Northrop Grumman 2010 Annual Report Download - page 57

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2009 – Information Systems operating income decreased $2 million as compared with 2008. The decrease was
primarily due to $30 million from the higher sales volume discussed above, offset by non-recurring costs
associated with the sale of ASD and unfavorable performance results in Civil Systems programs, principally due
to the VITA outsourcing program for the Commonwealth of Virginia.
SHIPBUILDING
$ in millions 2010 2009 2008
Year Ended December 31
Sales and Service Revenues $6,719 $6,213 $ 6,145
Segment Operating Income (Loss) 325 299 (2,307)
As a percentage of segment sales 4.8% 4.8% (37.5%)
Sales and Service Revenues
2010 – Shipbuilding revenue increased $506 million, or 8 percent, as compared with 2009. The increase is due
to $388 million higher sales in Expeditionary Warfare, $144 million higher sales in Aircraft Carriers and
$114 million in higher sales in Submarines, partially offset by $98 million lower sales in Surface Combatants. The
increase in Expeditionary Warfare is primarily due to higher sales volume on the LPD and LHA programs,
partially offset by delivery of the LHD 8 in 2009. In the second quarter of 2010, we announced the wind-down
of shipbuilding operations at the Avondale, Louisiana facility in 2013 (see Note 7 to the consolidated financial
statements in Part II, Item 8) and reduced revenues by $115 million to reflect revised estimates to complete LPDs
23 and 25. In the year-ended December 31, 2009, we reduced revenues by $160 million to reflect revised
estimates to complete the LPD-class ships and the LHA 6. The increase in Aircraft Carriers is primarily due to
higher sales volume on the Gerald R. Ford construction program and the USS Theodore Roosevelt Refueling and
Complex Overhaul (RCOH), partially offset by the delivery of USS George H.W. Bush and re-delivery of the
USS Enterprise and USS Carl Vinson in early 2010 and 2009, respectively. The increase in Submarines is due to
higher sales volume on the Virginia-class submarines. The decrease in Surface Combatants is due to lower sales
volume on the DDG programs.
2009 – Shipbuilding revenue increased $68 million, or 1 percent, 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.
Segment Operating Income (Loss)
2010 – Shipbuilding operating income increased $26 million, or 9 percent, as compared with 2009, primarily
due to the higher sales volume discussed above. Operating income in 2010 includes the effects of unfavorable
performance adjustments on Expeditionary Warfare programs, partially offset by milestone incentives on the LPD
contracts. In Expeditionary Warfare, we recorded unfavorable performance adjustments of $132 million on LPDs
22 through 25, including the effect of a $113 million charge for the cumulative effect of the $210 million of
incremental costs expected in connection with our decision to wind down shipbuilding operations at the
Avondale facility in 2013 (see Note 7 to the consolidated financial statements in Part II, Item 8). Additionally, we
recognized an unfavorable adjustment of $30 million to reflect additional costs to complete post-delivery work
for the LHD 8. In 2009, operating income included $38 million and $171 million in unfavorable performance
adjustments on the DDG 51 and LPD 17 programs, partially offset by a $54 million favorable adjustment on the
LHD 8 contract.
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NORTHROP GRUMMAN CORPORATION