Northrop Grumman 2010 Annual Report Download - page 3

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Earnings per share from continuing operations for 2010
increased 39 percent to $6.77 per diluted share. Higher segment
operating income and higher segment operating margin rate
drove this EPS growth. We view these metrics as key measures
of our operational performance and we showed substantial
improvement in 2010. At year-end, total backlog was more than
$64 billion. New awards for the year totaled $30 billion.
Before discretionary pension contributions net of taxes, 2010
cash from operations continued to be strong, totaling $3.1 bil-
lion, and free cash flow totaled $2.3 billion. Our strong cash
flow, along with the proceeds of the 2009 sale of TASC, allowed
us to return a substantial amount of cash to shareholders. In
2010, we repurchased 19.7 million shares for approximately
$1.2 billion. We raised our quarterly dividend in 2010 by 9.3 per-
cent — our seventh consecutive annual increase — and paid
shareholders $545 million in dividends in 2010. We also contin-
ued to make investments in the business.
We generated these outstanding results while undertaking
several strategic initiatives, including the consolidation of
our Gulf Coast shipyards; debt restructuring to reduce future
interest expense and extend maturities; and ongoing stream-
lining activities, including our corporate office relocation to
the Washington, DC area. We also restructured our incentive
compensation plans to drive behaviors that are consistent with
our focus on managing risks and improving performance.
In addition to these strategic business initiatives, we also
remained active in supporting our customers, employees, and
communities. We continued to uphold our long-standing tradi-
tion of volunteerism and corporate citizenship. We encourage
our shareholders to review our annual Corporate Responsibility
Report, which highlights our operating standards and values,
our commitment to our customers and their missions, the
investments we have made in our communities, and our focus
on environmental sustainability.
On March 15, 2011, we announced that our board of directors
approved the spin-off of our shipbuilding business, now
known as Huntington Ingalls Industries, Inc. (HII), to Northrop
Grumman stockholders. We are confident that this spin-off
of our shipbuilding business will drive future shareholder value
and will enable both Northrop Grumman and HII to focus
more intently on their respective customers.
We are operating in an environment of continued pressure on
defense and security budgets globally. It appears that, in the
aggregate, Northrop Grumman programs continue to be well-
supported. This reflects our alignment with critical areas of
investment such as unmanned systems, cybersecurity, C4ISR,
and logistics.
In 2011, we will continue to position our businesses to create
value in a challenging budget environment; thoughtfully shape
our capabilities to better align with the needs of our custom-
ers; and continually improve our cost structure, operational
execution, and productivity, in line with our customers’ afford-
ability and efficiency objectives.
We also want to recognize the hard work and dedication of the
men and women of Northrop Grumman. Across the company,
our employees continue to demonstrate their commitment to
performance improvement while undertaking the important
strategic initiatives that will position us for a more challenging
environment going forward.
Creating long-term shareholder value in this environment
requires absolute focus on our key priorities — building on our
performance improvements, effectively deploying our cash,
and optimizing our portfolio for the future.
Northrop Grumman and its employees are firmly committed
to these priorities as we continue to generate value for our
shareholders, customers, and employees.
DEAR FELLOW SHAREHOLDERS
LEW COLEMAN
Non-Executive Chairman
WES BUSH
Chief Executive Officer and President
Northrop Grumman delivered strong results in 2010,
demonstrating that across all our businesses, we are improving
performance and building a track record of consistent execution.
We believe our company is well positioned to continue creating
value for our shareholders and customers.
March 30, 2011
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