| Exhibit 99 | ||
| News Release | ||||
| Contact: | Randy Belote (Media) | |||
| (703) 280-2720 | ||||
| randy.belote@ngc.com | ||||
| Steve Movius (Investors) | ||||
| (703) 280-4575 | ||||
| steve.movius@ngc.com | ||||
Northrop Grumman Reports First Quarter 2012 Financial Results
| • | EPS from Continuing Operations Increase 17 Percent to $1.96 |
| • | 2012 Guidance for EPS from Continuing Operations Raised to $6.70 - $6.95 |
| • | Sales Total $6.2 Billion |
| • | Total Backlog of $39.1 Billion; New Business Awards Total $5.8 Billion |
| • | 4.4 Million Shares Repurchased |
FALLS CHURCH, Va. – April 25, 2012 – Northrop Grumman Corporation (NYSE: NOC) reported that first quarter 2012 earnings from continuing operations increased to $506 million, or $1.96 per diluted share, from $496 million, or $1.67 per diluted share, in the first quarter of 2011. On a pension-adjusted basis, earnings per diluted share from continuing operations increased 31 percent to $1.88 from $1.44. The company repurchased 4.4 million shares of its common stock in the 2012 first quarter; $1.4 billion remains on its current share repurchase authorization.
“We are off to a strong start for the year in a challenging environment. First quarter results demonstrate our team's ability to drive affordability by performing on our programs, reducing costs and improving the efficiency of our businesses. We continue to focus on performance, effective cash deployment and alignment of our portfolio with our customers' priority investment areas,” said Wes Bush, chairman, chief executive officer and president.
Northrop Grumman Corporation
2980 Fairview Park Drive • Falls Church, VA 22042-4511
www.northropgrumman.com/media
| Northrop Grumman Reports First Quarter 2012 Financial Results | 2 | |
Table 1 — Financial Highlights
| First Quarter | ||||||||
| ($ in millions, except per share amounts) | 2012 | 2011 | ||||||
| Sales | $ | 6,198 | $ | 6,734 | ||||
Segment operating income1 | 789 | 721 | ||||||
Segment operating margin rate1 | 12.7 | % | 10.7 | % | ||||
| Operating income | 796 | 811 | ||||||
| Operating margin rate | 12.8 | % | 12.0 | % | ||||
| Earnings from continuing operations | 506 | 496 | ||||||
| Diluted EPS from continuing operations | 1.96 | 1.67 | ||||||
| Net earnings | 506 | 530 | ||||||
| Diluted EPS | 1.96 | 1.79 | ||||||
| Cash (used in) provided by continuing operations | (105 | ) | 112 | |||||
Free cash flow from continuing operations1 | (186 | ) | (11 | ) | ||||
| Pension-adjusted Operating Highlights | ||||||||
| Operating income | 796 | 811 | ||||||
Net pension adjustment1 | (32 | ) | (103 | ) | ||||
Pension-adjusted operating income1 | $ | 764 | $ | 708 | ||||
Pension-adjusted operating margin rate1 | 12.3 | % | 10.5 | % | ||||
| Pension-adjusted Per Share Data | ||||||||
| Diluted EPS from continuing operations | $ | 1.96 | $ | 1.67 | ||||
After-tax net pension adjustment per share1 | (0.08 | ) | (0.23 | ) | ||||
Pension-adjusted diluted EPS from continuing operations1 | $ | 1.88 | $ | 1.44 | ||||
| Weighted average shares outstanding — Basic | 253.1 | 291.8 | ||||||
| Dilutive effect of stock options and stock awards | 4.9 | 5.1 | ||||||
| Weighted average shares outstanding — Diluted | 258.0 | 296.9 | ||||||
1 | Non-GAAP metric — see definitions at the end of this press release. | ||
Despite lower sales, first quarter 2012 segment operating income increased $68 million, or 9 percent, to $789 million, and segment operating margin rate improved 200 basis points to 12.7 percent. Higher segment operating income and margin rate were primarily due to performance improvement at Electronic Systems and Information Systems.
While first quarter 2012 operating income decreased $15 million or 2 percent, operating margin rate increased 80 basis points to 12.8 percent. The change over the prior year includes the $68 million increase in segment operating income, which was more than offset by a $71 million decrease in net FAS/CAS pension adjustment and a $13 million increase in unallocated corporate expense. On a pension-adjusted basis, operating income increased 8 percent, and pension-adjusted operating margin rate expanded 180 basis points to 12.3 percent.
