21 Oct 09. Northrop Grumman Corporation (NYSE:NOC) reported that third quarter 2009 earnings from continuing operations totalled $487m, or $1.52 per diluted share, compared with $509m, or $1.50 per diluted share, in the third quarter of 2008. Third quarter 2009 net pension adjustment (FAS/CAS) reduced earnings from continuing operations by $47m, or $0.15 per diluted share, compared with an increase to earnings from continuing operations of $42 m, or $0.13 per diluted share, in the third quarter of 2008. Third quarter 2009 earnings included a net tax benefit of $75 m, or $0.23 per share, primarily for final settlement of the Internal Revenue Service’s (IRS) examination of the company’s 2001, 2002 and 2003 tax returns. In the third quarter of 2008 the company recognized net tax benefits totaling $21m, or $0.06 per share. Sales for the 2009 third quarter increased 4 percent to $8.73bn from $8.38bn in the 2008 third quarter. In the 2009 third quarter, $544 m of cash was provided by operations, compared with $1.37bn in the prior year period. The reduction is primarily driven by discretionary pension plan contributions totalling $586m that the company made in the 2009 third quarter. The company did not make discretionary pension plan contributions in the 2008 third quarter. “This was another solid quarter for Northrop Grumman, continuing our focus on managing risk, improving performance and driving growth. Based on this quarter’s results we are raising our guidance for 2009 earnings per share to $5.00 to $5.15 per share,” said Ronald D. Sugar, chairman and chief executive officer.
Financial Highlights
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Third Quarter Nine Months
($ in ms except per —————— ——————
share amounts) 2009 2008 2009 2008
—————— ——————
Sales $ 8,726 $ 8,381 $ 26,003 $ 24,733
Segment operating income(1) $ 786 $ 768 $ 2,296 $ 2,010
as a % of sales 9.0% 9.2% 8.8% 8.1%
Operating income $ 655 $ 771 $ 1,963 $ 2,041
as a % of sales 7.5% 9.2% 7.5% 8.3%
Diluted EPS from continuing
operations $ 1.52 $ 1.50 $ 3.89 $ 3.65
Average diluted shares
outstanding, in ms 320.6 340.1 326.1 344.5
Cash provided by operations $ 544 $ 1,373 $ 1,202 $ 2,174
Free cash flow(2) $ 384 $ 1,183 $ 708 $ 1,630
(1) Segment operating income is a non-GAAP measure used as an
internal measure of financial performance for the five sectors
and is reconciled to operating income in the “Business
Results” table presented later in this press release.
(2) Free cash flow is a non-GAAP measure defined as cash from
operations less capital expenditures and outsourcing contract
& related software costs. Management uses free cash flow as
an internal measure of financial performance. Free cash flow
is reconciled to cash from operations in the “Cash Flow
Highlights” table presented later in this press release.
Operating income for the 2009 third quarter totalled $655 m compared with $771m in the prior year period. As a percent of sales, operating income declined to 7.5 percent from 9.2 percent in the prior year period. The change includes a $136 m increase in net pension expense, which was partially offset by an $18m improvement in segment operating income. As a percent of sales, segment operating income was 9 percent compared with 9.2 percent in the prior year period. As reconciled in the Pension-adjusted Results table later in this press release, pension-adjusted operating income totaled 8.3 percent of sales for the third quarter of 2009 compared with 8.4 percent of sales for the third quarter of 200