WASHINGTON — Nearly a year after Northrop Grumman’s acquisition of Orbital ATK closed, company executives say they’re getting the benefits they expected from the deal in terms of cost savings and new business.
In a quarterly earnings report issued April 24, Northrop reported total sales of $8.19 billion and net earnings of $863 million for the first quarter of 2019. The company had total sales of $6.74 billion and net earnings of $840 million for the same quarter of 2018.
The increase in sales was due almost entirely to the addition of the Innovation Systems business unit, the former Orbital ATK. That unit generated $1.44 billion in sales for the quarter. In the first quarter of 2018, the last full quarter Orbital ATK was still an independent company, it reported sales of $1.31 billion.
Northrop Grumman’s $9.2 billion acquisition of Orbital ATK, announced in September 2017, closed last June. When the deal was announced, the companies said they expected a variety of benefits, from cost savings to new business opportunities, from incorporating Orbital ATK into Northrop Grumman.
Nearly a year later, Northrop leadership remains high on the deal. “The integration continues to progress exceptionally well,” Kathy Warden, president and chief executive of Northrop Grumman, said in an earnings call with financial analysts April 24. “All in all, I feel very positive about the performance of the business as well as the integration process that we are executing.”
One metric she noted was a goal of $150 million in “cost synergies” by the end of this year. “We are on track to achieve that,” she said, saying some performance improvements in various parts of the company can be linked to those savings. She didn’t elaborate on specific savings that are contributing that goal.
Another area is “revenue synergies” in space and missiles, which she said is growing faster than anticipated but did not quantify. A third area is “operational synergies” such as redundant facilities that can be eliminated. “We are making good headway on those operational synergies, again, even faster than I had anticipated,” she said.
Warden, in her opening comments on the call, highlighted the company’s space capabilities, including those from the Orbital ATK acquisition, calling space “a major area of opportunity” now. “With the addition of Innovations Systems, our space portfolio is in excess of $7 billion in annual revenue,” she said, including both satellites and launch vehicles as well as payloads and other capabilities.
One program she highlighted was a satellite built by Northrop Grumman for DARPA called Radio Frequency Risk Reduction Deployment Demonstration (R3D2). That satellite, launched March 28 on a Rocket Lab Electron rocket, was developed rapidly to demonstrate the ability of a small satellite to deploy a large antenna needed for high-bandwidth communications.
DARPA has said little about R3D2 after its launch, but Warden’s comments suggested the mission was going well. “This successful demonstration will lend support to developing additional smaller, faster to launch and lower cost capabilities that can optimize the new commercial market for small, inexpensive launch vehicles by both the DOD and commercial users,” she said. “We’re extremely proud of this effort and I want to congratulate the entire team on its success.”
Warden also mentioned the April 17 launch of the company’s Cygnus cargo spacecraft to the International Space Station on an Antares rocket. That mission was is the last under the original NASA Commercial Resupply Services contract awarded to the former Orbital Sciences Corp., “and we look forward to continued successful missions under our follow-on contract,” she said.
She made no mention, though, of the largest civil space project underway at the company, the James Webb Space Telescope. Technical problems with the spacecraft bus and sunshield have delayed its launch to March 2021 and increased its cost to $8.8 billion. NASA and company officials said at a town hall meeting earlier this month at the 35th Space Symposium that they were confident that JWST will remain on that revised schedule, despite concerns raised last month by Tom Young, who chaired an independent review board for the mission last year, that the program was consuming schedule reserve at a high rate.