First quarter 2012 net earnings totaled $506 million, or $1.96 per diluted share, compared with $530 million, or $1.79 per diluted share, in the first quarter of 2011. First quarter 2012 diluted earnings per share are based on 258 million weighted average shares outstanding compared with 296.9 million shares in the first quarter of 2011, a decrease of 13 percent. Results for the first quarter 2011 reflect the spin-off of Huntington Ingalls Industries, Inc. (HII), effective March 31, 2011, as discontinued operations.
Northrop Grumman Corporation
2980 Fairview Park Drive • Falls Church, VA 22042-4511
www.northropgrumman.com/media
| Northrop Grumman Reports First Quarter 2012 Financial Results | 3 | |
Table 2 — Cash Flow Highlights
| First Quarter | |||||||||||
| ($ millions) | 2012 | 2011 | Change | ||||||||
| Cash (used in) provided by continuing operations | $ | (105 | ) | $ | 112 | (217 | ) | ||||
| Less: | |||||||||||
| Capital expenditures | (81 | ) | (123 | ) | 42 | ||||||
Free cash flow from continuing operations1 | $ | (186 | ) | $ | (11 | ) | (175 | ) | |||
1 | Non-GAAP metric — see definitions at the end of this press release. | ||
Cash used in continuing operations through March 31, 2012, totaled $105 million compared with cash provided by continuing operations of $112 million in the prior year, due to higher working capital and income tax payments than in the prior year period. Free cash flow from continuing operations through March 31, 2012, was a use of $186 million compared with a use of $11 million in the prior year.
2012 Guidance Updated
| ($ in millions, except per share amounts) | Prior | Current | ||||||||||
| Sales | 24,700 | - | 25,400 | 24,700 | - | 25,400 | ||||||
Segment operating margin %1 | ~11% | Mid 11% | ||||||||||
| Operating margin % | Mid to high 10% | Low 11% | ||||||||||
| Diluted EPS from continuing operations | 6.40 | - | 6.70 | 6.70 | - | 6.95 | ||||||
| Cash provided by operations | 2,300 | - | 2,600 | 2,300 | - | 2,600 | ||||||
Free cash flow1 | 1,800 | - | 2,100 | 1,800 | - | 2,100 | ||||||
1 Non-GAAP metric - see definitions at the end of this press release. | ||||||||||||
Northrop Grumman Corporation
2980 Fairview Park Drive • Falls Church, VA 22042-4511
www.northropgrumman.com/media
| Northrop Grumman Reports First Quarter 2012 Financial Results | 4 | |
Table 3 — Cash Measurements, Debt and Capital Deployment
| ($ millions) | March 31, 2012 | December 31, 2011 | ||||||
| Total debt | $ | 3,948 | $ | 3,948 | ||||
| Cash & cash equivalents | 2,682 | 3,002 | ||||||
Net debt1 | $ | 1,266 | $ | 946 | ||||
Net debt to total capital ratio2 | 8.7 | % | 6.6 | % | ||||
1 | Total debt less cash and cash equivalents. | |
2 | Net debt divided by the sum of shareholders’ equity and total debt. | |
Changes in cash and cash equivalents include the following items for cash from operations, investing and financing through March 31, 2012:
Operations
•$105 million used in continuing operations
Investing
•$81 million for capital expenditures
Financing
•$263 million for repurchases of common stock
•$127 million for dividends
•$40 million proceeds from exercises of stock options
Northrop Grumman Corporation
2980 Fairview Park Drive • Falls Church, VA 22042-4511
www.northropgrumman.com/media
| Northrop Grumman Reports First Quarter 2012 Financial Results | 5 | |
Table 4 — Business Results
Consolidated Sales & Segment Operating Income1
| First Quarter | ||||||||||
| ($ millions) | 2012 | 2011 | Change | |||||||
| Sales | ||||||||||
| Aerospace Systems | $ | 2,383 | $ | 2,593 | (8 | %) | ||||
| Electronic Systems | 1,724 | 1,808 | (5 | %) | ||||||
| Information Systems | 1,844 | 2,025 | (9 | %) | ||||||
| Technical Services | 750 | 831 | (10 | %) | ||||||
| Intersegment eliminations | (503 | ) | (523 | ) | ||||||
| 6,198 | 6,734 | (8 | %) | |||||||
Segment operating income1 | ||||||||||
| Aerospace Systems | 279 | 287 | (3 | %) | ||||||
| Electronic Systems | 304 | 237 | 28 | % | ||||||
| Information Systems | 205 | 194 | 6 | % | ||||||
| Technical Services | 70 | 68 | 3 | % | ||||||
| Intersegment eliminations | (69 | ) | (65 | ) | ||||||
Segment operating income1 | 789 | 721 | 9 | % | ||||||
