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Northrop Grumman Reports First Quarter 2009 Financial Results
- Sales Increase to $8.3 Billion - GAAP EPS from Continuing Operations Increase to $1.17; Pension-adjusted EPS of $1.32 - All Operating Sectors Generate Higher Sales and Operating Income - 4.2 Million Shares Repurchased - 2009 EPS Guidance Raised - GAAP EPS Increased to $4.65 to $4.90; Pension-adjusted EPS Increased to $5.30 to $5.55 LOS ANGELES, April 22 /PRNewswire-FirstCall/ -- Northrop Grumman Corporation (NYSE: NOC) reported that first quarter 2009 earnings from continuing operations increased 48 percent to $389 million, or $1.17 per diluted share, compared with $263 million, or $0.76 per diluted share, in the first quarter of 2008. First quarter 2008 earnings were reduced by a pre-tax charge of $326 million, or $0.61 per diluted share, in the company's Shipbuilding sector. Sales for the 2009 first quarter increased 8 percent to $8.3 billion from $7.7 billion in the 2008 first quarter. First quarter 2008 sales were reduced by $134 million due to the $326 million charge in the Shipbuilding sector. In the 2009 first quarter, $172 million of cash was used in operations, including discretionary pension pre-funding of $214 million, compared with $194 million of cash provided by operations in the prior year period. "We're pleased with our first quarter financial results, and we're confident that our products and capabilities continue to be extremely well aligned with current and emerging national security priorities," said Ronald D. Sugar, chairman and chief executive officer.
Financial Highlights
-------------------- First Quarter
------------
($ in millions except per share amounts) 2009 2008
---- ----
Sales $8,320 $7,724
Segment operating income(1) $791 $458
as a % of sales 9.5% 5.9%
Operating income $655 $464
as a % of sales 7.9% 6.0%
Diluted EPS from continuing operations $1.17 $0.76
Average diluted shares outstanding, in millions 332.1 349.3
Cash (used in) provided by operations $(172) $194
Free cash flow(2) $(352) $16
(1) Segment operating income is a non-GAAP measure used as an internal
measure of financial performance for the five sectors and is
reconciled to operating income in the "Business Results" table
presented later in this press release.
(2) Free cash flow is a non-GAAP measure defined as cash from operations
less capital expenditures and outsourcing contract & related software
costs. Management uses free cash flow as an internal measure of
financial performance. Free cash flow is reconciled to cash from
operations in the "Cash Flow Highlights" table presented later in this
press release.
Operating income for the 2009 first quarter increased 41 percent to $655 million from $464 million in the 2008 first quarter due to higher segment operating income, which was partially offset by a $135 million change in net pension adjustment and a $21 million increase in unallocated expense. The first quarter 2009 net pension adjustment is an expense of $76 million compared to income of $59 million in the first quarter of 2008. The increase in unallocated expenses is principally due to higher post-retirement benefit plan and litigation costs. As a percent of sales, operating income increased to 7.9 percent from 6 percent in the prior year period. The higher segment operating income reflects higher sales and operating income for all five operating sectors. As a percent of sales, segment operating income increased to 9.5 percent from 5.9 percent in the prior year period. Segment operating income and margin rate for the 2008 first quarter were reduced by a $326 million charge in the Shipbuilding sector. Federal and foreign income taxes for the 2009 first quarter increased to $201 million from $146 million in the first quarter of 2008. The effective tax rate applied to earnings from continuing operations for the 2009 first quarter was 34.1 percent compared with 35.7 percent in the 2008 first quarter. Earnings per share are based on weighted average diluted shares outstanding of 332.1 million for the first quarter of 2009 and 349.3 million for the first quarter of 2008. Weighted average shares outstanding for the 2009 first quarter include share repurchases of approximately 4.2 million, and for the 2008 first quarter include the dilutive effect of approximately 4.5 million shares of preferred stock. New business awards totaled $7.1 billion in the 2009 first quarter. Total backlog, which includes funded backlog and firm orders for which funding is not currently contractually obligated by the customer, was $76.9 billion as of March 31, 2009.
