x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2010 | ||
or
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE
|
95-4840775 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
Yes x | No o |
Yes x | No o |
Large accelerated filer x | Accelerated filer o | |||||
Non-accelerated filer o | Smaller reporting company o | |||||
(Do not check if a smaller reporting company) |
Yes o | No x |
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EX-10.2 | ||||||||
EX-10.3 | ||||||||
EX-10.4 | ||||||||
EX-10.5 | ||||||||
EX-12.A | ||||||||
EX-15 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
1
Item 1. | Financial Statements |
Three Months Ended
|
||||||||
March 31 | ||||||||
$ in millions, except per share amounts | 2010 | 2009 | ||||||
Sales and Service Revenues
|
||||||||
Product sales
|
$ | 5,526 | $ | 4,570 | ||||
Service revenues
|
3,084 | 3,365 | ||||||
Total sales and service revenues
|
8,610 | 7,935 | ||||||
Cost of Sales and Service Revenues
|
||||||||
Cost of product sales
|
4,296 | 3,635 | ||||||
Cost of service revenues
|
2,781 | 2,963 | ||||||
General and administrative expenses
|
768 | 718 | ||||||
Operating income
|
765 | 619 | ||||||
Other (expense) income
|
||||||||
Interest expense
|
(80 | ) | (73 | ) | ||||
Other, net
|
7 | 8 | ||||||
Earnings from continuing operations before income taxes
|
692 | 554 | ||||||
Federal and foreign income taxes
|
230 | 188 | ||||||
Earnings from continuing operations
|
462 | 366 | ||||||
Earnings from discontinued operations, net of tax
|
7 | 23 | ||||||
Net earnings
|
$ | 469 | $ | 389 | ||||
Basic Earnings Per Share
|
||||||||
Continuing operations
|
$ | 1.53 | $ | 1.12 | ||||
Discontinued operations
|
0.02 | .07 | ||||||
Basic earnings per share
|
$ | 1.55 | $ | 1.19 | ||||
Weighted-average common shares outstanding, in millions
|
302.5 | 326.9 | ||||||
Diluted Earnings Per Share
|
||||||||
Continuing operations
|
$ | 1.51 | $ | 1.10 | ||||
Discontinued operations
|
.02 | .07 | ||||||
Diluted earnings per share
|
$ | 1.53 | $ | 1.17 | ||||
Weighted-average diluted shares outstanding, in millions
|
306.1 | 332.1 | ||||||
Net earnings (from above)
|
$ | 469 | $ | 389 | ||||
Other comprehensive income
|
||||||||
Change in cumulative translation adjustment
|
(28 | ) | (14 | ) | ||||
Change in unrealized gain on marketable securities and cash flow
hedges, net of tax
|
7 | |||||||
Change in unamortized benefit plan costs, net of tax
|
40 | 53 | ||||||
Other comprehensive income, net of tax
|
12 | 46 | ||||||
Comprehensive income
|
$ | 481 | $ | 435 | ||||
1
March 31,
|
December 31,
|
|||||||
$ in millions | 2010 | 2009 | ||||||
Assets
|
||||||||
Cash and cash equivalents
|
$ | 1,961 | $ | 3,275 | ||||
Accounts receivable, net of progress payments
|
4,197 | 3,394 | ||||||
Inventoried costs, net of progress payments
|
1,289 | 1,170 | ||||||
Deferred tax assets
|
627 | 524 | ||||||
Prepaid expenses and other current assets
|
295 | 272 | ||||||
Total current assets
|
8,369 | 8,635 | ||||||
Property, plant, and equipment, net of accumulated depreciation
of $4,340 in 2010 and $4,216 in 2009
|
4,797 | 4,868 | ||||||
Goodwill
|
13,517 | 13,517 | ||||||
Other purchased intangibles, net of accumulated amortization of
$1,898 in 2010 and $1,871 in 2009
|
846 | 873 | ||||||
Pension and post-retirement plan assets
|
304 | 300 | ||||||
Long-term deferred tax assets
|
883 | 1,010 | ||||||
Miscellaneous other assets
|
1,046 | 1,049 | ||||||
Total assets
|
$ | 29,762 | $ | 30,252 | ||||
Liabilities
|
||||||||
Notes payable to banks
|
$ | 14 | $ | 12 | ||||
Current portion of long-term debt
|
761 | 91 | ||||||
Trade accounts payable
|
1,642 | 1,921 | ||||||
Accrued employees compensation
|
1,134 | 1,281 | ||||||
Advance payments and billings in excess of costs incurred
|
1,909 | 1,954 | ||||||
Other current liabilities
|
2,028 | 1,726 | ||||||
Total current liabilities
|
7,488 | 6,985 | ||||||
Long-term debt, net of current portion
|
3,440 | 4,191 | ||||||
Pension and post-retirement plan liabilities
|
4,723 | 4,874 | ||||||
Other long-term liabilities
|
1,471 | 1,515 | ||||||
Total liabilities
|
17,122 | 17,565 | ||||||
Commitments and Contingencies (Note 10)
|
||||||||
Shareholders Equity
|
||||||||
Common stock, $1 par value; 800,000,000 shares
authorized; issued and outstanding: 2010
300,814,235; 2009 306,865,201
|
301 | 307 | ||||||
Paid-in capital
|
8,264 | 8,657 | ||||||
Retained earnings
|
7,077 | 6,737 | ||||||
Accumulated other comprehensive loss
|
(3,002 | ) | (3,014 | ) | ||||
Total shareholders equity
|
12,640 | 12,687 | ||||||
Total liabilities and shareholders equity
|
$ | 29,762 | $ | 30,252 | ||||
2
Three Months Ended
|
||||||||
March 31 | ||||||||
$ in millions | 2010 | 2009 | ||||||
Operating Activities
|
||||||||
Sources of Cash Continuing Operations
|
||||||||
Cash received from customers
|
||||||||
Progress payments
|
$ | 2,379 | $ | 803 | ||||
Collections on billings
|
5,339 | 6,326 | ||||||
Other cash receipts
|
1 | 51 | ||||||
Total sources of cash continuing operations
|
7,719 | 7,180 | ||||||
Uses of Cash Continuing Operations
|
||||||||
Cash paid to suppliers and employees
|
(8,003 | ) | (7,203 | ) | ||||
Interest paid, net of interest received
|
(126 | ) | (98 | ) | ||||
