FALLS CHURCH, Va., July 24, 2013 /PRNewswire-FirstCall/ -- Northrop
Grumman Corporation (NYSE: NOC) second quarter 2013 net earnings
increased 2 percent to $488 million,
or $2.05 per diluted share, from
$480 million, or $1.88 per diluted share, in the second quarter of
2012. Second quarter 2013 earnings include a $30 million pre-tax charge, or $0.08 per share, principally related to
"make-whole" premiums paid to redeem $850
million of senior notes on June 27,
2013. Second quarter 2013 diluted earnings per share are
based on 237.5 million weighted average shares outstanding compared
with 254.7 million shares in the second quarter of 2012, a 7
percent decrease. The company repurchased 6.1 million shares of its
common stock in the 2013 second quarter, and 12.6 million shares
year-to-date, consistent with its previously announced goal of
repurchasing approximately 60 million shares of its common stock by
the end of 2015, market conditions permitting.
"Second quarter and year-to-date financial results reflect the
hard work and dedication of the entire Northrop Grumman team. As a
company, we remain focused on program performance, effective cash
deployment and portfolio alignment as we continue to create value
for our shareholders, customers and employees," said Wes Bush, chairman, chief executive officer and
president.
Table 1 —
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
Six
Months
|
($ in millions,
except per share amounts)
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Sales
|
|
$
|
6,294
|
|
|
$
|
6,274
|
|
|
$
|
12,398
|
|
|
$
|
12,472
|
|
Segment operating
income1
|
|
797
|
|
|
782
|
|
|
1,545
|
|
|
1,571
|
|
Segment operating
margin rate1
|
|
12.7%
|
|
|
12.5%
|
|
|
12.5%
|
|
|
12.6%
|
|
Operating
income
|
|
806
|
|
|
774
|
|
|
1,565
|
|
|
1,570
|
|
Operating margin
rate
|
|
12.8%
|
|
|
12.3%
|
|
|
12.6%
|
|
|
12.6%
|
|
Net
earnings
|
|
488
|
|
|
480
|
|
|
977
|
|
|
986
|
|
Diluted
EPS
|
|
2.05
|
|
|
1.88
|
|
|
4.08
|
|
|
3.84
|
|
Cash provided by
operations
|
|
328
|
|
|
876
|
|
|
329
|
|
|
771
|
|
Free cash
flow1
|
|
280
|
|
|
825
|
|
|
241
|
|
|
639
|
|
|
|
|
|
|
|
|
|
|
Pension-adjusted
Operating Highlights
|
|
|
|
|
|
|
|
|
Operating
income
|
|
806
|
|
|
774
|
|
|
1,565
|
|
|
1,570
|
|
Net FAS/CAS pension
adjustment1
|
|
(31)
|
|
|
(35)
|
|
|
(64)
|
|
|
(67)
|
|
Pension-adjusted
operating income1
|
|
$
|
775
|
|
|
$
|
739
|
|
|
$
|
1,501
|
|
|
$
|
1,503
|
|
Pension-adjusted
operating margin rate1
|
|
12.3%
|
|
|
11.8%
|
|
|
12.1%
|
|
|
12.1%
|
|
|
|
|
|
|
|
|
|
|
Pension-adjusted
Per Share Data
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
2.05
|
|
|
$
|
1.88
|
|
|
$
|
4.08
|
|
|
$
|
3.84
|
|
After-tax net pension
adjustment per share1
|
|
(0.08)
|
|
|
(0.09)
|
|
|
(0.17)
|
|
|
(0.17)
|
|
Pension-adjusted
diluted EPS1
|
|
$
|
1.97
|
|
|
$
|
1.79
|
|
|
$
|
3.91
|
|
|
$
|
3.67
|
|
Weighted average
shares outstanding — Basic
|
|
234.0
|
|
|
250.8
|
|
|
235.2
|
|
|
252.0
|
|
Dilutive effect of
stock options and stock awards
|
|
3.5
|
|
|
3.9
|
|
|
4.0
|
|
|
4.5
|
|
Weighted average
shares outstanding — Diluted
|
|
237.5
|
|
|
254.7
|
|
|
239.2
|
|
|
256.5
|
|
|
1
Non-GAAP metric — see definitions at the
end of this press release.
|
Second quarter 2013 total operating income increased
$32 million or 4 percent, and
operating margin rate increased 50 basis points to 12.8 percent.