Pension-adjusted Results
------------------------
First Quarter
------------
($ in millions except per share amounts) 2009 2008
---- ----
Sales $8,320 $7,724
Operating income $655 $464
as a % of sales 7.9% 6.0%
Net pension adjustment 76 (59)
--- ---
Pension-adjusted operating income(1) $731 $405
Pension-adjusted operating margin %(1) 8.8% 5.2%
Earnings from continuing operations $389 $263
Net pension adjustment, after-tax 49 (38)
--- ---
Pension-adjusted earnings from
continuing operations(2) $438 $225
Diluted EPS from continuing operations $1.17 $0.76
Adjustment for net pension 0.15 (0.12)
---- -----
Pension-adjusted diluted EPS from
continuing operations(3) $1.32 $0.64
Weighted average diluted shares
outstanding, in millions 332.1 349.3
(1) Pension-adjusted operating income and margin % are non-GAAP measures
defined as operating income before net pension adjustment and as a %
of sales. Both are reconciled above. Net pension adjustment is a
non-GAAP measure defined as pension expense determined in accordance
with GAAP less pension expense allocated to the business segments
under U.S. Government Cost Accounting Standards. Management uses
pension-adjusted operating income and margin % as internal measures of
the financial performance of the company.
(2) Pension-adjusted earnings from continuing operations is a non-GAAP
measure defined as earnings from continuing operations excluding net
pension adjustment, after-tax at the statutory rate of 35%.
Management uses pension-adjusted earnings from continuing operations
as a performance metric for operating results.
(3) Pension-adjusted diluted EPS from continuing operations is a non-GAAP
measure defined as diluted EPS from continuing operations available to
common shareholders excluding net pension adjustment, after-tax at the
statutory rate of 35%. Management uses pension-adjusted diluted EPS
as a performance metric for operating results.
As reconciled in the table above, first quarter 2009 operating income totaled 8.8 percent of sales when adjusted for the first quarter 2009 net pension adjustment of $76 million expense. First quarter 2008 operating income totaled 5.2 percent of sales when adjusted for the 2008 first quarter net pension adjustment of $59 million income. Pension-adjusted earnings per share from continuing operations increased to $1.32 for the first quarter of 2009 from $0.64 for the first quarter of 2008.
Cash Flow Highlights
--------------------
First Quarter
-----------------------
($ millions) 2009 2008 Change
---- ---- ------
Before discretionary pension pre-funding $42 $194 $(152)
Discretionary pension pre-funding (214) (214)
---- --- ----
Cash (used in) provided by operations (172) 194 (366)
Less:
Capital expenditures 162 143 (19)
Outsourcing contract & related
software costs 18 35 17
--- --- ---
Free cash flow(1) $(352) $16 $(368)
(1) Free cash flow is a non-GAAP measure defined as cash from operations
less capital expenditures and outsourcing contract & related software
costs. Management uses free cash flow as an internal measure of
financial performance.
Cash used in operations in the 2009 first quarter totaled $172 million compared with $194 million provided by operations in the prior year period. The $366 million change includes the impact of $214 million of discretionary pension plan pre-funding as well as higher working capital than in the prior year period. First quarter 2009 free cash outflow totaled $352 million compared with free cash flow of $16 million in the prior year period.
Cash Measurements, Debt and Capital Deployment
----------------------------------------------
($ millions) 3/31/2009 12/31/2008
------------ --------- ----------
Cash & cash equivalents $882 $1,504
Total debt 3,941 3,944
Net debt(1) 3,059 2,440
Net debt to total capital ratio(2) 19% 15%
(1) Total debt less cash and cash equivalents.
(2) Net debt divided by the sum of shareholders' equity and total debt.