Income taxes paid, net of refunds received
|
(111 | ) | (73 | ) | ||||
Excess tax benefits from stock-based compensation
|
(5 | ) | ||||||
Other cash payments
|
(5 | ) | (22 | ) | ||||
Total uses of cash continuing operations
|
(8,250 | ) | (7,396 | ) | ||||
Cash used in continuing operations
|
(531 | ) | (216 | ) | ||||
Cash provided by discontinued operations
|
44 | |||||||
Net cash used in operating activities
|
(531 | ) | (172 | ) | ||||
Investing Activities
|
||||||||
Additions to property, plant, and equipment
|
(135 | ) | (162 | ) | ||||
Payments for outsourcing contract costs and related software
costs
|
(3 | ) | (18 | ) | ||||
Other investing activities, net
|
3 | 4 | ||||||
Net cash used in investing activities
|
(135 | ) | (176 | ) | ||||
Financing Activities
|
||||||||
Net borrowings (payments) under lines of credit
|
2 | (1 | ) | |||||
Principal payments of long-term debt
|
(89 | ) | ||||||
Proceeds from exercises of stock options and issuances of common
stock
|
70 | 8 | ||||||
Dividends paid
|
(129 | ) | (131 | ) | ||||
Excess tax benefits from stock-based compensation
|
5 | |||||||
Common stock repurchases
|
(507 | ) | (150 | ) | ||||
Net cash used in financing activities
|
(648 | ) | (274 | ) | ||||
Decrease in cash and cash equivalents
|
(1,314 | ) | (622 | ) | ||||
Cash and cash equivalents, beginning of period
|
3,275 | 1,504 | ||||||
Cash and cash equivalents, end of period
|
$ | 1,961 | $ | 882 | ||||
3
Three Months Ended
|
||||||||
March 31 | ||||||||
$ in millions | 2010 | 2009 | ||||||
Reconciliation of Net Earnings to Net Cash Used in Operating
Activities
|
||||||||
Net earnings
|
$ | 469 | $ | 389 | ||||
Net earnings from discontinued operations
|
(23 | ) | ||||||
Adjustments to reconcile to net cash used in operating activities
|
||||||||
Depreciation
|
140 | 136 | ||||||
Amortization of assets
|
39 | 38 | ||||||
Stock-based compensation
|
38 | 35 | ||||||
Excess tax benefits from stock-based compensation
|
(5 | ) | ||||||
Pre-tax gain on sale of business
|
(11 | ) | ||||||
(Increase) decrease in
|
||||||||
Accounts receivable
|
(2,706 | ) | (1,748 | ) | ||||
Inventoried costs
|
13 | (355 | ) | |||||
Prepaid expenses and other current assets
|
(6 | ) | (31 | ) | ||||
Increase (decrease) in
|
||||||||
Progress payments
|
1,779 | 1,431 | ||||||
Accounts payable and accruals
|
(526 | ) | (265 | ) | ||||
Deferred income taxes
|
(1 | ) | 46 | |||||
Income taxes payable
|
163 | 131 | ||||||
Retiree benefits
|
107 | (5 | ) | |||||
Other non-cash transactions, net
|
(24 | ) | 5 | |||||
Cash used in continuing operations
|
(531 | ) | (216 | ) | ||||
Cash provided by discontinued operations
|
44 | |||||||
Net cash used in operating activities
|
$ | (531 | ) | $ | (172 | ) | ||
Non-Cash Investing and Financing Activities
|
||||||||
Capital expenditures accrued in accounts payable
|
$ | 38 | $ | 29 | ||||
4
Three Months Ended
|
||||||||
March 31 | ||||||||
$ in millions, except per share | 2010 | 2009 | ||||||
Common Stock
|
||||||||
At beginning of period
|
$ | 307 | $ | 327 | ||||
Common stock repurchased
|
(8 | ) | (4 | ) | ||||
Employee stock awards and options
|
2 | 2 | ||||||
At end of period
|
301 | 325 | ||||||
Paid-in Capital
|
||||||||
At beginning of period
|
8,657 | 9,645 | ||||||
Common stock repurchased
|
(477 | ) | (161 | ) | ||||
Employee stock awards and options
|
84 | (2 | ) | |||||
At end of period
|
8,264 | 9,482 | ||||||
Retained Earnings
|
||||||||
At beginning of period
|
6,737 | 5,590 | ||||||
Net earnings
|
469 | 389 | ||||||
Dividends declared
|
(129 | ) | (133 | ) | ||||
At end of period
|
7,077 | 5,846 | ||||||
Accumulated Other Comprehensive Loss
|
||||||||
At beginning of period
|
(3,014 | ) | (3,642 | ) | ||||
Other comprehensive income, net of tax
|
12 | 46 | ||||||
At end of period
|
(3,002 | ) | (3,596 | ) | ||||
Total shareholders equity
|
$ | 12,640 | $ | 12,057 | ||||
Cash dividends declared per share
|
$ | .43 | $ | .40 | ||||
5
1. | BASIS OF PRESENTATION |
March 31,
|
December 31,
|
|||||||
$ in millions | 2010 | 2009 | ||||||
Cumulative translation adjustment
|
$ | 13 | $ | 41 | ||||
Net unrealized gain on marketable securities and cash flow
hedges, net of tax
|
||||||||
expense of $3 as of March 31, 2010 and December 31,
2009
|
4 | 4 | ||||||
Unamortized benefit plan costs, net of tax benefit of $1,959 as
of March 31, 2010, and $1,984 as of December 31, 2009
|
(3,019 | ) | (3,059 | ) | ||||
Total accumulated other comprehensive loss
|
$ | (3,002 | ) | $ | (3,014 | ) | ||
6
2. | ACCOUNTING STANDARDS UPDATES |
3. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
7
March 31, 2010 | December 31, 2009 | |||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
$ in millions | Amount | Value | Amount | Value | ||||||||||||
Cash surrender value of life insurance policies
|
$ | 246 | $ | 246 | $ | 242 | $ | 242 | ||||||||
Long-term debt
|
(4,201 | ) | (4,753 | ) | (4,282 | ) | (4,825 | ) | ||||||||
4. | DIVIDENDS ON COMMON STOCK |
5. | BUSINESS ACQUISITIONS AND DISPOSITIONS |
8
6. | SEGMENT INFORMATION |
Three Months Ended
|
||||||||
March 31 | ||||||||
$ in millions | 2010 | 2009 | ||||||
Sales and service revenues
|
||||||||
Aerospace Systems
|
$ | 2,696 | $ | 2,456 | ||||
Electronic Systems
