Administration June 1, 2004

Northrop Pension Drags Down 4Q

January 30, 2002 (PLANSPONSOR.com) - Northrop Grumman Corp's 9% loss for the fourth quarter is yet another example of how a retirement plan can significantly drag down - or boost - the corporate bottom line.

Reported by

Fred Schneyer

Because Northrop gets approximately 50% of its overall earnings from its pension fund, weak pension performance caused by a stumbling financial market can put a sizable crimp in Northrop’s overall balance sheet – as it did during the latest fourth quarter.

With the effect of Northrop’s pension performance, a 45% earnings drop to $88 million and increasing interest expenses, the company ended the quarter with an overall 9% profit dip to $131 million, Reuters reported.

But, take out the pension fund’s effect and Northrop’s total earnings were $158 million, or $1.55 per share. Sales nearly doubled to $4.3 billion.

In recent years, Northrop – and other companies with large pensions – have seen both the good and the bad effects of having sizable pension obligations.

Strong economies and strong markets have given their balance sheets a turbo boost while a bear market has substantially dragged down the rest of the companies’ finances.