Northrop Grumman Reports Fourth Quarter and 2008 Results
- Q4 Sales Increase 4 Percent to Record
- Record
- Q4 Cash from Operations Increases to
- Q4 Free Cash Flow Increases to
- Q4 and 2008 Loss from Continuing Operations of
- Excluding Goodwill Impairment Charge, Q4 Earnings per Share from
Continuing Operations Increases 19 Percent to
Fourth quarter 2008 sales increased 4 percent to
"Our underlying fourth quarter operating results were outstanding and
represent a strong finish to the year. We begin 2009 with a
"Looking ahead, we continue to position our organization to be more agile and competitive. Our priorities are flawless execution for our customers and superior returns for our shareholders through the generation of outstanding cash flow and solid growth in pension-adjusted earnings," Sugar concluded.
Fourth quarter 2008 adjusted earnings from continuing operations increased
15 percent to
Operating Highlights
($ in
millions
except per Fourth Quarter Total Year
share ---- ---- ---- ----
amounts) 2008 2007 2008 2007
---- ---- ---- ----
Sales $9,154 $8,765 $33,887 $31,828
Operating
income (loss) (2,152) 759 (111) 3,018
as % of
sales NM 8.7% NM 9.5%
Earnings
(loss) from
continuing
operations $(2,536) $457 $(1,281) $1,811
Diluted EPS
from
continuing
operations (7.76) 1.32 (3.83) 5.18
Average
shares
outstanding(1),
in millions 326.9 351.1 334.5 354.3
Cash from
operations $1,037 $734 $3,211 $2,890
Free cash
flow(2) 790 435 2,420 2,071
Operating Highlights - Adjusted for Goodwill Impairment
($ in
millions
except per Fourth Quarter Total Year
share ---- ---- ---- ----
amounts) 2008 2007 2008 2007
---- ---- ---- ----
Sales $9,154 $8,765 $33,887 $31,828
Operating
income (loss) (2,152) 759 (111) 3,018
Goodwill
impairment
charge 3,060 3,060
----- --- ----- -----
Adjusted
operating
income(3) 908 759 2,949 3,018
as a % of
sales 9.9% 8.7% 8.7% 9.5%
Earnings
(loss) from
continuing
operations $(2,536) $457 $(1,281) $1,811
Goodwill
impairment
charge 3,060 3,060
----- --- ----- -----
Adjusted
earnings from
continuing
operations(3) 524 457 1,779 1,811
Adjusted
diluted EPS
from
continuing
operations(4) 1.57 1.32 5.21 5.18
Average
shares
outstanding(1),
in millions 333.6 351.1 341.6 354.3
(1) See Schedules 7 and 8 for reconciliation of average diluted share
amounts.
(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.
(3) Adjusted operating income is a non-GAAP measure defined as operating
income (loss) before the $3.060 billion 2008 goodwill impairment
charge. Adjusted earnings from continuing operations is a non-GAAP
measure defined as earnings (loss) from continuing operations before
the $3.060 billion goodwill impairment charge. Both measures have
been provided for consistency and comparability of the 2008 results
with results of operations from prior periods.
(4) Adjusted diluted EPS from continuing operations is a non-GAAP measure
defined as diluted EPS from continuing operations before the per share
2008 goodwill impairment charge impact. Adjusted diluted EPS from
continuing operations has been provided for consistency and
comparability of the 2008 results with results of operations from
prior periods and is reconciled in Schedule 7.
Adjusted Fourth Quarter and 2008 Financial Results
Fourth quarter adjusted operating income increased 20 percent to $908
million from $759 million , and as a percent of sales increased 120 basis
points to 9.9 percent from 8.7 percent primarily due to higher segment
operating income and lower net pension adjustment and lower unallocated
expenses. Before the goodwill impairment charge, the four businesses combined
to generate a $96 million , or 12 percent, increase in segment operating
income. As a percent of sales, operating performance improved 70 basis points
to 9.9 percent from 9.2 percent. Net pension adjustment improved by $36
million and unallocated expenses improved by $12 million .
For 2008, adjusted operating income declined to $2.9 billion from $3.0
billion , and as a percent of sales totaled 8.7 percent compared with 9.5
percent. The decline reflects lower Shipbuilding margin driven by the net
impact of the LHD-8 related Shipbuilding charge during the year, largely
offset by higher operating income for Aerospace and Electronics, and lower net
pension adjustment and lower unallocated expense. Net pension adjustment and
unallocated expenses improved by $136 million and $47 million , respectively.
Fourth quarter 2008 other expense totaled $34 million compared with other
income of $21 million . The decline in other income reflects negative
mark-to-market adjustments on investments in marketable securities used as a
funding source for non-qualified employee benefits. For 2008, other income
increased $22 million , to $38 million , primarily due to $59 million in patent
infringement settlements at Electronics in 2008, partially offset by the
fourth quarter mark-to-market adjustments on investments.
Federal and foreign income taxes for the 2008 fourth quarter totaled $278
million compared with $243 million in the fourth quarter of 2007. The
effective tax rate applied to adjusted earnings from continuing operations for
the 2008 fourth quarter was 34.7 percent, unchanged from the effective tax
rate for the 2007 fourth quarter. For 2008 federal and foreign income taxes
totaled $913 million compared with $887 million for 2007. The effective tax
rate applied to 2008 adjusted earnings from continuing operations was 33.9
percent compared with 32.9 percent in 2007.
The company's net loss for the fourth quarter and 2008 totaled $2.5
billion and $1.3 billion respectively. Fourth quarter adjusted net earnings
totaled $527 million or $1.58 per diluted share, compared with net earnings of
$454 million , $1.31 per diluted share, for the same period of 2007. Adjusted
earnings per share are based on weighted average diluted shares outstanding of
333.6 million for the fourth quarter of 2008 and 351.1 million for the fourth
quarter of 2007.
For 2008, adjusted net earnings were comparable to the prior year period
at $1.8 billion , and on a per share basis increased 3 percent to $5.26 per
diluted share from $5.12 per diluted share. Adjusted earnings per share are
based on weighted average diluted shares outstanding of 341.6 million for 2008
and 354.3 million for 2007. Weighted average shares outstanding for 2008
include 1 million shares for the dilutive effects of the company's Series B
mandatorily redeemable preferred stock. Weighted average shares outstanding
for 2007 include 6.4 million shares for the dilutive effects of the company's
Series B mandatorily redeemable preferred stock. These shares were redeemed
or converted to common shares on or before April 4, 2008 .
Record Backlog and New Business Awards
Total backlog, which includes funded backlog and firm orders for which
funding is not currently contractually obligated by the customer, was $78
billion on Dec. 31, 2008 , compared with $63.7 billion on Dec. 31, 2007 . The
Shipbuilding, Space Technology, Integrated Systems and Electronics segments
ended 2008 with substantially higher backlogs. New business awards for 2008
totaled $48.3 billion and included nearly $15 billion for Shipbuilding
programs as well as substantial restricted awards. In addition, in the fourth
quarter the company reduced total backlog by $1.5 billion to reflect the
termination of the U.S. Air Force aerial refueling tanker program.
