01—Abstract
Summary
Summary of the 10-Q filed April 22, 2009. Cited figures are marked; the original filing is the authoritative source.
Northrop Grumman Corporation (NOC) reported strong financial performance for the first quarter ended March 31, 2009, with a significant increase in sales and operating income compared to the prior year.
Total sales and service revenues rose by 8% to $8.32 billiona, driven by growth across all operating segments. Operating income more than doubled, reaching $655 million, an increase of 41%, largely due to the absence of a substantial charge recorded in the first quarter of 2008 related to shipbuilding contracts. Diluted earnings per share from continuing operations saw a substantial improvement, rising to $1.17 from $0.76 in the same period last year.
The company also highlighted its robust backlog of $76.9 billionb, providing visibility into future revenue streams. Despite a net cash outflow from operating activities in the quarter ($172 million), attributed partly to discretionary pension pre-funding and working capital needs, the company maintained a strong liquidity position. Key strategic initiatives during the quarter included streamlining the organizational structure into five operating segments and continuing its share repurchase program.
02—Key points
Key Highlights
- Total sales and service revenues increased by 8% to $8.32 billion in Q1 2009 compared to Q1 2008.
- Operating income significantly improved to $655 million, a 41% increase, largely benefiting from the reversal of a prior year shipbuilding charge.
- Diluted earnings per share from continuing operations grew to $1.17, up from $0.76 in the prior year's first quarter.
- The company maintained a substantial backlog of $76.9 billion as of March 31, 2009.
- Net cash used in operating activities was $(172) million for the quarter, impacted by pension pre-funding and working capital changes.
- Northrop Grumman repurchased $165 million worth of its shares during the quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2009, Northrop Grumman Corp kept $0.05.
- Revenue$7.93B100.0%
- Cost of revenue−$3.63B45.8%
- Gross profit$4.30B54.2%
- Operating costs−$3.68B46.4%
- Operating income$619.0M7.8%
- Interest, other & tax−$230.0M2.9%
- Net income$389.0M4.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2009filed April 22, 2009Financial Statements
| Revenue | $7.93B |
| Cost of Revenue | $3.63B |
| Gross Profit | $4.30B |
| Operating Income | $619.00M |
| Net Income | $389.00M |
| EPS (Basic) | $1.19 |
| EPS (Diluted) | $1.17 |
| Shares Outstanding (Basic) | 326.90M |
| Shares Outstanding (Diluted) | 332.10M |
05—Questions
Frequently Asked Questions
What was the primary driver for the significant increase in operating income?
The primary driver for the substantial increase in operating income was the absence of a significant pre-tax charge of $326 million recorded in the first quarter of 2008 related to cost growth on the LHD-8 and other Shipbuilding programs. This charge impacted the prior year's results, making the current year's comparison appear stronger.
What is the company's outlook on defense spending, and how does it expect economic uncertainties to affect its business?
Northrop Grumman expects that while the upward trend in overall defense spending may slow, the demand for defense products and services will remain stable. The company anticipates increased investment in areas like intelligence, surveillance, and reconnaissance (ISR) systems, cyber warfare, and information superiority. While acknowledging economic uncertainties, the company believes that spending on homeland security and defense asset modernization will remain a national priority.
Can you explain the net cash used in operating activities for the quarter?
The company reported $(172) million in net cash used in operating activities for the first quarter of 2009. This was primarily due to $214 million in discretionary pension pre-funding contributions and higher trade working capital requirements during the period. This contrasts with net cash provided by operating activities of $194 million in the same period of 2008.
What are the key segments contributing to Northrop Grumman's revenue?
The five reportable segments are Information Systems, Aerospace Systems, Electronic Systems, Shipbuilding, and Technical Services. For the first quarter of 2009, Information Systems generated the highest revenue ($2.49 billion), followed closely by Aerospace Systems ($2.46 billion), Electronic Systems ($1.79 billion), Shipbuilding ($1.38 billion), and Technical Services ($0.63 billion).
06—Continue