x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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DELAWARE
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80-0640649
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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|
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2980 Fairview Park Drive
Falls Church, Virginia
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22042
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(Address of principal executive offices)
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(Zip code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $1 par value
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New York Stock Exchange
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Yes
x
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No
o
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Yes
o
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No
x
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Yes
x
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No
o
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Yes
x
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No
o
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Large accelerated filer
x
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Accelerated filer
o
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Smaller reporting company
o
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||
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Emerging growth company
o
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Yes
o
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No
x
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Page
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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($ in millions)
|
|
U.S.
Government
(1)
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|
International
(2)
|
|
Other Customers
|
|
Total
|
|
Percentage
of Total Sales
|
|||||||||
Cost-type contracts
|
|
$
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13,441
|
|
|
$
|
641
|
|
|
$
|
86
|
|
|
$
|
14,168
|
|
|
55
|
%
|
Fixed-price contracts
|
|
8,396
|
|
|
2,661
|
|
|
578
|
|
|
11,635
|
|
|
45
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%
|
||||
Total sales
|
|
$
|
21,837
|
|
|
$
|
3,302
|
|
|
$
|
664
|
|
|
$
|
25,803
|
|
|
100
|
%
|
(1)
|
Sales to the
U.S.
Government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S. Government. Each of the company’s segments derives substantial revenue from the U.S. Government.
|
▪
|
We depend heavily on a single customer, the U.S. Government, for a substantial portion of our business. Changes in this customer’s priorities and spending could have a material adverse effect on our financial position, results of operations and/or cash flows.
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▪
|
Significant delays or reductions in appropriations for our programs and U.S. Government funding more broadly may negatively impact our business and programs and could have a material adverse effect on our financial position, results of operations and/or cash flows.
|
▪
|
We are subject to various investigations, claims, disputes, enforcement actions, litigation and other legal proceedings that could ultimately be resolved against us.
|
▪
|
We use estimates when accounting for contracts. Contract cost growth or changes in estimated contract revenues and costs could affect our profitability and our overall financial position.
|
▪
|
Our international business exposes us to additional risks, including risks related to geopolitical and economic factors, laws and regulations.
|
▪
|
Our reputation, our ability to do business and our financial position, results of operations and/or cash flows may be impacted by the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we participate.
|
▪
|
Our business could be negatively impacted by cyber and other security threats or disruptions.
|
▪
|
Our earnings and profitability depend, in part, on subcontractor and supplier performance and financial viability as well as raw material and component availability and pricing.
|
▪
|
As a U.S. Government contractor, we and our partners are subject to various procurement and other laws and regulations applicable to our industry and we could be adversely affected by changes in such laws and regulations or any negative findings by the U.S. Government as to our compliance with them. We also may be adversely affected by changes in our customers’ business practices globally.
|
▪
|
Competition within our markets and bid protests may affect our ability to win new contracts and result in reduced revenues and market share.
|
▪
|
Our ability to win new competitions and meet the needs of our customers depends, in part, on our ability to maintain a qualified workforce.
|
▪
|
Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise or are dependent upon factors not wholly within our control. Failure to meet our contractual obligations could adversely affect our profitability, reputation and future prospects.
|
▪
|
Environmental matters, including unforeseen costs associated with compliance and remediation efforts, and government and third party claims, could have a material adverse effect on our reputation and our financial position, results of operations and/or cash flows.
|
▪
|
Our business is subject to disruption caused by natural and/or environmental disasters that could adversely affect our profitability and our overall financial position.
|
▪
|
Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks or our insurers may deny coverage of or be unable to pay for material losses we incur, which could adversely affect our profitability and overall financial position.
|
▪
|
We provide products and services related to hazardous and high risk operations, which subjects us to various environmental, regulatory, financial, reputational and other risks.
|
▪
|
Pension and medical liabilities and related expenses recorded in our financial statements may fluctuate significantly depending upon future investment performance of plan assets, changes in actuarial assumptions, and legislative or other regulatory actions.
|
▪
|
Anticipated benefits of the Orbital ATK Acquisition may not be realized.
|
▪
|
We may be unable fully to exploit or adequately to protect intellectual property rights, which could materially affect our ability to compete, our reputation and our financial position, results of operations and/or cash flows.
|
▪
|
Our future success depends, in part, on our ability to develop new products and new technologies and maintain technologies, facilities and equipment to win new competitions and meet the needs of our customers.
|
▪
|
Changes in future business conditions could cause business investments and/or recorded goodwill and other long-lived assets to become impaired, resulting in substantial losses and write-downs that would reduce our operating income.
|
▪
|
Unanticipated changes in our tax provisions or exposure to additional tax liabilities could affect our profitability and cash flow.
|
•
|
our dependence on the U.S. Government for a substantial portion of our business
|
•
|
significant delays or reductions in appropriations for our programs and U.S. Government funding more broadly
|
•
|
investigations, claims, disputes, enforcement actions and/or litigation
|
•
|
the use of estimates when accounting for our contracts and the effect of contract cost growth and/or changes in estimated contract revenues and costs
|
•
|
our exposure to additional risks as a result of our international business, including risks related to geopolitical and economic factors, laws and regulations
|
•
|
the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we participate and the impact on our reputation, our ability to do business, and our financial position, results of operations and/or cash flows
|
•
|
cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners
|
•
|
the performance and financial viability of our subcontractors and suppliers and the availability and pricing of raw materials and components
|
•
|
changes in procurement and other laws, regulations and practices applicable to our industry, findings by the U.S. Government as to our compliance with such laws and regulations, and changes in our customers’ business practices globally
|
•
|
increased competition within our markets and bid protests
|
•
|
the ability to maintain a qualified workforce
|
•
|
our ability to meet performance obligations under our contracts, including obligations that are technologically complex, require certain manufacturing expertise or are dependent on factors not wholly within our control
|
•
|
environmental matters, including unforeseen environmental costs and government and third party claims
|
•
|
natural and/or environmental disasters
|
•
|
the adequacy and availability of our insurance coverage, customer indemnifications or other liability protections
|
•
|
products and services we provide related to hazardous and high risk operations, which subject us to various environmental, regulatory, financial, reputational and other risks
|
•
|
the future investment performance of plan assets, changes in actuarial assumptions associated with our pension and other post-retirement benefit plans and legislative or other regulatory actions impacting our pension, post-retirement and health and welfare plans
|
•
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the satisfaction of conditions (including regulatory approvals) to and successful consummation of the Orbital ATK Acquisition; our ability successfully to integrate the Orbital ATK business and realize fully the anticipated benefits of the acquisition, without adverse consequences
|
•
|
our ability to exploit or protect intellectual property rights
|
•
|
our ability to develop new products and technologies and maintain technologies, facilities, and equipment to win new competitions and meet the needs of our customers
|
•
|
changes in business conditions that could impact business investments and/or recorded goodwill or the value of other long-lived assets
|
•
|
unanticipated changes in our tax provisions or exposure to additional tax liabilities
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Square feet (in thousands)
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Owned
|
|
Leased
|
|
U.S. Government
Owned/Leased
|
|
Total
|
||||
Aerospace Systems
|
|
6,775
|
|
|
7,164
|
|
|
2,761
|
|
|
16,700
|
|
Mission Systems
|
|
8,783
|
|
|
5,588
|
|
|
—
|
|
|
14,371
|
|
Technology Services
|
|
434
|
|
|
2,772
|
|
|
1
|
|
|
3,207
|
|
Corporate
|
|
657
|
|
|
444
|
|
|
—
|
|
|
1,101
|
|
Total
|
|
16,649
|
|
|
15,968
|
|
|
2,762
|
|
|
35,379
|
|
|
|
Dividends per common share
|
|
Stock prices (Low - High)
|
||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
First Quarter
|
|
$
|
0.90
|
|
|
$
|
0.80
|
|
|
$223.88 - $249.43
|
|
$175.00 - $200.78
|
Second Quarter
|
|
|
1.00
|
|
|
|
0.90
|
|
|
235.16 - 262.59
|
|
198.75 - 223.42
|
Third Quarter
|
|
|
1.00
|
|
|
|
0.90
|
|
|
256.65 - 287.81
|
|
206.69 - 224.12
|
Fourth Quarter
|
|
|
1.00
|
|
|
|
0.90
|
|
|
287.22 - 311.15
|
|
212.02 - 253.80
|
Total
|
|
$
|
3.90
|
|
|
$
|
3.50
|
|
|
$223.88 - $311.15
|
|
$175.00 - $253.80
|
•
|
Assumes $100 invested at the close of business on
December 31, 2012
, in Northrop Grumman Corporation common stock, Standard & Poor’s (S&P) 500 Index and the S&P Aerospace & Defense Index.
|
•
|
The cumulative total return assumes reinvestment of dividends.
|
•
|
The S&P Aerospace & Defense Index is comprised of Arconic, Inc., The Boeing Company, General Dynamics Corporation, Harris Corporation, L3 Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Company, Rockwell Collins, Inc., Textron, Inc., TransDigm Group and United Technologies Corporation.
|
•
|
The total return is weighted according to market capitalization of each company at the beginning of each year.
|
•
|
This graph is not deemed to be “filed” with the U.S. Securities and Exchange Commission (SEC) or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act), and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Exchange Act.
|
|
|
Year Ended December 31
|
||||||||||||||||||
$ in millions, except per share amounts
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Sales
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government
(1)
|
|
$
|
21,837
|
|
|
$
|
20,573
|
|
|
$
|
19,458
|
|
|
$
|
20,085
|
|
|
$
|
21,278
|
|
International
(2)
|
|
3,302
|
|
|
3,205
|
|
|
3,339
|
|
|
3,045
|
|
|
2,493
|
|
|||||
Other Customers
|
|
664
|
|
|
730
|
|
|
729
|
|
|
849
|
|
|
890
|
|
|||||
Total sales
|
|
25,803
|
|
|
24,508
|
|
|
23,526
|
|
|
23,979
|
|
|
24,661
|
|
|||||
Operating income
|
|
3,299
|
|
|
3,193
|
|
|
3,076
|
|
|
3,196
|
|
|
3,123
|
|
|||||
Net earnings
|
|
2,015
|
|
|
2,200
|
|
|
1,990
|
|
|
2,069
|
|
|
1,952
|
|
|||||
Basic earnings per share
|
|
$
|
11.55
|
|
|
$
|
12.30
|
|
|
$
|
10.51
|
|
|
$
|
9.91
|
|
|
$
|
8.50
|
|
Diluted earnings per share
|
|
11.47
|
|
|
12.19
|
|
|
10.39
|
|
|
9.75
|
|
|
8.35
|
|
|||||
Cash dividends declared per common share
|
|
3.90
|
|
|
3.50
|
|
|
3.10
|
|
|
2.71
|
|
|
2.38
|
|
|||||
Year-End Financial Position
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
|
$
|
34,917
|
|
|
$
|
25,614
|
|
|
$
|
24,424
|
|
|
$
|
26,545
|
|
|
$
|
26,351
|
|
Notes payable to banks and long-term debt
|
|
15,266
|
|
|
7,070
|
|
|
6,496
|
|
|
5,901
|
|
|
5,900
|
|
|||||
Other long-term obligations
(3)
|
|
6,505
|
|
|
7,667
|
|
|
7,059
|
|
|
7,520
|
|
|
4,018
|
|
|||||
Financial Metrics
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by operating activities
|
|
$
|
2,613
|
|
|
$
|
2,813
|
|
|
$
|
2,162
|
|
|
$
|
2,593
|
|
|
$
|
2,483
|
|
Free cash flow
(4)
|
|
1,685
|
|
|
1,893
|
|
|
1,691
|
|
|
2,032
|
|
|
2,119
|
|
|||||
Other Information
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Company-sponsored research and development expenses
|
|
$
|
639
|
|
|
$
|
705
|
|
|
$
|
712
|
|
|
$
|
569
|
|
|
$
|
507
|
|
Total backlog
|
|
42,878
|
|
|
45,339
|
|
|
35,923
|
|
|
38,199
|
|
|
37,033
|
|
|||||
Square footage at year-end (in thousands)
|
|
35,379
|
|
|
34,112
|
|
|
34,392
|
|
|
34,264
|
|
|
34,500
|
|
|||||
Number of employees at year-end
|
|
70,000
|
|
|
67,000
|
|
|
65,000
|
|
|
64,300
|
|
|
65,300
|
|
(1)
|
Sales to the
United States (U.S.)
Government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S. Government. Each of the company’s segments derives substantial revenue from the U.S. Government.
|
(2)
|
International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is an international customer. These sales include foreign military sales contracted through the U.S. Government, direct sales with governments outside the U.S. and commercial sales outside the U.S.
|
(3)
|
Other long-term obligations include pension and other post-retirement benefit plan liabilities, deferred compensation, unrecognized tax benefits, environmental liabilities and other long-term obligations.
|
(4)
|
Free cash flow is a non-GAAP measure defined as net cash
provided by
operating activities less capital expenditures, and may not be defined and calculated by other companies in the same manner. We use free cash flow as a key factor in our planning for, and consideration of, acquisitions, stock repurchases, and the payment of dividends. This measure may be useful to investors and other users of our financial statements as a supplemental measure of our cash performance, but should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating cash flows presented in accordance with
accounting principles generally accepted in the United States of America (“GAAP” or “FAS”). See “Liquidity and Capital Resources” – “
Free Cash Flow
” in Management’s Discussion and Analysis of Financial Conditions and Results of Operations (MD&A) for more information on this measure, including a reconciliation of free cash flow to net cash
provided by
operating activities.
