Northrop Grumman earnings rise as it eyes acquisition

The Associated Press
Thursday October 25, 2001

LOS ANGELES — Northrop Grumman Corp., fresh off a government decision that aids its acquisition bid for Newport News Shipbuilding Inc., reported strong third quarter earnings Wednesday, although net income dropped because of investment losses in its pension fund. 

The Los Angeles-based defense contractor reported net income of $117 million, or $1.28 per share for the quarter ended Sept. 30, compared to $150 million, or $2.11 per share, in the same period last year. 

Analysts surveyed by Thomson/First Call had expected earnings of $1.47 per share. 

Excluding the pension fund losses, Grumman reported a 58 percent increase in earnings to $161 million, or $1.79 per share, due mainly to its acquisition of Litton Industries and continuing strong demand for the radar, guided missiles and other high-tech systems produced by its Electronic Systems and Information Technology division. 

Grumman said it is on track to report earnings per share of between $6.25 and $6.40 for the year and double-digit earnings growth in 2002. 

Revenue for the third quarter more than doubled to $3.6 billion, compared to $1.7 billion in the same quarter last year. 

The company said its Information Technology Division generated $1 billion in sales during the most recent quarter and won $1 billion worth of new contracts, including a system to provide advanced warning of Internet-based attacks on Department of Defense computers. 

On Tuesday, the Department of Defense said it favors Northrop Grumman’s bid for Newport News over a rival offer from General Dynamics. The Justice Department went to court to block the General Dynamics bid. 

Government lawyers said a merger between the Newport News, Va.-based shipbuilder and General Dynamics would result in a monopoly for building nuclear submarines, a weapon vital to national security. 

Northrop Grumman has offered to buy Newport News for a combination of cash and stock originally worth $2.1 billion. 

Grumman chief executive officer Kent Kresa said his company is almost finished with its due diligence examination of Newport News and hopes to close the deal sometime in November or shortly thereafter if it receives final federal approval. 

Grumman entered the shipbuilding industry earlier this year when it acquired Litton, making it the largest producer of non-nuclear ships in the country. 

Shares of Northrop Grumman were up $3.74 to $103.74 at the close of regular trading on the New York Stock Exchange.