26 Jan 22. The results from the US Majors reflected continuing COVID-related supply chain issues.
Boeing
General Dynamics
Lockheed Martin
Northrop Grumman
Raytheon Technologies
Textron
Boeing
26 Jan 22. Boeing Reports Fourth-Quarter Results.
Fourth Quarter 2021
* Continued global return to service of 737 MAX, including progress in China
* Revenue of $14.8bn; operating cash flow of $0.7bn
* 787 program recorded $3.5 bn pre-tax non-cash charge; focused on actions required to resume deliveries
* GAAP loss per share of ($7.02) and core (non-GAAP)* loss per share of ($7.69)
Full-Year 2021
* Revenue of $62.3 bn; operating cash flow of ($3.4) bn; cash and marketable securities of $16.2 bn
* GAAP loss per share of ($7.15) and core (non-GAAP)* loss per share of ($9.44)
* Total backlog of $377 bn and added 535 net commercial orders
* Focused on safety, quality and operational stability
Boeing posts loss as 787 jet deliveries stall with ‘no firm end in sight.’
Boeing Co (BA.N) said on Wednesday it incurred $4.5 bn charges in the fourth quarter on its sidelined 787 program, obscuring the U.S. planemaker’s long-awaited return to positive cash flow fueled by rebounding 737 MAX deliveries.
The planemaker sank to a loss after two quarters of profits because of the charges. Shares in Boeing fell 3.6% as the array of charges and uncertainty over the 787 program dwarfed a surprise return to positive free cash flow and plans to increase production on the 737 and 777.
The quarterly results underscore the challenges Boeing faces as it seeks to rebound from the coronavirus pandemic and 737 MAX safety crises, while navigating industrial and regulatory currents on its bigger 787 and 777X flagship.
Its ability to resume deliveries to airlines depends on approvals from the U.S. Federal Aviation Administration.
Reuters reported last week that deliveries of the 787 are expected to remain frozen for months as U.S. regulators review repairs and inspections over structural flaws in the jets, while designs for the larger 777X face further regulatory pushback from Europe. read more
“We’ll have to complete the rework on a large fleet of airplanes,” Calhoun told analysts on a conference call later on Wednesday. “There’s no way to shortcut it … I wish it could go faster, and I can’t accelerate it.”
Asked whether deliveries would resume in April, as some people in the industry expect, Calhoun said the timing would be set by the FAA.
The program remains at a low production rate, with an expected gradual return to five per month over time, Boeing said. Calhoun and Chief Financial Officer Brian West later told investors on a call 737 MAX deliveries and service would resume in China’s crucial aviation market in the first quarter.
Boeing unveiled a $3.5bn pre-tax non-cash charge related to 787 delivery delays and customer concessions, and another $1 bn in abnormal production costs.
Boeing had previously forecast low production rates and rework for the 787 due to manufacturing flaws and required inspections and repairs to result in about $1bn of abnormal costs – putting the overall price tag at some $5.5bn.
“Here we go again,” Vertical Research Partners analyst Rob Stallard said. “Just as we saw with the 737 MAX, Boeing is now racking up massive charges on the 787 with no firm end in sight, and its fate in the hands of the FAA.”
HAIR-THIN GAPS
At its U.S. factories, Boeing is combing through parked 787s with ultrasound devices and tools to measure gaps barely visible to the naked eye. The gaps – left in the process for making carbon-composite structures that make the jet lighter and cheaper to fly – are the width of a human hair but violate Boeing’s specifications.
The company reported a core operating loss of $4.54bn in the fourth quarter ended Dec. 31, compared with a loss of $8.38bn a year earlier, when the company recorded a $6.5bn charge due to delays in its 777X jet program.
Still, Boeing generated positive cash flow in the fourth quarter, representing its first positive cash quarter since early 2019, fueled by 737 MAX deliveries as air travel rebounds from the pandemic. 2023 cash flow would be “materially” higher than 2022, West said.
Boeing said its 737 program was producing at a rate of 26 per month, up from 19 jets in the earlier quarter. It said it was on track to reach production targets of 31 per month in early 2022, though it faces supply-chain risks like labor and parts shortages.
Boeing currently has 335 737 MAX airplanes in inventory, and anticipates delivering most of those jets by end-2023, it said.
Boeing also said it aims to increase its 777/777X production to 3 aircraft per month in 2022 from 2 previously, fueled by orders for 777 freighters amid booming air cargo demand. It reiterated plans to deliver the first 777X in late 2023.
Higher revenue and operating margins in its Global Services Division were hurt by an asset-impairment write down of $220 m due to fluctuating demand and pricing, Boeing said.
Boeing also took a $402m pre-tax charge on its KC-46 tanker program, due to changing customer requirements to the plane’s remote vision system and supply chain disruptions.
Debt fell to $58.1bn from $62.4bn at the beginning of the quarter, Boeing said. (Source: Reuters)
The Boeing Company [NYSE: BA] reported fourth-quarter revenue of $14.8bn, reflecting higher commercial volume and lower defense revenue. GAAP loss per share of ($7.02) and core loss per share (non-GAAP)* of ($7.69) reflect lower charges and higher commercial volume. Boeing recorded operating cash flow of $0.7bn.
“2021 was a rebuilding year for us as we overcame hurdles and reached key milestones across our commercial, defense and services portfolios. We increased 737 MAX production and deliveries, and safely returned the 737 MAX to service in nearly all global markets. As the commercial market recovery gained traction, we also generated robust commercial orders, including record freighter sales. Demonstrating progress in our overall recovery, we also returned to generating positive cash flow in the fourth quarter,” said David Calhoun, Boeing President and Chief Executive Officer. “On the 787 program, we’re progressing through a comprehensive effort to ensure every airplane in our production system conforms to our exacting specifications. While this continues to impact our near-term results, it is the right approach to building stability and predictability as demand returns for the long term. Across the enterprise, we remain focused on safety and quality as we deliver for our customers and invest in our people and in our sustainable future.”
Operating cash flow improved to $0.7bn in the quarter, reflecting higher commercial volume, higher advance payments, and lower expenditures.
Cash and investments in marketable securities decreased to $16.2bn, compared to $20.0bn at the beginning of the quarter, primarily driven by debt repayment partially offset by operating cash flow. Debt was $58.1bn, down from $62.4bn at the beginning of the quarter due to the prepayment of a term loan and repayment of maturing debt.
Total company backlog at quarter-end was $377bn.
Segment Results
Commercial Airplanes
Commercial Airplanes fourth-quarter revenue increased slightly to $4.8 bn primarily driven by higher 737 deliveries, partially offset by lower widebody deliveries and less favorable mix. Fourth-quarter operating margin was primarily driven by a charge on the 787 program.
Boeing is continuing to make progress on the global safe return to service of the 737 MAX. In December, the Civil Aviation Administration of China issued an airworthiness directive outlining changes required for Chinese airlines to prepare their fleets to resume service. Since the FAA’s approval to return the 737 MAX to operations in November 2020, over 300,000 revenue flights have been completed, and the reliability of the 737 MAX fleet remains above 99 percent (as of January 24, 2022). The 737 program is currently producing at a rate of 26 per month and continues to progress towards a production rate of 31 per month in early 2022. The company is evaluating the timing of further rate increases.
The company continues to perform rework on 787 airplanes in inventory and is engaged in detailed discussions with the FAA regarding required actions to resume deliveries. In the fourth quarter, the company determined that these activities will take longer than previously expected, resulting in further delays in customer delivery dates and associated customer considerations. Accordingly, Commercial Airplanes recorded a $3.5bn pre-tax non-cash charge on the 787 program. The program is producing at a very low rate and will continue to do so until deliveries resume, with an expected gradual return to five per month over time. The company now anticipates 787 abnormal costs will increase to approximately $2bn, with most being incurred by the end of 2023, including $285m recorded in the quarter.
Commercial Airplanes secured orders for 164 737 MAX and 24 freighter aircraft. Commercial Airplanes delivered 99 airplanes during the quarter and backlog included over 4,200 airplanes valued at $297bn.
Defense, Space & Security
Defense, Space & Security fourth-quarter revenue decreased to $5.9bn and fourth-quarter operating margin decreased to (4.4) percent, primarily due to lower volume and less favorable performance across the portfolio, including a $402m pre-tax charge on the KC-46A Tanker program.