2009 Guidance
Sales ~$34.5B
Segment operating margin %(1) low to mid 9%
Operating margin % mid 7%
Pension-adjusted operating margin
%(2) mid 8%
Diluted EPS from continuing
operations $4.50 - 4.75
Pension-adjusted diluted EPS from
continuing operations(3) $5.15 - 5.40
Cash from operations(4) $2.7B - 3.2B
Free cash flow(4) $1.9B - 2.4B
(1) Segment operating margin % is a non-GAAP measure defined as operating
income before unallocated expenses, net pension adjustment and
reversal of royalty income, divided by sales. Management uses segment
operating margin % as an internal measure of financial performance.
(2) Pension-adjusted operating margin % is a non-GAAP measure defined as
operating income before net pension adjustment. Net pension adjustment
is a non-GAAP measure defined as pension expense determined in
accordance with GAAP less pension expense allocated to the business
segments under U.S. Government Cost Accounting Standards. Management
uses pension-adjusted operating margin % as an internal measure of the
financial performance of the company.
(3) Pension-adjusted diluted EPS from continuing operations is a non-GAAP
measure defined as diluted EPS from continuing operations available to
common shareholders excluding net pension adjustment, after-tax.
Management uses pension-adjusted EPS as a performance metric for
operating results.
(4) Before discretionary pre-funding of pension funds.
Guidance for 2009 includes the GAAP measures of sales, operating margin,
diluted earnings per share from continuing operations, and cash from
operations. In addition the company provides guidance for the non-GAAP
measures of segment operating margin percent, pension-adjusted operating
margin percent, pension-adjusted diluted earnings per share from continuing
operations, and free cash flow. Management uses these non-GAAP measures as
internal measures of performance and believes they provide valuable
information regarding the consolidated performance of the company's
businesses.
Pension Update
Due to adverse capital market conditions the company's pension plan assets
experienced a negative return of approximately 16 percent in 2008 compared
with a long-term estimated rate of return of 8.5 percent. As a result of plan
returns, the company estimates that its 2009 net pension adjustment will be a
pre-tax expense of approximately $335 million (approximately $0.65 on a per
share diluted basis), compared with income of $263 million for 2008 net
pension adjustment. The 2009 estimate is based on a 6.25 percent discount
rate and a long-term rate of return of 8.5 percent.
Goodwill Impairment Charge
Northrop Grumman reported fourth quarter and 2008 operating losses due to
a non-cash, after-tax charge of $3.1 billion for impairment of goodwill.
Testing of goodwill as of Nov. 30, 2008 , using discounted cash flow analysis
supported by comparative market multiples to determine the fair values,
indicated that the book values of Shipbuilding and Space Technology were
impaired. To reflect the goodwill impairment, operating income for
Shipbuilding was reduced by $2.5 billion and operating income for Space
Technology was reduced by $570 million .
The goodwill impairment charges for these businesses are primarily driven
by adverse equity market conditions that caused a decrease in current market
multiples and the company's stock price as of Nov. 30, 2008 . The charge
reduces goodwill recorded in connection with acquisitions made in 2001 and
2002 and does not impact the company's normal business operations.
Cash Flow Highlights
Fourth Quarter Total Year
-------------- ----------
($ in millions) 2008 2007 Change 2008 2007 Change
---- ---- ------ ---- ---- ------
Cash from
operations $1,037 $734 $303 $3,211 $2,890 $321
Less:
Capital expenditures 237 251 14 681 682 1
Outsourcing
contract & related
software costs 10 48 38 110 137 27
-- -- -- --- --- --
Free cash flow $790 $435 $355 $2,420 $2,071 $349
Cash provided by operations for both fourth quarter and total year
improved by $303 million and $321 million , respectively, primarily due to
strong fourth quarter cash collections that resulted in improved working
capital. Fourth quarter and full year cash from operations were reduced by
discretionary pension pre-funding of $200 million in 2008 and 2007.
Cash, Debt and Capital Deployment
($ in millions) 12/31/2008 12/31/2007
--------------- ---------- ----------
Cash & cash equivalents $1,504 $963
Total debt 3,944 4,055
Net debt(1) 2,440 3,092
Mandatorily redeemable preferred stock - 350
Net debt to total capital ratio(2) 15% 14%
(1) Total debt less cash and cash equivalents. (2) Net debt divided by the
sum of shareholders' equity and total debt.
Changes in cash and cash equivalents and total debt reflect the following
cash deployment and financing actions during 2008:
-
$1.6 billion for share repurchases -
$681 million capital expenditures and$110 million for outsourcing contract and related software costs -
$525 million dividends paid -
$113 million principal payments of long-term debt -
$175 million proceeds from the sale ofElectro-Optical Systems -
$92 million payments for purchases of businesses -
$103 million proceeds from exercises of stock options and issuance of common stock li>
Segment Operating Results
Beginning with 2008 second quarter results, the company transferred
certain missile systems programs from Mission Systems to Space Technology.
Schedule 6 provides previously reported quarterly financial results and the
adjustments for first and second quarter 2008 realignments and the second
quarter 2008 sale of
Consolidated Sales &
Segment Operating
Income (Loss)
($ in millions except Fourth Total
per share amounts) Quarter Year
------- ------
2008 2007 Change 2008 2007 Change
---- ---- ------ ---- ---- ------
Sales
Information &
Services $3,282 $3,112 5% $12,454 $11,740 6%
Aerospace 2,578 2,424 6% 9,840 9,243 6%
Electronics 2,046 1,795 14% 7,090 6,528 9%
Shipbuilding 1,742 1,804 (3%) 6,145 5,788 6%
Intersegment
eliminations (494) (370) (1,642) (1,471)
---- ---- - ------ ------ -
$9,154 $8,765 4% $33,887 $31,828 6%
Segment
operating
income
(loss)(1)
Information &
Services $244 $251 (3%) $934 $957 (2%)
Aerospace (305) 224 NM 417 920 (55%)
Electronics 277 221 25% 952 813 17%
Shipbuilding (2,333) 142 NM (2,307) 538 NM
Intersegment
eliminations (38) (29) (141) (113)
--- --- - ---- ---- -
Segment
operating
income (loss) $(2,155) $809 - $(145) $3,115 -
as a % of
sales NM 9.2% NM NM 9.8% NM
Reconciliation
to operating
income (loss):
Unallocated
expenses $(64) $(76) $(159) $(206)
Net pension
adjustment 71 35 263 127
Reversal
of royalty
income
included
above (4) (9) (70) (18)
-- -- -- --- --- --
Total operating
income (loss) $(2,152) $759 NM $(111) $3,018 NM
as a % of
sales NM 8.7% NM 9.5%
Net interest
expense $(72) $(80) $(295) $(336)
Other
income
(expense) (34) 21 38 16
--- -- -- --
Earnings
(Loss) from
continuing
operations
before taxes (2,258) 700 (368) 2,698
Federal and
foreign
income taxes (278) (243) (913) (887)
---- ---- ---- ----
Earnings (Loss)
from continuing
operations $(2,536) $457 NM $(1,281) $1,811 NM
(1) Segment operating income is a non-GAAP measure defined as operating
income before unallocated expenses, net pension adjustment and
reversal of royalty income and is reconciled above. Management uses
segment operating income as an internal measure of financial
performance.
