Northrop Grumman profits despite trouble

IT division successes offset contract delays in electronics section

Aerospace

October 21, 1999|By Greg Schneider | Greg Schneider,SUN STAFF

Slow international sales at the Electronic Sensors & Systems Sector in Linthicum dampened Northrop Grumman Corp.'s overall performance during the third quarter, but the corporation still posted a 10 percent earnings increase.

The California-based aerospace company reported net income of $128 million, or $1.83 per share, for the three months ending Sept. 30.

That compared with $116 million, or $1.67 per share, for last year's third quarter.

Pension fund investment income and strong performance by the company's information technology sector accounted for the increase.

Overall sales decreased slightly, to $2.1 billion from the $2.2 billion logged in the year-ago period.

The local electronics operation, which is one of three sectors that make up Northrop Grumman, saw sales sag by 17 percent compared with last year's third quarter, dropping to $626 million from the 1998 mark of $752 million.

The sector's operating margin dropped even more sharply for the third quarter, to $39 million from the $68 million reported last year.

A Northrop Grumman news release blamed the lagging numbers at the Electronic Sensors & Systems Sector, or ESSS, on "delayed international contract awards."

Those delayed contracts were in three main areas, according to a corporate spokesman:

ESSS is slated to supply combat radar for F-16 fighter planes ordered by Egypt and Israel, but those countries have not supplied the contractual paperwork.

Argentina has ordered $141 million worth of ground radars, but a judge in that country has held up the work because of bid protests filed by competitors.

Boeing has subcontracted with ESSS to provide radar for an Australian surveillance plane known as Project Wedgetail, but "those contracts haven't kicked in yet, either," said corporate spokesman Bob Bishop.

Despite the slow quarter at ESSS, "we continue to anticipate double-digit sales and margin growth going forward as these recent program wins are brought under contract and several current contracts transition into production," said Kent Kresa, Northrop Grumman's chairman, president and chief executive officer.

The lag at ESSS was partially offset by strong growth at Logicon Inc., which is Northrop Grumman's Information Technology Sector.

The Northern Virginia-based Logicon saw sales rise to a record $376 million in the third quarter, compared with $258 million in the third quarter of 1998. Its operating margin climbed over the same period to $23 million from $13 million.

Pension fund investment income also boosted Northrop Grumman's totals, reaching $92 million in the quarter as compared with $67 million in the comparable period last year.

The company's third sector -- Dallas-based Integrated Systems & Aerostructures -- saw its sales decline to $1.16 billion in the third quarter from the $1.25 billion logged a year ago.

A slowdown in the sales of Boeing jetliners caused the drop; Northrop Grumman makes the fuselage for the wide-body 747 and components for every other Boeing model.

Northrop Grumman stock rose 43.75 cents yesterday to close at $54.875.

Pub Date: 10/21/99

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