During the quarter, Defense, Space & Security secured an award for six MH-47G Block II Chinook helicopters for the U.S. Army Special Operations, a contract extension for Future Logistics Information Services for the U.K. Ministry of Defence, an award for modernization of Airborne Warning and Control System to the Royal Saudi Air Force, and contracts for proprietary space programs. Defense, Space & Security also completed the first carrier tests for the MQ-25 unmanned aerial tanker and started flight testing on the second uncrewed Loyal Wingman aircraft.
Backlog at Defense, Space & Security was $60bn, of which 33 percent represents orders from customers outside the U.S.
Global Services
Global Services fourth-quarter revenue increased to $4.3bn and fourth-quarter operating margin increased to 9.3 percent primarily driven by higher commercial volume and favorable mix. Operating margin was negatively impacted by a $220 m inventory impairment.
During the quarter, Global Services secured a V-22 Performance Based Logistics contract for the U.S. Marine Corps, was awarded a contract for F/A-18 Landing Gear Repair for the U.S. Navy, and was selected to provide Apache training and support services to the U.K. Ministry of Defence. Global Services also delivered the 50th 767-300 converted freighter.
Additional Financial Information
At quarter-end, Boeing Capital’s net portfolio balance was $1.7bn. The change in revenue and earnings from other unallocated items and eliminations was primarily due to the timing of allocations. The loss from other unallocated items and eliminations was also impacted by a $744m charge related to an agreement between Boeing and the U.S. Department of Justice in 2020. The fourth quarter 2021 effective tax rate primarily reflects a higher income tax benefit due to a lower valuation allowance charge than in fourth quarter 2020.
General Dynamics
26 Jan 22. General Dynamics Reports Fourth-Quarter and Full-Year 2021 Financial Results
– Fourth-quarter net earnings of $952m and diluted EPS of $3.39 on $10.3bn in revenue
– Full-year net earnings of $3.3 bn and diluted EPS of $11.55 on $38.5bn in revenue
– Record-high revenue and operating earnings from the collective defense segments for the year
– Highest Gulfstream orders in more than a decade
General Dynamics (NYSE: GD) today reported quarterly net earnings of $952m, or $3.39 diluted earnings per share (EPS), on $10.3 bn in revenue. For the full year, net earnings were $3.3 bn, or $11.55 per diluted share, on revenue of $38.5bn.
Operating margin was 11.5% for the quarter and 10.8% for the full year. The defense segments collectively delivered revenue and operating earnings for the year that were the highest in the company’s history.
“Our continued focus on operating performance and protecting the health and safety of our employees contributed to strong fourth-quarter and full-year results,” said Phebe N. Novakovic, chairman and chief executive officer. “Furthermore, favorable cash flow has enabled us to continue reducing debt, returning value to shareholders and investing in future growth.”
Cash
Net cash provided by operating activities in the quarter totaled $1.7bn, or 177% of net earnings. For the year, net cash provided by operating activities totaled a record-high $4.3bn, or 131% of net earnings. For the year, the company reduced debt by $1.5bn, invested $887m in capital expenditures, paid $1.3 bn in dividends, and repurchased $1.8bn in shares, ending 2021 with $1.6bn in cash and equivalents on hand.
Backlog
Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1-to-1 for the quarter and the year. In addition to company-wide backlog of $87.6bn, estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $39.9bn at year end. Total estimated contract value, the sum of all backlog components, was $127.5bn.
In the Aerospace segment, backlog grew in the quarter to $16.3bn, up 40% from the year-ago quarter, driven by the strongest order-year for Gulfstream since 2008. Book-to-bill was 1.7-to-1 for the quarter and 1.6-to-1 for the year.
Significant awards in the quarter for the Marine Systems, Combat Systems and Technologies segments included $1.1bn for several key contracts for classified customers and options totaling $140m of additional potential value; $820m from the U.S. Navy to provide ongoing lead yard services for the Virginia-class submarine program; $555m to produce Piranha 5 wheeled armored vehicles and provide associated support services to the Romanian Armed Forces; a contract with a maximum potential value of $535m for hardware, software and logistics sustainment support for the U.S. Army; $355m with a maximum potential value of $600m to design, develop, implement and operate a state’s healthcare exchange; $305 m for the production of an M1A2 Abrams tank variant for an international customer; and a contract with a maximum potential value of $220 m for the development, production and sustainment of a cryptographic touchscreen wireless device for the Army.
BACKLOG BY SEGMENT – (UNAUDITED)
DOLLARS IN MILLIONS
FOURTH QUARTER 2021 SIGNIFICANT ORDERS – (UNAUDITED)
DOLLARS IN MILLIONS
We received the following significant contract awards during the fourth quarter of 2021:
Marine Systems:
* $820 from the U.S. Navy to provide ongoing lead yard services for the Virginia-class submarine program.
* $160 from the Navy for Advanced Nuclear Plant Studies (ANPS) in support of the Columbia-class submarine program.
* $95 from the Navy to provide maintenance for submarines at the Naval Submarine Base New London in Connecticut.
* $85 from the Navy to provide ongoing planning yard services for the Arleigh Burke-class (DDG-51) guided-missile destroyer program.
* $40 from the Navy for planning yard services for nuclear-powered submarines and support yard services for moored training ships.
* $30 from the Navy to provide preservation and repair services for the Nautilus (SSN 571).
Combat Systems:
* $555 to produce Piranha 5 wheeled armored vehicles and provide associated support services to the Romanian Armed Forces.
* $305 for the production of an M1A2 Abrams tank variant for an international customer.
* $105 from the U.S. Army for various munitions and ordnance.
* $100 to produce various calibers of ammunition for the Canadian government.
* $100 to produce gun systems for the F-35 Joint Strike Fighter, F-18 Hornet and F-16 Fighting Falcon aircraft programs.
* $80 for the production of Pandur 6×6 wheeled combat vehicles for the Austrian Federal Ministry of Defense.
Technologies:
* $1.1BN for several key contracts for classified customers and options totaling $140 of additional potential value.
* $355 to design, develop, implement and operate a state’s healthcare exchange. The contract has a maximum potential value of $600.
* $35 for hardware, software and logistics sustainment support for the Army. The contract has a maximum potential value of $535.
* A contract for the development, production and sustainment of the Army’s Next Generation Load Device-Medium (NGLD-M) cryptographic touchscreen wireless device. The contract has a maximum potential value of $220.
* $90 from the Navy for the design and development of prototype encapsulated torpedo effectors to detect, classify and defeat undersea targets, and options totaling $170 of additional potential value.
* $40 from the Navy to provide fire control system modifications for ballistic-missile and guided-missile submarines and options totaling $140 of additional potential value.
* $85 from the Navy to provide sustainment services for the next-generation Mobile User Objective System (MUOS) satellite communications system.
* $75 to provide logistics, sustainment and maintenance support services for the Army.
* $60 from the Navy to design, develop and integrate the Conventional Prompt Strike (CPS) weapon control system.
* $55 from the Army for computing and communications equipment under the Common Hardware Systems-5 program. (Source: PR Newswire)
Lockheed Martin
27 jan 22. Lockheed Martin posts better-than-expected profit, reiterates 2022 sales outlook. U.S. weapons maker Lockheed Martin Corp (LMT.N) reported better-than-expected quarterly profit on Tuesday, helped by a strong performance at its ships and helicopters unit and venture capital gains, and reiterated its sales guidance for 2022.
But the company also said it had been informed by the U.S. Federal Trade Commission that its planNed purchase of Aerojet Rocketdyne (AJRD.N) would raise antitrust concerns, leaving Lockheed either to abandon the transaction or fight a federal lawsuit in order to close the deal.
The $4.4bn deal announced in late 2020 is Lockheed’s first large acquisition under new Chief Executive Jim Taiclet. It would reshape the competitive landscape for solid rocket fuel missiles which are used with jets and drones.
Lockheed reported net operating earnings were $2bn in the fourth quarter, or $7.47 per share, surpassing analyst estimates of $1.98bn, or $7.12 per share, according to Refinitiv data. Full-year earnings per share were $22.76, beating analyst estimates of $22.44.
Net sales were $17.7bn during the fourth quarter, just beating analyst estimates of $17.67bn.
Last October, the Bethesda, Maryland-based company lowered its 2022 full-year revenue outlook to $66bn – sending its shares tumbling – citing challenges with its supply chain. Lockheed reaffirmed that 2022 revenue guidance on Tuesday.
