Northrop Grumman 2011 Annual Report Download - page 3

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NORTHROP GRUMMAN 2011 ANNUAL REPORT
DEAR FELLOW SHAREHOLDERS
2011 was an outstanding year for Northrop Grumman, affirming that
our focus on performance, portfolio alignment and effective cash
deployment continues to create value for our shareholders, customers
and employees and position our company positively for the future.
Despite a challenging top line environment, we delivered
strong results by nearly every measure. Both segment and
total operating margin, earnings per share, cash from operations,
and free cash flow were higher than our 2010 results. Our team
continues to build on our strong record of program execution
and performance, which is essential to meeting our customers’
increasing needs for high quality and affordable products
and services.
Actions to date in support of affordability have included
consolidating business units across the enterprise, reducing
overhead in our operating businesses, restructuring our debt to
reduce interest expense, streamlining our corporate office, and
redesigning our benefit plans. Of particular note in 2011 were
the move of our corporate office to the Washington, D.C. area,
and the spin-off of our shipbuilding business into Huntington
Ingalls Industries Inc., creating a new enterprise focused on
their important mission while allowing Northrop Grumman to
concentrate on our core capabilities.
Our results for the year demonstrate the benefit of our continued
focus on performance. Earnings per share from continuing
operations for 2011 increased 17 percent to $7.41 per diluted
share. New business awards totaled $25.3 billion. Before
discretionary pension contributions, 2011 cash from operations
totaled nearly $3 billion, and free cash flow totaled $2.5 billion.
Our strong cash flow and the $1.4 billion contribution from the
shipbuilding spin-off allowed us to return $2.8 billion to our
shareholders through share repurchases and dividends.
In 2011 we spent $2.3 billion to repurchase more than 40 million
shares, raised our quarterly dividend by 6.4 percent – our eighth
consecuve annual increase – and paid shareholders $543 million
in dividends. Through the spin-off, we distributed an additional
$1.8 billion of equity value to shareholders.
Looking forward, based on our nation’s new strategic security
direction, we believe we are well positioned to support the more
agile, technologically advanced security force our government
envisions. We expect about 75 percent of our 2012 sales to come
from our four key strategic markets – C4ISR, unmanned systems,
cybersecurity, and logistics – plus our manned strike aircraft
business. Despite the uncertainties in our environment, including
the 2013 budget process, we’re confident that the high performing
porolio we are building aligns closely with our customer’s priority
investment areas. We also view the new military strategy as
supportive of our efforts to market our products internationally.
Even as we intensify our focus on our business priorities, we
continue working to serve the communities where we live and
work – in educaon, human services and the environment, cultural
awareness, disaster relief, and support for the men and women in
our armed services. I encourage you to read our annual Corporate
Responsibility report highlighting our progress and activities in
2011. I’m pleased that among our environmental accomplishments,
our new corporate oce has received the U.S. Green Business
Council’s Gold-level certification for Leadership in Energy and
Environmental Design (LEED).
Creating shareholder value in the current environment means
that we must continue to be laser-focused on our key priorities –
driving performance, effectively deploying our cash, and optimizing
our portfolio. Our record over the past several years shows great
progress in these efforts. I’m also extremely proud of how our team
has come together to drive performance improvements in our
business, making tough decisions that have positioned us to
be successful well into the future, while maintaining our high
ethical standards.
I’m delighted to be working with our company’s talented team as we
continue to create long-term sustained value for our shareholders,
customers and employees.
WES BUSH
Chairman, CEO and President
March 30, 2012
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