FALLS CHURCH, Va.,
July 23, 2014 /PRNewswire/ -- Northrop Grumman
Corporation (NYSE: NOC) reported second quarter 2014 net earnings
increased 5 percent to $511 million,
or $2.37 per diluted share, compared
to $488 million, or $2.05 per diluted share, in the second quarter of
2013. Second quarter 2013 earnings included a $30 million charge principally related to
"make-whole" premiums paid to redeem $850
million of senior notes, which reduced net earnings by
$20 million, or $0.08 per share.
Second quarter 2014 diluted earnings per share are based on
215.2 million weighted average shares outstanding compared with
237.5 million shares in the second quarter of 2013, a decrease of
approximately 9 percent. The company repurchased 6.1 million shares
of its common stock for $741 million
in the second quarter of 2014. As of June
30, 2014, the company had repurchased 31.7 million shares
toward its previously announced goal of retiring 60 million shares
of its common stock by the end of 2015, market conditions
permitting.
"Second quarter results demonstrate our team's continued
commitment to strong execution. We continue to focus on
performance, cash deployment and portfolio alignment as the primary
value creation drivers for our shareholders, customers and
employees," said Wes Bush, chairman,
chief executive officer and president.
Table 1 — Financial Highlights
|
Second
Quarter
|
|
Six
Months
|
($ in millions,
except per share amounts)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Sales
|
$
|
6,039
|
|
$
|
6,294
|
|
$
|
11,887
|
|
$
|
12,398
|
Segment operating
income1
|
742
|
|
797
|
|
1,499
|
|
1,545
|
Segment operating
margin rate1
|
12.3%
|
|
12.7%
|
|
12.6%
|
|
12.5%
|
Operating
income
|
820
|
|
806
|
|
1,665
|
|
1,565
|
Operating margin
rate
|
13.6%
|
|
12.8%
|
|
14.0%
|
|
12.6%
|
Net
earnings
|
511
|
|
488
|
|
1,090
|
|
977
|
Diluted
EPS
|
2.37
|
|
2.05
|
|
5.01
|
|
4.08
|
Net cash provided by
operations
|
572
|
|
328
|
|
170
|
|
329
|
Free cash
flow1
|
456
|
|
280
|
|
(6)
|
|
241
|
|
|
|
|
|
|
|
|
Pension-adjusted
Operating Highlights
|
|
|
|
|
|
|
|
Operating
income
|
820
|
|
806
|
|
1,665
|
|
1,565
|
Net FAS/CAS pension
adjustment1
|
(110)
|
|
(31)
|
|
(220)
|
|
(64)
|
Pension-adjusted
operating income1
|
$
|
710
|
|
$
|
775
|
|
$
|
1,445
|
|
$
|
1,501
|
Pension-adjusted
operating margin rate1
|
11.8%
|
|
12.3%
|
|
12.2%
|
|
12.1%
|
|
|
|
|
|
|
|
|
Pension-adjusted
Per Share Data
|
|
|
|
|
|
|
|
Diluted
EPS
|
$
|
2.37
|
|
$
|
2.05
|
|
$
|
5.01
|
|
$
|
4.08
|
After-tax net pension
adjustment per share1
|
(0.33)
|
|
(0.08)
|
|
(0.66)
|
|
(0.17)
|
Pension-adjusted
diluted EPS1
|
$
|
2.04
|
|
$
|
1.97
|
|
$
|
4.35
|
|
$
|
3.91
|
Weighted average
shares outstanding — Basic
|
212.4
|
|
234.0
|
|
214.3
|
|
235.2
|
Dilutive effect of
stock awards and options
|
2.8
|
|
3.5
|
|
3.4
|
|
4.0
|
Weighted average
shares outstanding — Diluted
|
215.2
|
|
237.5
|
|
217.7
|
|
239.2
|
1 Non-GAAP metric — see definitions at the end of this
press release.
|
Second quarter 2014 total operating income increased
$14 million or 2 percent, and
operating margin rate increased 80 basis points to 13.6 percent.
Higher operating income and margin rate are primarily due to a
$79 million improvement in net
FAS/CAS pension adjustment, which more than offset lower segment
operating income and higher unallocated corporate expenses. Second
quarter 2014 segment operating income decreased 7 percent due to
lower sales and a slightly lower margin rate.
Total backlog as of June 30, 2014, was $35.6 billion. Second quarter 2014 new awards
totaled $5.3 billion, and new awards
for the first six months totaled $10.2
billion. After the close of the 2014 second quarter the U.S.