Segment Operating Results Adjusted for Goodwill Impairment
Fourth quarter and 2008 operating income for Shipbuilding and Aerospace were dramatically reduced by the goodwill impairment charges recorded in the fourth quarter. Segment operating income and its trends adjusted for the goodwill impairment impacts are detailed below.
Consolidated
Adjusted Segment
Operating Income
($ in millions
except per Fourth Total
share amounts) Quarter Year
-------- ------
2008 2007 Change 2008 2007 Change
---- ---- ------ ---- ---- ------
Information &
Services $244 $251 (3%) $934 $957 (2%)
Aerospace 265 224 18% 987 920 7%
Electronics 277 221 25% 952 813 17%
Shipbuilding 157 142 11% 183 538 (66%)
Intersegment
eliminations (38) (29) (141) (113)
--- --- -- ---- ---- --
Adjusted
segment
operating
income(1) $905 $809 12% $2,915 $3,115 (6%)
as a % of
sales 9.9% 9.2% 70 bps 8.6% 9.8% (120 bps)
(1) Adjusted segment operating income is a non-GAAP measure defined as
operating income before goodwill impairment charge, unallocated
expenses, net pension adjustment and reversal of royalty income.
Adjusted segment operating income has been provided for consistency
and comparability of the 2008 results with results of operations from
prior periods and is reconciled above. Reconciliations of Aerospace
and Shipbuilding adjusted operating income to operating income are
provided in tables presented later in this release.
Information & Services
Fourth Quarter ($ in millions)
2008 2007
Operating % Operating %
Sales Income of Sales Sales Income of Sales
Mission Systems $1,537 $119 7.7% $1,381 $138 10.0%
Information
Technology 1,133 97 8.6% 1,198 81 6.8%
Technical Services 612 28 4.6% 533 32 6.0%
$3,282 $244 7.4% $3,112 $251 8.1%
Total Year ($ in millions)
Mission Systems $5,640 $508 9.0% $5,077 $508 10.0%
Information
Technology 4,518 305 6.8% 4,486 329 7.3%
Technical Services 2,296 121 5.3% 2,177 120 5.5%
$12,454 $934 7.5% $11,740 $957 8.2%
Mission Systems fourth quarter and 2008 sales increased 11 percent. Higher sales for both the fourth quarter and 2008 are due to higher volume for intelligence, surveillance & reconnaissance programs and command, control & communication programs. Fourth quarter operating income declined 14 percent and 230 basis points as a percent of sales. For the fourth quarter, operating income from higher sales was offset by final allocation of current and prior year overhead items and higher planned internal investment for a new business opportunity. For 2008, operating income was unchanged from the prior year period and as a percent of sales declined to 9 percent from 10 percent, reflecting lower performance for command, control & communications programs, including higher planned internal investment, and final allocations described above.
Information Technology fourth quarter sales declined 5 percent and include higher volume for intelligence programs, which was offset by lower sales volume for commercial, state & local, defense, and civilian agencies programs. Sales for 2008 were comparable to the prior year period and include higher volume for intelligence, defense and civilian agencies programs offset by lower volume for commercial, state & local programs.
Information Technology fourth quarter 2008 operating income increased 20
percent, and as a percent of sales improved to 8.6 percent from 6.8 percent.
The improvement in rate is due to final allocation of current and prior year
overhead items and improved performance for several defense programs,
including NETCENTS. For 2008, operating income declined 7 percent, and as a
percent of sales declined to 6.8 percent from 7.3 percent. The declines in
2008 operating income and margin rate are principally due to performance on
commercial, state & local programs, including a
Technical Services fourth quarter sales rose 15 percent, and 2008 sales rose 5 percent. Sales increases for both periods include higher volume for life cycle optimization and engineering programs and training and simulation programs.
Technical Services fourth quarter operating income declined by
Aerospace
Fourth Quarter ($ in millions)
2008
Operating 2007
Income % Operating %
Sales (Loss) of Sales Sales Income of Sales
Integrated
Systems $1,461 $156 10.7% $1,306 $137 10.5%
Space Technology 1,117 (461) NM 1,118 87 7.8%
Goodwill
Impairment 570
--- --- ---- ----
Adjusted 1,117 109 9.8% 1,118 87 7.8%
Aerospace
Adjusted $2,578 $265 10.3% $2,424 $224 9.2%
Total Year ($in millions)
Integrated
Systems $5,504 $613 11.1% $5,067 $591 11.7%
Space Technology 4,336 (196) NM 4,176 329 7.9%
Goodwill
Impairment 570
--- --- ---- ----
Adjusted 4,336 374 8.6% 4,176 329 7.9%
Aerospace
adjusted $9,840 $987 10.0% $9,243 $920 10.0%
Aerospace fourth quarter 2008 sales increased 6 percent, and include
higher volume for
Fourth quarter and 2008 operating income for Aerospace includes a goodwill
impairment charge of
Space Technology fourth quarter sales were comparable to the prior year period, and 2008 sales increased 4 percent. Higher 2008 sales are primarily attributable to higher volume for restricted and civil systems programs, which more than offset lower volume in the military systems programs, primarily the Advanced Extremely High Frequency program.
Fourth quarter and 2008 operating income for Space Technology includes a
goodwill impairment charge of
Electronics
($ in millions)
2008 2007
Operating % of Operating % of
Sales Income Sales Sales Income Sales
Fourth Quarter $2,046 $277 13.5% $1,795 $221 12.3%
Total Year $7,090 $952 13.4% $6,528 $813 12.5%
Electronics fourth quarter 2008 sales increased 14 percent. The fourth quarter sales improvement was primarily driven by increased deliveries for restricted programs, infrared countermeasures programs and commercial marine products, as well as higher volume for the COBRA Judy, Multi-role Electronically Scanned Array (MESA) Korea, and EA-18 programs. Sales for 2008 increased 9 percent primarily due to higher deliveries of electronics for the F-16 international radar kit programs and the Large Aircraft Infrared Countermeasures (LAIRCM) program, as well as higher volume for the MESA Korea, VIS, Ground / Air Task Oriented Radar (G/ATOR) and inertial navigation programs.
