Northrop Grumman feels federal penny-pinching

Northrop Grumman Corp.’s sales in its Information Systems division slipped in the fourth quarter of 2011 and for the year compared to 2010’s figures, the company reported on Feb. 1.

Sales were down 8 percent for the quarter and 6 percent for the year. The company had $1.910 billion in sales for the quarter compared to $2.085 billion in the same period of 2010. For 2011, it had $7.921 billion in sales, while reaching $8.395 billion the previous year.

The company chalked up the results to a decline in program volume for defense and civil systems for both periods. The defense systems decrease comes as the government reduced funding for existing programs as well as for completing programs.

As for the civil systems, the company said the sales figures were impacted by the sale of the County of San Diego's outsourcing contract in the second quarter of 2011. The sale affected fourth quarter sales by $30 million and by $70 million for the year.

Information Systems' fourth-quarter operating income increased 10 percent, and as a percent of sales, it increased from 8.5 percent in the fourth quarter of 2010 to 10.3 percent in 2011. The company worked to improve performance and its business mix in civil systems. The County of San Diego outsourcing contract more than offset the decline in sales.

As a whole, Northrop Grumman had $26.4 billion in sales for all of 2011, compared to the $28.1 billion in sales for all of 2010. In the fourth quarter, the company had $6.5 billion in sales, compared to $6.9 billion in the final quarter of 2010.

The year-over-year change in sales shows the effects of constrained government spending and the company’s reduction in its work in non-core and underperforming businesses, the company said. Northrop Grumman also reduced its participation in the Nevada National Security Site joint venture. Since Jan. 1, 2011, the company stopped consolidating NSTec revenue. The joint venture represented $579 million in sales in 2010.

Meanwhile, earnings from continuing operations increased 80 percent to $550 million in the fourth quarter of 2011. In the fourth quarter of 2010, earnings reached $306 million. For 2011, earnings from continuing operations increased by 10 percent to $2.1 billion, compared to $1.9 billion in 2010.

Wes Bush, chairman, CEO and president of Northrop Grumman, said these results show progress in better operating performance and business. This year, there will be more of the same.

“Our 2012 guidance reflects our continued commitment to performance, affordability for our customers and strong cash generation," Bush said. "While we are in a challenging environment, we believe that we can continue to create value for shareholders, customers and employees,” he added.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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