Northrop’s Profit Climbs 4.8% After 2 Acquisitions

Northrop Grumman Corp., maker of the Global Hawk unmanned surveillance aircraft in use over Afghanistan, said fourth-quarter profit rose 4.8% as sales almost doubled after acquisitions.

Net income rose to $131 million, or $1.28 a share, from $125 million, or $1.73, in the year-earlier period. The average number of shares outstanding increased by 35%. Sales rose to $4.3 billion from $2.2 billion, Northrop said in a statement.

The profit increase came from Northrop’s recent acquisitions of Litton Industries Inc. and Newport News Shipbuilding Inc., making Northrop the No. 1 builder of warships.

Some investors have said they’re concerned that Northrop may have expanded too quickly.

“The big question is, how are they going to be able to get cash out of those businesses to pay down the debt,” said Jonathan Schrader, an analyst with Morningstar Inc., who follows the defense and aerospace industries and says he doesn’t own Northrop shares.

Northrop Grumman shares rose 27 cents to $106.81 on the New York Stock Exchange. They’ve risen 22% in the last year.

Century City-based Northrop, whose most notable program in recent years was the B-2 stealth bomber, now gets about 25% of its profit from shipbuilding, a business it entered last year after buying Litton for $5.1 billion.

The company completed the $2.6-billion acquisition of Newport News, the only maker of nuclear aircraft carriers, this month, after the U.S. government blocked a bid by rival General Dynamics Corp. It also expanded its businesses in systems and information technology, areas in which Northrop Chairman Kent Kresa said he expects to see growth.

“The strategy that created the new Northrop Grumman has been validated by the current defense spending priorities,” Kresa said in a conference call.

Northrop’s debt at the end of 2001 was $5 billion, almost five times the $1.3 billion in debt the company had at the end of 2000. Interest expense in the fourth quarter rose to $104 million from $40 million a year ago.

Standard & Poor’s Corp. and Moody’s Investors Service have assigned Northrop’s debt their lowest investment-grade ratings.

Northrop will be able to get sufficient money out of its acquired businesses to pay down debt, Chief Operating Officer Ronald Sugar said in an interview. Northrop has acquired and successfully integrated at least 14 companies in the last decade, he said.

Sales at Northrop’s Electronic Systems business, which includes air-traffic control and defense electronics, rose 60% to $1.5 billion, mostly because of the addition of Litton businesses. Operating profit almost tripled to $145 million from $55 million a year earlier.

Northrop’s Integrated Systems division, whose programs include the B-2 and Global Hawk unmanned aerial vehicle, had a 24% drop in operating profit, to $42 million from $52 million.

Northrop said it expects to benefit from increases in spending on intelligence, homeland security and precision-guided weapons.

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Other California companies reporting earnings, excluding one-time gains or charges unless noted:

* Chiron Corp. reported net income was $44.8 million, or 23 cents a share, compared to a loss of $134.4 million, or 74 cents, because of acquisition costs, a year earlier. The Emeryville-based biotechnology company said revenue increased 8.3% to $317.9 million from $293.5 million.

* McClatchy Co. reported net income fell to $20.9 million, or 46 cents a share, from $26.7 million, or 59 cents, a year earlier. The Sacramento-based newspaper publisher said revenue fell to $276.7 million, down 10.7% from $310 million.