Electronics fourth quarter 2008 operating income increased 25 percent, and
as a percent of sales, increased to 13.5 percent from 12.3 percent. The
fourth quarter increases in operating income and margin rate are primarily
attributable to higher sales volume and improved performance. In addition,
fourth quarter 2007 operating income was reduced by an
Shipbuilding
Fourth Quarter ($ in millions)
2008
Operating 2007
Income % Operating %
Sales (Loss) of Sales Sales Income of Sales
Shipbuilding $1,742 ($2,333) NM $1,804 $142 7.9%
Goodwill Impairment $2,490
---- ---- ---- ---
Shipbuilding adjusted $1,742 $157 9.0% $1,804 $142 7.9%
Total Year ($ millions)
Shipbuilding $6,145 ($2,307) NM $5,788 $538 9.3%
Goodwill
Impairment $2,490
---- ---- ---- ----
Shipbuilding adjusted $6,145 $183 3.0% $5,788 $538 9.3%
Shipbuilding fourth quarter 2008 sales declined 3 percent. The decrease in fourth quarter reflects lower volume for the LPD and U.S. Coast Guard National Security Cutter program as well as lower service sales. Sales for 2008 increased 6 percent primarily due to higher volume for aircraft carrier programs, including the Gerald R. Ford (CVN 78) and the USS Enterprise programs, and the addition of AMSEC.
Fourth quarter and 2008 operating income for Shipbuilding includes a
goodwill impairment charge of
For 2008, adjusted operating income declined by 66 percent due to a
Fourth Quarter Highlights
- The U.S. Navy awarded a contract for the construction of eight
Virginia -class submarines, andNorthrop Grumman received a$5.6 billion subcontract from the prime contractor. The multi-year contract allows the team to proceed with the construction of one ship per year in 2009 and 2010, and two ships per year from 2011 through 2013. The eighth ship to be procured under this contract is scheduled for delivery in 2019. -
The U.S. Department of Energy/National Nuclear Security Agency awarded theNorthrop Grumman -led joint ventureNational Security Technologies, LLC a one-year, cost-reimbursement type contract extension valued at approximately$450 million to manage and operate the Nevada Test Site through 2012. - The U.S. Army awarded
Northrop Grumman a$128 million firm fixed-priced contract to provide Lightweight Laser Designator Rangefinder systems, which provide battle-proven targeting capability for laser-guided, GPS-guided and conventional munitions. - The U.S. Army awarded
Northrop Grumman a$97 million contract to procure, modify and deliver 12 Hunter MQ-5B Unmanned Aerial Vehicle aircraft and related ground control stations, tactical common data link and ground data link terminal sets; ground support equipment and spare parts. -
Northrop Grumman was selected to provide a new computer-aided dispatch system for the London Ambulance Service to handle emergency calls and ambulance movements, which will be introduced in 2010. The system will be fully operational to support the London Ambulance Service during the 2012 London Olympics. -
Northrop Grumman delivered its 25th Aegis guided missile destroyer to the U.S. Navy. The company announced that Truxtun (DDG 103) had completed U.S. Navy acceptance trials in the Gulf ofMexico . -
Northrop Grumman christened the sixth submarine of theVirginia class,New Mexico (SSN 779), at the company's shipyard in Newport News, Va. -
Northrop Grumman unveiled the first of the U.S. Navy's new unmanned combat aircraft, designated the X-47B Navy Unmanned Combat Air System. It is the first of two aircraftNorthrop Grumman will produce for the Navy to demonstrate unmanned combat aircraft operations from the deck of an aircraft carrier. -
Northrop Grumman successfully conducted the first demonstration flight of the company's newest Active Electronically Scanned Array fighter sensor, the Scalable Agile Beam Radar (SABR). SABR is being developed as a significant avionics enhancement for the existing fleet of F-16s and other fighter aircraft worldwide. -
Northrop Grumman andAREVA announced a plan to build a new manufacturing and engineering facility in Newport News, Va., to supply the growing American nuclear energy sector. The joint venture is known asAREVA Newport News, LLC . -
Northrop Grumman completed the acquisition of 3001International, Inc. , which provides geospatial data production and analysis, including airborne imaging, surveying, mapping and geographic information systems for domestic and international government intelligence, defense and civilian customers. -
Northrop Grumman announced onJan. 7, 2009 a streamlining of its organizational structure, reducing the number of sectors from seven to five. The five sectors will be Aerospace Systems;Electronic Systems ; Information Systems; Shipbuilding; and Technical Services. Gary W. Ervin was named to head the Aerospace Systems sector,Linda A. Mills was named to lead the Information Systems sector, and Alexis C. Livanos was named corporate vice president and Chief Technology Officer. -
Northrop Grumman's board of directors electedStephen D. Yslas corporate vice president and general counsel effectiveJan. 1, 2009 . -
Madeleine Kleiner , former executive vice president and general counsel forHilton Hotels Corporation , andBruce S. Gordon , Lead Director ofTyco International LTD and Director ofCBS Corporation , were elected to the board of directors.Northrop Grumman's board now totals 14 members, 13 of whom are non-employee directors. li>
About
Note: Certain statements and assumptions in this release contain or are
based on "forward-looking" information that
Such "forward-looking" information includes, among other things, financial guidance regarding sales, segment operating income, pension expense, employer contributions under pension plans and medical and life benefits plans, cash flow, and earnings per share, and is subject to numerous assumptions and uncertainties, many of which are outside the Company's control. These include the Company's assumptions with respect to the impact of domestic and global economic uncertainties on financial markets, access to capital, value of goodwill and other long-lived assets; changes in government spending; future revenues; expected program performance and cash flows; returns on pension plan assets and variability of pension actuarial and related assumptions and regulatory requirements; the outcome of litigation, claims, appeals, bid protests, and investigations; hurricane-related insurance recoveries; environmental remediation; acquisitions and divestitures of businesses; joint ventures and other business arrangements; performance issues with, and financial viability of, key suppliers and subcontractors; product performance and the successful execution of internal plans; successful negotiation of contracts with labor unions; allowability and allocability of costs under U.S. Government contracts; effective tax rates and timing and amounts of tax payments; the results of any audit or appeal process with the Internal Revenue Service; the availability and retention of skilled labor; and anticipated costs of capital investments, among other things.
