Annual Report Project on Northrop Grumman Corporation (NOC) Fiscal year 2012

Accounting 100

Abstract An annual report which is also called a 10k report contains many useful informational items for its investors and stakeholders. It provides a synopsis of what the business is about, the risk factors, financial statements, auditor reports, summary of financial data, and other corporate information. This information can help investors determine if it’s worth investing in the company. For the purpose of looking further into an annual report I have chosen Northrop Grumman’s (NOC) Fiscal Year 2012 10k report. I will review the major areas of the annual report and discuss the assets and liabilities. Also I will discuss how the performance of the company was in 2012. I will also review the internal controls of the company. The 10k report for Northrop Grumman starts with the cover letter of “United States Securities and Exchange Commission” followed by the Table of Contents. Though we will not pick through every topic discussed in the annual report we will discuss the few points listed in the abstract. Historical information is very critical in order to see the success of the company. The business section clearly describes what Northrop Grumman’s business is about. It also states how the company started and has grown by acquiring more companies. The current sectors of the company are also listed in the annual report as well as each sectors business and responsibilities. These are the four sectors that Northrop Grumman currently has: Aerospace Systems, Electronic Systems, Information Systems, and Technical Services. In the business section there is also information about who the customer is and in Northrop Grumman’s case the majority of the revenue is from the U.S. Government. For example, the 10k report sates in “2012, 2011, and 2010 90% or more of revenue generated was from U.S. Government. While investing in a business it is also a good idea to know who the competitors are which are also listed in the business section. Sign of a good company is good employee relation and Northrop Grumman’s annual report suggests they maintain a good relationship with their employees. Since Northrop Grumman is a Government contractor it has to abide by the Government Contract Regulations and majority of the contracts are Cost-type or Firm Fixed price. These were a few points listed in the business section of the annual report which give insight into the company. Risk factors are an important element of information for any investor. Following are the risk factors listed and taken from the annual report:
“We depend heavily on a single customer, the U.S. Government, for a substantial portion of our business. Changes in this customer’s priorities and spending could have a material adverse effect on our financial position, results of operations, or cash flows.”(p7)
“Significant delays or reductions in appropriations for our programs and U.S. Government funding more broadly may negatively impact our business and programs and could have a material adverse effect on our financial position, results of operations or cash flows.”(p8)
“As a U.S. Government contractor, we are subject to various procurement regulations and could be adversely affected by changes in regulations or any negative findings from a U.S. Government audit or investigation.”(p9)
“Changes to business practices for U.S. Government contractors could have a significant adverse effect on current programs, potential new awards and the processes by which procurements are awarded and managed.”(p9)
“Competition within our markets and an increase in bid protests may reduce our revenues and market share.”(p10)
“Our future success depends, in part, on our ability to develop new products and new technologies and maintain technologies, facilities, equipment and a qualified workforce to meet the needs of current and future customers.”(p10)
“Many of our contracts