Northrop Grumman 2009 Annual Report Download - page 53

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2008 – Aerospace Systems operating income decreased $503 million, or 55 percent, as compared with 2007. The
decrease in operating income was due to a $570 million goodwill impairment charge and a $27 million favorable
adjustment in 2007 related to the settlement of prior years’ overhead costs, partially offset by $59 million from
the higher sales volume described above and $35 million in net performance improvements associated with risk
retirement in several key programs within S&SS, AP&T, and various restricted programs.
ELECTRONIC SYSTEMS
$ in millions 2009 2008 2007
Year Ended December 31
Sales and Service Revenues $7,671 $7,048 $6,466
Segment Operating Income 969 947 809
As a percentage of segment sales 12.6% 13.4% 12.5%
Sales and Service Revenues
2009 – Electronic Systems revenue increased $623 million, or 9 percent, as compared with 2008. The increase
was primarily due to $225 million in higher sales in Aerospace Systems (AS), $128 million higher sales in
Space & I&SR Systems, $89 million higher sales in Defensive Systems (DS), $80 million in higher sales in
Navigation Systems (NS) and $59 million in higher sales in Naval & Marine Systems (N&MS). The increase in
AS was due to higher volume on the F-35 Low Rate Initial Production (LRIP), B-52 Sustainment and
intercompany programs. The increase in Space & ISR Systems was due to higher volume on the Space Based
Infrared System (SBIRS) follow-on production program. The increase in DS was due to higher deliveries
associated with the Large Aircraft Infrared Countermeasures (LAIRCM) program. The increase in N&MS was
due to higher volume on power and propulsion systems for the Virginia-class submarine program. The increase in
NS was due to higher volume on Inertial and Fiber Optic Gyro Navigation Programs.
2008 – Electronic Systems revenue increased $582 million, or 9 percent, as compared with 2007. The increase was
primarily due to $241 million in higher sales in AS, $165 million in higher sales in Land Forces, $69 million in higher
sales in NS, and $60 million in higher sales in DS. The increase in AS was due to higher deliveries of upgraded F-16
international fire control radar systems and increased volume on the MESA Korea program. The increase in Land
Forces was due to higher volume on vehicular intercommunication systems (VIS) and the Ground/Air Task Oriented
Radar(G/ATOR)radarprogram.TheincreaseinNSwasduetohighervolumeassociatedwithInertialNavigation
programs. The increase in DS was due to higher deliveries associated with the LAIRCM program.
Segment Operating Income
2009 – Electronic Systems operating income increased $22 million, or 2 percent, as compared with 2008. The
increase was primarily due to $79 million from the higher sales volume discussed above, partially offset by
$57 million in higher unfavorable performance adjustments in 2009. The higher unfavorable performance
adjustments in 2009 were due to adjustments of $98 million in Government Systems, primarily on the Flats
Sequencing System postal automation program, partially offset by favorable performance adjustments in restricted
Aerospace Systems programs and Land Forces programs. Operating performance adjustments in 2008 included
royalty income of $60 million and a $20 million charge for the MESA Wedgetail program as discussed below.
2008 – Electronic Systems operating income increased $138 million, or 17 percent, as compared with 2007. The
increase in operating income was primarily due to $78 million from the higher sales volume described above and
$60 million in royalty income resulting from patent infringement settlements at NS. The 2008 operating income
included a charge of $20 million for our MESA Wedgetail program associated with potential liquidated damages
arising from the prime contractor’s announced schedule delay in completing the program. The 2007 operating
income included a charge of $27 million for the F-16 Block 60 fixed-price development combat avionics
program.
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NORTHROP GRUMMAN CORPORATION
eBP - v54508-i003_a.pdf - Page 47 of 124 - March 11, 2010 - 20:02:39