Segment operating margin rate1 | 12.7 | % | 10.7 | % | 200 bps | |||||
| Reconciliation to operating income | ||||||||||
| Unallocated corporate expenses | (23 | ) | (10 | ) | 130 | % | ||||
Net pension adjustment1 | 32 | 103 | (69 | %) | ||||||
| Reversal of royalty income included above | (2 | ) | (3 | ) | (33 | %) | ||||
| Operating income | 796 | 811 | (2 | %) | ||||||
| Operating margin rate | 12.8 | % | 12.0 | % | 80 bps | |||||
| Net interest expense | (53 | ) | (58 | ) | (9 | %) | ||||
| Other, net | 13 | 5 | 160 | % | ||||||
| Earnings from continuing operations before income taxes | 756 | 758 | ||||||||
| Federal and foreign income tax expense | (250 | ) | (262 | ) | (5 | %) | ||||
| Earnings from continuing operations | 506 | 496 | 2 | % | ||||||
| Earnings from discontinued operations | — | 34 | (100 | %) | ||||||
| Net earnings | $ | 506 | $ | 530 | (5 | %) | ||||
1 | Non-GAAP metric — see definitions at the end of this press release. | ||
Federal and foreign income tax expense totaled $250 million in the first quarter of 2012 compared with $262 million in the prior year period. The effective tax rate for the 2012 first quarter declined to 33.1 percent from 34.6 percent for the first quarter of 2011 due to higher manufacturing deductions than in the prior year period.
Effective Jan. 1, 2012, the company transferred its missile business, principally the Intercontinental Ballistic Missile program (ICBM), previously reported in Aerospace Systems to Technical Services. Schedule 6 provides a reconciliation of previously reported and current results.
Northrop Grumman Corporation
2980 Fairview Park Drive • Falls Church, VA 22042-4511
www.northropgrumman.com/media
| Northrop Grumman Reports First Quarter 2012 Financial Results | 6 | |
Aerospace Systems ($ millions)
| First Quarter | |||||||||||
| 2012 | 2011 | Change | |||||||||
| Sales | $ | 2,383 | $ | 2,593 | (8.1 | )% | |||||
| Operating income | 279 | 287 | (2.8 | )% | |||||||
| Operating margin rate | 11.7 | % | 11.1 | % | |||||||
Aerospace Systems first quarter 2012 sales declined 8 percent due to lower volume for manned military aircraft and space programs, which more than offset higher volume for unmanned systems such as Global Hawk and Firebird. Lower sales for military aircraft reflects lower volume across several programs, including F-35 (due to the adoption of units-of-delivery revenue recognition beginning with low rate initial production lot 5) and Joint STARS, as well as fewer F/A-18 deliveries. Lower volume for these manned aircraft programs more than offset higher volume for the E-2D program. Lower sales in space systems reflects lower volume for restricted programs and the cancellation of a weather satellite program.
Aerospace Systems first quarter 2012 operating income declined 3 percent and operating margin rate increased 60 basis points to 11.7 percent from 11.1 percent. The decrease in operating income is due to lower volume, and the increase in margin rate reflects performance improvement due to contract risk mitigation and affordability improvement initiatives.
Electronic Systems ($ millions)
| First Quarter | |||||||||||
| 2012 | 2011 | Change | |||||||||
| Sales | $ | 1,724 | $ | 1,808 | (4.6 | )% | |||||
| Operating income | 304 | 237 | 28.3 | % | |||||||
| Operating margin rate | 17.6 | % | 13.1 | % | |||||||
Electronic Systems first quarter 2012 sales declined 5 percent principally due to lower volume for programs in intelligence, surveillance and reconnaissance, and targeting systems (ISR&T) and navigation systems programs. Lower ISR&T sales reflects $90 million lower postal automation volume primarily due to the company's previously announced decision to de-emphasize its domestic postal automation business. Lower navigation systems sales primarily reflect lower demand for domestic systems.
Electronic Systems first quarter 2012 operating income increased 28 percent, and operating margin rate increased to 17.6 percent from 13.1 percent. Higher operating income and margin rate reflect improved program performance in ISR&T resulting from a higher level of favorable performance adjustments due to contract risk mitigation and cost reductions, which more than offset the impact of lower volume.
