01—Abstract
Summary
Summary of the 10-Q filed October 27, 2010. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Total 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.
- Operating income for the nine months ended September 30, 2010, rose to $2.28 billion, compared to $1.85 billion in the prior year.
- The company announced plans to consolidate its Gulf Coast shipbuilding operations and is exploring strategic alternatives for its Shipbuilding segment, including a potential spin-off.
- Net cash provided by operating activities for the nine months was $1.07 billion.
- Diluted earnings per share from continuing operations for the nine months increased to $5.49, up from $3.67 in the prior year.
- Northrop Grumman repurchased 17.8 million common shares for $1.1 billion during the nine months ended September 30, 2010, and increased its quarterly dividend.
- A significant IRS settlement resulted in net tax benefits of approximately $296 million in the second quarter of 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2010, Northrop Grumman Corp kept $0.07.
- Revenue$7.07B100.0%
- Cost of revenue−$2.92B41.3%
- Gross profit$4.15B58.7%
- Operating costs−$3.43B48.5%
- Operating income$723.0M10.2%
- Interest, other & tax−$226.0M3.2%
- Net income$497.0M7.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2010filed October 27, 2010Financial Statements
Q3 FY2010 against Q3 FY2009
| Line item | Q3 FY2010Q3 FY2009 | Change |
|---|---|---|
| Revenue | $7.07B$8.35B | −15.3% |
| Cost of Revenue | $2.92B$4.03B | −27.5% |
| Gross Profit | $4.15B$4.32B | −3.9% |
| Operating Income | $723.00M$619.00M | +16.8% |
| Net Income | $497.00M$490.00M | +1.4% |
| EPS (Basic) | $1.69$1.55 | +9.0% |
| EPS (Diluted) | $1.67$1.53 | +9.2% |
| Shares Outstanding (Basic) | 293.50M317.10M | −7.4% |
| Shares Outstanding (Diluted) | 297.60M320.60M | −7.2% |
05—Questions
Frequently Asked Questions
How did Northrop Grumman's revenue perform in the nine months ended September 30, 2010, compared to the same period in 2009?
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.
What significant strategic initiatives are underway for the Shipbuilding segment?
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.
How did the company's profitability change in the nine-month period?
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.
What was the cash flow situation during the nine months ended September 30, 2010?
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.
06—Continue