01—Abstract
Summary
Summary of the 10-Q filed October 26, 2011. Cited figures are marked; the original filing is the authoritative source.
Northrop Grumman Corporation reported third-quarter and year-to-date results for the period ending September 30, 2011.
The company experienced a decrease in total sales and service revenues compared to the prior year, primarily driven by lower sales across all operating segments. This revenue decline was attributed to reduced volumes on key programs, including space and aircraft programs in Aerospace Systems, and a reduced participation in the National Security Technologies (NSTec) joint venture impacting Technical Services. Despite the revenue decrease, operating income saw an increase due to performance improvements in the Aerospace Systems and Electronic Systems segments, alongside benefits from the NSTec participation change.
The company also continued its share repurchase program and increased its quarterly dividend. A significant event during the period was the completion of the spin-off of its Shipbuilding business (Huntington Ingalls Industries) in March 2011, which is now reported as discontinued operations. This spin-off also resulted in a substantial cash contribution to the company.
02—Key points
Key Highlights
- Total sales and service revenues decreased by 6.5% to $6.61 billion for the third quarter and by 6.3% to $19.91 billion for the nine months ended September 30, 2011, compared to the prior year.
- Operating income increased by 14.1% to $825 million for the third quarter and by 15.1% to $2.48 billion for the nine months, driven by segment performance improvements and cost efficiencies.
- Diluted earnings per share from continuing operations rose to $1.86 in the third quarter and $5.34 for the nine months, up from $1.51 and $5.28, respectively, in the prior year.
- The company completed the spin-off of its Shipbuilding business (Huntington Ingalls Industries) on March 31, 2011, with its results now reported under discontinued operations.
- Shareholder returns included an increase in the quarterly common stock dividend to $0.50 per share and significant share repurchases totaling $2.64 billion for the nine-month period.
- Backlog stood at $42.0 billion as of September 30, 2011, a decrease from $46.8 billion at December 31, 2010, reflecting adjustments related to the NSTec joint venture and program restructurings.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2011, Northrop Grumman Corp kept $0.08.
- Revenue$6.61B100.0%
- Cost of revenue−$2.85B43.0%
- Gross profit$3.77B57.0%
- Operating costs−$2.94B44.5%
- Operating income$825.0M12.5%
- Interest, other & tax−$305.0M4.6%
- Net income$520.0M7.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2011filed October 26, 2011Financial Statements
Q3 FY2011 against Q3 FY2010
| Line item | Q3 FY2011Q3 FY2010 | Change |
|---|---|---|
| Revenue | $6.61B$7.07B | −6.5% |
| Cost of Revenue | $2.85B$2.92B | −2.5% |
| Gross Profit | $3.77B$4.15B | −9.3% |
| Operating Income | $825.00M$723.00M | +14.1% |
| Net Income | $520.00M$497.00M | +4.6% |
| EPS (Basic) | $1.89$1.69 | +11.8% |
| EPS (Diluted) | $1.86$1.67 | +11.4% |
| Shares Outstanding (Basic) | 274.90M293.50M | −6.3% |
| Shares Outstanding (Diluted) | 279.30M297.60M | −6.1% |
05—Questions
Frequently Asked Questions
What was the main reason for the decrease in sales revenue?
The decrease in sales revenue was primarily due to lower sales volumes across most operating segments, including space and manned aircraft programs in Aerospace Systems, and a reduced participation in the National Security Technologies (NSTec) joint venture by the Technical Services segment.
How did the spin-off of the Shipbuilding business impact the financial results?
The spin-off of Huntington Ingalls Industries (HII) on March 31, 2011, resulted in its operations being classified as discontinued operations. The company also received a $1.429 billion cash contribution from HII in connection with the spin-off, which bolstered liquidity.
What is the company's outlook on government spending, and how might it affect Northrop Grumman?
The company notes uncertainty regarding future U.S. government defense spending due to budget deficit reduction efforts and the Budget Control Act of 2011. While defense spending is expected to remain a priority, potential reductions could significantly impact future contract funding and program levels. Northrop Grumman believes it is well-positioned to meet critical future capability requirements.
How is the company returning value to shareholders?
Northrop Grumman is returning value to shareholders through an increased quarterly dividend (raised to $0.50 per share) and a robust share repurchase program. For the nine months ended September 30, 2011, the company repurchased approximately $2.64 billion worth of its common stock.
06—Continue