The Company's operations are subject to various additional risks and
uncertainties resulting from its position as a supplier, either directly or as
subcontractor or team member, to the U.S. government and its agencies as well
as to foreign governments and agencies; actual outcomes are dependent upon
various factors, including, without limitation, the Company's successful
performance of internal plans; government customers' budgetary constraints;
customer changes in short-range and long-range plans; domestic and
international competition in both the defense and commercial areas; technical,
operational or quality setbacks that could adversely affect the profitability
or cash flow of the Company; product performance; continued development and
acceptance of new products and, in connection with any fixed-price development
programs, controlling cost growth in meeting production specifications and
delivery rates; performance issues with key suppliers and subcontractors;
government import and export policies; acquisition or termination of
government contracts; the outcome of political and legal processes and of the
assertion or prosecution of potential substantial claims by or on behalf of a
U.S. government customer; natural disasters, including amounts and timing of
recoveries under insurance contracts, availability of materials and supplies,
continuation of the supply chain, contractual performance relief and the
application of cost sharing terms, allowability and allocability of costs
under U.S. Government contracts, impacts of timing of cash receipts and the
availability of other mitigating elements; terrorist acts; legal, financial
and governmental risks related to international transactions and global needs
for military aircraft, military and civilian electronic systems and support,
information technology, naval vessels, space systems, technical services and
related technologies, as well as other economic, political and technological
risks and uncertainties and other risk factors set out in the Company's
filings from time to time with the
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NORTHROP GRUMMAN CORPORATION SCHEDULE 1
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(preliminary and unaudited)
Year ended
December 31
-----------
$ in millions, except per
share amounts 2008 2007 2006
------------------------- ---- ---- ----
Sales and Service Revenues
Product sales $19,634 $18,577 $18,294
Service revenues 14,253 13,251 11,697
---------------- ------ ------ ------
Total sales and service revenues 33,887 31,828 29,991
-------------------------------- ------ ------ ------
Cost of Sales and Service Revenues
Cost of product sales 15,490 14,340 14,275
Cost of service revenues 12,208 11,297 10,220
General and administrative expenses 3,240 3,173 3,002
Goodwill impairment 3,060
------------------- ----- ----- -----
Operating (loss) income (111) 3,018 2,494
Other (expense) income
Interest expense (295) (336) (347)
Other, net 38 16 169
---------- -- -- ---
(Loss) earnings from continuing
operations before income taxes (368) 2,698 2,316
Federal and foreign income taxes 913 887 723
-------------------------------- --- --- ---
(Loss) earnings from
continuing operations (1,281) 1,811 1,593
Income (loss) from discontinued
operations, net of tax 19 (21) (51)
------------------------------- -- --- ---
Net (loss) earnings $(1,262) $1,790 $1,542
------------------- ------- ------ ------
Basic (Loss) Earnings Per Share
Continuing operations $(3.83) $5.30 $4.61
Discontinued operations .06 (.06) (.15)
----------------------- --- ---- ----
Basic (loss) earnings per share $(3.77) $5.24 $4.46
------------------------------- ------ ----- -----
Weighted-average common shares
outstanding, in millions 334.5 341.7 345.7
------------------------------ ----- ----- -----
Diluted (Loss) Earnings Per Share
Continuing operations $(3.83) $5.18 $4.51
Discontinued operations .06 (.06) (.14)
----------------------- --- ---- ----
Diluted (loss) earnings per share $(3.77) $5.12 $4.37
--------------------------------- ------ ----- -----
Weighted-average diluted shares
outstanding, in millions 334.5 354.3 358.6
------------------------------- ----- ----- -----
Net (loss) earnings (from above) $(1,262) $1,790 $1,542
Other comprehensive (loss) income
Change in cumulative
translation adjustment (24) 12 22
Change in unrealized (loss) gain
on marketable securities and
cash flow hedges, net
of tax benefit (expense) of $22
in 2008, ($1 ) in 2007, and $2
in 2006 (35) 1 (5)
Reclassification adjustment on
write-down of marketable
securities, net of tax
expense of ($5) 10
Additional minimum pension
liability adjustment, net of tax
expense of ($32) 40
Change in unamortized benefit plan
costs, net of tax benefit (expense)
of $1,888 in 2008 and ($384 )
in 2007 (2,884) 594
------------------------------- ------ --- --
Other comprehensive (loss)
income, net of tax (2,943) 607 67
-------------------------- ------ --- --
Comprehensive (loss) income $(4,205) $2,397 $1,609
--------------------------- ------- ------ ------
NORTHROP GRUMMAN CORPORATION SCHEDULE 2
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(preliminary and unaudited)
December 31, December 31,
$ in millions 2008 2007
------------- ---- ----
Assets
Current Assets
Cash and cash equivalents $1,504 $963
Accounts receivable, net 3,904 3,790
Inventoried costs, net 1,003 1,000
Deferred income taxes 549 542
Prepaid expenses and other current assets 229 502
----------------------------------------- --- ---
Total current assets 7,189 6,797
-------------------- ----- -----
Property, Plant, and Equipment
Land and land improvements 619 602
Buildings 2,326 2,237
Machinery and other equipment 5,080 4,749
Leasehold improvements 588 526
---------------------- --- ---
8,613 8,114
Accumulated depreciation (3,803) (3,424)
------------------------ ------ ------
Property, plant, and equipment, net 4,810 4,690
------------------------------------ ----- -----
Other Assets
Goodwill 14,518 17,672
Other purchased intangibles, net of accumulated
amortization of $1,795 in 2008 and $1,687 in
2007 947 1,074
Pension and postretirement benefits asset 290 2,080
Long-term deferred tax asset 1,510 65
Miscellaneous other assets 933 995
-------------------------- --- ---
Total other assets 18,198 21,886
------------------ ------ ------
Total assets $30,197 $33,373
------------ ------- -------
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable to banks $24 $26
Current portion of long-term debt 477 111
Trade accounts payable 1,943 1,890
Accrued employees' compensation 1,284 1,175
Advance payments and billings in
excess of costs incurred 2,036 1,563
Other current liabilities 1,660 1,667
------------------------- ----- -----
Total current liabilities 7,424 6,432
------------------------- ----- -----
Long-term debt, net of current portion 3,443 3,918
Mandatorily redeemable preferred stock 350
Pension and postretirement benefits liability 5,823 3,008
Other long-term liabilities 1,587 1,978
--------------------------- ----- -----
Total liabilities 18,277 15,686
----------------- ------ ------
Shareholders' Equity
Common stock, $1 par value; 800,000,000
shares authorized; issued and
outstanding: 2008 - 327,012,663;
2007 - 337,834,561 327 338
Paid-in capital 9,645 10,661
Retained earnings 5,590 7,387
Accumulated other comprehensive loss (3,642) (699)
------------------------------------ ------ ----
Total shareholders' equity 11,920 17,687
