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
The company also announced that it is increasing its quarterly dividend to
"Although the LHD-8 charge is disappointing, the remainder of our first
quarter performance was strong. Total backlog increased more than
"Based on the strength of that long-term outlook, we continue to execute
our balanced cash deployment strategy. During the quarter we purchased
Operating income for the 2008 first quarter decreased 33 percent to
Federal and foreign income taxes for the 2008 first quarter declined to
Net earnings for the 2008 first quarter declined to
New business awards totaled
Cash provided by operations in the 2008 first quarter totaled
Cash and cash equivalents totaled
During the first quarter of 2008 the company announced its intention to redeem its mandatorily redeemable Series B convertible preferred stock on April 4, 2008 . The reduction in mandatorily redeemable preferred stock reflects the voluntary conversion by holders of approximately 3 million shares during the first quarter of 2008.
During the first quarter of 2008 the company also announced the sale of
its Electro-Optical Systems business for
The company continues to expect sales of approximately
Operating results for all periods presented reflect the reclassification of Electro-Optical Systems (formerly reported in Electronics) from continuing to discontinued operations, as well as the transfer of the Park Air and Remotec businesses from Electronics to Mission Systems effective Jan. 1, 2008 . Schedule 6 provides previously reported quarterly financial results revised to reflect discontinued operations.
Information & Services First Quarter ($ millions) 2008 2007 Operating % Operating % Sales Income of Sales Sales Income of Sales Mission Systems $1,545 $145 9.4 % $1,395 $117 8.4 % Information Technology 1,085 89 8.2 % 1,038 86 8.3 % Technical Services 505 26 5.1 % 520 28 5.4 % $3,135 $260 8.3 % $2,953 $231 7.8 %Information & Services first quarter 2008 sales increased 6 percent from the prior year period due to higher sales for Mission Systems and Information Technology. Operating income for Information & Services rose 13 percent in the 2008 first quarter. As a percent of sales, operating income increased 50 basis points to 8.3 percent from 7.8 percent in the prior year period. The increase in operating income is due to higher volume, and the increase in operating income rate reflects improved program performance for Mission Systems.
Mission Systems sales increased 11 percent due to higher volume for intelligence, surveillance & reconnaissance programs, higher volume for command, control & communications programs and higher volume for the Kinetic Energy Interceptor program. Operating income rose 24 percent, and as a percent of sales, increased 100 basis points to 9.4 percent from 8.4 percent in the prior year period. The increase in operating income reflects higher volume and improved program performance.
Information Technology sales rose 5 percent due to higher volume for intelligence programs, the New York City Wireless program, the Virginia IT outsourcing program, and the Network Centric Solutions program. Operating income rose 3 percent, and as a percent of sales was comparable to the prior year period at 8.2 percent compared with 8.3 percent.
Technical Services sales declined 3 percent due to completion of the Western Range Operations program in 2007 and lower volume for the Joint Base Operations Support program than in the prior year period. Operating income decreased 7 percent, and as a percent of sales, declined to 5.1 percent from 5.4 percent in the prior year period. The comparison to first quarter 2007 reflects lower volume as well as contract mix.
Aerospace First Quarter ($ millions) 2008 2007 Operating % Operating % Sales Income of Sales Sales Income of Sales Integrated Systems $1,340 $170 12.7 % $1,281 $160 12.5 % Space Technology 775 65 8.4 % 754 59 7.8 % $2,115 $235 11.1 % $2,035 $219 10.8 %Aerospace first quarter 2008 sales increased 4 percent from the prior year period and includes higher volume for both Integrated Systems and Space Technology. Aerospace first quarter 2008 operating income increased 7 percent, and as a percent of sales, increased to 11.1 percent from 10.8 percent in the prior year period.
Integrated Systems sales rose 5 percent. The increase includes higher volume for restricted, Global Hawk, Navy UCAS-D, and KC-45 air mobility tanker programs, which was partially offset by lower volume for the F-35, Multi-Platform Radar Technology Insertion program, and the E-10A. Integrated Systems operating income rose 6 percent, and as a percent of sales, increased to 12.7 percent from 12.5 percent in the prior year period. The increase in operating income and rate reflect higher volume and improved program performance.
Space Technology sales increased 3 percent, primarily due to higher volume for restricted and James Webb Space Telescope programs. Increases in these programs were partially offset by lower volume in the Advanced Extremely High Frequency, Space Tracking and Surveillance System, and Transformational Satellite Communications System programs. Space Technology operating income increased 10 percent, and as a percent of sales increased to 8.4 percent from 7.8 percent, reflecting improved program performance and higher sales volume.
