Northrop Grumman: Strong 4Q and 2011 Financials
Highlights include: Q4 EPS from Continuing Operations Increase to $2.09; 2011 EPS from Continuing Operations Increase to $7.41; Free Cash Flow before Discretionary Pension Contributions Totals $1.4 Billion for Q4 and $2.5 Billion for 2011; 11.8 Million Shares Repurchased in Q4 for $649 Million; 40.2 Million Shares Repurchased in 2011 for $2.3 Billion; 2012 Guidance for EPS from Continuing Operations $6.40 to $6.70
Northrop Grumman Corporation (NYSE: NOC) reported that fourth quarter 2011 earnings from continuing operations increased 80 percent to $550 million, or $2.09 per diluted share, from $306 million, or $1.03 per diluted share, in the fourth quarter of 2010. Fourth quarter 2010 results included a pre-tax charge of $229 million, or $0.50 per diluted share, principally related to premiums paid to redeem $682 million in debt in 2010. Fourth quarter 2011 diluted earnings per share are based on 262.7 million weighted average shares outstanding compared with 296.9 million shares in the fourth quarter of 2010.
For 2011, earnings from continuing operations increased 10 percent to $2.1 billion, or $7.41 per diluted share, from $1.9 billion, or $6.32 per diluted share in 2010. The 17 percent increase in earnings per share reflects improved performance, more favorable pension expense, lower interest expense and a lower weighted average share count than in the prior year period, which more than offset the impact of lower sales and higher taxes. Earnings per share from continuing operations in 2010 included a non-recurring benefit of $0.99 per diluted share for an Internal Revenue Service (IRS) tax settlement, which was partially offset by the non-recurring charge of $229 million, or $0.49 per diluted share, for the 2010 debt redemption. These items increased 2010 earnings per share from continuing operations by $0.50 per diluted share. Excluding the impact of these 2010 items, 2011 earnings per share increased 27 percent. Diluted earnings per share for 2011 are based on 281.6 million weighted average shares outstanding compared with 301.1 million weighted average shares in 2010.
Fourth quarter 2011 sales totaled $6.5 billion compared with $6.9 billion in the prior year period. Sales in 2011 totaled $26.4 billion compared with $28.1 billion in 2010. The year-over-year change in sales reflects the impact of U.S. Government spending constraints and the company's actions to reduce volume in non-core and underperforming businesses. The company also reduced its participation in the Nevada National Security Site joint venture (NSTec), and as a result, effective Jan. 1, 2011, the company no longer consolidates NSTec revenue, which represented sales of $579 million in 2010.
"Fourth quarter and full year results demonstrate our progress in achieving superior operating performance and effective cash deployment. Our businesses drove higher operating income, earnings, cash and a strong book-to-bill ratio for the quarter. Our 2012 guidance reflects our continued commitment to performance, affordability for our customers and strong cash generation. While we are in a challenging environment, we believe that we can continue to create value for shareholders, customers and employees," said Wes Bush, chairman, chief executive officer and president.
Total backlog as of Dec. 31, 2011, was $39.5 billion compared with total backlog of $46.8 billion as of Dec. 31, 2010. The change in backlog reflects new business awards totaling $25.3 billion in 2011. Lower backlog includes a $3 billion adjustment for a change in the company's backlog measurement criteria, which acknowledges the reduced likelihood of amounts remaining on certain open but unfulfilled contracts being realized as future sales.
