FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to _________________
Commission File Number 1-3024
GRUMMAN CORPORATION
(Exact name of Registrant as specified in its Charter)
New York 11-0844750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Bethpage, Long Island, New York 11714-3580
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 575-0574
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered*
Common Stock, $1 Par Value New York Stock Exchange
*Grumman Corporation common stock is also listed on the Boston, Midwest,
Pacific, Philadelphia and Tokyo Stock Exchanges.
Securities registered pursuant to Section 12(g) of the Act:
10-3/8% Notes due January 1, 1999
(Title of class)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. YES. X NO .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10K or any amendment to this Form 10-K. ( )
As of February 28, 1994, 33,935,448 shares of common stock were
outstanding, and the aggregate market value at March 21, 1994 of the voting
stock held by non-affiliates was approximately $2,172 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1993 Annual Report to Shareholders are
incorporated by reference in Parts I and II of this Form 10-K.
Portions of the Registrant's Schedule 14D-9 filed March 8, 1994, as
amended, are incorporated by reference in Parts I and III of this Form 10-K.
PART I
Item 1. Business
Grumman Corporation is a New York corporation organized in 1929 under the
name Grumman Aircraft Engineering Corporation. The activities of Grumman
Corporation and its subsidiaries (the "company" or "Grumman") are described
in the following four industry segments:
"Aerospace" - Includes the design and production of military
aircraft, space systems and commercial aircraft components and
subassemblies, as well as the modernization or conversion of previously
completed aircraft.
"Electronics Systems" - Includes the design, manufacture and
integration of sophisticated electronics for aircraft, computerized test
equipment and other defense related products, such as airborne surveillance
systems.
"Information and Other Services" - Includes electronic data
processing services for affiliates and other customers as well as real
estate and leasing services. It also includes technical services that help
ready the space shuttle for flight, provide space station program support,
service and maintain flight simulators and trainers and support Grumman
aircraft.
"Special Purpose Vehicles" - Includes fabrication of Long Life
Vehicles for the U.S. Postal Service and aluminum truck bodies.
The sales and operating income (loss) and the identifiable assets
attributable to each industry segment for the three years ended December 31,
1993 are set forth in Note 13 of the Notes to Consolidated Financial
Statements in the company's 1993 Annual Report to Shareholders which is
incorporated herein by reference.
Aerospace
Production contracts with the U.S. Government have included the F-14
"Tomcat" fighter, the A-6 "Intruder" attack aircraft, the EA-6B "Prowler"
tactical jamming system, the E-2C "Hawkeye" early warning aircraft, and the
C-2A "Greyhound" carrier on-board delivery system, of which, only the E-2C
is currently in production. These aircraft systems incorporate advanced
electronic detection, attack and countermeasures equipment, all-weather
capability, short take-off and landing characteristics and, in the case of
the F-14 fighter, a variable-sweep wing configuration. Upgraded radar
packages and new power plants were incorporated into the F-14. The company
also furnishes spare parts, specialized support equipment, technical manuals
and data and advisory services for its past and present aircraft and space
systems, and engages in modernization and conversion programs of previously
completed aircraft.
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Through 1992, the company's most important military aircraft program was
the F-14D Super "Tomcat" fighter which is capable of carrying Phoenix
missiles, which are long range, self-guiding, high speed missiles
manufactured by Hughes Aircraft. The highly maneuverable supersonic Tomcat,
with advanced radar, can track twenty-four targets simultaneously, including
the low-flying cruise missile, at distances of over 100 miles, and launch
its complement of six Phoenix missiles to provide air superiority. (The F-
14 is the principal air superiority fighter plane presently in use by the
U.S. Navy.) Sales on the F-14 program during the last three years amounted
to 7% for 1993, 20% for 1992 and 23% for 1991. During 1992 and 1991 the
company delivered 10 and 14 F-14's, respectively, to the U.S. Navy. The
company began deliveries of the upgraded F-14 (F-14D) in 1990. The upgrade
from the F-14A to the F-14D version was accomplished in two steps.
Deliveries of the interim aircraft, the F-14A+, began in 1987 and ended in
1990. This configuration of the Tomcat had the new engines, but none of the
radar or avionics upgrades. The company delivered 37 F-14Ds between 1990
and 1992. The company produced 712 F-14's from 1973 to 1992.
In November 1991, the House and Senate Authorization Committee on the
Fiscal Year 1992 Defense Budget announced that its recommendation would not
include funding to continue the F-14D(R) remanufacturing program. The last
new F-14 was delivered in mid-1992 while the last remanufactured F-14 was
delivered in 1993. In 1994 the company will deliver ten F-14 remanufacture
upgrade kits.
In September 1993, the company received a contract worth $95 million to
produce 15 modification kits for an F-14A to F-14B conversion. In December
1993, the U. S. Navy awarded the company a $57 million contract for the
installation of those 15 kits on F-14As that have relatively low flight
hours. The modification entails the installation of more powerful engines,
structural enhancements to extend the service life of the airframe, and the
installation of an updated radar warning receiver system to alert pilots
when potentially hostile radar is tracking their aircraft. The 1995 budget
request contains $171.7 million to give the F-14 Tomcat advanced strike
attack capability.
The company was teamed with Boeing and Lockheed in competing for the
A-X aircraft program, which was to be the Navy's replacement for Grumman's
A-6 Intruder. Grumman, as prime, had been awarded a $30 million concept
exploration contract. The Navy cancelled the A-X program during 1993 and
the company subsequently announced that it could no longer support and
maintain its high performance airframe design capability to the extent it
has in the past.
Sales of the A-6 "Intruder", EA-6B "Prowler" and E-2C "Hawkeye" as a
percentage of the company's consolidated sales amounted to 24% for 1993, 20%
for 1992 and 21% for 1991. Each of these programs has been in production
for more than twenty years. The last production A-6 Intruder was delivered
in January 1992. In September 1993, the U. S. Navy ordered the company to
stop work immediately on all its A-6 re-wing and related programs. This
cancellation followed the Pentagon's bottom-up review of the nation's
defense needs.
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In 1993, six E-2C aircraft were delivered to the Navy. Two more aircraft
will be delivered in 1994. The company is currently building the last E-2C
at Calverton under the current Navy contract. However, in 1993 the Navy
conducted a study to determine the cost effectiveness of restarting the
production line in 1995 instead of updating older E-2Cs. The 1995 defense
budget request includes $398 million for four new E-2s. The work would be
performed in St. Augustine, Florida.
In 1993, four E-2C aircraft were delivered to foreign countries - three
to Japan and one to Egypt. In 1994, the company will deliver four E-2s to
the Republic of China under a $542 million contract awarded in 1993. E-2C
aircraft are now in service with four foreign countries; in addition,
France, Korea, Turkey, Bahrain and Thailand have expressed interest.
Under a U. S. Navy contract, the company has been developing the fifth
generation of the EA-6B aircraft - the advanced capability (ADVCAP) Prowler.
The 1995 defense budget request does not include the EA-6B ADVCAP
remanufacture program due to budget constraints. The U. S. Navy issued a
cancellation notice in February 1994 for the ADVCAP upgrade development
program. ADVCAP is a three-part effort: the AP-1 Advanced Capability
program; the Vehicle Enhancement Program (VEP), which is an improvement to
the aerodynamic characteristics of the EA-6B aircraft and has been partially
terminated; and the Avionics Improvement Program which has been terminated
completely. The company will continue to perform some remaining work on the
EA-6B ADVCAP program and will maintain the modification line to update older
EA-6Bs at St. Augustine, Florida.
The company is teamed with Gruppo Agusta of Italy to compete for a
program to replace the U. S. Air Force/U. S. Navy primary training aircraft
called JPATS - the Joint Primary Aircraft Training System. Seven teams are
competing for the work, with the Grumman Agusta team offering the S211A - a
nimble, easy-to-fly jet. The request for proposal should be released early
in 1994; a winner is to be selected in 1995.
The company is under contract to provide aircraft components and major
subassemblies to other manufacturers. These contracts include the center
wing section for the Boeing 767 jetliner, nacelles and thrust reversers for
the Gulfstream IV and Fokker aircraft, transcowls for General Electric CF6-
80C2 engines, C-17 control surfaces, and composite spoilers and inboard
flaps for the new Boeing 777 airliner.
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Electronics Systems
In 1985, the U.S. Air Force awarded Grumman a $657 million contract for
development of the Joint Surveillance Target Attack Radar System, known as
"Joint STARS". This developmental phase, worth approximately $1 billion,
concluded in November 1993 with the delivery of the first two Joint STARS
prototype E-8A aircraft to the Air Force. The Air Force will use the two E-
8A's for test purposes. In November 1990, the company received a $523
million follow-on contract for further full-scale development; this included
the acquisition of a third Joint STARS aircraft, product improvement and
logistics support. This follow-on contract, currently worth $684 million,
is scheduled for completion in 1995. After a favorable review by the
Defense Acquisition Board in May 1993 that approved five low rate initial
production aircraft, the Air Force authorized full funding of $415 million
for the initial two aircraft. The E-8C is the production configuration of
Joint STARS and incorporates additional work stations and other system
improvements. Joint STARS has strong potential for overseas sales, and the
company is pursuing opportunities with NATO. According to present plans, a
total of 19 production E-8C aircraft will be delivered to the Air Force
beginning in 1995.
Flight tests of the Joint STARS aircraft began April 1, 1988 and
continued through 1990. Early in January 1991, the two Joint STARS aircraft
were pulled out of development six years early and deployed to the Persian
Gulf to support the combined forces in Desert Shield/Storm. Over the course
of 49 consecutive all night missions, the Joint STARS successfully
pinpointed enemy convoys, trucks, tanks, and Scud launchers and relayed that
information to allied air and ground forces.
In September 1991, the company and TRW Inc. teamed to compete for the
U.S. Air Force's Follow-on Early Warning System (FEWS) - a space-based
system that would provide tactical warning and assessment of missile
launches. The company, which was to be the principal subcontractor to TRW,
established a new subsidiary, Grumman Sensor Systems, Inc. for FEWS and
other sensor applications. TRW has made significant investments in capital
and equipment and holds a minority equity position in Grumman Sensor
Systems, Inc. In July 1992, the TRW/Grumman team was awarded a $240 million
demonstration/validation contract from the U. S. Air Force Space and Missile
Systems Center for FEWS. In November 1993, the FEWS program received formal
notification from the Air Force of a stop work order on the
demonstration/validation contract. Following the cancellation of the FEWS
program, the Air Force is moving forward to initiate a competitive Defense
Support Program Follow-On program and cancel two or more DSP systems
currently under contract. The program will be renamed ALARM (Alert, Locate
and Report Missiles) with more than $1 billion in the Pentagon's 1995 thru
1999 budget.
The company designs and produces test equipment to support its own
aircraft programs, non-company programs, and government-furnished equipment
systems.
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A significant program in this segment is the Integrated Family of Test
Equipment, or IFTE, the Army's next generation of automatic test equipment.
IFTE is used to diagnose the electronics problems of equipment in the field,
depot repair centers and in the factories of weapons systems manufacturers.
IFTE is adaptable to the U. S. Army's wide range of systems, eliminating the
need for a separate tester for each one. Currently there are 30 different
Army systems dedicated to the use of IFTE. The total Army requirement for
IFTE Base Shop Test Facilities (BSTF) is over 200. The Army continues to
endorse IFTE for foreign applications on proven Army systems. In 1993,
there were seven system fieldings in South Korea and stateside Army bases.
IFTE deliveries continued on or ahead of schedule in 1993. Major hardware
deliveries included four Commercial Equivalent Equipment (CEEs), nine base
station test facilities and eight portable intelligent maintained aid units.
Under a $20 million contract, the company is upgrading eight U. S. Army
Firefinder radar systems which locate hostile artillery units and direct
counterfire against them. Upgrading Firefinder with digital electronics
will increase the system's mobility, effective range, and threat response.
The production phase is anticipated to begin in 1996 and there are major
opportunities for foreign sales.
The company is manufacturing intercom systems for combat vehicles under
the Vehicular Intercommunication System (VIS) contract awarded in 1992 by
the U. S. Army Communications and Electronics Command. VIS will provide the
Army's combat vehicles with a highly reliable, digital-voice intercom
capable of handling six radios and 10 crew stations. VIS replaces a system
that has been used on Army tanks and infantry fighting vehicles for almost
40 years. The basic contract is a 20-month program slated for completion in
October 1994. Under this phase, 110 VIS sets will be delivered. The Army
recently exercised its option and ordered another 800 VIS units. Another
1,117 units will be installed on vehicles purchased by the Saudi Arabian
National Guard. Production of this order runs through 1998.
The company won a $118 million contract in October 1993 from the U. S.
Air Force to produce an automated test system for the F-15 aircraft. The
company will manufacture the testers and develop the system's software along
with IBM, the principal subcontractor. The mobile, downsized system will
test the F-15 avionics including armament, communications, displays, flight
controls, navigation and radar. It replaces five different testers.
Information and Other Services
The company's data systems business designs, develops, operates and
supports computer systems for scientific and management information. Its
services include systems integration, systems service, technical and
professional services, information conversion services and training; its
customers and potential customers include agencies of federal, state and
local governments including among others: the U.S. Navy and Marine Corps,
the Air Force, NASA, the Defense Logistics Agency and the Internal Revenue
Service. Approximately 58% of the data systems revenue in 1993 was derived
from work performed for other Grumman units.
