Northrop Grumman 2009 Annual Report Download - page 55

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SHIPBUILDING
$ in millions 2009 2008 2007
Year Ended December 31
Sales and Service Revenues $6,213 $ 6,145 $5,788
Segment Operating Income 299 (2,307) 538
As a percentage of segment sales 4.8% (37.5)% 9.3%
Sales and Service Revenues
2009 – Shipbuilding revenue increased $68 million as compared with 2008. The increase was due to
$180 million higher sales in Submarines, $58 million higher sales in Expeditionary Warfare and $39 million
higher sales in Aircraft Carriers, partially offset by $113 million lower sales in Fleet Support and $109 million
lower sales in Surface Combatants. The increase in Submarines was primarily due to higher sales volume on the
construction of the Virginia-class submarines. The increase in Expeditionary Warfare was due to higher sales
volume in the LPD program due to production ramp-ups, partially offset by the delivery of the LHD 8. The
decrease in Fleet Support was primarily due to the redelivery of the USS Toledo submarine in the first quarter of
2009 and decreased carrier fleet support services. The decrease in Surface Combatants was primarily due to
lower sales volume on the DDG 51 program.
2008 – Shipbuilding revenues increased $357 million, or 6 percent, as compared with 2007. The increase was
primarily due to $254 million higher sales in Aircraft Carriers, $178 million higher sales in Surface Combatants,
and $112 million higher sales in Fleet Support, partially offset by $184 million lower sales in Expeditionary
Warfare. The increase in Aircraft Carriers was primarily due to higher sales volume on the Gerald R. Ford, USS
Enterprise Extended Dry-docking Selected Restricted Availability (EDSRA), and USS Theodore Roosevelt
Refueling and Complex Overhaul (RCOH), partially offset by lower volume on the USS Carl Vinson. The
increase in Surface Combatants was primarily due to higher sales volume in the DDG 51 and DDG 1000
programs. The increase in Fleet Support was primarily due to the consolidation of AMSEC in the 2008 period.
Expeditionary Warfare sales for 2008 were negatively impacted by a contract adjustment of $134 million on the
LHD 8 program and the impact of Hurricane Gustav, partially offset by higher sales in the LPD program. In
2007, all programs at the Pascagoula, Mississippi facility were negatively impacted by a labor strike.
Segment Operating Income (Loss)
2009 – Shipbuilding operating income was $299 million as compared with operating loss of $2.3 billion in 2008.
The increase was primarily due to the 2008 goodwill impairment charge of $2.5 billion (See Note 10 to the
consolidated financial statements in Part II, Item 8), and improved performance in Expeditionary Warfare as
compared to 2008. In 2008, the Expeditionary Warfare business had net negative performance adjustments of
$263 million due principally to adjustments on the LHD 8 contract, cost growth and schedule delays on the
LPD program and the effects of Hurricane Ike on a subcontractor’s performance.
2008 – Shipbuilding operating loss was $2.3 billion as compared with operating income of $538 million in the
same period of 2007. The decrease was due to a goodwill impairment charge of $2.5 billion, and $366 million in
net lower performance results, partially offset by the higher sales volume described above. The decrease in
performance results was primarily due to $263 million in net performance adjustments on LHD 8 and other
programs in 2008, cost growth and schedule delays on several LPD ships resulting primarily from the effects of
Hurricane Ike on an LPD subcontractor (see Note 15 to the consolidated financial statements in Part II, Item 8),
and the effect of reductions in contract booking rates resulting from management taking a more conservative
approach in its risk assessment on programs throughout the Gulf Coast Shipyards.
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NORTHROP GRUMMAN CORPORATION
eBP - v54508-i003_a.pdf - Page 49 of 124 - March 11, 2010 - 20:02:39