Cost Overruns Will Hurt Quarterly Profit, Litton Says

Litton Industries Inc. on Monday warned that fiscal second-quarter profit will be below forecasts because of cost overruns on contracts to develop guidance and control systems in combat ships and helicopters.

The company’s shares fell 14% after it said earnings for the quarter ended last week will be about 80 cents a share. It was forecast to earn $1.05, the average estimate of analysts surveyed by First Call/Thomson Financial.

Woodland Hills-based Litton, the No. 1 U.S. maker of nonnuclear combat ships, has about $184 million in contracts with the U.S. and the Royal Australian Navy to develop software to hook together the machinery, bridge and other systems on ships and helicopters.

Higher-than-expected development expenses and increased customer requirements raised costs. It didn’t disclose the amount. Litton will seek to be reimbursed by its customers.

Profit for fiscal 2000 is expected to match the $4.78-a-share average estimate of analysts.

Litton shares declined $5.81 to close at $36.44 on the New York Stock Exchange. Earlier, they touched a 52-week low of $36.25. The shares have declined 38% in the past 12 months.

The revised profit estimates don’t include any reimbursement for the increased costs, Michael Brown, Litton’s chief executive, said on a conference call.

Litton said its $123.7-million contract with the U.S. Navy includes the initial development and manufacture of systems for eight ships and one land-based system. The contract has an option for as many as 19 additional systems.

The Australian contract is valued at about $60 million. The market for similar upgrades is expected to be about $5.7 billion within five years.

The company is considering the sale of some businesses to concentrate on higher-growth products, Brown said. He didn’t elaborate.