28 Apr 05. Northrop Grumman Corporation (NYSE: NOC – News) reported that first quarter 2005 income from continuing operations rose 72 percent to $398m, or $1.08 per diluted share, from $232m, or $0.64 per diluted share, for the same period of 2004. Sales for the first quarter of 2005 increased 4 percent to $7.5bn from $7.2bn for the same period of 2004. First quarter 2004 sales increased $59m as a result of the reclassification of certain operations from discontinued to continuing operations. First quarter 2005 income from continuing operations includes a previously announced after-tax gain of $45m, or $0.12 per diluted share, from the sale of approximately 7.3 million shares of TRW Automotive Holdings Corp. (NYSE: TRW – News) common stock. Operating margin for the 2005 first quarter increased 36 percent to $595m from $438m for the same period of 2004. The increase was driven by lower unallocated expenses and higher operating margin from all six of the company’s business segments. Unallocated expenses declined to $27m in the first quarter of 2005 from $107m for the same period of 2004, primarily due to lower legal costs and lower unrecoverable costs. First quarter 2005 pension expense, as determined in accordance with accounting principles generally accepted in the United States, increased to $103m from $91m for the same period of 2004. Pension expense allocated to contracts pursuant to government Cost Accounting Standards (CAS) increased operating margin by $92m in the first quarter of 2005 and $80m for the same period of 2004. Other, net for the 2005 first quarter increased to $82 million from $10m for the same period of 2004 due to the sale of approximately 7.3m
shares of TRW common stock, which resulted in a pre-tax gain of $70m. Net income for the 2005 first quarter increased to $409m, or $1.11 per diluted share, from $236m, or $0.65 per diluted share, for the same period of 2004. First quarter 2005 net income includes an after-tax gain of $11m resulting from the sale of Teldix GmbH. Contract acquisitions were $7.8bn in the first quarter of 2005 compared with $8.5bn for the same period of 2004. Total backlog, which includes funded backlog and firm orders for which funding is not currently contractually obligated by the customer, increased to $60.4bn at March 31, 2005, from $58.1bnat Dec. 31, 2004. Net cash provided by operating activities for the 2005 first quarter was $263m, unchanged from the first quarter of 2004. Net cash provided by operating activities in the first quarter of 2005 was reduced by a $99mlitigation settlement payment, and first quarter 2004 net cash provided by operating activities included federal and state tax refunds totaling $104m. Capital spending in the first quarter totaled $197m. Northrop Grumman’s total debt was $5.2bn at March 31, 2005, unchanged from Dec. 31, 2004. Interest expense for the first quarter of 2005 declined to $95m in the first quarter of 2005 from $113m in the first quarter of 2004 primarily due to a reduction in
fixed-rate debt. The company continues to expect sales to increase to between $31 and $31.5bn in 2005. For 2006, the company expects sales to increase to between $32 and $33bn versus its previous guidance of approximately $33bn. The range for 2006 sales guidance reflects the company’s present understanding of the U.S. Navy’s plans for the DD(X) acquisition strategy.The company now expects 2005 earnings per diluted share from continuing operations to increase to between $3.70 and $3.85 versus previous guidance of $3.60 to $3.75. The company has increased 2005 earnings per share guidance primarily to reflect the delay in adoption of Statement of Net cash provided by operating activities in 2005 is expected to increase to between $2.2 and $2.5bn, and net cash provided by operating activities in 2006 is expected to be approximately $2.5bn. Effective Jan. 1, 2005, certain business areas within the Electronic Systems, Ships and Space Technology segments were realigned an