-------------------------- ------ ------
Total liabilities and shareholders' equity $30,197 $33,373
------------------------------------------ ------- -------
NORTHROP GRUMMAN CORPORATION SCHEDULE 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(preliminary and unaudited)
Year ended
December 31
-----------
$ in millions 2008 2007 2006
------------- ---- ---- ----
Operating Activities
Sources of Cash - Continuing Operations
Cash received from customers
Progress payments $7,818 $7,312 $6,670
Collections on billings 26,938 24,570 23,303
Insurance proceeds received 5 125 100
Other cash receipts 83 34 42
------------------- -- -- --
Total sources of cash -
continuing operations 34,844 32,041 30,115
----------------------- ------ ------ ------
Uses of Cash - Continuing Operations
Cash paid to suppliers and employees (30,566) (27,835) (27,242)
Interest paid, net of interest received (287) (334) (321)
Income taxes paid, net of
refunds received (719) (853) (618)
Excess tax benefits from
stock-based compensation (48) (52) (57)
Payments for litigation settlements (4) (33) (11)
Other cash payments (12) (19) (12)
------------------- --- --- ---
Total uses of cash -
continuing operations (31,636) (29,126) (28,261)
---------------------- ------- ------- -------
Cash provided by continuing operations 3,208 2,915 1,854
Cash provided by (used in)
discontinued operations 3 (25) (98)
-------------------------- - --- ---
Net cash provided by operating activities 3,211 2,890 1,756
----------------------------------------- ----- ----- -----
Investing Activities
Proceeds from sale of
businesses, net of cash divested 175 43
Payments for businesses
purchased, net of cash acquired (92) (690)
Proceeds from sale of property,
plant, and equipment 19 22 21
Additions to property,
plant, and equipment (681) (682) (732)
Payments for outsourcing contract costs
and related software costs (110) (137) (77)
Proceeds from insurance carriers
related to capital expenditures 4 117
Proceeds from sale of investments 209
Payment for purchase of investment (35)
Decrease (increase) in restricted cash 61 59 (127)
Other investing activities, net 2 (6) (20)
------------------------------- - -- ---
Net cash used in investing activities (626) (1,430) (601)
------------------------------------- ---- ------ ----
Financing Activities
Net (payments) borrowings
under lines of credit (2) (69) 44
Proceeds from issuance of long-term debt 200
Principal payments of long-term debt (113) (90) (1,212)
Proceeds from exercises of stock options
and issuances of common stock 103 274 393
Dividends paid (525) (504) (402)
Excess tax benefits from
stock-based compensation 48 52 57
Common stock repurchases (1,555) (1,175) (825)
------------------------------------- ------ ------ ------
Net cash used in financing activities (2,044) (1,512) (1,745)
------------------------------------- ------ ------ ------
Increase (decrease) in cash
and cash equivalents 541 (52) (590)
Cash and cash equivalents,
beginning of year 963 1,015 1,605
-------------------------- --- ----- -----
Cash and cash equivalents, end of year $1,504 $963 $1,015
-------------------------------------- ------ ---- ------
NORTHROP GRUMMAN CORPORATION SCHEDULE 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(preliminary and unaudited)
Year ended
December 31
-----------
$ in millions 2008 2007 2006
------------- ---- ---- ----
Reconciliation of Net (Loss) Earnings to Net Cash
Provided by Operating Activities
Net (Loss) Earnings $(1,262) $1,790 $1,542
Adjustments to reconcile to net cash
provided by operating activities
Depreciation 572 575 567
Amortization of assets 189 152 136
Impairment of goodwill 3,060
Stock-based compensation 118 196 184
Excess tax benefits from stock-based
compensation (48) (52) (57)
Loss on disposals of property, plant, and
equipment 13 19 6
Impairment of property, plant, and
equipment damaged by Hurricane Katrina 37
Amortization of long-term debt premium (9) (11) (14)
Pre-tax gain on sale of businesses (58) (9)
Pre-tax gain on sale of investments (23) (96)
Decrease (increase) in
Accounts receivable (351) (6,475) (2,228)
Inventoried costs (521) 4 (70)
Prepaid expenses and other current assets (21) 9 (10)
Increase (decrease) in
Progress payments 764 6,513 2,261
Accounts payable and accruals 416 114 203
Deferred income taxes 183 175 183
Income taxes payable 241 (59) (68)
Retiree benefits (167) (50) (772)
Other non-cash transactions, net 89 38 59
-------------------------------- -- -- --
Cash provided by continuing operations 3,208 2,915 1,854
Cash provided by (used in) discontinued
operations 3 (25) (98)
--------------------------------------- - --- ---
Net cash provided by operating activities $3,211 $2,890 $1,756
----------------------------------------- ------ ------ ------
Non-Cash Investing and Financing Activities
Investment in unconsolidated affiliate $30
Sale of business
Liabilities assumed by purchaser $(18)
-------------------------------- ----
Purchase of businesses
Liabilities assumed by the company $20 $136
---------------------------------- --- ----
Mandatorily redeemable convertible
preferred stock converted or
redeemed into common stock $350
-------------------------------- ---- ---
Capital leases $35
-------------- ---
NORTHROP GRUMMAN CORPORATION SCHEDULE 5
TOTAL BACKLOG AND CONTRACT AWARDS
(preliminary and unaudited)
December 31, December 31,
$ in millions 2008 2007 (3)
------------- ------------ ---------
TOTAL TOTAL
FUNDED (1) UNFUNDED(2) BACKLOG FUNDED (1) UNFUNDED(2) BACKLOG
---------- ----------- ------- ---------- ----------- --------
Information &
Services
Mission
Systems $2,646 $3,004 $5,650 $2,365 $3,288 $5,653
Information
Technology 2,724 1,899 4,623 2,581 2,268 4,849
Technical
Services 1,734 2,600 4,334 1,471 3,193 4,664
----- ----- ----- ----- ----- -----
Total
Information
& Services 7,104 7,503 14,607 6,417 8,749 15,166
Aerospace
Integrated
Systems 5,759 5,122 10,881 4,204 4,525 8,729
Space
Technology 1,889 17,761 19,650 2,295 13,963 16,258
----- ------ ------ ----- ------ ------
Total
Aerospace 7,648 22,883 30,531 6,499 18,488 24,987
Electronics 8,437 2,124 10,561 7,887 2,047 9,934
Shipbuilding 14,205 8,148 22,353 10,348 3,230 13,578
------ ----- ------ ------ ----- ------
Total $37,394 $40,658 $78,052 $31,151 $32,514 $63,665
------- ------- ------- ------- ------- -------
(1) Funded backlog represents firm orders for which funding has been
contractually obligated by the customer.
(2) Unfunded backlog represents firm orders for which funding is not
currently contractually obligated by the customer.
Unfunded backlog excludes unexercised contract options and unfunded
Indefinite Delivery Indefinite Quantity (IDIQ) contract awards.
(3) Certain prior period amounts have been reclassified to conform to the
2008 presentation.
CONTRACT AWARDS
---------------
The value of new contract awards during the year ended December 31, 2008 ,
was approximately $48.3 billion . Significant new awards during this
period include $5.6 billion for the VCS Block III Submarine programs,
$5.1 billion for the CVN 78 Gerald R. Ford aircraft carrier, $1.4 billion
for the DDG 1000 Zumwalt-class destroyer, $1.2 billion for the Broad
Area Maritime Surveillance (BAMS) Unmanned Aircraft System program,
$402 million for the Vehicular Intercommunications Systems IDIQ, $385
million for the Intercontinental Ballistic Missile (ICBM) program, and
various restricted programs.
