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 | Apr-15-2008Northrop Falls Most Since 2003 on $360 Million Charge (Update2)(topic overview) CONTENTS:
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LONDON, Apr. 15, 2008 (Thomson Financial delivered by Newstex) -- Northrop Grumman (NYSE:NOC) Corp. said Tuesday it expects to record a first quarter pre-tax charge of between $320 million and $360 million, or 61 cents to 69 cents, due to higher costs and delays linked to the development of its LHD-8 amphibious assault ship. The company said the charge also included the cost of an evaluation of other ships under construction at its Gulf Coast shipyard, including the resource impact caused by the delay of the LHD-8 ship. It said the amount of the expected charge will be finalized on the conclusion of an ongoing review of costs and schedule delays in its shipbuilding operations. Northrop Grumman said the expected charge does not affect its previously announced 2012 financial targets. mc1/mc1/rfw Copyright Thomson Financial News Limited 2007. [1] The company is performing an evaluation on other ships under construction at the Gulf Coast shipyard, including the resource impact caused by the delay in the LHD-8. Northrop Grumman will announce the amount of the charge and updated 2008 financial guidance while announcing its first quarter results later in April.[2]
The charge reflects a re-evaluation of the estimated schedule and cost to finish an LHD-8 amphibious assault ship, resource impacts on other Gulf Coast vessels and a purchased intangible assets evaluation related to Northrop's shipbuilding operations.[3] The charge will also reflect the resource impact on other Gulf Coast ships, and an evaluation of purchased intangible assets related to the shipbuilding business, Northrop added. Northrop, the No. 3 Pentagon supplier behind Lockheed Martin Corp (LMT.N: Quote, Profile, Research ) and Boeing Co (BA.N: Quote, Profile, Research ), said the expected charge does not impact its 2012 financial targets announced earlier.[4]
The charge, which totals $320 million to $360 million before tax, also covers the "resource impacts on other Gulf Coast ships, and an evaluation of purchased intangible assets associated with the shipbuilding business," Northrop Grumman said.[5]
Northrop Grumman (nyse: NOC - news - people ) said Tuesday that it expects to take a charge of $320 million to $360 million in the first quarter, as deliveries of an amphibious assault ship will be delayed.[6] April 15 (Bloomberg) -- Northrop Grumman Corp., the third- largest U.S. defense company, dropped the most since 2002 in New York trading after saying it will take a first-quarter charge of as much as $360 million because of delays on a new ship. The LHD-8 amphibious assault ship will now be delivered in the second quarter of 2009 instead of the end of this year, Los Angeles-based Northrop said in a statement today.[7]
The Los Angeles-based defense and government contractor estimated that the charge will be between 61 cents and 69 cents per share. Northrop is due to report its first quarter earnings later this month. The charge is likely to be a big one for Northrop. Its net income in the first quarter last year was $387 million. The ship, called the LHD-8, will now be delivered in the second quarter of 2009 instead of the end of this year, Northrop said ' adding that a review identified the need for a'substantial rework' on the ship. 'In its current state, the ship does not meet our quality standards and it will not be delivered until it does,' Chief Executive Ronald Sugar said in the statement.[8] After hitting a one-year low of $72.53 in May, the stock hit a one-year high of $85.21 in November. Shares of NOC are trading lower this morning after the company announced it expects to take a charge of $320 million to $360 million, or 61 to 69 cents per share, in the first quarter, related to its shipbuilding business.[9] The company added that the anticipated charge will not impact its earlier provided 2012 financial targets. The company said the pre-tax charge in its first quarter would be $320 to $360 million or $0.61 to $0.69 per share, and the total charge will be finalized upon conclusion of ongoing reviews and will be recorded in the Shipbuilding segment.[2]
Analyst Conference Call to be Webcast Today at 8:30 a.m. EDT LOS ANGELES, April 15 /PRNewswire-FirstCall/ -- Northrop Grumman announced today that it expects to record a pre-tax charge to 2008 first quarter earnings of $320 to $360 million or $0.61 to $0.69 per diluted share.[10]
Northrop declined $4.48, or 5.8 percent, to $72.36 at 12:30 p.m. in New York Stock Exchange composite trading, the biggest drop since Nov. 4, 2002. The charge will be $320 million to $360 million before tax, or 61 cents to 69 cents a share, with the final amount to be disclosed in the earnings report later this month, Northrop said.[7] The company anticipates the charge will be between $320 million to $360 million, or 61 cents to 69 cents per share.[3]
The charge of $320 million to $360 million will mainly reflect a re-evaluation of the estimated schedule and cost to complete the construction of the amphibious assault ship known as LHD-8, the company said in a statement.[4] Northrop Grumman Corp. said Tuesday that it plans to take a charge of up to $360 million on its first-quarter earnings because delivery of an amphibious assault ship will be delayed.[8]
Northrop Grumman stock is falling in morning trading on a charge it expects to post on delayed deliveries as other aerospace and defense stocks are mixed.[6] April 15 (Reuters) - Defence contractor Northrop Grumman Corp (NOC.N: Quote, Profile, Research ) expects to take a first-quarter pretax charge of 61 cents to 69 cents a share related to delays in its amphibious-assault-ship program due to quality concerns, sending its shares down more than 3 percent.[4] LOS ANGELES -- Military contractor and shipbuilder Northrop Grumman Corp. said Tuesday it expects to take a charge in the first quarter related to its shipbuilding business.[3] The amount of the expected charge will be finalized upon conclusion of ongoing reviews and will be recorded in the Shipbuilding segment. The amount of the charge and updated 2008 financial guidance will be disclosed when Northrop Grumman issues its first quarter results later this month.[10]
Northrop now expects the LHD-8 will be delivered in the 2009 second quarter. The company does not anticipate the charge will impact its prior 2012 financial forecasts and said the actual amount will be known once it completes ongoing reviews.[3]
The LHD-8 is expected to be delivered in the second quarter of 2009, said Northrop, which makes warships, nuclear submarines, unmanned surveillance aircraft and a range of military electronics.[4]
The ship is now set for delivery in the second quarter of 2009, Northrop Grumman said.[5] Northrop Grumman noted that the delays in ship construction and financial performance for the program were exacerbated by Hurricane Katrina.[2] The additional work required on LHD-8 will lead to delays in construction of other ships and raise cost of material, Chief Financial Officer James Palmer said on the conference call. Quality problems identified "late in the ship's construction'' will mean "time, effort and cost is far greater than if they were done earlier,'' Palmer said.[7] Delays in construction of the ship and financial performance for the program were exacerbated by Hurricane Katrina. The company will hold an analyst conference call at 8:30 a.m. EDT today to discuss this release.[10]
An evaluation is being performed on other ships under construction at the Gulf Coast shipyard, including the resource impact caused by the delay in the LHD-8.[10] "The LHD-8 Amphibious Assault Ship will be no exception. In its current state, the ship does not meet our quality standards and it will not be delivered until it does. We are deeply disappointed by the impact of this unanticipated development on our customer and our shareholders. This is not acceptable to me or anyone at this company.[10] Bush had said Jan. 24 that progress was being made for scheduled delivery in 2008. New and inexperienced "green'' workers were hired to replace employees displaced by the hurricane, contributing to the "poor quality'' on the first all-electric amphibious assault ship of its kind, Bush said.[7]