Cash and cash equivalents totaled $882 million at March 31, 2009 compared with $1.5 billion at Dec. 31, 2008, and total debt was comparable to the year end 2008. Changes in cash and cash equivalents include the following cash deployment and financing actions during the quarter:
Settlement of Legal Matters As previously reported, on April 2 the company reached an agreement with the U.S. government to settle two legal matters: the Department of Justice's microelectronics claim and the company's claim against the U.S. government related to the award, performance and termination of the Tri-Service Standoff Attack Missile (TSSAM) program. While the settlement amounts for the two claims were equal and therefore offset each other, the company had previously recorded a provision for the microelectronics claim. The company expects that the final impact of the agreement, after other litigation matters and legal costs, will be a pre-tax gain of $60 to $70 million in its second quarter 2009 financial results, and is considered in the 2009 guidance provided below.
2009 EPS Guidance Raised
------------------------
Previous Current
Diluted EPS from continuing operations $4.50 - 4.75 $4.65 - 4.90
Pension-adjusted diluted EPS from
continuing operations $5.15 - 5.40 $5.30 - 5.55
The company will provide additional 2009 guidance detail at its Institutional Investor Conference to be held on May 5, 2009 at its Electronic Systems facility in Baltimore. The Conference will be webcast.
Business Results
----------------
Consolidated Sales & Segment Operating Income
($ millions) First Quarter
-------------------------
2009 2008 Change
---- ---- ------
Sales
Information Systems $2,491 $2,298 8%
Aerospace Systems 2,456 2,361 4%
Electronic Systems 1,788 1,545 16%
Shipbuilding 1,375 1,264 9%
Technical Services 632 558 13%
Intersegment eliminations (422) (302)
---- ---- ---
$8,320 $7,724 8%
Segment operating income
Information Systems $223 $212 5%
Aerospace Systems 258 252 2%
Electronic Systems 229 209 10%
Shipbuilding 84 (218) NM
Technical Services 37 29 28%
Intersegment eliminations (40) (26)
--- --- --
Segment operating income $791 $458 73%
as a % of sales 9.5% 5.9% 360 bps
Reconciliation to operating income:
Unallocated expenses $(53) $(32)
Net pension adjustment(1) (76) 59
Reversal of royalty income included above (7) (21)
--- --- ---
Operating income $655 $464 41%
as a % of sales 7.9% 6.0% 190 bps
(1) Net pension adjustment is a non-GAAP measure defined as pension
expense determined in accordance with GAAP less pension expense
allocated to the business segments under U.S. Government Cost
Accounting Standards.
Operating results for all periods presented reflect the realignment of the former Mission Systems and Information Technology into the Information Systems sector and the realignment of the former Integrated Systems and Space Technology into the Aerospace Systems sector. In addition, the presentation reflects the transfer of certain businesses from Information Systems and Electronic Systems to the Technical Services sector. Schedule 6 provides previously reported quarterly financial results revised to reflect the current reporting structure.
Information Systems
First Quarter ($ millions)
---------------------------
2009 2008
Operating Operating
Sales Income % of Sales Sales Income % of Sales
----- ---------- ---------- ------ ---------- ----------
$2,491 $223 9.0% $2,298 $212 9.2%
------ ---- --- ------ ---- ---
Information Systems first quarter 2009 sales increased 8 percent due to higher sales for command, control & communications, ISR, and intelligence programs. The higher volume for these programs was partially offset by lower volume for commercial, state & local programs. Information Systems operating income rose 5 percent in the 2009 first quarter. As a percent of sales, operating income was 9 percent compared with 9.2 percent in the prior year period. The increase in operating income is due to higher volume. The slightly lower margin rate principally reflects lower performance for commercial, state and local programs.
Aerospace Systems
First Quarter ($ millions)
---------------------------
2009 2008
Operating Operating
Sales Income % of Sales Sales Income % of Sales
----- ---------- ---------- ------ ---------- ----------
$2,456 $258 10.5% $2,361 $252 10.7%
------ --- ---- ------ ---- ----
Aerospace Systems first quarter 2009 sales increased 4 percent, principally due to higher volume for unmanned aircraft programs, including Broad Area Maritime Surveillance (BAMS) Unmanned Aerial System, Unmanned Combat Air Systems Carrier Demonstration (UCAS-D), and Global Hawk; manned programs such as F-35, Joint STARS, B-2, and F/A-18; and restricted programs. Higher volume for these programs was partially offset by the cancellation of the Air Mobility Tanker replacement program and lower volume for the Intercontinental Ballistic Missile (ICBM), E-2D Advanced Hawkeye, and Airborne Laser programs. Aerospace Systems operating income rose 2 percent, and as a percent of sales, was 10.5 percent, slightly lower than the prior year period. The increase in operating income reflects higher volume, and the margin rate for the period reflects the impact of higher positive program adjustments in the 2008 first quarter.