Higher operating income reflects higher segment operating income
and lower corporate unallocated expenses than in the prior year
period. Second quarter 2013 segment operating income increased 2
percent from the prior year period due to a $20 million sales increase and a $25 million increase in net favorable performance
adjustments. Segment operating margin rate improved 20 basis points
to 12.7 percent.
As of June 30, 2013, total backlog
was $37.7 billion compared with
$40.8 billion as of Dec. 31, 2012. Second quarter 2013 new awards
totaled $5.5 billion. The decline in
backlog and new awards is primarily due to reduced customer
spending in response to the current U.S. government budget
environment.
Table 2 — Cash
Flow Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
Six
Months
|
($
millions)
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Cash provided by
operating activities before discretionary pension
contributions1
|
|
$
|
740
|
|
|
$
|
876
|
|
|
$
|
741
|
|
|
$
|
771
|
|
After-tax
discretionary pension pre-funding impact
|
|
(412)
|
|
|
—
|
|
|
(412)
|
|
|
—
|
|
Net cash provided by
operating activities
|
|
$
|
328
|
|
|
$
|
876
|
|
|
$
|
329
|
|
|
$
|
771
|
|
Less:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
(48)
|
|
|
(51)
|
|
|
(88)
|
|
|
(132)
|
|
Free cash
flow1
|
|
$
|
280
|
|
|
$
|
825
|
|
|
$
|
241
|
|
|
$
|
639
|
|
After-tax
discretionary pension pre-funding impact
|
|
412
|
|
|
—
|
|
|
412
|
|
|
—
|
|
Free cash flow
provided by operating activities before discretionary pension
contributions1
|
|
$
|
692
|
|
|
$
|
825
|
|
|
$
|
653
|
|
|
$
|
639
|
|
|
1
Non-GAAP metric — see definitions at the
end of this press release.
|
Second quarter 2013 cash provided by operating activities before
discretionary pension contributions was $740
million compared with $876
million in the prior year period. Second quarter 2013 free
cash flow provided by operating activities before discretionary
pension contributions was $692
million.
Changes in cash and cash equivalents include the following items
for cash from operations, investing and financing through
June 30, 2013:
Operations
- $329 million provided by
operations
Investing
- $88 million for capital
expenditures
Financing
- $921 million for
repurchases of common stock
- $2.84 billion net proceeds
from issuance of long-term debt
- $877 million for redemption
of long-term debt
- $272 million for
dividends
2013
Guidance Updated
|
|
|
|
|
|
|
|
|
($ in millions,
except per share amounts)
|
Prior
|
|
Current
|
|
|
|
|
|
|
|
|
Sales
|
~24,000
|
|
~24,300
|
|
|
|
|
|
|
|
|
Segment operating
margin %1
|
Low to mid
11%
|
|
~12%
|
|
|
|
|
|
|
|
|
Operating margin
%
|
High 10% to Low
11%
|
|
~12%
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
6.85
|
—
|
7.15
|
|
7.60
|
—
|
7.80
|
|
|
|
|
|
|
|
|
Cash provided by
operations before after-tax impact of discretionary pension
pre-funding contributions1
|
2,100
|
—
|
2,400
|
|
2,100
|
—
|
2,400
|
|
|
|
|
|
|
|
|
Free cash flow before
after-tax impact of discretionary pension pre-funding
contributions1
|
1,700
|
—
|
2,000
|
|
1,700
|
—
|
2,000
|
|
|
|
|
|
|
|
|
1 Non-GAAP
metric - see definitions at the end of this press
release.
|
The company's updated 2013 financial guidance is based on the
funding levels provided for by the FY 2013 appropriations bill
enacted on March 26, 2013, as
impacted by sequestration, and assumes that an appropriations bill
or continuing resolution for FY 2014 will be in effect beginning on
Oct. 1, 2013, in each case continuing
to support and fund the company's programs. Guidance for 2013 also
assumes no disruption or shutdown of government operations
resulting from a federal government debt ceiling breach and no
cancellation or termination of any of our significant programs.