U.S. President Joe Biden has not signaled he plans to slash the 2023 budget for Lockheed’s biggest customer, the Pentagon, despite progressive Democrats calling for a reduction in military spending and the U.S. withdrawal from Afghanistan.
The company said it now expects full-year 2022 earnings per share to be about $26.70, ahead of analysts’ expectation of $26.36 per share, according to data from Refinitiv.
Lockheed’s biggest unit, which makes F-35 fighter jets for the United States and its allies, delivered 142 of the stealthy planes in 2021, three more than originally planned. read more
During 2021 the company sent $7bn back to shareholders in the form of dividends and share repurchases, and paid an effective tax rate of 16.9%. (Source: Reuters)
25 Jan 22. Lockheed Martin Reports Fourth Quarter and Full Year 2021 Financial Results.
– Net sales of $17.7bn in the fourth quarter and $67.0bn in 2021
– Net earnings from continuing operations of $2.0bn, or $7.47 per share, in the fourth quarter and $6.3bn, or $22.76 per share, in 2021
– Generated cash from operations of $4.3bn in the fourth quarter and $9.2bn in 2021
– Returned cash to shareholders through $2.1 bn of share repurchases and $762m of dividends in the fourth quarter, and $4.1 bn of share repurchases and $2.9bn of dividends in 2021
– 2022 financial outlook provided
Lockheed Martin Corporation [NYSE: LMT] today reported fourth quarter 2021 net sales of $17.7bn, compared to $17.0bn in the fourth quarter of 2020. Net earnings from continuing operations in the fourth quarter of 2021 were $2.0bn, or $7.47 per share, compared to $1.8bn, or $6.38 per share, in the fourth quarter of 2020. Cash from operations was $4.3 bn in the fourth quarter of 2021, compared to $1.8bn in the fourth quarter of 2020. Cash from operations in the fourth quarter of 2020 was after $1.0bn of discretionary pension contributions.
“We closed the year on a strong note with solid growth in fourth quarter sales, segment operating profit, and earnings per share, while cash exceeded our projections as we delivered on our customer commitments and drove strong execution,” said Lockheed Martin Chairman, President and CEO James Taiclet. “We delivered significant value back to shareholders in 2021, including $7 bn in dividends and share repurchases, and our team continued to provide world-class support to our customers despite the ongoing challenges of the global pandemic. Through our strong balance sheet, we continue to invest in the many emerging growth opportunities ahead – from new aircraft competitions around the world, to our classified portfolio, to solid demand for our signature programs, to emerging technologies like hypersonics. Looking ahead to 2022, we will remain fully dedicated to service to our customers and dynamic and disciplined capital allocation for the benefit of our shareholders.”
Net earnings for the quarter ended Dec. 31, 2021, included net gains of $85m ($64m, or $0.23 per share, after-tax) due to increases in the fair value of investments held in the Lockheed Martin Ventures Fund. Net earnings for the year ended Dec. 31, 2021, included a noncash pension settlement charge of $1.7bn ($1.3bn, or $4.72 per share, after-tax) associated with the $4.9bn gross pension liability transfer completed in the third quarter; net gains of $265m ($199m, or $0.72 per share, after-tax) due to increases in the fair value of investments held in the Lockheed Martin Ventures Fund; and severance and restructuring charges of $36m ($28m, or $0.10 per share, after-tax) announced in the first quarter. Net earnings for the year ended Dec. 31, 2020, included a non-cash impairment charge of $128m ($96m, or $0.34 per share, after tax) for an investment in a joint venture; and severance charges of $27m ($21m, or $0.08 per share, after-tax).
Update on Proposed Aerojet Rocketdyne Acquisition
Earlier this month, Lockheed Martin and Aerojet Rocketdyne agreed with the Federal Trade Commission (FTC) that the parties would not close the transaction before Jan. 27, 2022, to enable the parties to discuss the scope and nature of the merchant supply and firewall commitments previously offered by Lockheed Martin. Lockheed Martin has been advised by the FTC that its concerns regarding the transaction cannot be addressed adequately by the terms of a consent order. Lockheed Martin believes it is highly likely that the FTC will vote to sue to block the transaction and expects they will make a decision before Jan. 27, 2022.
If the FTC sues to block the transaction, Lockheed Martin could elect to defend the lawsuit or terminate the merger agreement. Additional information concerning the transaction can be found in Lockheed Martin’s 2021 Form 10-K that has been filed with the Securities and Exchange Commission.
Lockheed Martin continues to believe in the benefits of the transaction for the United States and its allies, the industry, and all of the company’s stakeholders.
Summary Financial Results
2022 Financial Outlook
The following table and other sections of this news release contain forward-looking statements, which are based on the company’s current expectations. Actual results may differ materially from those projected. It is the company’s practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, ventures, pension risk transfer transactions, changes in law, or new accounting standards until such items have been consummated, enacted or adopted.
Cash Deployment Activities
The company’s cash deployment activities in the quarter and year end Dec. 31, 2021, included the following:
* accelerating $2.2bn of payments to suppliers during the quarter ended Dec. 31, 2021, that were due in the first quarter of 2022, compared to accelerating $2.1bn of payments to suppliers in the fourth quarter of 2020 that were due in the first quarter of 2021;
* making no pension contributions during the quarter and year ended Dec. 31, 2021, compared to making discretionary pension contributions of $1.0 bn during the quarter and year ended Dec. 31, 2020;
* making capital expenditures of $607m and $1.5bn during the quarter and year ended Dec. 31, 2021, compared to $722m and $1.8bn during the quarter and year ended Dec. 31, 2020;
* paying cash dividends of $762m and $2.9 bn during the quarter and year ended Dec. 31, 2021, compared to $728 m and $2.8 bn during the quarter and year ended Dec. 31, 2020;
* paying $2.1bn to repurchase 6.1m shares (including 2.2 m shares received upon settlement of an accelerated share repurchase agreement (ASR) in January 2022) and $4.1bn to repurchase 11.7m shares (including the 2.2m shares received upon settlement of an ASR in January 2022) during the quarter and year ended Dec. 31, 2021, compared to no shares repurchased and paying $1.1 bn to repurchase 3.0 m shares during the quarter and year ended Dec. 31, 2020;
* making no repayments and a scheduled repayment of $500 m of long-term debt during the quarter and year ended Dec. 31, 2021, compared to making repayments of $500m and $1.7bn of long-term debt during the quarter and year ended Dec. 31, 2020; and
* receiving no proceeds from the issuance of debt during the year ended Dec. 31, 2021, compared to receiving $1.1bn of net proceeds from the issuance of debt during the year ended Dec. 31, 2020.
Segment Results
The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the company’s business segments and reconciles these amounts to the company’s consolidated financial results.
Net sales and operating profit of the company’s business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation. Operating profit of the company’s business segments includes the company’s share of earnings or losses from equity method investees as the operating activities of the investees are closely aligned with the operations of its business segments.
Operating profit of the company’s business segments also excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, and other miscellaneous corporate activities.
The company recovers CAS pension cost through the pricing of its products and services on U.S. Government contracts and, therefore, recognizes CAS pension cost in each of its business segments’ net sales and cost of sales. The company’s consolidated financial statements must present pension and other postretirement benefit plan income calculated in accordance with FAS requirements under U.S. generally accepted accounting principles. The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension (expense) income and total CAS pension cost. The non-service FAS pension (expense) income component is included in other non-service FAS pension (expense) income in our consolidated statements of earnings. The net FAS/CAS pension adjustment increases or decreases CAS pension cost to equal total FAS pension income (both service and non-service).
Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. In addition, comparability of the company’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the company’s contracts for which it recognizes revenue over time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes.
Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets.
The company’s consolidated net adjustments not related to volume, including net profit booking rate adjustments, represented approximately 29% and 28% of total segment operating profit in the quarter and year ended Dec. 31, 2021, as compared to 25% and 26% in the quarter and year ended Dec. 31, 2020.
Aeronautics
Aeronautics’ net sales during the fourth quarter of 2021 increased $413m, or 6%, compared to the same period in 2020. The increase was primarily attributable to higher net sales of approximately $270m for the F-35 program due to higher volume on production contracts that was partially offset by lower volume on development contracts; and about $110m for classified contracts due to higher volume and risk retirements.