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In February 1993, the company's Data Systems Division was awarded the
Service Center Recognition Image Processing System (SCRIPS) contract by the
Internal Revenue Service. The company is developing an image-based, forms
processing, character recognition system. In January 1994, two SCRIPS
systems were installed at an IRS center in Cincinnati where they are
currently undergoing testing. The current contract value is approximately
$27 million including engineering change proposals. If the IRS exercises
the options for 10 more SCRIPS systems, the total effort could amount to
over $88 million.
NASA named the company the winner of the Space Station Program Support
contract in July 1987; in March 1992 a major modification to the contract
was executed restructuring the contract consistent with the restructured
Space Station Freedom. However, in September 1993 NASA ordered the company
to cut its work force on the space station engineering and integration
contract to 60 people by December 1993 due to work authorization and funding
limitations on the program. NASA has scaled back and downsized the program
significantly, and awarded the management job to Boeing.
The company is a subcontractor, under Lockheed's Shuttle Processing
Contract with NASA for management and support to the Space Shuttle launch
processing operation, in such areas as instrumentation, measurement and
calibration. The current contract, which began in October 1983, was
extended to September 1995. There is one remaining three year option period
which ends in September 1998. The company is a prime contractor on the
Information Systems Contract which was awarded in October 1992. This is a
five year contract which extends through December 1997 and which is valued
at approximately $340 million. This contract requires contractor support
for all institutional computing capability at Johnson Space Center, Houston,
Texas.
Special Purpose Vehicles
In 1986, the company was awarded a $1.1 billion contract to build 99,150
Long Life Vehicles (LLV) for the U.S. Postal Service over a six year period;
deliveries commenced in April 1987 and totaled 7,581 units for 1987, 18,844
in 1988, 18,950 in 1989, 19,100 in 1990, 19,608 in 1991 and 15,067 in 1992.
In September 1991, the company negotiated an agreement for a follow-on
contract with the U.S. Postal Service worth over $586 million to produce an
additional 43,505 Long Life Vehicles of which 4,723 and 19,881 were
delivered in 1992 and 1993, respectively. The combination of the original
contract and the follow-on contract will result in unit deliveries to the
U. S. Postal Service totaling 142,655 at the conclusion of the program.
The Postal Service notified the company in September 1993 that it would
not exercise contract options which could have extended production into
1996. As a result, the last 18,901 units of the 142,655 LLV units will be
delivered by the end of 1994.
The company also manufactures aluminum truck bodies which are mounted on
purchased chassis and sold as delivery vans.
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Company Restructure
In January 1994, the company announced a plan to compete more effectively
in the changing defense market by consolidating its facilities and
restructuring its operations. Five major Long Island, New York, facilities
will be closed over the next two years, and the current 15 million square
feet of nationwide manufacturing, office and warehouse space will be reduced
by 4.5 million square feet. Overall, the company expects to reduce
operating costs by nearly $600 million over the next three years. As a
result, the company took a one-time charge of $85 million ($55 million after
federal income taxes or $1.60 a share) in the fourth quarter of 1993. The
restructuring charge provides for equipment and inventory write-offs of
approximately $60 million and plant closing costs of approximately $25
million.
Competition and Customers
The aerospace industry is dominated by large companies, and sizable
contracts are awarded by winning new design competitions against formidable
opposition. Many of the company's competitors are considerably larger in
terms of sales, number of employees and financial resources. Since most
defense products are tailored to specific military use, the Department of
Defense, as the sole customer, occupies the superior bargaining position,
and there is not the usual give and take of a commercial negotiation.
Initial procurements of military programs are the result of open
competition, with the award of the prime contract made to the prospective
contractor offering the best overall proposal on the basis of price and
other factors. Follow-on buys of military programs in the past were usually
made from the current prime contractor, but as of late the customer has
increasingly resorted to competitive bids.
The company's new strategic direction will emphasize expanding in
electronic systems and surveillance integration capabilities in lieu of our
traditional role as a prime airframe producer. Along with this, is our
continued commitment to supporting the company's existing aircraft and
winning the new J-PATS training program. The principal competition in these
areas come from both traditional aircraft producers such as Northrop
Corporation, Lockheed Aircraft Corporation and McDonnell Douglas Corporation
and some new competitors in E-Systems, Martin Marietta Corporation and G. M.
Hughes Electronics Corporation.
Total sales to the U.S. Government and its agencies (including sales to
foreign governments through foreign military sales contracts with U.S.
Government agencies) for the years ended December 31, 1993, 1992 and 1991
amounted to $2.8 billion, $3.2 billion and $3.6 billion, respectively. As a
consequence of its concentration upon the U.S. Government's defense
programs, the company's sales and income may be materially affected by any
change in emphasis on such programs, or in any substantial change in
government spending thereon.
All U.S. Government contracts provide that they may be terminated in
whole or in part for the convenience of the government. Upon any such
termination, the company would be entitled to reimbursement in accordance
with the formula set forth in the applicable government procurement
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regulations. Where the government has exercised this extraordinary right,
which has occurred infrequently, the company has in the past recovered its
costs together with an appropriate share of the profit or fee on the work
done. For a summary of policies used by the company in accounting for
inventories and sales under U.S. Government contracts, see Note 1 of the
Notes to Consolidated Financial Statements in the company's 1993 Annual
Report to Shareholders which has been incorporated herein by reference.
Backlog
The backlog of potential sales under U.S. Government and commercial
contracts includes those contracts that have been negotiated, whether funded
or unfunded. No material portion of the company's backlog is considered to
be seasonal. Fluctuations in the backlog may occur from quarter to quarter
depending upon contract execution and funding dates. Approximately $3.4
billion of the backlog at December 31, 1993 represents deliveries to be made
after 1994.
Backlog as of December 31, 1993 1992
(In Millions)
Aerospace $ 3,674 $ 4,585
Electronics Systems 1,320 886
Information & Other Services 764 1,575
Special Purpose Vehicles 278 515
Total Backlog $ 6,036 $ 7,561
The backlog at December 31, 1993 includes $2.8 billion of authorized but
unfunded amounts as well as negotiated and priced options which have not yet
been exercised.
Raw Materials and Suppliers
All raw materials and many items of equipment and components used in the
production of the company's products are purchased from outside sources.
From the standpoint of aggregate cost, the most important manufactured items
purchased from outside sources are electronic components and subsystems for
airborne applications. While the company does not usually produce these
electronic items in its capacity as systems-manager, it manages their
design, testing and evaluation, and integrates these elements into a working
system. The company's business is dependent upon the ability of its
subcontractors to meet performance specifications, quality standards and
delivery schedules. Their failure in any of these areas could have an
adverse effect upon the company's business.
Although certain priorities under U.S. Government contracts are
available, it has become necessary to enter early orders for materials with
long lead time requirements. The company cannot predict what the impact of
any further extension of lead time requirements or of shortages or delays in
delivery by suppliers may be on its business or financial requirements.
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Environmental Matters
Compliance with current provisions of Federal, State and local
authorities regulating the discharge of materials into the environment is
not expected to have a material effect on the company's capital
expenditures, earnings and competitive position. (See Item 3. Legal
Proceedings).
Commitments for Capital Expenditures
Outstanding commitments for capital expenditures at December 31, 1993
were $23.4 million. Funds are generally committed to acquire equipment to
support and develop advanced technologies and to improve manufacturing and
computing capabilities. Capital expenditures are expected to be financed
from internally generated funds in the foreseeable future.
Employees
As of December 31, 1993, approximately 17,900 persons were employed by
the company. The company is predominantly non-union, although approximately
300 employees in a second-tier subsidiary are covered by union contracts
with expiration dates in 1995 and 1997. The company believes its employee
relations are satisfactory.
Patents
While the company owns a number of patents and has licenses under patents
owned by others, it does not believe that its business would be materially
affected by the expiration of any patent or termination of any patent
license agreement.
The company holds no material franchises or concessions.
Research and Development
Research and development costs associated with government programs up to
a negotiated ceiling are charged to inventory and are recorded in cost of
sales when products are delivered or services performed. Costs in excess of
ceiling and expenditures for commercial projects are charged against income
in the year incurred. Total expenditures for research and development, bid
and proposal efforts were $122.5, $132.8 and $127.5 million in 1993, 1992
and 1991, respectively.
Export Sales
Export sales by geographic area for the three years ended December 31,
1993 are set forth in Note 13 (Segment Information) of the Notes to
Consolidated Financial Statements in the company's 1993 Annual Report to
Shareholders which has been incorporated herein by reference.
In 1993 export sales generated $36.1 million of operating income and had
identifiable assets, primarily including inventories and receivables, of
$52.4 million at December 31, 1993.
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Subsequent Events
On March 6, 1994, the Boards of Directors of Grumman Corporation (the
"company") and Martin Marietta Corporation ("Martin") approved the execution
of an Agreement and Plan of Merger (the "Merger Agreement"), by and among
the company, Martin, and MMC Acquisition Corp., a wholly-owned subsidiary of
Martin ("MMC"). The Merger Agreement, which was subsequently executed by
the company, Martin and MMC, provides for the commencement of a cash tender
offer, by MMC, for the purchase of all outstanding shares of Common Stock
(including the associated Rights) of the company, at $55.00 net per share.
The Merger Agreement further provides, among other things, that subject to
the terms and conditions thereof, as soon as practicable after the
consummation of the tender offer, and the approval and adoption of the
Merger Agreement by the shareholders of the company, MMC will be merged into
and with the company, with the company being the corporation surviving the
merger.
On March 8, 1994, Martin and MMC commenced the tender offer by filing
their Schedule 14D-1, Tender Offer Statement pursuant to Section 14(d)(1) of
the Securities Exchange Act of 1934 (the "Exchange Act"), with the
Securities and Exchange Commission (the "Commission"). Pursuant to the
Offer to Purchase contained within such Schedule 14D-1, the tender offer
will expire at 12:00 Midnight, New York City time, on Monday April 4, 1994,
unless the offer is extended. The tender offer is conditioned upon, among
other things, there being validly tendered and not withdrawn prior to the
expiration of the tender offer, shares of Common Stock (including the
associated Rights) of the company representing not less than 2/3 of the
total number of shares outstanding on a fully diluted basis.
Also on March 8, 1994, the company filed its Schedule 14D-9,
Solicitation/Recommendation Statement pursuant to Section 14(d)(4) of the
Exchange Act, with the Commission. Such Schedule 14D-9, as amended, is
incorporated herein by reference.
On March 10, 1994, Northrop Corporation ("Northrop") announced that it
would, on March 14, 1994, commence a cash tender offer for all shares of
Common Stock of the company, at $60 per share. Northrop also stated that
its Board of Directors had authorized it to enter into a tender offer/merger
agreement with the company on substantially identical terms as those agreed
upon by the company and Martin.
On March 14, 1994, Northrop and Northrop Acquisition Inc. ("NAI"), a
wholly-owned subsidiary of Northrop, filed a Schedule 14D-1 with the
Commission, commencing a cash tender offer by NAI for the purchase of all
outstanding shares of Common Stock (including the associated Rights) of the
company, at $60.00 net per share. Pursuant to the Offer to Purchase
contained within such Schedule 14D-1, the tender offer will expire at 12:00
Midnight, New York City time, on April 8, 1994, unless the offer is
extended. The tender offer is conditioned upon, among other things, there
being validly tendered and not withdrawn prior to the expiration of the
tender offer, shares of Common Stock of the company representing not less
than 2/3 of the total number of shares outstanding on a fully diluted basis.
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Item 2. Properties
The company's principal properties are located at Bethpage and Calverton,
Long Island, New York. These properties include operating facilities and
airfields. The company's executive offices are located in Bethpage. The
company also owns and leases facilities at a number of other locations.
The following table sets forth information by business segment, as to the
company's principal operating properties as of December 31, 1993, with an
indication of the areas involved and the character of the company's interest
therein:
Company Leased Government
Owned (1) From Others Owned
Floor Land Floor Land Floor Land
Area Area Area Area Area Area
(2) (Acres) (2) (Acres) (2) (Acres)
Aerospace
Long Island area -
N.Y. 4,208 517 469 2,678 3,053
Georgia 507 162 60
Florida 474 57 857 742
Maryland 384 79 6
Various other states 277 35 452 26 34
Electronics Systems
Long Island area - N.Y. 356 86 124
Florida 565 49
Louisiana 1,234 167
Various other states 107 18 149
Information & Other Services
Long Island area - N.Y. 840 234 232 4
Florida 183 33 2
Virginia 364
Texas 218 15
Various other states 62 37 332 98
Special Purpose Vehicles
Long Island area - N.Y. 13
Pennsylvania 286 45 57 3
Michigan 340 119
Various other states 400 110 2
(1) Including buildings constructed by Grumman upon land held under
long-term leases.
(2) Square feet rounded to nearest thousand.
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The government-owned property at Calverton, Long Island, New York which
includes a plant, airfield and hangars, is leased under a rental agreement
with the United States Government. The aggregate rental paid by the company
for calendar year 1993 was $4,608,000.
The government-owned plants at Bethpage and a substantial amount of
government-owned machinery and equipment, located principally at Bethpage
and Calverton, are furnished rent-free under a Facilities Management
Contract for use in the performance of government contracts. These
facilities may also be used in the performance of non-government work
subject to government approval and the payment of rent. The Facilities
Management Contract is subject to termination at the government's
convenience.
The company's facilities are well maintained, in good operating condition
and suitable for the purposes for which they are utilized. In general, due
to the current economic environment in the defense industry resulting from
reduced budgets, the company has excess production and administrative
facilities. The company is aggressively taking appropriate action to
eliminate this condition by reducing leased facilities and marketing and/or
developing its excess owned land and buildings.
In connection with the consolidation of its facilities, the company
anticipates reducing its total floor space approximately 30 percent by 1997.