Navy awarded the company a $3.6
billion fixed price, incentive fee multiyear contract to
deliver 25 new E-2D Advanced Hawkeye aircraft. The E-2D award is
not included in second quarter 2014 new awards or backlog.
Table 2 — Cash Flow Highlights
|
|
Second
Quarter
|
|
Six
Months
|
($
millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Cash provided by
operating activities before discretionary pension
contributions1
|
|
$
|
572
|
|
$
|
740
|
|
$
|
170
|
|
$
|
741
|
After-tax
discretionary pension pre-funding impact
|
|
—
|
|
(412)
|
|
—
|
|
(412)
|
Net cash provided by
operating activities
|
|
$
|
572
|
|
$
|
328
|
|
$
|
170
|
|
$
|
329
|
Less:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
(116)
|
|
(48)
|
|
(176)
|
|
(88)
|
Free cash
flow1
|
|
$
|
456
|
|
$
|
280
|
|
$
|
(6)
|
|
$
|
241
|
After-tax
discretionary pension pre-funding impact
|
|
—
|
|
412
|
|
—
|
|
412
|
|
|
Free cash flow
provided by (used in) operating activities before discretionary
pension contributions1
|
|
$
|
456
|
|
$
|
692
|
|
$
|
(6)
|
|
$
|
653
|
1
Non-GAAP metric — see definitions at the
end of this press release.
|
Second quarter 2014 cash provided by operating activities
increased to $572 million from
$328 million in the prior year
period. Second quarter 2014 free cash flow provided by operating
activities increased to $456 million
from $280 million in the prior year
period. Higher cash provided by operations and free cash flow
principally reflect a $500 million
voluntary pre-tax pension contribution made in the second quarter
of 2013, partially offset by higher trade working capital in
2014.
Changes in cash and cash equivalents include the following for
cash from operations, investing and financing activities through
June 30, 2014:
Operations
- $170 million provided by
operations
Investing
- $176 million used for capital
expenditures
- $72 million used for other
investing activities
Financing
- $1.3 billion used for repurchase
of common stock
- $280 million used for
dividends
2014 Guidance
($ in millions,
except per share amounts)
|
Current
|
|
Prior
|
|
|
|
|
|
|
|
|
Sales
|
23,500
|
—
|
23,800
|
|
23,500
|
—
|
23,800
|
|
|
|
|
|
|
|
|
Segment operating
margin %1
|
Low
12%
|
|
~12%
|
|
|
|
|
|
|
|
|
Operating margin
%
|
Low
13%
|
|
~13%
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
9.15
|
—
|
9.35
|
|
8.90
|
—
|
9.15
|
|
|
|
|
|
|
|
|
Cash provided by
operations
|
2,300
|
—
|
2,600
|
|
2,300
|
—
|
2,600
|
|
|
|
|
|
|
|
|
Free cash
flow1
|
1,700
|
—
|
2,000
|
|
1,700
|
—
|
2,000
|
|
|
|
|
|
|
|
|
1 Non-GAAP metric - see
definitions at the end of this press release.
|
The company's 2014 financial guidance is based on the spending
levels provided for in the Bipartisan Budget Act of 2013 and the
Consolidated Appropriations Act of 2014, and current tax and other
applicable laws and regulations. The guidance assumes no
disruption or cancellation of any of our significant programs and
adequate appropriations for our programs in the first quarter of
the U.S. government's fiscal year 2015.
