Northrop Grumman 2011 Annual Report Download - page 58

NORTHROP GRUMMAN CORPORATION
New Awards
2011 –The estimated value of contract awards added to backlog during the year ended December 31, 2011, is
$25.3 billion. Significant new awards during this period include $2.0 billion for F/A-18 program, $1.1 billion for
E2-D Advanced Hawkeye program, $1.0 billion for Global Hawk program, $1.1 billion for B-2 program , $886
million for F-35 program, and $404 million for KC-10 program.
2010 –The estimated value of contract awards added to backlog during the year ended December 31, 2010, was
$26.4 billion. Significant new awards during this period include $1.2 billion for the Global Hawk HALE program,
$979 million for the E-2 Hawkeye programs, $942 million for the AEHF program, $802 million for the VITA
program, $677 million for the Joint National Integration Center Research and Development contract,
$656 million for the F/A 18 Hornet Strike Fighter program, $654 million for the ICBM program, $631 million
for the B-2 Stealth Bomber programs, $579 million for the F-35 program, $565 million for the NSTec program,
$507 for the KC-10 program, $505 million for the Large Aircraft Infrared Counter-measures programs and various
restricted awards.
LIQUIDITY AND CAPITAL RESOURCES
We endeavor to ensure the most efficient conversion of operating results into cash for deployment in growing our
businesses and maximizing shareholder value. We actively manage our capital resources through working capital
improvements, capital expenditures, strategic business acquisitions and divestitures, debt issuance and repayment,
required and voluntary pension contributions, returning cash to our shareholders through dividend payments, and
repurchases of common stock. In addition to our cash position, we use various financial measures to assist in capital
deployment decision-making, including, but not limited to, cash provided by operations, free cash flow, and
debt-to-EBITDA ratio. We believe these measures are useful to investors in assessing our financial performance.
As of December 31, 2011, the amount of cash, cash equivalents, and marketable securities held outside of the U.S.
by foreign subsidiaries was $546 million. At the present time, we do not anticipate repatriating these balances to
fund domestic operations.
The table below summarizes key components of operating cash flow for continuing operations:
Year Ended December 31
$ in millions 2011 2010 2009
Net earnings $2,118 $2,053 $1,686
Earnings from discontinued operations, net of tax (32) (134) (234)
Gain on sale of business (10) (446)
Charge on debt redemption 229
Other non-cash items(1) 1,108 758 857
Retiree benefit funding less than (in excess of) expense (904) (354) 60
Trade working capital change 57 (486) 72
Cash provided by continuing operations $2,347 $2,056 $1,995
(1) Includes depreciation and amortization, stock based compensation expense and deferred taxes.
Free Cash Flow
Free cash flow from continuing operations is a non-GAAP financial measure and is calculated as cash provided by
operating activities from continuing operations 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’s period of performance. We believe free cash flow from continuing operations is a
useful measure for investors to consider. This measure is a key factor in our planning for and consideration of
strategic acquisitions, stock repurchases and the payment of dividends.
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