Northrop Grumman Reports First Quarter 2008 Financial Results, Updates Guidance and Raises Dividend

LOS ANGELES , April 24 /PRNewswire-FirstCall/ -- Northrop Grumman Corporation (NYSE: NOC) reported that first quarter 2008 earnings from continuing operations declined to $263 million , or $0.76 per diluted share, from $394 million , or...


LOS ANGELES , April 24 /PRNewswire-FirstCall/ -- Northrop Grumman Corporation (NYSE: NOC) reported that first quarter 2008 earnings from continuing operations declined to $263 million, or $0.76 per diluted share, from $394 million, or $1.12 per diluted share, in the first quarter of 2007. First quarter 2008 earnings were reduced by a pre-tax charge of $326 million, or $0.61 per diluted share, primarily for cost growth and schedule extension in the company's LHD-8 amphibious assault ship program, as announced on April 15, 2008 . Sales for the 2008 first quarter increased 6 percent to $7.7 billion from $7.3 billion in the 2007 first quarter. Cash provided by operations for the 2008 first quarter totaled $194 million compared with $400 million in the prior year period.

The company also announced that it is increasing its quarterly dividend to $0.40 per share from $0.37 per share. The company has increased its quarterly dividend in each of the last five years, and with the increase to $0.40 per share the company has doubled its quarterly common stock dividend since 2003.

"Although the LHD-8 charge is disappointing, the remainder of our first quarter performance was strong. Total backlog increased more than $4 billion to a record $68 billion. We demonstrated strong growth and performance in our Information & Services, Aerospace and Electronics businesses, and we won the KC-45 tanker program. These positives demonstrate the solid, underlying business trends we expect and reinforce our confidence in our long-term financial targets," said Ronald D. Sugar , Northrop Grumman chairman and chief executive officer.

"Based on the strength of that long-term outlook, we continue to execute our balanced cash deployment strategy. During the quarter we purchased $600 million of our shares, and today we announced an increase in our quarterly dividend. This is our fifth annual increase and represents a doubling of our dividend since the TRW acquisition."

Operating income for the 2008 first quarter decreased 33 percent to $464 million from $690 million for the 2007 first quarter. As a percent of sales, operating income decreased to 6 percent from 9.4 percent in the prior year period. The $326 million pre-tax charge in Shipbuilding caused the decline in operating income in the quarter and as a percent of sales, impacted operating income by approximately 400 basis points.

Federal and foreign income taxes for the 2008 first quarter declined to $146 million from $206 million in the first quarter of 2007. The effective tax rate applied to earnings from continuing operations for the 2008 first quarter was 35.7 percent compared with 34.3 percent in the 2007 first quarter.

Net earnings for the 2008 first quarter declined to $264 million, or $0.76 per diluted share, from $387 million, or $1.10 per diluted share, for the same period in 2007. Earnings per share are based on weighted average diluted shares outstanding of 349.3 million for the first quarter of 2008 and 358.3 million for the first quarter of 2007. Weighted average shares outstanding for both periods include the dilutive effects of the company's mandatorily redeemable Series B convertible preferred stock and the impact of share repurchases during the quarter.

New business awards totaled $12.1 billion in the first quarter. Total backlog, which includes funded backlog and firm orders for which funding is not currently contractually obligated by the customer, increased to a record $68 billion as of March 31, 2008 .

Cash provided by operations in the 2008 first quarter totaled $194 million compared with $400 million in the prior year period. The decline in cash provided by operations reflects an increase in accounts receivable. The increase in receivables is due to timing of billing and collection resulting from the transition to a common internal accounting software system. The transition impacted working capital by approximately $200 million, which is largely expected to be recovered in the second quarter of 2008. First quarter 2008 capital spending totaled $143 million compared with capital spending of $158 million in the prior year period. First quarter 2008 free cash flow totaled $16 million compared with $212 million in the prior year period.

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