On February 29, 2008 , the company won a $1.5 billion contract awarded
by the U.S. Air Force as an initial step to replace its aerial refueling
tanker fleet. The losing bidder for the contract protested the award
decision by the U.S. Air Force. In the fourth quarter the company
reduced total backlog by $1.5 billion to reflect the termination of the
U.S. Air Force aerial refueling tanker program.
The value of new contract awards during the year ended December 31, 2007 ,
was approximately $35.1 billion . Significant new awards during this
period include $2.4 billion for National Polar-orbiting Operational
Environmental Satellite System, $2.2 billion for LHA-6, $1 billion for
LPD-25, $875 million for the Flats Sequencing Systems/ Postal Automation
program, $636 million for the Unmanned Combat Air System Carrier
Demonstration, $628 million for the DDG 1000 Zumwalt-class destroyer
program, $607 million for the ICBM program, $272 million for the Joint
National Integration Center Research & Development program, $234 million
for the F-22 program, and various restricted programs.
NORTHROP GRUMMAN CORPORATION SCHEDULE 6
REALIGNED SELECTED OPERATING RESULTS
(preliminary and unaudited)
AS REPORTED (1)
$ in millions,
except
per share
amounts 2006 2007 2008
---- ---- ----
Three
Months
Total Three Months Ended Total Ended
NET SALES Year Mar 31 Jun 30 Sep 30 Dec 31 Year Mar 31
---- ------ ------ ------ ------ ---- ------
Information &
Services
Mission
Systems $5,494 $1,362 $1,542 $1,459 $1,568 $5,931 $1,545
Information
Technology 3,962 1,038 1,143 1,107 1,198 4,486 1,085
Technical
Services 1,858 520 551 573 533 2,177 505
----- --- --- --- --- ----- ---
Total
Information
&
Services 11,314 2,920 3,236 3,139 3,299 12,594 3,135
Aerospace
Integrated
Systems 5,500 1,281 1,225 1,255 1,306 5,067 1,340
Space
Technology 2,923 754 769 750 860 3,133 775
----- --- --- --- --- ----- ---
Total
Aerospace 8,423 2,035 1,994 2,005 2,166 8,200 2,115
Electronics 6,543 1,587 1,720 1,673 1,926 6,906 1,555
Shipbuilding 5,321 1,156 1,359 1,469 1,804 5,788 1,264
Intersegment
Eliminations (1,488) (358) (383) (358) (371) (1,470) (345)
------ ---- ---- ---- ---- ------ ----
Total Sales
and Service
Revenues $30,113 $7,340 $7,926 $7,928 $8,824 $32,018 $7,724
------- ------ ------ ------ ------ ------- ------
SEGMENT
OPERATING
INCOME
Information &
Services
Mission
Systems $519 $119 $160 $144 $143 $566 $145
Information
Technology 342 86 90 72 81 329 89
Technical
Services 120 28 32 28 32 120 26
--- -- -- -- -- --- --
Total
Information &
Services 981 233 282 244 256 1,015 260
Aerospace
Integrated
Systems 551 160 149 145 137 591 170
Space
Technology 245 59 69 59 74 261 65
--- -- -- -- -- --- --
Total
Aerospace 796 219 218 204 211 852 235
Electronics 754 185 183 211 234 813 209
Shipbuilding 393 79 134 183 142 538 (218)
Intersegment
Eliminations (117) (29) (28) (25) (33) (115) (28)
---- --- --- --- --- ---- ---
Total
Segment
Operating
Income (3) $2,807 $687 $789 $817 $810 $3,103 $458
------ ---- ---- ---- ---- ------ ----
CONSOLIDATED
HIGHLIGHTS
Earnings From
Continuing
Operations $1,573 $390 $466 $490 $457 $1,803 $263
Diluted
Earnings per
Share from
Continuing
Operations $4.46 $1.11 $1.33 $1.41 $1.31 $5.16 $0.76
Weighted
Average
Diluted Shares
Outstanding,
in millions 358.6 358.3 355.3 352.6 351.1 354.3 349.3
REALIGNED (2)
$ in millions,
except per
share amounts 2006 2007 2008
---- ---- ----
Three
Months
Total Three Months Ended Total Ended
NET SALES Year Mar 31 Jun 30 Sep 30 Dec 31 Year Mar 31
---- ------ ------ ------ ------ ---- ------
Information
& Services
Mission
Systems $4,704 $1,159 $1,288 $1,249 $1,381 $5,077 $1,298
Information
Technology 3,962 1,038 1,143 1,107 1,198 4,486 1,085
Technical
Services 1,858 520 551 573 533 2,177 505
----- --- --- --- --- ----- ---
Total
Information
&
Services 10,524 2,717 2,982 2,929 3,112 11,740 2,888
Aerospace
Integrated
Systems 5,500 1,281 1,225 1,255 1,306 5,067 1,340
Space
Technology 3,869 990 1,067 1,001 1,118 4,176 1,022
----- --- ----- ----- ----- ----- -----
Total
Aerospace 9,369 2,271 2,292 2,256 2,424 9,243 2,362
Electronics 6,267 1,528 1,628 1,577 1,795 6,528 1,555
Shipbuilding 5,321 1,156 1,359 1,469 1,804 5,788 1,264
Intersegment
Eliminations (1,490) (358) (383) (360) (370) (1,471) (345)
------ ---- ---- ---- ---- ------ ----
Total
Sales and
Service
Revenues $29,991 $7,314 $7,878 $7,871 $8,765 $31,828 $7,724
------- ------ ------ ------ ------ ------- ------
SEGMENT
OPERATING
INCOME
Information
& Services
Mission
Systems $451 $103 $142 $125 $138 $508 $128
Information
Technology 342 86 90 72 81 329 89
Technical
Services 120 28 32 28 32 120 26
--- -- -- -- -- --- --
Total
Information
&
Services 913 217 264 225 251 957 243
Aerospace
Integrated
Systems 551 160 149 145 137 591 170
Space Technology 311 73 90 79 87 329 82
--- -- -- -- -- --- --
Total
Aerospace 862 233 239 224 224 920 252
Electronics 786 192 189 211 221 813 209
Shipbuilding 393 79 134 183 142 538 (218)
Intersegment
Eliminations (117) (29) (28) (27) (29) (113) (28)
---- --- --- --- --- ---- ---
Total
Segment
Operating
Income (3) $2,837 $692 $798 $816 $809 $3,115 $458
------ ---- ---- ---- ---- ------ ----
CONSOLIDATED
HIGHLIGHTS
Earnings From
Continuing
Operations $1,593 $394 $472 $488 $457 $1,811 $263
Diluted
Earnings
per Share
from
Continuing
Operations $4.51 $1.12 $1.35 $1.40 $1.32 $5.18 $0.76
Weighted
Average
Diluted
Shares
Outstanding,
in millions 358.6 358.3 355.3 352.6 351.1 354.3 349.3
(1) "As Reported" amounts are as of December 31, 2007 , which reflect the
results of Interconnect Technologies as a discontinued operation.