Northrop Grumman Corporation
2980 Fairview Park Drive • Falls Church, VA 22042-4511
www.northropgrumman.com/media
| Northrop Grumman Reports First Quarter 2012 Financial Results | 7 | |
Information Systems ($ millions)
| First Quarter | |||||||||||
| 2012 | 2011 | Change | |||||||||
| Sales | $ | 1,844 | $ | 2,025 | (8.9 | )% | |||||
| Operating income | 205 | 194 | 5.7 | % | |||||||
| Operating margin rate | 11.1 | % | 9.6 | % | |||||||
Information Systems first quarter 2012 sales declined 9 percent due to lower volume in all three business areas. For defense systems, lower funding on existing programs due to in-theater troop drawdowns, a program termination and program completions reduced first quarter 2012 sales. Civil systems volume was reduced by the sale of the County of San Diego outsourcing contract, which contributed sales of $30 million in the 2011 first quarter, and the completion of the Enterprise Network Management contract. For intelligence systems, lower volume across several programs, including Counter Narco-Terrorism Programs and Operations (CNTPO), reduced sales during the quarter.
Information Systems first quarter 2012 operating income increased 6 percent and operating margin rate increased to 11.1 percent from 9.6 percent in the prior year period. Higher operating income and margin rate primarily reflect favorable performance on several civil systems programs, as well as cost reductions resulting from affordability initiatives, both of which more than offset the impact of lower volume.
Technical Services ($ millions)
| First Quarter | |||||||||||
| 2012 | 2011 | Change | |||||||||
| Sales | $ | 750 | $ | 831 | (9.7 | )% | |||||
| Operating income | 70 | 68 | 2.9 | % | |||||||
| Operating margin rate | 9.3 | % | 8.2 | % | |||||||
Technical Services first quarter 2012 sales declined 10 percent due to lower volume in defense and government services and integrated logistics and modernization programs. Lower defense and government services volume reflects reduced cyclical sustainment requirements on the ICBM program (previously reported in Aerospace Systems), as well as portfolio shaping actions. Lower volume for integrated logistics and modernization reflects lower volume for the KC-10 program and the intercompany CNTPO program.
Technical Services first quarter 2012 operating income increased 3 percent, and operating margin rate increased to 9.3 percent from 8.2 percent, principally due to improved program performance in integrated logistics and modernization.
Northrop Grumman Corporation
2980 Fairview Park Drive • Falls Church, VA 22042-4511
www.northropgrumman.com/media
| Northrop Grumman Reports First Quarter 2012 Financial Results | 8 | |
About Northrop Grumman
Northrop Grumman will webcast its earnings conference call at 11:30 a.m. ET on April 25, 2012. A live audio broadcast of the conference call along with a supplemental presentation will be available on the investor relations page of the company’s Web site at www.northropgrumman.com.
Northrop Grumman is a leading global security company providing innovative systems, products and solutions in aerospace, electronics, information systems, and technical services to government and commercial customers worldwide. Please visit www.northropgrumman.com for more information.
This release and the attachments contain statements, other than statements of historical fact, that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expect,” “intend,” “may,” “could,” “plan,” “project,” “forecast,” “believe,” “estimate,” “outlook,” ”anticipate,” “trends,” “guidance,” and similar expressions generally identify these forward-looking statements. Forward-looking statements in this release and the attachments include, among other things, financial guidance regarding future sales, segment operating income, pension expense, employer contributions under pension plans and medical and life benefits plans, cash flow and earnings. Forward-looking statements are based upon assumptions, expectations, plans and projections that we believe to be reasonable when made. These statements are not guarantees of future performance and inherently involve a wide range of risks and uncertainties that are difficult to predict. Actual results may differ materially from those expressed or implied in these forward-looking statements due to factors such as: the effect of economic conditions in the United States and globally; changes in government and customer priorities and requirements (including, government budgetary constraints, shifts in defense spending, changes in import and export policies, and changes in customer short-range and long-range plans); access to capital; future sales and cash flows; the timing of cash receipts; effective tax rates and timing and amounts of tax payments; returns on pension plan assets, interest and discount rates and other changes that may impact pension plan assumptions; retiree medical expense; the outcome of litigation, claims, audits, appeals, bid protests and investigations; the adequacy of our insurance coverage and recoveries (including earthquake-related coverage); the costs of environmental remediation; our ability to attract and retain qualified personnel; the costs of capital investments; changes in organizational structure and reporting segments; risks associated with acquisitions, dispositions, spin-off transactions, joint ventures, strategic alliances and other business arrangements; possible impairments of goodwill or other intangible assets; the effects of legislation, rulemaking, and changes in accounting, tax or defense procurement rules or regulations; the acquisition or termination of contracts; technical, operational or quality setbacks in contract performance; our ability to protect intellectual property rights; risks associated with our nuclear operations; issues with, and financial viability of, key suppliers and subcontractors; availability of materials and supplies; controlling costs of fixed-price development programs; contractual performance relief and the application of cost sharing terms; allowability and allocability of costs under U.S. Government contracts; progress and acceptance of new products and technology; domestic and international competition; legal, financial and governmental risks related to international transactions; potential security threats, information technology attacks, natural disasters and other disruptions not under our control; and other risk factors disclosed in our filings with the Securities and Exchange Commission.