|
1,882 | 1,788 | ||||||
Information Systems
|
2,064 | 2,093 | ||||||
Shipbuilding
|
1,721 | 1,375 | ||||||
Technical Services
|
763 | 632 | ||||||
Intersegment eliminations
|
(516 | ) | (409 | ) | ||||
Total sales and service revenues
|
$ | 8,610 | $ | 7,935 | ||||
9
Three Months Ended
|
||||||||
March 31 | ||||||||
$ in millions | 2010 | 2009 | ||||||
Operating income
|
||||||||
Aerospace Systems
|
$ | 296 | $ | 258 | ||||
Electronic Systems
|
226 | 229 | ||||||
Information Systems
|
183 | 186 | ||||||
Shipbuilding
|
106 | 84 | ||||||
Technical Services
|
49 | 37 | ||||||
Intersegment eliminations
|
(50 | ) | (39 | ) | ||||
Total segment operating income
|
810 | 755 | ||||||
Non-segment factors affecting operating income
|
||||||||
Unallocated corporate expenses
|
(33 | ) | (53 | ) | ||||
Net pension adjustment
|
(8 | ) | (76 | ) | ||||
Royalty income adjustment
|
(4 | ) | (7 | ) | ||||
Total operating income
|
$ | 765 | $ | 619 | ||||
7. | EARNINGS PER SHARE |
10
Shares Repurchased
|
||||||||||||||||||||
(in millions)
|
||||||||||||||||||||
Total Shares
|
Three Months Ended
|
|||||||||||||||||||
Repurchase Program
|
Amount Authorized
|
Average Price Per
|
Retired
|
March 31 | ||||||||||||||||
Authorization Date | (in millions) | Share (2) | (in millions) | 2010 | 2009 | |||||||||||||||
December 19,
2007
(1)
|
$ | 3,600 | $ | 59.94 | 52.7 | 8.3 | 4.2 | |||||||||||||
(1) | On December 19, 2007, the companys board of directors authorized a share repurchase program of up to $2.5 billion of the companys common stock. On November 5, 2009, the board of directors authorized an additional $1.1 billion to the December 19, 2007 authorization. | |
(2) | Includes commissions paid and calculated as the average price per share since the repurchase program authorization date. |
8. | GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS |
Aerospace
|
Electronic
|
Information
|
Technical
|
|||||||||||||||||||||
$ in millions | Systems | Systems | Systems | Shipbuilding | Services | Total | ||||||||||||||||||
Goodwill
|
$ | 3,801 | $ | 2,402 | $ | 5,248 | $ | 1,141 | $ | 925 | $ | 13,517 | ||||||||||||
March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||
$ in millions | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||
Contract and program intangibles
|
$ | 2,644 | $ | (1,819 | ) | $ | 825 | $ | 2,644 | $ | (1,793 | ) | $ | 851 | ||||||||||
Other purchased intangibles
|
100 | (79 | ) | 21 | 100 | (78 | ) | 22 | ||||||||||||||||
Total
|
$ | 2,744 | $ | (1,898 | ) | $ | 846 | $ | 2,744 | $ | (1,871 | ) | $ | 873 | ||||||||||
11
$ in millions | ||||
Year ending December 31
|
||||
2010 (April 1 December 31)
|
$ | 65 | ||
2011
|
57 | |||
2012
|
56 | |||
2013
|
48 | |||
2014
|
36 | |||
2015
|
34 | |||
9. | LITIGATION |
12
13
10. | COMMITMENTS AND CONTINGENCIES |
14
15
16
11. | RETIREMENT BENEFITS |
Three Months Ended March 31 | ||||||||||||||||
Pension
|
Medical and
|
|||||||||||||||
Benefits | Life Benefits | |||||||||||||||
$ in millions | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Components of Net Periodic Benefit Cost
|
||||||||||||||||
Service cost
|
$ | 165 | $ | 165 | $ | 12 | $ | 12 | ||||||||
Interest cost
|
349 | 337 | 39 | 41 | ||||||||||||
Expected return on plan assets
|
(438 | ) | (389 | ) | (14 | ) | (12 | ) | ||||||||
Amortization of:
|
||||||||||||||||
Prior service cost (credit)
|
12 | 12 | (15 | ) | (15 | ) | ||||||||||
Net loss from previous years
|
61 | 85 | 7 | 7 | ||||||||||||
Net periodic benefit cost
|
$ | 149 | $ | 210 | $ | 29 | $ | 33 | ||||||||
Defined contribution plans cost
|
$ | 83 | $ | 82 | ||||||||||||
12. | STOCK COMPENSATION PLANS |
17
Weighted Average Assumptions | 2010 | 2009 | ||||||
Dividend yield
|
2.9 | % | 3.3 | % | ||||
Volatility rate
|
25 | % | 25 | % | ||||
Risk-free interest rate
|
2.3 | % | 1.7 | % | ||||
Expected option life (years)
|
6 | 6 |
Shares
|
Weighted-
|
Weighted-Average
|
Aggregate
|
|||||||||||||
Under Option
|
Average
|
Remaining
|
Intrinsic Value
|
|||||||||||||
(in thousands) | Exercise Price | Contractual Term | ($ in millions) | |||||||||||||
Outstanding at January 1, 2010
|
14,442 | $ | 53 | 3.8 years | $ | 88 | ||||||||||
Granted
|
1,903 | 60 | ||||||||||||||
Exercised
|
(1,393 | ) | 51 | |||||||||||||
Cancelled and forfeited
|
(2 | ) | 48 | |||||||||||||
Outstanding at March 31, 2010
|
14,950 | $ | 54 | 4.3 years | $ | 191 | ||||||||||
18
Shares
|
Weighted-
|
Weighted-Average
|
Aggregate
|
|||||||||||||
Under Option
|
Average
|
Remaining
|
Intrinsic Value
|
|||||||||||||
(in thousands) | Exercise Price | Contractual Term | ($ in millions) | |||||||||||||
Vested and expected to vest in the future at March 31, 2010
|
14,724 | $ | 54 | 4.3 years | $ | 188 | ||||||||||
Exercisable at March 31, 2010
|
10,764 | $ | 54 | 3.5 years | $ | 143 | ||||||||||
Available for grant at March 31, 2010
|
7,048 | |||||||||||||||
Stock
|
Weighted-Average
|
Weighted-Average
|
||||||||||
Awards
|
Grant Date
|
Remaining
|
||||||||||
(in thousands) | Fair Value | Contractual Term | ||||||||||
Outstanding at January 1, 2010
|
3,658 | $ | 58 | 1.6 years | ||||||||
Granted
|
2,211 | 60 | ||||||||||
Vested
|
(10 | ) | 74 | |||||||||
Forfeited
|
(71 | ) | 57 | |||||||||
Outstanding at March 31, 2010
