-
EPS from Continuing Operations Increase 23 Percent to $1.86
-
2011 Guidance for EPS from Continuing Operations Raised to $6.95 to $7.05 from $6.75 to $6.90
-
Cash from Operations Increases to $948 Million; Free Cash Flow Increases to $839 Million
-
Sales Total $6.6 Billion; New Business Awards Total $7.8 Billion
- 12.7 Million Shares Repurchased in the Third Quarter; 28.4 Million Year-to-date
FALLS CHURCH, Va. – Oct. 26, 2011 – Northrop Grumman Corporation (NYSE:NOC) reported that third quarter 2011 earnings from continuing operations increased 16 percent to $520 million, or $1.86 per diluted share, from $448 million, or $1.51 per diluted share, in the third quarter of 2010. For the nine months ended Sept. 30, 2011, the company repurchased 28.4 million shares of its common stock for $1.6 billion, and $2.4 billion remained under its current share repurchase authorization.
"Superior operating performance in our businesses drove higher operating income, earnings, cash and a strong book-to-bill ratio for the quarter. Based on year-to-date operating results and effective cash deployment, we are again raising our 2011 EPS guidance. The combination of performance and share repurchases continues to produce strong earnings per share growth despite top line pressures," said Wes Bush, chairman, chief executive officer and president.
Table 1 - Financial Highlights | |||||||||||||
Third Quarter | Nine Months | ||||||||||||
($ in millions, except per share amounts) | 2011 | 2010 | 2011 | 2010 | |||||||||
Sales | $ 6,612 | $ 7,071 | $ 19,906 | $ 21,240 | |||||||||
Operating income | 825 | 723 | 2,477 | 2,152 | |||||||||
as % of sales | 12.5% | 10.2% | 12.4% | 10.1% | |||||||||
Earnings from continuing operations | $ 520 | $ 448 | $ 1,536 | $ 1,598 | |||||||||
Diluted EPS from continuing operations | 1.86 | 1.51 | 5.34 | 5.28 | |||||||||
Net earnings | 520 | 497 | 1,570 | 1,677 | |||||||||
Diluted EPS | 1.86 | 1.67 | 5.45 | 5.54 | |||||||||
Cash provided by continuing operations | 948 | 816 | 1,026 | 916 | |||||||||
Free cash flow from continuing operations 1 | 839 | 692 | 700 | 610 | |||||||||
Pension-adjusted Operating Highlights | |||||||||||||
Operating income | $ 825 | $ 723 | $ 2,477 | $ 2,152 | |||||||||
Net pension adjustment 1 | (100) | 1 | (302) | (2) | |||||||||
Pension-adjusted operating income 1 | $ 725 | $ 724 | $ 2,175 | $ 2,150 | |||||||||
as % of sales 1 | 11.0% | 10.2% | 10.9% | 10.1% | |||||||||
Adjusted Per Share Data | |||||||||||||
Diluted EPS from continuing operations | $ 1.86 | $ 1.51 | $ 5.34 | $ 5.28 | |||||||||
Tax benefit | (0.99) | ||||||||||||
After-tax net pension adjustment per share 1 | (0.23) | (0.68) | |||||||||||
Adjusted diluted EPS from continuing operations 1 | $ 1.63 | $ 1.51 | $ 4.66 | $ 4.29 | |||||||||
Weighted average shares outstanding - Basic | 274.9 | 293.5 | 283.1 | 298.6 | |||||||||
Dilutive effect of stock options and stock awards | 4.4 | 4.1 | 4.8 | 3.9 | |||||||||
Weighted average shares outstanding - Diluted | 279.3 | 297.6 | 287.9 | 302.5 | |||||||||
1 Non-GAAP metric - see definitions at the end of this press release. |
Table 2 - Cash Flow Highlights | |||||||||||||
Third Quarter | Nine Months | ||||||||||||
($ millions) | 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||
Cash provided by continuing operations before discretionary pension contributions 1 | $ 903 | $ 829 | $ 74 | $ 1,393 | $ 1,235 | $ 158 | |||||||
After-tax discretionary pension pre-funding impact | 45 | (13) | 58 | (367) | (319) | (48) | |||||||
Cash provided by continuing operations | 948 | 816 | 132 | 1,026 | 916 | 110 | |||||||
Less: | |||||||||||||
Capital expenditures | (108) | (123) | 15 | (324) | (301) | (23) | |||||||
Outsourcing contract & related software costs | (1) | (1) | (2) | (5) | 3 | ||||||||
