns
on pension plan assets, interest and discount rates and other changes that may impact pension plan
assumptions; retiree medical expense; the outcome of litigation, claims, audits, appeals, bid
protests and investigations; hurricane and earthquake-related insurance coverage and recoveries;
costs of environmental remediation; our relationships with labor unions; availability and retention
of qualified personnel; costs of capital investments; changes in organizational structure and
reporting segments; risks associated with acquisitions, dispositions, joint ventures, strategic
alliances and other business arrangements; possible impairments of goodwill or other intangible
assets; effects of legislation, rulemaking, and changes in accounting, tax or defense procurement;
changes in government and customer priorities and requirements (including, government budgetary
constraints, shifts in defense spending, changes in import and export policies, changes in customer
short-range and long-range plans); acquisition or termination of contracts; technical, operation or
quality setbacks in contract performance; protection of intellectual property rights; risks
associated with our nuclear operations; issues with, and financial viability of, key suppliers and
subcontractors; availability of materials and supplies; controlling costs of fixed-price
development programs; contractual performance relief and the application of cost sharing terms;
allowability and allocability of costs under U.S. Government contracts; progress and acceptance of
new products and technology; domestic and international competition; legal, financial and
governmental risks related to international transactions; potential security threats, natural
disasters and other disruptions not under our control; and other risk factors disclosed in our
filings with the Securities and Exchange Commission.
These forward-looking statements speak only as of the date of this release and we undertake no
obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Northrop Grumman Reports Third Quarter 2010 Financial Results | 10 |
This release and the attachments also contain non-GAAP financial measures. A reconciliation to the
nearest GAAP measure and a discussion of the companys use of these measures are included in this
release or the attachments.
LEARN MORE ABOUT US: Northrop Grumman news releases, product information, photos and video clips
are available on the Internet at: http://www.northropgrumman.com
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
SCHEDULE 1
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
$ in millions, except per share amounts | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Sales and Service Revenues |
||||||||||||||||
Product sales |
$ | 5,303 | $ | 4,982 | $ | 16,373 | $ | 14,972 | ||||||||
Service revenues |
3,411 | 3,368 | 9,777 | 9,858 | ||||||||||||
Total sales and service revenues |
8,714 | 8,350 | 26,150 | 24,830 | ||||||||||||
Cost of Sales and Service Revenues |
||||||||||||||||
Cost of product sales |
4,096 | 4,027 | 12,759 | 12,007 | ||||||||||||
Cost of service revenues |
3,092 | 2,960 | 8,846 | 8,768 | ||||||||||||
General and administrative expenses |
725 | 744 | 2,263 | 2,203 | ||||||||||||
Operating income |
801 | 619 | 2,282 | 1,852 | ||||||||||||
Other (expense) income |
||||||||||||||||
Interest expense |
(68 | ) | (76 | ) | (216 | ) | (219 | ) | ||||||||
Other, net |
13 | 41 | 10 | 62 | ||||||||||||
Earnings from continuing operations before income taxes |
746 | 584 | 2,076 | 1,695 | ||||||||||||
Federal and foreign income taxes |
257 | 120 | 414 | 497 | ||||||||||||
Earnings from continuing operations |
489 | 464 | 1,662 | 1,198 | ||||||||||||
Earnings from discontinued operations, net of tax |
8 | 26 | 15 | 75 | ||||||||||||
Net earnings |
$ | 497 | $ | 490 | $ | 1,677 | $ | 1,273 | ||||||||
Basic Earnings Per Share |
||||||||||||||||
Continuing operations |
$ | 1.67 | $ | 1.46 | $ | 5.57 | $ | 3.72 | ||||||||
Discontinued operations |
.02 | .09 | .05 | .23 | ||||||||||||
Basic earnings per share |
$ | 1.69 | $ | 1.55 | $ | 5.62 | $ | 3.95 | ||||||||