Table 3 — Business Results
Consolidated Sales & Segment Operating
Income1
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
($
millions)
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace
Systems
|
$
|
2,502
|
|
$
|
2,613
|
|
(4%)
|
|
$
|
4,922
|
|
$
|
5,098
|
|
(3%)
|
Electronic
Systems
|
1,744
|
|
1,771
|
|
(2%)
|
|
3,388
|
|
3,492
|
|
(3%)
|
Information
Systems
|
1,562
|
|
1,689
|
|
(8%)
|
|
3,139
|
|
3,363
|
|
(7%)
|
Technical
Services
|
732
|
|
722
|
|
1%
|
|
1,429
|
|
1,439
|
|
(1%)
|
Intersegment
eliminations
|
(501)
|
|
(501)
|
|
|
|
(991)
|
|
(994)
|
|
|
|
6,039
|
|
6,294
|
|
(4%)
|
|
11,887
|
|
12,398
|
|
(4%)
|
Segment operating
income1
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace
Systems
|
290
|
|
336
|
|
(14%)
|
|
614
|
|
606
|
|
1%
|
Electronic
Systems
|
291
|
|
322
|
|
(10%)
|
|
559
|
|
618
|
|
(10%)
|
Information
Systems
|
153
|
|
141
|
|
9%
|
|
315
|
|
312
|
|
1%
|
Technical
Services
|
68
|
|
69
|
|
(1%)
|
|
136
|
|
134
|
|
1%
|
Intersegment
eliminations
|
(60)
|
|
(71)
|
|
|
|
(125)
|
|
(125)
|
|
|
Segment operating
income1
|
742
|
|
797
|
|
(7%)
|
|
1,499
|
|
1,545
|
|
(3%)
|
Segment operating
margin rate1
|
12.3%
|
|
12.7%
|
|
(40)
bps
|
|
12.6%
|
|
12.5%
|
|
10
bps
|
Reconciliation to
operating income
|
|
|
|
|
|
|
|
|
|
|
|
Net FAS/CAS pension
adjustment1
|
110
|
|
31
|
|
255%
|
|
220
|
|
64
|
|
244%
|
Unallocated
corporate expenses
|
(31)
|
|
(21)
|
|
(48%)
|
|
(53)
|
|
(40)
|
|
(33%)
|
Other
|
(1)
|
|
(1)
|
|
—
|
|
(1)
|
|
(4)
|
|
75%
|
Operating
income
|
820
|
|
806
|
|
2%
|
|
1,665
|
|
1,565
|
|
6%
|
Operating margin
rate
|
13.6%
|
|
12.8%
|
|
80
bps
|
|
14.0%
|
|
12.6%
|
|
140
bps
|
Interest
expense
|
(70)
|
|
(60)
|
|
(17%)
|
|
(139)
|
|
(113)
|
|
(23%)
|
Other,
net
|
6
|
|
(22)
|
|
127%
|
|
16
|
|
(16)
|
|
200%
|
Earnings before
income taxes
|
756
|
|
724
|
|
4%
|
|
1,542
|
|
1,436
|
|
7%
|
Federal and foreign
income tax expense
|
(245)
|
|
(236)
|
|
(4%)
|
|
(452)
|
|
(459)
|
|
2%
|
Net
earnings
|
$
|
511
|
|
$
|
488
|
|
5%
|
|
$
|
1,090
|
|
$
|
977
|
|
12%
|
1 Non-GAAP metric — see definitions at the end of this
press release.
|
Other, net for the second quarter of 2014 improved to income of
$6 million from expense of
$22 million. Second quarter 2013
Other, net included a $30 million
pre-tax charge, principally for "make-whole" premiums, paid to
redeem $850 million of long-term
debt.
For the second quarter of 2014, federal and foreign income tax
expense increased to $245 million
from $236 million in 2013. The
effective tax rate for the second quarter of 2014 declined to 32.4
percent from 32.6 percent in the prior year period.
Aerospace Systems ($ millions)
|
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
Sales
|
$
|
2,502
|
|
$
|
2,613
|
|
(4.2%)
|
|
$
|
4,922
|
|
$
|
5,098
|
|
(3.5%)
|
Operating
income
|
290
|
|
336
|
|
(13.7%)
|
|
614
|
|
606
|
|
1.3%
|
Operating margin
rate
|
11.6%
|
|
12.9%
|
|
|
|
12.5%
|
|
11.9%
|
|
|
Aerospace Systems second quarter 2014 sales decreased 4 percent
due to lower volume for unmanned and space programs. Lower unmanned
sales reflect volume declines for several programs, including
Global Hawk and Fire Scout, partially offset by higher volume for
NATO Alliance Ground Surveillance. Lower space sales reflect volume
declines for several space programs, including Advanced EHF. Volume
for manned military aircraft programs was comparable to the prior
year period.
Aerospace Systems second quarter 2014 operating income decreased
14 percent and operating margin rate decreased 130 basis points to
11.6 percent. Lower operating income and margin rate reflect lower
sales volume and quarter-over-quarter differences in risk
retirements and performance improvements.
Electronic Systems ($ millions)
|
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
Sales
|
$
|
1,744
|
|
$
|
1,771
|
|
(1.5%)
|
|
$
|
3,388
|
|
$
|
3,492
|
|
(3.0%)
|
Operating
income
|
291
|
|
322
|
|
(9.6%)
|
|
559
|
|
618
|
|
(9.5%)
|
Operating margin
rate
|
16.7%
|
|
18.2%
|
|
|
|
16.5%
|
|
17.7%
|
|
|
Electronic Systems second quarter 2014 sales decreased 2 percent
primarily due to fewer deliveries of navigation and maritime
systems and infrared countermeasures products. These declines were
partially offset by growth in international programs and higher
volume for space programs.