|
5,788 | $ | 59 | 1.9 years | ||||||||
Available for grant at March 31, 2010
|
422 | |||||||||||
Stock
|
Weighted-Average
|
Weighted-Average
|
||||||||||
Awards
|
Grant Date
|
Remaining
|
||||||||||
(in thousands) | Fair Value | Contractual Term | ||||||||||
Outstanding at January 1, 2009
|
3,276 | $ | 75 | 1.4 years | ||||||||
Granted
|
2,350 | 45 | ||||||||||
Vested
|
(185 | ) | 66 | |||||||||
Forfeited
|
(61 | ) | 74 | |||||||||
Outstanding at March 31, 2009
|
5,380 | $ | 62 | 1.9 years | ||||||||
19
13. | INCOME TAXES |
20
/s/
Deloitte & Touche LLP
21
Table of Contents
29
34
35
36
Item 2.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
22
Table of Contents
Three Months Ended
March 31
$ in millions, except per
share
2010
2009
$
8,610
$
7,935
7,077
6,598
768
718
765
619
(80
)
(73
)
7
8
230
188
1.51
1.10
(531
)
(172
)
Three Months Ended
March 31
$ in millions
2010
2009
$
5,526
$
4,570
3,084
3,365
$
8,610
$
7,935
23
Table of Contents
Three Months Ended
March 31
$ in millions
2010
2009
$
4,296
$
3,635
77.7
%
79.5
%
2,781
2,963
90.2
%
88.1
%
768
718
8.9
%
9.0
%
$
7,845
$
7,316
24
Table of Contents
Three Months Ended
March 31
$ in millions
2010
2009
$
810
$
755
(33
)
(53
)
(8
)
(76
)
(4
)
(7
)
$
765
$
619
25
Table of Contents
Three Months Ended
March 31
$ in millions
2010
2009
$
2,696
$
2,456
1,882
1,788
2,064
2,093
1,721
1,375
763
632
(516
)
(409
)
$
8,610
$
7,935
$
296
$
258
226
229
183
186
106
84
49
37
(50
)
(39
)
810
755
(33
)
(53
)
(8
)
(76
)
(4
)
(7
)
$
765
$
619
26
Table of Contents
Three Months Ended
March 31
$ in millions
2010
2009
$
2,696
$
2,456
296
258
11.0
%
10.5
%
27
Table of Contents
Three Months Ended
March 31
$ in millions
2010
2009
$
1,882
$
1,788
226
229
12.0
%
12.8
%
28
Table of Contents
Three Months Ended
March 31
$ in millions
2010
2009
$
2,064
$
2,093
183
186
8.9
%
8.9
%
Three Months Ended
March 31
$ in millions
2010
2009
$
1,721
$
1,375
106
84
6.2
%
6.1
%
Table of Contents
Three Months Ended
March 31
$ in millions
2010
2009
$
763
$
632
49
37
6.4
%
5.9
%
30
Table of Contents
March 31, 2010
December 31, 2009
Total
Total
$ in millions
Funded
Unfunded
Backlog
Funded
Unfunded
Backlog
$
10,643
$
13,475
$
24,118
$
8,320
$
16,063
$
24,383
7,986
2,321
10,307
7,591
2,784
10,375
4,586
4,181
8,767
4,319
4,508
8,827
12,082
6,988
19,070
11,294
9,151
20,445
2,551
2,651
5,202
2,352
2,804
5,156
$
37,848
$
29,616
$
67,464
$
33,876
$
35,310
$
69,186
Three Months Ended
March 31
$ in millions
2010
2009
$
469
$
389
(23
)
200
255
107
(5
)
(1,307
)
(832
)
44
$
(531
)
$
(172
)
(1)
Includes depreciation and amortization, stock-based compensation
expense, and deferred income taxes.
31
Table of Contents
Three Months Ended
March 31
$ in millions
2010
2009
$
(531
)
$
(172
)
(135
)
(162
)
(3
)
(18
)
$
(669
)
$
(352
)
32
Table of Contents
Program Name
Program Description
Advanced Extremely High
Frequency (AEHF)
Provide the communication payload for the nations next
generation military strategic and tactical satellite relay
systems that will deliver survivable, protected communications
to U.S. forces and selected allies worldwide.
Airborne Warning and Control
System (AWACS) radar
Provide all-weather surveillance and command, control and
communications needed by commanders of air tactical forces.
Armed Forces Health
Longitudinal Technology
Application
An enterprise-wide medical and dental clinical information
system that provides secure online access to health records.
B-2 Stealth Bomber
Maintain strategic, long-range multi-role bomber with
war-fighting capability that combines long range, large payload,
all-aspect stealth, and near-precision weapons in one aircraft.
Battlefield Airborne
Communications Node (BACN)
Install the BACN system in three Bombardier BD-700 Global
Express aircraft for immediate fielding and install the BACN
system into two Global Hawk Block 20 unmanned aerial
vehicles.
Broad Area Maritime
Surveillance (BAMS) Unmanned
Aircraft System
A maritime derivative of the Global Hawk that provides
persistent maritime Intelligence, Surveillance, and
Reconnaissance (ISR) data collection and dissemination
capability to the Maritime Patrol and Reconnaissance Force.
Counter Narco-Terrorism
Program Office (CNTPO)
Counter Narco-Terrorism Program Office provides support to the
U.S. Government, coalition partners, and host nations in
Technology Development and Application Support; Training;
Operations and Logistics Support; and Professional and Executive
Support. The program provides equipment and services to
research, develop, upgrade, install, fabricate, test, deploy,
operate, train, maintain, and support new and existing federal
Government platforms, systems, subsystems, items, and
host-nation support initiatives.
C-20
Contractor Logistics Services (CLS) contract supporting the U.S.
Air Force, Army, Navy and Marine Corps C-20 aircraft including
depot maintenance, contractor operational and maintained base
supply, flight line maintenance and field team support at
multiple Main Operating Bases (MOBs), located in the United
States and overseas.
33
Table of Contents
Program Name
Program Description
DDG 51
Build Aegis guided missile destroyer, equipped for conducting
anti-air, anti-submarine, anti-surface and strike operations.
