Item 6. Selected Financial Data

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Item 6. Selected Financial Data

The data presented in the following table is derived from the audited consolidated financial statements and other information.

SELECTED FINANCIAL DATA

Selected financial data below reflects the retrospective effects from the January 1, 2018 adoption of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, and Accounting Standards Update (ASU) No. 2017-07, Compensation Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost and the fourth quarter 2018 change in accounting method related to the recognition of actuarial gains and losses for our pension and OPB plans (see Notes 1, 13, 16, 17 and 18 to the consolidated financial statements for further information on these changes).



	Year Ended December 31
$ in millions, except per share amounts	2018(5)		2017		2016		2015(3)		2014(3)
Sales	$	30,095	$	26,004	$	24,706	$	23,526	$	23,979
Operating income	3,780		3,218		3,277		2,984		3,069
Net earnings (loss)	3,229		2,869		2,043		2,119		(233		)
Basic earnings per share	$	18.59	$	16.45	$	11.42	$	11.19	$	(1.12	)
Diluted earnings per share	18.49		16.34		11.32		11.06		(1.12		)
Cash dividends declared per common share	4.70		3.90		3.50		3.10		2.71
Year-End Financial Position
Total assets	$	37,653	$	35,128	$	25,815	$	24,424	$	26,545
Notes payable to banks and long-term debt	14,400		15,266		7,070		6,496		5,901
Other long-term obligations(1)	7,309		6,505		7,667		7,059		7,520
Financial Metrics
Net cash provided by operating activities	$	3,827	$	2,613	$	2,813	$	2,162	$	2,593
Free cash flow(2)	2,578		1,685		1,893		1,691		2,032
Other Information
Company-sponsored research and development expenses	$	764	$	639	$	705	$	712	$	569
Total backlog(4)	53,500		42,629		45,339		35,923		38,199
Square footage at year-end (in thousands)	53,283		35,379		34,112		34,392		34,264
Number of employees at year-end	85,000		70,000		67,000		65,000		64,300


(1)	Other long-term obligations include pension and OPB plan liabilities, unrecognized tax benefits, deferred compensation, environmental liabilities, deferred tax liabilities and other long-term obligations.


(2)	Free cash flow is a non-GAAP measure defined as net cash provided by operating activities less capital expenditures, and may not be defined and calculated by other companies in the same manner. We use free cash flow as a key factor in our planning for, and consideration of, acquisitions, the payment of dividends and share repurchases. This non-GAAP measure may be useful to investors and other users of our financial statements as a supplemental measure of our cash performance, but should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating cash flows presented in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”). See “Liquidity and Capital Resources” – “Free Cash Flow” in Management’s Discussion and Analysis of Financial Conditions and Results of Operations (MD&A) for more information on this measure, including a reconciliation of free cash flow to net cash provided by operating activities.

(2)

Free cash flow is a non-GAAP measure defined as net cash provided by operating activities less capital expenditures, and may not be defined and calculated by other companies in the same manner. We use free cash flow as a key factor in our planning for, and consideration of, acquisitions, the payment of dividends and share repurchases. This non-GAAP measure may be useful to investors and other users of our financial statements as a supplemental measure of our cash performance, but should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating cash flows presented in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”). See “Liquidity and Capital Resources” – “Free Cash Flow” in Management’s Discussion and Analysis of Financial Conditions and Results of Operations (MD&A) for more information on this measure, including a reconciliation of free cash flow to net cash provided by operating activities.


(3)	Years prior to 2016 do not reflect the effects from our January 1, 2018 adoption of ASC Topic 606.


(4)	We applied the ASC Topic 606 transition practical expedient related to remaining performance obligations for reporting periods presented before the date of initial application. As such, years prior to 2017 have not been restated for the adoption of ASC Topic 606. For comparative purposes, we have recast our backlog as of December 31, 2017 to reflect the impact of ASC Topic 606.


(5)	Selected financial data includes the operating results of Innovation Systems subsequent to the Merger date.

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NORTHROP GRUMMAN CORPORATION

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