Table 3 — Business
Results
Consolidated Sales
& Segment Operating Income1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
($
millions)
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace
Systems
|
$
|
2,613
|
|
|
$
|
2,404
|
|
|
9%
|
|
|
$
|
5,098
|
|
|
$
|
4,787
|
|
|
6%
|
|
Electronic
Systems
|
1,771
|
|
|
1,744
|
|
|
2%
|
|
|
3,492
|
|
|
3,468
|
|
|
1%
|
|
Information
Systems
|
1,689
|
|
|
1,856
|
|
|
(9%)
|
|
|
3,363
|
|
|
3,700
|
|
|
(9%)
|
|
Technical
Services
|
722
|
|
|
783
|
|
|
(8%)
|
|
|
1,439
|
|
|
1,533
|
|
|
(6%)
|
|
Intersegment
eliminations
|
(501)
|
|
|
(513)
|
|
|
|
|
(994)
|
|
|
(1,016)
|
|
|
|
|
6,294
|
|
|
6,274
|
|
|
—
|
|
|
12,398
|
|
|
12,472
|
|
|
(1%)
|
|
Segment operating
income1
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace
Systems
|
336
|
|
|
292
|
|
|
15%
|
|
|
606
|
|
|
571
|
|
|
6%
|
|
Electronic
Systems
|
322
|
|
|
276
|
|
|
17%
|
|
|
618
|
|
|
580
|
|
|
7%
|
|
Information
Systems
|
141
|
|
|
202
|
|
|
(30%)
|
|
|
312
|
|
|
407
|
|
|
(23%)
|
|
Technical
Services
|
69
|
|
|
74
|
|
|
(7%)
|
|
|
134
|
|
|
144
|
|
|
(7%)
|
|
Intersegment
eliminations
|
(71)
|
|
|
(62)
|
|
|
|
|
(125)
|
|
|
(131)
|
|
|
|
Segment operating
income1
|
797
|
|
|
782
|
|
|
2%
|
|
|
1,545
|
|
|
1,571
|
|
|
(2%)
|
|
Segment operating
margin rate1
|
12.7%
|
|
|
12.5%
|
|
|
20
bps
|
|
|
12.5%
|
|
|
12.6%
|
|
|
(10)
bps
|
|
Reconciliation to
operating income
|
|
|
|
|
|
|
|
|
|
|
|
Net pension
adjustment1
|
31
|
|
|
35
|
|
|
(11%)
|
|
|
64
|
|
|
67
|
|
|
(4%)
|
|
Unallocated corporate
expenses
|
(21)
|
|
|
(39)
|
|
|
46%
|
|
|
(40)
|
|
|
(62)
|
|
|
35%
|
|
Other
|
(1)
|
|
|
(4)
|
|
|
75%
|
|
|
(4)
|
|
|
(6)
|
|
|
33%
|
|
Operating
income
|
806
|
|
|
774
|
|
|
4%
|
|
|
1,565
|
|
|
1,570
|
|
|
—
|
|
Operating margin
rate
|
12.8%
|
|
|
12.3%
|
|
|
50
bps
|
|
|
12.6%
|
|
|
12.6%
|
|
|
—
|
|
Interest
expense
|
(60)
|
|
|
(52)
|
|
|
(15%)
|
|
|
(113)
|
|
|
(105)
|
|
|
(8%)
|
|
Other, net
|
(22)
|
|
|
5
|
|
|
(540%)
|
|
|
(16)
|
|
|
18
|
|
|
(189%)
|
|
Earnings before
income taxes
|
724
|
|
|
727
|
|
|
—
|
|
|
1,436
|
|
|
1,483
|
|
|
(3%)
|
|
Federal and foreign
income tax expense
|
(236)
|
|
|
(247)
|
|
|
4%
|
|
|
(459)
|
|
|
(497)
|
|
|
8%
|
|
Net
earnings
|
$
|
488
|
|
|
$
|
480
|
|
|
2%
|
|
|
$
|
977
|
|
|
$
|
986
|
|
|
(1%)
|
|
|
1
Non-GAAP metric — see definitions at the
end of this press release.
|
Other, net for the second quarter of 2013 was an expense of
$22 million compared with income of
$5 million in the prior year period
due to a $30 million pre-tax charge,
principally for "make-whole" premiums paid to redeem $850 million of long-term debt in June 2013.
Federal and foreign income tax expense totaled $236 million in the second quarter of 2013,
compared with $247 million in the
prior year period. The effective tax rate for the 2013 second
quarter declined to 32.6 percent from 34.0 percent in the prior
year period. The lower effective tax rate reflects the benefit of
the American Taxpayer Relief Act, which reinstated research tax
credits for years 2012 and 2013.