You should not put undue reliance on any forward-looking statements in this release. These forward-looking statements speak only as of the date of this release, and we undertake no obligation to update or revise any forward-looking statements after we distribute this release. This release and the attachments also contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the company's use of these measures are included in this release or the attachments.
Northrop Grumman Corporation
2980 Fairview Park Drive • Falls Church, VA 22042-4511
www.northropgrumman.com/media
SCHEDULE 1
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended March 31 | |||||||
| $ in millions, except per share amounts | 2012 | 2011 | |||||
| Sales | |||||||
| Product | $ | 3,341 | $ | 3,863 | |||
| Service | 2,857 | 2,871 | |||||
| Total sales | 6,198 | 6,734 | |||||
| Operating costs and expenses | |||||||
| Product | 2,527 | 3,003 | |||||
| Service | 2,314 | 2,352 | |||||
| General and administrative expenses | 561 | 568 | |||||
| Operating income | 796 | 811 | |||||
| Other (expense) income | |||||||
| Interest expense | (53 | ) | (58 | ) | |||
| Other, net | 13 | 5 | |||||
| Earnings from continuing operations before income taxes | 756 | 758 | |||||
| Federal and foreign income tax expense | 250 | 262 | |||||
| Earnings from continuing operations | 506 | 496 | |||||
| Earnings from discontinued operations, net of tax | — | 34 | |||||
| Net earnings | $ | 506 | $ | 530 | |||
| Basic earnings per share | |||||||
| Continuing operations | $ | 2.00 | $ | 1.70 | |||
| Discontinued operations | — | 0.12 | |||||
| Basic earnings per share | $ | 2.00 | $ | 1.82 | |||
| Weighted-average common shares outstanding, in millions | 253.1 | 291.8 | |||||
| Diluted earnings per share | |||||||
| Continuing operations | $ | 1.96 | $ | 1.67 | |||
| Discontinued operations | — | 0.12 | |||||
| Diluted earnings per share | $ | 1.96 | $ | 1.79 | |||
| Weighted-average diluted shares outstanding, in millions | 258.0 | 296.9 | |||||
| Net earnings (from above) | $ | 506 | $ | 530 | |||
| Other comprehensive income | |||||||
| Change in cumulative translation adjustment | 6 | 27 | |||||
| Change in unrealized gain on marketable securities and cash flow hedges, net of tax | — | (2 | ) | ||||
| Change in unamortized benefit plan costs, net of tax | 50 | 21 | |||||
| Other comprehensive income, net of tax | 56 | 46 | |||||
| Comprehensive income | $ | 562 | $ | 576 | |||
SCHEDULE 2
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
| $ in millions | March 31, 2012 | December 31, 2011 | |||||
| Assets | |||||||
| Cash and cash equivalents | $ | 2,682 | $ | 3,002 | |||
| Accounts receivable, net of progress payments | 3,231 | 2,964 | |||||
| Inventoried costs, net of progress payments | 804 | 873 | |||||
| Deferred tax assets | 466 | 496 | |||||
| Prepaid expenses and other current assets | 177 | 411 | |||||
| Total current assets | 7,360 | 7,746 | |||||
| Property, plant, and equipment, net of accumulated depreciation of $4,018 in 2012 and $3,933 in 2011 | 2,993 | 3,047 | |||||
| Goodwill | 12,374 | 12,374 | |||||
| Non-current deferred tax assets | 895 | 900 | |||||
| Other non-current assets | 1,431 | 1,344 | |||||
| Total assets | $ | 25,053 | $ | 25,411 | |||
| Liabilities | |||||||
| Trade accounts payable | $ | 1,226 | $ | 1,481 | |||
| Accrued employees compensation | 935 | 1,196 | |||||
| Advance payments and billings in excess of costs incurred | 1,756 | 1,777 | |||||
| Other current liabilities | 1,677 | 1,681 | |||||
| Total current liabilities | 5,594 | 6,135 | |||||
| Long-term debt, net of current portion | 3,933 | 3,935 | |||||
| Pension and post-retirement plan liabilities | 4,080 | 4,079 | |||||
| Other non-current liabilities | 905 | 926 | |||||
| Total liabilities | 14,512 | 15,075 | |||||
| Shareholders’ equity | |||||||
| Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued and outstanding | — | — | |||||
| Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2012—252,211,220; 2011—253,889,622 | 252 | 254 | |||||
| Paid-in capital | 3,646 | 3,873 | |||||
| Retained earnings | 10,077 | 9,699 | |||||