Aeronautics’ operating profit during the fourth quarter of 2021 increased $93m, or 13%, compared to the same period in 2020. The increase was primarily attributable to higher operating profit of approximately $55m for classified contracts due to higher risk retirements; and about $35m for the C-130 program due to higher risk retirements on sustainment activities. Operating profit for the F-35 program was comparable as higher volume on production contracts was offset by lower risk retirements on sustainment contracts. Adjustments not related to volume, including net profit booking rate adjustments, were $80m higher in the fourth quarter of 2021 compared to the same period in 2020.
Aeronautics’ net sales in 2021 increased $482 m, or 2%, compared to 2020. The increase was primarily attributable to higher net sales of approximately $290m on classified contracts due to higher volume; about $180 m for the F-16 program due to higher volume on production contracts that was partially offset by lower sustainment volume; approximately $75m for the F-35 program primarily due to higher volume on production and sustainment contracts that was partially offset by lower volume on development contracts; and about $30m for the C-130 program primarily due to higher volume on production contracts and higher risk retirements on sustainment activities. These increases were partially offset by a decrease of approximately $170m for lower sustainment volume for the F-22 program.
Aeronautics’ operating profit in 2021 decreased $44m, or 2%, compared to 2020. The decrease was primarily attributable to lower operating profit of approximately $120m for classified contracts primarily due to a $225 m loss recognized in the second quarter of 2021 for performance issues experienced on a classified program that was partially offset by higher risk retirements on other classified programs recognized in the second half of 2021; and about $70m for the F-35 program due to lower risk retirements and volume on development contracts and lower risk retirements on production contracts that were partially offset by higher risk retirements and volume on sustainment contracts. These decreases were partially offset by an increase of approximately $90m for the C-130 program due to higher risk retirements on sustainment contracts; and about $50m for the F-16 program due to higher risk retirements on sustainment contracts and higher production volume. Adjustments not related to volume, including net profit booking rate adjustments, were $60 m lower in 2021 compared to 2020.
Missiles and Fire Control
MFC’s net sales during the fourth quarter of 2021 increased $353m, or 12%, compared to the same period in 2020. The increase was primarily attributable to higher net sales of approximately $200m for integrated air and missile defense programs due to higher volume (primarily PAC-3); and about $190m for tactical and strike missile programs due to higher volume (primarily Hellfire, Long Range Anti-Ship Missile (LRASM) and Joint Air-to-Surface Standoff Missile (JASSM)). These increases were partially offset by a decrease of about $40m for sensors and global sustainment programs due to lower volume (primarily Special Operations Forces Global Logistics Support Services (SOF GLSS)).
MFC’s operating profit during the fourth quarter of 2021 increased $64m, or 17%, compared to the same period in 2020. The increase was primarily attributable to higher operating profit of approximately $40m for tactical and strike missile programs due to higher volume (primarily Hellfire, LRASM and JASSM) and higher risk retirements (primarily Guided Multiple Launch Rocket Systems (GMLRS)); and about $25m for integrated air and missile defense programs due to higher volume (primarily PAC-3). Adjustments not related to volume, including net profit booking rate adjustments, were comparable in the fourth quarter of 2021 to the same period in 2020.
MFC’s net sales in 2021 increased $436m, or 4%, compared to 2020. The increase was primarily attributable to higher net sales of approximately $340m for integrated air and missile defense programs due to higher volume and risk retirements (primarily PAC-3); and about $215m for tactical and strike missile programs due to higher volume (primarily LRASM and JASSM). These increases were partially offset by a decrease of approximately $90m for sensors and global sustainment programs due to lower volume (primarily Sniper Advanced Targeting Pod (SNIPER®) and Apache) that was partially offset by close out activities related to the Warrior Capability Sustainment Program (Warrior) that was terminated by the customer in March 2021.
MFC’s operating profit in 2021 increased $103m, or 7%, compared to 2020. The increase was primarily attributable to higher operating profit of approximately $65m for integrated air and missile defense programs due to higher risk retirements and volume (primarily PAC-3); about $45 m for tactical and strike missile programs due to higher volume (primarily LRASM and JASSM) and higher risk retirements (primarily GMLRS); and approximately $20m for sensors and global sustainment programs due to the reversal of a portion of previously recorded losses on the Warrior program in the second and third quarters of 2021 that will not recur as a result of the program being terminated, which was partially offset by lower volume (primarily SNIPER and Apache). These increases were partially offset by charges of approximately $25m due to performance issues on an energy program during the third quarter of 2021. Adjustments not related to volume, including net profit booking rate adjustments, were $85m higher in 2021 compared to 2020.
Rotary and Mission Systems
RMS’ net sales during the fourth quarter of 2021 increased $248m, or 6%, compared to the same period in 2020. The increase was primarily attributable to higher net sales of approximately $115m for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to higher volume; about $70m for training and logistics solutions (TLS) programs due to higher volume; and approximately $45m for integrated warfare systems and sensors (IWSS) programs due to higher volume on Canadian Surface Combatant (CSC) and Aegis programs.
RMS’ operating profit during the fourth quarter of 2021 increased $42m, or 10%, compared to the same period in 2020. The increase was primarily attributable to higher operating profit of approximately $30m for Sikorsky helicopter programs due to higher risk retirements (primarily Combat Rescue Helicopter (CRH) and VH-92A); and about $20m for C6ISR programs due to higher risk retirements. Adjustments not related to volume, including net profit booking rate adjustments, were $10m higher in the fourth quarter of 2021 compared to the same period in 2020.
RMS’ net sales in 2021 increased $794m, or 5%, compared to 2020. The increase was primarily attributable to higher net sales of $540m for Sikorsky helicopter programs due to higher production volume (Black Hawk, CH-53K and CRH); and about $340 m for TLS programs primarily due to the delivery of an international pilot training system in the first quarter of 2021. These increases were partially offset by lower net sales of about $65m for IWSS programs due to lower volume on the LCS and TPQ-53 programs that were partially offset by higher volume on the CSC and Aegis programs.
RMS’ operating profit in 2021 increased $183m, or 11%, compared to 2020. The increase was primarily attributable to higher operating profit of approximately $140m for Sikorsky helicopter programs due to higher risk retirements (Black Hawk and CH-53K), higher production volume (Black Hawk and CRH), and lower charges on the CRH program in the first half of 2021; and about $10m for TLS programs due to the delivery of an international pilot training system in the first quarter of 2021. Operating profit for IWSS programs was comparable as lower risk retirements on the LCS program and lower volume on the TPQ-53 program were offset by higher volume on the CSC program and lower charges on a ground-based radar program. Adjustments not related to volume, including net profit booking rate adjustments, were $80 m higher in 2021 compared 2020.
Space
Space’s net sales during the fourth quarter of 2021 decreased $317m, or 10%, compared to the same period in 2020. The decrease was primarily attributable to lower net sales of approximately $385m due to the June 30, 2021, renationalization of the Atomic Weapons Establishment (AWE) program after which date, the ongoing operations are no longer included in the company’s financial results; and about $80 m for commercial civil space programs due to lower volume (primarily Orion). These decreases were partially offset by higher net sales of about $165 m for strategic and missile defense programs due to higher volume (primarily Next Generation Interceptor (NGI), Fleet Ballistic Missile (FBM) and hypersonic development).
Space’s operating profit during the fourth quarter of 2021 decreased $60m, or 16%, compared to the same period in 2020. The decrease was primarily attributable to approximately $60 m of lower equity earnings from the company’s investment in United Launch Alliance (ULA) due to launch vehicle mix; and about $25m for commercial civil space programs due to lower risk retirements and volume (primarily Orion). These decreases were partially offset by an increase of approximately $10m for strategic and missile defense programs due to higher risk retirements (primarily FBM) that were partially offset by lower risk retirements (primarily hypersonic development). There was not a significant decrease in operating profit for the AWE program as its operating profit in the fourth quarter of 2020 was mostly offset by accelerated and incremental amortization expense for intangible assets as a result of the renationalization. Adjustments not related to volume, including net profit booking rate adjustments, were $10m higher in the fourth quarter of 2021 compared to the same period in 2020.
Space’s net sales in 2021 decreased $66m, or 1%, compared to 2020. The decrease was primarily attributable to lower net sales of approximately $535m due to the renationalization of the AWE program; and about $105m for commercial civil space programs due to lower volume (primarily Orion). These decreases were partially offset by higher net sales of approximately $405m for strategic and missile defense programs due to higher volume (primarily hypersonic development and NGI programs); and about $140 m for national security space programs due to higher volume and risk retirements (primarily Next Gen OPIR and SBIRS).