The stock now has dropped about 2.5 percent since the company beat Boeing Co. for a $35 billion Air Force aerial tanker program on Feb. 29. "In its current state, the ship does not meet our quality standards and it will not be delivered until it does,'' Chief Executive Officer Ronald Sugar said in the statement. [7] Northrop Grumman Corp. stock fell $3.28, or 4.3 percent, to $73.56.[6]
The delay and charge knocked Northrop to a 52-week low, from the intraday high of $85.21 on Nov. 7.[7] Shares in Northrop were down 4.1 percent top $73.73 in early trading Tuesday.[8] NOC closed Monday's regular trading session at $76.84, on a 731 thousand share volume.[2]
On average, 17 analysts polled by First Call/Thomson Financial expect first quarter earnings of $1.28 per share, while revenue is estimated to be $7.72 billion.[2] Analysts polled by Thomson Financial forecast a first-quarter profit of $1.28 per share.[3]

The expected charge does not impact the company's previously announced 2012 financial targets. [10] The cost and schedule impacts to be finalized in that evaluation are included in the above charge.[10]

All times are ET. : Time reflects local markets trading time. - Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. Disclaimer [5]
SOURCES
1. Northrop Grumman to report 1Q charge 61c-69c on shipbuilding costs, delays 2. Northrop Grumman To Record Charges In Q1 Towards Shipbuilding Business [NOC] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news . 3. Northrop Grumman Expects 1Q Charge | Chron.com - Houston Chronicle 4. UPDATE 1-Northrop to record Q1 charge on assault ship delay | Industries | Industrials, Materials & Utilities | Reuters 5. Northrop Grumman To Post 1Q Charge On Shipbuilding Operations 6. Opening Glance: Northrop down, defense stocks move sideways - Forbes.com 7. Bloomberg.com: U.S. 8. Los Angeles Business Journal Online - business news and information for Los Angeles California 9. Northrop Grumman Corp. (NOC) NewsBite - NOC Falls on Expected 1Q Charge 10. Northrop Grumman Announces Schedule Extension and Charge on Shipbuilding Program

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