Defense Integrated Military
Human Resources System
(DIMHRS)
An enterprise resource planning program for human resources to
replace legacy systems and integrate payroll and personnel
functions into one integrated web-based system for the Business
Transformation Agencys Defense Business Systems
Acquisition Executive, within the U.S. DoD.
E-2
Hawkeye
The U.S. Navys airborne battle management command and
control mission system platform providing airborne early warning
detection, identification, tracking, targeting, and
communication capabilities. The company is developing the next
generation capability including radar, mission computer,
vehicle, and other system enhancements, to support the U.S Naval
Battle Groups and Joint Forces, called the E-2D Advanced
Hawkeye. Recently the U.S. Navy approved Milestone C for Low
Rate Initial Production.
EA-6B
The EA-6B (Prowler) primary mission is to jam enemy radar and
communications, thereby preventing them from directing hostile
surface-to-air missiles at assets the Prowler protects. When
equipped with the improved ALQ-218 receiver and the next
generation ICAP III (Increased Capability) Airborne Electronic
Attack (AEA) suite the Prowler is able to provide rapid
detection, precise classification, and highly accurate
geolocation of electronic emissions and counter modern,
frequency-hopping radars. A derivative/variant of the EA-6B ICAP
III mission system is also being incorporated into the F/A-18
platform and designated the EA-18G.
EA-18G
The armed services only offensive tactical radar jamming
aircraft. The Increased Capability (ICAP) III mission system
capability, developed for the EA-6B Prowler, will be in
incorporated into an F/A-18 platform (designated the EA-18G).
F-16 Block 60
Direct commercial firm fixed-price program with Lockheed Martin
Aeronautics Company to develop and produce 80 Lot systems for
aircraft delivery to the United Arab Emirates Air Force as well
as test equipment and spares to be used to support in-country
repairs of sensors.
F/A-18
Produce the center and aft fuselage sections, twin vertical
stabilizers, and integrate all associated subsystems for the
F/A-18 Hornet strike fighters.
F-22
Joint venture with Raytheon to design, develop and produce the
F-22 radar system. Northrop Grumman is responsible for the
overall design of the AN/APG-77 and AN/APG-77(V) 1 radar
systems, including the control and signal processing software
and responsibility for the AESA radar systems integration and
test activities. In addition, Northrop Grumman is responsible
for overall design and integration of the
F-22
Communication, Navigation, and Identification (CNI) system.
F-35 Joint Strike Fighter
Design, integration, and/or development of the center fuselage
and weapons bay, communications, navigations, identification
subsystem, systems engineering, and mission systems software as
well as provide ground and flight test support, modeling,
simulation activities, and training courseware.
Table of Contents
Program Name
Program Description
Ft. Polk program
Provide logistical support including vehicle and equipment
maintenance, base supply, transportation and
deployment/redeployment support for Fort Polk and
rotational training units.
Gerald R. Ford-class aircraft
carriers
Design and construction for the new class of aircraft carriers.
Global Hawk High-Altitude
Long-Endurance (HALE)
Systems
Develop, deliver and sustain the Global Hawk HALE unmanned
aerial system and its derivatives to both domestic and
international customers for intelligence, reconnaissance, and
surveillance, including deployment of assets to support the
global war on terror. The Global Hawk system has a central role
in ISR missions supporting operations in Afghanistan and Iraq.
Hunter Contractor Logistics
Support (CLS)
Operate, maintain, train and sustain the multi-mission Hunter
Unmanned Aerial System in addition to deploying Hunter support
teams.
Inertial Navigation Programs
Consists of a wide variety of products across land, sea and
space that address the customers needs for precise
knowledge of position, velocity, attitude, and heading. These
applications include platforms, such as the F-16, satellites and
ground vehicles as well as for sensors such as radar, MP-RTIP,
and EO/IR pods. Many inertial applications require integration
with GPS to provide a very high level of precision and long term
stability.
Intercontinental Ballistic Missile
(ICBM)
Maintain readiness of the nations ICBM weapon system.
Integrated Base Defense Security
System (IBDSS)
Integrated Base Defense Security System contract is an IDIQ
acquisition vehicle to provide the U.S. Air Force and other
DoD customers with integrated base defense security solutions,
utilizing comprehensive and integrated technology to satisfy a
wide array of security concerns both within and outside the
continental U.S.
Joint National Integration Center
Research and Development
Contract (JRDC)
Support the development and application of modeling and
simulation, wargaming, test and analytic tools for air and
missile defense.
KC-10
Contractor Logistics Services (CLS) contract supporting the U.S.
Air Force KC-10 tanker fleet including depot maintenance, supply
chain management, maintenance and management at locations in the
United States and worldwide.
Kinetic Energy Interceptor (KEI)
Develop mobile missile-defense system with the unique capability
to destroy a hostile missile during its boost, ascent or
midcourse phase of flight. This program was terminated for the
U.S. governments convenience in 2009.
LHA
Amphibious assault ships that will provide forward presence and
power projection as an integral part of joint, interagency, and
multinational maritime expeditionary forces.
LPD
The LPD 17 San Antonio Class is the newest addition to the
U.S. Navys 21st Century amphibious assault force. The
684-foot-long, 105-foot-wide ships have a crew of 360 and are
used to transport and land 700 to 800 Marines, their equipment,
and supplies by embarked air cushion or conventional landing
craft and assault vehicles, augmented by helicopters or other
rotary wing aircraft. The ships will support amphibious assault,
special operations, or expeditionary warfare and humanitarian
missions.
Table of Contents
Program Name
Program Description
National Security Technology
(NSTec)
Manage and operate the Nevada Test Site facility, providing
infrastructure support, including management of the nuclear
explosives safety team, supporting hazardous chemical spill
testing, emergency response training and conventional weapons
testing.
Navstar Global Positioning
System Operational
Control Segment (GPS OCX)
Operational control system for existing and future GPS
constellation. Includes all satellite C2, mission planning,
constellation management, external interfaces, monitoring
stations, and ground antennas. Phase A effort includes effort to
accomplish a System Requirements Review (SRR), System Design
Review (SDR), and development of a Mission Capabilities
Engineering Model (MCEM) prototype.
New York City Wireless
Network (NYCWiN)
Provide New York Citys broadband public-safety wireless
network.
Space Tracking and Surveillance
System (STSS)
Develop a critical system for the nations missile defense
architecture employing low-earth orbit satellites with onboard
sensors to provide target acquisition, tracking, and
discrimination of ballistic missile threats to the United States
and its deployed forces and allies. The program includes
delivery of two flight demonstration satellites and the ground
processing segment.
