NORTHROP PROFITS UP 4.6% IN QUARTER LITTON ACQUISITION HELPS DRIVE GAIN.

Byline: Gregory J. Wilcox Staff Writer

CENTURY CITY - Defense giant Northrop Grumman Corp. reported a 4.6 percent gain in fourth-quarter profits Wednesday, reflecting the results of an acquisition binge during 2001.

For the quarter, Century City-based Northrop Grumman earned $131 million, or $1.28 per share, on sales of $4.3 billion. In the like period during 2000, the company earned $125 million, $1.73 cents, on sales on $2.2 billion.

Economic earnings, which factor out noncash items like the amortization of good will and are a key focus of Wall Street analysts, were stronger.

Northrop Grumman officials said economic earnings totaled $158 million during the quarter, an annual gain of 49 percent.

Kent Kresa, the company's chairman and chief executive officer, noted that the acquisitions last year - of Woodland Hills-based Litton Industries Inc., Newport News Shipbuilding and the Electronics and Information Systems group of Aerojet-General Corp. - strengthened Northrop Grumman's balance sheet.

``Last year's strategic acquisitions, which added some $8 billion in annualized revenues, provided new core competencies and established a solid foundation for future growth,'' he said.

Northrop Grumman's fourth-quarter operating margin increased 25 percent to $314 million from $252 million in the year-ago period, despite a sharp drop in pension income.

During the fourth quarter, pension income declined to $88 million from $128 million in the last three months of 2000.

The company's earnings report came the morning after President George W. Bush, in his State of the Union speech, vowed to boost the defense-spending budget.

This was obviously good news for Northrop Grumman, the nation's third biggest defense contractor, which builds weapons systems used on land, sea and in the air.

``Counter-terrorism, suppressing regional conflicts and peacekeeping have become the priority mission of the 21st century, and these missions require 21st century systems,'' Kresa said.

Bolstering this outlook, the company also reported Wednesday that it has been awarded a $41.5 million contract from the U.S. Air Force for engineering and manufacturing development work for the Global Hawk unmanned aerial vehicle system.

This experimental, pilotless surveillance aircraft has been used successfully during the war in Afghanistan.

Work is expected to be completed by December 2003 and will be performed at Edwards Air Force Base and at company facilities in Palmdale and San Diego.

Northrop Grumman officials also said they expect earnings of $6.60 to $7.10 per share this year.

``Each of the segments came in just as advertised, and cash flow was strong, so the fourth quarter was very good,'' said Joseph Nadol, an analyst at J.P. Morgan in New York.

For the full year Northrop Grumman earned $427 million, $4.80 per share, versus net income of $608 million, $8.58 a share, in 2000.

Sales for 2001 increased 78 percent to $13.6 billion from $7.6 billion for 2000 on the strength of the acquisitions.