Income Statement

The income statement presents information on the financial results of a company business activities over a period of time. The income statement communicates how much revenue the company generated during a period and what cost it incurred in connection with generating that revenue.

Northrop Grumman Corp., consolidated income statement

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Product	28,522)	27,868)	27,015)	23,852)	20,469)
Service	8,080)	7,799)	9,784)	9,989)	9,626)
Sales	36,602)	35,667)	36,799)	33,841)	30,095)
Product	(22,761)	(22,309)	(21,559)	(18,675)	(15,785)
Service	(6,367)	(6,090)	(7,762)	(7,907)	(7,519)
Cost of sales	(29,128)	(28,399)	(29,321)	(26,582)	(23,304)
Gross profit	7,474)	7,268)	7,478)	7,259)	6,791)
General and administrative expenses	(3,873)	(3,597)	(3,413)	(3,290)	(3,011)
Gain on sale of business	—)	1,980)	—)	—)	—)
Operating income	3,601)	5,651)	4,065)	3,969)	3,780)
Interest expense	(506)	(556)	(593)	(528)	(562)
Non-operating FAS pension benefit	1,505)	1,469)	1,198)	800)	1,049)
Mark-to-market pension and OPB benefit (expense)	1,232)	2,355)	(1,034)	(1,800)	(655)
Other, net	4)	19)	92)	107)	130)
Other income (expense)	2,235)	3,287)	(337)	(1,421)	(38)
Earnings before income taxes	5,836)	8,938)	3,728)	2,548)	3,742)
Federal and foreign income tax expense	(940)	(1,933)	(539)	(300)	(513)
Net earnings	4,896)	7,005)	3,189)	2,248)	3,229)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The financial data over the five-year period reveals a series of trends in revenue, cost management, profitability, and other financial activities.

Sales and Revenue: Product sales exhibited a consistent upward trend, growing steadily from approximately $20.5 billion in 2018 to about $28.5 billion in 2022. Service revenues showed a contrasting pattern, generally declining from nearly $9.6 billion in 2018 to slightly above $8 billion in 2022, with a most notable drop after 2020. Overall sales increased from around $30.1 billion in 2018 to approximately $36.6 billion in 2022, although with a slight dip in 2021.
Cost of Sales: Costs associated with product sales escalated consistently, mirroring the revenue increases, rising from roughly $15.8 billion in 2018 to over $22.7 billion in 2022. Service-related costs decreased notably after 2020, dropping from about $7.5 billion to $6.4 billion by 2022. Total cost of sales followed an upward trajectory until 2020, peaking near $29.3 billion, then slightly decreasing before rising again near $29.1 billion in 2022.
Gross Profit: Gross profit remained relatively stable over the period, hovering between $6.8 billion and $7.5 billion. Although there were fluctuations, the gross profit in 2022 nearly matched that of 2020, suggesting some margin compression or cost limitations amid rising revenues.
Operating Expenses and Income: General and administrative expenses showed a consistent increase, rising from approximately $3.0 billion in 2018 to about $3.9 billion in 2022, indicating rising overhead costs. Operating income demonstrated variability, initially increasing from $3.8 billion in 2018 to $5.7 billion in 2021, largely influenced by a significant non-recurring gain of $1.98 billion in 2021 related to the sale of a business segment. Excluding this gain, operating income in 2021 would have been lower. The subsequent decline in operating income to $3.6 billion in 2022 suggests reduced operational profitability post divestiture.
Interest and Other Income/Expenses: Interest expenses remained relatively stable, fluctuating modestly around $500-$600 million during the period, with a slight downward trend by 2022. Pension-related benefits showed mostly positive contributions, with non-operating pension benefits increasing from $1.0 billion in 2018 to $1.5 billion in 2022. The mark-to-market pension and other postretirement benefits showed volatility, with a significant expense in 2019 (-$1.8 billion) transitioning to benefits in 2021 ($2.4 billion) and 2022 ($1.2 billion), reflecting changes in actuarial assumptions or market conditions. Other income and related items saw substantial improvement, particularly the jump from a large expense in 2019 (-$1.4 billion) to substantial income in 2021 ($3.3 billion) and 2022 ($2.2 billion), significantly impacting earnings before taxes in those years.
Earnings Before Taxes and Net Earnings: Earnings before income taxes displayed considerable volatility, with a low of about $2.5 billion in 2019 and a peak of nearly $8.9 billion in 2021, influenced strongly by the items described above. 2022 saw a decline to $5.8 billion. Tax expenses fluctuated accordingly, reaching a high in 2021 at nearly $1.9 billion, while declining thereafter. Net earnings corresponded with pre-tax earnings, peaking at $7.0 billion in 2021 before retreating to $4.9 billion in 2022.

Overall, the company's financial performance from 2018 to 2022 demonstrated growth in product sales alongside reductions in service revenues. Profitability was significantly impacted by one-time gains and pension-related accounting adjustments, leading to notable fluctuations in operating income and earnings. Cost control in general expenses and interest remained consistent, while tax expenses varied in line with earnings volatility. The data suggests a focus on product revenue growth, with attention needed to stabilize service revenues and manage operating expenses for sustained profit improvement.

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Northrop Grumman Corp. (NYSE:NOC)

Income Statement