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NORTHROP GRUMMAN 2014 ANNUAL REPORT
DEAR FELLOW SHAREHOLDERS
“Our Northrop Grumman team delivered another
year of strong nancial performance in 2014.
We remain intent on driving performance for our
shareholders, customers and employees.”
Our Northrop Grumman team delivered another year of
strong nancial performance in 2014 – the result of sustained
performance, a well-aligned porolio, eecve cash deployment,
aordability iniaves and innovaon across our four businesses.
Financial highlights in 2014 included: increased earnings per
share by 17 percent to $9.75 per diluted share; a record pension-
adjusted operang margin rate of 12.2 percent; and free cash
ow of $2.0 billion. Through share repurchases and dividends, we
returned $3.2 billion in cash to our shareholders, or approximately
160 percent of 2014 reported free cash ow.
From the end of 2009 through the end of 2014, as U.S. security
spending has been reduced, our sales have declined about 13
percent. During the same period, our focus on performance
has generated an 18
percent increase in
absolute segment
operang income and
more than a 35 percent
improvement in segment operang margin rate. As a result, in
combinaon with eecve cash deployment, earnings per share
from connuing operaons have grown by a compound annual
growth rate of 17 percent, driven primarily by superior program
performance and porolio shaping, and a connuing reducon in
our cost structure.
In 2014, we connued the expansion of our business with U.S.
allies around the globe, establishing and enhancing operaons
in a number of countries and regions. Internaonal sales grew
in all four of our business sectors, increasing 20 percent overall
to approximately $3.0 billion, represenng 13 percent of our
2014 revenue. At year-end, internaonal awards represented 14
percent of our backlog. We connue to opmize our porolio
to ensure alignment with global security priories in our key
capability domains of unmanned systems, C4ISR, cyber, logiscs and
modernizaon, and strike aircra.
As we pursue opportunies around the globe, we are also aware
that we have a responsibility beyond business to the communies
where we live and work, in terms of giving back, supporng
local needs and sustaining the environment. In 2014, Northrop
Grumman, the Northrop Grumman Foundaon and ECHO – our
Employees Charity Organizaon – contributed a total of $25.3
million in support of science, technology, engineering and math
(STEM) programs; assistance
to veterans, service members
and their families; and help
for those with crical needs in
our communies. And as we
expand our global business presence we look forward to the new
opportunies we will encounter. Please take a few minutes to read
our 2014 Corporate Responsibility report to learn more about our
eorts and accomplishments.
We are proud of our team’s strong 2014 results achieved in concert
with the highest ethical standards and integrity. We remain intent
on driving performance for our shareholders, customers and
employees, and we thank you for your connued investment in
Northrop Grumman.
WES BUSH
Chairman, CEO and President
March 18, 2015
PAGE 1
This leer includes references to pension-adjusted operang margin rate, free cash ow, segment operang income, and segment operang margin rate, which are
non-GAAP nancial measures. For reconciliaons between our non-GAAP measures and the nearest GAAP measures, please refer to the page preceding the back
cover of this Annual Report.