Space’s operating profit in 2021 decreased $15m, or 1%, compared to 2020. The decrease was primarily attributable to approximately $70m of lower equity earnings from the company’s investment in ULA due to lower launch volume and launch vehicle mix; and about $20m due to the renationalization of the AWE program. These decreases were partially offset by an increase of about $35 m for strategic and missile defense programs due to higher volume (primarily hypersonic development programs); and approximately $25m for national security space programs due to higher risk retirements (primarily SBIRS and classified programs) and higher volume (primarily Next Gen OPIR) that was partially offset by charges of about $80m on a commercial ground solutions program. Operating profit was comparable for commercial civil space programs as higher risk retirements (primarily space transportation programs) were offset by lower volume (primarily Orion). Adjustments not related to volume, including net profit booking rate adjustments, were $100 m higher in 2021 compared to 2020.
Total equity earnings (primarily ULA) represented approximately $30m, or 9%, and approximately $65m, or 6%, of Space’s operating profit during the quarter and year ended Dec. 31, 2021, compared to approximately $90m, or 24%, and approximately $135m, or 12%, in the quarter and year ended Dec. 31, 2020.
Income Taxes
The company’s effective income tax rate was 17.7% and 16.4% in the quarter and year ended Dec. 31, 2021, compared to 18.1% and 16.4% in the quarter and year ended Dec. 31, 2020. The rates for the year ended Dec. 31, 2021, and Dec. 31, 2020, benefited from tax deductions for foreign derived intangible income, the research and development tax credit, dividends paid to the company’s defined contribution plans with an employee stock ownership plan feature and tax deductions for employee equity awards. The rate for the quarter ended Dec. 31, 2021 was lower than the rate for the quarter ended Dec. 31, 2020 primarily due to increased research and development tax credits partially offset by a reduction in the tax deduction for foreign derived intangible income.
Northrop Grumman
27 Jan 22. Northrop Grumman Reports Fourth Quarter and Full-Year 2021 Financial Results
- Q4 Sales of $8.6bn; 2021 Sales of $35.7bn; 2021 Organic Sales1 Increase 3 Percent
- Q4 EPS of $17.14, including per share MTM benefit of $11.14; Q4 Transaction-Adjusted EPS1 of $6.00
- 2021 EPS of $43.54; Transaction-Adjusted EPS1 Increase 8 Percent to $25.63
- 2021 Cash from Operations of $3.6bn; 2021 Transaction-Adjusted Free Cash Flow1 of $3.1bn
- $4.7 bn returned to shareholders via dividends and share repurchases in 2021
- Guidance reflects continued growth in 2022 with Organic Sales1 up 2-3 Percent
- Board Authorizes $2.0bn Additional Share Repurchases
Northrop sales disappoint as supply chain snarls restrict deliveries. Northrop Grumman Corp (NOC.N) missed fourth-quarter revenue estimates on Thursday as labor shortages and supply chain snarls hampered its ability to deliver components for defense products, including Lockheed Martin’s (LMT.N) F-35 jets.
The defense contractor’s sales fell 15% in the final three months of 2021 to $8.64bn, falling short of the average analyst estimate of $8.99bn, according to Refinitiv data.
The drop was driven by a 25% decline in revenue from its aeronautics unit that makes the center fuselage for fighter jets and also reflected how the pandemic has hobbled manufacturers by disrupting supply chains.
Northrop’s shares fell 1.7% before the bell as its 2022 forecast suggested the supply chain pressure was likely to continue. The company expects sales of between $36.2bn and $36.6bn this year, below estimates of $37.03bn.
But its space systems business was a bright spot, with revenue rising 4% in the fourth quarter as countries ramped up investment in space exploration and satellite-based sensors.
Quarterly net earnings rose to $2.71bn, or $17.14 per share, from $330m, or $1.97 per share, a year ago, aided by a one-time gain on the sale of its IT services business.
On an adjusted basis, the company earned $6 per share, beating estimates of $5.96 per share.
Its total profit for 2021 more than doubled to $7bn.
The results come after Lockheed Martin and Raytheon Technologies Corp (RTX.N) beat analysts’ estimates for quarterly profit, encouraged by easing restrictions around the globe. (Source: Reuters)
Northrop Grumman Corporation (NYSE: NOC) reported fourth quarter 2021 sales of $8.6 bn. Fourth quarter 2021 organic sales decreased 10 percent from the prior year period due to four less working days in the fourth quarter of 2021 and a $444m sale of equipment to a restricted customer at Aeronautics Systems during the fourth quarter of 2020. 2021 sales were $35.7bn and 2021 organic sales1 increased 3 percent to $35.5 bn. Fourth quarter 2021 net earnings increased to $2.7bn including a $1.8bn after-tax mark-to-market pension and OPB (“MTM”) benefit. Fourth quarter 2021 transaction-adjusted net earnings were $948 m, or $6.00 per diluted share, and include an after-tax charge of $73m, or $0.46 per diluted share, on the F-35 program at Aeronautics Systems largely driven by COVID-19-related impacts. 2021 net earnings increased to $7.0bn and include the noted MTM benefit as well as the first quarter 2021 after-tax benefit of $1.1 bn for the IT services sale. 2021 transaction adjusted net earnings were $4.1 bn, or $25.63 per diluted share.
“Northrop Grumman delivered another year of solid results in 2021, exceeding our initial outlook for sales and earnings. Our team continued to perform for our customers and shareholders in the midst of the COVID environment,” said Kathy Warden, chairman, chief executive officer and president. “Looking forward, our business remains well aligned to growing global defense budgets, and with a robust backlog and new competitive wins, we expect continued sales growth. Our strong balance sheet and operating cash flow provides for investment in our business while also returning significant capital to our shareholders.”
Transaction-adjusted Net Earnings and Transaction-adjusted EPS 2021 net earnings benefited from a gain on the sale of the company’s IT services business, and fourth quarter and 2021 net earnings reflect a MTM benefit of $1.8bn, net of tax. Excluding the gain on sale of the business, associated federal and state income tax expenses, transaction costs and the make-whole premium for early debt redemption, as well as the impact of MTM benefit (expense) and related tax impacts, 2021 transaction-adjusted net earnings1 increased 4 percent and transaction-adjusted EPS1 increased 8 percent. Transaction-adjusted net earnings1 and transaction-adjusted EPS1 are measures the company uses to compare performance to prior periods and for EPS guidance.
Sales
Fourth quarter 2021 sales decreased $1.6bn, or 15 percent, due, in part to a $583m reduction in sales related to the IT services divestiture. Fourth quarter 2021 organic sales decreased $990m, or 10 percent, due to lower sales at Aeronautics Systems, Defense Systems and Mission Systems, partially offset by higher sales at Space Systems.
Fourth quarter 2021 sales were reduced by approximately 6 percent at each of the sectors due to four less working days when compared to the fourth quarter of 2020. Sector operations also were affected by the ongoing impact of COVID-19 on the broader economic environment, including a tight labor market, elevated levels of employee leave, and supply chain challenges.
Fourth quarter 2020 sales included a $444m sale of equipment to a restricted customer at Aeronautics Systems. 2021 sales decreased $1.1bn, or 3 percent, due to a $2.2 bn reduction in sales related to the IT services divestiture. 2021 organic sales1 increased $1.0 bn, or 3 percent due to higher sales at Space and Mission Systems, partially offset by lower sales at Aeronautics Systems and Defense Systems. 2020 sales included a $444m sale of equipment to a restricted customer at Aeronautics Systems.
Operating Income and Margin Rate Fourth quarter 2021 operating income decreased $410m, or 36 percent, primarily due to lower segment operating income, higher unallocated corporate expense, which includes $124m of MTM-related deferred state tax expense as compared to a $54m benefit in the prior year period, and a lower FAS/CAS operating adjustment. Fourth quarter 2021 operating margin rate declined to 8.6 percent from 11.3 percent reflecting the items above. 2021 operating income increased $1.6bn, or 39 percent, primarily due to the IT services divestiture, including the $2.0bn pre-tax gain on sale and $192m of unallocated corporate expense for unallowable state taxes and transaction costs, partially offset by a $288m reduction in the FAS/CAS operating adjustment. Lower non-divestiture-related unallocated corporate expenses were partially offset by higher deferred state taxes principally related to the company’s 2021 MTM benefit. 2021 operating margin rate increased to 15.8 percent from 11.0 percent reflecting the items above.
