Northrop Grumman Reports Fourth Quarter and 2008 Results

- Q4 Sales Increase 4 Percent to Record $9.2 Billion ; 2008 Sales Increase 6 Percent to Record $33.9 Billion - Record $78 Billion Total Backlog; New Business Awards Total Record $48.3 Billion in 2008 - Q4 Cash from Operations...


- Q4 Sales Increase 4 Percent to Record $9.2 Billion; 2008 Sales Increase 6 Percent to Record $33.9 Billion

- Record $78 Billion Total Backlog; New Business Awards Total Record $48.3 Billion in 2008

- Q4 Cash from Operations Increases to $1 Billion; 2008 Cash from Operations Increases to Record $3.2 Billion After $200 Million Pension Pre-funding

- Q4 Free Cash Flow Increases to $790 Million; 2008 Free Cash Flow Increases to Record $2.4 Billion

- Q4 and 2008 Loss from Continuing Operations of $7.76 and $3.83 per Share Driven by Non-Cash Goodwill Impairment Charge of $3.1 Billion

- Excluding Goodwill Impairment Charge, Q4 Earnings per Share from Continuing Operations Increases 19 Percent to $1.57 and for 2008 Increases 1 Percent to $5.21 per Share

LOS ANGELES , Feb. 3 /PRNewswire-FirstCall/ -- Northrop Grumman Corporation (NYSE: NOC) reported a fourth quarter loss from continuing operations of $2.5 billion and a 2008 loss from continuing operations of $1.3 billion driven by a non-cash, after-tax charge of $3.1 billion for impairment of goodwill in accordance with Statement of Financial Accounting Standards (SFAS) 142 "Goodwill and Other Intangible Assets."

Fourth quarter 2008 sales increased 4 percent to $9.2 billion from $8.8 billion in the 2007 fourth quarter. 2008 sales increased 6 percent to $33.9 billion from $31.8 billion in 2007. Cash from operations for the 2008 fourth quarter increased to $1 billion from $734 million in the 2007 fourth quarter, and cash from operations for the year increased to a record $3.2 billion from $2.9 billion in 2007. Cash from operations, for both the fourth quarter and total year, was reduced by discretionary pension pre-funding of $200 million in both 2008 and 2007.

"Our underlying fourth quarter operating results were outstanding and represent a strong finish to the year. We begin 2009 with a $78 billion dollar backlog, the highest in Northrop Grumman's history, and a tribute to the dedication and talent of our 120,000 employees," said Ronald D. Sugar , Northrop Grumman chairman and chief executive officer.

"Looking ahead, we continue to position our organization to be more agile and competitive. Our priorities are flawless execution for our customers and superior returns for our shareholders through the generation of outstanding cash flow and solid growth in pension-adjusted earnings," Sugar concluded.

Fourth quarter 2008 adjusted earnings from continuing operations increased 15 percent to $524 million, or $1.57 per diluted share, from $457 million, or $1.32 per diluted share, in the fourth quarter of 2007. For 2008, earnings from continuing operations before the goodwill impairment charge was comparable to the prior year period at $1.8 billion, or $5.21 per diluted share in 2008, compared with $5.18 per diluted share in 2007.

Operating Highlights

Operating Highlights - Adjusted for Goodwill Impairment

Adjusted Fourth Quarter and 2008 Financial Results

Fourth quarter adjusted operating income increased 20 percent to $908 million from $759 million, and as a percent of sales increased 120 basis points to 9.9 percent from 8.7 percent primarily due to higher segment operating income and lower net pension adjustment and lower unallocated expenses. Before the goodwill impairment charge, the four businesses combined to generate a $96 million, or 12 percent, increase in segment operating income. As a percent of sales, operating performance improved 70 basis points to 9.9 percent from 9.2 percent. Net pension adjustment improved by $36 million and unallocated expenses improved by $12 million.

For 2008, adjusted operating income declined to $2.9 billion from $3.0 billion, and as a percent of sales totaled 8.7 percent compared with 9.5 percent. The decline reflects lower Shipbuilding margin driven by the net impact of the LHD-8 related Shipbuilding charge during the year, largely offset by higher operating income for Aerospace and Electronics, and lower net pension adjustment and lower unallocated expense. Net pension adjustment and unallocated expenses improved by $136 million and $47 million, respectively.

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