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...


Information Technology fourth quarter sales declined 5 percent and include higher volume for intelligence programs, which was offset by lower sales volume for commercial, state & local, defense, and civilian agencies programs. Sales for 2008 were comparable to the prior year period and include higher volume for intelligence, defense and civilian agencies programs offset by lower volume for commercial, state & local programs.

Information Technology fourth quarter 2008 operating income increased 20 percent, and as a percent of sales improved to 8.6 percent from 6.8 percent. The improvement in rate is due to final allocation of current and prior year overhead items and improved performance for several defense programs, including NETCENTS. For 2008, operating income declined 7 percent, and as a percent of sales declined to 6.8 percent from 7.3 percent. The declines in 2008 operating income and margin rate are principally due to performance on commercial, state & local programs, including a $57 million negative performance adjustment for the New York City Wireless program.

Technical Services fourth quarter sales rose 15 percent, and 2008 sales rose 5 percent. Sales increases for both periods include higher volume for life cycle optimization and engineering programs and training and simulation programs.

Technical Services fourth quarter operating income declined by $4 million, and as a percent of sales, declined to 4.6 percent from 6 percent in the prior year period. Higher operating income due to increased volume was offset by a higher level of planned internal investment and final allocation of current and prior year overhead items than in the prior year period. For 2008, operating income increased as a result of higher volume and as a percent of sales is comparable to the prior year.

Aerospace fourth quarter 2008 sales increased 6 percent, and include higher volume for Integrated Systems and comparable sales for Space Technology. For 2008, sales increased 6 percent and include higher volume for both Integrated Systems and Space Technology.

Fourth quarter and 2008 operating income for Aerospace includes a goodwill impairment charge of $570 million resulting from annual impairment testing required by SFAS 142. Adjusted Aerospace fourth quarter 2008 operating income increased 18 percent, and as a percent of sales increased to 10.3 percent from 9.2 percent, reflecting improved program performance for both Integrated Systems and Space Technology. For 2008, adjusted operating income increased 7 percent, and as a percent of sales was unchanged at 10 percent.

Integrated Systems fourth quarter sales increased 12 percent primarily due to higher volume for BAMS, F-35, UCAS-D, and restricted programs. Sales for 2008 increased by 9 percent and include higher volume for UCAS-D, Global Hawk, B-2, Joint STARS, BAMS, and restricted programs.

Integrated Systems fourth quarter operating income rose 14 percent, and as a percent of sales, increased to 10.7 percent from 10.5 percent. Higher fourth quarter operating income is principally due to higher volume than in the prior year period. Operating income for 2008 increased 4 percent, and as a percent of sales declined to 11.1 percent from 11.7 percent. The higher margin rate in 2007 includes the impact of a $27 million positive adjustment related to the settlement of prior year overhead costs.

Space Technology fourth quarter sales were comparable to the prior year period, and 2008 sales increased 4 percent. Higher 2008 sales are primarily attributable to higher volume for restricted and civil systems programs, which more than offset lower volume in the military systems programs, primarily the Advanced Extremely High Frequency program.

Fourth quarter and 2008 operating income for Space Technology includes a goodwill impairment charge of $570 million resulting from annual impairment testing required by SFAS 142. Space Technology fourth quarter adjusted operating income increased 25 percent, and as a percent of sales increased to 9.8 percent from 7.8 percent. The higher margin rate on comparable sales reflects performance improvements for missile systems and restricted programs as a result of risk retirement. Adjusted operating income for 2008 increased 14 percent and as a percent of sales increased to 8.6 percent from 7.9 percent. The improvement in 2008 operating income and margin rate reflects higher volume and improved performance for several programs as a result of risk retirement.