Segment Operating Income and Margin Rate
Fourth quarter 2021 segment operating income decreased $171m, or 15 percent, primarily due to lower operating income at Aeronautics Systems, principally due to a $93m unfavorable estimate-at-completion (EAC) adjustment on F-35. Defense Systems operating income also declined in the fourth quarter of 2021 due to the impact of the IT services divestiture.
Fourth quarter 2020 segment operating income from the IT services business was $67 m. Fourth quarter 2021 segment operating margin rate of 11.2 percent was consistent with the prior year period. 2021 segment operating income increased $29m, or 1 percent. Higher operating income at Space Systems and Mission Systems was driven by increased volume and improved performance.
Lower operating income at Defense Systems is due to the impact of the IT services divestiture and lower operating income at Aeronautics Systems principally relates to net unfavorable EAC adjustments on F-35. 2021 segment operating income from the IT services business was $20m as compared to $247m in 2020. Segment operating income includes a first quarter 2021 benefit of approximately $100m due to the impact of lower overhead rates on the company’s fixed price contracts. Segment operating margin rate increased to 11.8 percent from 11.4 percent and reflects higher operating margin rates at Mission Systems, Defense Systems and Space Systems.
Federal and Foreign Income Taxes The fourth quarter 2021 effective tax rate (ETR) increased to 19.0 percent from (8.2) percent in the prior year period. MTM benefit increased the fourth quarter 2021 ETR by 4.0 percentage points and MTM expense reduced the fourth quarter 2020 ETR by 22.3 percentage points. The 2021 ETR increased to 21.6 percent from 14.5 percent in the prior year period primarily due to federal income taxes resulting from the IT services divestiture, including $250 m of income tax expense related to $1.2bn of nondeductible goodwill in the divested business.
The company’s 2021 MTM benefit did not significantly impact the 2021 ETR; however, MTM expense in 2020 reduced the 2020 ETR by 1.3 percentage points. Cash Flows Fourth quarter 2021 cash provided by operating activities decreased $160m due to $197m of federal and state taxes paid in connection with the IT services divestiture. 2021 cash provided by operating activities decreased $738m principally due to federal and state taxes of $785m paid in connection with the IT services divestiture. Lower 2021 pension and OPB contributions were largely offset by the impact of CARES Act social security tax deferrals and the 2020 increase in Department of Defense (DoD) progress payment rates. Fourth quarter 2021 transaction-adjusted free cash flow1 decreased $902 m due to changes in trade working capital and a $263 m reduction associated with CARES Act social security tax deferrals. 2021 transaction-adjusted free cash flow1 decreased $623m largely due to a $495m reduction associated with CARES Act social security tax deferrals. 2020 also benefited from the increase in DoD progress payment rates.
Awards and Backlog
Fourth quarter and full year 2021 net awards totaled $9.8bn and $32.1bn, respectively, and backlog totaled $76.0 bn. Significant fourth quarter new awards include $3.2bn for the SLS Booster Production and Operations Contract, $1.5bn for restricted programs (primarily at Mission Systems), $0.6 bn for F-35 at Mission Systems, $0.4bn for E-2 and $0.3bn for Global Hawk.
Significant 2021 new awards include $6.1bn for restricted programs (primarily at Space Systems, Mission Systems and Aeronautics Systems), $3.2bn for the SLS Booster Production and Operations Contract, $2.6 bn for NGI, $2.2 bn for F-35, $1.0bn for E-2 and $0.9bn for NASA’s HALO module. Share Repurchase Authorization On Jan. 24, 2022, the company’s board of directors authorized a new share repurchase program of up to an additional $2.0 bn in share repurchases of the company’s common stock, bringing the total outstanding authorization up to $4.2bn.
Segment Operating Results
AERONAUTICS SYSTEMS
Three Months Ended December 31
Sales
Fourth quarter 2021 sales decreased $856 m, or 25 percent, due to lower volume in both Manned Aircraft and Autonomous Systems. Approximately 6 percent of the decline relates to four fewer working days than the prior year period. Lower sales also reflect a $444m sale of equipment to a restricted customer in the fourth quarter of 2020 and $109m of lower F-35 sales. 2021 sales decreased $910m, or 7 percent, due to lower volume in both Manned Aircraft and Autonomous Systems. Lower sales reflect a $444m sale of equipment to a restricted customer in 2020, $150m of lower F-35 sales, lower A350 production activity, and lower volume on the B-2 Defensive Management Systems Modernization (DMS) program and certain Global Hawk programs.
Operating Income
Fourth quarter 2021 operating income decreased $119m, or 35 percent, principally due to lower sales. Operating margin rate decreased to 8.4 percent from 9.7 percent due to a $93m unfavorable EAC adjustment on F-35 related to continued labor-related production impacts largely driven by COVID-19. During the fourth quarter of 2021, we modified our F-35 production plan to support a more consistent flow on the program and expect gradually to increase production rate over time as COVID-19-related impacts subside. This decrease was partially offset by the favorable impact of lower overhead rates on certain fixed-price production programs. 2021 operating income decreased $113m, or 9 percent, principally due to lower sales. 2021 operating margin rate decreased to 9.7 percent from 9.9 percent due to lower net favorable EAC adjustments, driven by F-35, partially offset by improved performance on Autonomous Systems programs.
DEFENSE SYSTEMS
Three Months Ended December 31
Sales
Fourth quarter 2021 sales decreased $539m, or 28 percent, primarily due to a $407m reduction in sales related to the IT services divestiture. Fourth quarter 2021 organic sales1 decreased $132m, or 9 percent, principally due to four fewer working days than the prior year period and close-out of the contract at the Army’s Lake City ammunition plant (Lake City). These reductions were partially offset by higher volume on medium caliber weapons programs. 2021 sales decreased $1.8bn, or 23 percent, primarily due to a $1.5bn reduction in sales related to the IT services divestiture. 2021 organic sales decreased $236m, or 4 percent due to $397m lower sales in connection with the close-out of Lake City and lower volume on an international training program, partially offset by higher volume on several programs including Republic of Korea Global Hawk Contractor Logistics Support (ROK Global Hawk CLS), U.S. Customs and Border Protection P-3 (CBP P-3), Guided Multiple Launch Rocket System (GMLRS), B-2 sustainment and advanced fuzes.
Operating Income Fourth quarter 2021 operating income decreased $47m, or 22 percent, due to the impact of the IT services divestiture. Operating margin rate increased to 12.1 percent from 11.2 percent primarily due improved performance on Mission Readiness programs. 2021 operating income decreased $150m, or 18 percent, due to the impact of the IT services divestiture. Operating margin rate increased to 12.0 percent from 11.2 percent and reflects improved performance at Battle Management and Missile Systems due to changes in mix as a result of recent contract completions.
MISSION SYSTEMS
Three Months Ended December 31
Sales
Fourth quarter 2021 sales decreased $215m, or 8 percent, primarily due to a $133m reduction in sales related to the IT services divestiture. Fourth quarter 2021 organic sales1 decreased $82m, or 3 percent due to four less working days than the prior year period, partially offset by higher volume on land systems and infrared countermeasures programs.
2021 sales increased $54m, or 1 percent, due to higher volume across the sector, partially offset by a $485m reduction in sales related to the IT services divestiture. 2021 organic sales increased $539m, or 6 percent. Maritime/Land Systems and Sensors sales increased primarily due to $137 m higher volume on G/ATOR and higher marine systems volume.
Airborne Multifunction Sensors sales increased principally due to $105m higher volume on airborne radar programs, including SABR, and higher restricted sales, partially offset by lower volume on airborne electronic warfare programs. Navigation, Targeting and Survivability sales increased principally due to $124m higher intercompany volume largely related to GBSD ramp-up. Networked Information Solutions sales increased principally due to higher volume on electronic warfare programs, including JCREW, and higher intercompany volume, partially offset by lower volume on F-35 CNI programs. Operating Income Fourth quarter 2021 operating income increased $13m, or 3 percent, due to a higher operating margin rate, partially offset by lower sales volume. Operating margin rate increased to 15.9 percent from 14.2 percent principally due to higher net favorable EAC adjustments and changes in contract mix toward more fixed-price content, largely as a result of the IT services divestiture. 2021 operating income increased $120m, or 8 percent, due to a higher operating margin rate and higher sales. Operating margin rate increased to 15.6 percent from 14.5 percent due to higher net favorable EAC adjustments, which reflect improved performance and the first quarter 2021 reduction in overhead rates, the favorable resolution of certain government accounting matters in the second quarter of 2021 and mix changes largely related to the IT services divestiture.
