Nation’s Largest Defense Contractor Reports More Bad News
ST. LOUIS (AP) _ McDonnell Douglas Corp. on Friday reported a 58 percent decline in fourth- quarter profits as major write-offs in several divisions plagued the nation’s largest defense contractor.
For the three-month period ending Dec. 31, the company had profits of $60 million, or $1.56 a share, compared with $145 million, or $3.79 a share, for the same period a year earlier.
Revenue for the quarter totaled $4.29 billion, up slightly from $4.14 billion for 1988′s final quarter.
″This is obviously a major disappointment,″ said Phil Friedman, a stock analyst with Drexel Burnham Lambert Inc. in New York. ″You never expect write-offs like these.″
McDonnell Douglas stock closed at $57.62 1/2 Friday on the New York Stock Exchange, down 62 1/2 cents.
The company, based in St. Louis, took $127 million in after-tax write-offs in the quarter - $91 million for its AH-64 Apache helicopter, $22 million for its T-45 aircraft training system, and $14 million in its missiles, space and electronic systems segment.
Companies take write-offs when they have to reduce the value of an asset. McDonnell Douglas attributed its reductions to higher cost estimates that lowered earnings rates.
The company already had reductions of $162 million in the first three quarters of the year that contributed to a 37 percent decline in annual profits.
For the year, the company reported profits of $219 million, down from $350 million for the same period a year ago. Revenue increased to $14.6 billion from $14.4 billion in 1988.
″They’re having a lot of trouble figuring out where their problem is and that doesn’t give the investor a lot of confidence,″ said Paul Nisbet, an analyst with Prudential Bache Securities Inc. in New York.
Along with the write-offs, the company’s transport aircraft division, based in Long Beach, Calif., continued to struggle through cost overruns and increased interest expenses.
The division, called Douglas Aircraft Co., has said all of its programs including the development of the Air Force’s C-17 cargo plane and the new commercial, wide-body jet, MD-11, are behind schedule.
In the fourth quarter, the division had a profit of $5 million in the quarter, compared to $76 million for the same period a year earlier. For the year, the division lost $222 million, compared to profits of $127 million in 1988.
McDonnell Douglas is the nation’s second largest maker of commerical aircraft.