10-QPeriod: Q1 FY2020

NORTHROP GRUMMAN CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2020

Filed April 29, 2020For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) reported its first quarter 2020 financial results, showing a modest increase in total sales to $8.62 billion, up 5% year-over-year. While sales grew across all segments, operating income remained flat at $934 million, with the operating margin rate declining slightly to 10.8% due to lower margins in Aeronautics Systems and Defense Systems. Net earnings saw a marginal increase to $868 million, resulting in a diluted EPS of $5.15, a 2% improvement. The company's cash position strengthened significantly, ending the quarter with $3.28 billion in cash and cash equivalents, bolstered by a substantial increase in net cash provided by financing activities, largely due to the issuance of new long-term debt to enhance financial flexibility amid the emerging COVID-19 pandemic. Despite the overall stable financial performance, investors should note the impact of the COVID-19 pandemic, which the company anticipates will reduce 2020 revenue and operating margins due to supplier disruptions and productivity changes. The company is taking proactive steps to mitigate these impacts and maintain operations. Backlog remains strong at $64.2 billion, providing visibility into future revenue, though the company's substantial debt, growing to $16.1 billion (net of current portion), warrants attention.

Financial Highlights

51 data points
Beta

Revenue

$8.62B

Net Income

$868.00M

10.1% Net Margin

EPS (Diluted)

$5.15

Total Assets

$43.20B

Cash & Equivalents

$3.28B

Free Cash Flow

-$1.26B

Financial Statements
Beta
Revenue$8.62B
Operating Expenses$7.69B
Operating Income$934.00M
Net Income$868.00M
EPS (Basic)$5.18
EPS (Diluted)$5.15
Shares Outstanding (Basic)167.70M
Shares Outstanding (Diluted)168.40M

Key Highlights

  • 1Total sales increased by 5% to $8.62 billion, driven by growth across all four operating segments.
  • 2Operating income remained stable at $934 million, but operating margin rate decreased to 10.8% from 11.4% due to lower margins in specific segments.
  • 3Net earnings increased slightly to $868 million ($5.15 diluted EPS), up 1% and 2% respectively.
  • 4The company significantly increased its cash and cash equivalents to $3.28 billion, primarily through the issuance of $2.25 billion in senior notes to enhance liquidity.
  • 5Backlog remained robust at $64.2 billion as of March 31, 2020, indicating substantial future revenue potential.
  • 6The company acknowledges the potential adverse impacts of COVID-19 on 2020 revenue and operating margins, citing supplier disruptions and productivity changes.
  • 7Long-term debt increased to $16.1 billion (net of current portion), reflecting the recent debt issuance.

Frequently Asked Questions

Northrop Grumman reported a 5% increase in total sales for the first quarter of 2020, reaching $8.62 billion. This growth was observed across all four of its operating segments: Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems.

Northrop Grumman anticipates that the COVID-19 pandemic will likely lead to a reduction in 2020 revenue and operating margins. This is primarily attributed to potential supplier disruptions, changes in employee productivity, and related program delays. The company is implementing measures to mitigate these impacts and maintain operations.

The company significantly strengthened its liquidity position, ending the quarter with $3.28 billion in cash and cash equivalents. This was largely driven by the issuance of $2.25 billion in unsecured senior notes in March 2020, undertaken to preserve financial flexibility in response to the uncertainties surrounding the COVID-19 pandemic.

Northrop Grumman's long-term debt, net of the current portion, stood at $16.1 billion as of March 31, 2020. This reflects the recent issuance of $2.25 billion in senior notes, intended for general corporate purposes including debt repayment and working capital.