Northrop Grumman 2011 Annual Report Download - page 59

NORTHROP GRUMMAN CORPORATION
Free cash flow from continuing operations 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, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating
results presented in accordance with GAAP as indicators of performance.
The table below reconciles cash provided by continuing operations to free cash flow from continuing operations:
Year Ended December 31
$ in millions 2011 2010 2009
Cash provided by continuing operations $2,347 $2,056 $1,995
Less:
Capital expenditures (488) (579) (473)
Outsourcing contract and related software costs (4) (6) (68)
Free cash flow from continuing operations $1,855 $1,471 $1,454
Cash Flows
The following is a discussion of our major operating, investing and financing activities from continuing operations
for each of the three years in the period ended December 31, 2011, as classified on the consolidated statements of
cash flows in Part II, Item 8.
Operating Activities
2011 – Cash provided by continuing operations in 2011 increased $291 million, as compared to 2010, primarily
due to lower tax payments and changes in trade working capital, partially offset by higher pension plan
contributions. In 2011, pension plan contributions totaled $1.1 billion, of which $1 billion was voluntarily
pre-funded.
In 2012, we expect to contribute the required minimum funding level of approximately $65 million to our
pension plans and approximately $120 million to our other post-retirement benefit plans. We expect our cash on
hand and cash generated from operations for 2012 to be sufficient to service debt and contract obligations, finance
capital expenditures, continue acquisition of shares under the share repurchase program, and continue paying
dividends to our shareholders. Although 2012 cash from operations is expected to be sufficient to service these
obligations, we may borrow under credit facilities to accommodate timing differences in cash flows. We have an
aggregate commitment of $2 billion available under two revolving credit facilities that can be accessed on a
same-day basis. Both facilities are currently undrawn and had no borrowings during the year ended December 31,
2011. Additionally, we believe we could access capital markets for debt financing for longer-term funding, under
current market conditions, if needed.
2010 – Cash provided by continuing operations in 2010 increased $61 million as compared with 2009, primarily
the result of lower tax payments. Pension plan contributions totaled $789 million in 2010, of which $728 million
was voluntarily pre-funded. In 2009, cash provided by continuing operations included $508 million for taxes paid
related to the sale of ASD.
2009 – Cash provided by continuing operations in 2009 decreased $710 million as compared with 2008, reflecting
higher voluntary pension contributions and increased income taxes paid resulting from the sale of ASD. Pension
plan contributions totaled $657 million in 2009, of which $601 million was voluntarily pre-funded.
Investing Activities
2011 – Net cash provided by investing activities of continuing operations was $743 million in 2011, reflecting a
$1.4 billion contribution received from the spin-off of Shipbuilding business in 2011, partially offset by $488
million of capital expenditures and a $250 million investment in short term investments. Capital expenditure
commitments at December 31, 2011, of approximately $293 million are expected to be paid with cash on hand.
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