Item 3. Legal Proceedings
There are pending litigations related to matters which are in the
ordinary course of the company's business activities. See Note 12
(Commitments and Contingencies) of the Notes to Consolidated Financial
Statements, which has been incorporated herein by reference from the
company's 1993 Annual Report to Shareholders.
Currently, there are five waste disposal sites where the company has been
named either as a potentially responsible party or an owner/operator of the
site by a cognizant governmental agency for the cleanup of hazardous
materials previously placed there either directly or through an agent and
where the cost of remediation or settlement could reasonably exceed $100,000
in amount. In addition, the company on its own initiative undertook an
investigation and potential remediation of another second-tier subsidiary's
facility; the company has voluntarily submitted this remediation plan to the
cognizant state agency for its review and approval. Environmental costs
incurred are generally allowable under terms of existing U. S. Government
procurement regulations and are reflected in the prices of the company's
products and services. However, it is unknown at this time what the
ultimate financial impact of these environmental matters on the company will
be but it is not expected to have a material adverse effect on the company's
financial position.
- 12 -
In another matter, Registrant's second-tier subsidiary, Grumman
St. Augustine Corporation, was the named defendant in a civil action filed
in the Federal District Court for the Middle District of Florida in 1991 by
the United States of America, at the request of the United States
Environmental Protection Agency, and subsequently entered into a Consent
Decree which resulted in final dismissal of the suit on May 15, 1993. The
Consent Decree was subsequently declared final on July 20, 1993.
As a Government contractor, the company is, from time to time, subject to
U.S. Government investigations of business practices and cost
classifications from which legal and/or administrative proceedings could
result. Under current government procurement regulations, a contractor can
be fined as well as be suspended or debarred from eligibility to receive
further Government contracts based upon the results of such investigations.
However, the company is not aware of any Government investigation, the
outcome of which would have a material adverse effect on the company's
financial position.
Four putative class actions have been filed in Supreme Court of the State
of New York, County of Nassau, on behalf of the company's shareholders,
alleging causes of action arising out of the proposed acquisition of the
company by Martin Marietta Corporation ("Martin") (see Item 1, "Subsequent
Events"). The four actions are described in the company's Schedule 14D-9,
as amended, filed with the Securities and Exchange Commission in connection
with such proposed acquisition and incorporated herein by reference.
Further developments in connection with such actions will be described, as
appropriate, in subsequent amendments to such Schedule 14D-9.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the company's Shareholders during
the fourth quarter of the year ended December 31, 1993.
Item 4a. Executive Officers of the Registrant, as of March 1, 1994
The name, age, offices and positions held for the last five years of the
company's executive officers are as follows:
Age at
Name, Offices and Positions March 1, 1994
Renso L. Caporali--Chairman of the Board and Chief 60
Executive Officer since July 1990; President's title
included during the period July 1990 through January 1991;
Vice Chairman-Corporate Technology, August 1988 through
June 1990.
Robert J. Myers--President and Chief Operating Officer 59
since January 1991; President-Grumman Data Systems
Division 1986-1990.
- 13 -
Age at
Name, Offices and Positions March 1, 1994
J. Robert Anderson--Vice Chairman and Chief Financial 57
Officer since July 1991; Vice Chairman, Chief Financial
Officer and Chief Administrative Officer-Bridgestone/Firestone,
Inc., 1989-1991; Senior Vice President and Chief Financial
Officer-Firestone Tire & Rubber Company, 1983-1989.
Jacob J. Bussolini, Jr.--Senior Vice President-Strategic 58
and Technology Planning since January 1993; Vice President-
Strategic Planning 1991-1992; Vice President-Business Operations,
1990-1991; Vice President-Business Operations with the Corporate
Services Division, 1985-1990.
Steven Dely--Senior Vice President-Executive Staff and 50
Corporate Secretary since January 1993; Vice President-
Executive Staff, 1991-1992; Vice President and Assistant
to the President and Chairman of the Board, 1986-1991.
Thomas J. Kane, Jr.--Senior Vice President-Business 60
Development since January 1991; Senior Vice President-
Business Development of Grumman Aircraft Systems
Division,1988-1990.
Richard G. Anderson--Vice President and Chief 59
Technical Officer since October 1990; Vice President-
Technology Development, 1988-1990.
Edward Balinsky--Vice President-Mergers and 64
Acquisitions since July 1989; President of Grumman
Credit Corporation, 1983-1989.
Nat P. Busi--Vice President and Controller since July 64
1978.
* Joseph A. DiGiacomo--Vice President-Finance of the 59
Grumman Data Systems Division since April 1991; Vice
President-Controller, 1987-1991 of the Grumman Data
Systems Division.
Howard J. Dunn, Jr.--Vice President-Audit and Ethics 63
since February 1991; Vice President-Audit, 1979-1991.
Robert E. Foster--Vice President--Human Resources 62
since January 1993; Director of Human Resources with
Corporate Operations, 1987-1993.
Thomas L. Genovese--Vice President and General 58
Counsel since January 1981.
- 14 -
Age at
Name, Offices and Positions March 1, 1994
Robert P. Harwood--Vice President-Public Affairs 49
since January 1991; Director of Investor and Public
Relations, 1986-1990.
Michael C. Kerby--Vice President, Washington 57
Operations since April 1991; Vice Commander-In-Chief,
Pacific Air Forces, (USAF), Hickam AFB, Hawaii,
1988-1991.
Thomas J. McKee--Vice President-Government Relations, 45
Washington Operations since June 1991; Vice President,
Development, Washington Operations, 1988-1991.
William D. Rizzardi--Vice President-Information 51
Resource Management since September 1991; Vice
President-Intercorporate Computer Services with the
Grumman Data Systems Division, 1987-1991.
*Frank J. Rizzo--Vice President and Controller of 60
Grumman Allied Group since 1991; Controller of Allied
Division, 1986-1991.
*Leonard Rothenberg--President of the Grumman Allied 53
Group since January 1991; President of the Allied
Division, 1988-1991.
*Gerald H. Sandler--President of the Grumman Data 59
Systems and Services Group since January 1991; Senior
Vice President of the Data Systems Division, 1985-1990.
Robert Simon--Vice President-Corporate Procurement 61
since January 1991; Vice President-Corporate Procurement
with the Corporate Services Division, 1985-1990.
*Michael N. Solomita--Vice President and Controller- 59
Aerospace and Electronics Group since January 1993;
Vice President-Finance of the Aircraft Systems Division,
1990-1992; Assistant Treasurer-Accounting of the Grumman
Aerospace Corporation, 1983-1990.
Fred L. Thompson--Vice President-Total Quality since 51
October 1993; Director-Total Quality for Monsanto Chemical
Company, 1987-1993.
*Albert Verderosa--President-Aerospace & Electronics 61
Group since January 1993; President-Space & Electronics
Group, 1991-1992; President of the Grumman Melbourne
Systems Division, 1985-1991.
- 15 -
Age at
Name, Offices and Positions March 1, 1994
William Wachino, Jr.--Treasurer since February 1991; 52
Assistant Treasurer, 1978-1991.
*Joseph Wilson, Jr.--Senior Vice President-Aerospace & 53
Electronics Group since January 1993; Senior Vice
President-Business and Financial Management of the
Grumman Aircraft Systems Division, 1991-1992;
Vice President-Business and Financial Management
of the Aircraft Systems Division, 1990-1991; Corporate
Director-Business Management, 1989-1990; Corporate Director-
Contracts, 1985-1989.
*Officers of operating units who are deemed to be executives of the
registrant in accordance with Section 16 of the 1934 Securities Exchange
Act.
There are no family relationships, as defined, between any of the above
officers. No officer of the company was selected as an officer pursuant to
any arrangement or understanding between him and any other person. The
executive officers serve for one-year terms and stand for election annually
at the Board of Directors' meeting which follows (usually on the same day)
the Annual Meeting of Shareholders.
PART II
The following table indexes all of the Part II items to those pages which
have been incorporated herein by reference from the Registrant's 1993 Annual
Report to Shareholders.
Page Numbers-
Part II Registrant's 1993
Item Annual Report to
No. Description Shareholders
5 Market for the Registrant's Common
Stock and Related Stockholder Matters 32 & 53
6 Selected Financial Data 50 - 51
7 Management's Discussion and Analysis
of Financial Condition and Results of
Operations 27 - 30
8 Financial Statements and Supplementary
Data 31 - 48
9 Disagreements on Accounting and Financial
Disclosure - not applicable -
- 16 -
PART III
Item 10. Directors and Executive Officers of the Registrant
See Item 4a of Part I for the required information regarding the
Registrant's executive officers.
The information required by Item 10 concerning the Registrant's directors
is contained in Annex I to Registrant's Schedule 14D-9 filed
March 8, 1994, as amended, and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by Item 11 is contained in the section entitled
"Compensation Committee Report on Executive Compensation" in Annex I to
Registrant's Schedule 14D-9 filed March 8, 1994, as amended, and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is contained in the sections entitled
"Security Ownership of Management" and "Security Ownership of Record Owners"
in Annex I to Registrant's Schedule 14D-9 filed
March 8, 1994, as amended, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
NOT APPLICABLE
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Consolidated Financial Statements
The following consolidated financial statements of Grumman
Corporation and its subsidiaries are included in Part II, Item 8 and have
been incorporated by reference from the Registrant's 1993 Annual Report
to Shareholders, pages 33 through 49, inclusive:
Consolidated Statement of Income - Years Ended December 31, 1993,
1992 and 1991
Consolidated Balance Sheet - December 31, 1993 and 1992
Consolidated Statement of Common Shareholders' Equity - Years
Ended December 31, 1993, 1992 and 1991
Consolidated Statement of Cash Flows - Years Ended December 31, 1993,
1992 and 1991
- 17 -
(a) 1. Consolidated Financial Statements (continued)
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Subsequent events - Reference is made to the subsequent events section
of Item 1 and Item 3, Legal Proceedings, for information concerning
events which have occurred after the preparation of the Registrant's
1993 Annual Report to Shareholders.
2. Financial Statement Schedules
Selected Quarterly Financial Data - for the years ended
December 31, 1993 and 1992 is included in Part II, Item 8 and has been
incorporated by Reference from the Registrant's 1993 Annual Report to
Shareholders, pages 31 and 32.
PAGE
Report of Independent Public Accountants 21
Schedule IX - Short-term Borrowings 22
Schedule X - Supplementary Income Statement 23
Information
3. Exhibits Index
The following exhibits marked (*) are incorporated by reference in
this Form 10-K:
*Exhibit 2 Company's Schedule 14D-9 - Solicitation/Recommendation
Statement Pursuant to Section 14(d)(4) of the Securities
Exchange Act of 1934 filed on March 8, 1994, as amended.
*Exhibit 3 Corporation's By-Laws as amended, (filed as Exhibit 1 to
Registrant's Form 8-K dated January 9, 1987).
*Exhibit 4
(a) Form of Indenture dated as of January 1, 1989 with respect to
the 10 3/8% Notes due January 1, 1999 (filed as Exhibit 4(a)
to Registrant's Registration Statement on Form S-3 Commission
File number 33-25760).
(b) Restated Credit Agreement dated February 26, 1993 that
provides a revolving facility of up to $200 million during the
three-year period ending February 25, 1996 and a short-term
credit facility effective April 1, 1993, expiring on March 30,
1994, which will provides an additional $100 million (filed as
Exhibit 19 to the Registrant's Form 10-K for the year ended
December 31, 1992).
- 18 -
*Exhibit 10
(a) Grumman Corporation 1981 Stock Option Plan (filed on
September 23, 1981 as Exhibit 15(a) to Registrant's Form
S-8, Commission file number 2-72447).
(b) Grumman Corporation's 1990 Stock Option Plan (filed on
August 28, 1990 as Exhibit 4(a) to Registrant's Form S-8,
Commission file number 33-36587).
(c) Grumman Corporation Restricted Stock Award Plan (filed as
Exhibit A to Registrant's Proxy Statement dated April 12, 1978
and amended by resolution contained in Registrant's Proxy
Statement dated March 11, 1988 and adopted by the shareholders
on April 21, 1988).
(d) Grumman Corporation Management Incentive Plan as Amended
(filed as Exhibit 10 (III) to Registrant's Form 10-K for the
year ended December 31, 1980).
(e) Grumman Corporation Long-Term Incentive Plan (filed as Exhibit
A to Registrant's Proxy Statement dated March 6, 1992 and
adopted by the shareholders on April 16, 1992).
Exhibit 11 Computation of Earnings Per Share, Years Ended December 31,
1993, 1992 and 1991.
Exhibit 13 Grumman Corporation 1993 Annual Report to Shareholders,
portions of which are incorporated by reference in this Form
10-K. All other data appearing in the Annual Report is
furnished for the information of the Commission and is not
deemed filed as part of this Form 10-K.
Exhibit 21 Subsidiaries of the Registrant
Exhibit 23 Consent of Independent Public Accountants
Exhibit 24 Powers of Attorney
Exhibit 99 Undertakings; to be incorporated by reference into Form S-8
Registration Statements Nos. 2-76690, 2-77047, 2-72447 and 33-
36587.
(b) Reports on Form 8-K during the quarter ended December 31, 1993:
NONE
- 19 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Grumman Corporation
(Registrant)
By /s/ Nat P. Busi
Nat P. Busi
Vice President & Controller
Principal Accounting Officer
March 23, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the date set forth above.