Free cash flow from continuing operations 1 | $ 839 | $ 692 | $ 147 | $ 700 | $ 610 | $ 90 | |||||||
After-tax discretionary pension pre-funding impact | (45) | 13 | (58) | 367 | 319 | 48 | |||||||
Pension-adjusted free cash flow from continuing operations 1 | $ 794 | $ 705 | $ 89 | $ 1,067 | $ 929 | $ 138 | |||||||
1 Non-GAAP metric - see definitions at the end of this press release |
Table 3 - Cash Measurements, Debt and Capital Deployment | |||||||||||||
September 30, | December 31, | ||||||||||||
($ millions) | 2011 | 2010 | |||||||||||
Cash & cash equivalents | $ 2,946 | $ 3,701 | |||||||||||
Total debt | 3,975 | 4,724 | |||||||||||
Net debt 1 | 1,029 | 1,023 | |||||||||||
Net debt to total capital ratio 2 | 6.5% | 5.6% | |||||||||||
1 Total debt less cash and cash equivalents. | |||||||||||||
2 Net debt divided by the sum of shareholders' equity and total debt. |
Table 4 - Business Results | |||||||||||||
Consolidated Sales & Segment Operating Income 1 | |||||||||||||
Third Quarter | Nine Months | ||||||||||||
($ millions) | 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||
Sales | |||||||||||||
Aerospace Systems | $ 2,572 | $ 2,706 | (5%) | $ 7,900 | $ 8,244 | (4%) | |||||||
Electronic Systems | 1,905 | 1,874 | 2% | 5,504 | 5,740 | (4%) | |||||||
Information Systems | 1,955 | 2,123 | (8%) | 6,011 | 6,310 | (5%) | |||||||
Technical Services | 680 | 871 | (22%) | 2,024 | 2,435 | (17%) | |||||||
Intersegment eliminations | (500) | (503) | (1,533) | (1,489) | |||||||||
$ 6,612 | $ 7,071 | (6%) | $ 19,906 | $ 21,240 | (6%) | ||||||||
Segment operating income 1 | |||||||||||||
Aerospace Systems | $ 304 | $ 303 | $ 936 | $ 934 | |||||||||
Electronic Systems | 293 | 261 | 12% | 814 | 751 | 8% | |||||||
Information Systems | 187 | 190 | (2%) | 570 | 578 | (1%) | |||||||
Technical Services | 55 | 56 | (2%) | 160 | 157 | 2% | |||||||
Intersegment eliminations | (62) | (50) | (198) | (163) | |||||||||
Segment operating income 1 | $ 777 | $ 760 | 2% | $ 2,282 | $ 2,257 | 1% | |||||||
as a % of sales 1 | 11.8% | 10.7% | 110 bps | 11.5% | 10.6% | 90 bps | |||||||
Reconciliation to operating income | |||||||||||||
Unallocated corporate expenses | $ (48) | $ (34) | (41%) | $ (96) | $ (99) | 3% | |||||||
Net pension adjustment 1 | 100 | (1) | NM | 302 | 2 | NM | |||||||
Reversal of royalty income included above | (4) | (2) | (100%) | (11) | (8) | (38%) | |||||||
Operating income | 825 | 723 | 14% | 2,477 | 2,152 | 15% | |||||||
as a % of sales | 12.5% | 10.2% | 230 bps | 12.4% | 10.1% | 230 bps | |||||||
Net interest expense | (57) | (64) | 11% | (168) | (206) | 18% | |||||||
Other, net | (13) | 13 | 200% | (8) | 10 | 180% | |||||||
Earnings from continuing operations before
income taxes |
755 | 672 | 12% | 2,301 | 1,956 | 18% | |||||||
Federal and foreign income tax expense | (235) | (224) | 5% | (765) | (358) | (114%) | |||||||
Earnings from continuing operations | 520 | 448 | 16% | 1,536 | 1,598 | (4%) | |||||||
Earnings from discontinued operations | 49 | (100%) | 34 | 79 | (57%) | ||||||||
Net earnings | $ 520 | $ 497 | 5% | $ 1,570 | $ 1,677 | (6%) | |||||||
1 Non-GAAP metric - see definitions and reconciliations at the end of this press release. | |||||||||||||
Aerospace Systems ($ millions) | |||||||||||||
Third Quarter | Nine Months | ||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||
Sales | $ 2,572 | $ 2,706 | (5.0%) | $ 7,900 | $ 8,244 | (4.2%) | |||||||
Operating income | 304 | 303 | 0.3% | 936 | 934 | 0.2% | |||||||
as a % of sales | 11.8% | 11.2% | 11.8% | 11.3% |
Electronic Systems ($ millions) | |||||||||||||
Third Quarter | Nine Months | ||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||
Sales | $ 1,905 | $ 1,874 | 1.7% | $ 5,504 | $ 5,740 | (4.1%) | |||||||
Operating income | 293 | 261 | 12.3% | 814 | 751 | 8.4% | |||||||
as a % of sales | 15.4% | 13.9% | 14.8% | 13.1% |