| Accumulated other comprehensive loss | (3,434 | ) | (3,490 | ) | |||
| Total shareholders’ equity | 10,541 | 10,336 | |||||
| Total liabilities and shareholders’ equity | $ | 25,053 | $ | 25,411 | |||
SCHEDULE 3
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31 | |||||||
| $ in millions | 2012 | 2011 | |||||
| Operating activities | |||||||
| Sources of cash—continuing operations | |||||||
| Cash received from customers | |||||||
| Progress payments | $ | 1,021 | $ | 1,035 | |||
| Collections on billings | 4,921 | 5,427 | |||||
| Other cash receipts | 27 | 7 | |||||
| Total sources of cash—continuing operations | 5,969 | 6,469 | |||||
| Uses of cash—continuing operations | |||||||
| Cash paid to suppliers and employees | (5,858 | ) | (6,168 | ) | |||
| Pension contributions | (17 | ) | (34 | ) | |||
| Interest paid, net of interest received | (78 | ) | (96 | ) | |||
| Income taxes paid, net of refunds received | (92 | ) | (46 | ) | |||
| Excess tax benefits from stock-based compensation | (27 | ) | (9 | ) | |||
| Other cash payments | (2 | ) | (4 | ) | |||
| Total uses of cash—continuing operations | (6,074 | ) | (6,357 | ) | |||
| Cash (used in) provided by continuing operations | (105 | ) | 112 | ||||
| Cash used in discontinued operations | — | (232 | ) | ||||
| Net cash used in operating activities | (105 | ) | (120 | ) | |||
| Investing activities | |||||||
| Continuing operations | |||||||
| Maturities of short-term investments | 250 | — | |||||
| Capital expenditures | (81 | ) | (123 | ) | |||
| Contribution received from the spin-off of shipbuilding business | — | 1,429 | |||||
| Other investing activities, net | — | 38 | |||||
| Cash provided by investing activities from continuing operations | 169 | 1,344 | |||||
| Cash used in investing activities from discontinued operations | — | (63 | ) | ||||
| Net cash provided by investing activities | 169 | 1,281 | |||||
| Financing activities | |||||||
| Common stock repurchases | (263 | ) | (13 | ) | |||
| Cash dividends paid | (127 | ) | (137 | ) | |||
| Proceeds from exercises of stock options | 40 | 43 | |||||
| Excess tax benefits from stock-based compensation | 27 | 9 | |||||
| Payments of long-term debt | — | (750 | ) | ||||
| Other financing activities, net | (61 | ) | 5 | ||||
| Net cash used in financing activities | (384 | ) | (843 | ) | |||
| (Decrease) increase in cash and cash equivalents | (320 | ) | 318 | ||||
| Cash and cash equivalents, beginning of year | 3,002 | 3,701 | |||||
| Cash and cash equivalents, end of period | $ | 2,682 | $ | 4,019 | |||
SCHEDULE 4
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31 | |||||||
| $ in millions | 2012 | 2011 | |||||
| Reconciliation of net earnings to net cash used in operating activities | |||||||
| Net earnings | $ | 506 | $ | 530 | |||
| Net earnings from discontinued operations | — | (34 | ) | ||||
| Adjustments to reconcile to net cash used in operating activities: | |||||||
| Depreciation | 105 | 103 | |||||
| Amortization | 15 | 18 | |||||
| Stock-based compensation | 26 | 33 | |||||
| Excess tax benefits from stock-based compensation | (27 | ) | (9 | ) | |||
| (Increase) decrease in assets: | |||||||
| Accounts receivable, net | (267 | ) | (245 | ) | |||
| Inventoried costs, net | 60 | 30 | |||||
| Prepaid expenses and other assets | (119 | ) | (3 | ) | |||
| Increase (decrease) in liabilities: | |||||||
| Accounts payable and accruals | (635 | ) | (627 | ) | |||
| Deferred income taxes | — | 19 | |||||
| Income taxes payable | 169 | 289 | |||||
| Retiree benefits | 77 | 34 | |||||
| Other, net | (15 | ) | (26 | ) | |||
| Cash (used in) provided by continuing operations | (105 | ) | 112 | ||||
| Cash used in discontinued operations | — | (232 | ) | ||||
| Net cash used in operating activities | $ | (105 | ) | $ | (120 | ) | |
SCHEDULE 5
NORTHROP GRUMMAN CORPORATION
TOTAL BACKLOG AND CONTRACT AWARDS
(Unaudited)
| $ in millions | March 31, 2012 | December 31, 2011 | ||||||||||||||
FUNDED (1) | UNFUNDED (2) | TOTAL BACKLOG | TOTAL BACKLOG (3) | |||||||||||||
Aerospace Systems(3) | $ | 10,889 | $ | 7,369 | $ | 18,258 | $ | 18,638 | ||||||||
