10-QPeriod: Q3 FY2010

NORTHROP GRUMMAN CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2010

Filed October 27, 2010For Securities:NOC

Summary

Northrop Grumman Corporation reported solid financial results for the third quarter and the first nine months of 2010. Total sales and service revenues increased year-over-year, driven by growth in key segments like Aerospace Systems, Electronic Systems, and Technical Services. Operating income also saw a healthy rise, reflecting improved performance and cost management. The company demonstrated strong operational efficiency, with margins expanding in several segments. Significant strategic developments include the announcement of exploring alternatives for the Shipbuilding segment, including a potential spin-off, and the consolidation of Gulf Coast shipbuilding operations. The company maintained a robust balance sheet with substantial liquidity. Shareholder returns were supported by an increased quarterly dividend and significant share repurchases. Management also highlighted a favorable IRS settlement that provided a significant tax benefit. Looking ahead, while acknowledging potential impacts from evolving U.S. government budget priorities and acquisition reforms, Northrop Grumman remains confident in its ability to secure future business due to its strong position in critical defense and government technology programs.

Financial Highlights

47 data points
Beta

Revenue

$7.07B

58.7% Gross Margin

Net Income

$497.00M

7.0% Net Margin

EPS (Diluted)

$1.67

Total Assets

$30.18B

Cash & Equivalents

$2.53B

Free Cash Flow

$855.00M

Financial Statements
Beta
Revenue$7.07B
Cost of Revenue$2.92B
Gross Profit$4.15B
Operating Income$723.00M
Net Income$497.00M
EPS (Basic)$1.69
EPS (Diluted)$1.67
Shares Outstanding (Basic)293.50M
Shares Outstanding (Diluted)297.60M

Key Highlights

  • 1Total sales and service revenues for the nine months ended September 30, 2010, increased to $26.15 billion, up from $24.83 billion in the same period of 2009.
  • 2Operating income for the nine months ended September 30, 2010, rose to $2.28 billion, compared to $1.85 billion in the prior year.
  • 3The company announced plans to consolidate its Gulf Coast shipbuilding operations and is exploring strategic alternatives for its Shipbuilding segment, including a potential spin-off.
  • 4Net cash provided by operating activities for the nine months was $1.07 billion.
  • 5Diluted earnings per share from continuing operations for the nine months increased to $5.49, up from $3.67 in the prior year.
  • 6Northrop Grumman repurchased 17.8 million common shares for $1.1 billion during the nine months ended September 30, 2010, and increased its quarterly dividend.
  • 7A significant IRS settlement resulted in net tax benefits of approximately $296 million in the second quarter of 2010.

Frequently Asked Questions

Total sales and service revenues increased by approximately $1.3 billion, from $24.83 billion in the first nine months of 2009 to $26.15 billion in the first nine months of 2010. This growth was observed across most operating segments, with the exception of Information Systems.

Northrop Grumman announced plans in July 2010 to consolidate its Gulf Coast shipbuilding operations by winding down work at the Avondale, Louisiana facility by 2013. Additionally, the company is actively evaluating strategic alternatives for the entire Shipbuilding segment, including the possibility of a spin-off to shareholders. A registration statement for a potential spin-off was filed in October 2010.

Operating income increased significantly, rising from $1.85 billion in the first nine months of 2009 to $2.28 billion in the same period of 2010. Diluted earnings per share from continuing operations also saw a substantial increase, from $3.67 to $5.49 year-over-year, reflecting improved operational performance and a favorable tax settlement.

Net cash provided by operating activities was $1.07 billion for the nine months ended September 30, 2010. This was a slight decrease from the $1.20 billion in the prior year, primarily due to cash generated by discontinued operations in the prior period and higher working capital requirements and tax payments in 2010, partially offset by higher net earnings.