SPACE SYSTEMS
Three Months Ended December 31
Sales
Fourth quarter 2021 sales increased $108m, or 4 percent, primarily due to higher sales in both the Launch & Strategic Missiles and Space business areas, which more than offset four fewer working days than the prior year period and a $47 m reduction in sales related to the IT services divestiture. Fourth quarter 2021 organic sales1 increased $155m, or 6 percent. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, including a $200 m increase on GBSD and a $98 m increase on the Next Generation Interceptor (NGI) program, partially offset by a decrease in sales on Commercial Resupply Services (CRS) launch vehicles due to follow-on award timing. Space sales reflect higher volume on restricted programs, partially offset by a decrease in sales on CRS Cygnus spacecraft, due to follow-on award timing, and communication satellite programs.
Northrop Grumman Reports2021 sales increased $1.9bn, or 21 percent, due to higher sales in both the Launch & Strategic Missiles and Space business areas, partially offset by a $166m reduction in sales related to the IT services divestiture. 2021 organic sales increased $2.0bn, or 24 percent. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, including a $1.1bn increase on GBSD and a $206 m increase on NGI.
Space sales were driven by higher volume on restricted programs and increases of $192 m on Artemis and $140 m on Next Gen OPIR. Operating Income Fourth quarter 2021 operating income was consistent with the prior year period. Operating margin rate decreased to 9.6 percent from 10.1 percent, principally due to a shift in contract mix toward development programs, such as GBSD and NGI. 2021 operating income increased $228m, or 26 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 10.6 percent from 10.2 percent primarily due to higher net favorable EAC adjustments, which were largely driven by improved performance on commercial space programs and the first quarter 2021 reduction in overhead rates.
Raytheon Technologies
25 Jan 22. Raytheon Technologies Reports 2021 Results, Announces 2022 Outlook.
Expects continued sales, earnings and free cash flow growth in 2022.
Raytheon Technologies Corporation (NYSE: RTX) reported fourth quarter 2021 results and announced its 2022 outlook.
Raytheon sales forecast disappoints as profit beats estimates.
Raytheon Technologies Corp (RTX.N) on Tuesday forecast full-year sales below Wall Street estimates, even as demand for the company’s aerospace products and services benefited from a surge in air travel during the holiday season.
Raytheon forecast full-year sales for 2022 to be in the range of $68.5bn to $69.5bn, below the average Refinitiv-IBES estimate of $70.09bn.
Its shares were down about 2% in morning trading in New York
Raytheon reported adjusted quarterly profit that beat market estimates. Sales fell 10% in its key missile and defense business, where demand remained strong but higher prices, labor shortages and supply chain constraints reduced its ability to make deliveries.
The U.S. government’s decision ahead of the holidays to open its borders to vaccinated individuals from abroad helped the wide-body aerojet aftermarket recover, driving demand for Raytheon’s aircraft cabin interiors and engines.
“We’re expecting continued commercial aero recovery, particularly on the backs of the international border reopenings and widebody aircraft returning to the air,” Raytheon Chief Financial Officer Neil Mitchill told Reuters in an interview.
Easing coronavirus restrictions also translated into higher demand for Raytheon’s Collins Aerospace systems as well as its space and missile units, even as manufacturers across various sectors were hit by pandemic-induced logistical problems.
Raytheon, whose Pratt and Whitney unit supplies aircraft engines to companies like Boeing Co (BA.N) and Airbus SE (AIR.PA), said fourth-quarter revenue rose to $17.04bn from $16.42bn a year earlier.
Raytheon’s missile business was given a boost when competitor Lockheed Martin (LMT.N) disclosed the Federal Trade Commission’s opposition to its planned purchase of rocket motor maker Aerojet Rocketdyne. read more Raytheon has been a vocal opponent of the deal.
Aerojet develops and manufactures liquid and solid rocket propulsion, air-breathing hypersonic engines, and electric power and propulsion for space, defense, civil and commercial applications. Its customers include the Pentagon, NASA, Boeing, Lockheed Martin, Raytheon Technologies, and the United Launch Alliance.
Raytheon’s net income rose five-fold to $686m, or 46 cents per share, in the fourth quarter ended Dec. 31 from a year earlier.
On an adjusted basis, Raytheon posted a profit of $1.08 per share, beating analysts’ average estimate of $1.02. (Source: Reuters)
Fourth quarter 2021
* Sales of $17.0bn
* GAAP EPS from continuing operations of $0.46, which included $0.62 of acquisition accounting adjustments and net significant and/or non-recurring charges
* Adjusted EPS of $1.08
* Operating cash flow from continuing operations of $3.2 bn; Free cash flow of $2.2bn
* Completed the acquisitions of FlightAware and SEAKR Engineering, and the disposition of RIS’ Global Training and Services business
* Achieved approximately $190 m of incremental RTX gross cost synergies
* Company backlog of $156 bn; including defense backlog of $63bn
* Repurchased $327m of RTX shares
Full year 2021
* Sales of $64.4bn
* GAAP EPS of $2.58
* Adjusted EPS of $4.27
* Operating cash flow from continuing operations of $7.1bn; Free cash flow of $5.0bn
* Achieved approximately $760 m of incremental RTX gross cost synergies
* Repurchased $2.3bn of RTX shares
Outlook for full year 2022
* Sales of $68.5 – $69.5bn
* Adjusted EPS of $4.60 – $4.80
* Free cash flow of approximately $6.0bn. Assumes the legislation requiring R&D capitalization for tax purposes is deferred beyond 2022.
* Share repurchase of at least $2.5 bn of RTX shares
“We closed the year on a strong note with full year adjusted EPS and free cash flow significantly exceeding the outlook we set a year ago,” said Raytheon Technologies Chairman and CEO Greg Hayes. “We also exceeded our cost synergy target for the year, delivered margin expansion across our businesses and returned $5.3 bn of capital to shareowners including the repurchase of $2.3 bn of RTX shares, demonstrating strong execution against our strategy and operational initiatives in 2021.”
“Raytheon Technologies is entering 2022 with continued momentum and resilience. The long-term outlook for our commercial aerospace and defense markets remains strong. Our focused A&D portfolio and intense focus on program execution position us well to deliver sales, earnings and free cash flow growth, as well as margin expansion across all businesses in 2022.”
Fourth Quarter 2021
Raytheon Technologies reported fourth quarter sales of $17.0bn. GAAP EPS from continuing operations was $0.46 and included $0.62 of acquisition accounting adjustments and net significant and/or non-recurring charges. This includes $0.15 of net divestiture activity related to the disposition of Raytheon Intelligence & Space’s Global Training and Services business, that was offset by $0.33 of debt extinguishment costs, $0.30 of acquisition accounting adjustments primarily related to intangible amortization, $0.11 of accruals related to previously disclosed legal matters, $0.02 of restructuring and $0.01 of other items. Adjusted EPS was $1.08.
The company recorded net income from continuing operations in the fourth quarter of $685 m, which included $929 m of acquisition accounting adjustments and net significant and/or nonrecurring charges. Adjusted net income was $1.6 bn. Operating cash flow from continuing operations in the fourth quarter was $3.2 bn. Capital expenditures were $1.0 bn, resulting in free cash flow of $2.2bn.
Full Year 2021
Raytheon Technologies reported full year sales of $64.4bn. GAAP EPS from continuing operations was $2.58 and included $1.69 of acquisition accounting adjustments and net significant and/or non-recurring charges. Adjusted EPS was $4.27.
The company recorded net income from continuing operations for the year of $3.9bn, which included $2.5bn of acquisition accounting adjustments and net significant and/or nonrecurring charges. Adjusted net income was $6.4bn. Operating cash flow from continuing operations for the year was $7.1bn. Capital expenditures were $2.1 bn, resulting in full year free cash flow of $5.0bn.
