10-QPeriod: Q2 FY2021

NORTHROP GRUMMAN CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 29, 2021For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) reported solid financial results for the six months ended June 30, 2021, driven significantly by the divestiture of its IT and mission support services business, which generated a substantial pre-tax gain of $2.0 billion. Despite this one-time gain, the company demonstrated strong underlying performance with an 11% increase in organic sales year-over-year, reaching $18.1 billion. Net earnings saw a significant jump to $3.23 billion, largely due to the divestiture gain, though adjusted net earnings also grew by a healthy 13% to $2.11 billion, reflecting operational improvements across its segments. The company's backlog remains robust at $76.6 billion, providing good visibility into future revenue. While the overall backlog saw a slight decrease, this was primarily due to the IT services divestiture. The company continues to focus on key defense programs, particularly in space, missiles, and autonomous systems, and is navigating a complex geopolitical and economic environment. Shareholder returns were supported by significant share repurchases and an increased dividend. The company's financial position appears stable, with adequate liquidity to fund operations.

Financial Highlights

50 data points
Beta

Revenue

$9.15B

Net Income

$1.04B

11.3% Net Margin

EPS (Diluted)

$6.42

Total Assets

$42.14B

Cash & Equivalents

$3.94B

Free Cash Flow

$798.00M

Financial Statements
Beta
Revenue$9.15B
Operating Expenses$8.11B
Operating Income$1.04B
Net Income$1.04B
EPS (Basic)$6.44
EPS (Diluted)$6.42
Shares Outstanding (Basic)161.00M
Shares Outstanding (Diluted)161.50M

Key Highlights

  • 1Completed the sale of its IT and mission support services business for $3.4 billion, recognizing a $2.0 billion pre-tax gain.
  • 2Achieved 11% year-over-year growth in organic sales to $18.1 billion for the six months ended June 30, 2021.
  • 3Total sales increased by 5% to $18.3 billion for the six months ended June 30, 2021.
  • 4Operating income surged by 101% to $3.87 billion for the six months ended June 30, 2021, primarily due to the IT services divestiture gain.
  • 5Diluted EPS increased significantly by 78% to $19.89 for the six months ended June 30, 2021, largely influenced by the divestiture.
  • 6Maintained a substantial backlog of $76.6 billion as of June 30, 2021, providing a strong base for future revenue.
  • 7Returned capital to shareholders through $2.1 billion in share repurchases and $486 million in dividends paid during the first six months of 2021.

Frequently Asked Questions

The primary driver for the substantial increase in net earnings and operating income for the six months ended June 30, 2021, was the divestiture of Northrop Grumman's IT and mission support services business. This transaction resulted in a pre-tax gain on sale of $2.0 billion and significantly boosted reported financial figures.

Excluding the IT services divestiture, Northrop Grumman demonstrated strong underlying performance. Organic sales grew by 11% to $18.1 billion for the six months ended June 30, 2021, indicating healthy growth in its continuing operations across segments like Space Systems and Mission Systems.

As of June 30, 2021, the company's total backlog stood at $76.6 billion. This backlog represents future sales expected from firm orders received, equivalent to the company's remaining performance obligations. While it decreased slightly, this was largely due to the reduction from the IT services divestiture. Approximately 40% of this backlog is expected to be recognized as revenue over the next 12 months.

Northrop Grumman is actively managing its capital. For the six months ended June 30, 2021, the company repurchased approximately $2.1 billion of its common stock and paid $486 million in dividends. The dividend per share was also increased by 8% in May 2021. The company also had $3.9 billion in cash and cash equivalents as of June 30, 2021, and sufficient liquidity to fund operations.