Northrop Grumman to post '08 loss on $3 billion charge
LOS ANGELES -- Defense contractor Northrop Grumman warned Thursday it will post losses for the 2008 fourth quarter and full year due to a charge of $3 billion to $3.4 billion connected to past acquisitions.
Recent market turmoil has forced Northrop to write down the value of its acquisitions of Litton Industries Inc. and TRW Inc. made in 2000 and 2001, respectively. Northrop annually accounts for the difference between book values and fair values of the company's shipbuilding and space units at the end of November.
Including debt, Northrop respectively paid $5.1 billion and $7.8 billion for Litton and TRW.
JSA Research analyst Paul Nisbet explained the "paper loss" will not impair Northrop's outlook or potential earnings going forward.
The price on the books for Northrop's shipbuilding and space operations "were too high given the decline in market values," said Nisbet. "So, they have written it down to (reflect) the current market value."
Los Angeles-based Northrop forecasts 2008 earnings from continuing operations, before the charge, of about $5.20 per share -- in line with Wall Street's average estimate.
In a note to clients, Cowen & Co. analyst Cai von Rumohr said while there is still risk that pension expenses could spike in 2009 for Northrop, the company's projection for operating results in 2009 is "encouraging."
The company will postpone the release of its earnings until Feb. 3.
Shares of Northrop Grumman fell 53 cents to $47.45 in morning trading.