This is a partial transcript from Your World with Neil Cavuto, July 28, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.
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NEIL CAVUTO, HOST: Northrop Grumman (search), the company behind the B-2 Stealth Bomber and the Global Hawk Unmanned Spy Plane, seeing its profits jump 14 percent in the latest quarter, far better than the street expected.
Northrop earning a buck-eight a share, blowing past estimates. Sales surging 57 percent to more than $6.5 billion. The stock taking off. It climbed 6 percent on Monday.
Joining me now with all the details on this performance, the man who runs Northrop Grumman, Ron Sugar. Mr. Sugar joins us from Los Angeles.
Mr. Sager, thank you for joining us.
CAVUTO: How much of this, sir, is built on the growing angst about our nation’s security and preference for defense and military stocks?
SUGAR: Well, certainly, the world has become a more dangerous place. It was always a dangerous place. It’s looking more dangerous now all the time.
The demand that we see over the next several years and, certainly, what we’ve seen to this point is the need for the technology that we’re providing.
This is giving us the opportunity to have the kind of quarter we had and the opportunity to have double-digit growth estimates for next year as well.
CAVUTO: Do you think now giving -- I think "morass" is too strong a word, but the difficulties we’re having in Iraq, in a perverse sense, kind of help your company.
SUGAR: Well, I’m not the right guy to talk about that.
I can certainly tell you, though, that the ability to rapidly bring force from around the world to bear, to very decisively defeat an enemy, using the kind of systems that we and our colleagues in this industry supply -- this is extremely important for the nation, and we’re proud to be part of that.
CAVUTO: You had argued that the big worry isn’t in places like over there. It’s over here. You had told Aerospace Daily not too long ago, Mr. Sugar, the threat of ballistic missile attacks is real, and, unfortunately, it is imminent. What did you mean by that?
SUGAR: Yes. Well, certainly, the threat is right now. Whether someone’s going to launch a missile or not, who knows? We know that there are a number of nations out there that have the technology.
One of the things that we’re involved in is working on systems to counter these threats to be able to shoot down ballistic missiles shortly after they’re launched or later in their flight.
I think it’s very important that this nation continue a very heavy effort toward deployment in that regard.
CAVUTO: Are you worried, though, that with these deficits we’re running that, ironically, all the money we’ve committed to the military has hit sort of like a ceiling, or a floor, I guess, in this case, that we can’t get any more dough to defense than we’re doing at present?
SUGAR: Well, we all have to make choices.
It’s interesting that only a few percent of our gross national product is devoted to our defense, and yet nothing can be more important, in my judgment, than the obligation of a nation to defend its people.
Given that the threat is real, I think the resources are going to have to be there, and we’re just going to have to make these systems.
CAVUTO: There’s no doubt you’ve had great success with the B-2 Stealth Bomber, the Global Hawk Unmanned Spy Plane, but a number of analysts were so shocked with the strength of your numbers that they almost think you’re robbing from the future.
One in particular, Eric Hugel of Stephens Bank, had told Reuters earlier today, Mr. Sugar -- and I hope I’m quoting accurately -- "You wonder if there was stuff that was going to come back in the back half of the year that came into this quarter," in other words that you’re robbing from the future for a great quarter now.
What do you say?
SUGAR: Well, we had a terrific quarter. We, certainly, exceeded everybody’s expectations.
I think the fact that we increased our expectation for the year indicates that we didn’t just pull it all from the back to the front. There were a couple of awards that we received, in terms of profit awards, which came sooner than we expected, because, frankly, the programs we’re running are actually performing better than expected.
But, overall, the fact we raised guidance, I think, is an indication that we’ve got the strength for the whole year.
CAVUTO: Do you buy that relationship -- I don’t know if I do, necessarily, Mr. Sugar -- that says that the worse the president’s poll ratings look, the worse defense stocks look, the idea presumably being that this president is more a friend to your industry than would be almost any Democrat. I haven’t ever checked a correlation there between the polls and your stocks, but what do you make of that?
SUGAR: Well, I’m not sure I can correlate between the personalities and politics.
The real issue here is that the world is dangerous, the obligations of the nation are increasing, not decreasing, and that’s happened over the last several presidents, irrespective of party.
I think the game here is to make sure that the technologies that our troops have and our forces have is better than anybody’s and nobody will be able to challenge us.
We’re not playing this game with massive numbers of people, we’re playing it with technology, and that’s the kind of thing we’re involved in.
CAVUTO: All right. Ron Sugar, thank you very much for joining us. We appreciate it.
SUGAR: Thank you very much, Neil. Pleased to be here.
CAVUTO: Ron Sugar is the man who runs Northrop Grumman.
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