FALLS CHURCH, Va. -- For the third quarter of 2021, Northrop Grumman reported that sales decreased 4 percent to $8.7 billion from $9.1 billion in the third quarter of 2020. Third quarter 2021 net earnings rose to $1.1 billion from $1.0 billion in the third quarter of 2020.
"Our third quarter results reflect strong program performance and the continued focus on operational excellence by the Northrop Grumman team," said Kathy Warden, chairman, chief executive officer and president. "While we did see some labor related and supply chain challenges stemming from the COVID-19 pandemic on our operations, we delivered solid organic growth, outstanding segment operating margins and strong transaction-adjusted free cash flow in the quarter. We are raising our full year earnings guidance and continue to expect strong organic sales growth."
Backlog totaled $74.8 billion for the third quarter, compared ot $81.0 billion at the end of 2020.
For 2021, Northrop Grumman is forecasting sales in the $36.0 billion, compared to earlier estimate of between $35.8 billion and $36.2 billion.
INDUSTRY SEGMENTS
Aeronautics Systems
Third quarter 2021 sales decreased to $2.7 billion (3Q20: $2.9 billion), or 6 percent due to lower volume in both Manned Aircraft and Autonomous Systems, including restricted programs, F-35, the B-2 Defensive Management Systems Modernization program and certain Global Hawk programs.
Third quarter 2021 operating income decreased to $265 million (3Q20: $294 million), or 10 percent, due to lower sales and a lower operating margin rate. Operating margin rate decreased to 9.7 percent from 10.1 percent principally due to a $42 million unfavorable EAC adjustment on F-35 due to labor-related production inefficiencies largely driven by COVID-19-related impacts on the labor market and employee leave. This was partially offset by higher net favorable EAC adjustments at Autonomous Systems.
Defense Systems
Third quarter 2021 sales decreased to $1.4 billion (3Q20: $1.9 billion), or 24 percent, primarily due to a $425 million reduction in sales related to the IT services divestiture. Third quarter 2021 organic sales decreased $25 million, or 2 percent, principally due to the close-out of the contract at the Army’s Lake City ammunition plant, partially offset by higher volume on several Mission Readiness programs, including the U.S. Customs and Border Protection P-3 program.
Third quarter 2021 operating income decreased to $175 million (3Q20: $217 million), or 19 percent, primarily due to the impact of the IT services divestiture. Operating margin rate increased to 12.4 percent from 11.7 percent and reflects improved performance at Battle Management and Missile Systems due to changes in mix as a result of recent contract completions, partially offset by lower net favorable EAC adjustments.
Mission Systems
Third quarter 2021 sales decreased to $2.4 billion (3Q20: $2.6 billion), or 5 percent, due to a $133 million reduction in sales related to the IT services divestiture. Third quarter 2021 organic sales1 increased $18 million, or 1 percent. Navigation, Targeting and Survivability sales increased primarily due to higher intercompany volume on the ramp up of the Ground Based Strategic Deterrent (GBSD) program. Maritime/Land Systems and Sensors sales increased principally due to higher volume on land systems, including the Ground/Air Task-Oriented Radar program. Networked Information Solutions sales decreased primarily due to lower volume on F-35 and restricted programs, partially offset by higher volume on the Joint Counter Radio-Controlled Improvised Explosive Device Electronic Warfare program.
Third quarter 2021 operating income was consistent with the prior year period at $372 million (3Q20: $370 million) and reflects a higher operating margin rate and lower sales. Operating margin rate increased to 15.3 percent from 14.5 percent principally due to improved performance and changes in contract mix toward more fixed-price content, largely as a result of the IT services divestiture, partially offset by lower net favorable EAC adjustments.
Space Systems
Third quarter 2021 sales increased to $2.7 billion (3Q20: $2.2 billion), or 22 percent, due to higher sales in both the Launch & Strategic Missiles and Space business areas, partially offset by a $48 million reduction in sales related to the IT services divestiture. Third quarter 2021 organic sales1 increased $531 million, or 25 percent. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, such as GBSD and the Next Generation Interceptor program. Space sales were driven by higher volume on restricted programs.
Third quarter 2021 operating income increased to$288 million (3Q20: $224 million), or 29 percent, due to higher sales volume and a higher operating margin rate. Operating margin rate increased to 10.7 percent from 10.2 percent principally due to higher net favorable EAC adjustments, which were largely driven by improved performance on restricted programs.