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions, except per share amounts
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
||||||||
Sales
|
$
|
25,803
|
|
|
$
|
24,508
|
|
|
$
|
23,526
|
|
|
5
|
%
|
|
4
|
%
|
Operating costs and expenses
|
22,504
|
|
|
21,315
|
|
|
20,450
|
|
|
6
|
%
|
|
4
|
%
|
|||
Operating costs and expenses as a % of sales
|
87.2
|
%
|
|
87.0
|
%
|
|
86.9
|
%
|
|
|
|
|
|||||
Operating income
|
3,299
|
|
|
3,193
|
|
|
3,076
|
|
|
3
|
%
|
|
4
|
%
|
|||
Operating margin rate
|
12.8
|
%
|
|
13.0
|
%
|
|
13.1
|
%
|
|
|
|
|
|||||
Federal and foreign income tax expense
|
1,034
|
|
|
723
|
|
|
800
|
|
|
43
|
%
|
|
(10
|
)%
|
|||
Effective income tax rate
|
33.9
|
%
|
|
24.7
|
%
|
|
28.7
|
%
|
|
|
|
|
|||||
Net earnings
|
2,015
|
|
|
2,200
|
|
|
1,990
|
|
|
(8
|
)%
|
|
11
|
%
|
|||
Diluted earnings per share
|
11.47
|
|
|
12.19
|
|
|
10.39
|
|
|
(6
|
)%
|
|
17
|
%
|
Aerospace Systems
|
|
Mission Systems
|
|
Technology Services
|
Autonomous Systems
|
|
Sensors and Processing
|
|
Global Logistics and Modernization
|
Manned Aircraft
|
|
Cyber and ISR
|
|
Advanced Defense Services
|
Space
|
|
Advanced Capabilities
|
|
System Modernization and Services
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
||||||||
Segment operating income
|
$
|
2,959
|
|
|
$
|
2,935
|
|
|
$
|
2,920
|
|
|
1
|
%
|
|
1
|
%
|
Segment operating margin rate
|
11.5
|
%
|
|
12.0
|
%
|
|
12.4
|
%
|
|
|
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
||||||||
Segment operating income
|
$
|
2,959
|
|
|
$
|
2,935
|
|
|
$
|
2,920
|
|
|
1
|
%
|
|
1
|
%
|
CAS pension expense
|
1,026
|
|
|
847
|
|
|
703
|
|
|
21
|
%
|
|
20
|
%
|
|||
Less: FAS pension expense
|
(432
|
)
|
|
(531
|
)
|
|
(355
|
)
|
|
(19
|
)%
|
|
50
|
%
|
|||
Net FAS/CAS pension adjustment
|
594
|
|
|
316
|
|
|
348
|
|
|
88
|
%
|
|
(9
|
)%
|
|||
Unallocated corporate expenses
|
(250
|
)
|
|
(53
|
)
|
|
(190
|
)
|
|
372
|
%
|
|
(72
|
)%
|
|||
Other
|
(4
|
)
|
|
(5
|
)
|
|
(2
|
)
|
|
(20
|
)%
|
|
150
|
%
|
|||
Total operating income
|
$
|
3,299
|
|
|
$
|
3,193
|
|
|
$
|
3,076
|
|
|
3
|
%
|
|
4
|
%
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
2017
|
|
2016
|
|
2015
|
||||||
Favorable EAC adjustments
|
$
|
668
|
|
|
$
|
765
|
|
|
$
|
924
|
|
Unfavorable EAC adjustments
|
(305
|
)
|
|
(271
|
)
|
|
(344
|
)
|
|||
Net EAC adjustments
|
$
|
363
|
|
|
$
|
494
|
|
|
$
|
580
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
2017
|
|
2016
|
|
2015
|
||||||
Aerospace Systems
|
$
|
246
|
|
|
$
|
263
|
|
|
$
|
352
|
|
Mission Systems
|
79
|
|
|
191
|
|
|
169
|
|
|||
Technology Services
|
51
|
|
|
69
|
|
|
68
|
|
|||
Eliminations
|
(13
|
)
|
|
(29
|
)
|
|
(9
|
)
|
|||
Net EAC adjustments
|
$
|
363
|
|
|
$
|
494
|
|
|
$
|
580
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
||||||||
Sales
|
$
|
11,955
|
|
|
$
|
10,828
|
|
|
$
|
9,940
|
|
|
10
|
%
|
|
9
|
%
|
Operating income
|
1,259
|
|
|
1,236
|
|
|
1,205
|
|
|
2
|
%
|
|
3
|
%
|
|||
Operating margin rate
|
10.5
|
%
|
|
11.4
|
%
|
|
12.1
|
%
|
|
|
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
||||||||
Sales
|
$
|
11,382
|
|
|
$
|
10,928
|
|
|
$
|
10,674
|
|
|
4
|
%
|
|
2
|
%
|
Operating income
|
1,453
|
|
|
1,445
|
|
|
1,410
|
|
|
1
|
%
|
|
2
|
%
|
|||
Operating margin rate
|
12.8
|
%
|
|
13.2
|
%
|
|
13.2
|
%
|
|
|
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
||||||||
Sales
|
$
|
4,750
|
|
|
$
|
4,825
|
|
|
$
|
4,819
|
|
|
(2
|
)%
|
|
—
|
%
|
Operating income
|
524
|
|
|
512
|
|
|
514
|
|
|
2
|
%
|
|
—
|
%
|
|||
Operating margin rate
|
11.0
|
%
|
|
10.6
|
%
|
|
10.7
|
%
|
|
|
|
|
|
|
Year Ended December 31
|
||||||||||||||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||||||||
Segment Information:
|
|
Sales
|
|
Operating Costs and Expenses
|
|
Sales
|
|
Operating Costs and Expenses
|
|
Sales
|
|
Operating Costs and Expenses
|
||||||||||||
Aerospace Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
|
$
|
9,841
|
|
|
$
|
8,796
|
|
|
$
|
8,868
|
|
|
$
|
7,837
|
|
|
$
|
7,976
|
|
|
$
|
7,025
|
|
Service
|
|
2,114
|
|
|
1,900
|
|
|
1,960
|
|
|
1,755
|
|
|
1,964
|
|
|
1,710
|
|
||||||
Mission Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
|
6,907
|
|
|
5,981
|
|
|
6,471
|
|
|
5,588
|
|
|
6,448
|
|
|
5,532
|
|
||||||
Service
|
|
4,475
|
|
|
3,948
|
|
|
4,457
|
|
|
3,895
|
|
|
4,226
|
|
|
3,732
|
|
||||||
Technology Services
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
|
392
|
|
|
360
|
|
|
320
|
|
|
292
|
|
|
358
|
|
|
339
|
|
||||||
Service
|
|
4,358
|
|
|
3,866
|
|
|
4,505
|
|
|
4,021
|
|
|
4,461
|
|
|
3,966
|
|
||||||
Segment Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total Product
|
|
$
|
17,140
|
|
|
$
|
15,137
|
|
|
$
|
15,659
|
|
|
$
|
13,717
|
|
|
$
|
14,782
|
|
|
$
|
12,896
|
|
Total Service
|
|
10,947
|
|
|
9,714
|
|
|
10,922
|
|
|
9,671
|
|
|
10,651
|
|
|
9,408
|
|
||||||
Intersegment eliminations
|
|
(2,284
|
)
|
|
(2,007
|
)
|
|
(2,073
|
)
|
|
(1,815
|
)
|
|
(1,907
|
)
|
|
(1,698
|
)
|
||||||
Total Segment
(1)
|
|
$
|
25,803
|
|
|
$
|
22,844
|
|
|
$
|
24,508
|
|
|
$
|
21,573
|
|
|
$
|
23,526
|
|
|
$
|
20,606
|
|
(1)
|
A reconciliation of segment operating income to total operating income is included in “Segment Operating Results.”
|
|
|
2017
|
|
2016
|
|
|
|||||||||||||
$ in millions
|
|
Funded
|
|
Unfunded
|
|
Total
Backlog
|
|
Total
Backlog
|
|
% Change in 2017
|
|||||||||
Aerospace Systems
|
|
$
|
9,335
|
|
|
$
|
15,687
|
|
|
$
|
25,022
|
|
|
$
|
27,310
|
|
|
(8
|
)%
|
Mission Systems
|
|
10,241
|
|
|
3,790
|
|
|
14,031
|
|
|
13,715
|
|
|
2
|
%
|
||||
Technology Services
|
|
2,797
|
|
|
1,028
|
|
|
3,825
|
|
|
4,314
|
|
|
(11
|
)%
|
||||
Total backlog
|
|
$
|
22,373
|
|
|
$
|
20,505
|
|
|
$
|
42,878
|
|
|
$
|
45,339
|
|
|
(5
|
)%
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net earnings
|
|
$
|
2,015
|
|
|
$
|
2,200
|
|
|
$
|
1,990
|
|
Non-cash items
(1)
|
|
1,172
|
|
|
585
|
|
|
1,035
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
||||||
Trade working capital
|
|
(340
|
)
|
|
(240
|
)
|
|
(564
|
)
|
|||
Retiree benefits
|
|
(191
|
)
|
|
393
|
|
|
(263
|
)
|
|||
Other, net
|
|
(43
|
)
|
|
(125
|
)
|
|
(36
|
)
|
|||
Net cash provided by operating activities
|
|
$
|
2,613
|
|
|
$
|
2,813
|
|
|
$
|
2,162
|
|
(1)
|
Includes deferred income taxes, depreciation and amortization and stock based compensation expense (including related excess tax benefits in 2015).
|
|
|
Year Ended December 31
|
|
% Change in
|
||||||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
||||||||
Net cash provided by operating activities
|
|
$
|
2,613
|
|
|
$
|
2,813
|
|
|
$
|
2,162
|
|
|
(7
|
)%
|
|
30
|
%
|
Less: capital expenditures
|
|
(928
|
)
|
|
(920
|
)
|
|
(471
|
)
|
|
1
|
%
|
|
95
|
%
|
|||
Free cash flow
|
|
$
|
1,685
|
|
|
$
|
1,893
|
|
|
$
|
1,691
|
|
|
(11
|
)%
|
|
12
|
%
|
$ in millions
|
|
Total
|
|
2018
|
|
2019- 2020
|
|
2021- 2022
|
|
2023 and beyond
|
||||||||||
Long-term debt
|
|
$
|
15,350
|
|
|
$
|
867
|
|
|
$
|
1,563
|
|
|
$
|
2,339
|
|
|
$
|
10,581
|
|
Interest payments on long-term debt
|
|
7,705
|
|
|
530
|
|
|
1,069
|
|
|
955
|
|
|
5,151
|
|
|||||
Operating leases
|
|
1,338
|
|
|
232
|
|
|
340
|
|
|
207
|
|
|
559
|
|
|||||
Purchase obligations
(1)
|
|
9,772
|
|
|
5,396
|
|
|
3,187
|
|
|
458
|
|
|
731
|
|
|||||
Other long-term liabilities
(2)
|
|
1,187
|
|
|
302
|
|
|
376
|
|
|
132
|
|
|
377
|
|
|||||
Total contractual obligations
|
|
$
|
35,352
|
|
|
$
|
7,327
|
|
|
$
|
6,535
|
|
|
$
|
4,091
|
|
|
$
|
17,399
|
|
(1)
|
A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. These amounts are primarily comprised of open purchase order commitments to suppliers and subcontractors pertaining to funded contracts.
|
(2)
|
Other long-term liabilities, including their current portions, primarily consist of total accrued environmental reserves, deferred compensation and other miscellaneous liabilities, of which
$148 million
is related to environmental reserves recorded in other current liabilities. It excludes obligations for uncertain tax positions of
$294 million
, as the timing of such payments, if any, cannot be reasonably estimated.
|
$ increase/(decrease) in millions
|
25 Basis Point Decrease in Rate
|
|
25 Basis Point Increase in Rate
|
||||
Pension expense
|
$
|
96
|
|
|
$
|
(92
|
)
|
Other post-retirement benefit expense
|
1
|
|
|
(1
|
)
|
||
Pension obligation
|
1,096
|
|
|
(1,039
|
)
|
||
Other post-retirement benefit obligation
|
57
|
|
|
(54
|
)
|
$ increase/(decrease) in millions
|
25 Basis Point Decrease in Rate
|
|
25 Basis Point Increase in Rate
|
||||
Pension expense
|
$
|
(26
|
)
|
|
$
|
27
|
|
Pension obligation
|
(135
|
)
|
|
141
|
|
$ increase/(decrease) in millions
|
25 Basis Point Decrease
|
|
25 Basis Point Increase
|
||||
Pension expense
|
$
|
66
|
|
|
$
|
(66
|
)
|
Other post-retirement benefit expense
|
3
|
|
|
(3
|
)
|
/s/
|
Deloitte & Touche LLP
|
|
McLean, Virginia
|
|
January 29, 2018
|
|
We have served as the Company’s auditor since 1975.
|
|
|
Year Ended December 31
|
||||||||||
$ in millions, except per share amounts
|
|
2017
|
|
2016
|
|
2015
|
||||||
Sales
|
|
|
|
|
|
|
|
|
|
|||
Product
|
|
$
|
16,038
|
|
|
$
|
14,738
|
|
|
$
|
13,966
|
|
Service
|
|
9,765
|
|
|
9,770
|
|
|
9,560
|
|
|||
Total sales
|
|
25,803
|
|
|
24,508
|
|
|
23,526
|
|
|||
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|||
Product
|
|
12,271
|
|
|
11,002
|
|
|
10,333
|
|
|||
Service
|
|
7,578
|
|
|
7,729
|
|
|
7,551
|
|
|||
General and administrative expenses
|
|
2,655
|
|
|
2,584
|
|
|
2,566
|
|
|||
Operating income
|
|
3,299
|
|
|
3,193
|
|
|
3,076
|
|
|||
Other (expense) income
|
|
|
|
|
|
|
|
|
|
|||
Interest expense
|
|
(360
|
)
|
|
(301
|
)
|
|
(301
|
)
|
|||
Other, net
|
|
110
|
|
|
31
|
|
|
15
|
|
|||
Earnings before income taxes
|
|
3,049
|
|
|
2,923
|
|
|
2,790
|
|
|||
Federal and foreign income tax expense
|
|
1,034
|
|
|
723
|
|
|
800
|
|
|||
Net earnings
|
|
$
|
2,015
|
|
|
$
|
2,200
|
|
|
$
|
1,990
|
|
|
|
|
|
|
|
|
|
|
|
|||
Basic earnings per share
|
|
$
|
11.55
|
|
|
$
|
12.30
|
|
|
$
|
10.51
|
|
Weighted-average common shares outstanding, in millions
|
|
174.4
|
|
|
178.9
|
|
|
189.4
|
|
|||
Diluted earnings per share
|
|
$
|
11.47
|
|
|
$
|
12.19
|
|
|
$
|
10.39
|
|
Weighted-average diluted shares outstanding, in millions
|
|
175.6
|
|
|
180.5
|
|
|
191.6
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Net earnings (from above)
|
|
$
|
2,015
|
|
|
$
|
2,200
|
|
|
$
|
1,990
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|||
Change in unamortized benefit plan costs, net of tax (expense) benefit of ($383) in 2017, $89 in 2016 and ($45) in 2015
|
|
830
|
|
|
(175
|
)
|
|
75
|
|
|||
Change in cumulative translation adjustment
|
|
(4
|
)
|
|
(50
|
)
|
|
(41
|
)
|
|||
Other, net
|
|
2
|
|
|
(1
|
)
|
|
2
|
|
|||
Other comprehensive income (loss), net of tax
|
|
828
|
|
|
(226
|
)
|
|
36
|
|
|||
Comprehensive income
|
|
$
|
2,843
|
|
|
$
|
1,974
|
|
|
$
|
2,026
|
|
|
|
December 31
|
||||||
$ in millions
|
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
11,225
|
|
|
$
|
2,541
|
|
Accounts receivable, net
|
|
3,976
|
|
|
3,299
|
|
||
Inventoried costs, net
|
|
780
|
|
|
816
|
|
||
Prepaid expenses and other current assets
|
|
368
|
|
|
200
|
|
||
Total current assets
|
|
16,349
|
|
|
6,856
|
|
||
Property, plant and equipment, net of accumulated depreciation of $5,066 for 2017 and $4,831 for 2016
|
|
4,225
|
|
|
3,588
|
|
||
Goodwill
|
|
12,455
|
|
|
12,450
|
|
||
Deferred tax assets
|
|
475
|
|
|
1,462
|
|
||
Other non-current assets
|
|
1,413
|
|
|
1,258
|
|
||
Total assets
|
|
$
|
34,917
|
|
|
$
|
25,614
|
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
||||
Trade accounts payable
|
|
$
|
1,661
|
|
|
$
|
1,554
|
|
Accrued employee compensation
|
|
1,382
|
|
|
1,342
|
|
||
Advance payments and amounts in excess of costs incurred
|
|
1,617
|
|
|
1,471
|
|
||
Other current liabilities
|
|
2,305
|
|
|
1,263
|
|
||
Total current liabilities
|
|
6,965
|
|
|
5,630
|
|
||
Long-term debt, net of current portion of $867 for 2017 and $12 for 2016
|
|
14,399
|
|
|
7,058
|
|
||
Pension and other post-retirement benefit plan liabilities
|
|
5,511
|
|
|
6,818
|
|
||
Other non-current liabilities
|
|
994
|
|
|
849
|
|
||
Total liabilities
|
|
27,869
|
|
|
20,355
|
|
||
|
|
|
|
|
||||
Commitments and contingencies (Note 12)
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
Shareholders’ equity
|
|
|
|
|
||||
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued and outstanding
|
|
—
|
|
|
—
|
|
||
Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2017—174,085,619 and 2016—175,068,263
|
|
174
|
|
|
175
|
|
||
Paid-in capital
|
|
44
|
|
|
—
|
|
||
Retained earnings
|
|
11,548
|
|
|
10,630
|
|
||
Accumulated other comprehensive loss
|
|
(4,718
|
)
|
|
(5,546
|
)
|
||
Total shareholders’ equity
|
|
7,048
|
|
|
5,259
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
34,917
|
|
|
$
|
25,614
|
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
||||||
Operating activities
|
|
|
|
|
|
|
||||||
Net earnings
|
|
$
|
2,015
|
|
|
$
|
2,200
|
|
|
$
|
1,990
|
|
Adjustments to reconcile to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
475
|
|
|
456
|
|
|
467
|
|
|||
Stock-based compensation
|
|
94
|
|
|
93
|
|
|
99
|
|
|||
Excess tax benefits from stock-based compensation
|
|
—
|
|
|
—
|
|
|
(103
|
)
|
|||
Deferred income taxes
|
|
603
|
|
|
36
|
|
|
572
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts receivable, net
|
|
(677
|
)
|
|
(461
|
)
|
|
(30
|
)
|
|||
Inventoried costs, net
|
|
36
|
|
|
(15
|
)
|
|
(80
|
)
|
|||
Prepaid expenses and other assets
|
|
(81
|
)
|
|
(110
|
)
|
|
43
|
|
|||
Accounts payable and other liabilities
|
|
539
|
|
|
198
|
|
|
(632
|
)
|
|||
Income taxes payable, net
|
|
(157
|
)
|
|
148
|
|
|
135
|
|
|||
Retiree benefits
|
|
(191
|
)
|
|
393
|
|
|
(263
|
)
|
|||
Other, net
|
|
(43
|
)
|
|
(125
|
)
|
|
(36
|
)
|
|||
Net cash provided by operating activities
|
|
2,613
|
|
|
2,813
|
|
|
2,162
|
|
|||
|
|
|
|
|
|
|
||||||
Investing activities
|
|
|
|
|
|
|
||||||
Capital expenditures
|
|
(928
|
)
|
|
(920
|
)
|
|
(471
|
)
|
|||
Other, net
|
|
39
|
|
|
115
|
|
|
40
|
|
|||
Net cash used in investing activities
|
|
(889
|
)
|
|
(805
|
)
|
|
(431
|
)
|
|||
|
|
|
|
|
|
|
||||||
Financing activities
|
|
|
|
|
|
|
||||||
Common stock repurchases
|
|
(393
|
)
|
|
(1,547
|
)
|
|
(3,182
|
)
|
|||
Net proceeds from issuance of long-term debt
|
|
8,245
|
|
|
749
|
|
|
600
|
|
|||
Payments of long-term debt
|
|
—
|
|
|
(321
|
)
|
|
—
|
|
|||
Net (payments to) proceeds from credit facilities
|
|
(13
|
)
|
|
135
|
|
|
—
|
|
|||
Cash dividends paid
|
|
(689
|
)
|
|
(640
|
)
|
|
(603
|
)
|
|||
Payments of employee taxes withheld from share-based awards
|
|
(92
|
)
|
|
(153
|
)
|
|
(186
|
)
|
|||
Other, net
|
|
(98
|
)
|
|
(9
|
)
|
|
96
|
|
|||
Net cash provided by (used in) financing activities
|
|
6,960
|
|
|
(1,786
|
)
|
|
(3,275
|
)
|
|||
Increase (decrease) in cash and cash equivalents
|
|
8,684
|
|
|
222
|
|
|
(1,544
|
)
|
|||
Cash and cash equivalents, beginning of year
|
|
2,541
|
|
|
2,319
|
|
|
3,863
|
|
|||
Cash and cash equivalents, end of year
|
|
$
|
11,225
|
|
|
$
|
2,541
|
|
|
$
|
2,319
|
|
|
|
Year Ended December 31
|
||||||||||
$ in millions, except per share amounts
|
|
2017
|
|
2016
|
|
2015
|
||||||
Common stock
|
|
|
|
|
|
|
||||||
Beginning of year
|
|
$
|
175
|
|
|
$
|
181
|
|
|
$
|
199
|
|
Common stock repurchased
|
|
(2
|
)
|
|
(7
|
)
|
|
(19
|
)
|
|||
Shares issued for employee stock awards and options
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
End of year
|
|
174
|
|
|
175
|
|
|
181
|
|
|||
Paid-in capital
|
|
|
|
|
|
|
||||||
Beginning of year
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Stock compensation
|
|
44
|
|
|
—
|
|
|
—
|
|
|||
End of year
|
|
44
|
|
|
—
|
|
|
—
|
|
|||
Retained earnings
|
|
|
|
|
|
|
||||||
Beginning of year
|
|
10,630
|
|
|
10,661
|
|
|
12,392
|
|
|||
Common stock repurchased
|
|
(371
|
)
|
|
(1,548
|
)
|
|
(3,154
|
)
|
|||
Net earnings
|
|
2,015
|
|
|
2,200
|
|
|
1,990
|
|
|||
Dividends declared
|
|
(687
|
)
|
|
(633
|
)
|
|
(596
|
)
|
|||
Stock compensation
|
|
(39
|
)
|
|
(50
|
)
|
|
29
|
|
|||
End of year
|
|
11,548
|
|
|
10,630
|
|
|
10,661
|
|
|||
Accumulated other comprehensive loss
|
|
|
|
|
|
|
||||||
Beginning of year
|
|
(5,546
|
)
|
|
(5,320
|
)
|
|
(5,356
|
)
|
|||
Other comprehensive income (loss), net of tax
|
|
828
|
|
|
(226
|
)
|
|
36
|
|
|||
End of year
|
|
(4,718
|
)
|
|
(5,546
|
)
|
|
(5,320
|
)
|
|||
Total shareholders’ equity
|
|
$
|
7,048
|
|
|
$
|
5,259
|
|
|
$
|
5,522
|
|
Cash dividends declared per share
|
|
$
|
3.90
|
|
|
$
|
3.50
|
|
|
$
|
3.10
|
|
|
Year Ended December 31
|
||||||||||
$ in millions, except per share data
|
2017
|
|
2016
|
|
2015
|
||||||
Operating income
|
$
|
363
|
|
|
$
|
494
|
|
|
$
|
580
|
|
Net earnings
(1)
|
236
|
|
|
321
|
|
|
377
|
|
|||
Diluted earnings per share
(1)
|
1.34
|
|
|
1.78
|
|
|
1.97
|
|
(1)
|
Based on statutory tax rates in effect for each year presented.