Aerospace Systems
($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
Sales
|
$
|
2,613
|
|
|
$
|
2,404
|
|
|
8.7%
|
|
|
$
|
5,098
|
|
|
$
|
4,787
|
|
|
6.5%
|
|
Operating
income
|
336
|
|
|
292
|
|
|
15.1%
|
|
|
606
|
|
|
571
|
|
|
6.1%
|
|
Operating margin
rate
|
12.9%
|
|
|
12.1%
|
|
|
|
|
11.9%
|
|
|
11.9%
|
|
|
|
Aerospace Systems second quarter 2013 sales increased 9 percent
due to higher volume for manned military aircraft, unmanned and
space programs. The increase in manned military aircraft is
principally due to higher F-35 volume resulting from the delivery
of 11 units under low rate initial production lot 5 (LRIP 5), the
first lot accounted for under the units-of-delivery method. There
were no deliveries under LRIP 5 in the second quarter of 2012.
Higher unmanned volume reflects the ramp-up of unmanned programs,
principally NATO AGS and Fire Scout, partially offset by lower
Global Hawk volume. The increase in space sales is due to higher
volume for the AEHF and James Webb Space Telescope programs,
partially offset by lower volume for restricted programs.
Aerospace Systems second quarter 2013 operating income increased
15 percent and operating margin rate increased 80 basis points to
12.9 percent. The increase in operating income is due to higher
sales volume described above as well as higher net favorable
adjustments than in the prior year period, principally for improved
performance on space programs.
Electronic Systems
($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
Sales
|
$
|
1,771
|
|
|
$
|
1,744
|
|
|
1.5%
|
|
|
$
|
3,492
|
|
|
$
|
3,468
|
|
|
0.7%
|
|
Operating
income
|
322
|
|
|
276
|
|
|
16.7%
|
|
|
618
|
|
|
580
|
|
|
6.6%
|
|
Operating margin
rate
|
18.2%
|
|
|
15.8%
|
|
|
|
|
17.7%
|
|
|
16.7%
|
|
|
|
Electronic Systems second quarter 2013 sales increased 2 percent
from the prior year period and include higher volume for
international, tactical sensor and space programs. Higher volume
for these programs was partially offset by lower volume for
navigation, combat avionics and maritime systems due to program
completions, as well as lower volume for laser systems and infrared
countermeasures.
Electronic Systems second quarter 2013 operating income
increased 17 percent, and operating margin rate increased 240 basis
points to 18.2 percent. Higher 2013 operating income and margin
rate reflect improved performance and a higher level of net
favorable adjustments than in the prior year period due to improved
performance in marine and space programs.
Information
Systems ($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
Sales
|
$
|
1,689
|
|
|
$
|
1,856
|
|
|
(9.0%)
|
|
|
$
|
3,363
|
|
|
$
|
3,700
|
|
|
(9.1%)
|
|
Operating
income
|
141
|
|
|
202
|
|
|
(30.2%)
|
|
|
312
|
|
|
407
|
|
|
(23.3%)
|
|
Operating margin
rate
|
8.3%
|
|
|
10.9%
|
|
|
|
|
9.3%
|
|
|
11.0%
|
|
|
|
Information Systems second quarter 2013 sales declined 9
percent. The transfer of intercompany efforts to the company's
shared services organization and portfolio shaping accounted for
$33 million of the decline. Excluding
the transfer and portfolio shaping, second quarter sales declined 7
percent due to lower funding levels and contract completions across
the portfolio, including programs impacted by in-theater force
reductions.
Information Systems second quarter 2013 operating income
decreased 30 percent and operating margin rate was 8.3 percent.
Second quarter 2013 operating income and margin rate reflect lower
sales and a $27 million reduction in
net favorable adjustments from the prior year period.
Technical Services
($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
Sales
|
$
|
722
|
|
|
$
|
783
|
|
|
(7.8%)
|
|
|
$
|
1,439
|
|
|
$
|
1,533
|
|
|
(6.1%)
|
|
Operating
income
|
69
|
|
|
74
|
|
|
(6.8%)
|
|
|
134
|
|
|
144
|
|
|
(6.9%)
|
|
Operating margin
rate
|
9.6%
|
|
|
9.5%
|
|
|
|
|
9.3%
|
|
|
9.4%
|
|
|
|
Technical Services second quarter 2013 sales declined 8 percent,
principally due to lower volume for the KC-10 and ICBM programs as
well as portfolio shaping actions.
Technical Services second quarter 2013 operating income
decreased 7 percent, and operating margin rate totaled 9.6 percent.
The decline in operating income is primarily due to lower sales;
operating margin rate is comparable to the prior year period.
About Northrop Grumman
Northrop Grumman will webcast its earnings conference call at
noon Eastern time on July 24, 2013. 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 website
at www.northropgrumman.com.