Signature Title
Renso L. Caporali * Chairman of the Board, Chief
Executive Officer, and Director
Robert J. Myers * President, Chief Operating
Officer and Director
J. Robert Anderson * Vice Chairman, Chief Financial
Officer and Director
Kenneth S. Axelson * Director
Lucy Wilson Benson * Director
Richard Dulude * Director
Victor Hao Li * Director
Charles Marshall * Director
James F. Orr III * Director
John T. Sargent * Director
Eddie N. Williams * Director
*By /s/Nat P. Busi
(Nat P. Busi, Attorney-in Fact)
- 20 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of
Directors of Grumman Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in Grumman Corporation's
Annual Report to Shareholders incorporated by reference in this Form 10-K,
and have issued our report thereon dated January 20, 1994. Our audit was
made for the purpose of forming an opinion on those statements taken as a
whole. The supplemental schedules on pages 22 and 23 herein are the
responsibility of the company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not
part of the basic financial statements. These supplemental schedules have
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
New York, N.Y.
January 20, 1994
- 21 -
<TABLE>
SHORT-TERM BORROWINGS
GRUMMAN CORPORATION AND SUBSIDIARIES
SCHEDULE IX
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in Thousands)
<CAPTION>
Maximum Average Weighted Weighted
Category of Weighted Amount Amount Average
Aggregate Balance Average Outstanding Outstanding Interest Rate
Short-term At End of Interest During the During the During the
Borrowings (F1) Period Rate Period (F2) Period (F2) Period (F3)
<S> <C> <S> <C> <C> <C>
December 31, 1993:
Short-term
credit line $ -0- N/A $ -0- $ -0- N/A
December 31, 1992:
Short-term
credit line $ -0- N/A $ -0- $ -0- N/A
December 31, 1991:
Short-term
credit line $ -0- N/A $ 83,000 $ 21,600 8.54%
<FN>
(F1) On February 26, 1993 Grumman and a group of banks entered into a restated Credit
Agreement that provides a revolving facility of up to $200,000 during the three-year period
ending February 25, 1996; a short-term credit facility with the same group of banks
effective April 1, 1993, expiring on March 30, 1994, which provides an additional $100,000
upon covenants and conditions substantially identical to those of the revolving facility.
(F2) Based on month-end balances.
(F3) Applicable short-term interest divided by the composite weighted monthly average of
outstanding short-term borrowings.
- 22 -
</TABLE>
[TEXT]
GRUMMAN CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
SCHEDULE X
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in Thousands)
Year Ended December 31,
1993 1992 1991
Maintenance and repairs $ 60,160 $ 70,334 $ 81,024
Expenditures for royalties, advertising, charges for amortization of
intangible assets, preoperating costs and similar deferrals, and taxes,
other than payroll and income taxes, were each less than one percent of
total revenues for 1993, 1992 and 1991.
- 23 -
EXHIBIT 11
GRUMMAN CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousands, Except Per Share Amounts)
Year Ended December 31,
1993 1992 1991
Net income from continuing
operations $ 65,507 $ 119,861 $ 95,171
Less: preferred stock
dividends - 2,515 3,623
Net income from continuing
operations for computation
of primary earnings per share 65,507 117,346 91,548
Adjustment for dividends, and
interest expense on convertible
debentures, net of federal
income taxes 39 3,056 3,057
Net income from continuing
operations for computation of
fully diluted earnings per
share $ 65,546 $ 120,402 $ 94,605
Income (loss) from discontinued
operations $ (6,700) $ (45,035) $ 4,166
Cumulative effect of change in
accounting for postretirement
benefits $ - $ (198,000) $ -
Net income (loss) for
computation of primary
earnings per share $ 58,807 $ (125,689) $ 95,714
Net income (loss) for computation
of fully diluted earnings
per share $ 58,846 $ (122,633) $ 98,771
Average shares outstanding 34,041,036 33,469,292 33,223,481
Common share equivalents 386,469 193,384 60,244
Primary shares and common
share equivalents 34,427,505 33,662,676 33,283,725
Additional shares not deemed
common share equivalents
(principally convertible
securities) 754,646 1,524,236 1,468,255
Fully diluted shares 35,182,151 35,186,912 34,751,980
- 24 -
EXHIBIT 11
GRUMMAN CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousands, Except Per Share Amounts)
(Continued)
Year Ended December 31,
1993 1992 1991
Earnings (loss) per common share:
Primary
Income (loss) from
continuing operations $1.90 $ 3.49 $2.75
Income (loss) from
discontinued operations (.19) (1.34) .13
Cumulative effect of
accounting change - (5.88) -
Net income (loss) $1.71 $(3.73) $2.88
Fully Diluted
Income (loss) from
continuing operations $1.86 $ 3.42 $2.72
Income (loss) from
discontinued operations (.19) (1.28) .12
Cumulative effect of
accounting change - (5.63) -
Net income (loss) $1.67 $(3.49) $2.84
EXHIBIT 21
GRUMMAN CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
State
Incorporated
Subsidiaries of the Registrant:
Grumman Aerospace Corporation New York
Grumman Allied Industries, Inc. New York
Grumman Data Systems Corporation Delaware
Subsidiaries not listed, considered in the aggregate, do not constitute a
significant subsidiary.
- 25 -
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated January 20, 1994 included in
Grumman Corporation's 1993 Annual Report to Shareholders and incorporated by
reference in this Form 10-K for the year ended December 31, 1993, and of our
report dated January 20, 1994, which is included in this Form 10-K, into the
company's previously filed Registration Statements File Nos. 2-76690,
2-77047, 2-72447 and 33-36587.
ARTHUR ANDERSEN & CO.
New York, N.Y.
March 23, 1994
- 26 -
EXHIBIT 24
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ Renso L. Caporali
Renso L. Caporali
Chairman of the Board,
Chief Executive Officer
and Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ Robert J. Myers
Robert J. Myers
President, Chief Operating
Officer and Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ J. Robert Anderson
J. Robert Anderson
Vice Chairman, Chief Financial
Officer and Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ Kenneth S. Axelson
Kenneth S. Axelson
Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ Lucy Wilson Benson
Lucy Wilson Benson
Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ Richard Dulude
Richard Dulude
Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ Victor Hao Li
Victor Hao Li
Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ Charles Marshall
Charles Marshall
Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ James F. Orr III
James F. Orr III
Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ John T. Sargent
John T. Sargent
Director
GRUMMAN CORPORATION
POWER OF ATTORNEY
WHEREAS, Grumman Corporation (the "Company") intends to file with the
Securities and Exchange Commission, under the Securities Exchange Act of
1934, its Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
NOW THEREFORE, the undersigned, in his capacity as a director or officer,
or both, of Grumman Corporation, hereby appoints Renso L. Caporali, J.
Robert Anderson and Nat P. Busi, and each of them severally, his true and
lawful attorneys or attorney with power to act with or without the others
and with full power of substitution and resubstitution, to execute in his
name, place, and stead, in his capacity as a director, officer, or both of
Grumman Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith, and to file
the same with Securities and Exchange Commission. Each of said attorneys
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in any and all capacities, every act whatsoever
necessary or desirable to be done in the premises, as fully to all intents
and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
17th day of March, 1994.
/s/ Eddie N. Williams
Eddie N. Williams
Director
EXHIBIT 99
GRUMMAN CORPORATION AND SUBSIDIARIES
TO BE INCORPORATED BY REFERENCE INTO FORM S-8 REGISTRATION STATEMENTS
NOS. 2-76690, 2-77047, 2-72447 and 33-36587
UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material with respect to the plan of distribution
not previously disclosed in the registration statement of any material
change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
- 27 -
(f) Employee plans on Form S-8
(1) The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus to each employee to whom the prospectus is
sent or given a copy of the registrant's annual report to shareholders for
its last fiscal year, unless such employee otherwise has received a copy of
such report, in which case the registrant shall state in the prospectus that
it will promptly furnish, without charge, a copy of such report on written
request of the employee. If the last fiscal year of the registrant has
ended within 120 days prior to the use of the prospectus, the annual report
of the registrant for the preceding fiscal year may be so delivered, but
within such 120 day period the annual report for the last fiscal year will
be furnished to each such employee.
(2) The undersigned registrant hereby undertakes to transmit or cause
to be transmitted to all employees participating in the plan who do not
otherwise receive such material as shareholders of the registrant, at the
time and in the manner such material is sent to its shareholders, copies of
all reports, proxy statements and other communications distributed to its
shareholders generally.
(3) Where interests in a plan are registered herewith, the undersigned
registrant and plan hereby undertake to transmit or cause to be transmitted
promptly, without charge, to any participant in the plan who makes a written
request, a copy of the then latest annual report of the plan filed pursuant
to section 15(d) of the Securities Exchange Act of 1934 (Form 11-K). If
such report is filed separately on Form 11-K, such form shall be delivered
upon written request. If such report is filed as a part of the registrant's
annual report on Form 10-K, that entire report (excluding exhibits) shall be
delivered upon written request. If such report is filed as a part of the
registrant's annual report to shareholders delivered pursuant to paragraph
(1) or (2) of this undertaking, additional delivery shall not be required.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter had been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
- 28 -
Financial Review
Management's responsibility
for financial statements
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles. They include amounts
based on judgments and estimates. Representations in the financial
statements and the fairness and integrity of such statements are the
responsibility of management. In order to meet management's
responsibility, the company maintains a system of internal controls and
procedures and a program of internal audits designed to provide
reasonable assurance that the company's assets are controlled and
safeguarded, that transactions are executed in accordance with
management's authorization and properly recorded, and that accounting
records may be relied upon in the preparation of financial statements.
The financial statements have been audited by Arthur Andersen & Co.,
independent public accountants, whose appointment was ratified by
shareholders. Their report expresses a professional opinion as to
whether management's financial statements considered in their entirety
present fairly, in conformity with generally accepted accounting
principles, the company's financial position and results of operations.
Their audit was conducted in accordance with generally accepted
auditing standards. As part of this audit, Arthur Andersen & Co.
considered the company's system of internal controls to the degree they
deemed necessary to determine the nature, timing and extent of their
audit tests which support their opinion on the financial statements.
The Audit Committee of the Board of Directors consists of directors
who are not officers or employees of the company. The committee meets
periodically with representatives of management, the independent public
accountants and the company's internal auditors to review matters
relating to financial reporting, internal accounting controls and
auditing. Both the internal auditors and the independent public
accountants have unrestricted access to the Audit Committee to discuss
the results of their reviews.
Management's discussion and analysis of financial condition and results
of operations
This discussion supplements the detailed information presented in the
consolidated financial statements and notes to consolidated financial
statements which begin on Page 33.
Financial condition
The company's financial condition continued to improve significantly.
In 1993 total debt was reduced 43 percent from $439 million to $250
million. In February 1993, the company fully redeemed its $75 million
of outstanding 9-1/2 percent notes which were due in February 1996,
and, in April, the company called its $50 million issue of convertible
subordinated debentures, which increased the company's shareholders'
equity by $48.4 million. The company also called in April $55.6 million
of 10-1/2 percent sinking fund debentures which were due in February
2011. These repayments and conversions are in addition to the repayment
of $283.4 million of debt in 1992 and net repayments of $60 million in
1991.
During 1993, the company initiated a common stock repurchase program to
buy back a total of $100 million of Grumman stock. Through December 31,
1993, the company has repurchased 1,360,500 shares at a cost of $49.9
million. Dividends paid to shareholders were increased in the second
quarter of 1993 from 25 cents per share to 30 cents per share,
resulting in total dividend payments of $38.7 million in 1993 as
compared with $33.5 million in 1992 and $33.2 million in 1991.
Exercises of stock options by employees and other common stock
transactions in 1993 provided the company with an additional $20.8
million of cash.
At December 31, 1993, the ratio of debt to capital (debt plus
shareholders' equity) was 23 percent as compared with 36 percent at
December 31, 1992. The company also renegotiated the terms of its bank
credit agreements on a more flexible basis and reduced the amount
available from $402 million to $300 million. These new agreements
provide for lower variable interest rates should the company find it
necessary to borrow funds and also lowered the cost of maintaining the
facilities. The company has not had to use these facilities since May
1992 and there are no plans to borrow against them in the near future.
Cash flows provided by operating activities were
$322.3 million in 1993 as compared with $514.8 million in 1992 and
$280.3 million in 1991. In each of these years, cash flow benefited
from aggressive management of inventories and higher progress payment
rates and advances from customers. The decline in scheduled aircraft
deliveries resulted in a lower investment in inventories. During 1993
and particularly in 1992, cash flow from operating activities improved
from the substantial reductions in receivables that occurred as a
result of the decline in the level of the company's sales and
management taking aggressive steps to improve cash flow. Primarily as a
result of the way taxes are paid on profits earned on contracts, the
company had substantially higher tax payments in 1993 than in 1992.
Cash flow from operating activities during 1993 was also affected by
the company having invested in current marketable securities which at
December 31, 1993, were $18 million as compared to none at December 31,
1992, when all excess funds were invested in cash equivalents.
As a result of the above operating, investing and financing
transactions, cash and cash equivalents together with investments in
current marketable securities increased $65 million or 22 percent to
$364 million at December 31, 1993.
Future operations
As reported previously, the fiscal year 1992 defense budget did not
contain funds for new or remanufactured F-14s. The last new F-14 was
delivered in mid-1992 while the last remanufactured F-14 was delivered
in 1993. F-14 program sales were about 7 percent and 20 percent of the
company's total sales in 1993 and 1992, respectively.
Total program backlog at year-end was $360 million, including the
recently awarded $57 million F-14 upgrade program.
The fiscal year 1994 budget contained long-lead funding for production
E-2 aircraft. Taiwan will accept delivery of four E-2s in 1994 under a
$542 million contract signed in 1993. Japan, Egypt, Singapore and
Israel currently have E-2s in their fleets and there are several other
potential foreign customers.
The Joint STARS program continues to receive substantial funding. In
May 1993, full authorization for two production aircraft was received.