|
|
|
Year Ended December 31
|
||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||
$ in millions
|
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|||||||||
U.S. Government
(1)
|
|
$
|
21,837
|
|
85
|
%
|
|
$
|
20,573
|
|
84
|
%
|
|
$
|
19,458
|
|
83
|
%
|
International
(2)
|
|
3,302
|
|
13
|
%
|
|
3,205
|
|
13
|
%
|
|
3,339
|
|
14
|
%
|
|||
Other Customers
|
|
664
|
|
2
|
%
|
|
730
|
|
3
|
%
|
|
729
|
|
3
|
%
|
|||
Total Sales
|
|
$
|
25,803
|
|
|
|
$
|
24,508
|
|
|
|
$
|
23,526
|
|
|
(1)
|
Sales to the
U.S.
Government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S. Government. Each of the company’s segments derives substantial revenue from the U.S. Government.
|
(2)
|
International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is an international customer. These sales include foreign military sales contracted through the U.S. Government, direct sales with governments outside the U.S. and commercial sales outside the U.S.
|
|
|
|
|
December 31
|
||||||
Useful life in years, $ in millions
|
|
Useful Life
|
|
2017
|
|
2016
|
||||
Land and land improvements
|
|
Up to 40
(1)
|
|
$
|
420
|
|
|
$
|
415
|
|
Buildings and improvements
|
|
Up to 40
|
|
1,834
|
|
|
1,798
|
|
||
Machinery and other equipment
|
|
Up to 20
|
|
5,105
|
|
|
4,711
|
|
||
Capitalized software costs
|
|
3-5
|
|
537
|
|
|
439
|
|
||
Leasehold improvements
|
|
Length of Lease
(2)
|
|
1,395
|
|
|
1,056
|
|
||
Property, plant and equipment, at cost
|
|
|
|
9,291
|
|
|
8,419
|
|
||
Accumulated depreciation
|
|
|
|
(5,066
|
)
|
|
(4,831
|
)
|
||
Property, plant and equipment, net
|
|
|
|
$
|
4,225
|
|
|
$
|
3,588
|
|
(1)
|
Land is not a depreciable asset.
|
(2)
|
Leasehold improvements are depreciated over the shorter of the useful life of the asset or the length of the lease.
|
|
|
December 31
|
||||||
$ in millions
|
|
2017
|
|
2016
|
||||
Unamortized benefit plan costs, net of tax benefit of $3,056 for 2017 and $3,439 for 2016
|
|
$
|
(4,586
|
)
|
|
$
|
(5,416
|
)
|
Cumulative translation adjustment
|
|
(136
|
)
|
|
(132
|
)
|
||
Net unrealized gain on marketable securities and cash flow hedges, net of tax
|
|
4
|
|
|
2
|
|
||
Total accumulated other comprehensive loss
|
|
$
|
(4,718
|
)
|
|
$
|
(5,546
|
)
|
|
Year Ended December 31
|
||||||
$ in millions, except per share amounts
|
2017
|
|
2016
|
||||
Sales
|
$
|
26,004
|
|
|
$
|
24,706
|
|
Operating income
|
3,246
|
|
|
3,125
|
|
||
Net earnings
|
1,995
|
|
|
2,156
|
|
||
Basic earnings per share
|
$
|
11.44
|
|
|
$
|
12.05
|
|
Diluted earnings per share
|
11.36
|
|
|
11.94
|
|
Repurchase Program
Authorization Date |
|
Amount
Authorized (in millions) |
|
Total
Shares Retired (in millions) |
|
Average
Price Per Share (1) |
|
Date Completed
|
|
Shares Repurchased
(in millions) |
||||||||||||
|
||||||||||||||||||||||
Year Ended December 31
|
||||||||||||||||||||||
2017
|
|
2016
|
|
2015
|
||||||||||||||||||
May 15, 2013
|
|
$
|
4,000
|
|
|
32.8
|
|
|
$
|
121.97
|
|
|
March 2015
|
|
—
|
|
|
—
|
|
|
2.7
|
|
December 4, 2014
|
|
$
|
3,000
|
|
|
18.0
|
|
|
$
|
166.70
|
|
|
March 2016
|
|
—
|
|
|
1.4
|
|
|
16.6
|
|
September 16, 2015
|
|
$
|
4,000
|
|
|
7.4
|
|
|
$
|
222.93
|
|
|
|
|
1.6
|
|
|
5.9
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
1.6
|
|
|
7.3
|
|
|
19.3
|
|
(1)
|
Includes commissions paid.
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
||||||
Sales
|
|
|
|
|
|
|
||||||
Aerospace Systems
|
|
$
|
11,955
|
|
|
$
|
10,828
|
|
|
$
|
9,940
|
|
Mission Systems
|
|
11,382
|
|
|
10,928
|
|
|
10,674
|
|
|||
Technology Services
|
|
4,750
|
|
|
4,825
|
|
|
4,819
|
|
|||
Intersegment eliminations
|
|
(2,284
|
)
|
|
(2,073
|
)
|
|
(1,907
|
)
|
|||
Total sales
|
|
25,803
|
|
|
24,508
|
|
|
23,526
|
|
|||
Operating income
|
|
|
|
|
|
|
||||||
Aerospace Systems
|
|
1,259
|
|
|
1,236
|
|
|
1,205
|
|
|||
Mission Systems
|
|
1,453
|
|
|
1,445
|
|
|
1,410
|
|
|||
Technology Services
|
|
524
|
|
|
512
|
|
|
514
|
|
|||
Intersegment eliminations
|
|
(277
|
)
|
|
(258
|
)
|
|
(209
|
)
|
|||
Total segment operating income
|
|
2,959
|
|
|
2,935
|
|
|
2,920
|
|
|||
Net FAS/CAS pension adjustment
|
|
594
|
|
|
316
|
|
|
348
|
|
|||
Unallocated corporate expenses
|
|
(250
|
)
|
|
(53
|
)
|
|
(190
|
)
|
|||
Other
|
|
(4
|
)
|
|
(5
|
)
|
|
(2
|
)
|
|||
Total operating income
|
|
$
|
3,299
|
|
|
$
|
3,193
|
|
|
$
|
3,076
|
|
|
|
Year Ended December 31
|
||||||||||||||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||||||||
|
|
Sales
|
Operating
Income
|
|
Sales
|
Operating
Income
|
|
Sales
|
Operating
Income
|
|||||||||||||||
Intersegment sales and operating income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Aerospace Systems
|
|
$
|
295
|
|
|
$
|
33
|
|
|
$
|
239
|
|
|
$
|
28
|
|
|
$
|
221
|
|
|
$
|
27
|
|
Mission Systems
|
|
954
|
|
|
141
|
|
|
875
|
|
|
136
|
|
|
781
|
|
|
97
|
|
||||||
Technology Services
|
|
1,035
|
|
|
103
|
|
|
959
|
|
|
94
|
|
|
905
|
|
|
85
|
|
||||||
Total
|
|
$
|
2,284
|
|
|
$
|
277
|
|
|
$
|
2,073
|
|
|
$
|
258
|
|
|
$
|
1,907
|
|
|
$
|
209
|
|
|
|
December 31
|
||||||
$ in millions
|
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
|
||||
Aerospace Systems
|
|
$
|
8,449
|
|
|
$
|
7,523
|
|
Mission Systems
|
|
10,204
|
|
|
9,991
|
|
||
Technology Services
|
|
3,010
|
|
|
3,082
|
|
||
Segment assets
|
|
21,663
|
|
|
20,596
|
|
||
Corporate assets
(1)
|
|
13,254
|
|
|
5,018
|
|
||
Total assets
|
|
$
|
34,917
|
|
|
$
|
25,614
|
|
(1)
|
Corporate assets principally consist of cash and cash equivalents and deferred tax assets.
|
|
|
Capital Expenditures
|
|
Depreciation and Amortization
(1)
|
||||||||||||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||
Aerospace Systems
|
|
$
|
665
|
|
|
$
|
451
|
|
|
$
|
237
|
|
|
$
|
234
|
|
|
$
|
216
|
|
|
$
|
215
|
|
Mission Systems
|
|
164
|
|
|
372
|
|
|
141
|
|
|
131
|
|
|
140
|
|
|
153
|
|
||||||
Technology Services
|
|
15
|
|
|
6
|
|
|
3
|
|
|
40
|
|
|
37
|
|
|
36
|
|
||||||
Corporate
|
|
84
|
|
|
91
|
|
|
90
|
|
|
70
|
|
|
63
|
|
|
63
|
|
||||||
Total
|
|
$
|
928
|
|
|
$
|
920
|
|
|
$
|
471
|
|
|
$
|
475
|
|
|
$
|
456
|
|
|
$
|
467
|
|
(1)
|
Depreciation and amortization expense includes amortization of purchased intangible assets, as well as amortization of deferred and other outsourcing costs.
|
|
|
December 31
|
||||||
$ in millions
|
|
2017
|
|
2016
|
||||
Due from U.S. Government
(1)
|
|
|
|
|
||||
Billed
|
|
$
|
656
|
|
|
$
|
482
|
|
Unbilled
|
|
10,818
|
|
|
9,730
|
|
||
Progress and performance-based payments received
|
|
(8,068
|
)
|
|
(7,484
|
)
|
||
Total due from U.S. Government
|
|
3,406
|
|
|
2,728
|
|
||
Due from International and Other Customers
|
|
|
|
|
||||
Billed
|
|
218
|
|
|
200
|
|
||
Unbilled
|
|
3,397
|
|
|
3,895
|
|
||
Progress and performance-based payments received
|
|
(2,966
|
)
|
|
(3,461
|
)
|
||
Total due from International and Other Customers
|
|
649
|
|
|
634
|
|
||
Total accounts receivable
|
|
4,055
|
|
|
3,362
|
|
||
Allowance for doubtful accounts
|
|
(79
|
)
|
|
(63
|
)
|
||
Total accounts receivable, net
|
|
$
|
3,976
|
|
|
$
|
3,299
|
|
(1)
|
Includes receivables due from the U.S. Government associated with foreign military sales (FMS). For FMS, we contract with and are paid by the U.S. Government.
