Northrop Grumman 2009 Annual Report Download - page 83

5. BUSINESS DISPOSITIONS
2009 – In December 2009, the company sold ASD for $1.65 billion in cash to an investor group led by General
Atlantic, LLC, and affiliates of Kohlberg Kravis Roberts & Co. L.P., and recognized a gain of $15 million, net of
taxes. ASD was a business unit comprised of the assets and liabilities of TASC, Inc., its wholly-owned subsidiary
TASC Services Corporation, and certain contracts carved out from other Northrop Grumman businesses also in
Information Systems that provide systems engineering technical assistance (SETA) and other analysis and advisory
services. Sales for this business in the years ended December 31, 2009, 2008, and 2007, were approximately
$1.5 billion, $1.6 billion, and $1.5 billion, respectively. The assets, liabilities and operating results of this business
unit are reported as discontinued operations in the consolidated statements of operations for all periods presented.
2008 – In April 2008, the company sold its Electro-Optical Systems (EOS) business for $175 million in cash to
L-3 Communications Corporation and recognized a gain of $19 million, net of taxes. EOS, formerly a part of
the Electronic Systems segment, produces night vision and applied optics products. Sales for this business through
April 2008 and for the year ended December 31, 2007, were approximately $53 million and $190 million,
respectively. The assets, liabilities and operating results of this business are reported as discontinued operations in
the consolidated statements of operations for all periods presented.
2007 – During the second quarter of 2007, management announced its decision to exit the remaining
Interconnect Technologies (ITD) business reported within the Electronic Systems segment. Sales for this business
in the year ended December 31, 2007, was $14 million. The shut-down was completed during the third quarter
of 2007 and costs associated with the shut-down were not material. The results of this business are reported as
discontinued operations in the consolidated statements of operations for all periods presented.
Discontinued Operations – Earnings for the businesses classified within discontinued operations (primarily the result
of the sale of ASD discussed above) were as follows:
$ in millions 2009 2008 2007
Year Ended December 31
Sales and service revenues $1,536 $1,625 $1,691
Earnings from discontinued operations 149 146 60
Income tax expense (54) (55) (21)
Earnings, net of tax $95 $91 $39
Gain on divestitures 446 66
Income tax expense on gain (428) (40)
Gain from discontinued operations, net of tax $18 $26
Earnings from discontinued operations, net of tax $ 113 $ 117 $ 39
Tax rates on discontinued operations vary from the company’s effective tax rate generally due to the non-
deductibility of goodwill for tax purposes and the effects, if any, of capital loss carryforwards. Assets of
discontinued operations as of December 31, 2008, consisted primarily of $1 billion in goodwill and accounts
receivable of ASD. Liabilities of discontinued operations consisted primarily of accounts payable of ASD.
6. SEGMENT INFORMATION
At December 31, 2009, the company was aligned into five reportable segments: Aerospace Systems, Electronic
Systems, Information Systems, Shipbuilding, and Technical Services.
Segment Realignments – The company, from time to time, acquires or disposes of businesses, and realigns contracts,
programs or business areas among and within its operating segments that possess similar customers, expertise, and
capabilities. Internal realignments are designed to more fully leverage existing capabilities and enhance
development and delivery of products and services.
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NORTHROP GRUMMAN CORPORATION
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