(2) Reported amounts adjusted to reflect the Park Air / Remotec
realignment, Missile Systems realignment, and the presentation of
Electro-Optical Systems as a discontinued operation.
These events were previously reported in Schedule 6 of the Year End
December 2007 , First Quarter 2008, and Second Quarter 2008 earnings
releases.
(3) Non-GAAP measure. Management uses segment operating income as an
internal measure of financial performance for the individual
business segments.
NORTHROP GRUMMAN CORPORATION SCHEDULE 7
NON-GAAP RECONCILIATION: ADJUSTED EARNINGS PER SHARE FROM
CONTINUING OPERATIONS
(preliminary and unaudited)
December 31
In millions, except -----------
per share amounts 2008 2007
---------------------- ---- ----
FOURTH FOURTH
Earnings Reconciliation QUARTER YTD QUARTER YTD
-------- --- --------- ---
(Loss) earnings from
continuing
operations $(2,536) $(1,281) $457 $1,811
Add back: Goodwill
impairment charge 3,060 3,060 - -
Add back:
Dividends
on mandatorily
redeemable
convertible
preferred
stock - - 6 24
- - - --
Adjusted
earnings from
continuing
operations (1) $524 $1,779 $463 $1,835
---- ------ ---- ------
Per Share Amounts
Weighted
average
common
shares
outstanding 326.9 334.5 338.2 341.7
Dilutive effect of
stock options,
stock awards, and
mandatorily
redeemable
convertible
preferred stock 6.7 7.1 12.9 12.6
--- --- ---- ----
Adjusted diluted
average common
shares
outstanding (2) 333.6 341.6 351.1 354.3
----- ----- ----- -----
Earnings Per Share
(EPS) Calculations
Adjusted
earnings from
continuing
operations
from above (1) $524 $1,779 $463 $1,835
Adjusted diluted
average common
shares
outstanding from
above (2) 333.6 341.6 351.1 354.3
Adjusted
diluted EPS
from
continuing
operations (3) $1.57 $5.21 $1.32 $5.18
Loss from
continuing
operations
from above $(2,536) $(1,281)
Weighted
average
common
shares
outstanding
(4) 326.9 334.5
Loss per
share from
continuing
operations $(7.76) $(3.83)
Goodwill
impairment
charge $(3,060) $(3,060)
Weighted
average
common
shares
outstanding(4) 326.9 334.5
Impairment
charge per
share $(9.36) $(9.15)
(1) Adjusted earnings from continuing operations is a non-GAAP measure
defined as earnings (loss) from continuing operations before the
$3.060 billion goodwill impairment charge. This measure has been
provided for consistency and comparability of the 2008 results with
results of operations from prior periods.
(2) Adjusted diluted average common shares outstanding is a non-GAAP
measure defined as weighted average common shares outstanding
plus the dilutive effect of stock options, stock awards, and
mandatorily redeemable convertible preferred stock. This measure has
been provided for consistency and comparability of the 2008 results
with earnings per share from prior periods.
(3) Adjusted diluted EPS from continuing operations is a non-GAAP measure
defined as diluted EPS from continuing operations before the per
share 2008 goodwill impairment charge impact. Adjusted diluted EPS
from continuing operations has been provided for consistency and
comparability of the 2008 results with results of operations from
prior periods.
(4) Per share amounts are based on basic weighted average shares
outstanding, as use of dilutive securities (ie. stock options, stock
awards, and mandatorily redeemable convertible preferred stock
outstanding) would result in a lesser per share loss.
NORTHROP GRUMMAN CORPORATION SCHEDULE 8
NON-GAAP RECONCILIATION: ADJUSTED NET EARNINGS PER SHARE
(preliminary and unaudited)
December 31
-----------
In millions, except
per share amounts 2008 2007
---------------------- ---- ----
FOURTH FOURTH
Earnings Reconciliation QUARTER YTD QUARTER YTD
-------- --- ------- ---
Net (loss) earnings $(2,533) $(1,262) $454 $1,790
Add back: Goodwill
impairment charge 3,060 3,060 - -
Add back:
Dividends on
mandatorily
redeemable
convertible
preferred stock - - 6 24
- - - --
Adjusted net earnings (1) $527 $1,798 $460 $1,814
---- ------ ---- ------
Per Share Amounts
Weighted average common
shares outstanding 326.9 334.5 338.2 341.7
Dilutive effect of stock
options, stock awards,
and mandatorily
redeemable convertible
preferred stock 6.7 7.1 12.9 12.6
--- --- ---- ----
Adjusted diluted average
common shares
outstanding (2) 333.6 341.6 351.1 354.3
----- ----- ----- -----
Earnings Per Share
(EPS) Calculations
Adjusted net earnings
from above (1) $527 $1,798 $460 $1,814
Adjusted diluted
average common
shares
outstanding
from above (2) 333.6 341.6 351.1 354.3
Adjusted diluted EPS (3) $1.58 $5.26 $1.31 $5.12
Net loss from above $(2,533) $(1,262)
Weighted average
common shares
outstanding (4) 326.9 334.5
Net loss per share $(7.75) $(3.77)
Goodwill
impairment
charge $(3,060) $(3,060)
Weighted average
common shares
outstanding (4) 326.9 334.5
Impairment charge
per share $(9.36) $(9.15)
(1) Adjusted net earnings is a non-GAAP measure defined as net earnings
(loss) before the $3.060 billion goodwill impairment charge.
This measure has been provided for consistency and comparability of
the 2008 results with results of operations from prior periods.
(2) Adjusted diluted average common shares outstanding is a non-GAAP
measure defined as weighted average common shares outstanding
plus the dilutive effect of stock options, stock awards, and
mandatorily redeemable convertible preferred stock. This measure has
been provided for consistency and comparability of the 2008 results
with earnings per share from prior periods.
(3) Adjusted diluted EPS is a non-GAAP measure defined as earnings per
share before the per share 2008 goodwill impairment charge impact.
Adjusted diluted EPS from continuing operations has been provided for
consistency and comparability of the 2008 results with results
of operations from prior periods.
(4) Per share amounts are based on basic weighted average shares
outstanding, as use of dilutive securities (ie. stock options, stock
awards, and mandatorily redeemable convertible preferred stock
outstanding) would result in a lesser per share loss.
SOURCE
CONTACT:
Media
+1-310-201-3335
or Investors,
+1-310-201-3423
both of
Web Site: http://www.northropgrumman.com