Electronic Systems
First Quarter ($ millions)
---------------------------
2009 2008
Operating Operating
Sales Income % of Sales Sales Income % of Sales
----- ---------- ---------- ------ ---------- ----------
$1,788 $229 12.8% $1,545 $209 13.5%
------ ---- ---- ------ ---- ----
Electronic Systems first quarter 2009 sales increased 16 percent from the prior year period and included higher deliveries for LAIRCM, and higher volume for aerospace systems and postal automation programs, the Space Based Infrared System (SBIRS) program, and intercompany programs. Electronic Systems first quarter 2009 operating income rose 10 percent, and as a percent of sales was 12.8 percent compared with 13.5 percent in the prior year period. The increase in operating income is due to higher volume. The decline in margin rate reflects a net positive impact to royalty income of $15 million for patent infringement settlements in the 2008 first quarter compared to the 2009 first quarter.
Shipbuilding
First Quarter ($ millions)
---------------------------
2009 2008
Operating Operating
Sales Income % of Sales Sales (Loss) % of Sales
----- ---------- ---------- ------ ---------- ----------
$1,375 $84 6.1% $1,264 ($218) NM
------ --- --- ------ ----- ---
Shipbuilding first quarter 2009 sales increased 9 percent, principally due to higher volume for the LHD 8 amphibious assault ship, Virginia-class submarine, and aircraft carrier programs. Higher volume for these programs was partially offset by lower volume on the DDG 51 program. Shipbuilding revenue in the 2008 first quarter was reduced by $134 million due to the revision of the LHD 8 contract's estimate to complete. Shipbuilding operating income for the 2009 first quarter totaled $84 million, or 6.1 percent of sales, compared to a loss of $218 million in the first quarter of 2008. First quarter 2009 operating income includes adjustments for cost growth on the DDG 51 program and LPD 22, as well as positive performance for risk retirement and escalation adjustments on the LHD 8 program. During the 2008 first quarter the company recorded a $326 million charge primarily related to the LHD 8 contract performance and operating impacts to other programs.
Technical Services
First Quarter ($ millions)
---------------------------
2009 2008
Operating Operating
Sales Income % of Sales Sales Income % of Sales
----- ---------- ---------- ----- ---------- ----------
$632 $37 5.9% $558 $29 5.2%
---- --- --- ----- --- ---
Technical Services sales increased 13 percent due to higher volume for life cycle optimization & engineering, and training & simulation programs. Operating income increased 28 percent, and as a percent of sales, increased to 5.9 percent from 5.2 percent in the prior year period. The comparison to first quarter 2008 reflects the higher volume as well as improved performance on several programs. First Quarter Highlights
About Northrop Grumman 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. Northrop Grumman will webcast its earnings conference call at 11:30 a.m. EDT on April 22, 2009. A live audio broadcast of the conference call along with a supplemental presentation will be available on the investor relations page of the company's Web site at http://www.northropgrumman.com. Note: Certain statements and assumptions in this release contain or are based on "forward-looking" information that Northrop Grumman Corporation (the "Company") believes to be within the definition in the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties, and include, among others, statements in the future tense, and all statements accompanied by terms such as "preliminary," "project," "expect," "estimate," "assume," "believe," "plan," "forecast," "intend," "anticipate," "guidance," "outlook," "trends," "target" or variations thereof. This information reflects the Company's best estimates when made, but the Company expressly disclaims any duty to update this information if new data become available or estimates change after the date of this release. Such "forward-looking" information includes, among other things, financial guidance regarding sales, segment operating income, pension expense, employer contributions under pension plans and medical and life benefits