Weighted-average common shares outstanding, in millions |
293.5 | 317.1 | 298.6 | 322.0 | ||||||||||||
Diluted Earnings Per Share |
||||||||||||||||
Continuing operations |
$ | 1.64 | $ | 1.45 | $ | 5.49 | $ | 3.67 | ||||||||
Discontinued operations |
.03 | .08 | .05 | .23 | ||||||||||||
Diluted earnings per share |
$ | 1.67 | $ | 1.53 | $ | 5.54 | $ | 3.90 | ||||||||
Weighted-average diluted shares outstanding, in millions |
297.6 | 320.6 | 302.5 | 326.1 | ||||||||||||
Net earnings (from above) |
$ | 497 | $ | 490 | $ | 1,677 | $ | 1,273 | ||||||||
Other comprehensive income |
||||||||||||||||
Change in cumulative translation adjustment |
18 | 20 | (34 | ) | 44 | |||||||||||
Change in unrealized gain on marketable securities
and cash flow hedges, net of tax |
35 | |||||||||||||||
Change in unamortized benefit plan costs, net of tax |
39 | 53 | 118 | 159 | ||||||||||||
Other comprehensive income, net of tax |
57 | 73 | 84 | 238 | ||||||||||||
Comprehensive income |
$ | 554 | $ | 563 | $ | 1,761 | $ | 1,511 | ||||||||
SCHEDULE 2
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
September 30, | December 31, | |||||||
$ in millions | 2010 | 2009 | ||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 2,528 | $ | 3,275 | ||||
Accounts receivable, net of progress payments |
4,172 | 3,394 | ||||||
Inventoried costs, net of progress payments |
1,193 | 1,170 | ||||||
Deferred tax assets |
718 | 524 | ||||||
Prepaid expenses and other current assets |
392 | 272 | ||||||
Total current assets |
9,003 | 8,635 | ||||||
Property, plant, and equipment, net of accumulated depreciation of $4,608 in
2010 and $4,216 in 2009 |
4,767 | 4,868 | ||||||
Goodwill |
13,517 | 13,517 | ||||||
Other purchased intangibles, net of accumulated amortization of $1,943 in 2010
and $1,871 in 2009 |
801 | 873 | ||||||
Pension and post-retirement plan assets |
324 | 300 | ||||||
Long-term deferred tax assets |
654 | 1,010 | ||||||
Miscellaneous other assets |
1,110 | 1,049 | ||||||
Total assets |
$ | 30,176 | $ | 30,252 | ||||
Liabilities |
||||||||
Notes payable to banks |
$ | 15 | $ | 12 | ||||
Current portion of long-term debt |
757 | 91 | ||||||
Trade accounts payable |
1,677 | 1,921 | ||||||
Accrued employees compensation |
1,238 | 1,281 | ||||||
Advance payments and billings in excess of costs incurred |
2,069 | 1,954 | ||||||
Other current liabilities |
2,007 | 1,726 | ||||||
Total current liabilities |
7,763 | 6,985 | ||||||
Long-term debt, net of current portion |
3,437 | 4,191 | ||||||
Pension and post-retirement plan liabilities |
4,511 | 4,874 | ||||||
Other long-term liabilities |
1,271 | 1,515 | ||||||
Total liabilities |
16,982 | 17,565 | ||||||
Shareholders Equity |
||||||||
Common stock, $1 par value; 800,000,000 shares authorized; issued and
outstanding: 2010 292,228,109; 2009 306,865,201 |
292 | 307 | ||||||
Paid-in capital |
7,827 | 8,657 | ||||||
Retained earnings |
8,005 | 6,737 | ||||||
Accumulated other comprehensive loss |
(2,930 | ) | (3,014 | ) | ||||
Total shareholders equity |
13,194 | 12,687 | ||||||
Total liabilities and shareholders equity |
$ | 30,176 | $ | 30,252 | ||||
SCHEDULE 3
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended | ||||||||
September 30 | ||||||||
$ in millions | 2010 | 2009 | ||||||
Operating Activities |
||||||||
Sources of Cash Continuing Operations |
||||||||
Cash received from customers |
||||||||
Progress payments |
$ | 4,361 | $ | 5,472 | ||||
Collections on billings |
21,145 | 19,013 | ||||||
Other cash receipts |
28 | 32 | ||||||
Total sources of cash continuing operations |
25,534 | 24,517 | ||||||
Uses of Cash Continuing Operations |
||||||||
Cash paid to suppliers and employees |
(22,796 | ) | (21,681 | ) | ||||
Pension contributions |
(438 | ) | (832 | ) | ||||
Interest paid, net of interest received |
(254 | ) | (240 | ) | ||||
Income taxes paid, net of refunds received |
(933 | ) | (675 | ) | ||||
Excess tax benefits from stock-based compensation |
(12 | ) | (2 | ) | ||||
Other cash payments |
(35 | ) | (29 | ) | ||||
Total uses of cash continuing operations |