Northrop Grumman is a leading global security company providing
innovative systems, products and solutions in unmanned systems,
cyber, C4ISR, and logistics and modernization to government and
commercial customers worldwide. Please visit
www.northropgrumman.com for more information.
This release and the attachments contain statements, other than
statements of historical fact, that constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Words such as "expect," "intend," "may,"
"could," "plan," "project," "forecast," "believe," "estimate,"
"outlook," "anticipate," "trends," "guidance," "goal," and similar
expressions generally identify these forward-looking statements.
Forward-looking statements in this release and the attachments
include, among other things, statements relating to our future
financial condition and operating results. Forward-looking
statements are based upon assumptions, expectations, plans and
projections that we believe to be reasonable when made. These
statements are not guarantees of future performance and inherently
involve a wide range of risks and uncertainties that are difficult
to predict. Specific risks that could cause actual results to
differ materially from those expressed or implied in these
forward-looking statements include, but are not limited to, risks
related to: the assumptions on which our guidance is based; our
dependence on U.S. Government contracts; the effect of economic
conditions in the United States
and globally; changes in government and customer priorities and
requirements; government budgetary constraints; shifts or
reductions in defense spending resulting from sequestration under
the Budget Control Act of 2011, a continuing resolution with
limited new starts, the lack of annual appropriations legislation
or otherwise; debt-ceiling limits and disruption to or shutdown of
government operations; changes in import and export policies;
changes in customer short-range and long-range plans; major program
terminations; the acquisition, deferral, reduction or termination
of contracts or programs; market conditions; our ability to access
capital; interest and discount rates or other changes that may
impact pension plan assumptions and actual returns on pension plan
assets; the outcome of litigation, claims, audits, appeals, bid
protests and investigations; the adequacy of our insurance coverage
and recoveries; the costs of environmental remediation; our ability
to attract and retain qualified personnel; changes in
organizational structure and reporting segments; acquisitions,
dispositions, spin-off transactions, joint ventures, strategic
alliances and other business arrangements; possible impairments of
goodwill or other intangible assets; the effects of legislation,
regulations, and other changes in accounting, tax or defense
procurement rules or practices; technical, operational or quality
setbacks in contract performance; issues with, and financial
viability of, key suppliers and subcontractors; availability of
materials and supplies; controlling costs of fixed-price
development programs; domestic and international competition;
legal, financial and governmental risks related to international
transactions; potential security threats, information technology
attacks, natural disasters and other disruptions not under our
control; and other risk factors and other important factors
disclosed in our Form 10-K for the year ended December 31, 2012 and other filings with the
Securities and Exchange Commission.
You should not put undue reliance on any forward-looking
statements in this release. These forward-looking statements speak
only as of the date of this release, and we undertake no obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law. This release and the attachments also contain