Information Systems ($ millions) | |||||||||||||
Third Quarter | Nine Months | ||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||
Sales | $ 1,955 | $ 2,123 | (7.9%) | $ 6,011 | $ 6,310 | (4.7%) | |||||||
Operating income | 187 | 190 | (1.6%) | 570 | 578 | (1.4%) | |||||||
as a % of sales | 9.6% | 8.9% | 9.5% | 9.2% |
Technical Services ($ millions) | |||||||||||||
Third Quarter | Nine Months | ||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||
Sales | $ 680 | $ 871 | (21.9%) | $ 2,024 | $ 2,435 | (16.9%) | |||||||
Operating income | 55 | 56 | (1.8%) | 160 | 157 | 1.9% | |||||||
as a % of Sales | 8.1% | 6.4% | 7.9% | 6.4% |
NORTHROP GRUMMAN CORPORATION | SCHEDULE 1 | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||
(Unaudited) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30 | September 30 | ||||||||||||
$ in millions, except per share amounts | 2011 | 2010 | 2011 | 2010 | |||||||||
Sales and Service Revenues | |||||||||||||
Product sales | $ 3,780 | $ 3,968 | $ 11,352 | $ 12,159 | |||||||||
Service revenues | 2,832 | 3,103 | 8,554 | 9,081 | |||||||||
Total sales and service revenues | 6,612 | 7,071 | 19,906 | 21,240 | |||||||||
Cost of Sales and Service Revenues | |||||||||||||
Cost of product sales | 2,700 | 2,918 | 8,204 | 8,986 | |||||||||
Cost of service revenues | 2,498 | 2,856 | 7,512 | 8,283 | |||||||||
General and administrative expenses | 589 | 574 | 1,713 | 1,819 | |||||||||
Operating income | 825 | 723 | 2,477 | 2,152 | |||||||||
Other (expense) income | |||||||||||||
Interest expense | (57) | (64) | (168) | (206) | |||||||||
Other, net | (13) | 13 | (8) | 10 | |||||||||
Earnings from continuing operations before income taxes | 755 | 672 | 2,301 | 1,956 | |||||||||
Federal and foreign income tax expense | 235 | 224 | 765 | 358 | |||||||||
Earnings from continuing operations | 520 | 448 | 1,536 | 1,598 | |||||||||
Earnings from discontinued operations, net of tax | 49 | 34 | 79 | ||||||||||
Net earnings | $ 520 | $ 497 | $ 1,570 | $ 1,677 | |||||||||
Basic Earnings Per Share | |||||||||||||
Continuing operations | $ 1.89 | $ 1.53 | $ 5.43 | $ 5.35 | |||||||||
Discontinued operations | .16 | .12 | .27 | ||||||||||
Basic earnings per share | $ 1.89 | $ 1.69 | $ 5.55 | $ 5.62 | |||||||||
Weighted-average common shares outstanding, in millions | 274.9 | 293.5 | 283.1 | 298.6 | |||||||||
Diluted Earnings Per Share | |||||||||||||
Continuing operations | $ 1.86 | $ 1.51 | $ 5.34 | $ 5.28 | |||||||||
Discontinued operations | .16 | .11 | .26 | ||||||||||
Diluted earnings per share | $ 1.86 | $ 1.67 | $ 5.45 | $ 5.54 | |||||||||
Weighted-average diluted shares outstanding, in millions | 279.3 | 297.6 | 287.9 | 302.5 | |||||||||
Net earnings (from above) | $ 520 | $ 497 | $ 1,570 | $ 1,677 | |||||||||
Other comprehensive (loss) income | |||||||||||||
Change in cumulative translation adjustment | (25) | 18 | 2 | (34) | |||||||||
Change in unrealized gain on marketable securities | |||||||||||||
and cash flow hedges, net of tax | (2) | ||||||||||||
Change in unamortized benefit plan costs, net of tax | 22 | 39 | 57 | 118 | |||||||||
Other comprehensive (loss) income, net of tax | (3) | 57 | 57 | 84 | |||||||||
Comprehensive income | $ 517 | $ 554 | $ 1,627 | $ 1,761 |
NORTHROP GRUMMAN CORPORATION | SCHEDULE 2 | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||||||||||
(Unaudited) | |||||||||||||
September 30, | December 31, | ||||||||||||
$ in millions | 2011 | 2010 | |||||||||||
Assets | |||||||||||||
Cash and cash equivalents | $ 2,946 | $ 3,701 | |||||||||||
Accounts receivable, net of progress payments | 3,328 | 3,329 | |||||||||||
Inventoried costs, net of progress payments | 884 | 896 | |||||||||||
Current deferred tax assets | 393 | 419 | |||||||||||
Prepaid expenses and other current assets | 135 | 244 | |||||||||||
