STRONG EARNINGS CONTINUE FROM U.S. AND EUROPEAN DEFENCE MAJORS

29 Jul 10. The 2010 Reporting season continued with Northrop Grumman, Raytheon, and Goodrich in the USA and BAE Systems, Thales and Safran continuing the trend in reporting strong earnings.

Northrop Grumman Corporation

29 Jul 10. Northrop Grumman Corporation (NYSE:NOC) reported that second quarter 2010 earnings from continuing operations increased to $711m, or $2.34 per diluted share, from $368m, or $1.13 per diluted share, in the second quarter of 2009. The 2010 second quarter included a tax benefit of $296m, or $0.97 per diluted share, which was partially offset by a pre-tax charge of $113m, or $0.24 per diluted share, related to the company’s decision to consolidate its Gulf Coast shipbuilding operations. The net impact of the tax benefit and the consolidation charge increased second quarter earnings from continuing operations by $0.73 per diluted share. Second quarter 2010 sales increased 3.3 percent to $8.8bn from $8.5bn. Cash provided by operations totaled $619m in the second quarter of 2010 compared with cash provided by operations of $830m in the second quarter of 2009. New business awards for the 2010 second quarter totaled $6.5bn, bringing total backlog to $66bn as of June 30, 2010.

“Overall, we’re pleased with our second quarter results. Our focus on performance improvement is generating positive results across all our businesses. Aerospace, Electronics, Information Systems and Technical Services each generated solid operating income growth. Shipbuilding, before the consolidation-related adjustment, demonstrated that they are on a solid path of performance improvement. The increase in our 2010 EPS guidance reflects the strength of this quarter’s results. Looking ahead, we foresee a more challenging environment, and we are proactively managing our businesses to create value for shareholders while supporting our customers’ focus on affordability,” said Wes Bush, chief executive officer and president.

Financial Highlights
($in millions, except per share amounts)

Second Quarter Six Months
2010 2009 2010 2009

Sales 8,826 8,545 17,436 16,480
Operating income 716 614 1,481 1,233
as % of sales 8.1% 7.2% 8.5% 7.5%
Earnings from
continuing operations 711 368 1,173 734
Diluted EPS
from continuing
operations 2.34 1.13 3.85 2.23
Net earnings 711 394 1,180 783
Diluted EPS 2.34 1.21 3.87 2.38
Cash provided by
operations 619 830 88 658
Free cash flow 515 676 (154) 324

During the second quarter of 2010 the company recognized a $113m pre-tax charge in Shipbuilding related to its decision to consolidate its Gulf Coast operations. Despite the charge, second quarter 2010 operating income increased 17 percent to $716 m from $614 m in the prior year period, and as a percent of sales increased 90 basis points to 8.1 percent from 7.2 percent. The improvement over the prior year reflects higher segment operating income and lower net pension adjustment, partially offset by higher unallocated corporate expenses.

Second quarter

2010 segment operating income increased $92m, or 14 percent, driven by improved performance in four of the company’s five businesses. As a percent of sales, second quarter 2010 segment operating income improved 70 basis points to 8.7 percent from 8 percent. Net pension adjustment declined to an expense of $8m from an expense of $76m in the prior year period. Unallocated corporate expenses totaled $46m in the 2010 second quarter compared with income of $21m in the 2009 second quarter. The quarter-over-quarter increase is due to a $64 m pre-tax gain for legal costs an