Northrop Grumman Receives FTC Clearance to Close Acquisition of Orbital ATK and Updates 2018 Financial Guidance
06 Juin 2018 - 1:19AM
- Combination enhances
capabilities, innovation and competition in critical global
security domains
- Orbital ATK to become Northrop
Grumman Innovation Systems, a new, fourth business
sector
- Northrop Grumman now expects
2018 sales of approximately $30 billion, EPS of $16.20 to $16.45
and free cash flow1 of $2.3
to $2.6 billion
FALLS CHURCH, Va., June 05, 2018 (GLOBE NEWSWIRE)
-- Northrop Grumman Corporation (NYSE:NOC) announced today that the
U.S. Federal Trade Commission (FTC) has cleared Northrop Grumman's
proposed acquisition of Orbital ATK Inc. The FTC's Bureau of
Competition has completed its review of the merger, and the
Premerger Notification Office has informed the company that the
waiting period under the HSR Act has terminated, allowing the
companies to complete the merger. As part of that clearance, the
FTC issued a decision and order providing for solid rocket motors
to be available on a non-discriminatory basis under specified
circumstances and under processes defined in the order. The company
expects to complete the transaction after market close tomorrow and
is issuing the following updated guidance. This updated guidance
assumes the completion of the transaction tomorrow.
1 Non-GAAP
measure - see definitions at the end of this release.
Updated 2018
Guidance
2018 financial guidance reflects the company's
judgment based on the information available to the company at the
time of this release. The government budget and appropriations
processes can impact our customers, programs and financial results.
Government budgets, appropriations, including the timing of
appropriations, and the occurrence of continuing resolutions and
government shutdowns can impact the company's ability to achieve
2018 guidance.
Updated 2018 guidance reaffirms Northrop Grumman
stand-alone guidance provided on April 25, 2018 and reflects the
expected results of Innovation Systems for the remainder of the
year. Updated guidance reflects a partial year of
acquisition-related purchased intangibles amortization of
approximately $175 million; this estimate is subject to the
completion of purchase accounting and other post-closing
activities. Free cash flow guidance for 2018 also reflects an
expected $250 million discretionary pension contribution.
2018 Guidance |
($ in millions, except per share
amounts) |
As of 4/25/18 |
As of 6/5/18 |
|
|
|
|
|
|
|
Sales |
~27,000 |
~30,000 |
|
|
|
|
|
|
|
Segment operating margin %1 |
Low - mid 11% |
Low - mid 11% |
|
|
|
|
|
|
|
Total net FAS/CAS pension adjustment2 |
~960 |
~1,080 |
|
|
|
|
|
|
|
Unallocated corporate expenses3 |
~250 |
~425 |
|
|
|
|
|
|
|
Operating margin % |
~12% |
High 11% |
|
|
|
|
|
|
|
Net interest expense4 |
~390 |
~520 |
|
|
|
|
|
|
|
Effective tax rate % |
~18% |
~18% |
|
|
|
|
|
|
|
Diluted EPS |
15.40 |
- |
15.65 |
16.20 |
- |
16.45 |
|
|
|
|
|
|
|
Capital expenditures |
~1,000 |
~1,150 |
|
|
|
|
|
|
|
Free cash flow1 |
2,000 |
- |
2,300 |
2,300 |
- |
2,600 |
1 Non-GAAP
measure - see definitions at the end of this release. |
2 Total
net FAS/CAS pension adjustment is presented as a single amount
consistent with our historical presentation, and includes expected
2018 CAS pension cost of $965 million and FAS pension benefit of
$115 million. In accordance with ASU No. 2017-07, $405 million of
FAS (service-related) pension cost is reflected in operating income
and $520 million of FAS (non-service) pension benefit is reflected
below operating income. CAS pension cost continues to be recorded
in operating income. |
3 Includes
initial estimate of approximately $175 million for approximately
seven months of purchased intangibles amortization in 2018.
Purchased intangibles amortization in 2019 is not expected to be
ratable to 2018 due to accelerated amortization of customer-related
intangibles. |
4 Includes
full year of net interest expense for $8.25 billion debt issued in
October 2017 to finance the Orbital ATK acquisition, as well as
estimated net interest for the company's remaining debt. |
About Northrop
Grumman
Northrop Grumman is a leading global security
company providing innovative systems, products and solutions in
autonomous systems, cyber, C4ISR, strike, and logistics and
modernization to customers worldwide. Please
visit news.northropgrumman.com and follow us on
Twitter, @NGCNews, for more information.
