Summary
Northrop Grumman Corporation (NOC) reported third-quarter 2008 results showing a 6% increase in sales and service revenues to $8.38 billion, driven by growth across most segments, particularly Aerospace and Electronics. However, operating income saw a 6% decrease to $771 million, primarily impacted by significant charges in the Shipbuilding segment related to the LHD-8 contract and Hurricane Ike's impact on a subcontractor. Despite these headwinds, the company's liquidity remained strong, with net cash provided by operating activities increasing to $1.37 billion for the quarter. The company also completed the conversion and redemption of its mandatorily redeemable convertible preferred stock, strengthening its capital structure.
Financial Highlights
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Financial Statements
Beta
| Revenue | $8.38B |
| Cost of Revenue | $3.68B |
| Gross Profit | $4.70B |
| Operating Income | $771.00M |
| Net Income | $512.00M |
| EPS (Basic) | $1.53 |
| EPS (Diluted) | $1.51 |
| Shares Outstanding (Basic) | 334.20M |
| Shares Outstanding (Diluted) | 340.10M |
Key Highlights
- 1Total sales and service revenues increased by 6.5% to $8.38 billion for the third quarter of 2008 compared to the prior year's $7.87 billion.
- 2Operating income decreased by 4.5% to $771 million in Q3 2008 from $806 million in Q3 2007.
- 3Diluted earnings per share from continuing operations increased to $1.50 in Q3 2008 from $1.41 in Q3 2007.
- 4The Shipbuilding segment experienced a significant operating income decline of 36% in Q3 2008, largely due to charges related to the LHD-8 contract and subcontractor issues stemming from Hurricane Ike.
- 5Net cash provided by operating activities increased to $1.37 billion for the third quarter of 2008, up from $1.01 billion in the same period of 2007.
- 6The company acquired 3001 International, Inc. in early October 2008 for approximately $92 million to enhance its geospatial data capabilities within the Information Technology segment.
Frequently Asked Questions
The increase in sales and service revenues was primarily driven by higher sales in the Aerospace, Electronics, and Mission Systems segments. The Aerospace segment benefited from programs like UCAS-D and B-2, while Electronics saw growth in areas like Land Forces and Aerospace Systems. Mission Systems also contributed with increased sales in ISR and C3 programs.
The decrease in operating income was mainly due to significant charges within the Shipbuilding segment. This included cost growth and schedule delays on LPD ships due to Hurricane Ike's impact on a subcontractor, a more conservative risk assessment on Gulf Coast shipyard programs, and a performance improvement adjustment on the LHD-8 contract. Additionally, the Information Technology segment reported a negative performance adjustment of $57 million on the NYCWiN program.
The company's liquidity has improved. Net cash provided by operating activities for the third quarter of 2008 increased to $1.37 billion from $1.01 billion in the same period of 2007. This was largely due to improved trade working capital and higher patent infringement settlements.
The acquisition of 3001 International, Inc. for approximately $92 million strengthens Northrop Grumman's capabilities in geospatial data production and analysis. This acquisition is expected to be reported within the Information Technology segment and complements the company's offerings for government intelligence, defense, and civilian customers.