| Electronic Systems | 7,400 | 1,672 | 9,072 | 9,123 | ||||||||||||
| Information Systems | 4,265 | 4,571 | 8,836 | 8,563 | ||||||||||||
Technical Services(3) | 2,486 | 482 | 2,968 | 3,191 | ||||||||||||
| Total | $ | 25,040 | $ | 14,094 | $ | 39,134 | $ | 39,515 | ||||||||
(1) | Funded backlog represents firm orders for which funding is contractually obligated by the customer. |
(2) | Unfunded backlog represents firm orders for which as of the reporting date, funding is not contractually obligated by the customer. Unfunded backlog excludes unexercised contract options and unfunded indefinite delivery, indefinite quantity (ID/IQ) orders. |
(3) | Effective January 1, 2012, the company transferred its missile business (principally the Intercontinental Ballistic Missile program), previously reported in Aerospace Systems to Technical Services. As a result of this realignment, $599 million of backlog was transferred from Aerospace Systems to Technical Services. Total backlog as of December 31, 2011, reflects this transfer. |
New Awards — The estimated value of contract awards included in backlog during the three months ended March 31, 2012, was $5.8 billion.
SCHEDULE 6
NORTHROP GRUMMAN CORPORATION
SEGMENT REALIGNMENT
($ in millions)
(Unaudited)
SEGMENT SALES(3) | SEGMENT OPERATING INCOME(3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2009 | 2010 | 2011 | 2011 | 2009 | 2010 | 2011 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total | Total | Total | Three Months Ended | Total | Total | Total | Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year | Year | Year | Mar 31 | Jun 30 | Sep 30 | Dec 31 | Year | Year | Year | Mar 31 | Jun 30 | Sep 30 | Dec 31 | |||||||||||||||||||||||||||||||||||||||||||
AS REPORTED(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Aerospace Systems | $ | 10,419 | $ | 10,910 | $ | 10,458 | $ | 2,736 | $ | 2,592 | $ | 2,572 | $ | 2,558 | $ | 1,071 | $ | 1,256 | $ | 1,261 | $ | 301 | $ | 331 | $ | 304 | $ | 325 | ||||||||||||||||||||||||||||
| Electronic Systems | 7,671 | 7,613 | 7,372 | 1,808 | 1,791 | 1,905 | 1,868 | 969 | 1,023 | 1,070 | 237 | 284 | 293 | 256 | ||||||||||||||||||||||||||||||||||||||||||
| Information Systems | 8,536 | 8,395 | 7,921 | 2,025 | 2,031 | 1,955 | 1,910 | 624 | 756 | 766 | 194 | 189 | 187 | 196 | ||||||||||||||||||||||||||||||||||||||||||
| Technical Services | 2,776 | 3,230 | 2,699 | 688 | 656 | 680 | 675 | 161 | 206 | 216 | 54 | 51 | 55 | 56 | ||||||||||||||||||||||||||||||||||||||||||
| Intersegment Eliminations | (1,752 | ) | (2,005 | ) | (2,038 | ) | (523 | ) | (510 | ) | (500 | ) | (505 | ) | (190 | ) | (231 | ) | (258 | ) | (65 | ) | (71 | ) | (62 | ) | (60 | ) | ||||||||||||||||||||||||||||
| Total | $ | 27,650 | $ | 28,143 | $ | 26,412 | $ | 6,734 | $ | 6,560 | $ | 6,612 | $ | 6,506 | $ | 2,635 | $ | 3,010 | $ | 3,055 | $ | 721 | $ | 784 | $ | 777 | $ | 773 | ||||||||||||||||||||||||||||
RECASTED AND REALIGNED(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Aerospace Systems | $ | 9,877 | $ | 10,436 | $ | 9,964 | $ | 2,593 | $ | 2,473 | $ | 2,455 | $ | 2,443 | $ | 988 | $ | 1,213 | $ | 1,217 | $ | 287 | $ | 320 | $ | 295 | $ | 315 | ||||||||||||||||||||||||||||
| Electronic Systems | 7,671 | 7,613 | 7,372 | 1,808 | 1,791 | 1,905 | 1,868 | 969 | 1,023 | 1,070 | 237 | 284 | 293 | 256 | ||||||||||||||||||||||||||||||||||||||||||
| Information Systems | 8,536 | 8,395 | 7,921 | 2,025 | 2,031 | 1,955 | 1,910 | 624 | 756 | 766 | 194 | 189 | 187 | 196 | ||||||||||||||||||||||||||||||||||||||||||
| Technical Services | 3,323 | 3,705 | 3,193 | 831 | 776 | 796 | 790 | 245 | 249 | 260 | 68 | 62 | 63 | 67 | ||||||||||||||||||||||||||||||||||||||||||
| Intersegment Eliminations | (1,757 | ) | (2,006 | ) | (2,038 | ) | (523 | ) | (511 | ) | (499 | ) | (505 | ) | (191 | ) | (231 | ) | (258 | ) | (65 | ) | (71 | ) | (61 | ) | (61 | ) | ||||||||||||||||||||||||||||
| Total | $ | 27,650 | $ | 28,143 | $ | 26,412 | $ | 6,734 | $ | 6,560 | $ | 6,612 | $ | 6,506 | $ | 2,635 | $ | 3,010 | $ | 3,055 | $ | 721 | $ | 784 | $ | 777 | $ | 773 | ||||||||||||||||||||||||||||
(1) | As reported are the amounts presented in the 2011 Form 10-K, filed February 8, 2012. |