Electronic Systems second quarter 2014 operating income
decreased 10 percent, and operating margin rate declined 150 basis
points to 16.7 percent. Electronic Systems second quarter 2014
operating income principally reflects lower sales and
quarter-over-quarter differences in risk retirements and
performance improvements.
Information Systems ($ millions)
|
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
Sales
|
$
|
1,562
|
|
$
|
1,689
|
|
(7.5%)
|
|
$
|
3,139
|
|
$
|
3,363
|
|
(6.7%)
|
Operating
income
|
153
|
|
141
|
|
8.5%
|
|
315
|
|
312
|
|
1.0%
|
Operating margin
rate
|
9.8%
|
|
8.3%
|
|
|
|
10.0%
|
|
9.3%
|
|
|
Information Systems second quarter 2014 sales declined 8 percent
due to lower volume across a broad number of programs due to lower
funding levels and in-theater force reductions.
Information Systems second quarter 2014 operating income
increased 9 percent and operating margin rate increased 150 basis
points to 9.8 percent. Higher operating income and margin rate
reflect improved performance, which more than offset lower
sales.
Technical Services ($ millions)
|
|
Second
Quarter
|
|
|
|
Six
Months
|
|
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
Sales
|
$
|
732
|
|
$
|
722
|
|
1.4%
|
|
$
|
1,429
|
|
$
|
1,439
|
|
(0.7%)
|
Operating
income
|
68
|
|
69
|
|
(1.4%)
|
|
136
|
|
134
|
|
1.5%
|
Operating margin
rate
|
9.3%
|
|
9.6%
|
|
|
|
9.5%
|
|
9.3%
|
|
|
Technical Services second quarter 2014 sales increased 1 percent
due to higher international sales, primarily resulting from the
acquisition of Qantas Defence Services Pty Limited in the first
quarter of 2014. Higher international sales more than offset lower
volume for other programs, including the ICBM program.
Technical Services second quarter 2014 operating income was
comparable to the prior year period and operating margin rate
decreased to 9.3 percent.
About Northrop Grumman
Northrop Grumman will webcast its earnings conference call at
noon Eastern daylight time on
July 23, 2014. A live audio broadcast of the conference call
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," "goals," 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, results of operations and cash flows .
Forward-looking statements are based upon assumptions,
expectations, plans and projections that we believe to be
reasonable when made, but which may change over time. 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 budget pressures and/or changes in
priorities, 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; timing of
payments; 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; our non-U.S. business, including legal,
regulatory, financial, security and governmental risks related to
doing business internationally; the outcome of litigation, claims,
audits, appeals, bid protests and investigations; our ability to
recover certain costs under U.S. Government contracts; market
conditions; our ability to access capital; performance and
financial viability of key suppliers and subcontractors; interest
and discount rates or other changes that may impact pension plan
assumptions and actual returns on pension plan assets; the adequacy
of our insurance coverage and recoveries; the costs of
environmental remediation; our ability to attract and retain
qualified personnel; changes in health care costs and requirements;
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,
defense procurement or other rules or practices; technical,
operational or quality setbacks in contract performance;
availability of materials and supplies; controlling costs of
fixed-price development programs; domestic and international
competition; 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,
2013, and other filings with the Securities and Exchange
Commission.