Trailer Mounted Support System
(TMSS)
Trailer Mounted Support System is a key part of the
U.S. Armys SICPS Program providing workspace, power
distribution, lighting, environmental conditioning (heating and
cooling) tables and a common grounding system for commanders and
staff at all echelons.
USS
George H. W. Bush
The 10th and final Nimitz-class aircraft carrier that will
incorporate many new design features, commissioned in early 2009
(CVN 77).
Item 3.
Quantitative
and Qualitative Disclosures about Market Risk
Table of Contents
Item 4.
Controls
and Procedures
37
Table of Contents
Item 1.
Legal
Proceedings
Item 1A.
Risk
Factors
Item 2.
Unregistered
Sales of Equity Securities and Use of Proceeds
Total Numbers of
Approximate Dollar Value
Shares Purchased as
of Shares that May Yet
Total Number
Part of Publicly
Be Purchased Under the
of Shares
Average Price
Announced Plans or
Plans or Programs
Period
Purchased
(1)
Paid per
Share
(2)
Programs
($ in millions)
January 1 through
January 31, 2010
5,043,115
$
57.38
5,043,115
$
635
February 1 through
February 28, 2010
2,720,358
60.39
2,720,358
470
March 1 through
March 31, 2010
490,208
64.50
490,208
439
Total
8,253,681
$
58.80
8,253,681
$
439
(1)
(1)
On December 19, 2007, our board of directors authorized a
share repurchase program of up to $2.5 billion of our
outstanding common stock. On November 5, 2009, the board of
directors authorized an additional $1.1 billion to the
December 19, 2007 authorization. As of the end of the first
quarter 2010, we had $439 million remaining under this
authorization for share repurchases.
Share repurchases take place at managements discretion or
under pre-established, non-discretionary programs from time to
time, depending on market conditions, in the open market, and in
privately negotiated transactions. We retire our common stock
upon repurchase and have not made any purchases of common stock
other than in connection with these publicly announced
repurchase programs.
(2)
Includes commissions paid and calculated as the average price
per share since the repurchase program authorization date.
Item 3.
Defaults
upon Senior Securities
Item 4.
Other
Information
38
Table of Contents
Item 5.
Exhibits
3
.1
Amended and Restated Bylaws dated February 17, 2010
(incorporated by reference to Exhibit 3.2 to
Form 8-K
dated and filed February 22, 2010)
10
.1
Compensatory Arrangements of Certain Officers for 2010
(incorporated by reference to Item 5.02(e) of
Form 8-K
dated and filed February 22, 2010)
*10
.2
Form of Agreement for 2010 Restricted Performance Stock Rights
granted under the Northrop Grumman 2001 Long-Term Incentive
Stock Plan
*10
.3
Form of Agreement for 2010 Stock Options granted under the
Northrop Grumman 2001 Long-Term Incentive Stock Plan
*10
.4
Form of Agreement for 2010 Restricted Stock Rights granted under
the Northrop Grumman 2001 Long-Term Incentive Stock Plan
*10
.5
Policy Regarding the Recoupment of Certain Performance-Based
Compensation Payments dated March 31, 2010
10
.6
Non-Employee Director Compensation Term Sheet, effective
January 1, 2010 (incorporated by reference to
Exhibit 10.1 to
Form 8-K
dated and filed December 21, 2009)
10
.7
Northrop Grumman Corporation January 2010 Change in Control
Severance Plan (effective as of January 1, 2010)
(incorporated by reference to Exhibit 10(p) to
Form 10-K
for the year ended 2009, filed February 9, 2010)
10
.8
Appendix I to the Northrop Grumman Supplemental Plan 2
(Amended and Restated Effective as of January 1, 2009):
Officers Supplemental Executive Retirement Program II
(Effective as of January 1, 2010) (incorporated by
reference to Exhibit 10(i)(v) to
Form 10-K
for the year ended 2009, filed February 9, 2010)
*12
(a)
Computation of Ratio of Earnings to Fixed Charges
*15
Letter from Independent Registered Public Accounting Firm
*31
.1
Rule 13a-15(e)/15d-15(e)
Certification of Wesley G. Bush (Section 302 of the
Sarbanes-Oxley Act of 2002)
*31
.2
Rule 13a-15(e)/15d-15(e)
Certification of James F. Palmer (Section 302 of the
Sarbanes-Oxley Act of 2002)
**32
.1
Certification of Wesley G. Bush pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
**32
.2
Certification of James F. Palmer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
**101
Northrop Grumman Corporation Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2010, formatted in XBRL
(Extensible Business Reporting Language); (i) the Condensed
Consolidated Statements of Operations, (ii) Condensed
Consolidated Statements of Financial Position,
(iii) Condensed Consolidated Statements of Cash Flows,
(iv) Condensed Consolidated Statements of Changes in
Shareholders Equity, and (v) Notes to Condensed
Consolidated Financial Statements, tagged as blocks of text
*
Filed with this Report
**
Furnished with this Report
39
Table of Contents
By:
40
1. | Vesting; Payment of RPSRs . |
2. | Early Termination of Award; Termination of Employment . |
1
2
3. | Non-Transferability and Other Restrictions . |
4. | Compliance with Laws; No Stockholder Rights Prior to Issuance . |
5. | Adjustments; Change in Control . |
3
(a) | if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, and the termination of employment constitutes a Qualifying Termination (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantees right to severance benefits under such Change in Control Severance Arrangement. | ||
(b) | if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination, the termination occurs either within the Protected Period corresponding to a Change in Control of the Company or within twenty-four (24) calendar months following the date of a Change in Control of the Company, and the Grantees employment by the Company and its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. |
4
6. | Tax Matters . |
7. | Committee Authority . |
8. | Plan; Amendment . |
9. | Required Holding Period . |
10. | Definitions . |
5
(i) | The Grantees conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses or as a result of vicarious liability); or | ||
(ii) | The willful engaging by the Grantee in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Grantees part shall be considered willful unless done, or omitted to be done, by the Grantee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. |
(i) | A material and substantial reduction in the nature or status of the Grantees authorities or responsibilities (when such authorities and/or responsibilities are viewed in the aggregate) from their level in effect on the day immediately prior to the start of the Protected Period, other than (A) an inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Grantee, and/or (B) changes in the nature or status of the Grantees authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee having not materially and substantially fewer authorities and responsibilities (taking into consideration the Companys industry) when compared to the authorities and responsibilities applicable to the position held by the Grantee immediately prior to the start of the Protected Period. The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. | ||
In addition, if the Grantee is a vice president, the Grantees loss of vice-president status will constitute Good Reason; provided that the loss of the title of vice president will not, in and of itself, constitute Good Reason if the Grantees lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the Grantees business unit or if the loss of the title is the result of a promotion to a higher level office. For the purposes of the preceding sentence, the Grantees lack of a vice-president title will only be considered generally consistent with the manner in which such title is used if most persons in the business unit with authorities, duties, and responsibilities comparable to those of the Grantee immediately prior to the commencement of the Protected Period do not have the title of vice-president. | |||
(ii) | A reduction by the Company in the Grantees annualized rate of base salary as in effect on the first to occur of the start of the Performance |
6
Period or the start of the Protected Period, or as the same shall be increased from time to time. | |||
(iii) | A material reduction in the aggregate value of the Grantees level of participation in any of the Companys short and/or long-term incentive compensation plans (excluding stock-based incentive compensation plans), employee benefit or retirement plans, or policies, practices, or arrangements in which the Grantee participates immediately prior to the start of the Protected Period provided; however, that a reduction in the aggregate value shall not be deemed to be Good Reason if the reduced value remains substantially consistent with the average level of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. | ||