|
|
|
December 31
|
||||||
$ in millions
|
|
2017
|
|
2016
|
||||
Production costs of contracts in process
|
|
$
|
1,813
|
|
|
$
|
1,574
|
|
G&A expenses
|
|
266
|
|
|
249
|
|
||
Contracts in process, gross
|
|
2,079
|
|
|
1,823
|
|
||
Progress and performance-based payments received
|
|
(1,396
|
)
|
|
(1,107
|
)
|
||
Contracts in process, net
|
|
683
|
|
|
716
|
|
||
Product inventory and raw material
|
|
97
|
|
|
100
|
|
||
Total inventoried costs, net
|
|
$
|
780
|
|
|
$
|
816
|
|
|
Year Ended December 31, 2017
|
||||||||||||||
($ in millions)
|
Reduction of U.S. Corporate Income Tax Rate
|
Transition Tax on Foreign Earnings
|
Acceleration of Depreciation
|
Other
|
Total
|
||||||||||
Income tax expense
|
$
|
280
|
|
$
|
13
|
|
$
|
5
|
|
$
|
2
|
|
$
|
300
|
|
Effective tax rate
|
9.1
|
%
|
0.4
|
%
|
0.2
|
%
|
0.1
|
%
|
9.8
|
%
|
|||||
|
|
|
|
|
|
||||||||||
|
As of December 31, 2017
|
||||||||||||||
($ in millions)
|
Reduction of U.S. Corporate Income Tax Rate
|
Transition Tax on Foreign Earnings
|
Acceleration of Depreciation
|
Other
|
Total
|
||||||||||
Deferred tax assets
|
$
|
(280
|
)
|
$
|
(13
|
)
|
$
|
(80
|
)
|
$
|
—
|
|
$
|
(373
|
)
|
Other current liabilities
|
—
|
|
—
|
|
(75
|
)
|
2
|
|
(73
|
)
|
|
|
Year Ended December 31
|
||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
||||||
Federal income tax expense:
|
|
|
|
|
|
|
||||||
Current
|
|
$
|
449
|
|
|
$
|
661
|
|
|
$
|
310
|
|
Deferred
|
|
581
|
|
|
49
|
|
|
472
|
|
|||
Total federal income tax expense
|
|
1,030
|
|
|
710
|
|
|
782
|
|
|||
Foreign income tax expense:
|
|
|
|
|
|
|
||||||
Current
|
|
8
|
|
|
14
|
|
|
21
|
|
|||
Deferred
|
|
(4
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|||
Total foreign income tax expense
|
|
4
|
|
|
13
|
|
|
18
|
|
|||
Total federal and foreign income tax expense
|
|
$
|
1,034
|
|
|
$
|
723
|
|
|
$
|
800
|
|
|
|
Year Ended December 31
|
|||||||||||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
Income tax expense at statutory rate
|
|
$
|
1,067
|
|
|
35.0
|
%
|
|
$
|
1,023
|
|
|
35.0
|
%
|
|
$
|
976
|
|
|
35.0
|
%
|
Stock compensation - excess tax benefits
|
|
(48
|
)
|
|
(1.6
|
)
|
|
(85
|
)
|
|
(2.9
|
)
|
|
—
|
|
|
—
|
|
|||
Research credit
|
|
(130
|
)
|
|
(4.2
|
)
|
|
(61
|
)
|
|
(2.1
|
)
|
|
(119
|
)
|
|
(4.3
|
)
|
|||
Manufacturing deduction
|
|
(97
|
)
|
|
(3.2
|
)
|
|
(58
|
)
|
|
(2.0
|
)
|
|
(31
|
)
|
|
(1.1
|
)
|
|||
Settlements with taxing authorities
|
|
(42
|
)
|
|
(1.4
|
)
|
|
(40
|
)
|
|
(1.4
|
)
|
|
—
|
|
|
—
|
|
|||
Repatriation of non-U.S. earnings
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
(1.1
|
)
|
|
—
|
|
|
—
|
|
|||
Impacts related to the 2017 Tax Act
|
|
300
|
|
|
9.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other, net
|
|
(16
|
)
|
|
(0.5
|
)
|
|
(23
|
)
|
|
(0.8
|
)
|
|
(26
|
)
|
|
(0.9
|
)
|
|||
Total federal and foreign income taxes
|
|
$
|
1,034
|
|
|
33.9
|
%
|
|
$
|
723
|
|
|
24.7
|
%
|
|
$
|
800
|
|
|
28.7
|
%
|
|
|
December 31
|
||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
||||||
Unrecognized tax benefits at beginning of the year
|
|
$
|
135
|
|
|
$
|
223
|
|
|
$
|
210
|
|
Additions based on tax positions related to the current year
|
|
102
|
|
|
35
|
|
|
52
|
|
|||
Additions for tax positions of prior years
|
|
110
|
|
|
2
|
|
|
17
|
|
|||
Reductions for tax positions of prior years
|
|
(44
|
)
|
|
(40
|
)
|
|
(10
|
)
|
|||
Settlements with taxing authorities
|
|
(20
|
)
|
|
(84
|
)
|
|
—
|
|
|||
Other, net
|
|
—
|
|
|
(1
|
)
|
|
(46
|
)
|
|||
Net change in unrecognized tax benefits
|
|
148
|
|
|
(88
|
)
|
|
13
|
|
|||
Unrecognized tax benefits at end of the year
|
|
$
|
283
|
|
|
$
|
135
|
|
|
$
|
223
|
|
|
|
December 31
|
||||||
$ in millions
|
|
2017
|
|
2016
|
||||
Deferred Tax Assets
|
|
|
|
|
||||
Retiree benefits
|
|
$
|
1,477
|
|
|
$
|
2,814
|
|
Accrued employee compensation
|
|
263
|
|
|
349
|
|
||
Provisions for accrued liabilities
|
|
193
|
|
|
295
|
|
||
Inventory
|
|
191
|
|
|
287
|
|
||
Stock-based compensation
|
|
46
|
|
|
72
|
|
||
Other
|
|
39
|
|
|
72
|
|
||
Gross deferred tax assets
|
|
2,209
|
|
|
3,889
|
|
||
Less valuation allowance
|
|
(26
|
)
|
|
(31
|
)
|
||
Net deferred tax assets
|
|
2,183
|
|
|
3,858
|
|
||
Deferred Tax Liabilities
|
|
|
|
|
||||
Goodwill
|
|
511
|
|
|
798
|
|
||
Property, plant and equipment, net
|
|
256
|
|
|
321
|
|
||
Contract accounting differences
|
|
898
|
|
|
1,200
|
|
||
Other
|
|
43
|
|
|
77
|
|
||
Deferred tax liabilities
|
|
1,708
|
|
|
2,396
|
|
||
Total net deferred tax assets
|
|
$
|
475
|
|
|
$
|
1,462
|
|
$ in millions
|
|
Aerospace Systems
|
|
Mission Systems
|
|
Technology Services
|
|
Total
|
||||||||
Balance as of December 31, 2015
|
|
$
|
3,742
|
|
|
$
|
6,704
|
|
|
$
|
2,014
|
|
|
$
|
12,460
|
|
Businesses sold and other
(1)
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
||||
Balance as of December 31, 2016
|
|
$
|
3,742
|
|
|
$
|
6,694
|
|
|
$
|
2,014
|
|
|
$
|
12,450
|
|
Other
(1)
|
|
—
|
|
|
2
|
|
|
3
|
|
|
5
|
|
||||
Balance as of December 31, 2017
|
|
$
|
3,742
|
|
|
$
|
6,696
|
|
|
$
|
2,017
|
|
|
$
|
12,455
|
|
(1)
|
Other consists primarily of adjustments for foreign currency translation.
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
$ in millions
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||||||||
Financial Assets (Liabilities)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trading
|
|
$
|
342
|
|
|
$
|
1
|
|
|
$
|
343
|
|
|
$
|
321
|
|
|
$
|
2
|
|
|
$
|
323
|
|
Available-for-sale
|
|
10
|
|
|
—
|
|
|
10
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||
Derivatives
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
•
|
$1.0 billion
of
2.08 percent
Senior Notes due 2020 (the “2020 Notes”),
|
•
|
$1.5 billion
of
2.55 percent
Senior Notes due 2022 (the “2022 Notes”),
|
•
|
$1.5 billion
of
2.93 percent
Senior Notes due 2025 (the “2025 Notes”),
|
•
|
$2.0 billion
of
3.25 percent
Senior Notes due 2028 (the “2028 Notes”) and
|
•
|
$2.25 billion
of
4.03 percent
Senior Notes due 2047 (the “2047 Notes”).
|
$ in millions
|
|
|
|
December 31
|
||||||
2017
|
|
2016
|
||||||||
Fixed-rate notes and debentures, maturing in
|
|
Interest rate
|
|
|
|
|
||||
2018
|
|
1.75%
|
|
850
|
|
|
850
|
|
||
2019
|
|
5.05%
|
|
500
|
|
|
500
|
|
||
2020
|
|
2.08%
|
|
1,000
|
|
|
—
|
|
||
2021
|
|
3.50%
|
|
700
|
|
|
700
|
|
||
2022
|
|
2.55%
|
|
1,500
|
|
|
—
|
|
||
2023
|
|
3.25%
|
|
1,050
|
|
|
1,050
|
|
||
2025
|
|
2.93%
|
|
1,500
|
|
|
—
|
|
||
2026
|
|
7.75% - 7.88%
|
|
527
|
|
|
527
|
|
||
2027
|
|
3.20%
|
|
750
|
|
|
750
|
|
||
2028
|
|
3.25%
|
|
2,000
|
|
|
—
|
|
||
2031
|
|
7.75%
|
|
466
|
|
|
466
|
|
||
2040
|
|
5.05%
|
|
300
|
|
|
300
|
|
||
2043
|
|
4.75%
|
|
950
|
|
|
950
|
|
||
2045
|
|
3.85%
|
|
600
|
|
|
600
|
|
||
2047
|
|
4.03%
|
|
2,250
|
|
|
—
|
|
||
Credit facilities
|
|
1.62%
|
|
134
|
|
|
135
|
|
||
Other
|
|
Various
|
|
271
|
|
|
273
|
|
||
Debt issuance costs
|
|
|
|
(82
|
)
|
|
(31
|
)
|
||
Total long-term debt
|
|
|
|
15,266
|
|
|
7,070
|
|
||
Less: current portion
(1)
|
|
|
|
867
|
|
|
12
|
|
||
Long-term debt, net of current portion
|
|
|
|
$
|
14,399
|
|
|
$
|
7,058
|
|
$ in millions
|
|
|
|
Year Ending December 31
|
|
||
2018
|
$
|
867
|
|
2019
|
518
|
|
|
2020
|
1,045
|
|
|
2021
|
834
|
|
|
2022
|
1,505
|
|
|
Thereafter
|
10,581
|
|
|
Total principal payments
|
15,350
|
|
|
Unamortized premium on long-term debt, net of discount
|
(2
|
)
|
|
Debt issuance costs
|
(82
|
)
|
|
Total long-term debt
|
$
|
15,266
|
|
$ in millions
|
|
Range of Reasonably Possible Future Costs
(1)
|
|
Accrued Costs
(2)
|
|
Deferred Costs
(3)
|
||||
December 31, 2017
|
|
$405 - $792
|
|
$
|
410
|
|
|
$
|
207
|
|
December 31, 2016
|
|
379- 774
|
|
385
|
|
|
195
|
|
(1)
|
Estimated remediation costs are not discounted to present value. The range of reasonably possible future costs does not take into consideration amounts expected to be recoverable through overhead charges on U.S. Government contracts.
|
(2)
|
As of
December 31, 2017
,
$148 million
is recorded in other current liabilities and
$262 million
is recorded in other non-current liabilities.
|
(3)
|
As of
December 31, 2017
,
$76 million
is deferred in inventoried costs and
$131 million
is deferred in other non-current assets. These amounts are evaluated for recoverability on a routine basis.
|
$ in millions
|
|
||
Year Ending December 31
|
|
||
2018
|
$
|
232
|
|
2019
|
195
|
|
|
2020
|
145
|
|
|
2021
|
120
|
|
|
2022
|
87
|
|
|
Thereafter
|
559
|
|
|
Total minimum lease payments
|
$
|
1,338
|
|
|
|
Year Ended December 31
|
||||||||||||||||||||||
|
|
Pension Benefits
|
|
Medical and Life Benefits
|
||||||||||||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
|
$
|
424
|
|
|
$
|
446
|
|
|
$
|
484
|
|
|
$
|
23
|
|
|
$
|
30
|
|
|
$
|
35
|
|
Interest cost
|
|
1,234
|
|
|
1,284
|
|
|
1,224
|
|
|
84
|
|
|
94
|
|
|
94
|
|
||||||
Expected return on plan assets
|
|
(1,885
|
)
|
|
(1,853
|
)
|
|
(1,975
|
)
|
|
(89
|
)
|
|
(86
|
)
|
|
(89
|
)
|
||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit
|
|
(57
|
)
|
|
(60
|
)
|
|
(60
|
)
|
|
(22
|
)
|
|
(22
|
)
|
|
(28
|
)
|
||||||
Net loss from previous years
|
|
712
|
|
|
714
|
|
|
682
|
|
|
9
|
|
|
16
|
|
|
27
|
|
||||||
Other
|
|
4
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit cost
|
|
$
|
432
|
|
|
$
|
531
|
|
|
$
|
355
|
|
|
$
|
6
|
|
|
$
|
32
|
|
|
$
|
39
|
|
$ in millions
|
|
Pension Benefits
|
|
Medical and Life Benefits
|
|
Total
|
||||||
Changes in unamortized benefit plan costs
|
|
|
|
|
|
|
||||||
Change in net actuarial loss
|
|
$
|
626
|
|
|
$
|
(125
|
)
|
|
$
|
501
|
|
Amortization of:
|
|
|
|
|
|
|
||||||
Prior service credit
|
|
60
|
|
|
28
|
|
|
88
|
|
|||
Net loss from previous years
|
|
(682
|
)
|
|
(27
|
)
|
|
(709
|
)
|
|||
Tax (benefit) expense related to above items
|
|
(1
|
)
|
|
46
|
|
|
45
|
|
|||
Change in unamortized benefit plan costs – 2015
|
|
3
|
|
|
(78
|
)
|
|
(75
|
)
|
|||
Change in net actuarial loss
|
|
1,003
|
|
|
(91
|
)
|
|
912
|
|
|||
Amortization of:
|
|
|
|
|
|
|
||||||
Prior service credit
|
|
60
|
|
|
22
|
|
|
82
|
|
|||
Net loss from previous years
|
|
(714
|
)
|
|
(16
|
)
|
|
(730
|
)
|
|||
Tax (benefit) expense related to above items
|
|
(121
|
)
|
|
32
|
|
|
(89
|
)
|
|||
Change in unamortized benefit plan costs – 2016
|
|
228
|
|
|
(53
|
)
|
|
175
|
|
|||
Change in net actuarial loss
|
|
(476
|
)
|
|
(95
|
)
|
|
(571
|
)
|
|||
Amortization of:
|
|
|
|
|
|
|
||||||
Prior service credit
|
|
57
|
|
|
22
|
|
|
79
|
|
|||
Net loss from previous years
|
|
(712
|
)
|
|
(9
|
)
|
|
(721
|
)
|
|||
Tax (benefit) expense related to above items
|
|
365
|
|
|
18
|
|
|
383
|
|
|||
Change in unamortized benefit plan costs – 2017
|
|
$
|
(766
|
)
|
|
$
|
(64
|
)
|
|
$
|
(830
|
)
|
|
|
Pension Benefits
|
|
Medical and Life Benefits
|
||||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Amounts recorded in accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
||||||||
Net actuarial loss
|
|
$
|
(7,842
|
)
|
|
$
|
(9,030
|
)
|
|
$
|
(9
|
)
|
|
$
|
(113
|
)
|
Prior service credit
|
|
187
|
|
|
244
|
|
|
22
|
|
|
44
|
|
||||
Income tax benefits related to above items
|
|
3,042
|
|
|
3,407
|
|
|
14
|
|
|
32
|
|
||||
Unamortized benefit plan costs
|
|
$
|
(4,613
|
)
|
|
$
|
(5,379
|
)
|
|
$
|
27
|
|
|
$
|
(37
|
)
|
|
|
Pension Benefits
|
|
Medical and Life Benefits
|
||||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Plan Assets
|
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at beginning of year
|
|
$
|
24,384
|
|
|
$
|
23,950
|
|
|
$
|
1,208
|
|
|
$
|
1,153
|
|
Net gain on plan assets
|
|
3,885
|
|
|
1,867
|
|
|
208
|
|
|
97
|
|
||||
Employer contributions
|
|
596
|
|
|
81
|
|
|
45
|
|
|
83
|
|
||||
Participant contributions
|
|
11
|
|
|
11
|
|
|
24
|
|
|
20
|
|
||||
Benefits paid
|
|
(1,617
|
)
|
|
(1,480
|
)
|
|
(144
|
)
|
|
(146
|
)
|
||||
Other
|
|
(33
|
)
|
|
(45
|
)
|
|
(3
|
)
|
|
1
|
|
||||
Fair value of plan assets at end of year
|
|
27,226
|
|
|
24,384
|
|
|
1,338
|
|
|
1,208
|
|
||||
Projected Benefit Obligation
|
|
|
|
|
|
|
|
|
||||||||
Projected benefit obligation at beginning of year
|
|
30,409
|
|
|
29,182
|
|
|
2,100
|
|
|
2,181
|
|
||||
Service cost
|
|
424
|
|
|
446
|
|
|
23
|
|
|
30
|
|
||||
Interest cost
|
|
1,234
|
|
|
1,284
|
|
|
84
|
|
|
94
|
|
||||
Participant contributions
|
|
11
|
|
|
11
|
|
|
24
|
|
|
20
|
|
||||
Actuarial loss (gain)
|
|
1,526
|
|
|
1,026
|
|
|
26
|
|
|
(80
|
)
|
||||
Benefits paid
|
|
(1,617
|
)
|
|
(1,480
|
)
|
|
(144
|
)
|
|
(146
|
)
|
||||
Other
|
|
(20
|
)
|
|
(60
|
)
|
|
(3
|
)
|
|
1
|
|
||||
Projected benefit obligation at end of year
|
|
31,967
|
|
|
30,409
|
|
|
2,110
|
|
|
2,100
|
|
||||
Funded status
|
|
$
|
(4,741
|
)
|
|
$
|
(6,025
|
)
|
|
$
|
(772
|
)
|
|
$
|
(892
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Classification of amounts recognized in the consolidated statements of financial position
|
|
|
|
|
|
|
|
|
||||||||
Non-current assets
|
|
$
|
82
|
|
|
$
|
2
|
|
|
$
|
112
|
|
|
$
|
87
|
|
Current liability
|
|
(154
|
)
|
|
(146
|
)
|
|
(42
|
)
|
|
(42
|
)
|
||||
Non-current liability
|
|
(4,669
|
)
|
|
(5,881
|
)
|
|
(842
|
)
|
|
(937
|
)
|
$ in millions