Assets of discontinued operations | 5,212 | ||||||||||||
Total current assets | 7,686 | 13,801 | |||||||||||
Property, plant, and equipment, net of accumulated depreciation of $3,897
in 2011 and $3,712 in 2010 |
3,010 | 3,045 | |||||||||||
Goodwill | 12,376 | 12,376 | |||||||||||
Other purchased intangibles, net of accumulated amortization of $1,641 in 2011
and $1,613 in 2010 |
164 | 192 | |||||||||||
Pension and post-retirement plan assets | 355 | 320 | |||||||||||
Non-current deferred tax assets | 487 | 721 | |||||||||||
Miscellaneous other assets | 1,022 | 1,076 | |||||||||||
Total assets | $ 25,100 | $ 31,531 | |||||||||||
Liabilities | |||||||||||||
Notes payable to banks | $ 16 | $ 10 | |||||||||||
Current portion of long-term debt | 23 | 774 | |||||||||||
Trade accounts payable | 1,338 | 1,573 | |||||||||||
Accrued employees' compensation | 1,076 | 1,146 | |||||||||||
Advance payments and billings in excess of costs incurred | 1,744 | 1,969 | |||||||||||
Other current liabilities | 1,524 | 1,763 | |||||||||||
Liabilities of discontinued operations | 2,792 | ||||||||||||
Total current liabilities | 5,721 | 10,027 | |||||||||||
Long-term debt, net of current portion | 3,936 | 3,940 | |||||||||||
Pension and post-retirement plan liabilities | 2,591 | 3,089 | |||||||||||
Other long-term liabilities | 901 | 918 | |||||||||||
Total liabilities | 13,149 | 17,974 | |||||||||||
Shareholders' Equity | |||||||||||||
Common stock, $1 par value; 800,000,000 shares authorized; issued and
outstanding: 2011 — 265,540,830; 2010 — 290,956,752 |
266 | 291 | |||||||||||
Paid-in capital | 4,460 | 7,778 | |||||||||||
Retained earnings | 9,401 | 8,245 | |||||||||||
Accumulated other comprehensive loss | (2,176) | (2,757) | |||||||||||
Total shareholders' equity | 11,951 | 13,557 | |||||||||||
Total liabilities and shareholders' equity | $ 25,100 | $ 31,531 |
NORTHROP GRUMMAN CORPORATION | SCHEDULE 3 | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
(Unaudited) | |||||||||||||
Nine Months Ended | |||||||||||||
September 30 | |||||||||||||
$ in millions | 2011 | 2010 | |||||||||||
Operating Activities | |||||||||||||
Sources of Cash — Continuing Operations | |||||||||||||
Cash received from customers | |||||||||||||
Progress payments | $ 3,119 | $ 3,149 | |||||||||||
Collections on billings | 16,527 | 17,610 | |||||||||||
Other cash receipts | 103 | 18 | |||||||||||
Total sources of cash — continuing operations | 19,749 | 20,777 | |||||||||||
Uses of Cash — Continuing Operations | |||||||||||||
Cash paid to suppliers and employees | (17,131) | (18,219) | |||||||||||
Pension contributions | (572) | (415) | |||||||||||
Interest paid, net of interest received | (205) | (248) | |||||||||||
Income taxes paid, net of refunds received | (791) | (933) | |||||||||||
Excess tax benefits from stock-based compensation | (24) | (12) | |||||||||||
Other cash payments | (34) | ||||||||||||
Total uses of cash — continuing operations | (18,723) | (19,861) | |||||||||||
Cash provided by continuing operations | 1,026 | 916 | |||||||||||
Cash (used in) provided by discontinued operations | (232) | 150 | |||||||||||
Net cash provided by operating activities | 794 | 1,066 | |||||||||||
Investing Activities | |||||||||||||
Continuing Operations | |||||||||||||
Contribution received from the spin-off of Shipbuilding business | 1,429 | ||||||||||||
Additions to property, plant, and equipment | (324) | (301) | |||||||||||
Decrease in restricted cash | 34 | 5 | |||||||||||
Other investing activities, net | 13 | 8 | |||||||||||
Cash provided by (used in) investing activities by continuing operations | 1,152 | (288) | |||||||||||
Cash used in investing activities by discontinued operations | (63) | (93) | |||||||||||
Net cash provided by (used in) investing activities | 1,089 | (381) | |||||||||||
