Summary
Northrop Grumman Corporation (NOC) reported increased sales for the second quarter and first six months of 2008 compared to the prior year, driven by growth across all operating segments. However, profitability faced pressure, particularly in the Shipbuilding segment, which incurred significant pre-tax charges totaling $326 million in the first half of 2008 due to cost growth and schedule delays on the LHD-8 contract and other shipyard issues. This resulted in a substantial decrease in overall operating income and diluted earnings per share from continuing operations for the six-month period. Despite the profitability challenges, the company maintained a strong backlog of $66.9 billion at the end of June 2008, indicating robust future business. Financing activities show a significant increase in share repurchases year-over-year, alongside consistent dividend payments. The company's liquidity remains adequate, with cash provided by operating activities supporting its financial obligations and shareholder returns, though it was lower than the previous year due to increased cash paid to suppliers and lower insurance proceeds. Investors should monitor the resolution of the Shipbuilding segment's contract issues and the impact of ongoing government investigations and contract protests.
Financial Highlights
28 data points| Revenue | $8.63B |
| Cost of Revenue | $3.79B |
| Gross Profit | $4.83B |
| Operating Income | $806.00M |
| Net Income | $495.00M |
| EPS (Basic) | $1.46 |
| EPS (Diluted) | $1.44 |
| Shares Outstanding (Basic) | 339.00M |
| Shares Outstanding (Diluted) | 344.10M |
Key Highlights
- 1Total sales and service revenues increased by 9.5% to $8.63 billion for the three months ended June 30, 2008, and by 7.6% to $16.35 billion for the six months ended June 30, 2008, compared to the prior year periods.
- 2Operating income decreased by 5.6% to $806 million for the three months and significantly by 12.4% to $1.27 billion for the six months ended June 30, 2008, primarily impacted by a $326 million pre-tax charge in the Shipbuilding segment related to the LHD-8 contract and other issues.
- 3Diluted earnings per share from continuing operations were $1.40 for the three months ended June 30, 2008 (up from $1.35) but decreased to $2.15 for the six months ended June 30, 2008 (down from $2.46).
- 4The company's total backlog remained strong at $66.9 billion as of June 30, 2008, up from $63.7 billion at December 31, 2007.
- 5Net cash provided by operating activities decreased by 18.2% to $607 million for the three months and by 29.8% to $801 million for the six months ended June 30, 2008, compared to the prior year periods.
- 6Financing activities saw increased common stock repurchases, totaling $1.05 billion for the six months ended June 30, 2008, compared to $718 million in the prior year period.
- 7The company sold its Electro-Optical Systems business in April 2008 for $175 million in cash, recognizing a gain of $19 million.