plans, cash flow, and earnings per share, and is subject to numerous assumptions and uncertainties, many of which are outside the Company's control. These include the Company's assumptions with respect to the impact of domestic and global economic uncertainties on financial markets, access to capital, value of goodwill and other long-lived assets; changes in government spending; future revenues; expected program performance and cash flows; returns on pension plan assets and variability of pension actuarial and related assumptions and regulatory requirements; the outcome of litigation, claims, appeals, bid protests, and investigations; hurricane-related insurance recoveries; environmental remediation; acquisitions and divestitures of businesses; joint ventures and other business arrangements; performance issues with, and financial viability of, key suppliers and subcontractors; product performance and the successful execution of internal plans; successful negotiation of contracts with labor unions; allowability and allocability of costs under U.S. Government contracts; effective tax rates and timing and amounts of tax payments; the results of any audit or appeal process with the Internal Revenue Service; the availability and retention of skilled labor; and anticipated costs of capital investments, among other things. The Company's operations are subject to various additional risks and uncertainties resulting from its position as a supplier, either directly or as subcontractor or team member, to the U.S. government and its agencies as well as to foreign governments and agencies; actual outcomes are dependent upon various factors, including, without limitation, the Company's successful performance of internal plans; government customers' budgetary constraints; customer changes in short-range and long-range plans; domestic and international competition in both the defense and commercial areas; technical, operational or quality setbacks that could adversely affect the profitability or cash flow of the Company; product performance; continued development and acceptance of new products and, in connection with any fixed-price development programs, controlling cost growth in meeting production specifications and delivery rates; performance issues with key suppliers and subcontractors; government import and export policies; acquisition or termination of government contracts; the outcome of political and legal processes and of the assertion or prosecution of potential substantial claims by or on behalf of a U.S. government customer; natural disasters, including amounts and timing of recoveries under insurance contracts, availability of materials and supplies, continuation of the supply chain, contractual performance relief and the application of cost sharing terms, allowability and allocability of costs under U.S. Government contracts, impacts of timing of cash receipts and the availability of other mitigating elements; terrorist acts; legal, financial and governmental risks related to international transactions and global needs for military aircraft, military and civilian electronic systems and support, information technology, naval vessels, space systems, technical services and related technologies, as well as other economic, political and technological risks and uncertainties and other risk factors set out in the Company's filings from time to time with the Securities and Exchange Commission, including, without limitation, Company reports on Form 10-K and Form 10-Q. This release and its attachments also contain non-GAAP financial measures and include a GAAP reconciliation of the Company's use of these financial measures. 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 SCHEDULE 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended
March 31,
-------------------
$ in millions, except per share amounts 2009 2008
--------------------------------------- ---- ----
Sales and Service Revenues
Product sales $4,570 $4,394
Service revenues 3,750 3,330
---------------- ----- -----
Total sales and service revenues $8,320 $7,724
-------------------------------- ------ ------
Cost of Sales and Service Revenues
Cost of product sales 3,635 3,729
Cost of service revenues 3,281 2,793
