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Actionable news in NOC: NORTHROP GRUMMAN Corp,

Northrop Grumman: Q1 Eps Increase 26 Percent To

The following excerpt is from the company's SEC filing.

, including $0.44 per Share Tax Benefit

Q1 Sales Total

Billion

2016 EPS Guidance Increased to $10.40 to $10.70

FALLS CHURCH, Va. – April 27, 2016 – Northrop Grumman Corporation (NYSE: NOC) reported

quarter

net earnings

increased

15 percent to

$556 million

per diluted share, from

$484 million

per diluted share in the

quarter of

. In the first quarter of 2016 the company adopted an accounting standard update regarding treatment of share-based compensation, which resulted in a tax benefit of $80 million, o r $0.44 per diluted share.

diluted earnings per share are based on

183.4 million

weighted average shares outstanding compared with

200.5 million

shares in the prior year period, an 8.5 percent decline. The company repurchased

1.5 million

shares of its common stock in the

. As of

March 31, 2016

, approximately

$4.0 billion

remained on the company's share repurchase authorization.

“Our first quarter operational results support our outlook for 2016. We are positioned to achieve profitable growth over the long term. Congratulations to our entire team for another quarter of solid performance,” said Wes Bush, chairman, chief executive officer and president.

2980 Fairview Park Drive • Falls Church, VA 22042-4511

www.northropgrumman.com/media

Northrop Grumman Reports First Quarter 2016 Financial Results

Table 1 — Financial Highlights

($ in millions, except per share amounts)

Segment operating income

Segment operating margin rate

Operating income

Operating margin rate

Net earnings

Diluted EPS

Net cash used in operating activities

Free cash flow

Pension-adjusted Operating Highlights

Net FAS/CAS pension adjustment

Pension-adjusted operating income

Pension-adjusted operating margin rate

Pension-adjusted Per Share Data

After-tax net pension adjustment per share

Pension-adjusted diluted EPS

Weighted average shares outstanding — Basic

Dilutive effect of stock awards and options

Weighted average shares outstanding — Diluted

Non-GAAP metric — see definitions at the end of this earnings release.

segment operating income

decreased

$701 million

, and segment operating margin rate

50 basis points

11.8 percent

primarily due to lower operating income for Aerospace Systems than in the prior year period. Operating income

and operating margin rate

70 basis points

12.4 percent

. Lower operating income reflects the decline in segment operating income and a lower net FAS/CAS pension adjustment than in the prior year period.

During the first quarter of 2016, the company’s total backlog increased and reflects higher backlog at Aerospace Systems and Mission Systems and a modest decline in backlog at Technology Services. The company recorded various awards during the quarter, including a portion of the B-21 Long-Range Strike Bomber program.

Table 2 — Cash Flow Highlights

($ millions)

Cash used in operating activities before after-tax discretionary pension contributions

After-tax discretionary pension pre-funding impact

Capital expenditures

Free cash flow before after-tax discretionary pension contributions

cash used in operating activities totaled

$60 million

compared to a use of

$654 million

in the first quarter of 2015, which included a $500 million pre-tax discretionary pension pre-funding contribution. In addition, first quarter 2016 results benefited from an improvement in working capital and the previously described $80 million tax benefit. As a result of the accounting standard update the tax benefit is now presented in operating activities.

First quarter 2016 free cash flow was a use of

$358 million

and includes capital expenditures of

$298 million

. First quarter 2016 capital expenditures included $159 million for the purchase of a building previously leased by Mission Systems. Changes in cash and cash equivalents include the following for cash from operating, investing and financing activities through

used in operations

Investing

used for capital expenditures

Financing

$282 million

used for repurchase of common stock

$107 million

used for repayment of long-term debt

used for dividends

2016 Guidance

The company’s 2016 financial guidance is based on the spending levels provided for in the Bipartisan Budget Act of 2015 and the Consolidated Appropriations Act of 2016. The guidance assumes no disruption or cancellation of any of our significant programs and no disruption or shutdown of government operations. Guidance for 2016 also assumes adequate appropriations and funding for the company’s programs in the first quarter of the U.S. government’s fiscal year 2017.

As of 4/27/16

23,500

24,000

Segment operating margin %

High 11%

Operating margin %

Effective tax rate %

Non-GAAP metric - see definitions at the end of this earnings release.