(2) | Recasted and realigned amounts for years 2009 through 2011, as well as the three month periods in 2011, to reflect the January 2012 transfer of the company's missile business (principally the Intercontinental Ballistic Missile (ICBM) program), previously reported in Aerospace Systems and transferred to Technical Services. |
(3) | Management uses segment sales and segment operating income as internal measures of financial performance for the individual operating segments. |
| Northrop Grumman Reports First Quarter 2012 Financial Results | 15 | |
Non-GAAP Financial Measures Disclosure: Today’s press release contains non-GAAP (accounting principles generally accepted in the United States of America) financial measures, as defined by SEC (Securities and Exchange Commission) Regulation G and indicated by a footnote in the text of the release. While we believe that these non-GAAP financial measures may be useful in evaluating our financial information, they should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP. Definitions are provided for the non-GAAP measures and reconciliations are provided in the body of the release. References to a “Table” in the definitions below relate to tables in the body of this press release. Other companies may define these measures differently or may utilize different non-GAAP measures.
Pension-adjusted diluted EPS from continuing operations: Diluted EPS from continuing operations excluding the after-tax net pension adjustment per share, as defined below. These per share amounts are provided for consistency and comparability of operating results. Management uses pension-adjusted diluted EPS from continuing operations, as reconciled in Table 1, as an internal measure of financial performance.
Free cash flow from continuing operations: Cash provided by continuing operations less capital expenditures (including outsourcing contract & related software costs). We use free cash flow from continuing operations as a key factor in our planning for, and consideration of, strategic acquisitions, stock repurchases and the payment of dividends. This measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. Free cash flow from continuing operations is reconciled in Table 2.
Net pension adjustment: Pension expense determined in accordance with GAAP less pension expense allocated to the operating segments under U.S. Government Cost Accounting Standards (CAS). Net pension adjustment is presented in Table 1.
After-tax net pension adjustment per share: The per share impact of the net pension adjustment as defined above, after tax at the statutory rate of 35%, provided for consistency and comparability of 2012 and 2011 financial performance as presented in Table 1.
Pension-adjusted operating income: Operating income before net pension adjustment as reconciled in Table 1. Management uses pension-adjusted operating income as an internal measure of financial performance.
Pension-adjusted operating margin rate: Pension-adjusted operating income as defined above, divided by sales. Management uses pension-adjusted operating margin rate, as reconciled in Table 1, as an internal measure of financial performance.
Segment operating income: Total earnings from our four segments including allocated pension expense recognized under CAS. Reconciling items to operating income are unallocated corporate expenses, including unallowable or unallocable portions of management and administration, legal, environmental, certain compensation and retiree benefits, and other expenses; net pension adjustment; and reversal of royalty income included in segment operating income. Management uses segment operating income, as reconciled in Table 4, as an internal measure of financial performance of our individual operating segments.
Segment operating margin rate: Segment operating income as defined above, divided by sales. Management uses segment operating margin rate, as reconciled in Table 4, as an internal measure of financial performance.
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Northrop Grumman Corporation
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