Northrop’s Profit Drops 75% in Quarter

Northrop said Tuesday that weak profits in the second quarter resulted partly from provisions for investments in a new classified program that was awarded during the quarter.

Northrop earned $23.1 million on sales of $1.4 billion in the second quarter, a 75% decline from the year earlier, when earnings were also boosted by several non-operating gains.

In last year’s second quarter, Northrop posted a profit of $91.1 million on sales of $1.22 billion. The earnings last year included a $50-million legal settlement with McDonnell Douglas and a $34-million insurance award for the crash of an F-20 jet fighter.

The Los Angeles-based aerospace firm said it could provide few details about the new classified program. Financial analysts said the announcement took them by surprise. Northrop termed the program as “significant” but declined to say whether it is an aircraft or electronics program.

Northrop said operating income in its aircraft business dropped to $4.2 million in the second quarter from $144.1 million last year.

The 15% increase in this year’s revenue was attributed to greater sales volume in its aircraft and electronics segments, including a “higher level of customer-sponsored research,” the euphemism that the firm uses to describe its big stealth bomber program.

Meanwhile, the firm said operating income in its electronics business increased to $21.3 million from $18.7 million, despite recent problems it has encountered on the MX missile guidance system.

The Air Force has suspended $4 million in monthly progress payments because Northrop has not been meeting delivery deadlines.

F-20 expenses were $39 million, down from $43 million in the second quarter of 1985. The Air Force was scheduled to have made a decision by July 1 on whether it will purchase the F-20, but the decision has been pushed back to this fall.