Electronics First Quarter ($ Millions) 2008 2007 Operating % of Operating % of Sales Income Sales Sales Income Sales $1,555 $209 13.4 % $1,528 $192 12.6 %Electronics first quarter 2008 sales increased 2 percent from the prior year period principally due to higher sales for Army and navigation systems programs. These sales increases were partially offset by declining volume for naval and marine systems programs.
Electronics first quarter 2008 operating income rose 9 percent, and as a percent of sales, increased to 13.4 percent from 12.6 percent. Operating income primarily reflects improved program performance, higher volume, and higher royalty income than in the prior year period.
Shipbuilding First Quarter ($ millions) 2008 2007 Operating % of Operating % of Sales income Sales Sales income Sales $1,264 ($218) NM $1,156 $79 6.8 % Shipbuilding first quarter 2008 sales increased 9 percent from the prior
year period primarily due to higher volume in surface combatants and fleet
support. Higher surface combatant volume includes production ramp-up for the
DDG 107 and the DDG 110. The increase in fleet support reflects revenue from
the July 2007 reorganization of AMSEC. Shipbuilding revenue in the 2008 first
quarter was reduced by
Shipbuilding recorded a
About Northrop Grumman
Northrop Grumman Corporation is a global defense and technology company whose 120,000 employees provide innovative systems, products, and solutions in information and services, electronics, aerospace and shipbuilding to government and commercial customers worldwide.
Northrop Grumman will webcast its earnings conference call at noon EDT on April 24, 2008 . 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 http://www.northropgrumman.com.
Note: Certain statements and assumptions in this release contain or are based on "forward-looking" information that Northrop Grumman Corporation (the "Company") believes to be within the definition in the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties, and include, among others, statements in the future tense, and all statements accompanied by terms such as "project," "expect," "estimate," "assume," "believe," "plan," "guidance," "outlook," "trends," "target" or variations thereof. This information reflects the Company's best estimates when made, but the Company expressly disclaims any duty to update this information if new data become available or estimates change after the date of this release.
Such "forward-looking" information includes, among other things, financial guidance regarding sales, segment operating margin, pension expense, employer contributions under pension plans and medical and life benefits plans, cash flow, and earnings per share, and is subject to numerous assumptions and uncertainties, many of which are outside the Company's control. These include the Company's assumptions with respect to future revenues; expected program performance and cash flows; returns on pension plan assets and variability of pension actuarial and related assumptions; the outcome of litigation, claims, appeals, bid protests, and investigations; hurricane-related insurance recoveries; environmental remediation; acquisitions and divestitures of businesses; joint ventures and other business arrangements; access to capital; performance issues with key suppliers and subcontractors; product performance and the successful execution of internal plans; successful negotiation of contracts with labor unions; allowability and allocability of costs under U.S. Government contracts; effective tax rates and timing and amounts of tax payments; the results of any audit or appeal process with the Internal Revenue Service; and anticipated costs of capital investments, among other things.
The Company's operations are subject to various additional risks and uncertainties resulting from its position as a supplier, either directly or as subcontractor or team member, to the U.S. government and its agencies as well as to foreign governments and agencies; actual outcomes are dependent upon various factors, including, without limitation, the Company's successful performance of internal plans; government customers' budgetary constraints; customer changes in short-range and long-range plans; domestic and international competition in both the defense and commercial areas; technical, operational or quality setbacks, in development and production programs, that could adversely affect the profitability or cash flow of the company; product performance; continued development and acceptance of new products and, in connection with any fixed-price development programs, controlling cost growth in meeting production specifications and delivery rates; performance issues with key suppliers and subcontractors; government import and export policies; acquisition or termination of government contracts; the outcome of political and legal processes and of the assertion or prosecution of potential substantial claims by or on behalf of a U.S. government customer; natural disasters, including amounts and timing of recoveries under insurance contracts, availability of materials and supplies, continuation of the supply chain, contractual performance relief and the application of cost sharing terms, allowability and allocability of costs under U.S. Government contracts, impacts of timing of cash receipts and the availability of other mitigating elements; terrorist acts; legal, financial and governmental risks related to international transactions and global needs for military aircraft, military and civilian electronic systems and support, information technology, naval vessels, space systems, technical services and related technologies, as well as other economic, political and technological risks and uncertainties and other risk factors set out in the Company's filings from time to time with the Securities and Exchange Commission, including, without limitation, Company reports on Form 10-K and Form 10-Q.