(24,468 | ) | (23,459 | ) | ||||
Cash provided by continuing operations |
1,066 | 1,058 | ||||||
Cash provided by discontinued operations |
144 | |||||||
Net cash provided by operating activities |
1,066 | 1,202 | ||||||
Investing Activities |
||||||||
Payments for businesses purchased |
(33 | ) | ||||||
Additions to property, plant, and equipment |
(398 | ) | (436 | ) | ||||
Payments for outsourcing contract costs and related software costs |
(5 | ) | (58 | ) | ||||
Other investing activities, net |
22 | (12 | ) | |||||
Net cash used in investing activities |
(381 | ) | (539 | ) | ||||
Financing Activities |
||||||||
Net borrowings under lines of credit |
3 | 4 | ||||||
Proceeds from issuance of long-term debt |
850 | |||||||
Principal payments of long-term debt |
(91 | ) | (73 | ) | ||||
Proceeds from exercises of stock options and issuances of common stock |
112 | 29 | ||||||
Dividends paid |
(408 | ) | (405 | ) | ||||
Excess tax benefits from stock-based compensation |
12 | 2 | ||||||
Common stock repurchases |
(1,060 | ) | (650 | ) | ||||
Net cash used in financing activities |
(1,432 | ) | (243 | ) | ||||
(Decrease) increase in cash and cash equivalents |
(747 | ) | 420 | |||||
Cash and cash equivalents, beginning of period |
3,275 | 1,504 | ||||||
Cash and cash equivalents, end of period |
$ | 2,528 | $ | 1,924 | ||||
SCHEDULE 4
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended | ||||||||
September 30 | ||||||||
$ in millions | 2010 | 2009 | ||||||
Reconciliation of Net Earnings to Net Cash Provided by Operating Activities |
||||||||
Net earnings |
$ | 1,677 | $ | 1,273 | ||||
Adjustments to reconcile to net cash provided by operating activities |
||||||||
Depreciation |
436 | 424 | ||||||
Amortization of assets |
101 | 113 | ||||||
Stock-based compensation |
103 | 83 | ||||||
Excess tax benefits from stock-based compensation |
(12 | ) | (2 | ) | ||||
(Increase) decrease in |
||||||||
Accounts receivable, net |
(779 | ) | (64 | ) | ||||
Inventoried costs, net |
(46 | ) | (239 | ) | ||||
Prepaid expenses and other current assets |
(9 | ) | (39 | ) | ||||
Increase (decrease) in |
||||||||
Accounts payable and accruals |
(332 | ) | (182 | ) | ||||
Deferred income taxes |
87 | 136 | ||||||
Income taxes payable |
(121 | ) | (158 | ) | ||||
Retiree benefits |
4 | (208 | ) | |||||
Other non-cash transactions, net |
(43 | ) | (79 | ) | ||||
Cash provided by continuing operations |
1,066 | 1,058 | ||||||
Cash provided by discontinued operations |
144 | |||||||
Net cash provided by operating activities |
$ | 1,066 | $ | 1,202 | ||||
Non-Cash Investing and Financing Activities |
||||||||
Capital expenditures accrued in accounts payable |
$ | 55 | $ | 38 | ||||
SCHEDULE 5
NORTHROP GRUMMAN CORPORATION
TOTAL BACKLOG AND CONTRACT AWARDS
(Unaudited)
TOTAL BACKLOG AND CONTRACT AWARDS
(Unaudited)
$ in millions | September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||
TOTAL | TOTAL | |||||||||||||||||||||||
FUNDED (1) | UNFUNDED (2) | BACKLOG | FUNDED (1) | UNFUNDED (2) | BACKLOG | |||||||||||||||||||
Aerospace Systems |
$ | 8,541 | $ | 13,337 | $ | 21,878 | $ | 8,320 | $ | 16,063 | $ | 24,383 | ||||||||||||
Electronic Systems |
8,237 | 2,083 | 10,320 | 7,591 | 2,784 | 10,375 | ||||||||||||||||||
Information Systems |
4,951 | 5,536 | 10,487 | 4,319 | 4,508 | 8,827 | ||||||||||||||||||
Shipbuilding |
9,900 | 7,210 | 17,110 | 11,294 | 9,151 | 20,445 | ||||||||||||||||||
Technical Services |
2,855 | 1,997 | 4,852 | 2,352 | 2,804 | 5,156 | ||||||||||||||||||
Total |
$ | 34,484 | $ | 30,163 | $ | 64,647 | $ | 33,876 | $ | 35,310 | $ | 69,186 | ||||||||||||
(1) | Funded backlog represents firm orders for which funding is contractually obligated by the customer. | |
(2) | Unfunded backlog represents firm orders for which funding is not currently contractually obligated by the customer. | |
Unfunded backlog excludes unexercised contract options and unfunded indefinite delivery indefinite quantity (IDIQ) orders. |
New Awards The estimated value of contract awards included in backlog during the nine months ended September 30, 2010, was $20.8 billion.