General and administrative expenses 749 738
----------------------------------- --- ---
Operating income $655 $464
Other (expense) income
Interest expense (73) (77)
Other, net 8 22
---------- --- ---
Earnings from continuing operations
before income taxes 590 409
Federal and foreign income taxes 201 146
-------------------------------- --- ---
Earnings from continuing operations 389 263
Income from discontinued operations, net of tax 1
----------------------------------------------- --- ---
Net earnings $389 $264
------------ ---- ----
Basic Earnings Per Share
Continuing operations $1.19 $.78
Discontinued operations
----------------------- --- ---
Basic earnings per share $1.19 $.78
------------------------ ----- ----
Weighted-average common shares
outstanding, in millions 326.9 338.8
------------------------------- ----- -----
Diluted Earnings Per Share
Continuing operations $1.17 $.76
Discontinued operations
----------------------- --- ---
Diluted earnings per share $1.17 $.76
-------------------------- ----- ----
Weighted-average diluted
shares outstanding, in
millions 332.1 349.3
------------------------- ----- -----
NORTHROP GRUMMAN CORPORATION SCHEDULE 2
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)
March 31, December 31,
$ in millions 2009 2008
------------- -------- -----------
Assets
Cash and cash equivalents $882 $1,504
Accounts receivable, net of progress payments 4,416 3,904
Inventoried costs, net of progress payments 1,178 1,003
Deferred income taxes 520 549
Prepaid expenses and other current assets 256 229
---------------------------------- --- ---
Total current assets 7,252 7,189
Property, plant, and equipment, net of
accumulated depreciation of $3,925 in 2009
and $3,803 in 2008 4,777 4,810
Goodwill 14,524 14,518
Other purchased intangibles, net of
accumulated amortization of $1,821 in 2009
and $1,795 in 2008 921 947
Pension and postretirement plan assets 292 290
Long-term deferred tax assets 1,455 1,510
Miscellaneous other assets 921 933
-------------------------- --- ---
Total assets $30,142 $30,197
------------ ------- -------
Liabilities
Notes payable to banks $24 $24
Current portion of long-term debt 565 477
Trade accounts payable 1,924 1,943
Accrued employees' compensation 1,280 1,284
Advance payments and billings in
excess of costs incurred 1,953 2,036
Other current liabilities 1,763 1,660
------------------------- ----- -----
Total current liabilities 7,509 7,424
Long-term debt, net of current portion 3,352 3,443
Pension and postretirement plan liabilities 5,721 5,823
Other long-term liabilities 1,503 1,587
--------------------------- ----- -----
Total liabilities 18,085 18,277
----------------- ------ ------
Commitments and Contingencies
Shareholders' Equity
Common stock, $1 par value; 800,000,000 shares
authorized; issued and outstanding:
2009 - 324,674,859; 2008 - 327,012,663 325 327
Paid-in capital 9,482 9,645
Retained earnings 5,846 5,590
Accumulated other comprehensive loss (3,596) (3,642)
------------------------------------ ------ ------
Total shareholders' equity 12,057 11,920
-------------------------- ------ ------
Total liabilities and shareholders' equity $30,142 $30,197
------------------------------------------ ------- -------
NORTHROP GRUMMAN CORPORATION SCHEDULE 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
-----------------
$ in millions 2009 2008
------------- ---- ----
Operating Activities
Sources of Cash - Continuing Operations
Cash received from customers
Progress payments $1,174 $1,608
Collections on billings 6,326 5,950
Other cash receipts 51 33
------------------- --- ---
Total sources of cash -
continuing operations 7,551 7,591
------------------------ ----- -----
Uses of Cash - Continuing Operations
Cash paid to suppliers and employees (7,530) (7,189)
Interest paid, net of interest received (98) (106)
Income taxes paid, net of refunds received (73) (52)
Excess tax benefits from stock-based
compensation (44)
Other cash payments (22) (3)
------------------- --- ---
Total uses of cash -
continuing operations (7,723) (7,394)
---------------------- ------ ------
Cash (used in) provided by
continuing operations (172) 197
Cash used in discontinued operations (3)
------------------------------------ ---
