Northrop Grumman 2010 Annual Report Download - page 61

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The table below reconciles net cash provided by operating activities to free cash flow:
$ in millions 2010 2009 2008
Year Ended December 31
Net cash provided by operating activities $2,453 $2,133 $3,211
Less:
Capital expenditures (770) (654) (681)
Outsourcing contract & related software costs (6) (68) (110)
Free cash flow from operations $1,677 $1,411 $2,420
Cash Flows
The following is a discussion of our major operating, investing and financing activities for each of the three years
in the period ended December 31, 2010, as classified on the consolidated statements of cash flows located in
Part II, Item 8.
Operating Activities
2010 – Net cash provided by operating activities in 2010 increased $320 million as compared with 2009 and
reflects improved cash collections from our customers and lower tax payments. In 2009, net cash provided by
operating activities included $508 million taxes paid related to the sale of ASD. Pension plan contributions
totaled $894 million in 2010, of which $830 million was voluntarily pre-funded.
In 2011, we expect to contribute the required minimum funding level of approximately $62 million to our
pension plans and approximately $160 million to our other post-retirement benefit plans, and also expect to
make additional voluntary pension contributions of approximately $500 million. We expect cash generated from
operations for 2011 to be sufficient to service debt and contract obligations, finance capital expenditures,
continue acquisition of shares under the share repurchase program, and continue paying dividends to our
shareholders. Although 2011 cash from operations is expected to be sufficient to service these obligations, we
may borrow under credit facilities to accommodate timing differences in cash flows. We have a committed
$2 billion revolving credit facility that is currently undrawn and that can be accessed on a same-day basis.
Additionally, we believe we could access capital markets for debt financing for longer-term funding, under
current market conditions, if needed.
2009 – Net cash provided by operating activities in 2009 decreased $1.1 billion as compared with 2008, reflecting
higher voluntary pension contributions and increased income taxes paid resulting from the sale of ASD. Pension
plan contributions totaled $858 million in 2009, of which $800 million was voluntary pre-funded.
2008 – Net cash provided by operating activities in 2008 increased $321 million as compared with 2007, and
reflects lower income tax payments and continued trade working capital reductions. Pension plan contributions
totaled $320 million in 2008, of which $200 million was voluntarily pre-funded, and were comparable to 2007.
Net cash provided by operating activities for 2008 included $113 million of federal and state income tax refunds
and $23 million of interest income.
Investing Activities
2010 – Cash used in investing activities was $761 million in 2010 and reflects $770 million of capital
expenditures, which includes $57 million of capitalized software costs. Capital expenditure commitments at
December 31, 2010, were approximately $444 million, which are expected to be paid with cash on hand.
2009 – Cash provided by investing activities was $867 million in 2009. During 2009, we received $1.65 billion
in proceeds from the sale of ASD (see Note 6 to the consolidated financial statements in Part II, Item 8), paid
$68 million for outsourcing costs related to outsourcing services contracts, and paid $33 million to acquire
Sonoma Photonics, Inc. and the assets from Swift Engineering’s Killer Bee Unmanned Air Systems product line
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NORTHROP GRUMMAN CORPORATION