Estimated capital expenditures in 2016 reflect increased programmatic requirements and approximately $300 million for the purchase of facilities currently occupied by the Mission Systems sector. These investments support the company's continued focus on cost reduction, affordability and competitiveness.

Table 3 — Business Results

Effective Jan. 1, 2016, the company realigned from four to three segments: Aerospace Systems, Mission Systems and Technology Services. Operating results for all periods presented have been recast to reflect this realignment.

Consolidated Sales & Segment Operating Income

Intersegment eliminations

(50) bps

Reconciliation to operating income

Unallocated corporate expenses

(70) bps

Interest expense

Other, net

Earnings before income taxes

Federal and foreign income tax expense

Schedule 4 provides annual segment information in the realigned structure for years 2013-2015 and quarterly information for 2015

primarily due to lower segment operating income and lower net FAS/CAS pension adjustment than in the prior year period. Lower segment operating income reflects lower operating income at Aerospace Systems and Technology Services, which more than offset higher operating income at Mission Systems. Net FAS/CAS pension adjustment decreased

$9 million

For the

, federal and foreign income tax expense

$120 million

$220 million

; the company's effective tax rate declined to

17.8 percent

31.3 percent

. Lower federal and foreign income tax expense and effective tax rate are due to the company's adoption of an accounting standard update, as well as the extension of the research tax credit. The accounting standard

update requires excess tax benefits and tax deficiencies related to share-based compensation be recognized in the income statement and resulted in an $80 million tax benefit in the quarter.

Aerospace Systems ($ millions)

sales

due to higher volume for manned aircraft and autonomous systems programs. Manned aircraft sales rose due to production ramp-up on the E-2D program and higher F-35 deliveries, partially offset by lower volume for the B-2 program and fewer F/A-18 deliveries. Autonomous systems sales rose due to higher volume on the Global Hawk and Triton programs, partially offset by lower volume on NATO Alliance Ground Surveillance. Space sales were comparable to the prior year period.

11.1 percent

. Operating income and margin rate decreased due to lower margins on several manned aircraft programs, principally due to the timing of risk reductions, which more than offset higher sales.

Mission Systems ($ millions)

due to lower volume for cyber and ISR programs, partially offset by higher volume for sensors and processing programs and advanced capabilities programs. Lower sales for cyber and ISR programs is primarily due to lower volume on the Counter Narcoterrorism Technology program and lower volume for restricted programs. Higher sales in sensors and processing reflect higher volume for fixed wing avionics and C4ISR programs, as well as production ramp-up on the G/ATOR program. These increases were partially offset by lower volume for international programs. Higher sales for advanced capabilities programs reflect ramp-up on several navigation and maritime programs, including the SEWIP (Surface Electronic Warfare Improvement Program) Block III.

and operating margin rate was

13.1 percent

. Higher operating income and margin rate reflect higher margins on advanced capabilities programs, partially offset by lower margins on cyber and ISR programs.

Technology Services ($ millions)

primarily due to lower volume for Global Logistics and Modernization (GLM) and Advanced Defense Services (ADS) programs. GLM sales decreased mainly due to ramp-down activities on the Intercontinental Ballistic Missile (ICBM) program and lower volume for restricted programs. ADS sales declined primarily due to program completions in 2015, partially offset by ramp-up on the Passenger Systems Program Directorate program and higher volume on the Saudi Arabian Ministry of National Guard Training Support program.

$7 million

due to lower sales, and operating margin rate was comparable to the prior year period at

10.4 percent

About Northrop Grumman

Northrop Grumman will webcast its earnings conference call at noon Eastern time on April 27, 2016. A live audio broadcast of the conference call will be available on the investor relations page of the company’s website at

Northrop Grumman is a leading global security company providing innovative systems, products and solutions in autonomous systems, cyber, C4ISR, strike, and logistics and modernization to government and commercial customers worldwide. Please visit

for more information.

Forward-Looking Statements

This earnings release and the information we are incorporating by reference contain statements, other than statements of historical fact, that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expect,” “intend,” “may,” “could,” “plan,” “project,” “forecast,” “believe,” “estimate,” “guidance,” “outlook,” “anticipate,” “trends,” “goals,” and similar expressions generally identify these forward-looking statements.

