Northrop Grumman Reports Second Quarter 2008 Results

LOS ANGELES , July 29 /PRNewswire-FirstCall/ -- Northrop Grumman Corporation (NYSE: NOC) reported that second quarter 2008 earnings from continuing operations increased to $483 million , or $1.40 per diluted share, from $472 million , or...


LOS ANGELES , July 29 /PRNewswire-FirstCall/ -- Northrop Grumman Corporation (NYSE: NOC) reported that second quarter 2008 earnings from continuing operations increased to $483 million, or $1.40 per diluted share, from $472 million, or $1.35 per diluted share, in the second quarter of 2007. Earnings for the 2007 second quarter included tax benefits totaling $16 million, or $0.05 per share. Sales for the 2008 second quarter increased 10 percent to $8.6 billion from $7.9 billion in the 2007 second quarter. Cash provided by operations for the 2008 second quarter totaled $607 million compared with $741 million in the prior year period.

"Solid sales increases for all four businesses drove nearly double-digit sales growth for the quarter. Operating income and margin rates for all four businesses are in line with our expectations. Based on this quarter's solid performance and our $67 billion total backlog, we are on track to achieve our 2008 guidance. The long-term outlook for Northrop Grumman continues to be outstanding," said Ronald D. Sugar , Northrop Grumman chairman and chief executive officer.

Operating income for the 2008 second quarter increased 6 percent to $806 million from $763 million in the 2007 second quarter. The increase in operating income reflects higher sales volume, lower corporate unallocated expenses, and improved net pension expense, offset by lower segment operating income. Second quarter 2008 segment operating income declined by $14 million principally due to lower operating income and margin rates for the Shipbuilding and Information & Services businesses than in the prior year period.

Interest expense improved by $11 million compared with the prior year period and other income improved by $14 million.

Federal and foreign income taxes for the 2008 second quarter increased to $256 million from $199 million in the second quarter of 2007. The effective tax rate applied to income from continuing operations for the 2008 second quarter was 34.6 percent compared with 29.7 percent in the 2007 second quarter. In the 2007 second quarter the company recognized tax benefits totaling $16 million after reaching a favorable settlement with the Internal Revenue Service regarding a portion of its audit for the years 2001 through 2003.

Net earnings for the 2008 second quarter increased 8 percent to $495 million, or $1.44 per diluted share, from $460 million, or $1.31 per diluted share, for the same period of 2007. Second quarter 2008 net earnings include a small after-tax gain on the sale of the company's Electro-Optical Systems business. Earnings per share are based on weighted average diluted shares outstanding of 344.1 million for the second quarter of 2008 and 355.3 million for the second quarter of 2007. Weighted average shares outstanding for the 2007 second quarter include the dilutive effect of 6.4 million shares of the company's mandatorily redeemable convertible preferred stock. These shares were redeemed or converted to common shares on or before April 4, 2008 .

New business awards totaled $7.5 billion in the 2008 second quarter. Total backlog, which includes funded backlog and firm orders for which funding is not currently contractually obligated by the customer, was $66.9 billion as of June 30, 2008 .

Cash provided by operations in the 2008 second quarter totaled $607 million compared with $741 million in the prior year period. Second quarter 2007 included a $125 million insurance recovery.

Cash and cash equivalents totaled $581 million at June 30, 2008 compared with $963 million at Dec. 31, 2007 , and total debt was $3.9 billion at June 30, 2008 . Changes in cash and cash equivalents and total debt include the following cash deployment, investing and financing actions during the first six months of 2008:

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