During the second quarter of 2010, the company reached an agreement with the Commonwealth of Virginia that modified certain aspects of the Virginia IT outsourcing contract. As a result of these modifications, total backlog at September 30,
2010 includes an $824 million favorable adjustment to reflect minimum values for years 2011 through 2016, which are now provided for in the contract.
SCHEDULE 6
NORTHROP GRUMMAN CORPORATION
SCHEDULE OF REALIGNED SEGMENT
(Unaudited)
SCHEDULE OF REALIGNED SEGMENT
(Unaudited)
NET SALES | SEGMENT OPERATING INCOME (LOSS)(2) | |||||||||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||||||
Months Ended | Months Ended | |||||||||||||||||||||||||||||||
$ in millions | Year Ended December 31 | Dec 31 | Year Ended December 31 | Dec 31 | ||||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2007 | 2008 | 2009 | 2009 | |||||||||||||||||||||||||
AS REPORTED |
||||||||||||||||||||||||||||||||
Aerospace Systems |
$ | 9,234 | $ | 9,825 | $ | 10,419 | $ | 2,763 | $ | 919 | $ | 416 | $ | 1,071 | $ | 291 | ||||||||||||||||
Electronic Systems |
6,466 | 7,048 | 7,671 | 2,077 | 809 | 947 | 969 | 274 | ||||||||||||||||||||||||
Information Systems |
7,758 | 8,205 | 8,611 | 2,195 | 725 | 629 | 631 | 109 | ||||||||||||||||||||||||
Shipbuilding |
5,788 | 6,145 | 6,213 | 1,664 | 538 | (2,307 | ) | 299 | 88 | |||||||||||||||||||||||
Technical Services |
2,422 | 2,535 | 2,776 | 750 | 139 | 144 | 161 | 40 | ||||||||||||||||||||||||
Intersegment Eliminations |
(1,327 | ) | (1,443 | ) | (1,935 | ) | (524 | ) | (105 | ) | (128 | ) | (202 | ) | (58 | ) | ||||||||||||||||
Total |
$ | 30,341 | $ | 32,315 | $ | 33,755 | $ | 8,925 | $ | 3,025 | $ | (299 | ) | $ | 2,929 | $ | 744 | |||||||||||||||
RECASTED AND REALIGNED (1) |
||||||||||||||||||||||||||||||||
Aerospace Systems |
$ | 9,234 | $ | 9,825 | $ | 10,419 | $ | 2,763 | $ | 919 | $ | 416 | $ | 1,071 | $ | 291 | ||||||||||||||||
Electronic Systems |
6,466 | 7,048 | 7,671 | 2,077 | 809 | 947 | 969 | 274 | ||||||||||||||||||||||||
Information Systems |
7,717 | 8,174 | 8,536 | 2,174 | 722 | 626 | 624 | 107 | ||||||||||||||||||||||||
Shipbuilding |
5,788 | 6,145 | 6,213 | 1,664 | 538 | (2,307 | ) | 299 | 88 | |||||||||||||||||||||||
Technical Services |
2,422 | 2,535 | 2,776 | 750 | 139 | 144 | 161 | 40 | ||||||||||||||||||||||||
Intersegment Eliminations |
(1,286 | ) | (1,412 | ) | (1,860 | ) | (503 | ) | (102 | ) | (125 | ) | (195 | ) | (56 | ) | ||||||||||||||||
Total |
$ | 30,341 | $ | 32,315 | $ | 33,755 | $ | 8,925 | $ | 3,025 | $ | (299 | ) | $ | 2,929 | $ | 744 | |||||||||||||||
(1) | Reported amounts for total years 2007 through 2009 (previously reported in the 2009 Form 10-K), and the three months ended Dec. 31, 2009 (previously reported in the Fourth Quarter 2009 earnings release filed on Feb. 4, 2010) were adjusted to reflect the January 2010 transfer of the companys internal information technology services unit from the Information Systems segment to the companys corporate shared services group. | |
(2) | Non-GAAP measure. Management uses segment operating income as an internal measure of financial performance for the individual operating segments. |
Non-GAAP Financial Measures Disclosure: Todays press release contains non-GAAP
(accounting principles generally accepted in the United States of America) financial measures, as
defined by SEC (Securities and Exchange Commission) Regulation G and indicated by a footnote in the
text of the release. While we believe that these non-GAAP financial measures may be useful in
evaluating Northrop Grummans financial information, they should be considered as supplemental in
nature and not as a substitute for financial information prepared in accordance with GAAP.
