Northrop profit rises sharply Production-supply needs of aircraft industry boost earnings in third period

October 23, 1997|By Greg Schneider | Greg Schneider,SUN STAFF

The soaring commercial jetliner business helped boost Northrop Grumman Corp.'s third-quarter profit 25.6 percent higher than during the same period last year, the company said yesterday.

Gains in supplying aircraft parts to Boeing Co. offset a softer performance by the aerospace company's electronics business, and net income of $98 million for the quarter topped last year's mark of $78 million.

The profit translated to $1.46 per share, compared to $1.18 per share for the third quarter of 1996.

Overall sales for the quarter were $2.3 billion, up from $2.2 billion last year.

"They came in about as expected. It was a good quarter," said Paul Nisbet, an analyst with JSA Research. "They were having trouble keeping up with Boeing, and Boeing was having trouble keeping up with Boeing, so there was nothing new."

Boeing announced a $1.6 billion charge for the quarter yesterday because of difficulties meeting huge orders for jetliners. Northrop Grumman is the prime supplier to the Boeing 747 and provides parts for every 700-series plane Boeing makes.

The aircraft business also got a boost from the military, with increased deliveries of B-2 Stealth bomber parts and support work that offset a decline in sales of the F/A-18 fighter plane, a Boeing jet on which Northrop Grumman is the major subcontractor.

Overall aircraft-related sales hit $1.19 billion, up from $1.02 billion during the same quarter last year.

Headquartered in Los Angeles, Northrop Grumman's main electronics plant is the Electronic Sensors & Systems Division in Linthicum. Profits on that side of the company took a $53 million hit because of unexpected costs in converting a particular crop of Boeing 707s for use as Joint STARS radar surveillance planes.

Northrop Grumman's plant in Lake Charles, La., reconfigures used jetliners for the program, and the latest batch of planes had more damage than expected from years of ferrying cattle in Third World countries, officials said.

Now the plant has a new management team and a new process for converting the planes.

"At this time, we expect that [the $53 million charge] will resolve the financial aspects of this remanufacturing program," said corporate spokesman Jim Taft. "We do believe there will be some impact for the next two or three quarters with regard to our margins on that program, but then we see a gradual return to expected margins by late next year."

Nisbet agreed that "they seem to have gotten their arms around this and have a stronger management team in there now."

Northrop Grumman logged a series of one-time charges and gains during the quarter, including $24 million recovered from last year's sale of a facility in Georgia. The merger earlier this year with Logicon Inc., a military computers company, carried a cost of $18 million during the quarter.

Logicon helped boost the sales of the corporation's information technology segment, to $238 million from $222 million during the same portion of last year. But operating profit in that segment was down to $22 million from $28 million the year before.

Sales for the year to date are up 7 percent, to $6.6 billion from $6.2 billion for the same part of 1996, and net income is up 21 percent, to $290 million from $240 million.

Northrop Grumman is being acquired by Lockheed Martin Corp. for about $12 billion.

Pub Date: 10/23/97

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