01—Abstract
Summary
Summary of the 10-K filed February 5, 2013. Cited figures are marked; the original filing is the authoritative source.
Northrop Grumman Corporation (NOC) reported total sales of $25.2 billiona for the year ended December 31, 2012.
The company operates across four key sectors: Aerospace Systems, Electronic Systems, Information Systems, and Technical Services, with a significant focus on serving the U.S. Government, which accounted for over 90% of its revenue. The company's backlog stood at $40.8 billionb, indicating a strong pipeline of future work. While sales saw a decrease compared to the previous year, operational efficiency and performance improvements in certain segments, particularly Electronic Systems, helped maintain a stable operating income.
The company also continued its share repurchase program and dividend payments, returning value to shareholders. Investors should note the significant reliance on U.S. Government spending, which is subject to budgetary constraints and policy changes, as highlighted in the risk factors.
The company's ability to adapt to evolving defense strategies and technological advancements across its diverse portfolio is crucial for sustained growth. Management's focus on cost reduction and efficiency, evident in segment performance, provides a positive outlook amidst a challenging geopolitical and economic environment.
02—Key points
Key Highlights
- Total sales of $25.2 billion for the year ended December 31, 2012.
- U.S. Government accounted for over 90% of total revenue, emphasizing customer concentration.
- Total backlog of $40.8 billion, with $21.4 billion expected to be converted into sales in 2013.
- Operating income remained stable at $3.13 billion, with an operating margin rate of 12.4%.
- Company completed the spin-off of its former Shipbuilding business (Huntington Ingalls Industries) in 2011.
- Continued share repurchases and dividend payments, indicating commitment to shareholder returns.
- Significant investment in research and development ($520 million) to maintain technological competitiveness.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Northrop Grumman Corp kept $0.08.
- Revenue$25.22B100.0%
- Cost of revenue−$10.41B41.3%
- Gross profit$14.80B58.7%
- Operating costs−$11.67B46.3%
- Operating income$3.13B12.4%
- Interest, other & tax−$1.15B4.6%
- Net income$1.98B7.8%
Where FY2012 revenue went
$25.22B- Other operating costs: $11.15B, 44% of revenue
- Cost of revenue: $10.41B, 41% of revenue
- Net income: $1.98B, 7.8% of revenue
- R&D: $520.0M, 2.1% of revenue
- Interest, other & tax: $1.15B, 4.6% of revenue
Kept 7.8% as net incomeNet income $1.98B · 7.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 5, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $25.22B$26.41B | −4.5% |
| Cost of Revenue | $10.41B$11.49B | −9.4% |
| Gross Profit | $14.80B$14.92B | −0.8% |
| R&D Expenses | $520.00M$543.00M | −4.2% |
| Operating Income | $3.13B$3.28B | −4.5% |
| Net Income | $1.98B$2.12B | −6.6% |
| EPS (Basic) | $7.96$7.65 | +4.1% |
| EPS (Diluted) | $7.81$7.52 | +3.9% |
| Shares Outstanding (Basic) | 248.60M276.80M | −10.2% |
| Shares Outstanding (Diluted) | 253.40M281.60M | −10.0% |
05—Questions
Frequently Asked Questions
What is Northrop Grumman's primary customer base?
Northrop Grumman's primary customer is the U.S. Government, which accounted for 90 percent or more of its total revenues in each of the years presented (2010-2012). The company also conducts business with local, state, and foreign governments, as well as domestic and international commercial customers.
How did the spin-off of Huntington Ingalls Industries (HII) affect the company?
Effective March 31, 2011, Northrop Grumman completed the spin-off of its former Shipbuilding business (HII). As a result, the assets, liabilities, and results of operations for the former Shipbuilding segment have been reclassified as discontinued operations for all periods presented. This strategic move allowed both companies to pursue their respective opportunities more effectively.
What are the main risks highlighted by Northrop Grumman in its 2012 10-K filing?
Key risks highlighted include heavy dependence on the U.S. Government as a single customer, potential reductions in government spending and appropriations (including sequestration), the ability to comply with stringent procurement regulations, intense competition, the need for continuous technological innovation, and the impact of subcontractor performance and supply chain disruptions.
06—Continue