Northrop Grumman 2010 Annual Report Download - page 41

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we do not expect that such costs will have a material adverse effect upon our financial position, results of
operations or cash flows.
See Risk Factors located in Part I, Item 1A for a more complete description of risks faced by us and the defense
industry.
BUSINESS ACQUISITIONS
2009 – We acquired Sonoma Photonics, Inc., as well as assets from Swift Engineering’s Killer Bee Unmanned Air
Systems product line in April 2009 for an aggregate amount of approximately $33 million. The operating results
from the date of acquisition are reported in the Aerospace Systems segment from the date of acquisition.
2008 – We acquired 3001 International, Inc. (3001 Inc.) in October 2008 for approximately $92 million in cash.
3001 Inc. provides geospatial data production and analysis, including airborne imaging, surveying, mapping and
geographic information systems for U.S. and international government intelligence, defense and civilian
customers. The operating results of 3001 Inc. are reported in the Information Systems segment from the date of
acquisition.
BUSINESS DISPOSITIONS
2009 – We sold our Advisory Services Division (ASD) in December 2009, 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 businesses also
in Information Systems that provide systems engineering technical assistance (SETA) and other analysis and
advisory services. Sales for ASD in the years ended December 31, 2009, and 2008, were approximately
$1.5 billion, and $1.6 billion, respectively. The assets, liabilities and operating results of this business unit are
reported as discontinued operations in the consolidated financial statements for all periods presented.
2008 – We sold our Electro-Optical Systems (EOS) business in April 2008 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 were approximately $53 million. The assets, liabilities and operating results of this business are
reported as discontinued operations in the consolidated financial statements for all periods presented.
Discontinued Operations – Earnings for the businesses classified within discontinued operations (primarily as a result
of the sale of ASD discussed above) were as follows:
$ in millions 2010 2009 2008
Year Ended December 31
Sales and service revenues $1,536 $1,625
Earnings from discontinued operations 149 146
Income tax expense (54) (55)
Earnings, net of tax $ 95 $ 91
Gain on divestitures 10 446 66
Income tax benefit (expense) 5(428) (40)
Gain from discontinued operations, net of tax $15 $18 $26
Earnings from discontinued operations, net of tax $15 $ 113 $ 117
CONTRACTS
We generate the majority of our business from long-term government contracts for development, production,
and support activities. Government contracts typically include the following cost elements: direct material, labor
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NORTHROP GRUMMAN CORPORATION