01—Abstract
Summary
Summary of the 10-K filed February 20, 2008. Cited figures are marked; the original filing is the authoritative source.
Northrop Grumman Corporation (NOC) reported robust performance in its 2007 fiscal year, with sales reaching a record $32 billiona, marking a 6% increase over the previous year.
This growth was driven by strong performance in its Information & Services segment, particularly within Information Technology and Technical Services, and improved sales in the Electronics and Ships segments. The company's operating margin saw a significant 22% increase, reflecting improved operational efficiency and favorable contract performance across its diverse business segments. Key financial highlights include a record $2.9 billionb in cash from operations, driven by strong net income and effective working capital management.
The company also continued its commitment to shareholder value by repurchasing $1.2 billionc in common stock and maintaining a healthy backlog of $64.1 billion, indicating continued demand for its technologically advanced defense and security solutions. Looking ahead, Northrop Grumman anticipates further sales growth in 2008, supported by its strong backlog and strategic focus on high-priority defense programs, despite a projected slower growth rate in the overall U.S. defense budget.
02—Key points
Key Highlights
- Achieved record sales of $32 billion in 2007, a 6% increase year-over-year.
- Reported a 22% increase in operating margin, indicating improved profitability.
- Generated a record $2.9 billion in cash from operations.
- Repurchased $1.2 billion of common stock, demonstrating commitment to shareholder returns.
- Maintained a substantial backlog of $64.1 billion, signaling strong future revenue potential.
- Experienced revenue growth in Information & Services (11%) and Electronics/Ships segments, offsetting a planned decrease in Aerospace.
- Acquired Essex Corporation for approximately $590 million to enhance signal processing and optoelectronic capabilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2007, Northrop Grumman Corp kept $0.06.
- Revenue$30.34B100.0%
- Cost of revenue−$14.34B47.3%
- Gross profit$16.00B52.7%
- Operating costs−$13.08B43.1%
- Operating income$2.92B9.6%
- Interest, other & tax−$1.14B3.7%
- Net income$1.79B5.9%
Where FY2007 revenue went
$30.34B- Cost of revenue: $14.34B, 47% of revenue
- Operating costs: $13.08B, 43% of revenue
- Net income: $1.79B, 5.9% of revenue
- Interest, other & tax: $1.14B, 3.7% of revenue
Kept 5.9% as net incomeNet income $1.79B · 5.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 20, 2008Financial Statements
| Revenue | $30.34B |
| Cost of Revenue | $14.34B |
| Gross Profit | $16.00B |
| Operating Income | $2.92B |
| Net Income | $1.79B |
| EPS (Basic) | $5.24 |
| EPS (Diluted) | $5.12 |
| Shares Outstanding (Basic) | 341.70M |
| Shares Outstanding (Diluted) | 354.30M |
05—Questions
Frequently Asked Questions
What were the main drivers of Northrop Grumman's revenue growth in 2007?
Northrop Grumman's revenue growth in 2007 was primarily driven by strong performance in its Information & Services segment, particularly within the Information Technology and Technical Services businesses. Additionally, the Electronics and Ships segments saw improved sales, contributing to the overall 6% increase in total revenues to a record $32 billion.
How did the company manage its cash flow and what were its capital allocation priorities?
The company generated a record $2.9 billion in cash from operations in 2007. Its capital allocation priorities included strategic business acquisitions, such as the acquisition of Essex Corporation for $590 million, returning cash to shareholders through $1.2 billion in share repurchases and dividend payments, and investing in research and development and capital expenditures to support future growth.
What is the outlook for Northrop Grumman in 2008, given the defense spending environment?
Despite a projected slower growth rate in the U.S. defense budget, Northrop Grumman anticipates continued revenue growth in 2008, projecting sales of approximately $33 billion. This optimism is supported by a backlog of $64 billion and the company's focus on technologically advanced products and services critical to national defense, particularly in areas like intelligence, surveillance, and cybersecurity.
What are the key risks identified by the company in its 10-K filing?
The company's primary risk is its heavy dependence on the U.S. Government as a single customer, making it susceptible to federal budget processes and political changes. Other significant risks include the complexity and technological challenges of its contracts, potential contract cost growth, reliance on estimates, navigating domestic and international regulations, and disruptions from suppliers or workforce issues.
06—Continue