Forward-looking statements include, among other things, statements relating to our future financial condition, results of operations and cash flows. Forward-looking statements are based upon assumptions, expectations, plans and projections that we believe to be reasonable when made, but which may change over time. These statements are not guarantees of future performance and inherently involve a wide range of risks and uncertainties that are difficult to predict. Specific risks that could cause actual results to differ materially from those expressed or implied in these forward-looking statements include, but are not limited to, those identified and discussed more fully in the section entitled “Risk Factors” in our 2015 Annual Report on Form 10-K. They include:

our dependence on a single customer, the U.S. Government

delays or reductions in appropriations for our programs and U.S. Government funding

investigations, claims and/or litigation

our international business

the improper conduct of employees, agents, business partners or joint ventures in which we participate

the use of accounting estimates for our contracts

cyber and other security threats or disruptions

the future investment performance of plan assets and changes in actuarial assumptions associated with our pension and other post-retirement benefit plans

the performance and financial viability of our suppliers and the availability and pricing of raw materials and components

competition within our markets

changes in procurement and other laws, regulations and practices applicable to our industry

natural and/or environmental disasters

the adequacy of our insurance coverage, customer indemnifications or other liability protections

the products and services we provide related to nuclear and other hazardous and high risk operations

changes in business conditions that could impact recorded goodwill or the value of other long-lived assets

our ability to develop new products and technologies and maintain technologies, facilities, equipment and a qualified workforce

our ability to meet performance obligations under our contracts

unforeseen environmental costs

our ability to protect our intellectual property rights

changes in our tax provisions or exposure to additional tax liabilities

the spin-off of our former Shipbuilding business

Additional information regarding these risks and other important factors can be found in the section entitled “Risk Factors” in our 2015 Annual Report on Form 10-K and as disclosed in this report and from time to time in our other filings with the SEC.

You are urged to consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of forward-looking statements. These forward-looking statements speak only as of the date this report is first filed or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

This release and the attachments also contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the company's use of these measures are included in this release or the attachments.

SCHEDULE 1

NORTHROP GRUMMAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

March 31

Product

Total sales

Operating costs and expenses

General and administrative expenses

Other (expense) income

Basic earnings per share

Weighted-average common shares outstanding, in millions

Diluted earnings per share

Weighted-average diluted shares outstanding, in millions

Net earnings (from above)

Other comprehensive income

Change in unamortized benefit plan costs, net of tax

Change in cumulative translation adjustment

Other comprehensive income, net of tax

Comprehensive income

SCHEDULE 2

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31,

Assets

Cash and cash equivalents

Accounts receivable, net

Inventoried costs, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net of accumulated depreciation of $4,877 in 2016 and $4,849 in 2015

Goodwill

12,462

12,460

Deferred tax assets

Other non-current assets

Total assets

23,933

24,424

Liabilities

Trade accounts payable

Accrued employee compensation

Advance payments and amounts in excess of costs incurred

Other current liabilities

Total current liabilities

Long-term debt, net of current portion

Pension and other post-retirement benefit plan liabilities

Other non-current liabilities

Total liabilities

18,312

18,902

Shareholders’ equity

Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued and outstanding

Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2016—180,828,855 and 2015—181,303,083

Paid-in capital

Retained earnings

10,664

10,661

Accumulated other comprehensive loss

(5,224

(5,320

Total shareholders’ equity

Total liabilities and shareholders’ equity

SCHEDULE 3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating activities

Adjustments to reconcile to net cash used in operating activities:

Depreciation and amortization

Stock-based compensation

Excess tax benefits from stock-based compensation

Deferred income taxes

Changes in assets and liabilities:

Prepaid expenses and other assets

Accounts payable and other liabilities

Income taxes payable

Retiree benefits

Investing activities

Net cash used in investing activities

Financing activities

Common stock repurchases

Net proceeds from issuance of long-term debt

Payments of long-term debt

Cash dividends paid

Payments of employee taxes withheld from share-based awards

Net cash used in financing activities

Decrease in cash and cash equivalents

(1,042

(1,217

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of period

SCHEDULE 4

REALIGNED SEGMENTS

SUMMARY OPERATING RESULTS

SEGMENT OPERATING INCOME

($ in millions)

Mar 31

Jun 30

Sep 30

Dec 31

AS REPORTED

10,014

10,004

Electronic Systems

Information Systems

Technical Services

Intersegment Eliminations

(1,941

(1,990

(2,052

24,661

23,979

23,526

11,468

11,001

10,674

(1,798

(1,834

(1,907

"As reported" summary operating results for the years ended December 31, 2013, 2014 and 2015 and the three months ended March 31, June 30, September 30 and December 31, 2015 reflect our former organizational structure and reportable segments and were previously disclosed in the company's filings with the Securities and Exchange Commission (SEC).