(iv) | A material reduction in the Grantees aggregate level of participation in the Companys stock-based incentive compensation plans from the level in effect immediately prior to the start of the Protected Period; provided, however, that a reduction in the aggregate level of participation shall not be deemed to be Good Reason if the reduced level of participation remains substantially consistent with the average level of participation of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. | ||
(v) | The Grantee is informed by the Company that his or her principal place of employment for the Company will be relocated to a location that is greater than fifty (50) miles away from the Grantees principal place of employment for the Company at the start of the corresponding Protected Period; provided that, if the Company communicates an intended effective date for such relocation, in no event shall Good Reason exist pursuant to this clause (v) more than ninety (90) days before such intended effective date. |
(i) | If the Change in Control is triggered by a tender offer for shares of the Companys stock or by the offerors acquisition of shares pursuant to such a tender offer, the Protected Period shall commence on the date of the initial tender offer and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control. |
(ii) | If the Change in Control is triggered by a merger, consolidation, or reorganization of the Company with or involving any other corporation, the Protected Period shall commence on the date that serious and substantial discussions first take place to effect the merger, consolidation, or reorganization and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control. |
(iii) | In the case of any Change in Control not described in clause (i) or (ii) above, the Protected Period shall commence on the date that is six (6) months prior to the Change in Control and shall continue through and include the date of the Change in Control. |
7
1. | Vesting; Exercise of Option . |
2. | Termination of Option; Termination of Employment . |
2
3. | Non-Transferability and Other Restrictions . |
4. | Compliance with Laws; No Stockholder Rights Prior to Issuance . |
5. | Adjustments; Change in Control . |
3
(a) | if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, if the termination of employment constitutes a Qualifying Termination (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantees right to severance benefits under such Change in Control Severance Arrangement. |
(b) | if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination and if the termination occurs either within the Protected Period corresponding to a Change in Control of the Company or within twenty-four (24) calendar months following the date of a Change in Control of the Company, the Grantees employment by the Company and its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. |
6. | Tax Matters . |
4
7. | Committee Authority . |
8. | Plan; Amendment . |
9. | Required Holding Period . |
10. | Definitions . |
(i) | The Grantees conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses or as a result of vicarious liability); or |
(ii) | The willful engaging by the Grantee in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Grantees part shall be considered willful unless done, or omitted to be done, by the Grantee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. |
5
(i) | A material and substantial reduction in the nature or status of the Grantees authorities or responsibilities (when such authorities and/or |
responsibilities are viewed in the aggregate) from their level in effect on the day immediately prior to the start of the Protected Period, other than (A) an inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Grantee, and/or (B) changes in the nature or status of the Grantees authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee having not materially and substantially fewer authorities and responsibilities (taking into consideration the Companys industry) when compared to the authorities and responsibilities applicable to the position held by the Grantee immediately prior to the start of the Protected Period. The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. |
In addition, if the Grantee is a vice president, the Grantees loss of vice-president status will constitute Good Reason; provided that the loss of the title of vice president will not, in and of itself, constitute Good Reason if the Grantees lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the Grantees business unit or if the loss of the title is the result of a promotion to a higher level office. For the purposes of the preceding sentence, the Grantees lack of a vice-president title will only be considered generally consistent with the manner in which such title is used if most persons in the business unit with authorities, duties, and responsibilities comparable to those of the Grantee immediately prior to the commencement of the Protected Period do not have the title of vice-president. |
(ii) | A reduction by the Company in the Grantees annualized rate of base salary as in effect on the Grant Date or as the same shall be increased from time to time. |
(iii) | A material reduction in the aggregate value of the Grantees level of participation in any of the Companys short and/or long-term incentive compensation plans (excluding stock-based incentive compensation plans), employee benefit or retirement plans, or policies, practices, or arrangements in which the Grantee participates immediately prior to the start of the Protected Period provided; however, that a reduction in the aggregate value shall not be deemed to be Good Reason if the reduced value remains |
6
substantially consistent with the average level of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. |
(iv) | A material reduction in the Grantees aggregate level of participation in the Companys stock-based incentive compensation plans from the level in effect immediately prior to the start of the Protected Period; provided, however, that a reduction in the aggregate level of participation shall not be deemed to be Good Reason if the reduced level of participation remains substantially consistent with the average level of participation of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. |
(v) | The Grantee is informed by the Company that his or her principal place of employment for the Company will be relocated to a location that is greater than fifty (50) miles away from the Grantees principal place of employment for the Company at the start of the corresponding Protected Period; provided that, if the Company communicates an intended effective date for such relocation, in no event shall Good Reason exist pursuant to this clause (v) more than ninety (90) days before such intended effective date. |
(i) | If the Change in Control is triggered by a tender offer for shares of the Companys stock or by the offerors acquisition of shares pursuant to such a |
tender offer, the Protected Period shall commence on the date of the initial tender offer and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control. |
(ii) | If the Change in Control is triggered by a merger, consolidation, or reorganization of the Company with or involving any other corporation, the Protected Period shall commence on the date that serious and substantial discussions first take place to effect the merger, consolidation, or reorganization and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control. |
(iii) | In the case of any Change in Control not described in clause (i) or (ii) above, the Protected Period shall commence on the date that is six (6) months prior to the Change in Control and shall continue through and including the date of the Change in Control. |
7
1. | Vesting; Issuance of Shares . |
2. | Early Termination of Award; Termination of Employment . |
1
3. | Non-Transferability and Other Restrictions . |
4. | Compliance with Laws; No Stockholder Rights Prior to Issuance . |
5. | Adjustments; Change in Control . |
