Northrop Grumman 2009 Annual Report Download - page 58

Download and view the complete annual report

Please find page 58 of the 2009 Northrop Grumman annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

We use various financial measures to assist in capital deployment decision making, including net cash provided by
operations, free cash flow, net debt-to-equity, and net debt-to-capital. We believe these measures are useful to
investors in assessing our financial performance.
The table below summarizes key components of cash flow provided by operating activities.
$ in millions 2009 2008 2007
Year Ended December 31
Net earnings $1,686 $(1,262) $1,790
(Earnings) from discontinued operations (95) (91) (39)
Gain on sale of business (446) (58)
Impairment of goodwill 3,060
Other non-cash items
(1)
951 993 1,038
Retiree benefit funding in excess of expense (20) (167) (50)
Trade working capital (increase) decrease (45) 563 73
Cash provided by discontinued operations 102 173 78
Net cash provided by operating activities $2,133 $ 3,211 $2,890
(1) Includes depreciation & amortization, stock based compensation expense and deferred taxes.
Free Cash Flow
Free cash flow represents cash from operating activities less capital expenditures and outsourcing contract and
related software costs. Outsourcing contract and related software costs are similar to capital expenditures in that
the contract costs represent incremental external costs or certain specific internal costs that are directly related to
the contract acquisition and transition/set-up. These outsourcing contract and related software costs are deferred
and expensed over the contract life. We believe free cash flow is a useful measure for investors as it reflects our
ability to grow by funding strategic business acquisitions and return value to shareholders through repurchasing
our shares and paying dividends.
Free cash flow is not a measure of financial performance under GAAP, and may not be defined and calculated by
other companies in the same manner. This measure should not be considered in isolation or as an alternative to
operating results presented in accordance with GAAP as indicators of performance.
The table below reconciles net cash provided by operating activities to free cash flow:
$ in millions 2009 2008 2007
Year Ended December 31
Net cash provided by operating activities $2,133 $3,211 $2,890
Less:
Capital expenditures (654) (681) (681)
Outsourcing contract & related software costs (68) (110) (137)
Free cash flow from operations $1,411 $2,420 $2,072
Cash Flows
The following is a discussion of our major operating, investing and financing activities for each of the three years
in the period ended December 31, 2009, as classified on the consolidated statements of cash flows located in
Part II, Item 8.
-48-
NORTHROP GRUMMAN CORPORATION
eBP - v54508-i003_a.pdf - Page 52 of 124 - March 11, 2010 - 20:02:39