|
Pension Benefits
|
|
Medical and Life Benefits
|
|
Total
|
||||||
Amounts expected to be recognized in 2018 net periodic benefit cost
|
|
|
|
|
|
||||||
Net actuarial loss
|
$
|
535
|
|
|
$
|
—
|
|
|
$
|
535
|
|
Prior service credit
|
(58
|
)
|
|
(21
|
)
|
|
(79
|
)
|
|
|
December 31
|
||||||
$ in millions
|
|
2017
|
|
2016
|
||||
Projected benefit obligation
|
|
$
|
29,804
|
|
|
$
|
30,350
|
|
Accumulated benefit obligation
|
|
29,454
|
|
|
30,065
|
|
||
Fair value of plan assets
|
|
24,981
|
|
|
24,322
|
|
|
|
Pension Benefits
|
|
Medical and Life Benefits
|
||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Assumptions used to determine benefit obligation at December 31
|
|
|
|
|
|
|
|
|
||||
Discount rate
|
|
3.68
|
%
|
|
4.19
|
%
|
|
3.66
|
%
|
|
4.13
|
%
|
Initial cash balance crediting rate assumed for the next year
|
|
2.75
|
%
|
|
3.10
|
%
|
|
|
|
|
||
Rate to which the cash balance crediting rate is assumed to increase (the ultimate rate)
|
|
3.00
|
%
|
|
3.60
|
%
|
|
|
|
|
||
Year that the cash balance crediting rate reaches the ultimate rate
|
|
2023
|
|
|
2022
|
|
|
|
|
|
||
Rate of compensation increase
|
|
3.00
|
%
|
|
3.00
|
%
|
|
|
|
|
||
Initial health care cost trend rate assumed for the next year
|
|
|
|
|
|
6.50
|
%
|
|
6.50
|
%
|
||
Rate to which the health care cost trend rate is assumed to decline (the ultimate trend rate)
|
|
|
|
|
|
5.00
|
%
|
|
5.00
|
%
|
||
Year that the health care cost trend rate reaches the ultimate trend rate
|
|
|
|
|
|
2023
|
|
|
2020
|
|
||
Assumptions used to determine benefit cost for the year ended December 31
|
|
|
|
|
|
|
|
|
||||
Discount rate
|
|
4.19
|
%
|
|
4.53
|
%
|
|
4.13
|
%
|
|
4.47
|
%
|
Initial cash balance crediting rate assumed for the next year
|
|
3.10
|
%
|
|
3.00
|
%
|
|
|
|
|
||
Rate to which the cash balance crediting rate is assumed to increase (the ultimate rate)
|
|
3.60
|
%
|
|
3.75
|
%
|
|
|
|
|
||
Year that the cash balance crediting rate reaches the ultimate rate
|
|
2022
|
|
|
2021
|
|
|
|
|
|
||
Expected long-term return on plan assets
|
|
8.00
|
%
|
|
8.00
|
%
|
|
7.70
|
%
|
|
7.70
|
%
|
Rate of compensation increase
|
|
3.00
|
%
|
|
3.00
|
%
|
|
|
|
|
||
Initial health care cost trend rate assumed for the next year
|
|
|
|
|
|
6.50
|
%
|
|
7.00
|
%
|
||
Rate to which the health care cost trend rate is assumed to decline (the ultimate trend rate)
|
|
|
|
|
|
5.00
|
%
|
|
5.00
|
%
|
||
Year that the health care cost trend rate reaches the ultimate trend rate
|
|
|
|
|
|
2020
|
|
|
2020
|
|
|
|
Asset Allocation Ranges
|
|||
Cash and cash equivalents
|
|
0% - 12%
|
|||
U.S. equities
|
|
15% - 35%
|
|||
International equities
|
|
10% - 30%
|
|||
Fixed-income securities
|
|
20% - 55%
|
|||
Alternative investments
|
|
8% - 28%
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||||||||||
$ in millions
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||
Asset category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash and cash equivalents
|
|
$
|
55
|
|
|
$
|
72
|
|
|
$
|
4,086
|
|
|
$
|
2,477
|
|
|
|
|
|
|
$
|
4,141
|
|
|
$
|
2,549
|
|
||||
U.S. equities
|
|
3,365
|
|
|
3,686
|
|
|
|
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
3,366
|
|
|
3,689
|
|
||||||||
International equities
|
|
2,453
|
|
|
2,392
|
|
|
—
|
|
|
48
|
|
|
1
|
|
|
1
|
|
|
2,454
|
|
|
2,441
|
|
||||||||
Fixed-income securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. Treasuries
|
|
|
|
|
|
1,282
|
|
|
1,109
|
|
|
|
|
|
|
1,282
|
|
|
1,109
|
|
||||||||||||
U.S. Government Agency
|
|
|
|
|
|
345
|
|
|
424
|
|
|
|
|
|
|
345
|
|
|
424
|
|
||||||||||||
Corporate bond
|
|
|
|
|
|
|
|
2
|
|
|
—
|
|
|
|
|
|
|
2
|
|
|
—
|
|
||||||||||
Non-U.S. Government
|
|
|
|
|
|
135
|
|
|
108
|
|
|
|
|
|
|
135
|
|
|
108
|
|
||||||||||||
Corporate debt
|
|
|
|
|
|
4,404
|
|
|
3,723
|
|
|
|
|
|
|
4,404
|
|
|
3,723
|
|
||||||||||||
Asset backed
|
|
|
|
|
|
255
|
|
|
296
|
|
|
—
|
|
|
1
|
|
|
255
|
|
|
297
|
|
||||||||||
High yield debt
|
|
|
|
|
|
866
|
|
|
1,844
|
|
|
|
|
|
|
866
|
|
|
1,844
|
|
||||||||||||
Bank loans
|
|
|
|
|
|
248
|
|
|
297
|
|
|
|
|
|
|
248
|
|
|
297
|
|
||||||||||||
Other Assets
|
|
15
|
|
|
(10
|
)
|
|
3
|
|
|
12
|
|
|
2
|
|
|
—
|
|
|
20
|
|
|
2
|
|
||||||||
Investments valued using NAV as a practical expedient
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. equities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,053
|
|
|
700
|
|
||||||||||||||
International equities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,315
|
|
|
3,329
|
|
||||||||||||||
Fixed-income funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129
|
|
|
99
|
|
||||||||||||||
Hedge funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166
|
|
|
220
|
|
||||||||||||||
Opportunistic investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
873
|
|
|
581
|
|
||||||||||||||
Private equities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,091
|
|
|
1,801
|
|
||||||||||||||
Real estate funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,419
|
|
|
2,379
|
|
||||||||||||||
Fair value of plan assets at the end of the year
|
|
$
|
5,888
|
|
|
$
|
6,140
|
|
|
$
|
11,626
|
|
|
$
|
10,338
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
28,564
|
|
|
$
|
25,592
|
|
|
|
Stock
Awards (in thousands) |
|
Weighted-
Average Grant Date Fair Value Per Share |
|
Weighted-
Average Remaining Contractual Term (in years) |
|||
Outstanding at January 1, 2015
|
|
2,808
|
|
|
$
|
77
|
|
|
1.1
|
Granted
|
|
539
|
|
|
166
|
|
|
|
|
Vested
|
|
(1,691
|
)
|
|
62
|
|
|
|
|
Forfeited
|
|
(70
|
)
|
|
108
|
|
|
|
|
Outstanding at December 31, 2015
|
|
1,586
|
|
|
$
|
122
|
|
|
1.2
|
Granted
|
|
483
|
|
|
186
|
|
|
|
|
Vested
|
|
(872
|
)
|
|
97
|
|
|
|
|
Forfeited
|
|
(49
|
)
|
|
143
|
|
|
|
|
Outstanding at December 31, 2016
|
|
1,148
|
|
|
$
|
167
|
|
|
1.3
|
Granted
|
|
397
|
|
|
233
|
|
|
|
|
Vested
|
|
(521
|
)
|
|
152
|
|
|
|
|
Forfeited
|
|
(86
|
)
|
|
198
|
|
|
|
|
Outstanding at December 31, 2017
|
|
938
|
|
|
$
|
192
|
|
|
1.0
|
|
|
Year Ended December 31
|
||||||||
$ in millions
|
|
2017
|
2016
|
2015
|
||||||
Minimum aggregate payout amount
|
|
$
|
38
|
|
$
|
39
|
|
$
|
37
|
|
Maximum aggregate payout amount
|
|
201
|
|
199
|
|
194
|
|
2017
|
|
|
||||||||||||||
In millions, except per share amounts
|
|
1st Qtr
|
|
2nd Qtr
|
|
3rd Qtr
|
|
4th Qtr
|
||||||||
Sales
|
|
$
|
6,267
|
|
|
$
|
6,375
|
|
|
$
|
6,527
|
|
|
$
|
6,634
|
|
Operating income
|
|
832
|
|
|
855
|
|
|
845
|
|
|
767
|
|
||||
Net earnings
|
|
640
|
|
|
552
|
|
|
645
|
|
|
178
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share
|
|
3.66
|
|
|
3.16
|
|
|
3.70
|
|
|
1.02
|
|
||||
Diluted earnings per share
|
|
3.63
|
|
|
3.15
|
|
|
3.68
|
|
|
1.01
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
|
174.8
|
|
|
174.5
|
|
|
174.2
|
|
|
174.2
|
|
||||
Weighted-average diluted shares outstanding
|
|
176.1
|
|
|
175.5
|
|
|
175.3
|
|
|
175.5
|
|
2016
|
|
|
||||||||||||||
In millions, except per share amounts
|
|
1st Qtr
|
|
2nd Qtr
|
|
3rd Qtr
|
|
4th Qtr
|
||||||||
Sales
|
|
$
|
5,956
|
|
|
$
|
6,000
|
|
|
$
|
6,155
|
|
|
$
|
6,397
|
|
Operating income
|
|
739
|
|
|
797
|
|
|
826
|
|
|
831
|
|
||||
Net earnings
|
|
556
|
|
|
517
|
|
|
602
|
|
|
525
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share
|
|
3.07
|
|
|
2.87
|
|
|
3.38
|
|
|
2.98
|
|
||||
Diluted earnings per share
|
|
3.03
|
|
|
2.85
|
|
|
3.35
|
|
|
2.96
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
|
181.3
|
|
|
180.1
|
|
|
178.1
|
|
|
176.0
|
|
||||
Weighted-average diluted shares outstanding
|
|
183.4
|
|
|
181.5
|
|
|
179.6
|
|
|
177.6
|
|
Name
|
|
Age
|
|
Office Held
|
|
Since
|
|
Recent Business Experience
|
|
Wesley G. Bush
|
|
56
|
|
|
Chairman and Chief Executive Officer
|
|
2011
|
|
Chairman, Chief Executive Officer and President (2011-2017)
|
Patrick M. Antkowiak
|
|
57
|
|
|
Corporate Vice President and Chief Technology Officer
|
|
2014
|
|
Vice President and General Manager, Advanced Concepts and Technologies Division, Former Electronic Systems Sector (2010-2014)
|
Kenneth L. Bedingfield
|
|
45
|
|
|
Corporate Vice President and Chief Financial Officer
|
|
2015
|
|
Vice President, Finance (2014-2015); Vice President, Business Management and Chief Financial Officer, Aerospace Systems Sector (2013-2014); Corporate Vice President, Controller and Chief Accounting Officer (2011-2013)
|
Mark A. Caylor
|
|
53
|
|
|
Corporate Vice President and President, Mission Systems Sector
|
|
2018
|
|
Corporate Vice President and President, Enterprise Services and Chief Strategy Officer (2014-2017); Corporate Vice President and President, Enterprise Shared Services (2013-2014)
|
Sheila C. Cheston
|
|
59
|
|
|
Corporate Vice President and General Counsel
|
|
2010
|
|
|
Lisa R. Davis
|
|
56
|
|
|
Corporate Vice President, Communications
|
|
2016
|
|
Vice President, Communications, Former Electronic Systems Sector (2014-2016); Vice President, Communications, AstraZeneca (a biopharmaceutical company) (2006-2013)
|
Michael A. Hardesty
|
|
46
|
|
|
Corporate Vice President, Controller, and Chief Accounting Officer
|
|
2013
|
|
Vice President and Chief Financial Officer, Former Information Systems Sector (2011-2013)
|
Christopher T. Jones
|
|
53
|
|
|
Corporate Vice President and President, Technology Services Sector
|
|
2016
|
|
Corporate Vice President and President, Former Technical Services Sector (2013-2015)
|
Name
|
|
Age
|
|
Office Held
|
|
Since
|
|
Recent Business Experience
|
|
Lesley A. Kalan
|
|
44
|
|
|
Corporate Vice President, Government Relations
|
|
2018
|
|
Vice President, Legislative Affairs (2010-2017)
|
Janis G. Pamiljans
|
|
57
|
|
|
Corporate Vice President and President, Aerospace Systems Sector
|
|
2017
|
|
Vice President and General Manager, Strategic Systems Division, Aerospace Systems Sector (2015-2017); Vice President and General Manager, Unmanned Systems (now Autonomous Systems), Aerospace Systems Sector (2012-2014)
|
Denise M. Peppard
|
|
61
|
|
|
Corporate Vice President and Chief Human Resources Officer
|
|
2011
|
|
|
David T. Perry
|
|
53
|
|
|
Corporate Vice President and Chief Global Business Development Officer
|
|
2012
|
|
|
Shawn N. Purvis
|
|
44
|
|
|
Corporate Vice President and President of Enterprise Services
|
|
2018
|
|
Vice President and Chief Information Officer (2016-2017); Vice President and General Manager, Cyber Division, Former Information Systems Sector (2014-2016); Vice President and Business Manager, Integrated Intelligence Systems Business Unit, Former Information Systems Sector (2012-2014)
|
Kathy J. Warden
|
|
46
|
|
|
President and Chief Operating Officer
|
|
2018
|
|
Corporate Vice President and President, Mission Systems Sector (2016-2017); Corporate Vice President and President, Former Information Systems Sector (2013-2015)
|
(a)
|
1. Report of Independent Registered Public Accounting Firm
|
|
4(m)
|
Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and Mellon Bank, N.A., as trustee, dated as of May 1, 1986 (incorporated by reference to Exhibit 2 to the Form 8-A Registration Statement of TRW Inc. dated July 3, 1986, File No. 001-02384)
|
|
4(n)
|
First Supplemental Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and Mellon Bank, N.A., as trustee, dated as of August 24, 1989 (incorporated by reference to Exhibit 4(b) to Form S-3 Registration Statement No. 33-30350 of TRW Inc.)
|
|
**32.2
|
|
*101
|
Northrop Grumman Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2017, formatted in XBRL (Extensible Business Reporting Language); (i) the Consolidated Statements of Earnings and Comprehensive Income, (ii) Consolidated Statements of Financial Position, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Changes in Shareholders’ Equity, and (v) Notes to Consolidated Financial Statements
|
|
+
|
Management contract or compensatory plan or arrangement
|
|
*
|
Filed with this Report
|
|
**
|
Furnished with this Report
|
|
|
|
|
NORTHROP GRUMMAN CORPORATION
|
|
|
|
|
|
By:
|
/s/ Michael A. Hardesty
|
|
|
Michael A. Hardesty
|
|
|
Corporate Vice President, Controller, and Chief Accounting Officer
|
|
|
(Principal Accounting Officer)
|
Signature
|
|
Title
|
|
|
|
Wesley G. Bush*
|
|
Chairman and Chief Executive Officer (Principal Executive Officer), and Director
|
|
|
|
Kenneth L. Bedingfield*
|
|
Corporate Vice President and Chief Financial Officer (Principal Financial Officer)
|
|
|
|
Michael A. Hardesty
|
|
Corporate Vice President, Controller and Chief Accounting Officer
|
|
|
|
Marianne C. Brown*
|
|
Director
|
|
|
|
Victor H. Fazio*
|
|
Director
|
|
|
|
Donald E. Felsinger*
|
|
Director
|
|
|
|
Ann M. Fudge*
|
|
Director
|
|
|
|
Bruce S. Gordon*
|
|
Director
|
|
|
|
William H. Hernandez*
|
|
Director
|
|
|
|
Madeleine A. Kleiner*
|
|
Director
|
|
|
|
Karl J. Krapek*
|
|
Director
|
|
|
|
Gary Roughead*
|
|
Director
|
|
|
|
Thomas M. Schoewe*
|
|
Director
|
|
|
|
James S. Turley*
|
|
Director
|
|
|
|
Mark A. Welsh III*
|
|
Director
|
*By:
|
/s/ Jennifer C. McGarey
|
|
Jennifer C. McGarey
|
|
Corporate Vice President and Secretary
|
|
Attorney-in-Fact
|
|
pursuant to a power of attorney
|
1.
