Northrop Grumman Corp NOC
Q1 2013 Earnings Call Transcript

Transcript Call Date 04/24/2013

Operator: Good day, ladies and gentlemen, and welcome to the Northrop Grumman First Quarter 2013 Conference Call. My name is Cheverly and I will be your operator today. At this time, all participants are in a listen-only mode.

I would now like to turn the call over to your host Mr. Steve Movius, Vice President of Investor Relations. Mr. Movius please proceed.

Steve Movius - VP, IR: Thanks, Emily. Welcome to Northrop Grumman's first quarter 2013 conference call. We do not have PowerPoint presentation for the first quarter. however we are posting an updated company overview that provides supplemental information on our four sectors. You can access our new Company overview at

Before we start, please understand that matters discussed on today's call constitute forward-looking statements pursuant to Safe Harbor provisions of Federal Securities Laws. Forward-looking statements involve risks and uncertainties, which are detailed in today's press release and our SEC filings. These risk factors may cause actual Company results to differ materially.

On the call today are Wes Bush, our Chairman, CEO and President; and Jim Palmer, our CFO. At this time, I'd like to turn the call over to Wes.

Wes Bush - Chairman, President and CEO: Thanks, Steve. Good afternoon everyone. Thanks for joining us. Our first quarter performance demonstrates that our team's focus on affordability, cost competitiveness and program performance continues to generate solid results. This was another good quarter and I am very proud of the track record that our team has built.

Despite slightly lower sales first quarter earnings per share increased 4% to $2.03 the combination of strong operating performance from all four of our businesses and share repurchases drove this quarter's EPS growth.

Our first quarter sales declined by approximately $100 million or 1.5%. Sales for our short cycle businesses, Information Systems and Technical Services declined by approximately $200 million which was partially offset by $100 million sales increase at Aerospace Systems our longest cycle business. Jim will discuss trends within each sector, but generally speaking top line pressure in our short cycle business reflects federal budget turmoil continuing in-theatre force reductions and our own portfolio shaping actions. Information Systems was most impacted by the pervasive budget uncertainty in the first quarter and the restrictive nature of the continuing resolution that expires on March 27.

Segment operating margin rate was strong at 12.3% and we reduced our year-over-year weighted average shares outstanding by 7%. During the quarter, we repurchased 6.5 million shares of our stock for approximately $431 million. At the end of the first quarter, approximately 1 billion remained on our share repurchase authorization.

First quarter cash from operations improved year-over-year, and free cash flow improved by approximately $150 million. We ended the quarter with a total backlog of $39.4 billion, which reflects new awards of $4.7 billion, or 77% book-to-bill. First quarter book to book-to-bill was impacted by our customers' reluctance or inability to award contracts for task orders.

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