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STRONG RESULTS FROM U.S. MAJORS

26 Jan 06. The reporting season got off to a strong start with results from Lockheed Martin, Northrop Grumman, General Dynamics, UTC and Rockwell Collins exceeding market expectations.

On January 24th Northrop Grumman Corporation (NYSE: NOC – News) reported that fourth quarter earnings per share from continuing operations increased 24 percent to $0.92 per diluted share and 2005 earnings per share from continuing operations increased 27 percent to $3.81 per diluted share. Sales for the 2005 fourth quarter were $7.9bn and a record $30.7bn for 2005. Net cash provided by operating activities for the 2005 fourth quarter more than doubled to $678m and cash from operations for the year rose 37 percent to $2.6bn.

“Our continued focus on performance drove higher sales, earnings and cash,” said Ronald D. Sugar, Northrop Grumman chairman, chief executive officer and president. “Solid overall operating performance, monetization of non-core assets, and our action to reduce share count contributed to this year’s
excellent results. “Our outstanding cash generation supported the repurchase of $1.2 billion of our stock, a 13 percent increase in our dividend, and the continued strengthening of our balance sheet. This year’s strong financial results were achieved despite the charges associated with Hurricane Katrina and the F-16 Block 60 program. For 2006, we are raising our guidance for earnings per share and cash from operations. We expect double-digit growth in earnings per share to between $4.25 and $4.40 based on a sales base of approximately $31 billion, and we expect cash from operations to range between $2.3 and $2.6 billion.”

Fourth quarter 2005 income from continuing operations rose 21 percent to $331m, or $0.92 per diluted share, (2004: $273m, or $0.74). Fourth quarter 2005 income from continuing operations includes higher total segment operating margin, a lower effective tax rate, and a $14m pre-tax gain on the sale of 1.3 million shares of Endwave common stock, partially offset by a $65m pre-tax charge for the company’s F-16 Block 60 program. Fourth quarter 2004 income from continuing operations included a $42m pre-tax charge for the Wedgetail program and a $35m charge for a legal settlement. Sales for the fourth quarter of 2005 were essentially unchanged at $7.9bn compared with the same period of 2004. Operating margin for the 2005 fourth quarter was essentially unchanged at $534m (2004: $538m). Other income/expense for the 2005 fourth quarter increased to income of $16m from an expense of $25m for the same period of 2004. During the fourth quarter of 2005, the company sold 1.3 million shares of Endwave common stock, which generated a $14m pre-tax gain. In the fourth quarter of 2004, the company recorded a $15m foreign currency exchange loss on the liquidation of a subsidiary loan and a $13m expense related to the early retirement of debt. Net income for the 2005 fourth quarter increased 22 percent to $331m, or $0.92 per diluted share, (2004: $272m, or $0.74). Contract acquisitions for the 2005 fourth quarter declined to $6.6bn from $11.9bn for the same period of 2004. Fourth quarter 2005 contract acquisitions were impacted by the delay in the passage of the 2006 defense budget, which resulted in delayed contract awards. Total backlog, which includes funded backlog and firm orders for which funding is not currently contractually obligated by the customer, was $56.3bn at Dec. 31, 2005 compared with $58.1bn at Dec. 31, 2004. Income from continuing operations for 2005 rose 27 percent to $1.4bn, or $3.81 per share, (2004: $1.1bn, or $2.99) Sales for 2005 increased 3 percent to $30.7bn from $29.9bn in 2004 reflecting higher sales in every business but Ships. Operating margin for 2005 increased 9 percent to $2.2bn (2004: $2.0bn), reflecting double-digit increases in operating margin in Integrated Systems, Mission Systems, Information Technology, and Space Technology, and a $92m decline in
unallocated expenses p

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