10-QPeriod: Q1 FY2013

NORTHROP GRUMMAN CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2013

Filed April 24, 2013For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) reported total sales of $6.104 billion for the first quarter of 2013, a slight decrease of 1.5% compared to $6.198 billion in the same period of 2012. Net earnings were $489 million, or $2.03 per diluted share, compared to $506 million, or $1.96 per diluted share, in the prior year. The company experienced a decrease in operating income to $759 million from $796 million, with the operating margin rate declining to 12.4% from 12.8%. Despite a challenging fiscal environment, particularly the impact of sequestration on defense budgets, the company's financial performance remained relatively stable, with improved cash flow from operations. The company's results were influenced by various factors including lower sales in the Information Systems segment and a decrease in net favorable adjustments across segments. However, strong performance in the Aerospace Systems segment, driven by increased unit deliveries and ramp-ups in key programs, partially offset these declines. Northrop Grumman continues to actively manage its capital through share repurchases and dividends, demonstrating a commitment to shareholder returns amidst ongoing defense budget uncertainties. Investors should monitor the evolving U.S. defense spending landscape, including the impact of sequestration and future budget proposals, as this will be a key factor in the company's future performance.

Financial Highlights

46 data points
Beta

Revenue

$6.10B

56.9% Gross Margin

Net Income

$489.00M

8.0% Net Margin

EPS (Diluted)

$2.03

Total Assets

$25.91B

Cash & Equivalents

$3.18B

Free Cash Flow

-$39.00M

Financial Statements
Beta
Revenue$6.10B
Cost of Revenue$2.63B
Gross Profit$3.47B
Operating Income$759.00M
Net Income$489.00M
EPS (Basic)$2.07
EPS (Diluted)$2.03
Shares Outstanding (Basic)236.40M
Shares Outstanding (Diluted)241.00M

Key Highlights

  • 1Total sales for Q1 2013 were $6.104 billion, a 1.5% decrease from $6.198 billion in Q1 2012.
  • 2Net earnings for Q1 2013 were $489 million, or $2.03 per diluted share, up from $506 million, or $1.96 per diluted share, in Q1 2012.
  • 3Operating income decreased to $759 million from $796 million in the prior year.
  • 4The company reported net cash provided by operating activities of $1 million for Q1 2013, an improvement from $(105) million in Q1 2012.
  • 5Information Systems segment sales decreased by 9% due to in-theater force reductions and lower funding levels.
  • 6Aerospace Systems segment sales increased by 4% driven by higher unit deliveries and program ramp-ups.
  • 7The company continued its share repurchase program, with $1.0 billion remaining authorization as of March 31, 2013.

Frequently Asked Questions

The decrease in sales was primarily driven by lower sales in the Information Systems segment, which declined by 9% due to factors such as in-theater force reductions and lower funding levels across its program portfolio. Additionally, the Technical Services segment saw a 4% decrease due to portfolio shaping efforts and reductions in specific logistics programs.

Northrop Grumman's profitability saw a slight decrease in operating income, falling to $759 million from $796 million in the prior year's comparable quarter. While diluted earnings per share saw an increase to $2.03 from $1.96, this was influenced by a decrease in weighted-average shares outstanding due to share repurchases. The operating margin rate also decreased to 12.4% from 12.8%.

The company highlighted significant uncertainty and challenges related to the U.S. defense budget. The implementation of sequestration, a process of substantial additional budget reductions, was noted as a significant long-term risk that is expected to result in lower revenues, profits, and cash flows. The proposed FY 2014 budget and ongoing congressional debates regarding the debt ceiling were also mentioned as key factors that could impact future defense spending and, consequently, the company's performance.

Northrop Grumman reported an improvement in cash flow from operations, increasing to $1 million in Q1 2013 from $(105) million in Q1 2012, largely driven by improved trade working capital. The company continued its commitment to shareholder returns by actively repurchasing shares under its authorized program, with $1.0 billion remaining under its repurchase authorization as of the end of the quarter. Dividends were also maintained, with the quarterly common stock dividend at $0.55 per share.