non-GAAP financial measures. A reconciliation to the nearest GAAP
measure and a discussion of the company's use of these measures are
included in this release or the attachments.
SCHEDULE
1
|
NORTHROP GRUMMAN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE
INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30
|
|
Six Months
Ended
June 30
|
$ in millions,
except per share amounts
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Sales
|
|
|
|
|
|
|
|
Product
|
$
|
3,593
|
|
|
$
|
3,399
|
|
|
$
|
7,014
|
|
|
$
|
6,740
|
Service
|
2,701
|
|
|
2,875
|
|
|
5,384
|
|
|
5,732
|
Total
sales
|
6,294
|
|
|
6,274
|
|
|
12,398
|
|
|
12,472
|
Operating costs
and expenses
|
|
|
|
|
|
|
|
Product
|
2,703
|
|
|
2,604
|
|
|
5,334
|
|
|
5,131
|
Service
|
2,203
|
|
|
2,316
|
|
|
4,359
|
|
|
4,630
|
General and
administrative expenses
|
582
|
|
|
580
|
|
|
1,140
|
|
|
1,141
|
Operating
income
|
806
|
|
|
774
|
|
|
1,565
|
|
|
1,570
|
Other (expense)
income
|
|
|
|
|
|
|
|
Interest
expense
|
(60)
|
|
|
(52)
|
|
|
(113)
|
|
|
(105)
|
Other, net
|
(22)
|
|
|
5
|
|
|
(16)
|
|
|
18
|
Earnings before
income taxes
|
724
|
|
|
727
|
|
|
1,436
|
|
|
1,483
|
Federal and foreign
income tax expense
|
236
|
|
|
247
|
|
|
459
|
|
|
497
|
Net
earnings
|
$
|
488
|
|
|
$
|
480
|
|
|
$
|
977
|
|
|
$
|
986
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
2.09
|
|
|
$
|
1.91
|
|
|
$
|
4.15
|
|
|
$
|
3.91
|
Weighted-average
common shares outstanding, in millions
|
234.0
|
|
|
250.8
|
|
|
235.2
|
|
|
252.0
|
Diluted earnings
per share
|
$
|
2.05
|
|
|
$
|
1.88
|
|
|
$
|
4.08
|
|
|
$
|
3.84
|
Weighted-average
diluted shares outstanding, in millions
|
237.5
|
|
|
254.7
|
|
|
239.2
|
|
|
256.5
|
|
|
|
|
|
|
|
|
Net earnings (from
above)
|
$
|
488
|
|
|
$
|
480
|
|
|
$
|
977
|
|
|
$
|
986
|
Other comprehensive
income
|
|
|
|
|
|
|
|
Change in unamortized
benefit plan costs, net of tax
|
79
|
|
|
54
|
|
|
159
|
|
|
104
|
Change in cumulative
translation adjustment
|
9
|
|
|
(15)
|
|
|
(7)
|
|
|
(9)
|
Other comprehensive
income, net of tax
|
88
|
|
|
39
|
|
|
152
|
|
|
95
|
Comprehensive
income
|
$
|
576
|
|
|
$
|
519
|
|
|
$
|
1,129
|
|
|
$
|
1,081
|
SCHEDULE
2
|
NORTHROP GRUMMAN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
|
|
|
|
|
|
|
|
|
$ in
millions
|
June
30,
2013
|
|
December
31,
2012
|
Assets
|
|
|
|
Cash and cash
equivalents
|
|
$
4,904
|
|
|
|
$ 3,862
|
|
Accounts receivable,
net of progress payments
|
3,124
|
|
|
2,858
|
|
Inventoried costs,
net of progress payments
|
745
|
|
|
798
|
|
Deferred tax
assets
|
551
|
|
|
574
|
|
Prepaid expenses and
other current assets
|
240
|
|
|
300
|
|
Total current
assets
|
9,564
|
|
|
8,392
|
|
Property, plant and
equipment, net of accumulated depreciation of $4,283 in 2013 and
$4,146 in 2012
|
2,783
|
|
|
2,887
|
|
Goodwill
|
12,437
|
|
|
12,431
|
|
Non-current deferred
tax assets
|
1,429
|
|
|
1,542
|
|
Other non-current
assets
|
1,295
|
|
|
1,291
|
|
Total
assets
|
|
$27,508
|
|
|
|
$26,543
|
|
|
|
|
|
Liabilities
|
|
|
|
Trade accounts
payable
|
|
$
1,195
|
|
|
|
$ 1,392
|
|
Accrued employee
compensation
|
1,001
|
|
|
1,173
|
|
Advance payments and
billings in excess of costs incurred
|
1,802
|
|
|
1,759
|
|
Other current
liabilities
|
1,641
|
|
|
1,732
|
|
Total current
liabilities
|
5,639
|
|
|
6,056
|
|
Long-term debt, net
of current portion
|
5,929
|
|
|
3,930
|
|
Pension and
post-retirement benefit plan liabilities
|
5,426
|
|
|
6,085
|
|
Other non-current
liabilities
|
956
|
|
|
958
|
|
Total
liabilities
|
17,950
|
|
|
17,029
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
Preferred stock, $1
par value; 10,000,000 shares authorized; no shares issued and
outstanding
|
—
|
|
|
—
|
|
Common stock, $1 par
value; 800,000,000 shares authorized; issued and outstanding:
2013—230,801,552 and 2012—239,209,812
|
231
|
|
|
239
|
|
Paid-in
capital
|
2,124
|
|
|
2,924
|
|
Retained
earnings
|
11,838
|
|
|
11,138
|
|
Accumulated other
comprehensive loss
|
(4,635)
|
|
|
(4,787)
|
|
Total shareholders'
equity
|
9,558
|
|
|
9,514
|
|
Total liabilities
and shareholders' equity
|
|
$27,508
|
|
|
|
$26,543
|
|
SCHEDULE
3
|
NORTHROP GRUMMAN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June
30
|
$ in
millions
|
2013
|
|
2012
|
Operating
activities
|
|
|
|
Sources of
cash
|
|
|
|
Cash received from customers
|
|
|
|
Collections on billings
|
|
$
9,558
|
|
|
|
$ 9,911
|
|
Progress payments
|
2,554
|
|
|
2,553
|
|
Other cash receipts
|
32
|
|
|
38
|
|
Total
sources of cash
|
12,144
|
|
|
12,502
|
|
Uses of
cash
|
|
|
|
Cash
paid to suppliers and employees
|
(10,702)
|
|
|
(10,969)
|
|
Pension
contributions
|
(543)
|
|
|
(33)
|
|
Interest paid, net of interest received
|
(111)
|
|
|
(102)
|
|
Income
taxes paid, net of refunds received
|
(412)
|
|
|
(584)
|
|
Other cash payments
|
(47)
|
|
|
(43)
|
|
Total uses of cash
|
(11,815)
|
|
|
(11,731)
|
|
Net cash provided by
operating activities
|
329
|
|
|
771
|
|
Investing
activities
|
|
|
|
Capital
expenditures
|
(88)
|
|
|
(132)
|
|
Maturities of
short-term investments
|
—
|
|
|
250
|
|
Other
investing activities, net
|
6
|
|
|
44
|
|
Net cash (used in)
provided by investing activities
|
(82)
|
|
|
162
|
|
Financing
activities
|
|
|
|
Net proceeds
from issuance of long-term debt
|
2,841
|
|
|
—
|
|
Common stock
repurchases
|
(921)
|
|
|
(555)
|
|
Payments of
long-term debt
|
(877)
|
|
|
—
|
|
Cash dividends
paid
|
(272)
|
|
|
(265)
|
|
Proceeds from
exercises of stock options
|
110
|
|
|
67
|
|
Other
financing activities, net
|
(86)
|
|
|
(34)
|
|
Net cash provided by
(used in) financing activities
|
795
|
|
|
(787)
|
|
Increase in cash and
cash equivalents
|
1,042
|
|
|
146
|
|
Cash and cash
equivalents, beginning of year
|
3,862
|
|
|
3,002
|
|
Cash and cash
equivalents, end of period
|
|
$
4,904
|
|
|
|
$ 3,148
|
|
SCHEDULE
4
|
|
NORTHROP GRUMMAN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June
30
|
$ in
millions
|
2013
|
|
2012
|
Reconciliation of
net earnings to net cash provided by operating
activities
|
|
|
|
Net
earnings
|
$
|
977
|
|
|
$
|
986
|
|
Adjustments to
reconcile to net cash provided by operating activities:
|
|
|
|
Depreciation and
amortization
|
225
|
|
|
243
|
|
Stock-based
compensation
|
71
|
|
|
76
|
|
Excess tax benefits
from stock-based compensation
|
(27)
|
|
|
(29)
|
|
Deferred income
taxes
|
33
|
|
|
(21)
|
|
(Increase) decrease
in assets:
|
|
|
|
Accounts receivable, net
|
(268)
|
|
|
(175)
|
|
Inventoried costs, net
|
62
|
|
|
143
|
|
Prepaid expenses and other assets
|
6
|
|
|
(95)
|
|
Increase (decrease)
in liabilities:
|
|
|
|
Accounts payable and accruals
|
(430)
|
|
|
(453)
|
|
Income taxes payable
|
60
|
|
|
(22)
|
|
Retiree benefits
|
(397)
|
|
|
137
|
|
Other, net
|
17
|
|
|
(19)
|
|
Net cash provided by
operating activities
|
$
|
329
|
|
|
$
|
771
|
|
SCHEDULE
5
|
NORTHROP GRUMMAN
CORPORATION
TOTAL BACKLOG AND
CONTRACT AWARDS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2013
|
|
December 31,
2012
|
$ in
millions
|
|
FUNDED
(1)
|
|
UNFUNDED
(2)
|
|
TOTAL
BACKLOG
|
|
TOTAL
BACKLOG
|
Aerospace
Systems
|
|
$
|
10,437
|
|
|
$
|
8,376
|
|
|
$
|
18,813
|
|
|
$
|
19,594
|
|
Electronic
Systems
|
|
7,251
|
|
|
1,732
|
|
|
8,983
|
|
|
9,471
|
|
Information
Systems(3)
|
|
3,146
|
|
|
3,930
|
|
|
7,076
|
|
|
8,541
|
|
Technical
Services
|
|
2,372
|
|
|
478
|
|
|
2,850
|
|
|
3,203
|
|
Total
|
|
$
|
23,206
|
|
|
$
|
14,516
|
|
|
$
|
37,722
|
|
|
$
|
40,809
|
|
|
|
(1)
|
Funded backlog
represents firm orders for which funding is authorized and
appropriated by the customer.