Interest in this airborne long range ground surveillance and battle
management system remains high domestically as well as overseas. The
company has put in place the necessary facilities to deliver
anticipated production aircraft on a timely and cost effective basis.
It is our belief that as military budgets continue to shrink,
substantial refurbishment of weapon systems already in inventory will
be required. Grumman is capable of performing this work. Although it is
possible this may occur, and Grumman would be an effective contractor,
we have no assurance that the Department of Defense will follow this
course of action, and if it does, whether it will choose Grumman to
perform this type of service.
The company was teamed with Boeing and Lockheed in competing for the
A-X aircraft program, which was to be the Navy's replacement for
Grumman's A-6 Intruder. Grumman, as prime, had been awarded one of five
$30 million concept exploration contracts. The Navy cancelled the A-X
program during 1993 and the company subsequently announced that it
could no longer support and maintain its high performance airframe
design capability to the extent it has in the past.
Grumman is teamed with the aerospace company Agusta of Milan, Italy,
in competition to build the new Joint Primary Aircraft Trainer System
(JPATS). This contract may be awarded in early 1995 and could total
several billion dollars in sales for more than 700 aircraft, ground-
based training systems and support. The competition for this program is
very intense, and it is impossible to predict the ultimate winner of
these contracts.
In September 1991, the company and TRW Inc. teamed to compete for the
U.S. Air Force's Follow-on Early Warning System (FEWS) with Grumman to
be the principal subcontractor. Due to lack of funding, the Air Force
issued a stop work order on the program in November 1993 during the
demonstration and validation phase. It is possible the Air Force will
reopen this or a related program at some point but no decision has yet
been made.
The effects of inflation on selected financial data have been excluded
from this report. Most of the company's products and services are
acquired under binding long-term contracts with its customers,
principally the U.S. government. These contracts are priced on the
basis of estimated costs to complete the contract that include
projected inflation factors. Additionally, some of these contracts
include cost escalation clauses that reduce the risk of inflation
inherent in the performance of these tasks over prolonged periods of
time. For these reasons, the impact of inflation on the company is
minimized to a large extent.
Results of operations
1993 Compared with 1992
Net income from continuing operations in 1993, before a restructuring
charge, totalled $120.5 million or $3.50 per share. A restructuring
charge of $55.0 million, net of federal income tax, or $1.60 per share,
reduced 1993 net income from continuing operations to $65.5 million or
$1.90 per share. A loss from discontinued operations of $6.7 million or
$.19 per share resulting from the settlement of litigation in the first
quarter of 1993 involving Sunstream solar panels, a business that was
discontinued in 1985, brought net income for 1993 to $58.8 million or
$1.71 per share.
Consolidated sales in 1993 totalled $3.249 billion, down $255 million
or 7 percent from the 1992 total. The principle reason for the sales
decline was lower sales on the F-14 program which was approximately
$500 million lower than in 1992.
Income from continuing operations in 1992 totalled $119.9 million or
$3.49 per share which after recording a loss from discontinued
operations of $45 million and the cumulative cost effect of adopting
Financial Accounting Standard 106 covering postretirement health
benefits of $198 million resulted in a net loss for 1992 of $123.2
million or $3.73 per share.
In light of the current diminishing defense business environment and
the almost certain continued decline in future defense program outlays,
the company has completed studies reviewing the actions required to
ensure that it will remain a viable and vigorous competitor in this
business. These studies included a review of underutilized facilities
and laboratories, staffing of specialized technical disciplines, and
all associated costs identified with those which are excess to
foreseeable needs. As a result, a restructuring charge of $85 million
was recorded in the fourth quarter of 1993.
In November 1993, the company reached a settlement with the United
States Attorney relating to the government's investigation of
activities involving Grumman and entities affiliated with one James
Kane. After fully cooperating with the government through this lengthy
investigation, the company paid $17 million as restitution for certain
claims related to contracts entered into with Kane entities and $3
million to cover legal costs incurred by the government. Since the
company had previously established financial reserves for this
settlement payment to the government, 1993 earnings were not adversely
affected.
Interest expense in 1993 was $23.4 million lower than in 1992 as a
result of the previously discussed debt reductions. Total debt was down
$189 million to a level of $250 million at year end. Cash and cash
equivalents were $47 million higher at December 31, 1993, than in 1992.
The company's effective tax rate on income from continuing operations
increased from 18.2 percent in 1992 when tax reserves of $23.5 million
were released to 24.3 percent in 1993 which reflects a $9.4 million
decrease in the valuation allowance for deferred tax assets. More
detailed information regarding the company's tax liability and expense
is included in Note 6 of the Notes to Financial Statements.
Other pertinent comments by the company's principal business segments
follow:
Aerospace segment sales in 1993 decreased $375 million or 16 percent
to $1.965 billion. Operating income, exclusive of a restructuring
charge of $73 million, decreased $5.9 million or 4.4 percent. The sales
and operating income declines were attributable primarily to the F-14
program where the last ten production aircraft were delivered in 1992
and none in 1993. The F-14 program declines were partially offset by
higher sales and income on the E-2C programs where ten aircraft were
delivered in 1993 vs. eight in 1992. The profits of the segment were
adversely affected by charges of $4.5 million and $8.5 million in 1993
and 1992, respectively, attributable to the problems with wing control
surfaces on the Air Force/McDonnell Douglas C-17 aircraft program.
Aircraft deliveries for the past three years were:
Aircraft Program 1993 1992 1991
F-14D - 10 14
F-14D/R (Remanufactured) 5 6 2
E-2C 10 8 6
EA-6B - - 6
A-6E - 1 9
In 1994 the following deliveries are scheduled: ten F-14
remanufacture upgrade kits, two E-2C's and four E-2T's.
Electronics systems sales in 1993 increased $25 million or 4 percent
to $636 million while operating income exclusive of a restructuring
charge of $9 million decreased $2.1 million to $11.7 million. The sales
increase was due to higher revenues from the U. S. Air Force/Army Joint
STARSradar aircraft program and simulation/trainer systems programs.
Operating income was adversely affected by a $5.7 million adjustment
required to bring the Joint STARSprogram cost of sales in line with
current estimates of completion.
Sales in the information and other services segment increased $64
million or 11 percent to $657 million, and operating profits exclusive
of a restructuring charge of $3 million increased $2.9 million or 10
percent to $31 million. The sales increase is due to higher sales in
the engineering services unit while the income change over 1992 was due
to the increased sales and better profit margins on data systems sales.
In the special purposes vehicles segment, 1993 sales increased $24
million or 7 percent, while operating income decreased $1.3 million or
5 percent to $26.4 million. The sales change was attributable to
increased deliveries of aluminum trucks. The decrease in operating
income was due to increased research and development costs and startup
costs associated with the Pallet Reefer program. Although the
performance on the U. S. Postal Service delivery van (LLV) program
remains strong, the Postal Service notified the company in September
1993 that it would not exercise contract options that could have
extended production into 1996. As a result, the last of the 142,655 LLV
units will be delivered in December 1994. LLVprogram sales accounted
for approximately 8 percent of the company's total revenues in 1993.
The company's total backlog at December 31, 1993, was $6.0 billion, a
decrease of $1.5 billion from the year-end 1992 total.
1992 Compared with 1991
Consolidated sales in 1992 totalled $3.504 billion, down $470 million
or 12 percent from the 1991 total. However, income from continuing
operations amounted to $119.9 million or $3.49 per share in 1992, an
increase of $24.7 million or $.74 per share over the 1991 figures.
The company's reinsurance subsidiary experienced a pretax loss of
$54.0 million in 1992, attributable primarily to Hurricane Andrew,
which had the effect of reducing net income by $1.34 per share. The
company decided not to continue in this business and, accordingly, the
reinsurance business results have been reported as a discontinued
operation in the accompanying financial statements.
The company chose to adopt Financial Accounting Standard 106 (FAS
106)-Accounting For Postretirement Health Benefits-in 1992 rather than
wait until it was mandatory in 1993. Consistent with other major
defense contractors, the company expensed the transition obligation of
$300 million or $198 million after tax amounting to $5.88 per share in
1992. This one-time charge, which represents the actuarially computed
liability at January 1, 1992, is classified separately in the income
statement as a cumulative effect of a change in accounting principle.
See Note 11 of the Notes to Financial Statements for additional
details.
In 1992, the company provided additional reserves totalling $14
million to be available for the settlement of claims relating to the
government's investigation of activities involving Grumman and entities
affiliated with one James Kane.
In the fourth quarter of 1992 the Internal Revenue Service concluded
its review of the company's 1986-87 tax returns. As a result, the
company was able to release tax reserves in 1992 that had the effect of
reducing its effective tax rate on continuing operations from the
statutory rate of 34 percent to 18 percent.
Interest expense in 1992 was $30.2 million lower than in 1991 because
of substantially lower borrowings. Total debt was reduced $283 million
to a level of $439 million at year end. Cash and cash equivalents were
$127 million higher at December 31, 1992, than in 1991.
Other pertinent comments by the company's principal business segments
follow:
Aerospace segment sales in 1992 decreased $556 million or 19 percent
to $2.34 billion. Operating income increased $14.7 million or 12
percent. The 1991 results included a charge of $46.5 million for the
settlement of claims against Tracor Aviation, Inc. The sales decline
was attributable to four fewer new F-14D deliveries and lower sales on
the S-2 Taiwan and A-6 programs. The last new F-14D aircraft was
delivered in the second quarter. The profits of the segment were
adversely affected by charges of $8.5 million attributable to problems
with wing control surfaces on the Air Force/McDonnell Douglas C-17
aircraft program.
Electronics systems sales in 1992 increased $106 million or 21 percent
to $611 million while operating income of $14 million was the same as
in 1991. The sales increase was due to higher revenues from the U. S.
Air Force/Army Joint STARS radar aircraft program.
Sales in the information and other services segment decreased $29
million or 5 percent to $593 million, and operating profits decreased
$3 million or 11 percent to $28 million. Both the sales and operating
income decreases were predominantly due to reduced custom systems
revenues in the Data Systems division.
In the special purpose vehicles segment, 1992 sales decreased $23
million or 6 percent, while operating income increased $6 million or 31
percent. These changes were the direct result of the company's decision
to withdraw from the emergency vehicles business. The performance of
the U. S. Postal Service delivery van (LLV) program remained strong. In
October 1992, the company delivered the 100,000th LLV.
The company's total backlog at December 31, 1992, was $7.6 billion, an
increase of $400 million over the year-end 1991 total.
Quarterly Financial Data (Unaudited)
The following summarizes quarterly financial data for 1993 and 1992:
($ in thousands except per share data)
Quarter ended
1993 Mar. 31 June 30 Sept. 30 Dec. 31
Sales $871,771 $746,190 $791,417 $839,746
Gross profit 90,243 81,243 72,417 75,234
Income (loss) from
continuing operations 34,220 26,832 29,941 (25,486)(F1)
Net income (loss) 27,520 26,832 29,941 (25,486)(F1)
Primary earnings per share:
Income (loss) from
continuing operations $1.00 $.79 $.85 $(.74)(F1)
Net income (loss) .81 .79 .85 (.74)(F1)
[FN]
(F1) After a restructuring charge of $55 million or $1.60 per share,
net of federal income tax.
1992
Sales $950,467 $853,845 $768,873 $930,765
Gross profit 88,014 77,073 65,077 84,751
Income from continuing
operations 29,233 23,795 23,442 43,391
Net income (loss) (167,518)(F2)26,937 20,351 (2,944)(F3)
Primary earnings per share:
Income from continuing
operations $ .85 $.68 $.67 $1.29
Net income (loss) (4.99)(F2) .77 .58 (.09)(F3)
(F2) Reflects the adoption of Financial Accounting Standard 106,
regarding accounting for postretirement health benefits as of January
1, 1992, which resulted in a net charge of $198 million or $5.88 per
share.
(F3) Includes a charge of $46.3 million or $1.38 per share reflecting
the discontinuance of the company's reinsurance business.
($ in millions)
1993 1992 1991 1990 1989
Backlog*..........$6,036 $7,561 $7,212 $8,451 $8,800
*Includes authorized but unfunded amounts.
Dividend and stock price data
Cash dividends of $1.15 per share totalling $38.7 million and $1.00
per share totalling $33.5 million were paid on common stock in 1993
and 1992, respectively. Dividends on common stock have been paid
annually since 1930. For restrictions on cash dividends imposed under
the company's borrowing agreements, see Note 8 of the Notes to
Financial Statements.
The following table sets forth the reported high and low sales
prices for the common stock and the cash dividends per share paid by
the company for the periods indicated:
Common Stock
Cash Cash
1993 Sales Price Dividends 1992 Sales Price Dividends
Quarter High Low Paid Quarter High Low Paid
First $35-7/8 $24-1/8 $.25 First $20-1/4 $17-3/8 $.25
Second 41-3/4 34 .30 Second 22-7/8 17-3/8 .25
Third 41-7/8 33 .30 Third 23-3/8 20-3/4 .25
Fourth 41-3/8 34-1/2 .30 Fourth 25 19-5/8 .25
There were approximately 12,861 holders of record of the common stock
at January 31, 1994.
