Ron Sugar on the "Business Hour" on KNX Radio in Los Angeles
Ronald D. Sugar
Chairman and Chief Executive Officer,
Northrop Grumman Corporation
On Tuesday, April 24, 2007, Northrop Grumman Chairman and Chief Executive Officer Ronald Sugar appeared on the “Business Hour” on KNX Radio in Los Angeles to discuss the company’s 2007 first quarter financial results. Below is the transcript.
FRANK MOTTEK:
Southern California-based defense contractor Northrop Grumman reports first quarter profit is up but a bit less than Wall Street analysts expected. Quarterly net profit rose to $387 million, or a buck 10 a share. The Street was looking for $1.14. Northrop Grumman's stock closed down $2.45 at $74.17. Joining us now on the KNX Business Hour, Ron Sugar, the Chairman and CEO of Northrop Grumman.
Dr. Sugar, thanks again for being with us here on the KNX Business Hour, and let's go right to the top here and get your reaction to the earnings report you released today.
RONALD SUGAR:
We had a strong quarter, Frank. We were up in every dimension – sales, profits, earnings per share, cash flow, very strong bookings. We're very pleased. We're off to a good start for the year and we reconfirmed our guidance for the full year.
MOTTEK:
Tell us, how is military spending going from your standpoint?
SUGAR:
Well, I think the nation continues to be in a series of very difficult situations around the world. Certainly, the revenue that we book relates to planning for the future of the nation over the next five, 10, 15, 20 years, and that's very steady and strong. The nation does need to have ships and planes and radars and spacecraft of the future, and that's what we do.
MOTTEK:
All right, and, of course, with the wars going on in Iraq and Afghanistan and homeland security is still a major issue, tell us what's your outlook for the future of Pentagon spending.
SUGAR:
Well, we don't see any decline soon. We think there is very strong bipartisan support for strong defense budgets. While there are issues in terms of conduct of the Iraq war, those are being debated quite visibly and publicly by both parties. I think there is a strong bipartisan consensus for support for our military troops and the need for a strong national defense worldwide.
MOTTEK:
And you are, of course, the third-largest defense contractor in the country and, I believe, the largest military shipbuilder, right? Tell us about that.
SUGAR:
That is correct. We are the largest military shipbuilder, but ships are actually our smallest business. Our largest business is in information and services, and we do electronics and we do aircraft and spacecraft as well. And here in Southern California we have nearly 30,000 people hard at work on spacecraft and aircraft and a whole variety of software systems, and we're looking for more good people to join us here.
MOTTEK:
Well that's very interesting, and we want to get information about that. And let's talk about space. For example, with the space shuttle program starting to wrap up, there are some exciting things on the drawing board. What's Northrop Grumman's role in all of that?
SUGAR:
We're involved in largely military space and also in environmental sensing. We're involved in satellites that observe the Earth and also the universe. We have some exciting work going on there – advanced telescopes, advanced electronic systems. In the area of manned space, we're participating on the upcoming Ares launch vehicle program, as a participant in that. So, we see a continuing effort, both at NASA as well as the Department of Defense.
MOTTEK:
For unmanned aircraft, tell us what's on the drawing board, and how is that program going?
SUGAR:
That is a tremendous activity at Northrop Grumman in three Southern California locations – in El Segundo, in Northern San Diego County, and also out in Palmdale, where we actually build many of these aircraft.
We're building aircraft such as the Global Hawk, which is a high-altitude aircraft that can dwell for up to 30 or 40 hours at a time. It flies about 65,000 feet. We're building unmanned helicopters that have the ability to do reconnaissance in a remote controlled fashion. We're looking at the next generation of combat aircraft that can be landing and taking off from Naval aircraft carriers and actually conduct combat missions at great range. So a lot of exciting work in the future in unmanned combat aircraft and unmanned reconnaissance aircraft.
MOTTEK:
And as far as high-tech weaponry is concerned, are you involved in that? Lasers, for example?
SUGAR:
We are. We are probably the nation's premier provider of laser weapon technology. We're working on not only chemical lasers, but also advance solid-state lasers. These will give us the opportunity to provide line-of-sight defense in the future for ships, on aircraft, and platforms on the ground. So a lot of work where technology can significantly make a difference for us in the future.
MOTTEK:
And I understand, also, you recently came out with a postal sorting system. Tell us about that.
SUGAR:
We did. You don't think of Northrop in this area but we, in fact, did bring in almost a $1-billion contract to do sorting of packages and flats – large-order-size packages for the United States Postal Service. We're going to be delivering a large number of systems to post offices around the country. This is a continuation of work we've done for them in the past. It's pretty sophisticated mechanical sorting systems. Good business for us. It's an example of how we've diversified away from just being entirely dependent on defense.
Another example I want to give to you is what we're doing in New York City. They're putting in a very, very sophisticated emergency response wireless system. We've got a number of sites already put together in Lower Manhattan. This is a system that you can hear and talk in urban canyons and also in high-rise buildings up to about 60 stories. It’ll allow the firefighters and policemen and the other emergency workers to be able to talk together as they were unable to do in 9/11.
MOTTEK:
That's very, very important. And is the "help wanted" sign up there at Northrop Grumman, given all of these various areas that you're involved in?
SUGAR:
It certainly is. We're looking for quality people. We're looking for U.S. citizens with a variety of backgrounds -- technical backgrounds and also non-technical backgrounds – who would like to come to work for a great company and be part of defining the future.
MOTTEK:
We're on the line with Ron Sugar, who is Chairman and CEO of Northrop Grumman Corporation based here in Southern California. And, of course, you're very active in a variety of causes here in Southern California, and the philanthropic causes as well. And I see here you are also the national fundraising chairman of the Pearl Harbor Memorial Fund. Tell us about that.
SUGAR:
I am, Frank. The Pearl Harbor Memorial Fund is very important. We're raising $50 million to rebuild the Pearl Harbor Memorial Visitors Center in Hawaii. This is very important for us as a nation to understand the events of that time and also the lessons for now, and the future, about preparedness and being willing to do what it takes to defend freedom.
We're proud to be part of that. Co-sponsors of that are Senators Inouye from Hawaii, Senator McCain, Tom Hanks and others who see this as an important national effort.
MOTTEK:
Is there a Web site for that for people to get that effort?
SUGAR:
It’s www.PearlHarborMemorial.com.
MOTTEK:
Dr. Ronald Sugar, Chairman of the Board and CEO of Northrop Grumman Corporation based here in Southern California. Dr. Sugar, thanks again for being with us here on the KNX Business Hour.