|
(2)
|
Unfunded backlog
represents firm orders for which as of the reporting date, funding
is not authorized and appropriated by the customer. Unfunded
backlog excludes unexercised contract options and indefinite
delivery, indefinite quantity (IDIQ) contracts until the time the
option or IDIQ task order is exercised or awarded.
|
(3)
|
Information Systems
backlog as of June 30, 2013 includes a $1.0 billion adjustment
primarily to reduce unfunded backlog for expired periods of
performance on active contracts, including task orders on IDIQ
contracts.
|
|
|
|
New Awards
The estimated values of contract awards included in backlog
during the three months and six months ended June 30, 2013, were $5.5
billion and $10.3 billion,
respectively. Net of the Information Systems backlog adjustments,
contract awards for the three months and six months ended
June 30, 2013, were $4.6 billion and $9.3
billion, respectively.
Non-GAAP Financial Measures Disclosure:
Today's press release contains non-GAAP (accounting principles
generally accepted in the United States
of America) financial measures, as defined by SEC
(Securities and Exchange Commission) Regulation G and indicated by
a footnote in the text of the release. While we believe that these
non-GAAP financial measures may be useful in evaluating our
financial information, they should be considered as supplemental in
nature and not as a substitute for financial information prepared
in accordance with GAAP. Definitions are provided for the non-GAAP
measures and reconciliations are provided in the body of the
release. References to a "Table" in the definitions below relate to
tables in the body of this press release. Other companies may
define these measures differently or may utilize different non-GAAP
measures.
Pension-adjusted diluted EPS: Diluted EPS excluding the
after-tax net pension adjustment per share, as defined below. These
per share amounts are provided for consistency and comparability of
operating results. Management uses pension-adjusted diluted EPS, as
reconciled in Table 1, as an internal measure of financial
performance.
Cash provided by operating activities before discretionary
pension contributions: Cash provided by operating activities
before the after-tax impact of discretionary pension contributions.
Cash provided by operating activities before discretionary pension
contributions has been provided for consistency and comparability
of 2013 and 2012 financial performance and is reconciled in Table
2.
Free cash flow: Cash provided by operating activities
less capital expenditures (including outsourcing contract &
related software costs). We use free cash flow as a key factor in
our planning for, and consideration of, strategic acquisitions,
stock repurchases and the payment of dividends. This measure should
not be considered in isolation, as a measure of residual cash flow
available for discretionary purposes, or as an alternative to
operating results presented in accordance with GAAP. Free cash flow
is reconciled in Table 2.
Free cash flow provided by operating activities before
discretionary pension contributions: Free cash flow provided by
operating activities before the after-tax impact of discretionary
pension contributions. We use free cash flow provided by operating
activities before discretionary pension contributions as a key
factor in our planning for, and consideration of, strategic
acquisitions, stock repurchases and the payment of dividends. This
measure should not be considered in isolation, as a measure of
residual cash flow available for discretionary purposes, or as an
alternative to operating results presented in accordance with GAAP.
Free cash flow provided by operating activities before
discretionary pension contributions is reconciled in Table 2.
Net FAS/CAS pension adjustment: Pension expense
determined in accordance with GAAP less pension expense allocated
to the operating segments under U.S. Government Cost Accounting
Standards (CAS). Net pension adjustment is presented in Table
1.
After-tax net pension adjustment per share: The per share
impact of the net pension adjustment as defined above, after tax at
the statutory rate of 35%, provided for consistency and
comparability of 2013 and 2012 financial performance as presented
in Table 1.
Pension-adjusted operating income: Operating income
before net pension adjustment as reconciled in Table 1. Management
uses pension-adjusted operating income as an internal measure of
financial performance.
Pension-adjusted operating margin rate: Pension-adjusted
operating income as defined above, divided by sales. Management
uses pension-adjusted operating margin rate, as reconciled in Table
1, as an internal measure of financial performance.
Segment operating income: Total earnings from our four
segments including allocated pension expense recognized under CAS.
Reconciling items to operating income are unallocated corporate
expenses, including unallowable or unallocable portions of
management and administration, legal, environmental, certain
compensation and retiree benefits, and other expenses; net pension
adjustment; and reversal of royalty income included in segment
operating income. Management uses segment operating income, as
reconciled in Table 3, as an internal measure of financial
performance of our individual operating segments.
Segment operating margin rate: Segment operating income
as defined above, divided by sales. Management uses segment
operating margin rate, as reconciled in Table 3, as an internal
measure of financial performance.
SOURCE Northrop Grumman Corporation