Northrop Grumman 2011 Annual Report Download - page 51

NORTHROP GRUMMAN CORPORATION
2011 – General and administrative expenses for 2011 decreased $117 million, or 5 percent, compared to 2010,
primarily due to overall reductions in administrative costs due to cost reduction initiatives, lower bid and proposal
costs and lower research and development expenses. General and administrative expenses as a percentage of total
sales and service revenues was 9 percent for 2011, consistent with 2010.
2010 – General and administrative expenses for 2010 decreased $104 million, or 4 percent, compared to 2009
primarily due to the disposition of ASD in 2009 at Information Systems. The decrease in general and
administrative expenses as a percentage of total sales and service revenues for 2010, as compared to 2009, is
primarily due to cost reductions realized from the 2009 streamlining of our organizational structure, which
reduced the number of operating segments.
Interest Expense
2011 – Interest expense for 2011 decreased $48 million, as compared to 2010, primarily due to a lower weighted
average interest rate resulting from our debt refinancing in November 2010.
2010 – Interest expense in 2010 was comparable to 2009.
Charge on Debt Redemption
2010 – In November 2010, we repurchased outstanding debt and recorded a pre-tax charge of $229 million as
other expense primarily related to premiums paid on the debt tendered. See Liquidity and Capital Resources
below and Note 13 to our consolidated financial statements in Part II, Item 8.
Federal and Foreign Income Taxes
2011 – Our effective tax rate on earnings from continuing operations for 2011 was 32.3 percent, as compared
with 19.5 percent in 2010. In 2010, we recognized net tax benefits of $298 million to reflect the final approval
from the IRS and the U.S. Congressional Joint Committee on Taxation (Joint Committee) of the IRS’
examination of our tax returns for the years 2004 through 2006.
2010 – Our effective tax rate on earnings from continuing operations for 2010, was 19.5 percent compared with
30.7 percent in 2009. In 2010, we recognized net tax benefits of $298 million to reflect the final approval of the
IRS’s examination of our tax returns for years 2004 through 2006, as discussed above. In 2009, we recognized net
tax benefits of $75 million primarily as a result of a final settlement with the IRS Office of Appeals and the Joint
Committee related to our tax returns for years ended 2001 through 2003.
Excluding the effects of the $298 million net tax benefit in 2010 and the $75 million net tax benefit in 2009, our
effective tax rates would have been 32.1 percent and 34.3 percent in 2010 and 2009, respectively.
Cash Provided by Operating Activities
2011 – Cash provided by continuing operations in 2011 was $2.3 billion, as compared with $2.1 billion in 2010,
and reflects lower tax payments and timing of trade working capital. In 2011, we contributed $1.1 billion to our
pension plans, of which $1.0 billion was voluntarily pre-funded, as compared with $789 million in 2010, of which
$728 million was voluntarily pre-funded. Income taxes paid, net of refunds, was $810 million in 2011, as
compared with $1.1 billion in 2010. Cash provided by continuing operations for 2011 included $30 million of
federal and state income tax refunds and $9 million of interest income received.
2010 – Cash provided by continuing operations in 2010 was $2.1 billion as compared with $2 billion in 2009, and
reflects higher cash paid to our suppliers offset by lower tax payments, primarily due to $508 million for taxes paid
in 2009 related to the sale of ASD. In 2010, we contributed $789 million to our pension plans, of which $728
million was voluntarily pre-funded, as compared with $657 million in 2009, of which $601 million was voluntarily
pre-funded. Income taxes paid, net of refunds, was $1.1 billion in 2010, as compared with $1.3 billion in 2009.
Cash provided by continuing operations for 2010 included $94 million of federal and state income tax refunds and
$11 million of interest income received.
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