Summary
Northrop Grumman Corporation reported strong first-quarter 2002 results, driven significantly by recent acquisitions including Litton Industries, Newport News Shipbuilding, and the Electronics and Information Systems Group of Aerojet-General. Total net sales more than doubled to $4.1 billion from $2.0 billion in the prior year's comparable quarter, reflecting the integration of these strategic acquisitions. Net income increased to $149 million ($1.27 per diluted share) from $103 million ($1.42 per diluted share) in Q1 2001, though a decline in diluted EPS was attributed to a substantial increase in the number of outstanding shares, higher interest expenses, and reduced pension income. The company adopted SFAS No. 142, eliminating goodwill amortization, which positively impacted reported earnings. The balance sheet shows significant increases in goodwill and other purchased intangibles due to the acquisitions. Despite a cash outflow from operations in the quarter, the company anticipates generating sufficient cash flow for debt servicing, capital expenditures, and dividends for the remainder of the year, with a significant tax payment related to the B-2 contract expected in March 2003. Management is also actively pursuing a potential combination with TRW, which could further reshape the company's portfolio.
Key Highlights
- 1Total net sales for Q1 2002 surged to $4.1 billion, more than double the $2.0 billion reported in Q1 2001, primarily due to contributions from recent large acquisitions (Litton, Newport News, EIS).
- 2Net income rose to $149 million in Q1 2002 from $103 million in Q1 2001, however, diluted earnings per share decreased to $1.27 from $1.42, largely due to an increased number of outstanding shares.
- 3The company adopted SFAS No. 142, ceasing goodwill amortization. Pro forma adjustments for Q1 2001 show that without goodwill amortization, adjusted net income was $132 million and adjusted diluted EPS was $1.81.
- 4Goodwill on the balance sheet increased significantly to $8.92 billion from $8.67 billion, with other purchased intangibles also rising to $1.58 billion from $1.14 billion, reflecting purchase accounting for acquisitions.
- 5Funded order backlog more than doubled to $22.4 billion from $10.3 billion year-over-year, indicating a strong pipeline of future business.
- 6The company is exploring a significant strategic move with a proposed acquisition of TRW, signaling active portfolio management and growth ambitions.
- 7A jury verdict of approximately $31 million plus pre-judgment interest ($37 million) for cost overruns on an old aircraft prototype is under appeal.