10-KPeriod: FY2020

NORTHROP GRUMMAN CORP /DE/ Annual Report, Year Ended Dec 31, 2020

Filed January 28, 2021For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) reported solid performance in 2020, with sales increasing by 9% to $36.8 billion, 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 billion, 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 billion 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.

Financial Statements
Beta
Revenue$36.80B
R&D Expenses$1.10B
Operating Expenses$32.73B
Operating Income$4.07B
Net Income$3.19B
EPS (Basic)$19.08
EPS (Diluted)$19.03
Shares Outstanding (Basic)167.10M
Shares Outstanding (Diluted)167.60M

Key Highlights

  • 1Sales increased by 9% to $36.8 billion in 2020, driven by growth across all four operating segments.
  • 2Net earnings increased by 42% to $3.2 billion, significantly boosted by a reduction in Mark-to-Market pension expenses.
  • 3Total backlog grew by 25% to $81.0 billion at year-end 2020, indicating strong future revenue visibility.
  • 4The company maintains a strong liquidity position with $4.9 billion in cash and cash equivalents.
  • 5Approximately 84% of sales are derived from the U.S. government, highlighting significant customer concentration.
  • 6Northrop Grumman is in the process of divesting its IT and mission support services business for $3.4 billion, expected to close in Q1 2021.
  • 7The company managed operational continuity and employee safety despite the ongoing COVID-19 pandemic.

Frequently Asked Questions

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.

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.

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.

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.