10-QPeriod: Q1 FY2009

NORTHROP GRUMMAN CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2009

Filed April 22, 2009For Securities:NOC

Summary

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 billion, 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 billion, 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.

Financial Highlights

28 data points
Beta

Revenue

$7.93B

54.2% Gross Margin

Net Income

$389.00M

4.9% Net Margin

EPS (Diluted)

$1.17

Cash & Equivalents

$882.00M

Free Cash Flow

-$334.00M

Financial Statements
Beta
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

Key Highlights

  • 1Total sales and service revenues increased by 8% to $8.32 billion in Q1 2009 compared to Q1 2008.
  • 2Operating income significantly improved to $655 million, a 41% increase, largely benefiting from the reversal of a prior year shipbuilding charge.
  • 3Diluted earnings per share from continuing operations grew to $1.17, up from $0.76 in the prior year's first quarter.
  • 4The company maintained a substantial backlog of $76.9 billion as of March 31, 2009.
  • 5Net cash used in operating activities was $(172) million for the quarter, impacted by pension pre-funding and working capital changes.
  • 6Northrop Grumman repurchased $165 million worth of its shares during the quarter.

Frequently Asked Questions

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.

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.

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.

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).