|
Vesting; Payment of RPSRs
.
|
2.
|
Early Termination of Award; Termination of Employment
.
|
3.
|
Non-Transferability and Other Restrictions
.
|
4.
|
Post-Employment Conduct
.
|
5.
|
Compliance with Laws; No Stockholder Rights Prior to Issuance
.
|
6.
|
Adjustments; Change in Control
.
|
7.
|
Tax Matters
.
|
8.
|
Choice of Law; Venue; Arbitration
.
|
9.
|
Committee Authority
.
|
10.
|
Plan; Amendment
.
|
11.
|
Required Holding Period
.
|
12.
|
Definitions
.
|
(i)
|
The Grantee’s conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses, as a result of vicarious liability, or as a
|
(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 Grantee’s 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 or her action or omission was in the best interest of the Company.
|
(i)
|
A material and substantial reduction in the nature or status of the Grantee’s 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
|
(ii)
|
A material reduction by the Company in the Grantee’s annualized rate of base salary as in effect on the first to occur of the start of the Performance 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 Grantee’s level of participation in any of the Company’s 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
|
(iv)
|
A material reduction in the Grantee’s aggregate level of participation in the Company’s 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 Grantee’s 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
|
(i)
|
If the Change in Control is triggered by a tender offer for shares of the Company’s stock or by the offeror’s acquisition of shares
|
(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.
|
1.
|
Vesting; Issuance of Shares
.
|
2.
|
Early Termination of Award; Termination of Employment
.
|
3.
|
Non-Transferability and Other Restrictions
.
|
4.
|
Post-Employment Conduct
.
|
5.
|
Compliance with Laws; No Stockholder Rights Prior to Issuance
.
|
6.
|
Adjustments; Change in Control
.
|
7.
|
Tax Matters
.
|
8.
|
Choice of Law; Venue; Arbitration
|
9.
|
Committee Authority
.
|
10.
|
Plan; Amendment
.
|
11.
|
Required Holding Period
.
|
12.
|
Definitions
.
|
(i)
|
The Grantee’s conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses, as a result of vicarious liability, or as a result of good faith actions as an officer of the Company); 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 Grantee’s 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 or her action or omission was in the best interest of the Company.
|
(i)
|
A material and substantial reduction in the nature or status of the Grantee’s 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 Grantee’s authorities or responsibilities that, in the aggregate, would
|
(ii)
|
A reduction by the Company in the Grantee’s 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 Grantee’s level of participation in any of the
|
(iv)
|
A material reduction in the Grantee’s aggregate level of participation in the Company’s 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 Grantee’s principal place of employment for the Company at the start of the corresponding Protected Period.
|
(i)
|
If the Change in Control is triggered by a tender offer for shares of the Company’s stock or by the offeror’s 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.
|
1.
|
Vesting; Issuance of Shares
.
|
2.
|
Early Termination of Award; Termination of Employment
.
|
3.
|
Non-Transferability and Other Restrictions
.
|
4.
|
Post-Employment Conduct
.
|
5.
|
Compliance with Laws; No Stockholder Rights Prior to Issuance
.
|
6.
|
Adjustments; Change in Control
.
|
7.
|
Tax Matters
.
|
8.
|
Choice of Law; Venue; Arbitration
|
9.
|
Committee Authority
.
|
10.
|
Plan; Amendment
.
|
11.
|
Required Holding Period
.
|
12.
|
Definitions
.
|
(i)
|
The Grantee’s conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses, as a result of vicarious liability, or as a
result of good faith actions as an officer of the Company); 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 Grantee’s 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 or her action or omission was in the best interest of the Company.
|
(i)
|
A material and substantial reduction in the nature or status of the Grantee’s authorities or
|
(ii)
|
A reduction by the Company in the Grantee’s 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 Grantee’s level of participation in any of the Company’s 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
|
(iv)
|
A material reduction in the Grantee’s aggregate level of participation in the Company’s 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 Grantee’s principal place of employment for the Company at the start of the corresponding Protected Period.
|
(i)
|
If the Change in Control is triggered by a tender offer for shares of the Company’s stock or by the offeror’s acquisition of shares pursuant to such a tender offer, the Protected
|
(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.
|
(a)
|
The Northrop Grumman Pension Plan (subject to the special effective dates notes below for the following merged plans)
|
◦
|
The Northrop Grumman Retirement Value Plan (effective as of January 1, 2000)
|
o
|
The Northrop Grumman Commercial Aircraft Division Salaried Retirement Plan (effective as of July 1, 2000)
|
o
|
The Grumman Pension Plan (effective as of July 1, 2003)
|
(b)
|
The Northrop Grumman Electronic Systems - Space Division Consolidated Pension Plan (effective as of October 22, 2001)
|
(c)
|
The Northrop Grumman Norden Systems Employee Retirement Plan, a sub-plan of Northrop Grumman Retirement Plan “B” (effective as of midnight, December 31, 2017).
|
(a)
|
“Committee”
means the Compensation Committee of the Board of Directors of the Company or any successor to the Committee.
|
(b)
|
“Code”
means the Internal Revenue Code of 1986, as amended.
|
(c)
|
“Company”
means Northrop Grumman Corporation.
|
(d)
|
“CPC”
means the Corporate Policy Council.
|
(e)
|
“Disability”
means any disability of an Officer recognized as a disability for purposes of the Company’s long-term disability plan, or similar plan later adopted by the Company in place of such plan.
|
(f)
|
“Key Employee”
means an employee treated as a “specified employee” as of his Separation from Service under Code section 409A(a)(2)(B)(i) of the Company or its affiliate (i.e., a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)) if the Company’s stock is publicly traded on an established securities market or otherwise. The Company shall determine in accordance with a uniform Company policy which Officers are Key Employees as of each December 31 in accordance with IRS regulations or other guidance under Code section 409A, provided that in determining the compensation of individuals for this purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be used. Such determination shall be effective for the twelve (12) month period commencing on April 1 of the following year.
|
(g)
|
“Officer”
means an elected or appointed officer of Northrop Grumman Corporation, other than the Company’s Chief Executive Officer, who resides and works in the United States.
|
(h)
|
“Plan”
means this Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation, as it may be amended from time to time.
|
(i)
|
“Qualifying Termination”
means any one of the following (i) an Officer’s involuntary termination of employment with the Company, other than Termination for Cause or mandatory retirement, or (ii) an Officer’s election to terminate employment with the Company in lieu of accepting a downgrade to a non-Officer position or status. “Qualifying Termination” does not include any change in the Officer’s employment status due to any transfer within the Company or to an affiliate, or to a purchaser of assets or a portion of the business of the Company or an affiliate in connection with the purchase, Disability, voluntary termination or normal retirement.
|
(j)
|
“Release”
means the Separation Agreement and General Release prepared by the Company at the time of the Officer’s termination of employment, which may include such terms as the Company deems appropriate, including certain post-employment restrictions as a condition of receiving benefits under the Plan.
|
(k)
|
“Separation from Service”
or
“Separate from Service”
means a “separation from service” within the meaning of Code section 409A.
|
(l)
|
“Termination for Cause”
means an Officer’s termination of employment with the Company because of:
|
(i)
|
The continued failure by the Officer to devote reasonable time and effort to the performance of his duties (other than a failure resulting from the Officer’s incapacity due to physical or mental illness) after written demand for improved performance has been delivered to the Officer by the Company which specifically identifies how the Officer has not devoted reasonable time and effort to the performance of his duties;
|
(ii)
|
The willful engaging by Officer in misconduct which is substantially injurious to the Company, monetarily or otherwise; or
|
(iii)
|
The Officer’s 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).
|
(i)
|
Bad judgment or negligence on the part of the Officer other than habitual negligence; or
|
(ii)
|
An act or omission believed by the Officer in good faith to have been in or not opposed to the best interests of the Company and reasonably believed by the Officer to be lawful.
|
(a)
|
Benefits under the Plan are subject to the Company’s sole discretion and approval.
|
(b)
|
To be considered to receive benefits under the Plan an Officer must meet the following conditions:
|
(i)
|
The Officer must experience a Qualifying Termination that results in termination of employment. If, before termination of employment occurs due to the Qualifying Termination event, the Officer voluntarily quits, retires, or experiences a Termination for Cause, the Officer will not receive benefits under this Plan.
|
(ii)
|
The Officer must sign the Release.
|
(a)
|
Lump-sum Cash Severance Payment
. The designated Appendix describes the lump sum severance benefit available to the Officer.
|
(b)
|
Extension of Medical and Dental Benefits
. The Company will continue to pay its portion of the Officer’s medical and dental benefits for the period of time following the Officer’s termination date that is specified in the designated Appendix, provided that for the balance of the month that
|
(i)
|
Officer’s eligibility for benefits in one year will not affect Officer’s eligibility for benefits in any other year;
|
(ii)
|
Any reimbursement of eligible expenses will be made on or before the last day of the year following the year in which the expense was incurred; and
|
(iii)
|
Officer’s right to benefits is not subject to liquidation or exchange for another benefit.
|
(c)
|
Company Performance Related Payment
. The Officer will be eligible for a severance payment equal to a pro-rata portion of the bonus he or she would have received under the Company annual incentive plan in which he or she was a participant for the year in which the Qualifying Termination occurred, in addition to the lump-sum cash severance payment described in section 4(a). For this purpose, the pro-rated bonus (if any) will be based on the applicable annual incentive plan payout formula, with any applicable individual performance factor set at 1.00, prorated from the beginning of the performance period (January 1st) to the Officer’s date of termination. The severance payment contemplated by this Section 4(c) will be paid when the annual bonuses are paid to active employees between February 15 and March 15 of the year following termination. Notwithstanding anything to the contrary in this section 4(c), if the Officer’s bonus opportunity for the fiscal year in which his or her termination occurs is covered by the Company’s Incentive Compensation Plan (or similar successor bonus program designed to comply with the performance-based compensation exception under Section 162(m) of the Code), then the Officer’s severance payment pursuant to this section 4(c) shall not exceed the maximum bonus the Officer would have been entitled to receive under the Company’s Incentive Compensation Plan for that fiscal year, assuming the Officer had been employed through the date bonuses are paid under such plan for that year, and otherwise calculated under the terms of such plan based on actual performance for that fiscal year (but without giving effect to any discretion of the plan administrator to reduce the bonus amount from the maximum otherwise determined in accordance with such plan).
|
(d)
|
Other Fringe Benefits
. All reimbursements will be within the limits established in the Executive Perquisite Program. These perquisites will cease as of the date of termination except for the following:
|
(i)
|
Financial Planning
. If an Officer is eligible for financial planning reimbursement at the time of termination, the Officer will be reimbursed for any financial planning fees as specified in the designated Appendix. For these purposes, “financial planning reimbursement” includes any income tax preparation fee reimbursement the Officer may be entitled to under the financial planning reimbursement terms and conditions applicable to the Officer at the time of termination. The financial planning (including income tax preparation fee) reimbursements contemplated by the Appendices are subject to any other applicable limitations that may apply under the financial planning reimbursement terms and conditions applicable to the Officer at the time of termination (for example, and without limitation, annual caps on amounts that may be used in connection with income tax preparation). All such reimbursements pursuant to this section 4(d)(i) shall be administered consistent with the following additional requirements as set forth in Treas. Reg. § 1.409A-3(i)(1)(iv): (1) Officer’s eligibility for benefits in one year will not affect Officer’s eligibility for benefits in any other year; (2) any reimbursement of eligible expenses will be made on or before the last day of the year following the year in which the expense was incurred; and (3) Officer’s right to benefits is not subject to liquidation or exchange for another benefit. In addition, no reimbursements shall be made to an Officer who is a Key Employee for six months following the Officer’s Separation from Service.
|
(ii)
|
Outplacement Service
. The Officer will be reimbursed for the cost of reasonable outplacement services provided by the Company’s outplacement service provider for services provided within one year after the Officer’s date of termination; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Officer’s base salary as of the date of termination. All services will be subject
|
(e)
|
Time and Form of Payment
. The severance benefits under section 4(a) will be paid to the eligible Officer in a lump sum as soon as practicable following the Officer’s Separation from Service, but in no event beyond thirty (30) days from such date, provided the Officer signs the Release within twenty one (21) days following the Officer’s Separation from Service. Notwithstanding the foregoing, if the Officer is a Key Employee, the lump sum payment shall be made on or within thirty (30) days after the first day of the seventh month following the Officer’s Separation from Service (or, if earlier, the first day of the month after the Officer’s death), provided the Officer signs the Release within twenty-one (21) days following the Officer’s Separation from Service. This amount will be paid after all regular taxes and withholdings have been deducted. No payment made pursuant to the Plan is eligible compensation under any of the Company’s benefit plans, including without limitation, pension, savings, or deferred compensation plans.
|
Policyholder:
|
Northrop Grumman Corporation
|
Group Policy Number:
|
91360-2-G
|
Type of Insurance:
|
Term Life Insurance
|
MetLife Toll Free Number(s):
|
|
For Claim Information
|
FOR LIFE CLAIMS: 1-800-638-6420
|
•
|
Your right to elect to continue Life Insurance for You;
|
•
|
the amount You must pay each month to Your employer to keep such insurance in force;
|
•
|
instructions for payment; and
|
•
|
the time that payments are due.
|
•
|
the date the group policy ends for all employees or for the class of employees to which you belonged when Your Active Work ceased;
|
•
|
the date you fail to make a required premium payment when due;
|
•
|
the date you become covered for life insurance under this or any other group term life insurance plan; or
|
•
|
the end of 18 months following the date Your Active Work ended.
|
•
|
Life Insurance
|
•
|
Health Insurance
|
•
|
Annuities
|
•
|
for which You become and remain eligible;
|
•
|
which You elect, if subject to election; and
|
•
|
which are in effect.
|
BENEFIT
|
BENEFIT AMOUNTS AND HIGHLIGHTS
|
For Class I – IV Active Employees
|
An amount equal to 3 times Your Basic Annual Earnings, rounded to the next higher $1,000
|
||
Maximum Life Benefit
|
$
|
2,000,000
|
|
Accelerated Benefit Option
|
Up to 80% of Your Basic Life amount not to exceed $500,000
|
•
|
the Policyholder’s place of business;
|
•
|
an alternate place approved by the Policyholder; or
|
•
|
a place to which the Policyholder’s business requires You to travel.
|
1.
|
registered as domestic partners or members of a civil union with a government agency or office where such registration is available; or
|
2.
|
submitted a domestic partner declaration to the Policyholder.
|
•
|
each person is 18 years of age or older;
|
•
|
neither person is married;
|
•
|
neither person has had another Domestic Partner within 6 months prior to the enrollment date for insurance for the Domestic Partner under the Group Policy;
|
•
|
they have shared the same residence for at least 6 months prior to the date they enroll for insurance for the Domestic Partner under the Group Policy;
|
•
|
they are not related by blood in a manner that would bar their marriage in the jurisdiction in which they reside;
|
•
|
they have an exclusive mutual commitment to share the responsibility for each other’s welfare and financial obligations which commitment existed for at least 6 months prior to the date they enroll for insurance for the Domestic Partner under the Group Policy, and such commitment is expected to last indefinitely.
|
•
|
a joint mortgage or lease;
|
•
|
designation of the Domestic Partner as beneficiary for life insurance or retirement benefits;
|
•
|
joint wills or designation of the Domestic Partner as executor and/or primary beneficiary;
|
•
|
designation of the Domestic Partner as durable power of attorney or health care proxy;
|
•
|
ownership of a joint bank account, joint credit cards or other evidence of joint financial responsibility; or
|
•
|
other evidence of economic interdependence.
|
•
|
a person licensed to practice medicine in the jurisdiction where such services are performed; or
|
•
|
any other person whose services, according to applicable law, must be treated as Physician’s services for purposes of the Group Policy. Each such person must be licensed in the jurisdiction where he performs the service and must act within the scope of that license. He must also be certified and/or registered if required by such jurisdiction.
|
•
|
You;
|
•
|
Your Spouse or Domestic Partner; or
|
•
|
any member of Your immediate family including Your and/or Your Spouse’s or Domestic Partner's:
|
•
|
parents;
|
•
|
children (natural, step or adopted);
|
•
|
siblings;
|
•
|
grandparents; or
|
•
|
grandchildren.
