NORTHROP GRUMMAN ANNOUNCES 49% SALES INCREASE LED BY MISSION SYSTEMS AND SPACE
29 Apr 03. Northrop Grumman Corporation (NYSE: NOC – News), the United States’ second largest defense contractor, reported that sales increased 49 percent, earnings from continuing operations increased 17 percent, and segment operating margin increased 44 percent, for the 2003 first quarter compared with the first quarter of 2002. The record results, in large measure, reflect strong contributions by the company’s two new segments, Mission Systems and Space Technology; double-digit growth in sales and operating margins at three other segments, Electronic Systems, Ships and Information Technology; and a lower effective tax rate.
Northrop Grumman reported income from continuing operations of $174m, or $0.91 per share, (2003: $149m, or $1.27). First quarter 2003 earnings per share are based on weighted average diluted shares outstanding of 184.3 million versus 112.8 million for the first quarter of 2002.
The net pension adjustment in the 2003 first quarter was an expense of $69m, (2002: $50m). Net pension adjustment is the difference between pension costs calculated and funded in accordance with the Federal Government’s Cost Accounting Standards (CAS), which are reported in the segments’ operating results, and pension expense or income determined in accordance with FAS 87.
During the 2003 first quarter the company recorded a $26m tax credit for additional research tax credits covering the years 1981 through 1990. As a result, the company’s overall effective tax rate for the quarter was 18 percent, which added $.14 per share to the company’s 2003 first quarter earnings. The effective tax rate for the 2002 first quarter was 31 percent. Consistent with previous guidance, the effective tax rate for 2003 is expected to be approximately 28 percent.
“By virtually every measure, Northrop Grumman’s first quarter operating results were excellent,” said Ronald D. Sugar, Northrop Grumman’s chief executive officer and president. “Importantly, we have met or exceeded every milestone to date with regard to the TRW integration. I wish to recognize our recently retired chief executive officer Kent Kresa for his remarkable stewardship and contribution to the strategic positioning of our company. Looking ahead, we are focused on program execution excellence while we capitalize on our extraordinary portfolio of world-class defense technologies and capabilities,” Sugar added. “Finally, I am extremely proud of the dedication of the 120,000 women and men of Northrop Grumman Corporation, whose many advanced products and systems contributed so significantly to the success of Operation Iraqi Freedom.”
Sales for the 2003 first quarter increased 49 percent to $5.9bn from the $3.9bn reported for the first quarter of 2002, due to the contributions from Mission Systems and Space Technology and 10 percent organic growth in the legacy Northrop Grumman segments. Northrop Grumman’s segment operating margin for the first three months of 2003 increased 44 percent to $433m, (2002: $300m) due to the contributions from Mission Systems and Space Technology and 15 percent organic growth in the legacy Northrop Grumman segments. Total operating margin for the 2003 first quarter increased five percent to $328m, (2002: $313m), reflecting the increased segment operating margin, offset by the net pension adjustment.
Net income for the 2003 quarter was $253m, or $1.34 per share, (2002: ($283m, or $2.56)) Income from discontinued operations for the first quarter of 2003 was $80m, and included the results of TRW Automotive, which was sold Feb. 28, 2003, and the company’s Component Technologies businesses. Results for the 2002 first quarter included a $432m charge for the cumulative effect of an accounting change recorded upon adoption of SFAS No. 142 – Goodwill and Other Intangible Assets.
Companywide, contract acquisitions increased 26 perce