Net cash (used in) provided by
operating activities (172) 194
---------------------------- ---- ---
Investing Activities
Additions to property, plant, and equipment (162) (143)
Payments for outsourcing
contract costs and related
software costs (18) (35)
Decrease in restricted cash 3 26
Other investing activities, net 1 4
------------------------------- --- ---
Net cash used in investing activities (176) (148)
------------------------------------- ---- ----
Financing Activities
Net (payments) borrowings under
lines of credit (1) 33
Proceeds from exercises of
stock options and issuances of
common stock 8 69
Dividends paid (131) (126)
Excess tax benefits from stock-based
compensation 44
Common stock repurchases (150) (600)
------------------------ ---- ----
Net cash used in financing activities (274) (580)
------------------------------------- ---- ----
Decrease in cash and cash equivalents (622) (534)
Cash and cash equivalents,
beginning of period 1,504 963
-------------------------- ----- ---
Cash and cash equivalents, end of period $882 $429
---------------------------------------- ---- ----
NORTHROP GRUMMAN CORPORATION SCHEDULE 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
-----------------
$ in millions 2009 2008
------------- ---- ----
Reconciliation of Net Earnings to Net Cash (used in)
Provided by Operating Activities
Net Earnings $389 $264
Adjustments to reconcile to net cash (used in)
provided by operating activities
Depreciation 137 136
Amortization of assets 38 62
Stock-based compensation 35 44
Excess tax benefits from stock-based compensation (44)
Decrease (increase) in
Accounts receivable (1,762) (2,080)
Inventoried costs (355) (266)
Prepaid expenses and other current assets (33) (15)
Increase (decrease) in
Progress payments 1,431 1,642
Accounts payable and accruals (230) 254
Deferred income taxes 45 26
Income taxes payable 131 112
Retiree benefits (5) 31
Other non-cash transactions, net 7 31
-------------------------------- --- ---
Cash (used in) provided by continuing operations (172) 197
Cash used in discontinued operations (3)
------------------------------------ ----- ---
Net cash (used in) provided by operating
activities $(172) $194
---------------------------------------- ----- ----
Non-Cash Investing and Financing Activities
Mandatorily redeemable convertible preferred stock
converted into common stock $304
-------------------------------------------------- ----
NORTHROP GRUMMAN CORPORATION SCHEDULE 5
TOTAL BACKLOG AND CONTRACT AWARDS
(unaudited)
$ in millions March 31, 2009 December 31, 2008 (3)
------------- ----------------------- ------------------------
FUNDED UNFUNDED TOTAL FUNDED UNFUNDED TOTAL
(1) (2) BACKLOG (1) (2) BACKLOG
------ -------- ------- ------ -------- --------
Information Systems $5,188 $4,549 $9,737 $5,310 $4,672 $9,982
Aerospace Systems 8,967 21,315 30,282 7,648 22,883 30,531
Electronic Systems 8,355 2,355 10,710 8,391 2,124 10,515
Shipbuilding 13,415 8,411 21,826 14,205 8,148 22,353
Technical Services 1,728 2,595 4,323 1,840 2,831 4,671
----- ----- ----- ----- ----- -----
Total $37,653 $39,225 $76,878 $37,394 $40,658 $78,052
------- ------- ------- ------- ------- -------
(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) Certain prior period amounts have been reclassified to conform to the
2009 presentation.
CONTRACT AWARDS
---------------
The estimated value of contract awards included in backlog during the
three months ended March 31, 2009, was approximately $7.1 billion.
Significant new awards during this period include $637 million for
Virginia-class MPU & SSTG programs, $374 million for construction
preparation of the Gerald R. Ford class aircraft carrier, $325 million for
the B-2 program, $255 million for LAIRCM IDIQ, and various restricted
awards.
In the three months ended March 31, 2008, the company was awarded a $1.5
billion contract by the U.S. Air Force to replace its aerial refueling
tanker fleet. However, the losing bidder for the contract successfully
protested the award decision by the U.S. Air Force, and in the fourth
quarter of 2008, the company reduced total backlog by $1.5 billion to
reflect the termination of the U.S. Air Force refueling tanker program,
pending a recompete by the DoD.