|
•
|
the nature and extent of the loss or condition;
|
•
|
Our obligation to pay the claim; and
|
•
|
the claimant’s right to receive payment.
|
•
|
any individual policy of life insurance to which You converted when Your employment ended; and
|
•
|
any certificate of insurance continued as ported insurance when such employment ended.
|
3.
|
the end of the period for which the last premium has been paid for You; or
|
4.
|
the date Your employment ends; Your employment will end if You cease to be Actively at Work in any eligible class, except as stated in the section entitled CONTINUATION OF INSURANCE WITH PREMIUM PAYMENT.
|
5.
|
the date You retire in accordance with the Policyholder’s retirement plan.
|
•
|
at least 75% of the employees eligible to continue insurance elect to continue this insurance for such time period; and
|
•
|
You pay
the required premium for such insurance.
|
•
|
premium payment is required and You fail to pay premiums for such insurance;
|
•
|
the number of employees who elect to continue such insurance falls below 75% of all employees eligible to continue this insurance for such time period; or
|
•
|
You cease to be eligible to continue Life Insurance for You, under this section and You do not immediately resume Active Work in a class that is eligible for such insurance.
|
1.
|
if You cease Active Work due to injury or sickness, up to 24 months;
|
2.
|
if You cease Active Work due to part-time work, for a period in accordance with the Policyholder's general practice for an employee in Your job class;
|
3.
|
if You cease Active Work due to strike, for a period in accordance with the Policyholder's general practice for an employee in Your job class;
|
4.
|
if You cease Active Work due to any other Policyholder approved leave of absence, up to 1 month following the end of the month in which the leave began.
|
•
|
if You resume Active Work in an eligible class at this time, You will continue to be insured under the Group Policy;
|
•
|
if You do not resume Active Work in an eligible class at this time, Your employment will be considered to end and Your insurance will end in accordance with the DATE YOUR INSURANCE ENDS subsection of the section entitled ELIGIBILITY PROVISIONS: INSURANCE FOR YOU.
|
•
|
the amount of each ABO Eligible Life Insurance benefit to be accelerated equals or exceeds $10,000; and
|
•
|
the ABO Eligible Life Insurance to be accelerated has not been assigned; and
|
•
|
We have received Proof that You are Terminally Ill.
|
•
|
a completed accelerated benefit claim form;
|
•
|
a signed Physician’s certification that You are Terminally Ill; and
|
•
|
an examination by a Physician of Our choice, at Our expense, if We request it.
|
•
|
the date the ABO Eligible Life Insurance ends;
|
•
|
the date You or Your legal representative assign all ABO Eligible Life Insurance; or
|
•
|
the date You or Your legal representative have accelerated all ABO Eligible Life Insurance benefits.
|
•
|
You cease to be in an eligible class;
|
•
|
Your employment ends;
|
•
|
this Group Policy ends, provided You have been insured for life insurance for at least 5 continuous years; or
|
•
|
this Group Policy is amended to end all life insurance for an eligible class of which You are a member, provided You have been insured for at least 5 continuous years; or
|
•
|
on or after the date You attain age 65;
|
•
|
because You change from one eligible class to another; or
|
•
|
due to an amendment of this Group Policy.
|
A.
|
Our receipt within the Application Period of:
|
•
|
Your Written application for the new policy; and
|
•
|
the premium due for such new policy;
|
B.
|
the premium rates for the new policy will be based on:
|
•
|
Our rates then in use;
|
•
|
the form and amount of insurance for which you apply;
|
•
|
Your class of risk; and
|
•
|
Your age;
|
C.
|
the new policy may be on any form then customarily offered by Us excluding term insurance;
|
D.
|
the new policy will be issued without an accidental death and dismemberment benefit, an accelerated benefit option, a waiver of premium benefit or any other rider or additional benefit; and
|
E.
|
the new policy will take effect on the 32
nd
day after the date Your life insurance ends or is reduced; this will be the case regardless of the duration of the Application Period.
|
•
|
the amount of Your life insurance that ends under this Group Policy less the amount of life insurance for which You become eligible under any group policy within 31 days after the date insurance ends under this Group Policy; or
|
•
|
$10,000.
|
1.
|
the Group Policy and its Exhibits, which include the certificate(s);
|
2.
|
the Policyholder's application; and
|
3.
|
any amendments and/or endorsements to the Group Policy.
|
1.
|
the statement is in a Written application or enrollment form;
|
2.
|
You have Signed the application or enrollment form; and
|
3.
|
a copy of the application or enrollment form has been given to You or Your Beneficiary.
|
PLAN NUMBER
|
COVERAGE
|
PLAN NAME
|
|
|
|
501
|
Basic Life Insurance for Non-Represented Employees
|
Northrop Grumman Corporation Group Benefits Plan
|
1.
|
Your Spouse or Domestic Partner;
|
2.
|
Your child(ren), if there is no surviving Spouse or Domestic Partner; or
|
3.
|
Your estate.
|
1.
|
Effective April 1, 2009, the Employee Principle Sum under the Basic Accidental Death and Dismemberment Benefits section in the
Schedule of Benefit
s
for Class 1
is replaced by the following:
|
2.
|
Effective April 1, 2009, the Employee Principle Sum under the Basic Accidental Death and Dismemberment Benefits section in the
Schedule of Benefit
s
for Class 2
is replaced by the following:
|
3.
|
Effective April 1, 2009, the Employee Principle Sum under the Basic Accidental Death and Dismemberment Benefits section in the
Schedule of Benefit
s
for Class 6
is replaced by the following:
|
4.
|
Effective April 1, 2009, the Employee Principle Sum under the Basic Accidental Death and Dismemberment Benefits section in the
Schedule of Benefit
s
for Class 7
is replaced by the following:
|
5.
|
Effective April 1, 2009, the Employee Principle Sum under the Basic Accidental Death and Dismemberment Benefits section in the
Schedule of Benefit
s
for Class 15
is replaced by the following:
|
•
|
all policy provisions and any amendments and/or attachments issued;
|
•
|
employees' signed applications; and
|
•
|
the certificate of coverage.
|
-
|
that you are under the
regular care
of a
physician
;
|
-
|
the appropriate documentation of your monthly earnings;
|
-
|
the date your disability began;
|
-
|
the cause of your disability;
|
-
|
the extent of your disability, including restrictions and limitations preventing you from performing your regular occupation; and
|
-
|
the name and address of any
hospital or institution
where you received treatment, including all attending physicians.
|
-
|
fraud;
|
-
|
any error Unum makes in processing a claim; and
|
-
|
your receipt of deductible sources of income.
|
-
|
information about employees:
|
•
|
who are eligible to become insured;
|
•
|
whose amounts of coverage change; and/or
|
•
|
whose coverage ends;
|
-
|
occupational information and any other information that may be required to
|
-
|
any other information that may be reasonably required.
|
-
|
prevent an employee from receiving coverage;
|
-
|
affect the amount of an insured's coverage; or
|
-
|
cause an employee's coverage to begin or continue when the coverage would not otherwise be effective.
|
-
|
by Unum; or
|
-
|
by the Policyholder.
|
-
|
there is less than 25% participation of those eligible employees who pay all or part of their premium for a plan; or
|
-
|
there is less than 100% participation of those eligible employees for a Policyholder paid plan;
|
-
|
the Policyholder does not promptly provide Unum with information that is reasonably required;
|
-
|
the Policyholder fails to perform any of its obligations that relate to this policy;
|
-
|
fewer than 25 employees are insured under a plan;
|
-
|
the Policyholder fails to pay any premium within the 60 day
grace period
.
|
-
|
apply a new waiting period;
|
-
|
apply a new pre-existing conditions exclusion; or
|
-
|
require evidence of insurability.
|
-
|
the coverage for which you may be entitled;
|
-
|
to whom Unum will make a payment; and
|
-
|
the limitations, exclusions and requirements that apply within a plan.
|
-
|
the plan effective date; or
|
-
|
the date you enter an eligible group.
|
-
|
the date the policy or a plan is cancelled;
|
-
|
the date you no longer are in an eligible group;
|
-
|
the date your eligible group is no longer covered;
|
-
|
the last day of the period for which you made any required contributions; or
|
-
|
the last day you are in active employment except as provided under the covered leave of absence provision.
|
-
|
reduce or deny any claim; or
|
-
|
cancel your coverage from the original effective date.
|
-
|
use the facts to determine if you have coverage under the plan according to the policy provisions and in what amounts; and
|
-
|
make a fair adjustment of the premium.
|
-
|
you are
limited
from performing the
material and substantial duties
of your
|
-
|
you have a 20% or more loss in your
indexed monthly earnings
due to the same sickness or injury.
|
1.
|
Multiply your monthly earnings by 65%.
|
2.
|
The maximum
monthly benefit
is $15,000.
|
3.
|
Compare the answer from Item 1 with the maximum monthly benefit. The lesser of these two amounts is your
gross disability payment
.
|
1.
|
Add your monthly disability earnings to your gross disability payment.
|
2.
|
Compare the answer in Item 1 to your indexed monthly earnings.
|
1.
|
Subtract your disability earnings from your indexed monthly earnings.
|
2.
|
Divide the answer in Item 1 by your indexed monthly earnings. This is your percentage of lost earnings.
|
3.
|
Multiply your monthly payment by the answer in Item 2.
|
-
|
During the first 24 months of disability payments, the average of your disability earnings from the last 3 months exceeds 80% of indexed monthly earnings; or
|
-
|
Beyond 24 months of disability payments, the average of your disability earnings from the last 3 months exceeds 60% of indexed monthly earnings.
|
1.
|
The amount that you receive or are entitled to receive under:
|
-
|
a workers' compensation law.
|
-
|
an occupational disease law.
|
-
|
any other
act
or
law
with similar intent.
|
2.
|
The amount that you receive or are entitled to receive as disability income payments under any:
|
-
|
state compulsory benefit
act
or
law
.
|
-
|
other group insurance plan.
|
-
|
governmental retirement system as a result of your job with your Employer.
|
3.
|
The amount that you receive or are entitled to receive as disability payments or the amount you receive as retirement payments under:
|
-
|
the United States Social Security Act.
|
-
|
the Canada Pension
Plan
.
|
-
|
the Quebec Pension Plan.
|
-
|
any similar plan or act.
|
4.
|
The amount that you:
|
5.
|
The amount that you receive under Title 46, United States Code Section 688 (The Jones Act).
|
6.
|
The amount that you receive under a
salary continuation
or
accumulated sick leave
plan.
|
-
|
401(k) plans
|
-
|
profit sharing plans
|
-
|
thrift plans
|
-
|
tax sheltered annuities
|
-
|
stock ownership plans
|
-
|
non-qualified plans of deferred compensation
|
-
|
pension plans for partners
|
-
|
military pension and disability income plans
|
-
|
credit disability insurance
|
-
|
franchise disability income plans
|
-
|
a retirement plan from another employer, except a retirement plan from another employer for which your Employer (including any division, subsidiary or affiliated company) assumed financial liability or which was merged into your Employer's (including any division, subsidiary or affiliated company) retirement plan. Unum may obtain additional information from your Employer to determine whether a retirement plan is your Employer's retirement plan.
|
-
|
individual retirement accounts (IRA)
|
-
|
individual disability income plans
|
-
|
no fault motor vehicle plans
|
-
|
severance payments
|
-
|
10% of your gross disability payment.
|
-
|
have not been awarded; and
|
-
|
have not been denied; or
|
-
|
have been denied and the denial is being appealed.
|
-
|
apply for the disability payments under Item(s) 1, 2 and 3 in the deductible sources of income section and appeal your denial to all administrative levels Unum feels are necessary; and
|
-
|
sign Unum's payment option form. This form states that you promise to pay us any overpayment caused by an award.
|
-
|
of the amount awarded; or
|
-
|
that benefits have been denied and all appeals Unum feels are necessary have been completed. In this case, a lump sum refund of the estimated amount will be made to you.
|
-
|
during the first 24 months of payments, when you are able to work in your regular occupation on a
part-time basis
but you choose not to;
|
-
|
after 24 months of payments, when you are able to work in any gainful occupation on a part-time basis but you choose not to;
|
-
|
the end of the maximum period of payment;
|
-
|
the date you are no longer disabled under the terms of the plan;
|
-
|
the date you fail to submit proof of continuing disability;
|
-
|
the date your disability earnings exceed the amount allowable under the plan;
|
-
|
the date you die.
|
1.
|
If you are confined to a
hospital or institution
at the end of the 24 month period, Unum will continue to send you payments during your confinement.
|
2.
|
In addition to Item 1, if, after the 24 month period for which you have received payments, you continue to be disabled and subsequently become confined to a hospital or institution for at least 14 days in a row, Unum will send payments during the length of the reconfinement.
|
-
|
stroke;
|
-
|
trauma;
|
-
|
viral infection;
|
-
|
Alzheimer's disease; or
|
-
|
other conditions not listed which are not usually treated by a mental health provider or other qualified provider using psychotherapy, psychotropic drugs, or other similar methods of treatment.
|
-
|
intentionally self-inflicted injuries.
|
-
|
active participation in a riot.
|
-
|
loss of a professional license, occupational license or certification.
|
-
|
commission of a crime for which you have been convicted under state or federal law.
|
-
|
pre-existing condition.
|
-
|
you received medical treatment, consultation, care or services including diagnostic measures, or took prescribed drugs or medicines in the 3 months just prior to your effective date of coverage; and
|
-
|
the disability begins in the first 12 months after your effective date of coverage.
|
-
|
you were continuously insured under the plan for the period between your prior claim and your recurrent disability; and
|
-
|
your recurrent disability occurs within 6 months of the end of your prior claim.
|
-
|
your disability had continued for 180 or more consecutive days; and
|
-
|
you were receiving or were entitled to receive payments under the plan.
|
-
|
you are not in active employment because of a sickness or injury; and
|
-
|
you were covered by the prior policy.
|
-
|
in active employment and insured under the plan on its effective date; and
|
-
|
insured by the prior policy at the time of change.
|
1.
|
the Unum plan; or
|
2.
|
the prior carrier's plan, if benefits would have been paid had that policy remained in force.
|
a.
|
the monthly benefit that would have been payable under the terms of the prior plan if it had remained inforce; or
|
b.
|
the monthly payment under the Unum plan.
|
1.
|
the end of the maximum benefit period under the plan; or
|
2.
|
the date benefits would have ended under the prior plan if it had remained in force.
|
-
|
the equivalent of 2 months of your monthly benefit.
|
-
|
coordination with your Employer to assist you to return to work;
|
-
|
evaluation of adaptive equipment to allow you to return to work;
|
-
|
vocational evaluation to determine how your disability may impact your employment options;
|
-
|
job placement services;
|
-
|
resume preparation;
|
-
|
job seeking skills training; or
|
-
|
retraining for a new occupation.
|
-
|
you to receive Medicare after 24 months of disability payments;
|
-
|
you to protect your retirement benefits; and
|
-
|
your family to be eligible for Social Security benefits.
|
-
|
helping you find appropriate legal representation;
|
-
|
obtaining medical and vocational evidence; and
|
-
|
reimbursing pre-approved case management expenses.
|
•
|
your Employer's usual place of business;
|
•
|
an alternative work site at the direction of your Employer, including your home; or
|
•
|
a location to which your job requires you to travel.
|
•
|
are normally required for the performance of your regular occupation; and
|
•
|
cannot be reasonably omitted or modified, except that if you are required to work on average in excess of 40 hours per week, Unum will consider you able to perform that requirement if you are working or have the capacity to work 40 hours per week.
|
•
|
during the first 24 months of disability, the greatest extent of work you are able to do in your regular occupation, that is reasonably available.
|
•
|
beyond 24 months of disability, the greatest extent of work you are able to do in any occupation, that is reasonably available, for which you are reasonably fitted by education, training or experience.
|
•
|
you and your domestic partner share financial responsibility for a joint household and intend to continue an exclusive relationship indefinitely;
|
•
|
you and your domestic partner each are at least eighteen (18) years of age;
|
•
|
you and your domestic partner are both mentally competent to enter into a binding contract;
|
•
|
you and your domestic partner share a residence and have done so for at least 6 months;
|
•
|
neither you nor your domestic partner are married to, or legally separated from anyone else;
|
•
|
you and your domestic partner are not related to one another by blood closer than would bar marriage; and
|
•
|
neither you nor your domestic partner is a domestic partner of anyone else.
|
•
|
a person performing tasks that are within the limits of his or her medical license; and
|
•
|
a person who is licensed to practice medicine and prescribe and administer drugs or to perform surgery; or
|
•
|
a person with a doctoral degree in Psychology (Ph.D. or Psy.D.) whose primary practice is treating patients; or
|
•
|
a person who is a legally qualified medical practitioner according to the laws and regulations of the governing jurisdiction.
