Brian Bradley
NS&D Monitor
7/31/2015
Winning the Long Range Strike-Bomber contract would not change Northrop Grumman’s expectation of $700 million in capital expenditures for calendar year 2015, while losing the competition would have little effect on whether the company would acquire or be absorbed by another company, Northrop officials said on Wednesday during a company conference call. Aerospace analysts and stakeholders have recently hypothesized that Northrop could acquire or merge with another company if it loses the highly anticipated LRS-B award, now expected for sometime this fall.
“[W]e do not manage our company on the top line,” said Northrop Grumman President and CEO Wes Bush. “We manage the company based on value creation. … So the question of, if we’re not successful on one thing or another and perhaps that means our sales are not growing as quickly, do we try and make that up some way with M&A, that’s not the way we think about it. What we do think about is look at each of the alternatives that we see that are available to us in one way or another, stack them up against our priorities, stack them up against risk-adjusted value creation opportunity and make our decisions on that basis and that’s the way we’re going to be doing.”
Corporate Vice President and CFO Kenneth Bedingfield said Northrop thinks $700 million is a “reasonable” capex projection for 2015. “And given what we’ve seen publicly about the timing of an LRS[-B ] award, I don’t think that impacts us significantly one way or the other,” he said. Northrop is competing with a Boeing-Lockheed Martin team for the estimated $44 billion-$55 billion contract. The Air Force intends to procure 80 to 100 of the aircraft at a flyaway cost of $550 million apiece.
