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Northrop warns on 2001
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December 6, 2000: 1:04 a.m. ET
Reduced income from pension fund investments could lower its 2001 earnings, report says
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NEW YORK (CNNfn) - Northrop Grumman Corp., which has prospered because of pension-fund investments in the past, warned that reduced income from those investments this year could lower its earnings for 2001, according to a published report.
The Wall Street Journal's Web site reported Wednesday morning that reduced pension-fund income could cut $50 million, or 45 cents a share, from analysts' projections of at least $656 million, or $9.15 a share, in 2001 earnings.
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Strong stock-market conditions in recent years have boosted the pension-fund proceeds for Northrop, which has been getting about half its earnings from that source.
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Richard Waugh, chief financial officer of the Los Angeles-based aerospace concern, said in a conference call Tuesday that such a shortfall was not yet certain. He said pension investment gains in the last two months of this year "can have a significant impact" in offsetting any potential earnings decline, the Journal reported. Northrop (NOC: Research, Estimates) generally records pension fund gains in the subsequent year's earnings.
Waugh added that anticipated operating gains from the company's defense electronics, information services or other businesses could make up for any pension shortfall, the story said.
Strong stock-market conditions in recent years have boosted the pension-fund proceeds for Northrop, which has been getting about half its earnings from that source, the story said.
The reliance on pension-fund returns makes the company unusual within the aerospace and defense industry, although companies in other industries like financial services have become more aggressive about booking pension-fund gains to their bottom lines in recent years, the story added. 
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