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NORTHROP GRUMMAN CORPORATION SCHEDULE 1 CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited) Three months ended March 31 $ in millions, except per share 2008 2007 Sales and Service Revenues Product sales $4,394 $4,140 Service revenues 3,330 3,174 Total sales and service revenues 7,724 7,314 Cost of Sales and Service Revenues Cost of product sales 3,729 3,168 Cost of service revenues 2,793 2,749 General and administrative expenses 738 707 Operating income 464 690 Other Income (Expense) Interest income 7 7 Interest expense (77) (89) Other, net 15 (8) Earnings from continuing operations before income taxes 409 600 Federal and foreign income taxes 146 206 Earnings from continuing operations 263 394 Income (Loss) from discontinued operations, net of tax 1 (7) Net earnings $264 $387 Basic Earnings (Loss) Per Share Continuing operations $.78 $1.14 Discontinued operations (.02) Basic earnings per share $.78 $1.12 Weighted-average common shares outstanding, in millions 338.8 345.3 Diluted Earnings (Loss) Per Share Continuing operations $.76 $1.12 Discontinued operations (.02) Diluted earnings per share $.76 $1.10 Weighted-average diluted shares outstanding, in millions 349.3 358.3 NORTHROP GRUMMAN CORPORATION SCHEDULE 2 CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (unaudited) March 31, December 31, $ in millions 2008 2007 Assets: Cash and cash equivalents $429 $963 Accounts receivable, net of progress payments 4,358 3,790 Inventoried costs, net of progress payments 1,132 1,000 Deferred income taxes 529 542 Prepaid expenses and other current assets 501 502 Total current assets 6,949 6,797 Property, plant, and equipment, net of accumulated depreciation of $3,552 in 2008 and $3,424 in 2007 4,645 4,690 Goodwill 17,620 17,672 Other purchased intangibles, net of accumulated amortization of $1,711 in 2008 and $1,687 in 2007 1,020 1,074 Pension and postretirement benefits asset 2,103 2,080 Other assets 1,038 1,060 Total assets $33,375 $33,373 Liabilities: Notes payable to banks $59 $26 Current portion of long-term debt 110 111 Trade accounts payable 1,806 1,890 Accrued employees' compensation 1,248 1,175 Advance payments and billings in excess of costs incurred 1,834 1,563 Other current liabilities 1,680 1,667 Total current liabilities 6,737 6,432 Long-term debt, net of current portion 3,928 3,918 Mandatorily redeemable preferred stock 46 350 Pension and postretirement benefits liability 3,059 3,008 Other long-term liabilities 2,004 1,978 Total liabilities 15,774 15,686 Shareholders' Equity: Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2008 -- 339,155,655; 2007 -- 337,834,561 339 338 Paid-in capital 10,438 10,661 Retained earnings 7,518 7,387 Accumulated other comprehensive loss (694) (699) Total shareholders' equity 17,601 17,687 Total liabilities and shareholders' equity $33,375 $33,373 NORTHROP GRUMMAN CORPORATION SCHEDULE 3 CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (unaudited) Three months ended March 31 $ in millions 2008 2007 Operating Activities Sources of Cash - Continuing Operations Cash received from customers Progress payments $1,608 $1,532 Collections on billings 5,950 5,745 Income tax refunds received 2 1 Interest received 7 7 Proceeds from insurance carriers related to operations 5 Other cash receipts 28 15 Total sources of cash-continuing operations 7,600 7,300 Uses of Cash - Continuing Operations Cash paid to suppliers and employees (7,189) (6,676) Interest paid (113) (127) Income taxes paid (54) (22) Excess tax benefits from stock-based compensation (44) (52) Other cash payments (3) (9) Total uses of cash-continuing operations (7,403) (6,886) Cash provided by continuing operations 197 414 Cash used in discontinued operations (3) (14) Net cash provided by operating activities 194 400 Investing Activities Payment for businesses purchased, net of cash acquired (578) Additions to property, plant, and equipment (143) (158) Payments for outsourcing contract and related software costs (35) (30) Proceeds from insurance carriers related to capital expenditures 3 Proceeds from disposals of property, plant and equipment 3 Decrease in restricted cash 26 15 Other investing activities, net 1 1 Net cash used