"Realigned" summary operating results for the years ended December 31, 2013, 2014 and 2015 and the three months ended March 31, June 30, September 30 and December 31, 2015 were recast to reflect the changes in the company's organizational structure and reportable segments from four to three effective January 1, 2016 as described in the company's Form 8-K to be filed with the SEC immediately after the filing of the Form 10-Q for the quarter ended March 31, 2016. The three current sectors are Aerospace Systems, Mission Systems and Technology Services.

Non-GAAP Financial Measures Disclosure:

Today’s earnings release contains non-GAAP (accounting principles generally accepted in the United States of America) financial measures, as defined by SEC (Securities and Exchange Commission) Regulation G and indicated by a footnote in the text of the release. While the company believes that these non-GAAP financial measures may be useful in evaluating our financial information, they should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP. Definitions are provided for the non-GAAP measures and reconciliations are provided in the body of the release. References to a “Table” in the definitions below relate to tables in the body of this earnings release. Other companies may define these measures differently or may utilize different non-GAAP measures.

Pension-adjusted diluted EPS:

Diluted EPS excluding the after-tax net pension adjustment per share, as defined below. These per share amounts are provided for consistency and comparability of operating results. Management uses pension-adjusted diluted EPS, as reconciled in Table 1, as an internal measure of financial performance.

Cash used in operating activities before after-tax discretionary pension contributions:

Cash used in operating activities before the after-tax impact of discretionary pension contributions. Cash used in operating activities before discretionary pension contributions has been provided for consistency and comparability of financial performance and is reconciled in Table 2.

Free cash flow:

Net cash used in operating activities less capital expenditures. We use free cash flow as a key factor in our planning for, and consideration of, strategic acquisitions, stock repurchases and the payment of dividends. 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. Free cash flow is reconciled in Table 2.

Free cash flow before after-tax discretionary pension contributions:

Free cash flow before the after-tax impact of discretionary pension contributions. We use free cash flow before discretionary pension contributions as a key factor in our planning for, and consideration of, strategic acquisitions, stock repurchases and the payment of dividends. 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. Free cash flow before discretionary pension contributions is reconciled in Table 2.

Net FAS/CAS pension adjustment:

The difference between pension expense charged to contracts and included as cost in segment operating income in accordance with U.S. Government Cost Accounting Standards (CAS) and pension expense determined in accordance with FAS (GAAP Financial Accounting Standards). Net FAS/CAS pension adjustment is presented in Table 1.

After-tax net pension adjustment per share:

The per share impact of the net FAS/CAS pension adjustment as defined above, after tax at the statutory rate of 35 percent, provided for consistency and comparability of financial performance as presented in Table 1.

Pension-adjusted operating income:

Operating income before the net FAS/CAS pension adjustment as reconciled in Table 1. Management uses pension-adjusted operating income as an internal measure of financial performance.

Pension-adjusted operating margin rate:

Pension-adjusted operating income as defined above, divided by sales. Management uses pension-adjusted operating margin rate, as reconciled in Table 1, as an internal measure of financial performance.

Segment operating income:

Total earnings from our three segments including allocated pension expense recognized under CAS. Reconciling items to operating income include the net FAS/CAS pension adjustment, as defined above, as well as certain corporate-level expenses, which are not considered allowable or allocable under applicable CAS or FAR. Management uses segment operating income, as reconciled in Table 3, as an internal measure of financial performance.

Segment operating margin rate:

Segment operating income as defined above, divided by sales. Management uses segment operating margin rate, as reconciled in Table 3, as an internal measure of financial performance.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Quarterly report [Sections 13 or 15(d)] - April 27, 2016
Current report, items 8.01 and 9.01 - April 27, 2016
Northrop Grumman Corporation director just picked up 255 shares - April 4, 2016
Northrop Grumman Corporation director just picked up 26 shares - April 4, 2016