01—Abstract
Summary
Summary of the 10-Q filed April 25, 2012. Cited figures are marked; the original filing is the authoritative source.
Northrop Grumman Corporation's first quarter 2012 results show a decline in total sales to $6.2 billiona from $6.7 billion in the prior year's comparable period, an 8% decrease.
This decline was attributed to reduced volume across all four business segments, with Aerospace Systems and Information Systems experiencing the most significant drops. Despite the sales decrease, operating income saw a modest decline of 2% to $796 millionb, and the operating margin rate improved to 12.8% from 12.0% in Q1 2011, reflecting performance improvements and cost reduction initiatives. Financially, the company reported net earnings of $506 million for the quarter, down from $530 million in the prior year, with basic EPS at $2.00 compared to $1.82 in Q1 2011.
Cash flow from operations was negative $105 millionc, a decrease from positive $112 million in the prior year, largely due to increased working capital requirements. The company maintained a strong backlog of $39.1 billion at the end of the quarter, indicating continued demand for its products and services.
02—Key points
Key Highlights
- Total sales decreased by 8% to $6.2 billion in Q1 2012 compared to Q1 2011, primarily due to lower sales volume across all segments.
- Operating income decreased by 2% to $796 million, but operating margin rate improved to 12.8% from 12.0% due to performance improvements and cost reduction initiatives.
- Net earnings were $506 million, resulting in basic EPS of $2.00, an increase from $1.82 in the prior year's quarter.
- Cash used in operating activities was $105 million, a notable decrease from cash provided by operations of $112 million in Q1 2011, driven by increased working capital needs.
- The company successfully completed the spin-off of its shipbuilding business in March 2011, which generated a $1.4 billion cash contribution.
- Total backlog remained strong at $39.1 billion as of March 31, 2012, providing visibility for future revenues.
- The company repurchased approximately 4.4 million shares of common stock during the quarter, returning capital to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2012, Northrop Grumman Corp kept $0.08.
- Revenue$6.20B100.0%
- Cost of revenue−$2.53B40.8%
- Gross profit$3.67B59.2%
- Operating costs−$2.88B46.4%
- Operating income$796.0M12.8%
- Interest, other & tax−$290.0M4.7%
- Net income$506.0M8.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2012filed April 25, 2012Financial Statements
Q1 FY2012 against Q1 FY2011
| Line item | Q1 FY2012Q1 FY2011 | Change |
|---|---|---|
| Revenue | $6.20B$6.73B | −8.0% |
| Cost of Revenue | $2.53B$3.00B | −15.9% |
| Gross Profit | $3.67B$3.73B | −1.6% |
| Operating Income | $796.00M$811.00M | −1.8% |
| Net Income | $506.00M$530.00M | −4.5% |
| EPS (Basic) | $2.00$1.82 | +9.9% |
| EPS (Diluted) | $1.96$1.79 | +9.5% |
| Shares Outstanding (Basic) | 253.10M291.80M | −13.3% |
| Shares Outstanding (Diluted) | 258.00M296.90M | −13.1% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in sales during the first quarter of 2012?
The primary driver for the decrease in sales was lower sales volume across all four business segments, with Aerospace Systems and Information Systems experiencing the most significant reductions.
How did the company's profitability change compared to the prior year's first quarter?
While net earnings decreased slightly to $506 million from $530 million, the operating margin rate improved to 12.8% from 12.0%. This improvement was driven by performance enhancements and cost-reduction initiatives, offsetting the impact of lower sales volume.
What is the company's outlook regarding U.S. government defense spending?
The company anticipates continued debate and potential cuts in government defense spending, especially with the upcoming general election. The potential implementation of sequestration in January 2013 could significantly impact programs across the defense industry. However, the company believes spending on recapitalization, modernization, and maintenance of defense assets will remain a national priority.
How has the spin-off of the shipbuilding business impacted the company's financial position?
The spin-off of Huntington Ingalls Industries (HII) was completed in March 2011, with HII contributing $1.4 billion in cash to Northrop Grumman. This transaction has removed the former shipbuilding business from the company's operations and financial statements as of the current reporting period.
06—Continue