in investing activities (148) (747) Financing Activities Net borrowings under lines of credit 33 230 Principal payments of long-term debt (23) Proceeds from exercises of stock options and issuance of common stock 69 156 Dividends paid (126) (121) Excess tax benefits from stock-based compensation 44 52 Common stock repurchases (600) (600) Net cash used in financing activities (580) (306) Decrease in cash and cash equivalents (534) (653) Cash and cash equivalents, beginning of period 963 1,015 Cash and cash equivalents, end of period $429 $362 NORTHROP GRUMMAN CORPORATION SCHEDULE 4 CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (unaudited) Three months ended March 31 $ in millions 2008 2007 Reconciliation of Net Earnings to Net Cash Provided by Operating Activities Net Earnings $264 $387 Adjustments to reconcile to net cash provided by operating activities Depreciation 136 135 Amortization of assets 62 34 Stock-based compensation 44 38 Excess tax benefits from stock-based compensation (44) (52) Loss on disposals of property, plant, and equipment 1 Amortization of long-term debt premium (3) (3) Decrease (increase) in Accounts receivable (2,080) (1,436) Inventoried costs (266) (89) Prepaid expenses and other current assets (15) 18 Increase (decrease) in Progress payments 1,642 1,390 Accounts payable and accruals 254 (264) Deferred income taxes 26 (4) Income taxes payable 112 177 Retiree benefits 31 47 Other non-cash transactions, net 33 36 Cash provided by continuing operations 197 414 Cash used in discontinued operations (3) (14) Net cash provided by operating activities $194 $400 Non-Cash Investing and Financing Activities Purchase of business Fair value of assets acquired, including goodwill $682 Cash paid for businesses purchased (578) Liabilities assumed $104 Mandatorily redeemable preferred stock converted into common stock $304 Capital Leases $21 NORTHROP GRUMMAN CORPORATION SCHEDULE 5 TOTAL BACKLOG AND CONTRACT AWARDS ($ in millions) (unaudited) TOTAL BACKLOG(3) March 31, 2008 TOTAL FUNDED(1) UNFUNDED(2) BACKLOG Information & Services Mission Systems $3,847 $8,751 $12,598 Information Technology 2,606 2,024 4,630 Technical Services 1,655 2,898 4,553 Total Information & Services 8,108 13,673 21,781 Aerospace Integrated Systems 5,342 6,603 11,945 Space Technology 1,173 8,066 9,239 Total Aerospace 6,515 14,669 21,184 Electronics 8,518 2,200 10,718 Shipbuilding 12,075 2,252 14,327 Total $35,216 $32,794 $68,010 March 31, 2007 TOTAL FUNDED(1) UNFUNDED(2) BACKLOG Information & Services Mission Systems $3,674 $8,402 $12,076 Information Technology 2,609 1,673 4,282 Technical Services 1,317 3,667 4,984 Total Information & Services 7,600 13,742 21,342 Aerospace Integrated Systems 4,749 4,100 8,849 Space Technology 1,663 6,689 8,352 Total Aerospace 6,412 10,789 17,201 Electronics 7,123 1,463 8,586 Shipbuilding 10,674 2,122 12,796 Total $31,809 $28,116 $59,925 December 31, 2007 TOTAL FUNDED(1) UNFUNDED(2) BACKLOG Information & Services Mission Systems $3,399 $8,985 $12,384 Information Technology 2,581 2,268 4,849 Technical Services 1,471 3,193 4,664 Total Information & Services 7,451 14,446 21,897 Aerospace Integrated Systems 4,204 4,525 8,729 Space Technology 1,260 8,266 9,526 Total Aerospace 5,464 12,791 18,255 Electronics 7,887 2,047 9,934 Shipbuilding 10,348 3,230 13,578 Total $31,150 $32,514 $63,664 (1) Funded backlog represents unfilled orders for which funding has been contractually obligated by the customer. (2) Unfunded backlog represents firm orders for which funding is not currently contractually obligated by the customer. Unfunded backlog excludes unexercised contract options and unfunded Indefinite Delivery Indefinite Quantity contract awards. (3) Certain prior period amounts have been reclassified to conform to the 2008 presentation.CONTRACT AWARDS
The estimated value of contract awards included in backlog during the
three months ended March 31, 2008 , is approximately
On February 29, 2008 , the company was awarded a contract by the
U.S. Air Force to replace its aerial refueling tanker fleet. Included in
backlog is approximately
The estimated value of contract awards during the three months ended
March 31, 2007 , is approximately
SOURCE Northrop Grumman Corporation