01—Abstract
Summary
Summary of the 10-K filed January 28, 2021. Cited figures are marked; the original filing is the authoritative source.
Northrop Grumman Corporation (NOC) reported solid performance in 2020, with sales increasing by 9% to $36.8 billiona, driven by growth across all four operating segments: Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems.
The company's operating income saw a modest 2% increase, reaching $4.1 billionb, though the operating margin rate slightly decreased to 11.0% from 11.7% primarily due to a lower margin rate at Aeronautics Systems and increased unallocated corporate expenses. Net earnings rose significantly by 42% to $3.2 billion, largely benefiting from a substantial reduction in Mark-to-Market (MTM) pension and other postretirement benefit (OPB) expenses. The company ended the year with a robust backlog of $81.0 billion, representing a 25% increase, indicating strong future revenue potential.
Management highlighted the company's financial flexibility, with $4.9 billionc in cash and cash equivalents at year-end, and the successful issuance of $2.25 billion in unsecured senior notes to preserve liquidity amidst economic uncertainties. Northrop Grumman remains heavily reliant on U.S. government contracts, with 84% of sales attributed to this customer base, underscoring the importance of government spending and priorities for future performance. The company also noted its ongoing efforts to manage the impacts of COVID-19, including employee safety measures and supply chain support, and is preparing for the sale of its IT and mission support services business in early 2021.
02—Key points
Key Highlights
- Sales increased by 9% to $36.8 billion in 2020, driven by growth across all four operating segments.
- Net earnings increased by 42% to $3.2 billion, significantly boosted by a reduction in Mark-to-Market pension expenses.
- Total backlog grew by 25% to $81.0 billion at year-end 2020, indicating strong future revenue visibility.
- The company maintains a strong liquidity position with $4.9 billion in cash and cash equivalents.
- Approximately 84% of sales are derived from the U.S. government, highlighting significant customer concentration.
- Northrop Grumman is in the process of divesting its IT and mission support services business for $3.4 billion, expected to close in Q1 2021.
- The company managed operational continuity and employee safety despite the ongoing COVID-19 pandemic.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed January 28, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $36.80B$33.84B | +8.7% |
| R&D Expenses | $1.10B$953.00M | +15.4% |
| Operating Expenses | $32.73B$29.87B | +9.6% |
| Operating Income | $4.07B$3.97B | +2.4% |
| Net Income | $3.19B$2.25B | +41.9% |
| EPS (Basic) | $19.08$13.28 | +43.7% |
| EPS (Diluted) | $19.03$13.22 | +43.9% |
| Shares Outstanding (Basic) | 167.10M169.30M | −1.3% |
| Shares Outstanding (Diluted) | 167.60M170.00M | −1.4% |
05—Questions
Frequently Asked Questions
What is Northrop Grumman's primary revenue source?
Northrop Grumman's primary revenue source is its U.S. government contracts, which accounted for 84% of total sales in 2020. The company's business is heavily concentrated with the U.S. Department of Defense and intelligence community.
How did the company's financial performance trend in 2020?
In 2020, Northrop Grumman experienced strong top-line growth with a 9% increase in sales to $36.8 billion. Net earnings saw a substantial increase of 42% to $3.2 billion, largely due to a significant decrease in Mark-to-Market pension expenses. Operating income grew by 2% to $4.1 billion, although operating margin slightly decreased year-over-year.
What is the significance of the company's backlog?
The company's backlog represents its remaining performance obligations and stood at $81.0 billion at the end of 2020, a 25% increase from the previous year. This substantial backlog provides strong visibility into future revenue and indicates continued demand for Northrop Grumman's products and services.
What major corporate actions were undertaken in 2020?
In 2020, Northrop Grumman entered into an agreement to sell its IT and mission support services business for $3.4 billion, which was expected to close in the first quarter of 2021. The company also managed operational impacts of the COVID-19 pandemic, including employee safety measures and supply chain support, while maintaining strong financial liquidity.
06—Continue