Financial Statements
Consolidated Statement of Income Grumman Corporation and Subsidiaries
($ in thousands except per share data)
Year ended December 31,
1993 1992 1991
Revenues
Sales $3,224,535 $3,492,075 $3,963,492
Other income 24,589 11,875 10,359
Total sales and other income 3,249,124 3,503,950 3,973,851
Costs and expenses
Cost of sales 2,929,987 3,189,035 3,620,895
Restructuring charge 85,000 - -
Loss on Tracor Aviation Inc.
settlement - - 46,500
Selling, administrative and
other 115,928 113,289 124,049
Interest 31,702 55,065 85,236
Total costs and expenses 3,162,617 3,357,389 3,876,680
Income before income taxes 86,507 146,561 97,171
Provision for federal income
taxes 21,000 26,700 2,000
Income from continuing
operations 65,507 119,861 95,171
Income (loss) from discontinued
operations (6,700) (45,035) 4,166
Cumulative effect of change to accrual
method of accounting for
postretirement benefits - (198,000) -
Net income (loss) $ 58,807 $ (123,174) $ 99,337
Primary earnings per common share:
Income from continuing
operations $1.90 $3.49 $2.75
Income (loss) from
discontinued operations (.19) (1.34) .13
Cumulative effect of accounting
change - (5.88) -
Net income (loss) $1.71 $(3.73) $2.88
The accompanying notes are an integral part of these financial
statements.
Consolidated Balance Sheet Grumman Corporation and Subsidiaries
(amounts in thousands)
December 31,
Assets 1993 1992
Current Assets
Cash and cash equivalents $ 346,090 $ 299,077
Marketable securities (at cost,
approximating market) 18,034 -
Accounts receivable 518,731 534,260
Inventories, less progress payments 499,436 612,424
Prepaid expenses 40,992 41,280
Total current assets 1,423,283 1,487,041
Property, plant and equipment, less
accumulated depreciation 372,723 399,421
Non-current assets
Deferred income taxes 120,028 94,856
Long-term receivables 6,009 9,079
Investments 52,505 28,678
Other 49,901 69,941
228,443 202,554
Total $2,024,449 $2,089,016
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $ 6,571 $ 83,399
Accounts payable 147,576 128,610
Wages and benefits payable 90,229 95,519
Income taxes 88,932 145,353
Advances and deposits 95,340 30,251
Other current liabilities 89,699 127,902
Total current liabilities 518,347 611,034
Long-term debt 243,106 355,244
Accrued Retirement Benefits 304,752 306,500
Restructuring reserve 85,000 -
Other liabilities 37,191 23,348
Common stock - $1.00 par value,
authorized 80,000 shares; outstanding
34,049 and 33,519 shares
(net of treasury stock) 344,589 321,038
Retained earnings 491,464 471,852
Total $2,024,449 $2,089,016
The accompanying notes are an integral part of these financial
statements
<TABLE>
Consolidated Statement of Common Shareholders' Equity Grumman Corporation and Subsidiaries
(amounts in thousands)
<CAPTION>
Year 1993 Year 1992 Year 1991
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Common stock
Balance beginning of year 33,790 $337,896 33,512 $337,737 33,019 $313,916
Conversion of convertible
subordinated debentures 1,392 48,352 - - - -
Conversion of preferred stock - - 6 36 1 6
Exercise of stock options and
awards - net of (forfeitures) 605 22,935 272 4,014 492 7,149
Majority interest in capital
contributed to joint venture - - - (3,891) - 16,666
Balance end of year 35,787 409,183 33,790 337,896 33,512 337,737
Less:
Treasury stock
Balance beginning of year 271 4,415 247 3,998 221 3,529
Common stock repurchase program 1,361 49,931 - - - -
Reinstated (issued) under various
plans--net 106 2,848 24 417 26 469
Balance end of year 1,738 57,194 271 4,415 247 3,998
Restricted stock
Balance beginning of year 1,613 12,443 1,651 15,025 1,360 13,377
Awards (forfeitures)-net (85) (566) 131 1,490 444 6,462
Amortization and vesting (234) (4,477) (169) (4,072) (153) (4,814)
Balance end of year 1,294* 7,400 1,613* 12,443 1,651* 15,025
Common stock outstanding 34,049 $344,589 33,519 $321,038 33,265 $318,714
Retained earnings
Balance beginning of year $471,852 $632,998 $570,504
Net income (loss) 58,807 (123,174) 99,337
Cash dividends:
Common (per share: 1993,
$1.15; 1992 and 1991, $1.00) (38,690) (33,496) (33,220)
Preferred - (2,515) (3,623)
Redemption costs (505) (1,961) -
Balance end of year $491,464 $471,852 $632,998
* Shares are shown for information only and are included in common stock.
</TABLE>
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Cash Flows
Grumman Corporation and Subsidiaries
($ in thousands) Year ended December 31,
1993 1992 1991
Cash flows from operating activities
Net income (loss) $ 58,807 $(123,174) $ 99,337
Items affecting cash from operations:
Depreciation and amortization 73,835 82,127 94,274
Cumulative effect of change in
accounting for postretirement
benefits - 198,000 -
Restructuring charge 85,000 - -
Loss on Tracor Aviation Inc. settlement - - 46,500
Release of tax reserves - (23,500) (30,700)
Changes in assets and liabilities:
Decrease/(increase) in:
Accounts receivable and marketable
securities (2,505) 79,391 13,126
Inventories 112,988 147,817 142,811
Prepaid expenses 288 38,660 (9,930)
Increase/(decrease) in:
Accounts payable, wages and
benefits 13,676 (68,585) (52,399)
Income taxes payable (49,231) 65,947 (11,409)
Deferred income taxes (32,362) (6,351) (4,500)
Other current liabilities 26,886 56,155 (10,902)
Other 34,869 68,317 4,126
Net cash provided by operating
activities 322,251 514,804 280,334
Cash flows from investing activities
Capital expenditures (44,585) (39,054) (54,847)
Proceeds from sale of capital
assets 3,882 2,361 6,385
Decrease (increase) in investments (25,562) 4,237 (1,486)
Net cash used in investing
activities (66,265) (32,456) (49,948)
Cash flows from financing activities
Decrease in short-term debt - - (17,000)
Proceeds from long-term debt - - 75,000
Repayment of long-term debt (141,119) (283,372) (118,023)
Redemption of preferred stock - (34,321) (5)
Dividends paid (38,690) (36,011) (36,843)
Repurchase of common stock (49,931) - -
Exercise of stock options 20,767 (1,591) (3,015)
Capital received on formation of
joint venture - - 20,000
Net cash required by financing
activities (208,973) (355,295) (79,886)
Net increase in cash and cash
equivalents for the period 47,013 127,053 150,500
Cash and cash equivalents-January 1, 299,077 172,024 21,524
Cash and cash equivalents-
December 31, $ 346,090 $ 299,077 $172,024
The accompanying notes are an integral part of these financial
statements.
Notes to Consolidated Financial Statements
($ in thousands in tabular presentations except per share data)
Note 1-Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of the
company and all subsidiaries. All intercompany balances and
transactions have been eliminated.
Inventories
Inventoried costs relating to both long-term government and commercial
contracts and programs are stated at the actual production cost.
General and administrative expenses allocable to aerospace fixed-price
type contracts are included in inventory, whereas such expenses for
non-aerospace activities are expensed as incurred. The costs attributed
to units delivered under both long-term government and commercial
contracts and programs are based on the estimated average costs of all
units expected to be produced in a lot or contract. In accordance with
industry practice, inventories include amounts relating to contracts
and programs having long production cycles, portions of which are not
expected to be realized within one year.
Inventories of raw materials, purchased parts and supplies are carried
at the lower of cost or realizable values. Inventories are based on
average cost and/or first-in, first-out methods.
Revenue recognition
Sales under fixed-price production contracts are recorded at the time
of delivery. Sales, including fees earned, under cost-reimbursement and
research, development, test and evaluation contracts are recorded as
costs are incurred.
Certain contracts contain cost and/or performance incentives. Such
incentives are included in sales at the time actual performance can be
related to the target and the earned amount can be reasonably
determined. Accordingly, earnings recorded in one period may include
adjustments related to sales recorded in a prior period. Losses on
contracts are recorded when they become known.
Depreciation and amortization
The company uses a declining-balance method of depreciation for
substantially all of its plant and equipment. Leasehold improvements
are amortized over the terms of the leases or their estimated useful
lives, whichever is shorter.
Upon sale or retirement of plant and equipment, the related cost and
accumulated depreciation are removed from the accounts, and any gain or
loss is reflected currently. Maintenance and repair costs are expensed
as incurred.
Intangibles
The excess of cost over the net assets of acquired companies at
December 31, 1993 and 1992, was $3.6 and $3.7 million, respectively.
These amounts are included in Non-Current Assets-Other, and are being
amortized over 40 years.
Cash equivalents
It is the company's policy to treat securities which are readily
convertible to known amounts of cash with original maturities of three
months or less as cash equivalents. The carrying value of such items,
which is at cost, approximates fair value because of the short maturity
of those instruments.
Cash flow supplemental information
Cash paid during the year for: 1993 1992 1991
Interest (net of amount capitalized)$39,058 $57,543 $87,884
Federal income taxes...............97,800 37,000 40,000
Financial instruments
During 1993, the company initiated a Common Stock Repurchase Program
to purchase up to $100 million of the company's outstanding common
stock. As a hedge of the company's cost, the company entered into a
series of equity put warrants whereby the company may be obligated to
repurchase 750,000 shares, if put to the company, at expiration date.
These equity put warrants will expire during the period August through
October 1994.
Also during 1993, the company invested approximately $25 million in a
limited partnership which invests in repurchase and reverse repurchase
agreements backed by highly rated securities. At December 31, 1993, the
value of the partnership's underlying net assets approximated the
company's investment which is being accounted for using the equity
method.
Research and development
Research and development costs associated with government programs up
to a negotiated ceiling are charged to inventory and are recorded in
cost of sales when products are delivered or services performed. Costs
in excess of ceiling and expenditures for commercial projects are
charged against income in the year incurred. Total expenditures for
research and development, bid and proposal efforts were, in millions,
$122.5 in 1993, $132.8 in 1992 and $127.5 in 1991.
Earnings per common share
Primary earnings per share are determined after deducting preferred
stock dividends and are based on the weighted average number of
outstanding common shares and common stock equivalents.
Reclassification
Certain prior-year amounts have been reclassified to conform to 1993
classifications.
Note 2-Restructuring and Discontinued Operations
In order to become more competitive in the changing defense market, the
company recorded in the fourth quarter of 1993 an $85 million
restructuring provision. In connection with the consolidation of its
facilities, the company anticipates reducing its total floor space
approximately 30 percent by 1997. The restructuring charge provides for
equipment and inventory write-offs of approximately $60 million and
plant closing costs of approximately $25 million.
During 1993, the company settled a lawsuit relating to its previously
discontinued solar panel business and recorded a loss of $9.9 million
before an income tax benefit of $3.2 million.
Operating results for Paumanock Insurance Company Ltd. for the years
ended December 31, 1992 and 1991, were reported in the income statement
under the caption "Income (loss) from discontinued operations" and are
summarized as follows:
1992 1991
Sales $113,944.........$64,055
Income (loss) before income taxes (54,035)..........6,266
Income taxes (9,000)..........2,100
Net income (loss) (45,035)..........4,166
At December 31, 1992, the net book value of the insurance company's
assets and liabilities was $11.1 million and is included in other non-
current assets. This business was sold in the first quarter of 1993 at
an amount that approximated the company's carrying value.
Note 3-Accounts Receivable
Receivables at December 31 are summarized as follows:
1993 1992
Billed:
U.S. government $121,394 $110,873
Commercial 59,027 46,017
180,421 156,890
Unbilled costs and accrued profits:
U.S. government 320,370 337,306
Commercial 17,940 40,064
338,310 377,370
$518,731 $534,260
Unbilled costs and accrued profits represent revenue earned but not
billed to the customer at year-end. At December 31, 1993, approximately
$166.7 million of claims and accruals, a portion of which is subject to
negotiation, is not expected to be realized before December 31, 1994.
In June of 1991, the company submitted a request to the U. S. Air
Force for an equitable adjustment of the price of a contract involving
the F-111A/E & EF-111A Avionics Modernization Program, based on late
and inadequate government-furnished software and other property and
other failures to comply with contract requirements by the government.
The request, as amended in May of 1993, was in the amount of $62.5
million. On August 26, 1993, the Contracting Officer issued what
purports to be a decision under the Contract Disputes Act denying the
preponderance of the price increase requested and concluding that the
Air Force is entitled to recover a net amount of $5.5 million on the
basis of alleged company failures to comply with the terms of the
contract. The company believes there is little or no support for the
Contracting Officer's decision and that the amounts of revenue
recognized pursuant to this contract are appropriate as of December 31,
1993.
Note 4-Inventories
Inventories at December 31 consist of the following:
1993 1992
Work in process-long-term contracts:
Production costs $ 951,837 $1,140,212
General and administrative expenses 120,491 110,316
Work in process-other 9,595 13,664
Raw materials, purchased parts and
supplies 82,158 134,261
1,164,081 1,398,453
Less related progress payments 664,645 786,029
$ 499,436 $ 612,424
Under the contractual arrangements by which progress payments are
received, the government has a security interest in the inventories
identified with related contracts.
The aggregate amounts of selling, general and administrative expenses
incurred during 1993, 1992 and 1991 were, in millions, $375.0, $350.1
and $349.3 respectively.
Note 5-Property, Plant and Equipment
Property, plant and equipment at December 31 (at cost) consist of:
1993 1992
Land $ 11,954 $ 11,474
Buildings 316,029 310,747
Machinery and equipment 967,773 963,395
Leasehold improvements 51,437 51,829
Construction in progress 12,897 8,782
1,360,090 1,346,227
Less accumulated depreciation and
amortization 987,367 946,806
$ 372,723 $ 399,421
For the years 1993, 1992 and 1991, interest costs of $.9, $.5 and $1.8
million were capitalized, respectively, relating to construction in
progress.