Financing Activities | |||||||||||||
Common stock repurchases | (1,598) | (1,060) | |||||||||||
Payments of long-term debt | (750) | (91) | |||||||||||
Dividends paid | (414) | (408) | |||||||||||
Proceeds from exercises of stock options and issuances of common stock | 97 | 112 | |||||||||||
Excess tax benefits from stock-based compensation | 24 | 12 | |||||||||||
Other financing activities, net | 3 | 3 | |||||||||||
Net cash used in financing activities | (2,638) | (1,432) | |||||||||||
Decrease in cash and cash equivalents | (755) | (747) | |||||||||||
Cash and cash equivalents, beginning of period | 3,701 | 3,275 | |||||||||||
Cash and cash equivalents, end of period | $ 2,946 | $ 2,528 |
NORTHROP GRUMMAN CORPORATION | SCHEDULE 4 | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
(Unaudited) | |||||||||||||
Nine Months Ended | |||||||||||||
September 30 | |||||||||||||
$ in millions | 2011 | 2010 | |||||||||||
Reconciliation of Net Earnings to Net Cash Provided by Operating Activities | |||||||||||||
Net earnings | $ 1,570 | $ 1,677 | |||||||||||
Net earnings from discontinued operations | (34) | (79) | |||||||||||
Adjustments to reconcile to net cash provided by operating activities | |||||||||||||
Depreciation | 334 | 312 | |||||||||||
Amortization of assets | 53 | 83 | |||||||||||
Stock-based compensation | 97 | 103 | |||||||||||
Excess tax benefits from stock-based compensation | (24) | (12) | |||||||||||
(Increase) decrease in | |||||||||||||
Accounts receivable, net | (20) | (558) | |||||||||||
Inventoried costs, net | 22 | (46) | |||||||||||
Prepaid expenses and other current assets | 11 | (2) | |||||||||||
Increase (decrease) in | |||||||||||||
Accounts payable and accruals | (848) | (417) | |||||||||||
Deferred income taxes | 205 | 85 | |||||||||||
Income taxes payable | 4 | (121) | |||||||||||
Retiree benefits | (416) | (61) | |||||||||||
Other, net | 72 | (48) | |||||||||||
Cash provided by continuing operations | 1,026 | 916 | |||||||||||
Cash (used in) provided by discontinued operations | (232) | 150 | |||||||||||
Net cash provided by operating activities | $ 794 | $ 1,066 | |||||||||||
Non-Cash Investing and Financing Activities | |||||||||||||
Share repurchases accrued in accounts payable | $ 63 | $ 6 | |||||||||||
Capital expenditures accrued in accounts payable | 31 | 26 | |||||||||||
Capital expenditures accrued in liabilities from discontinued operations | 29 |
NORTHROP GRUMMAN CORPORATION | SCHEDULE 5 | ||||||||||||
TOTAL BACKLOG AND CONTRACT AWARDS | |||||||||||||
(Unaudited) | |||||||||||||
$ in millions | September 30, 2011 | December 31, 2010 | |||||||||||
FUNDED (1) | UNFUNDED (2) |
TOTAL
BACKLOG |
FUNDED (1) | UNFUNDED (2) |
TOTAL
BACKLOG |
||||||||
Aerospace Systems | $ 9,093 | $ 9,004 | $ 18,097 | (3) | $ 9,185 | $ 11,683 | $ 20,868 | ||||||
Electronic Systems | 7,844 | 2,043 | 9,887 | 8,093 | 2,054 | 10,147 | |||||||
Information Systems | 5,142 | 5,346 | 10,488 | 4,711 | 5,879 | 10,590 | |||||||
Technical Services | 2,831 | 650 | 3,481 | (4) | 2,763 | 2,474 | 5,237 | ||||||
Total | $ 24,910 | $ 17,043 | $ 41,953 | $ 24,752 | $ 22,090 | $ 46,842 | |||||||
(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. | |||||||||||||
(3) Total backlog as of September 30, 2011, was reduced by $1.5 billion for the restructuring of the NPOESS program and the termination of certain space programs. | |||||||||||||
(4)
Total backlog as of September 30, 2011, was reduced by $1.7 billion to reflect a change in the company's participation in the NSTec joint venture.
Effective January 1, 2011, NSTec joint venture results are no longer consolidated in the company's financial statements. |
|||||||||||||
New Awards – The estimated value of contract awards included in backlog during the three months ended September 30, 2011, was $7.8 billion. |