You are urged to consider the limitations on, and risks
associated with, forward-looking statements and not unduly rely on
forward-looking statements. These forward-looking statements speak
only as of the date of this release, and we undertake no obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by applicable 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
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Sales
|
|
|
|
|
|
|
|
Product
|
$
|
3,564
|
|
$
|
3,593
|
|
$
|
6,972
|
|
$
|
7,014
|
Service
|
2,475
|
|
2,701
|
|
4,915
|
|
5,384
|
Total
sales
|
6,039
|
|
6,294
|
|
11,887
|
|
12,398
|
Operating costs
and expenses
|
|
|
|
|
|
|
|
Product
|
2,668
|
|
2,703
|
|
5,201
|
|
5,334
|
Service
|
1,961
|
|
2,203
|
|
3,889
|
|
4,359
|
General and
administrative expenses
|
590
|
|
582
|
|
1,132
|
|
1,140
|
Operating
income
|
820
|
|
806
|
|
1,665
|
|
1,565
|
Other (expense)
income
|
|
|
|
|
|
|
|
Interest
expense
|
(70)
|
|
(60)
|
|
(139)
|
|
(113)
|
Other, net
|
6
|
|
(22)
|
|
16
|
|
(16)
|
Earnings before
income taxes
|
756
|
|
724
|
|
1,542
|
|
1,436
|
Federal and foreign
income tax expense
|
245
|
|
236
|
|
452
|
|
459
|
Net
earnings
|
$
|
511
|
|
$
|
488
|
|
$
|
1,090
|
|
$
|
977
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
2.41
|
|
$
|
2.09
|
|
$
|
5.09
|
|
$
|
4.15
|
Weighted-average
common shares outstanding, in millions
|
212.4
|
|
234.0
|
|
214.3
|
|
235.2
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
$
|
2.37
|
|
$
|
2.05
|
|
$
|
5.01
|
|
$
|
4.08
|
Weighted-average
diluted shares outstanding, in millions
|
215.2
|
|
237.5
|
|
217.7
|
|
239.2
|
|
|
|
|
|
|
|
|
Net earnings (from
above)
|
$
|
511
|
|
$
|
488
|
|
$
|
1,090
|
|
$
|
977
|
Other comprehensive
income
|
|
|
|
|
|
|
|
Change in unamortized
benefit plan costs, net of tax
|
35
|
|
79
|
|
96
|
|
159
|
Change in cumulative
translation adjustment
|
—
|
|
9
|
|
2
|
|
(7)
|
Other comprehensive
income, net of tax
|
35
|
|
88
|
|
98
|
|
152
|
Comprehensive
income
|
$
|
546
|
|
$
|
576
|
|
$
|
1,188
|
|
$
|
1,129
|
SCHEDULE
2
|
NORTHROP GRUMMAN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
December 31,
2013
|
$ in
millions
|
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
3,476
|
|
$
|
5,150
|
Accounts receivable,
net
|
3,280
|
|
2,685
|
Inventoried costs,
net
|
741
|
|
698
|
Deferred tax
assets
|
554
|
|
605
|
Prepaid expenses and
other current assets
|
339
|
|
350
|
Total current
assets
|
8,390
|
|
9,488
|
Property, plant and
equipment, net of accumulated depreciation of $4,471 in 2014 and
$4,337 in 2013
|
2,818
|
|
2,806
|
Goodwill
|
12,468
|
|
12,438
|
Non-current deferred
tax assets
|
180
|
|
209
|
Other non-current
assets
|
1,495
|
|
1,440
|
Total
assets
|
$
|
25,351
|
|
$
|
26,381
|
|
|
|
|
Liabilities
|
|
|
|
Trade accounts
payable
|
$
|
1,178
|
|
$
|
1,229
|
Accrued employee
compensation
|
1,154
|
|
1,446
|
Advance payments and
amounts in excess of costs incurred
|
1,588
|
|
1,722
|
Other current
liabilities
|
1,494
|
|
1,418
|
Total current
liabilities
|
5,414
|
|
5,815
|
Long-term debt, net
of current portion
|
5,927
|
|
5,928
|
Pension and other
post-retirement benefit plan liabilities
|
2,820
|
|
2,954
|
Other non-current
liabilities
|
922
|
|
1,064
|
Total
liabilities
|
15,083
|
|
15,761
|
|
|
|
|
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:
2014—209,127,586 and 2013—217,599,230
|
209
|
|
218
|
Paid-in
capital
|
—
|
|
848
|
Retained
earnings
|
12,945
|
|
12,538
|
Accumulated other
comprehensive loss
|
(2,886)
|
|
(2,984)
|
Total shareholders'
equity
|
10,268
|
|
10,620
|
Total liabilities
and shareholders' equity
|
$
|
25,351
|
|
$
|
26,381
|
SCHEDULE
3
|
NORTHROP GRUMMAN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
Six Months Ended
June 30
|
$ in
millions
|
2014
|
|
2013
|
Operating
activities
|
|
|
|
Net
earnings
|
$
|
1,090
|
|
$
|
977
|
Adjustments to
reconcile to net cash provided by operating activities:
|
|
|
|
Depreciation and
amortization
|
217
|
|
225
|
Stock-based
compensation
|
51
|
|
71
|
Excess tax benefits
from stock-based compensation
|
(74)
|
|
(27)
|
Deferred income
taxes
|
21
|
|
33
|
Changes in assets and
liabilities:
|
|
|
|
Accounts receivable,
net
|
(577)
|
|
(268)
|
Inventoried costs,
net
|
(33)
|
|
62
|
Prepaid expenses and
other assets
|
(23)
|
|
6
|
Accounts payable and