Note 6-Income Taxes
The provision for federal income taxes consists of the following:
1993 1992 1991
Current $101,400 $ 27,600) $ 8,600)
Deferred (83,900) (9,900) (4,500)
$ 17,500 $ 17,700* $ 4,100
*Excludes a tax benefit of $102 million relating to the cumulative
effect of the change to the accrual method of accounting for
postretirement health benefits.
A reconciliation between the provision for federal income taxes
(substantially all domestic) and the amount computed at the statutory
federal income tax rate is as follows:
1993 1992 1991
Provision computed at the statutory rate of
(1993 - 35%; 1992 and 1991 - 34%) $26,710 $ 31,459 $ 35,169)
Research and other tax credits realized - (23,500) (30,799)
Valuation allowance (9,372) 9,372 -
FAS109 adjustment and other 162 369 (270)
$17,500 $ 17,700 $ 4,100
The provision for deferred federal income taxes consisted of the
following:
1993 1992 1991
Contract tax accounting methods $(40,013) $ 16,208 $(4,692)
Accelerated depreciation (294) (1,716) (3,502)
Capitalized costs (2,463) (669) (6,285)
Gain from investment (17,150) - -
Restructuring charge (30,000) - -
Employee benefits and all other-net (2,980) (14,723) 9,979
Discontinued operations 9,000 (9,000) -
$(83,900) $ (9,900) $(4,500)
The current liability for income taxes shown in the accompanying
financial statements includes current deferred income taxes of $42.7
and $62.4 million as of December 31, 1993 and 1992, respectively.
Deferred tax liabilities (assets) consisted of the following:
December 31,
1993 1992
Contract tax accounting $ 86,910 $ 96,159
Excess tax over book depreciation 30,337 31,856
Gross deferred tax liabilities 117,247 128,015
Restructuring charge (30,000) -
Retiree benefit plans (106,673) (104,203)
Capitalized costs (17,307) (14,886)
Employee benefits and other (23,411) (32,398)
Gain from investment (17,150) -
Discontinued operations - (18,372)
Gross deferred tax assets (194,541) (169,859)
Valuation allowance - 9,372
Net deferred tax asset $ (77,294) $ (32,472)
The net change in the valuation allowance for deferred tax assets was
a decrease of $9.4 million as a result of the utilization of the loss
incurred on the sale of the reinsurance business.
Effective January 1, 1992, the company began using the liability method
as prescribed in Financial Accounting Standard No. 109 which was issued
in February 1992. Under FAS109, deferred tax assets and liabilities are
measured at the tax rate that, under existing law, will be in effect
when temporary differences between financial and tax reporting turn
around.
State taxes on income are included in general and administrative
expenses, and amounted to, in millions, $29.6 in 1993, $16.7 in 1992
and $11.3 in 1991.
Note 7-Stock Options and Incentive Plans
The 1981 Stock Option Plan provided for the granting, at any time
before April 30, 1991, of options to purchase not more than 2,500,000
shares of the company's stock. The 1990 Stock Option Plan provides for
the granting, at any time before April 30, 2000, of options to purchase
not more than 1,500,000 shares of the company's stock. The 1992 Long
Term Incentive Plan provides for grants of awards not to exceed
1,750,000 shares. The stock option purchase prices in these three
plans are not less than the fair market value at dates of grant.
The plans include an option surrender provision which allows the
holders to surrender some or all of their options and receive the value
of the appreciation of the shares in common stock.
Options
Available for
Outstanding future grant
December 31 Granted Exercised Surrendered Forfeited December 31
Number
of shares
1993 1,584,667 547,700 137,758 1,618,641 54,609 1,374,784
1992 2,847,975 535,000 11,150 493,200 131,200 1,457,472
Option price
per share
1993 $14.19-39.13 $29.19-39.13 $14.94-32.13
1992 $14.19-32.13 $18.69-21.06 $14.25-21.56
In exchange for the options surrendered in 1993 and 1992, 514,358 and
103,040 shares were issued, having an aggregate market value of $17.6
and $2.3 million, respectively.
Restricted Stock Award Plans provide for granting to employees, at any
time before January 1, 1998, not more than 3,750,000 shares of common
stock. At December 31, 1993, 1,063,130 shares were still available for
future awards. The cost of shares awarded under these plans is being
amortized over 10 years for awards made prior to April 1989 and seven
years thereafter, the periods after which all restrictions will have
lapsed. In 1993, 1992 and 1991, $3.2, $4.1 and $4.8 million,
respectively, have been charged against income for these awards.
The 1992 Long Term Incentive Plan provides for granting up to 1,750,000
shares in the form of stock options, performance shares and restricted
stock. To date three awards have been made totalling 428,650
performance shares, which are earned over a three-year period; and,
$4.4 million and $1.4 million of compensation expense has been recorded
for 1993 and 1992, respectively. Options for 495,500 shares have been
granted under this plan. Both the performance shares and the options
granted under this plan are included in the above table.
In addition, officers and key employees of the company and its
subsidiaries have received awards under a Management Incentive Plan
totalling, in millions, $7.0 in 1993, $6.8 in 1992 and $5.8 in 1991.
Note 8-Long-Term Debt
Long-term debt, net of current maturities, at December 31 is as
follows:
1993 1992
Notes due 1999, 10-3/8% $200,000 $200,000
Convertible subordinated debentures
due 2009, 9-1/4% - 50,000
Sinking fund debentures due 2011, 10-1/2% - 55,605
Notes and mortgages at rates from 5-3/4% to
12-7/8% with maturities through 2001 43,106 49,639
$243,106 $355,244
The fair value of the company's long-term debt is estimated based on
the quoted market prices for the same or similar issues or on the
current rates offered to the corporation for debt of the same remaining
maturities. Long-term debt at December 31, 1993, in the opinion of
management has a fair value of $262.3 million.
Long-term debt maturing in each of the next five years is as
follows, in millions: 1994, $6.6; 1995, $7.3; 1996, $8.1; 1997, $8.3;
1998, $9.5.
The company is party to a Restated Credit Agreement with various
banks under which it may borrow up to $200 million. Additionally, the
banks have provided a short-term credit facility which provides an
additional $100 million through March 31, 1994. On February 25, 1996,
the Restated Credit Agreement will terminate and any outstanding
advances must be repaid to the banks. Any outstanding advances under
the short-term credit facility must be repaid at termination. Interest
on borrowings under this agreement will be based on a three level scale
related to the company's current credit rating ranging from either
Citibank's Base Rate up to .25 percent over that rate or .50 to 1.25
percent over the applicable Eurodollar Rate. There is a commitment fee
associated with both agreements that is also based on the company's
credit rating ranging from .25 to .50 percent on the Restated Credit
Agreement and from .20 to .50 percent on the short term agreement.
Repayment of borrowings under all of the loan agreements is
guaranteed by the company's major subsidiaries. The agreements contain,
among other things, provisions regarding maintenance of working
capital, net worth and the payment of cash dividends on common stock.
The company's working capital and net worth are substantially in excess
of the minimum requirements, and the amount available for the payment
of cash dividends at December 31, 1993, was $36 million.
The $75 million 9.50 percent notes which were due February 15,
1996, were included in short-term debt at December 31, 1992, and were
redeemed on February 17, 1993, at 100 percent of face value, together
with accrued interest.
The 9.25 percent convertible subordinated debentures due August 15,
2009, were convertible at any time prior to maturity into common stock
at $34.75 per share. This issue of debentures was called by the company
July 7, 1993, at a price of 101.85 percent of face value plus accrued
interest. The 10.50 percent sinking fund debentures due February 15,
2011, were called by the company on April 20, 1993, at a price of 107
percent of face value plus accrued interest.
The 10.375 percent notes due January 1, 1999, will be redeemable at
any time on or after January 1, 1996, after written notice, as a whole
or in part at 100 percent of principal amount thereof, together with
accrued interest. Upon the occurrence of a designated event (primarily
a change in equity ownership, a merger with another company or a two-
thirds turnover of the board of directors), the holders of the notes
may require the company to repurchase their notes at 100 percent of the
principal amount.
Note 9-Preferred Stock
The company is authorized to issue 10 million shares of $1.00 par value
preferred stock, none of which is issued and outstanding at December
31, 1993. In July 1992, the remaining outstanding 1,192,249 shares of
$2.80 cumulative preferred stock were redeemed at $25.867 per share.
Each share of the $.80 convertible preferred stock was convertible into
2.2 shares of the company's common stock. In November 1992 the company
exercised its right to call this issue of stock. Those holders who did
not convert their holdings to common stock by November 25, 1992,
received a cash payment of $14.43 per share plus accrued dividends to
that date. Preferred stock converted into common stock during 1992 and
1991 were 2,888 shares and 454 shares, respectively.
Note 10-Retirement Plans
Grumman has noncontributory defined benefit plans covering
approximately 85 percent of its employees and some defined contribution
plans covering others. Benefits under the defined benefit plans are
based on employees' years of service and career average compensation.
Statement of Financial Accounting Standard (FAS) No. 87, Employers'
Accounting for Pensions, effective for fiscal years beginning after
December 15, 1986, established a methodology for calculating periodic
pension costs for defined benefit pension plans based on the projected
unit credit actuarial method.
The following tables set forth the status of the company's pension
plans:
December 31,
1993 1992
Actuarial present value of benefit obligations:
Vested $ 2,619,958 $2,140,407
Nonvested 233,482 199,334
Accumulated benefit obligation 2,853,440 2,339,741
Effect of projected future salary
increases 138,778 56,833
Projected benefit obligation for
services rendered to date 2,992,218 2,496,574
Plan assets at fair value 2,871,620 2,771,642
Projected benefit obligations (in excess
of)/less than plan assets (120,598) 275,068
Items not yet recognized in earnings:
Unamortized net (asset) (187,182) (207,112)
Deferred net loss/(gain) 326,734 (93,339)
Accrued pension (liability)/prepaid
expense $ 18,954 $ (25,383)
Periodic pension cost for 1993, 1992 and 1991 is as follows:
1993 1992 1991
Defined benefit plans:
Service cost-benefits earned
during period $ 54,993 $ 61,918) $ 61,135
Interest cost on projected
benefit obligation 209,062 198,841) 186,767
Actual return on assets (186,573) (149,733) (486,778)
Net amortization and
deferral (49,992) (67,693) 284,757
27,490 43,333 45,881
Defined contribution plans, etc.__11,737 10,740 9,260
Total pension expense* $ 39,227 $ 54,073 $ 55,141
Contributions to pension plans $ 77,892 $ 92,227 $ 88,507
*Since government procurement regulations permit the recovery of
pension expense only to the extent contributions are made to the
pension plans and the company's business is predominantly with the
government, the difference between plan contributions and the
calculated amount per FAS No. 87 is recorded in a deferred asset
account, as this difference will be expensed in the future as costs are
funded. The company's consolidated statement of income therefore
includes the total FAS No. 87 pension cost and a comparable amount of
revenue. Costs and liabilities associated with the pension enhancement
program where 1,900 employees accepted enhanced pensions as an
incentive to retire during the period April 2 through October 31,
1990, are included above and are being funded over a ten-year period
which began in 1991.
Assumptions used in determining the actuarial present value of benefit
obligations as of December 31 were:
1993 1992
Discount rate 7.50% 8.50%
Rate of increase in compensation levels 3.50% 5.00%
Expected long-term rate of return on assets 8.50% 8.75%
The discount rate was reduced from 8.50 percent to 7.50 percent
and the expected rate of return from 8.75 percent to 8.50 percent in
recognition of declining interest rates. These are the primary
reasons that plan assets shifted from being greater than the projected
benefit obligations at December 31, 1992 to being $120.6 million less
than the projected benefit obligation at December 31, 1993.
For the years 1992 and 1991, the assumptions used in determining the
net periodic pension expense and the actuarial present value of benefit
obligations were a discount rate of 8.75 percent, a compensation
increase rate of 6.00 percent, and an expected long-term rate of return
on assets of 8.75 percent.
Approximately 37 percent of the retirement plans' assets are
invested in diversified corporate stock, 32 percent in U.S. government
securities, 10 percent in corporate fixed income securities, 4 percent
in real estate investments and 17 percent in short-term investments. In
the event the company terminates its major plan, the U.S. government
may claim a share of the remaining excess assets after the accumulated
benefits have been satisfied. The company's objectives are to make
contributions to the plan that satisfy the ERISA funding requirements
and to utilize realistic actuarial assumptions based on long-term
trends.
Note 11-Postretirement Health and Postemployment Benefits
Approximately 75 percent of the company's employees employed at year-
end may become eligible for certain retiree health care benefits. The
length of time the benefit is available is directly related to years of
service. Retiree contributions depend on length of service and
Medicare status.
Financial Accounting Standard (FAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," requires
accrual accounting for retiree medical benefits. The company adopted
FAS No. 106 effective January 1, 1992, and elected to immediately
expense the $300 million transition obligation upon adoption. To date
the company has not prefunded this liability but has taken steps to
establish an acceptable funding vehicle with funding to commence in
1994.
The 1993 and 1992 net periodic postretirement benefit cost by
component is as follows:
1993 1992
Service cost $ 2,591 $ 3,350
Interest cost 20,310 25,150
Amortization of net gain (1,904) -
$20,997 $28,500
The funded status and breakdown of the postretirement benefits are as
follows:
December 31,
1993 1992
Accumulated benefit obligation
Active employees $ 96,681 $136,700
Retirees 155,325 169,800
Accumulated benefit obligation 252,006 306,500
Unrecognized gain 52,746 -
Accrued postretirement benefit cost $304,752 $306,500
The health care trend rates used by the company as of December 31,
1993, were: 1993, 14 percent; 1994 and 1995, 12.50 percent; 1996-1998,
inclusive, 9.50 percent; as of December 31, 1992, they were: 1992, 12
percent; 1993-1995, inclusive, 14 percent; 1996-1998, inclusive, 12
percent. The trend thereafter is zero due to the company's announcement
that these costs will be capped at 1998 levels and all increases
thereafter will be borne by the retirees.