Backlog and Bookings
Backlog at the end of the fourth quarter was $156bn, of which $93 bn was from commercial aerospace and $63bn was from defense.
Notable defense bookings during the quarter included:
* $1.3bn of classified bookings at Raytheon Intelligence & Space (RIS)
* $729m for two Standard Missile-2 (SM-2) production contracts for the U.S. Navy and international customers at Raytheon Missiles & Defense (RMD)
* $672m of Electro-Optical Infrared (EO/IR) products and services contracts, including the Electro-Optical Distributed Aperture System (EODAS) for the F-35 at RIS
* $592m for an F135 sustainment contract at Pratt & Whitney
* $435m for an F119 sustainment contract at Pratt & Whitney
* $269m for Evolved Seasparrow Missile (ESSM) for the U.S. Navy and international customers at RMD
* $255m for F-135 production contracts at Pratt & Whitney
* $227m for the Next Generation Jammer (NGJ) Mid-Band for the U.S. Navy at RIS
Segment Results
The company’s reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).
Collins Aerospace had fourth quarter 2021 adjusted sales of $4,942m, up 13 percent versus the prior year. The increase in sales was driven by a 47 percent increase in commercial aftermarket and a 4 percent increase in commercial OE, which more than offset a 3 percent decline in military. The increase in commercial sales was driven primarily by the recovery of commercial air traffic which has resulted in higher flight hours, aircraft fleet utilization and narrowbody OE volume, which was partially offset by lower 787 OE and F-35 volume.
Collins Aerospace recorded adjusted operating profit of $469m in the quarter, up 427 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket volume that was partially offset by higher E&D and SG&A expense.
Pratt & Whitney had fourth quarter 2021 adjusted sales of $5,115m, up 14 percent versus the prior year. The increase in sales was driven by a 32 percent increase in commercial OE and a 28 percent increase in commercial aftermarket, which more than offset a 6 percent decrease in military. The increase in commercial sales was primarily due to higher shop visits and related spare part sales and commercial engine deliveries principally driven by the recovery in commercial air traffic. The decrease in military sales was driven by lower spares sales on legacy programs.
Pratt & Whitney recorded adjusted operating profit of $162m in the quarter, up 54 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume, that was offset by higher SG&A and E&D expense and lower military volume on legacy programs.
Raytheon Intelligence &Space
RIS had fourth quarter 2021 adjusted sales of $3,870 m, down 2 percent versus the prior year. The decrease in sales was primarily driven by fewer workdays in the quarter as well as the divestiture of the Global Training and Services business at the beginning of December. Excluding the impact of acquisitions and divestitures, sales were down 1 percent.
RIS recorded adjusted operating profit of $400 m, up 11 percent versus the prior year. The increase in adjusted operating profit was primarily driven by productivity across various programs.
Raytheon Missiles & Defense
RMD had fourth quarter 2021 adjusted sales of $3,859m, down 10 percent versus prior year. The decrease in sales was primarily driven by four fewer workdays in the quarter as well as lower material receipts and expected declines on several international production contracts.
RMD recorded adjusted operating profit of $486m, down 16 percent versus the prior year. The decrease in adjusted operating profit was driven by lower net program efficiencies and lower sales volume. (Source: PR Newswire)
Textron
27 Jan 22. Textron sees higher corporate jet production, shares drop on 2022 guidance. Textron Inc (TXT.N) expects to continue ramping up business jet production in 2022 on demand from wealthy travelers, but broader industry supply-chain hiccups, labor shortages and recent surges in COVID-19 cases remain challenges.
Textron shares slipped 6% in afternoon trading, after the U.S. maker of Cessna business jets disappointed investors with some of its 2022 guidance.
Cautious passengers avoiding commercial flights during the pandemic have helped drive U.S. private air traffic above 2019 levels.
Business jet makers, eager to capitalize on that demand, are working with suppliers to mitigate the impact of global shipping and supply chain disruptions, along with the spread of the highly contagious Omicron variant.
“We have been ramping up the production rate. We continue to do that and expect to continue to do that throughout the course of 2022,” Textron Chief Executive Scott Donnelly told analysts on Thursday.
But Donnelly said Textron would be cautious with any increases and not “want to do something stupid and try to go radically accelerate production rates and then burn down backlog.”
Textron’s Donnelly said supplier issues have not slowed production rates or 2022 deliveries. A temporary spike in Omicron cases at the turn of the year, however, had some impact on operations.
Textron, which also produces helicopters, reported a fourth-quarter revenue miss, with its aviation division delivering 46 jets in the quarter, down from 61 a year earlier.
It delivered 167 jets in 2021, up from 132 in 2020, and reported an aviation backlog of $4.1bn at year end.
The company expects revenue of about $13.3bn for 2022, compared to analysts’ estimates of $13.56bn, according to Refinitiv IBES data.
Textron expects 2022 earnings per share between $3.80 and $4.00. The company reported revenue of $3.32bn in the three months ended Dec. 31, below analysts’ estimate of $3.44bn. (Source: Reuters)
Textron Inc. (NYSE: TXT) today reported fourth quarter 2021 income from continuing operations of $0.93 per share. Adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $0.94 per share for the fourth quarter of 2021, compared to $1.06 per share in the fourth quarter of 2020.
Full year 2021 income from continuing operations was $3.30 per share. Full year 2021 adjusted income from continuing operations, a non-GAAP measure, was also $3.30 per share, up from $2.07 in 2020.
“2021 was a solid year for Textron with strong order flow and execution at Aviation, continued progress on Future Vertical Lift programs at Bell, strong execution and margin performance at Systems, and higher revenues and operating profit at Industrial,” said Textron Chairman and CEO Scott C. Donnelly.
Cash Flow
Net cash provided by operating activities of continuing operations of the manufacturing group for the full year was $1.5bn. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $1.1 bn for the full year, up from $596m in 2020.
In the quarter, Textron returned $335m to shareholders through share repurchases. Full year 2021 share repurchases totaled $921m.
Share Repurchase Plan
On January 25, 2022, Textron’s Board of Directors approved a new authorization for the repurchase of up to 25m shares, under which the company intends to purchase shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes.
Outlook
Textron is forecasting 2022 revenues of approximately $13.3bn, up from $12.4bn. Textron expects full-year 2022 earnings per share will be in the range of $3.80 to $4.00.
The company is estimating net cash provided by operating activities of continuing operations of the manufacturing group will be between $1.1bn and $1.2bn and manufacturing cash flow before pension contributions, a non-GAAP measure, will be between $700m and $800m, with planned pension contributions of about $50m.
“Our outlook reflects continued momentum in our commercial businesses and ongoing investment in new products to increase long-term shareholder value,” Donnelly concludes.
Fourth Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation of $1.4bn were down $201 m from the fourth quarter of 2020, largely due to lower aircraft volume, partially offset by higher aftermarket volume.
Textron Aviation delivered 46 jets in the quarter, down from 61 last year, and 43 commercial turboprops, down from 61 last year.
Segment profit was $137m in the fourth quarter, up $29m from a year ago, largely due to favorable pricing, net of inflation, of $21 m and improved manufacturing performance.
Textron Aviation backlog at the end of the fourth quarter was $4.1bn.
Bell
Bell revenues were $858m, down $13m from last year, reflecting lower military revenues partially offset by higher commercial revenues.
Bell delivered 59 commercial helicopters in the quarter, up from 57 last year.
Segment profit of $88 m was down $22m, primarily due to lower military volume and mix.
Bell backlog at the end of the fourth quarter was $3.9bn.
Textron Systems
Revenues at Textron Systems were $313m, down $44m from last year’s fourth quarter due to lower volume, which included the impact from the U.S. Army’s withdrawal from Afghanistan on the segment’s fee-for-service contracts.
Segment profit of $45m was down $4m from a year ago, largely due to the lower volume.
Textron Systems’ backlog at the end of the fourth quarter was $2.1bn.
Industrial
Industrial revenues were $781m, down $85 m from last year, reflecting lower volume and mix of $133 m, largely in the Fuel Systems and Functional Components product line reflecting order disruptions related to the global auto OEM supply chain shortages, partially offset by a favorable impact of $50m from pricing, largely in the Specialized Vehicles product line.
Segment profit of $38m was down $17m from the fourth quarter of 2020, primarily due to the lower volume and mix, partially offset by a favorable impact from performance of $15m.
Finance
Finance segment revenues were $11m, and profit was $2m.