other liabilities
|
(588)
|
|
(430)
|
Income taxes
payable
|
103
|
|
60
|
Retiree
benefits
|
8
|
|
(397)
|
Other, net
|
(25)
|
|
17
|
Net cash provided by
operating activities
|
170
|
|
329
|
|
|
|
|
Investing
activities
|
|
|
|
Capital
expenditures
|
(176)
|
|
(88)
|
Other investing
activities, net
|
(72)
|
|
6
|
Net cash used in
investing activities
|
(248)
|
|
(82)
|
|
|
|
|
Financing
activities
|
|
|
|
Common stock
repurchases
|
(1,301)
|
|
(921)
|
Cash dividends
paid
|
(280)
|
|
(272)
|
Net proceeds from
issuance of long-term debt
|
—
|
|
2,841
|
Payments of long-term
debt
|
—
|
|
(877)
|
Other financing
activities, net
|
(15)
|
|
24
|
Net cash (used in)
provided by financing activities
|
(1,596)
|
|
795
|
(Decrease) increase
in cash and cash equivalents
|
(1,674)
|
|
1,042
|
Cash and cash
equivalents, beginning of year
|
5,150
|
|
3,862
|
Cash and cash
equivalents, end of period
|
$
|
3,476
|
|
$
|
4,904
|
SCHEDULE
4
|
NORTHROP GRUMMAN
CORPORATION
TOTAL BACKLOG AND
CONTRACT AWARDS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
December 31,
2013
|
$ in
millions
|
|
FUNDED (1)
|
|
UNFUNDED (2)
|
|
TOTAL
BACKLOG
|
|
TOTAL BACKLOG
|
Aerospace
Systems
|
|
$
|
9,783
|
|
$
|
6,880
|
|
$
|
16,663
|
|
$
|
18,321
|
Electronic
Systems
|
|
6,924
|
|
2,704
|
|
9,628
|
|
9,037
|
Information
Systems
|
|
3,154
|
|
3,510
|
|
6,664
|
|
6,864
|
Technical
Services
|
|
2,315
|
|
285
|
|
2,600
|
|
2,811
|
Total
|
|
$
|
22,176
|
|
$
|
13,379
|
|
$
|
35,555
|
|
$
|
37,033
|
|
|
(1)
|
Funded backlog represents firm orders for which
funding is authorized and appropriated.
|
(2)
|
Unfunded backlog
represents firm orders for which as of the reporting date, funding
is not authorized and appropriated. 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.
|
|
New Awards — Total backlog as of June 30,
2014, includes $5.3 billion and
$10.2 billion of estimated contract
awards in the three months and six months ended June 30, 2014,
respectively. After the close of the 2014 second quarter the U.S.
Navy awarded the company a $3.6
billion fixed price, incentive fee multiyear contract to
deliver 25 new E-2D Advanced Hawkeye aircraft. The E-2D award is
not included in second quarter 2014 new awards or backlog.
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.
The quarterly information in today's press release is labeled
using a calendar convention; that is, second quarter is
consistently labeled as ending on June 30. It is the company's
long-standing practice to establish actual interim closing dates
using a "fiscal" calendar, in which we close our books on a Friday
near these quarter-end dates in order to normalize the potentially
disruptive effects of quarterly closings on business processes.
This practice is only used at interim periods within a reporting
year.
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 2014 and 2013 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 (used in) operating activities
before discretionary pension contributions: Free cash flow
provided by (used in) operating activities before the after-tax
impact of discretionary pension contributions. We use free cash
flow provided by (used in) 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 (used in) operating activities before discretionary
pension contributions is reconciled in Table 2.
Net FAS/CAS pension adjustment: Pension expense in
accordance with Government Cost Accounting Standards (CAS) charged
to contracts and included as cost in segment operating income, less
pension expense determined in accordance with GAAP. Net FAS/CAS
pension adjustment is presented in Table 1.
After-tax net pension adjustment per share: The per share
impact of the net FAS/CAS pension adjustment as defined above,
after tax at the statutory rate of 35%, provided for consistency
and comparability of 2014 and 2013 financial performance as
presented in Table 1.
Pension-adjusted operating income: Operating income
before net FAS/CAS 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 include the net FAS/CAS
pension adjustment, as defined above, as well as certain
corporate-level expenses, which are not considered allowable or
allocable under applicable CAS or FAR. Segment operating income is
reconciled in Table 3.
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