Northrop Grumman 2009 Annual Report Download - page 36

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
Business
We provide technologically advanced, innovative products, services, and integrated solutions in aerospace,
electronics, information and services and shipbuilding to our global customers. We participate in many high-
priority defense and commercial technology programs in the United States (U.S.) and abroad as a prime
contractor, principal subcontractor, partner, or preferred supplier. We conduct most of our business with the
U.S. Government, principally the Department of Defense (DoD). We also conduct business with local, state, and
foreign governments and domestic and international commercial customers.
Notable Events
Certain notable events or activities affecting our 2009 consolidated financial results included the following:
Financial highlights for the year ended December 31, 2009
쐍Contributed voluntary pension pre-funding amounts totaling $800 million.
쐍Issued $850 million of unsecured senior obligations.
쐍Repurchased 23.1 million common shares for $1.1 billion
쐍Increased share repurchase authorization by $1.1 billion.
Notable events for the year ended December 31, 2009
쐍Sold our Advisory Services Division (ASD) for $1.65 billion.
쐍Delivered 6 ships in 6 different ship classes, USS Dewey (DDG 105), USS New York (LPD 21), USS
Makin Island (LHD 8), New Mexico (SSN 779) and USS George H. W. Bush (CVN 77) to the U.S. Navy
and USCGC Waesche (NSC 2) to the U.S Coast Guard. Completed the USS Carl Vinson
(CVN 70) refueling and complex overhaul and redelivered the ship to the U.S. Navy.
쐍Launched two Space Tracking and Surveillance System (STSS) Demonstrator satellites aboard a Delta II
rocket.
쐍Reached final settlement with the Internal Revenue Service (IRS) Office of Appeals on tax returns for
the years ended 2001 through 2003.
쐍Jointly settled the Department of Justice microelectronics claim and our claim against the
U.S. Government for the termination of the TSSAM program.
쐍Increased quarterly common stock dividend from $.40 per share to $.43 per share.
쐍Streamlined our organizational structure from seven to five operating segments.
Outlook
From the end of 2008 through 2009, the United States and global economies endured a period of substantial
economic uncertainty, and the related financial markets experienced significant volatility. While the financial
markets showed signs of stabilization in the second half of 2009, the U.S. and global economies are still
recovering and some companies continue to struggle. If the future economic environment continues to be less
favorable than it has been in recent years, we could be negatively impacted if the financial viability of certain of
our subcontractors and key suppliers is impaired. In addition, the valuation of our pension assets was negatively
affected by the volatility in the financial markets in 2008, resulting in higher pension costs in 2009. Should the
financial markets experience further decline which impacts our plan asset returns, we could again have higher
future pension costs and required plan funding than in prior years.
We conduct business primarily with U.S. Government customers under long-term contracts and we have not
materially changed our product and service offerings due to the current economic conditions. The
U.S. Government’s budgetary processes give us good visibility regarding future spending and the threat areas that
it is addressing. We believe that our current contracts, and our strong backlog of previously awarded contracts
align well with our customer’s future needs, and this provides us with good insight regarding future cash flows
from our businesses. Nonetheless, we recognize that no business is completely immune to the current economic
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NORTHROP GRUMMAN CORPORATION
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