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NORTHROP GRUMMAN RESULTS

NORTHROP GRUMMAN REPORTS STRONG FOURTH QUARTER AND 2010 RESULTS

09 Feb 11. Northrop Grumman Corporation (NYSE:NOC) reported that fourth quarter 2010 earnings from continuing operations totalled $376m, or $1.27 per diluted share, compared with $375m, or $1.19 per diluted share, in the fourth quarter of 2009. Fourth quarter 2010 results included a previously announced one-time, pre-tax charge of $231m, or $0.51 per diluted share, principally related to premiums paid to redeem $682m in debt through the company’s November 2010 tender offer. Earnings from continuing operations increased to $2bn in 2010, or $6.77 per diluted share, from $1.6bn, or $4.87 per diluted share in 2009. In addition to the fourth quarter charge related to the debt tender offer, 2010 results included a $113m pre-tax charge related to the consolidation of the company’s Gulf Coast facilities and a $296m tax benefit related to approval by the Internal Revenue Service (IRS) and the U. S. Congressional Joint Committee on Taxation of the IRS’ examination of tax returns for the years 2004 through 2006. These three items, all of which were previously announced, resulted in a net increase in 2010 earnings from continuing operations of $0.24 per share.

Fourth quarter 2010 sales totalled $8.6bn compared with $8.9bn in the prior year period. The 2010 fourth quarter had fewer working days than the prior year period. Sales increased 3 percent in 2010 to $34.8 bn from $33.8bn in 2009. New business awards for the 2010 fourth quarter totalled $9.2bn, bringing total backlog to $64.2bn as of Dec. 31, 2010. New business awards totalled $30bn in 2010.Fourth quarter 2010 cash provided by operations increased to $1.4bn from $931m in the prior year period. In the 2010 fourth quarter the company’s discretionary pension contributions totalled $440m, and in the fourth quarter of 2009 the company paid income taxes of $508m on the sale of its Advisory Services business (TASC). Cash provided by operations totaled $2.5bn in 2010 compared with $2.1 bn in 2009. Discretionary pension contributions totalled $830m and $800m for 2010 and 2009, respectively. Cash provided by operations in 2009 also included $102 m from discontinued operations, as well as the income taxes paid on the sale of TASC.”Northrop Grumman had a very good fourth quarter and a strong finish to 2010. Operating income and cash generation exceeded our guidance for the year, demonstrating that across all our businesses, our employees are focusing on performance and building a track record of consistent execution. Northrop Grumman is well positioned to continue creating value for our customers and shareholders,” said Wes Bush, chief executive officer and president.

Fourth quarter 2010 operating income increased 25 percent to $788m from $631m in the prior year period, and as a percent of sales increased 210 basis points to 9.2 percent from 7.1 percent. For 2010 operating income increased 24 percent to $3.1bn from $2.5bn in the prior year period, and as a percent of sales increased 140 basis points to 8.8 percent from 7.4 percent. The improvement for both periods principally reflects higher segment operating income and lower net pension adjustment, partially offset by higher corporate unallocated expenses.

Fourth quarter 2010 segment operating income increased $143m, or 19 percent, and 2010 segment operating income increased $397m, or 14 percent. As a percent of sales, fourth quarter 2010 segment operating income improved 200 basis points to 10.3 percent from 8.3 percent, and 2010 segment operating income improved by 90 basis points to 9.6 percent from 8.7 percent. The improvement in segment operating income and margin rate for both periods primarily reflects improved program performance. Net pension adjustment improved by $86 m in the 2010 fourth quarter and $286m for the full year. Unallocated corporate expenses totalled $95m in the 2010 fourth quarter and $220m for the full year, compared with

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