(a) | if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, if the termination of employment constitutes a Qualifying Termination (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantees right to severance benefits under such Change in Control Severance Arrangement. |
(b) | if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination and if the termination occurs either within the Protected Period corresponding |
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to a Change in Control of the Company or within twenty-four (24) calendar months following the date of a Change in Control of the Company, the Grantees employment by the Company and its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. |
6. | Tax Matters . |
7. | Committee Authority . |
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8. | Plan; Amendment . |
9. | Required Holding Period . |
10. | Definitions . |
(i) | The Grantees conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses or as a result of vicarious liability); or |
(ii) | The willful engaging by the Grantee in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Grantees part shall be considered willful unless done, or omitted to be done, by the Grantee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. |
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(i) | A material and substantial reduction in the nature or status of the Grantees authorities or responsibilities (when such authorities and/or responsibilities are viewed in the aggregate) from their level in effect on the day immediately prior to the start of the Protected Period, other than (A) an inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Grantee, and/or (B) changes in the nature or status of the Grantees authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee having not materially and substantially fewer authorities and responsibilities (taking into consideration the Companys industry) when compared to the authorities and responsibilities applicable to the position held by the Grantee immediately prior to the start of the Protected Period. The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. | ||
In addition, if the Grantee is a vice president, the Grantees loss of vice-president status will constitute Good Reason; provided that the loss of the title of vice president will not, in and of itself, constitute Good Reason if the Grantees lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the Grantees business unit or if the loss of the title is the result of a promotion to a higher level office. For the purposes of the preceding sentence, the Grantees lack of a vice-president title will only be considered generally consistent with the manner in which such title is used if most persons in the business unit with authorities, duties, and responsibilities comparable to those of the Grantee immediately prior to the commencement of the Protected Period do not have the title of vice-president. |
(ii) | A reduction by the Company in the Grantees annualized rate of base salary as in effect at the start of the Protected Period, or as the same shall be increased from time to time. |
(iii) | A material reduction in the aggregate value of the Grantees level of participation in any of the Companys short and/or long-term incentive compensation plans (excluding stock-based incentive compensation plans), employee benefit or retirement plans, or policies, practices, or arrangements in which the Grantee participates immediately prior to the start of the Protected Period; provided, however, that a reduction in the aggregate value shall not be deemed to be Good Reason if the reduced value remains substantially consistent with the average level of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. |
(iv) | A material reduction in the Grantees aggregate level of participation in the Companys stock-based incentive compensation plans from the level in effect immediately prior to the start of the Protected Period; provided, however, that a reduction in the aggregate level of participation shall not be deemed to be Good Reason if the reduced level of participation remains substantially consistent with the average level of participation of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. |
(v) | The Grantee is informed by the Company that his or her principal place of employment for the Company will be relocated to a location that is greater than fifty (50) miles away from the Grantees principal place of employment for the Company at the start of the corresponding Protected Period; provided that, if the Company communicates an intended effective date for such relocation, in no event shall Good Reason exist pursuant to this clause (v) more than ninety (90) days before such intended effective date. |
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(i) | If the Change in Control is triggered by a tender offer for shares of the Companys stock or by the offerors acquisition of shares pursuant to such a tender offer, the Protected Period shall commence on the date of the initial tender offer and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control. |
(ii) | If the Change in Control is triggered by a merger, consolidation, or reorganization of the Company with or involving any other corporation, the Protected Period shall commence on the date that serious and substantial discussions first take place to effect the merger, consolidation, or reorganization and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control. |
(iii) | In the case of any Change in Control not described in clause (i) or (ii) above, the Protected Period shall commence on the date that is six (6) months prior to the Change in Control and shall continue through and including the date of the Change in Control. |
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POLICY REGARDING THE RECOUPMENT OF
CERTAIN
PERFORMANCE-BASED COMPENSATION PAYMENTS [also known as Clawback Policy] |
Three Months
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Ended
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Year Ended December 31 | March 31 | ||||||||||||||||||||||||||||||||
$ in millions | 2009 | 2008 | 2007 | 2006 | 2005 | 2010 | 2009 (1) | ||||||||||||||||||||||||||
Earnings:
|
|||||||||||||||||||||||||||||||||
Earnings (loss) from continuing operations before income taxes
|
$ | 2,266 | $ | (520 | ) | 2,606 | $ | 2,226 | $ | 2,001 | $ | 692 | $ | 554 | |||||||||||||||||||
Fixed Charges:
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Interest expense, including amortization of debt premium
|
281 | 295 | 336 | 346 | 388 | 80 | 73 | ||||||||||||||||||||||||||
Portion of rental expenses on operating leases deemed to be
representative of the interest factor
|
183 | 190 | 189 | 174 | 169 | 43 | 47 | ||||||||||||||||||||||||||
Earnings (loss) from continuing operations before income taxes
and fixed charges
|
2,730 | (35 | ) | 3,131 | 2,746 | 2,558 | 815 | 674 | |||||||||||||||||||||||||
Fixed Charges:
|
464 | 485 | 525 | 520 | 557 | 123 | 120 | ||||||||||||||||||||||||||
Ratio of earnings to fixed
charges
(2)
|
5.9 | | 6.0 | 5.3 | 4.6 | 6.6 | 5.6 | ||||||||||||||||||||||||||
(1) | Certain prior-period information has been reclassified to conform to the current years presentation. | |
(2) | For the year ended December 31, 2008, the companys earnings were insufficient to cover fixed charges by $520 million. This loss was entirely due to the non-cash goodwill impairment charge of $3.1 billion recorded during the fourth quarter at the Aerospace and Shipbuilding Systems segments. |
1. | I have reviewed this report on Form 10-Q of Northrop Grumman Corporation (company); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. | The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the companys internal control over financial reporting that occurred during the companys most recent fiscal quarter (the companys fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. | The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
1. | I have reviewed this report on Form 10-Q of Northrop Grumman Corporation (company); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. | The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the companys internal control over financial reporting that occurred during the companys most recent fiscal quarter (the companys fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. | The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company. |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company. |