10-QPeriod: Q3 FY2013

NORTHROP GRUMMAN CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2013

Filed October 23, 2013For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) reported solid financial results for the nine months ended September 30, 2013. Total sales slightly decreased by 1% to $18.5 billion, primarily driven by a decline in the Information Systems segment, though partially offset by growth in Aerospace Systems and Electronic Systems. Net earnings saw a modest increase to $1.47 billion, with diluted EPS rising to $6.22, up from $5.67 in the prior year, reflecting improved operational efficiency and share repurchases. Despite an uncertain U.S. government budget environment marked by sequestration and potential government shutdowns, the company maintained a strong operating margin of 12.7% for the nine-month period. The company also demonstrated robust cash flow generation, with net cash provided by operating activities at $1.28 billion. NOC actively managed its capital structure, issuing new debt and continuing its share repurchase program, signaling confidence in its future performance and commitment to shareholder returns.

Financial Highlights

48 data points
Beta

Revenue

$6.11B

59.1% Gross Margin

Net Income

$497.00M

8.1% Net Margin

EPS (Diluted)

$2.14

Total Assets

$27.41B

Cash & Equivalents

$4.94B

Free Cash Flow

$860.00M

Financial Statements
Beta
Revenue$6.11B
Cost of Revenue$2.50B
Gross Profit$3.61B
Operating Income$790.00M
Net Income$497.00M
EPS (Basic)$2.18
EPS (Diluted)$2.14
Shares Outstanding (Basic)228.20M
Shares Outstanding (Diluted)232.60M

Key Highlights

  • 1Total sales for the nine months ended September 30, 2013, were $18.5 billion, a slight decrease of 1% compared to the prior year, impacted by reduced sales in the Information Systems segment.
  • 2Net earnings for the nine months increased to $1.47 billion, with diluted EPS rising to $6.22 from $5.67 in the same period last year.
  • 3Operating income for the nine months was $2.36 billion, with an operating margin of 12.7%, showing operational efficiency improvements.
  • 4Net cash provided by operating activities for the nine months was $1.28 billion, demonstrating strong cash generation.
  • 5The company issued $2.85 billion in senior notes and continued its share repurchase program, authorized for up to $4.0 billion.
  • 6Aerospace Systems segment saw sales increase by 3% year-over-year due to higher volumes in space and certain aircraft programs.
  • 7The company highlighted potential risks related to the U.S. government's fiscal challenges, including sequestration and potential government shutdowns, which could impact future funding and operations.

Frequently Asked Questions

Total sales for the nine months ended September 30, 2013, decreased by 1% to $18.5 billion, down from $18.7 billion in the prior year. This decline was primarily due to a significant decrease in sales within the Information Systems segment, partially offset by growth in Aerospace Systems and Electronic Systems.

Northrop Grumman reported net earnings of $1.47 billion for the nine months ended September 30, 2013, an increase from $1.45 billion in the comparable period of 2012. Diluted earnings per share rose to $6.22, up from $5.67 in the prior year, reflecting improved operational performance and the impact of share repurchases.

The company generated strong operating cash flow of $1.28 billion for the nine months. In terms of capital management, Northrop Grumman issued $2.85 billion in senior notes during the second quarter of 2013 and continued its share repurchase program, authorized for up to $4.0 billion, indicating a commitment to returning capital to shareholders while maintaining liquidity for operations and potential strategic initiatives.

The company explicitly noted significant uncertainty due to the U.S. government's fiscal challenges, including ongoing impacts from sequestration, potential government shutdowns, and debates around the debt ceiling. These factors could lead to reduced funding, program cancellations, delayed payments, and potentially have a material adverse effect on the company's financial position, results of operations, and cash flows.