NORTHROP GRUMMAN CORPORATION SCHEDULE 6
REALIGNED SEGMENT OPERATING RESULTS
($ in millions)
(unaudited)
NET SALES
---------
2006 2007 2008
----- ----- ------------------------------------
Total Total Three Months Ended Total
Year Year Mar 31 Jun 30 Sep 30 Dec 31 Year
---- ---- ------ ------ ------ ------ ----
AS REPORTED (1)
Information &
Services
Mission Systems $4,704 $5,077 $1,298 $1,388 $1,417 $1,537 $5,640
Information
Technology 3,962 4,486 1,085 1,215 1,085 1,133 4,518
Technical
Services 1,858 2,177 505 572 607 612 2,296
----- ----- --- --- --- --- -----
10,524 11,740 2,888 3,175 3,109 3,282 12,454
Aerospace
Integrated
Systems 5,500 5,067 1,340 1,358 1,345 1,461 5,504
Space
Technology 3,869 4,176 1,022 1,118 1,079 1,117 4,336
----- ----- ----- ----- ----- ----- -----
9,369 9,243 2,362 2,476 2,424 2,578 9,840
Electronics 6,267 6,528 1,555 1,675 1,814 2,046 7,090
Shipbuilding 5,321 5,788 1,264 1,688 1,451 1,742 6,145
Intersegment
Eliminations (1,490) (1,471) (345) (386) (417) (494) (1,642)
------ ------ ---- ---- ---- ---- ------
Total $29,991 $31,828 $7,724 $8,628 $8,381 $9,154 $33,887
------- ------- ------ ------ ------ ------ -------
REALIGNED (2)
Information
Systems $8,383 $9,245 $2,298 $2,512 $2,410 $2,557 $9,777
Aerospace Systems 9,358 9,234 2,361 2,472 2,417 2,575 9,825
Electronic
Systems 6,201 6,466 1,545 1,665 1,808 2,030 7,048
Shipbuilding 5,321 5,788 1,264 1,688 1,451 1,742 6,145
Technical
Services 2,090 2,422 558 634 665 678 2,535
Intersegment
Eliminations (1,362) (1,327) (302) (343) (370) (428) (1,443)
------ ------ ---- ---- ---- ---- ------
Total $29,991 $31,828 $7,724 $8,628 $8,381 $9,154 $33,887
------- ------- ------ ------ ------ ------ -------
SEGMENT OPERATING INCOME (3)
----------------------------
2006 2007 2008
----- ---- ------------------------------------
Total Total Three Months Ended Total
Year Year Mar 31 Jun 30 Sep 30 Dec 31 Year
---- ---- ------ ------ ------ ------ ----
AS REPORTED (1)
Information &
Services
Mission Systems $451 $508 $128 $133 $128 $119 $508
Information
Technology 342 329 89 82 37 97 305
Technical
Services 120 120 26 36 31 28 121
--- --- --- --- --- --- ---
913 957 243 251 196 244 934
Aerospace
Integrated
Systems 551 591 170 143 144 156 613
Space
Technology 311 329 82 93 90 (461) (196)
--- --- --- --- --- ---- ----
862 920 252 236 234 (305) 417
Electronics 786 813 209 202 264 277 952
Shipbuilding 393 538 (218) 126 118 (2,333) (2,307)
Intersegment
Eliminations (117) (113) (28) (31) (44) (38) (141)
---- ---- --- --- --- --- ----
Total $2,837 $3,115 $458 $784 $768 $(2,155) $(145)
------ ------ ---- ---- ---- ------- -----
REALIGNED (2)
Information
Systems $771 $815 $212 $207 $156 $208 $783
Aerospace Systems 861 919 252 236 233 (305) 416
Electronic
Systems 783 809 209 201 261 276 947
Shipbuilding 393 538 (218) 126 118 (2,333) (2,307)
Technical
Services 139 139 29 42 39 34 144
Intersegment
Eliminations (110) (105) (26) (28) (39) (35) (128)
---- ---- --- --- --- --- ----
Total $2,837 $3,115 $458 $784 $768 $(2,155) $(145)
------ ------ ---- ---- ---- ------- -----
(1) "As reported" amounts are as of December 31, 2008, which reflects the
Park Air / Remotec realignment, Missile Systems realignment, and the
presentation of Electro-Optical Systems as a discontinued operation
and are reported in the 2008 Form 10-K. 2008 quarterly results for
the three months ended Mar. 31, Jun. 30, and Sep. 30 were previously
reported in Schedule 6 of the Third Quarter 2008 earnings release.
(2) Reported amounts adjusted to reflect the realignment of certain
logistics, services, and technical support programs and assets from
the Information Systems and Electronic Systems segments to the
Technical Services segment and the streamlining of the company's
organizational structure by reducing the number of operating segments
from seven to five.
(3) Non-GAAP measure. Management uses segment operating income as an
internal measure of financial performance for the individual business
segments.
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