01—Abstract
Summary
Summary of the 10-Q filed April 27, 2011. Cited figures are marked; the original filing is the authoritative source.
Northrop Grumman Corporation reported a slight decrease in sales for the first quarter of 2011 compared to the prior year, reaching $6.73 billiona from $6.91 billion.
Despite the revenue dip, the company saw an increase in operating income to $811 millionb from $679 million, driven by performance improvements in its Electronic Systems, Information Systems, and Technical Services segments. Diluted earnings per share from continuing operations improved to $1.67 from $1.34. A significant event during the quarter was the completion of the spin-off of its Shipbuilding segment, Huntington Ingalls Industries, Inc. (HII), which is now reported as discontinued operations.
This transaction resulted in the company receiving a $1.429 billionc cash contribution. The company also reduced its participation in the NSTec joint venture, leading to a $1.745 billion reduction in contract backlog. The company's overall backlog stands at $43.7 billion as of March 31, 2011.
02—Key points
Key Highlights
- Sales for Q1 2011 decreased by 2.6% to $6.734 billion from $6.914 billion in Q1 2010.
- Operating income increased by 19.6% to $811 million in Q1 2011, from $679 million in Q1 2010.
- Diluted earnings per share from continuing operations rose to $1.67 in Q1 2011, from $1.34 in Q1 2010.
- The company completed the spin-off of its Shipbuilding segment (Huntington Ingalls Industries, Inc.) in March 2011, reporting it as discontinued operations.
- Received a $1.429 billion cash contribution in connection with the HII spin-off.
- Total backlog decreased to $43.7 billion as of March 31, 2011, from $46.8 billion as of December 31, 2010, primarily due to reduced participation in the NSTec joint venture.
- Net cash provided by continuing operations improved significantly to $112 million in Q1 2011, compared to cash used of $452 million in Q1 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2011, Northrop Grumman Corp kept $0.08.
- Revenue$6.73B100.0%
- Cost of revenue−$3.00B44.6%
- Gross profit$3.73B55.4%
- Operating costs−$2.92B43.4%
- Operating income$811.0M12.0%
- Interest, other & tax−$281.0M4.2%
- Net income$530.0M7.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2011filed April 27, 2011Financial Statements
Q1 FY2011 against Q1 FY2010
| Line item | Q1 FY2011Q1 FY2010 | Change |
|---|---|---|
| Revenue | $6.73B$6.91B | −2.6% |
| Cost of Revenue | $3.00B$2.99B | +0.4% |
| Gross Profit | $3.73B$3.92B | −4.9% |
| Operating Income | $811.00M$680.00M | +19.3% |
| Net Income | $530.00M$469.00M | +13.0% |
| EPS (Basic) | $1.82$1.55 | +17.4% |
| EPS (Diluted) | $1.79$1.53 | +17.0% |
| Shares Outstanding (Basic) | 291.80M302.50M | −3.5% |
| Shares Outstanding (Diluted) | 296.90M306.10M | −3.0% |
05—Questions
Frequently Asked Questions
What was the primary impact of the spin-off of Huntington Ingalls Industries (HII) on Northrop Grumman's financial results for the quarter?
The spin-off of HII, completed in March 2011, resulted in the Shipbuilding segment being reported as discontinued operations. The company received a cash contribution of $1.429 billion in connection with this transaction. This event also led to a reduction in the company's overall contract backlog and required adjustments to contractual obligations.
How did the company's sales and operating income perform in the first quarter of 2011 compared to the prior year?
Sales for the first quarter of 2011 slightly decreased by 2.6% to $6.734 billion from $6.914 billion in the same period of 2010. However, operating income saw a significant increase of 19.6% to $811 million from $679 million, driven by improved performance across several key segments, particularly Electronic Systems, Information Systems, and Technical Services.
What is the outlook for defense spending, and how does it affect Northrop Grumman?
The company operates in a complex national security environment with ongoing U.S. federal budget deficits and national debt. While it believes the U.S. Government will continue to prioritize defense spending, there are ongoing discussions and potential for changes in priorities and budget allocations. Initiatives by the DoD to improve efficiency and potentially reduce spending create uncertainty, although Northrop Grumman expects continued investment in areas like surveillance, intelligence, and advanced systems. The company is also exposed to risks related to contract terminations and changes in government procurement regulations.
How did the company's cash flow from operations change during the quarter?
Net cash provided by continuing operations showed a substantial improvement, moving from a cash usage of $452 million in the first quarter of 2010 to a net cash provided of $112 million in the first quarter of 2011. This increase is primarily attributed to lower working capital requirements.
06—Continue