The combination of fewer employees, lower health care claim cost
experience, and changes in actuarial assumptions has had the effect of
reducing the accumulated benefit obligation by approximately $54.7
million.
The 1993 valuation used a 7.50 percent discount rate. The effect of
a one percentage point increase in the assumed health care cost trend
rates on the accumulated benefit obligation would be an increase of
$6.7 million at December 31, 1993. The net periodic postretirement cost
for 1993 would increase by $1.3 million.
Prior to adoption of this standard, postretirement medical benefits
were accounted for on a pay-as-you-go basis. The cost of providing
these benefits net of retiree contributions amounted to $21.3 million
in 1991.
In 1994, FAS No. 112, "Employers' Accounting for Postemployment
Benefits," becomes mandatory. It requires postemployment benefits to
be accounted for on an accrual basis. The company's present accounting
policies provide for the accrual of the major components of these costs
and adoption of this standard will not have a material impact on the
company's financial statements.
Note 12-Commitments and Contingencies
Rental expense for all operating leases amounted to, in millions,
$67.1, $72.8 and $75.8 for 1993, 1992 and 1991, respectively. Minimum
rental commitments under long-term noncancellable operating leases
total $234.2 million which is payable as follows: 1994, $39.9; 1995,
$34.6; 1996, $28.6; 1997, $23.8; 1998, $21.4; and $85.9 million in
later years.
On January 28, 1993, a jury sitting in the United States District
Court for the District of Massachusetts returned a verdict against
Grumman Systems Support Corporation (GSSC), a subsidiary of Grumman
Data Systems Corporation (GDSC), which in turn is a wholly-owned
subsidiary of the company, in an action brought against GSSC by Data
General Corporation (DG)for copyright infringement and misappropriation
of trade secrets. Judgment against GSSC was entered in the United
States District Court for the District of Massachusetts in the amount
of $52.4 million. Immediately after the entry of judgment DGbrought a
post-trial motion seeking to join GDSCas a party defendant on a theory
of vicarious liability. The motion was denied and DGthen commenced a
separate action in the Federal District Court for the District of
Massachusetts, Wooster Div. to enforce the judgment obtained against
GDSC, which action is still pending. GSSC has filed an appeal with the
Federal Court of Appeals for the First Circuit which was heard on
December 8, 1993. While GSSC's ultimate liability in the disposition
of this matter continues to be difficult to estimate, it is
management's belief that the outcome is not likely to have a material
adverse effect on the company's financial position.
Three shareholder derivative actions, which are described as
brought on behalf of the company, have been filed in the New York State
Supreme Court for New York County. The actions name certain of the
company's current and former directors as defendants, and name the
company as "nominal defendant." The actions ask that damages and other
unspecified relief be awarded to the company for the individual
defendants' alleged breach of their fiduciary obligations primarily in
relation to the subject matter of a long-running federal investigation
known as "Operation Upwind." The matters referred to in these actions
have been and continue to be acted upon by the company's Board as part
of its own ongoing investigation. Motions for summary judgment which
seek to dismiss the complaints have been filed on behalf of the
defendant directors and the company in two of the three actions. No
response to the complaint in the third action has been filed.
Currently, there are five waste disposal sites where the company
has been named either as a potentially responsible party or an
owner/operator of the site by a cognizant governmental agency for the
cleanup of hazardous materials previously placed there either directly
or through an agent and where the cost of remediation or settlement
could reasonably exceed $100 thousand in amount. It is unknown at this
time what the company's share of these remediation efforts may be but
it is not expected to have a material adverse effect on the company's
financial position.
Other pending litigation relating to matters that are in the
ordinary course of the company's business activities, including
environmental matters, is not expected to have a material adverse
effect on the company's financial position.
Note 13-Segment Information
The company's operations are classified into four business segments as
follows:
"Aerospace"-Includes the design and production of military
aircraft, space systems and commercial aircraft components and
subassemblies, as well as the modernization or conversion of previously
completed aircraft.
"Electronics systems"-Includes the design, manufacture and
integration of sophisticated electronics for aircraft, computerized
test equipment and other defense related products, such as airborne
surveillance systems.
"Information and other services"-Includes electronic data
processing services for affiliates and other customers as well as real
estate and leasing services. It also includes technical services that
help ready the space shuttle for flight, provide space station program
support, service and maintain flight simulators and trainers and
support Grumman aircraft.
"Special purpose vehicles"-Includes fabrication of long life
vehicles for the U.S. Postal Service, and aluminum truck bodies.
Sales to the U.S. government and its agencies (including sales to
foreign governments through foreign military sales contracts with U.S.
government agencies) for the years 1993, 1992, and 1991 amounted to
$2.8, $3.2 and $3.6 billion, respectively.
A summary of export sales by geographic areas follows:
1993 1992 1991
Far East $205,843 $141,782 $240,106
Middle East 87,899 21,248 23,130
Europe 74,990 70,806 60,862
Western Hemisphere 5,720 4,478 9,949
$374,452 $238,314 $334,047
Report of Independent Public Accountants
ARTHUR ANDERSEN & CO.
NEW YORK, N.Y.
To the Shareholders and Board of Directors of Grumman Corporation:
We have audited the accompanying consolidated balance sheet of Grumman
Corporation (a New York corporation) and subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of income,
common shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1993. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Grumman
Corporation and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Notes 6 and 11 to the consolidated financial
statements, effective January 1, 1992, the company changed its method
of accounting for income taxes and for postretirement benefits other
than pensions.
ARTHUR ANDERSEN & CO.
January 20, 1994
<TABLE>
Information about the company's operations in its different industry segments for the past three
years is as follows:
<CAPTION>
Operating Depreciation
Income Identifiable and Capital
Sales (Loss) Assets Amortization Expenditures
<S> <C> <C> <C> <C> <C>
1993
Aerospace $1,965,066 $ 55,533* $1,150,003 $48,881 $29,337
Electronics systems 635,684 2,659* 298,680 10,309 8,768
Information and other services 657,396) 28,070* 294,224 9,391 4,850
Special purpose vehicles 367,405 26,367 93,121 3,870 1,386
Corporate items and eliminations (376,427) 5,580 188,421 1,384 244
Consolidated $3,249,124 118,209* $2,024,449 $73,835 $44,585
Interest expense 31,702
Income from continuing operations
before federal income taxes $86,507
*Includes an $85 million restructuring charge as follows, in millions: Aerospace, $73;
Electronics systems, $9 and Information and other services, $3.
1992
Aerospace $2,339,799 $134,476 $1,151,506 $54,855 $22,819
Electronics systems 610,850 13,715 317,111 11,245 9,705
Information and other services 593,152 28,189 290,826 10,236 5,058
Special purpose vehicles 343,350 27,646 74,334 4,026 1,251
Corporate items and eliminations (383,201) (2,400) 255,239 1,765 221
Consolidated $3,503,950 201,626 $2,089,016 $82,127 $39,054
Interest expense 55,065
Income from continuing operations
before federal income taxes $146,561
1991
Aerospace $2,895,794 $119,753** $1,323,650 $64,308 $30,932
Electronics systems 505,395 13,855 325,546 11,121 12,705
Information and other services 622,314 31,555 352,001 13,022 8,544
Special purpose vehicles 366,072 21,165 99,053 4,185 2,396
Corporate items and eliminations (415,724) (3,921) 142,166 1,638 270
Consolidated $3,973,851 182,407 $2,242,416 $94,274 $54,847
Interest expense 85,236
Income from continuing operations
before federal income taxes $ 97,171
**Includes a $46.5 million charge arising from the settlement of claims against Tracor Aviation
Inc.
</TABLE>
<TABLE>
Ten-Year Summary
Selected financial data
<CAPTION>
($ in thousands except per share data) 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Operations
Sales $3,249,124 $3,503,950 $3,973,851 $4,003,866
Costs and expenses:
Cost of sales 2,929,987 3,189,035 3,667,395(F2) 3,672,859
Restructuring charge 85,000 - - -
Selling, administrative and other 115,928 113,289 124,049 111,424
Interest 31,702 55,065 85,236 98,791
Provision for federal income taxes 21,000 26,700(F3) 2,000(F3) 40,000
Income from continuing operations 65,507 119,861 95,171 80,792
Net income (loss) 58,807 (123,174) 99,337 85,572
Primary earnings per share:
Continuing operations $1.90(F1) $3.49 $2.75 $2.34
Net income (loss) 1.71(F1) (3.73) 2.88 2.48
Fully diluted earnings per share:
Continuing operations 1.86 3.42 2.72 2.32
Net income (loss) 1.67 (3.49) 2.84 2.46
Cash dividends per common share 1.15 1.00 1.00 1.00
Financial position at December 31:
Working capital $ 904,936 $ 876,007 $1,171,601 $1,110,568
Total assets 2,024,449 2,089,016 2,242,416 2,334,222
Net property, plant and equipment 372,723 399,421 433,877 478,144
Long-term debt and redeemable
preferred stock 243,106 355,244 743,904 784,393
Shareholders' equity per common share 24.55 23.66 28.61 26.45
Other data:
Number of employees 17,900 21,200 23,600 26,100
Common shares outstanding 34,049,475 33,518,907 33,265,391 32,797,776
<FN>
(F1) After a restructuring charge of $55 million or $1.60 per share, net of federal income tax.
(F2) Includes a charge of $46.5 million arising from the settlement of claims against Tracor
Aviation Inc.
(F3) Tax reserves of $23.5 and $30.7 million no longer required were released and included in
net income in 1992 and 1991, respectively.
Ten-Year Summary
Selected financial data
($ in thousands except per share data) 1989 1988 1987 1986
<S> <C> <C> <C> <C>
Operations
Sales $3,523,894 $3,612,821 $3,341,777 $3,473,588
Costs and expenses:
Cost of sales 3,212,368 3,279,197 3,107,369 3,145,580
Restructuring charge - - - -
Selling, administrative and other 115,297 126,123 141,649 167,424
Interest 105,327 84,894 58,871 48,611
Provision for federal income taxes 27,000 41,300 11,100 36,100
Income from continuing operations 63,902 81,307 22,788 75,873
Net income (loss) 67,264 86,465 35,650 78,690
Primary earnings per share:
Continuing operations $1.81 $2.34 $.54 $2.23
Net income (loss) 1.91 2.50 .94 2.32
Fully diluted earnings per share:
Continuing operations 1.81 2.33 .54 2.21
Net income (loss) 1.91 2.48 .94 2.29
Cash dividends per common share 1.00 1.00 1.00 1.00
Financial position at December 31:
Working capital $1,038,141 $ 906,276 $ 734,369 $ 580,213
Total assets 2,506,512 2,487,746 2,188,543 1,904,084
Net property, plant and equipment 539,207 587,408 592,441 521,503
Long-term debt and redeemable
preferred stock 883,902 842,078 685,698 465,844
Shareholders' equity per common share 24.80 23.90 22.27 22.14
Other data:
Number of employees 28,900 32,000 33,700 33,400
Common shares outstanding 32,966,991 32,720,816 32,664,916 32,603,690
Ten-Year Summary
Selected financial data
($ in thousands except per share data) 1985 1984
<S> <C> <C>
Operations
Sales $3,071,617 $2,581,001
Costs and expenses:
Cost of sales 2,766,351 2,242,593
Restructuring charge - -
Selling, administrative and other 152,126 148,620
Interest 29,413 15,732
Provision for federal income taxes 45,100 68,300
Income from continuing operations 78,627 105,756
Net income (loss) 81,535 108,418
Primary earnings per share:
Continuing operations $2.55 $3.53
Net income (loss) 2.65 3.62
Fully diluted earnings per share:
Continuing operations 2.50 3.50
Net income (loss) 2.60 3.59
Cash dividends per common share 1.00 .925
Financial position at December 31:
Working capital $ 398,927 $ 476,559
Total assets 1,533,058 1,399,843
Net property, plant and equipment 411,836 308,892
Long-term debt and redeemable
preferred stock 308,263 281,908
Shareholders' equity per common share 20.70 19.00
Other data:
Number of employees 32,000 30,900
Common shares outstanding 29,146,887 28,616,065
</TABLE>
APPENDIX 1
TO EXHIBIT 13
GRUMMAN CORPORATION 1993 ANNUAL REPORT TO SHAREHOLDERS
PART II - Item No. 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following information is presented in graphic form in the financial
section of the printed version of the annual report incorporated by
reference in this Form 10-K:
Net Income-
Debt/Total Total Continuing
Year Capital Ratio Capital* Sales* Operations*
1988 52% $1,721 $3,613 $81
1989 53 1,804 3,524 64
1990 47 1,682 4,004 81
1991 43 1,706 3,974 95
1992 36 1,232 3,504 120
1993 23 1,086 3,249 66 (F1)
Opeating Margins Shareholders' Property Plant
as a % Equity Per and Working
Year of Sales (F2) Common Share Equipment - Net* Capital*
1988 5.7% $23.90 $587 $ 906
1989 5.6 24.80 539 1,038
1990 5.5 26.45 478 1,111
1991 4.6 28.61 434 1,172
1992 5.8 23.66 399 876
1993 3.6 (F3) 24.55 373 905
* - $ in millions
[FN]
(F1) After $55 million restructuring charge, net of federal income tax
(F2) Continuing operations
(F3) 6.3% before $85 million restructuring charge