Cautionary Statement Regarding
Forward-Looking Statements
Statements in this press release, other than statements of
historical fact, constitute "forward-looking" information within
the meaning of the Private Securities Litigation Reform Act of
1995. Words such as "will," "anticipate," "expect," "intend,"
"plan," "believe," "estimate," and similar expressions generally
identify these forward-looking statements. Forward-looking
statements include, among other things, statements regarding the
benefits and implications of the Orbital ATK acquisition. These
forward-looking statements speak only as of the date when made, and
Northrop Grumman undertakes no obligation to update or revise any
forward-looking statements after the date of this press release
except as required by applicable law. Forward-looking statements
are not guarantees of future performance and inherently involve a
wide range of risks and uncertainties that are difficult to
predict. Actual results may differ materially from those
described or implied in these statements based on a number of
factors. A discussion of these risks and uncertainties is
contained in Northrop Grumman's Annual Report on Form 10-K and in
our other filings with the Securities and Exchange Commission. They
include:
- our dependence on the U.S. Government for a
substantial portion of our business
- significant delays or reductions in
appropriations for our programs and U.S. Government funding more
broadly
- investigations, claims, disputes, enforcement
actions and/or litigation
- the use of estimates when accounting for our
contracts and the effect of contract cost growth and/or changes in
estimated contract revenues and costs
- our exposure to additional risks as a result of
our international business, including risks related to geopolitical
and economic factors, laws and regulations
- the improper conduct of employees, agents,
subcontractors, suppliers, business partners or joint ventures in
which we participate and the impact on our reputation, our ability
to do business, and our financial position, results of operations
and/or cash flows
- cyber and other security threats or disruptions
faced by us, our customers or our suppliers and other partners
- the performance and financial viability of our
subcontractors and suppliers and the availability and pricing of
raw materials and components
- changes in procurement and other laws,
regulations and practices applicable to our industry, findings by
the U.S. Government as to our compliance with such laws and
regulations, and changes in our customers' business practices
globally
- increased competition within our markets and bid
protests
- the ability to maintain a qualified
workforce
- our ability to meet performance obligations under
our contracts, including obligations that are technologically
complex, require certain manufacturing expertise or are dependent
on factors not wholly within our control
- environmental matters, including unforeseen
environmental costs and government and third party claims
- natural and/or environmental disasters
- the adequacy and availability of our insurance
coverage, customer indemnifications or other liability
protections
- products and services we provide related to
hazardous and high risk operations, which subject us to various
environmental, regulatory, financial, reputational and other
risks
- the future investment performance of plan assets,
changes in actuarial assumptions associated with our pension and
other post-retirement benefit plans and legislative or other
regulatory actions impacting our pension, post-retirement and
health and welfare plans
- our ability successfully to integrate the Orbital
ATK business and realize fully the anticipated benefits of the
acquisition, without adverse consequences
- our ability to exploit or protect intellectual
property rights
- our ability to develop new products and
technologies and maintain technologies, facilities, and equipment
to win new competitions and meet the needs of our customers
- changes in business conditions that could impact
business investments and/or recorded goodwill or the value of other
long-lived assets
- unanticipated changes in our tax provisions or
exposure to additional tax liabilities
Additional information regarding these risks and
other important factors can be found in the section entitled "Risk
Factors" in our 2017 Annual Report on Form 10-K and from time to
time in our other filings with the SEC.
You are urged to consider the limitations on, and
risks associated with, forward-looking statements and not unduly
rely on the accuracy of forward-looking statements. These
forward-looking statements speak only as of the date this release
is first issued or, in the case of any document incorporated by
reference, the date of that document. 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 also contains non-GAAP financial
measures. A definition and discussion of these non-GAAP financial
measures are included in this release.
Non-GAAP Financial Measures
Disclosure: This 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. Definitions for the non-GAAP measures are
provided below. Other companies may define these measures
differently or may utilize different non-GAAP measures.
Segment operating
income: Total earnings from our four segments,
including allocated pension expense recognized under CAS, and
excluding unallocated corporate items and FAS pension expense. This
measure may be useful to investors and other users of our financial
statements as a supplemental measure in evaluating the financial
performance and operational trends of our sectors. This measure
should not be considered in isolation or as an alternative to
operating results presented in accordance with GAAP.
Segment operating margin
rate: Segment operating income as defined above,
divided by sales. This measure may be useful to investors and other
users of our financial statements as a supplemental measure in
evaluating the financial performance and operational trends of our
sectors. This measure should not be considered in isolation or as
an alternative to operating results presented in accordance with
GAAP.
Free cash
flow: Net cash provided by operating activities less
capital expenditures. We use free cash flow as a key factor in our
planning for, and consideration of, acquisitions, stock repurchases
and the payment of dividends. This measure may be useful to
investors and other users of our financial statements as a
supplemental measure of our cash performance, but should not be
considered in isolation, as a measure of residual cash flow
available for discretionary purposes, or as an alternative to
operating cash flows presented in accordance with GAAP.
Contact:
Tim Paynter (media)
703-280-2720
timothy.paynter@ngc.com
Steve Movius (investors)
703-280-4575
steve.movius@ngc.com
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Northrop Grumman Corp. via Globenewswire
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