|
•
|
caused by a worsening in your condition; and
|
•
|
due to the same cause(s) as your prior disability for which Unum made a Long Term Disability payment.
|
•
|
you personally visit a physician as frequently as is medically required, according to generally accepted medical standards, to effectively manage and treat your disabling condition(s); and
|
•
|
you are receiving the most appropriate treatment and care which conforms with generally accepted medical standards, for your disabling condition(s) by a physician whose specialty or experience is the most appropriate for your disabling condition(s), according to generally accepted medical standards.
|
-
|
by Unum; or
|
-
|
by the Policyholder.
|
-
|
there is less than 25% participation of those eligible employees who pay all or part of their premium for a plan; or
|
-
|
there is less than 100% participation of those eligible employees for a Policyholder paid plan;
|
-
|
the Policyholder does not promptly provide Unum with information that is reasonably required;
|
-
|
the Policyholder fails to perform any of its obligations that relate to the policy;
|
-
|
fewer than 25 employees are insured under a plan;
|
-
|
the Policyholder fails to pay any premium within the 60 day grace period.
|
-
|
state the specific reason(s) for the determination;
|
-
|
reference specific Plan provision(s) on which the determination is based;
|
-
|
describe additional material or information necessary to complete the claim and why such information is necessary;
|
-
|
describe Plan procedures and time limits for appealing the determination, and your right to obtain information about those procedures and the right to bring a lawsuit
|
-
|
disclose any internal rule, guidelines, protocol or similar criterion relied on in making the adverse determination (or state that such information will be provided free of charge upon request).
|
-
|
the specific reason(s) for the determination;
|
-
|
a reference to the specific Plan provision(s) on which the determination is based;
|
-
|
a statement disclosing any internal rule, guidelines, protocol or similar criterion relied on in making the adverse determination (or a statement that such information will be provided free of charge upon request);
|
-
|
a statement describing your right to bring a lawsuit under Section 502(a) of ERISA if you disagree with the decision;
|
-
|
the statement that you are entitled to receive upon request, and without charge, reasonable access to or copies of all documents, records or other information relevant to the determination; and
|
-
|
the statement that "You or your Plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency".
|
•
|
Life Insurance
|
-
|
$300,000 in death benefits
|
-
|
$100,000 in cash surrender or withdrawal values
|
•
|
Health Insurance
|
-
|
$500,000 in hospital, medical and surgical insurance benefits
|
-
|
$300,000 in disability income insurance benefits
|
-
|
$300,000 in long-term care insurance benefits
|
-
|
$100,000 in other types of health insurance benefits
|
•
|
Annuities
|
-
|
$250,000 in withdrawal and cash values
|
Renewal Anniversary Date:
June 30, 2014
|
|
Developed Specifically For:
|
Northrop Grumman
Case #132219
|
Presented by:
|
Robert S. Combi
|
Prepared by:
|
Paul R. Wickline
San Francisco Sales Office |
|
Tier 1
|
Tier 2
|
Eligibility
|
All Newly Hired/Eligible, Full-Time Executives Residing in California
|
All Newly Hired/Eligible, Full-Time Executives Residing Outside of California
|
Insurable Income
|
Base Salary
|
Base Salary
|
Plan Design
|
75% of monthly insurable income less LTD to amount of the GSI offer
|
75% of monthly insurable income less LTD to amount of the GSI offer
|
LTD Plan
|
Unum: 65% of Base Salary to a maximum of $15,000, 100% Employer Paid
|
Unum: 65% of Base Salary to a maximum of $15,000, 100% Employer Paid
|
GSI Benefit Maximum
|
$10,000
|
$10,000
|
Elimination Period
|
180 days
|
180 days
|
Benefit Period
|
To Age 65
|
To Age 65
|
Contract Type
|
California Income Series 675/Non-Cancellable Contract
|
Income Series 750
|
Contributory Status
|
Employer Paid
|
Employer Paid
|
Participation Requirement
|
100% (of all eligible lives)
|
100% (of all eligible lives)
|
Discount
|
35% Large Case
|
35% Large Case
|
Optional Additional Benefits: *
|
Catastrophic Disability Benefit - 25% of insurable income to $8,000 (not to exceed 100% income replacement)
|
Catastrophic Disability Benefit - 25% of insurable income to $8,000 (not to exceed 100% income replacement)
|
|
Guaranteed Coverage Increase (GCI) - Annual to cap of GSI offer
|
Guaranteed Coverage Increase (GCI) - Annual to cap of GSI offer
|
|
|
Work Incentive Benefit - 6 Months
|
|
|
Recovery Benefit - 6 Months
|
Benefit Period
To Age 65
Elimination Period
Benefits begin after a waiting period of 180 days
Income Replacement for Total
Disability
•
1st Two Years of Disability:
a monthly income benefit will be paid if you are not able to perform with reasonable continuity the substantial and material acts necessary to perform your usual occupation in the usual and customary way and you choose not to work at any occupation. If you choose to work at any job, you will not be considered to be totally disabled under your policy but you may qualify for partial disability benefits
•
Remainder of Your Benefit Period:
a monthly income benefit will be paid if you are not able to perform with reasonable continuity in any occupation in which You could reasonably be expected to perform satisfactorily in light of your age, education, training, experience, station in life, physical and mental capacity and you choose not to work in any occupation that exists within any of the following locations: (a) a reasonable distance or travel time from your residence in light of the commuting practices of your community; or (b) a distance or travel time equivalent to the distance or travel time you traveled to work before becoming disabled; or (c) the regional labor market, if you reside or resided prior to becoming disabled in a metropolitan area
•
2 Years Mental Disorder Benefit
Return-To-Work Benefits
•
Partial Disability Benefits:
monthly benefits for less-than-total disability, based on your proportionate loss of income, for the duration of the Benefit Period you chose for your policy
|
|
•
Work Incentive Benefit:
when you initially qualify for Partial Disability or Residual Disability, you will receive a short-term incentive for up to 6 months equal to the difference between your pre-disability income and your current income, for up to 100% income replacement (subject to the maximum benefit amount)
•
Recovery Benefit:
paid for up to 6 months after you return to work full time in your own occupation but continue to have a loss of earnings while you rebuild your business or customer business
Optional Benefits
•
Guaranteed Coverage Increase:
allows employer or employees to increase monthly benefit without evidence of medical insurability up to the GSI Benefit Maximum as salary increases occur
•
Monthly Catastrophic Benefit:
added to your income benefit, replacing up to 100% of your prior income and paying in the event of certain very serious disabilities that are likely to increase your living expenses (your insurance professional can provide information on physical conditions that apply)
|
Benefit Period
To Age 65
Elimination Period
Benefits begin after a waiting period of 180 days
Income Replacement for Total
Disability
•
1st Two Years of Disability:
a monthly income benefit will be paid if you are totally disabled in your occupation, which means you are unable to work in your occupation, not working in any other occupation, and are under the care of a physician
•
Remainder of Your Benefit Period:
after Your Occupation Period of 2 years, pays if, due to injuries or sickness, you are unable to perform the material and substantial duties of any occupation, and are under the care of a physician
•
2 Years Mental Disorder Benefit
Return-To-Work Benefits
•
Rehabilitation Benefit:
can help you regain your self-sufficiency as soon as possible. While you are disabled and receiving benefits, we may pay rehabilitation expenses not covered by other benefits
•
Work Incentive Benefit:
when you return to work, you will receive a short-term incentive for up to 6 months equal to the difference between your prior income and your current income, for up to 100% income replacement (subject to the maximum benefit amount)
•
Residual Disability Benefit:
you must be under a doctor's care to be eligible for this benefit, which can pay for up to 2 years. You don't have to be totally disabled to be eligible, but you must still either lose time (due to injury or sickness) from your job or be unable to perform some of your job requirements and incur a loss of earnings of at least 20%
|
|
•
Recovery Benefit:
provides a benefit for up to 6 months if you fully recover, return to full-time work in your occupation but you continue to lose earned income due to your prior disability. This provision pays a benefit while you re-establish your earnings base. The amount you get is based on the percentage of earnings you lose
Other Features
•
Voluntary Suspension During Unemployment:
premium payments can be suspended for up to one year from date of unemployment. Any loss incurred during the suspension period is not covered
Optional Benefits
•
Guaranteed Coverage Increase:
allows employer or employees to increase monthly benefit without evidence of medical insurability up to the GSI Benefit Maximum as salary increases occur
•
Catastrophic Benefit:*
provides an additional benefit in the event of catastrophic disabilities that are likely to increase your living expenses (your insurance professional can provide information on physical conditions that apply)
*Not available in CT, GA, NH, TX and VT
•
Presumptive Benefit:*
provides an additional benefit in the event of presumptive disabilities that are likely to increase your living expenses (your insurance professional can provide information on physical conditions that apply)
*Only available in CT, NH, TX and VT
•
Disability Protection Benefit:*
provides an additional benefit in the event of catastrophic disabilities that are likely to increase your living expenses (your insurance professional can provide information on physical conditions that apply)
*Only available in GA |
TERMS & CONDITIONS
|
|
Who is eligible
|
This offer is extended to all eligible individuals (as defined under “Eligibility” on page 1) who are U.S. citizens or permanent U.S. residents possessing a green card.
For a period of time commencing 180 Days prior to and including the date of application, applicants must not have missed one or more days of work or been homebound or admitted to a medical facility due to injury or sickness, or had any restrictions or limitations on their ability to work on a full time basis (30 hours or more per week) due to injury or sickness.
|
Basis of Issue
|
A standard offer means no modifications can be made to the contract's premium rate, elimination period, benefit period or monthly benefit amounts to adjust for a pre-existing medical condition.
If the Catastrophic Disability benefit is included in the offering, all applicants will be asked questions for current Activities of Daily Living (ADL) losses. If any ADL loss or applicable pre-existing condition exists on the date of the application, no Catastrophic Disability benefit will be included in the policy.
Similarly, if the Serious Illness Benefit is included in the offering, applicants will be asked questions pertinent to the underwriting of this benefit. A yes answer to any of those specific questions will result in no Serious Illness Benefit being included in the policy.
Pre-existing Condition Limitation Provisions apply to the benefits in the previous two paragraphs only.
The IDI benefit will coordinate with any other disability coverage applied for; and any disability coverage already inforce.
Coverage applied for on a GSI basis cannot exceed this plan design and total coverage to be in-force (includes Group Long Term Disability and Individual Disability Insurance) cannot exceed our issue and participation limits.
The GSI benefit may be directly reduced by any inforce individual coverage that was issued by Unum or its affiliated companies on a GSI basis. Unum will not participate with any other active employer-sponsored individual disability GSI program that provides long-term coverage through a non-cancellable or guaranteed renewable contract.
Minimum policy size is $300 - must financially qualify.
Any additional amounts purchased beyond this offer amount will be considered to be outside the plan design and subject to our normal medical and financial underwriting guidelines.
|
Financial Requirements
|
We will accept a company-provided census (electronic preferred) listing employee name, date of birth, job title, date of hire and compensation (defined as Insurable Income on Page 1) as income documentation. For purposes of insurable income, base salary is defined as stable annual salary. Variable compensation may include bonus, commissions, K-1 earnings and other forms of incentive compensation, and is defined as a two-year average of compensation or last year’s if less. If only a one-year history of variable compensation documentation is available due to an individual not having been employed long enough to generate a two-year history, we will consider 75% of the variable compensation as insurable. Insurable income should be broken down into base salary and variable compensation in the census, if applicable.
Net Worth and Unearned Income considerations will be disregarded.
|
Application Type
|
GSI App Forms: Tier 1 A-32521 (short form GSI),
Tier 2 AE-1090 (short form GSI)
|
•
|
The above offer is contingent upon current ratebook and state regulations in effect at application time. Any change in plan design, eligibility/participation requirements, premium payer, etc. requires written approval by Case Design Underwriting.
|
•
|
Unum will be provided with a full census (name, job title, date of hire, insurable income, DOB, gender and employee Social Security Number) that will allow for the development of personalized enrollment materials including pre-printed applications for each employee.
|
•
|
The communication strategy will encompass an employer endorsement letter, the distribution of personalized enrollment materials for each employee and follow-up to each employee to review their personalized benefit proposal.
|
•
|
New employees must apply for coverage within 90 days of date of hire or eligibility.
|
•
|
Employees who enroll and fully participate in this plan will have the opportunity to update their coverage within the plan design and benefit maximums during a scheduled annual or biannual enrollment period.
|
•
|
First Retention Payment of $100,000 within 30-days of April 1, 2016,
|
•
|
Second Retention Payment of $100,000 within 30-days of April 1, 2017.
|
•
|
You remain continuously and actively employed by the Company (except for
|
•
|
You establish Melbourne, Florida as your primary work location no later than February 15, 2016; and
|
•
|
You remain in this new role and do not transfer to or accept another position within the Company, unless the transfer is authorized in advance and in writing by the Vice President Human Resources; and
|
•
|
You continue to provide your best efforts on assigned tasks while performing in accordance with expected standards of performance; and
|
•
|
You continue to comply with the policies, practices and procedures relevant to your employment with the Company.
|
•
|
Any dispute regarding this Agreement shall be resolved in accordance with the arbitration procedures set forth in Corporate Procedure H103A, except that the parties shall share equally the fees and costs of the arbitrator.
|
•
|
You agree to keep the terms and conditions of this Agreement confidential. However, you may disclose the terms of this Agreement in response to a lawfully issued subpoena, to any inquiry by a taxing authority or as otherwise required by law. You may also
|
•
|
This Agreement constitutes the entire agreement and understanding between you and the Company with regard to the Retention Incentive, and it supersedes all prior discussions, agreements and understandings regarding this matter. This Agreement does not nullify or replace any other agreement that you have entered into with the Company. This Agreement shall bind the Company's successors and assigns.
|
•
|
You forfeit all benefits you would have been entitled to receive under the Company's relocation policy, and you forfeit any other reimbursements that normally would be provided under the Company's relocation policy; and
|
•
|
You remain continuously and actively employed by the Company (except for legally protected absences) through December 31, 2018, you continue to perform in accordance with expected standards of performance, and you continue to comply with the policies, practices and procedures relevant to your employment with the Company.
|
$ in millions
|
Year Ended December 31
|
||||||||||||||
Earnings:
|
2017
|
2016
|
2015
|
2014
|
2013
|
||||||||||
Earnings before income taxes
|
$
|
3,049
|
|
$
|
2,923
|
|
$
|
2,790
|
|
$
|
2,937
|
|
$
|
2,863
|
|
Fixed Charges:
|
|
|
|
|
|
||||||||||
Interest expense, including amortization of debt premium
|
360
|
|
301
|
|
301
|
|
282
|
|
257
|
|
|||||
Portion of rental expenses on operating leases deemed to be representative of the interest factor
|
100
|
|
99
|
|
101
|
|
101
|
|
99
|
|
|||||
Earnings before income taxes and fixed charges
|
$
|
3,509
|
|
$
|
3,323
|
|
$
|
3,192
|
|
$
|
3,320
|
|
$
|
3,219
|
|
Fixed Charges:
|
$
|
460
|
|
$
|
400
|
|
$
|
402
|
|
$
|
383
|
|
$
|
356
|
|
Ratio of earnings to fixed charges
|
7.6
|
|
8.3
|
|
7.9
|
|
8.7
|
|
9.0
|
|
Name of Subsidiary
|
Jurisdiction of Incorporation
|
Ownership Percentage
|
Northrop Grumman Systems Corporation
|
Delaware
|
100%
|
Northrop Grumman Overseas Holdings, Inc.
|
Delaware
|
100%
|
1.
|
I have reviewed this report on Form
10-K
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 company's 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 company's 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 company's internal control over financial reporting that occurred during the company's most recent fiscal quarter (the company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
|
5.
|
The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's 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 company's 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 company's internal control over financial reporting.
|
/s/ Wesley G. Bush
|
Wesley G. Bush
|
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this report on Form
10-K
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 company's 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 company's 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 company's internal control over financial reporting that occurred during the company's most recent fiscal quarter (the company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
|
5.
|
The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's 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 company's 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 company's internal control over financial reporting.
|
/s/ Kenneth L. Bedingfield
|
Kenneth L. Bedingfield
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Corporate Vice President and Chief Financial Officer
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.
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/s/ Wesley G. Bush
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Wesley G. Bush
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Chairman and Chief Executive Officer
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.
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/s/ Kenneth L. Bedingfield
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Kenneth L. Bedingfield
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Corporate Vice President and Chief Financial Officer
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