Definitions are provided for the non-GAAP measures and reconciliations are provided in the body of
the release and in attached schedules. References to a Table in the definitions below relate to
tables in the body of this press release. Other companies may define these measures differently or
may utilize different non-GAAP measures.
Cash provided by operations before discretionary pension contributions: Cash provided by
operations before the after-tax impact of discretionary pension contributions. Cash provided by
operations before discretionary pension contributions has been provided for consistency and
comparability of 2010 and 2009 financial performance and is reconciled on Table 2.
Free cash flow: Cash provided by operations less capital expenditures and outsourcing
contract and related software costs. We use free cash flow as a key factor in our planning for and
consideration of strategic acquisitions, stock repurchases and the payment of dividends. This
measure should not be considered in isolation, as a measure of residual cash flow available for
discretionary purposes, or as an alternative to operating results presented in accordance with
GAAP. Free cash flow is reconciled in Table 2.
Free cash flow before discretionary pension contributions: Free cash flow before the
after-tax impact of discretionary pension contributions. We use free cash flow before
discretionary pension contributions as a key factor in our planning for and consideration of
strategic acquisitions, stock repurchases and the payment of dividends. This measure should not be
considered in isolation, as a measure of residual cash flow available for discretionary purposes,
or as an alternative to operating results presented in accordance
with GAAP. Free cash flow before discretionary pension contributions
is presented in Table 3.
Net pension adjustment: Pension expense determined in accordance with GAAP less pension
expense allocated to the operating segments under U.S. Government
Cost Accounting Standards (CAS). Net pension adjustment is presented
in Table 1.
After-tax net pension adjustment per share: The per share impact of the net pension
adjustment as defined above, after tax at the statutory rate of 35%, provided for consistency and
comparability of 2010 and 2009 financial performance and reconciled on Table 1.
Pension-adjusted diluted EPS from continuing operations: Diluted EPS from continuing
operations excluding the after-tax net pension adjustment per share. These per share amounts are
provided for consistency and comparability of operating results. Management uses pension-adjusted
diluted EPS from continuing operations, as reconciled in Table 1, as an internal measure of
financial performance.
Pension-adjusted operating income: Operating income before net pension adjustment as
reconciled in Table 1 and used as an internal measure of financial performance.
Pension-adjusted operating income as a % of sales: Pension-adjusted operating income as
defined above, divided by sales. Management uses pension-adjusted operating income as a % of
sales, as reconciled in Table 1, as an internal measure of financial performance.
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
Segment operating income (loss): Total earnings from our five segments including allocated
pension expense recognized under CAS. Reconciling items to operating income are unallocated
corporate expenses, which include management and administration, legal, environmental, certain
compensation and retiree benefits, and other expenses; net pension adjustment; and reversal of
royalty income included in segment operating income. Management uses segment operating income, as
reconciled in Table 5, as an internal measure of financial performance of our individual operating
segments.
Segment operating margin % / Segment operating income as a % of sales: Segment operating
income as defined above, divided by sales. Management uses segment operating income as a % of
sales, as reconciled in Table 5, as an internal measure of financial performance.
####
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com