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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 21, 1998
NORTHROP GRUMMAN CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 1-3229 95-1055798
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
1840 Century Park East
LOS ANGELES, CALIFORNIA 90067
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (310) 201-3000
None
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On January 21, 1998, the Corporation announced its results of operations
for the fourth quarter and the year ended December 31, 1997 in the press
release which is included as Exhibit 99.1 to this Current Report on Form 8-K.
ITEM 7. EXHIBITS
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<CAPTION>
Exhibit No. Description
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<C> <S>
99.1 Press Release of Northrop Grumman Corporation dated
January 21, 1998.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTHROP GRUMMAN CORPORATION
Date: January 21, 1998 By: /s/ James C. Johnson
-----------------------------------
James C. Johnson
Corporate Vice President, Secretary
and Assistant General Counsel
3
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Exhibit Index
Exhibit No. Description
- ----------- -----------
99.1 Press Release of Northrop Grumman
Corporation dated January 21, 1998
4
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
---------------------
Operating Profit Exceeds $1 Billion; Net Debt Reduced by $510 Million
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NORTHROP GRUMMAN REPORTS RECORD 1997 SALES, EARNINGS
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LOS ANGELES--Jan. 21, 1998--Northrop Grumman Corporation today reported
record sales and net income for 1997, a year in which operating profit topped $1
billion for the first time in the company's history. During the year, the
company also reduced its net debt by more than $500 million, from $3.26 billion
at the end of 1996 to $2.75 billion at Dec. 31, 1997.
Sales for 1997 were $9.2 billion, up 6 percent from the $8.6 billion
reported in 1996. Net income for the year was $407 million, up 54 percent from
the $264 million registered in 1996. Basic earnings per share for the year were
$6.10 ($5.98 diluted) versus $4.22 ($4.15 diluted) for all of 1996. Operating
profit for 1997 totaled $1.058 billion versus $908 million for the preceding
year.
Net income for 1996 included two nonrecurring items: a pretax charge of $90
million related to plant closures and a pretax gain of $28 million from the sale
of shares the company owned in ETEC Systems Inc., a manufacturer of high
technology equipment for the semiconductor industry.
Northrop Grumman's sales for the fourth quarter of 1997 were $2.5 billion,
up 4 percent from the $2.4 billion reported for the same period a year ago. Net
income for the quarter totaled $117 million, or $1.75 per share ($1.71 diluted),
compared with $24 million, or 38 cents per share (38 cents diluted) in the
fourth quarter of 1996, which included net nonrecurring pretax charges of $80
million.
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The company's operating margin in the fourth quarter of 1997 included a $27
million mark-to-market charge for restricted stock rights versus a $2 million
charge recorded in the fourth quarter of 1996. The higher charge resulted from
increases in the company's stock price and the number of shares accrued.
Northrop Grumman's business backlog at Dec. 31, 1997, was $11.9 billion,
down 6 percent from the $12.7 billion reported a year ago.
Aircraft business segment sales for the fourth quarter and all of 1997 were
higher than those of 1996 due to increased deliveries of shipsets for Boeing
jetliners and the Gulfstream V business jet. These improvements more than
offset lower business volume on the B-2 and F/A-18 military aircraft programs.
Fourth quarter operating profit in the Aircraft business segment benefited
from an increase in pension income, the delivery of two B-2's versus none in the
fourth quarter of 1996, and a $55 million cumulative margin rate adjustment on
the B-2 production contract.
Aircraft business segment operating profit for 1997 benefited from
increased pension income, higher levels of Boeing jetliner sales, and the
cumulative margin rate adjustment on the B-2 production contract. These
improvements were partially offset by lower F/A-18 operating margin on reduced
sales. The prior year's results included a $25 million charge related to the
company's work for Fokker Aircraft N.V., which declared bankruptcy in March
1996, and $22 million in charges related to plant closures. These charges were
partially offset by the favorable settlement in the third quarter of 1996 of a
claim involving productivity improvements on the F/A-18.
Electronics business segment sales were higher for the full year as a
result of the inclusion of the defense electronics activities of the
Westinghouse Electric Corporation, which Northrop Grumman acquired March 1,
1996, and now operates as
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its Electronic Sensors and Systems Division. Results for 1996 reflected only 10
months of ESSD operations.
Electronics business segment operating profit for the fourth quarter of
1997 was reduced by a $20 million charge related to an increase in the cost
estimate to complete the company's work on the Directed Infrared Countermeasures
(DIRCM) program.
Electronics business segment operating profit for all of 1997 was reduced
by a cumulative margin rate adjustment of $53 million on the E-8 Joint STARS in
the third quarter and a total of $33 million on DIRCM. Partially offsetting
these downward adjustments was a $20 million MX missile claim settlement
recorded in the third quarter of 1997. Electronics business segment results for
1996 included a $29 million avionics claim writedown recorded in the third
quarter for work performed by the former Grumman Corporation prior to its
acquisition by Northrop in 1994.
Information Technology and Services business segment operating profit
improved in both the fourth quarter and full year as a result of the return to
profitability of the company's data systems activities and increased margin
rates on higher sales at Logicon Inc., a wholly owned subsidiary.
Interest expense in the fourth quarter was $60 million, down $13 million
from the fourth quarter of 1996. Interest expense for the full year was $257
million versus $270 million for the same period a year ago.
For all of 1997, the company had a weighted average of 66,716,065 shares
outstanding compared with a weighted average of 62,603,724 shares outstanding
during 1996.
In July 1997, Northrop Grumman and Lockheed Martin Corporation announced a
definitive agreement to combine the companies to further enhance efficiencies
and increase global competitiveness. Under the terms of the agreement, Northrop
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Grumman shareholders will receive 1.1923 shares of Lockheed Martin common stock
for each share of Northrop Grumman stock.
The transaction, which is subject to shareholder approval, is estimated to
be completed in the first quarter of 1998.
# # #
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NORTHROP GRUMMAN CORPORATION
OPERATING RESULTS
YEAR ENDED DECEMBER 31,1997
($ in millions, except per share)
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<CAPTION>
FUNDED
CONTRACT ACQUISITIONS ORDER BACKLOG
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FOURTH QUARTER TOTAL YEAR DECEMBER 31,
---------------- ----------------- -------------------
1997 1996 1997 1996 1997 1996
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<S> <C> <C> <C> <C> <C> <C>
Aircraft $ 696 $1,626 $3,355 $ 4,144 $ 5,993 $ 7,045
Electronics 1,593 1,233 4,404 6,278 5,462 5,158
Information Technology
and Services 372 330 957 983 447 511
Intersegment
Eliminations (96) (78) (368) (310) (40) (47)
------ ------ ------ ------- ------- -------
Total $2,565 $3,111 $8,348 $11,095 $11,862 $12,667
====== ====== ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NET SALES OPERATING PROFIT
------------------------------------ -------------------------------------
FOURTH QUARTER TOTAL YEAR FOURTH QUARTER TOTAL YEAR
---------------- ---------------- ---------------- -----------------
1997 1996 1997 1996 1997 1996 1997 1996
------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft $1,162 $1,116 $4,405 $4,112 $ 194 $ 104 $ 654 $ 499
Electronics 1,174 1,135 4,101 3,883 86 123 309 360
Information Technology
and Services 278 242 1,022 910 26 (1) 95 49
Intersegment
Eliminations (104) (80) (375) (298)
------ ------ ------ ------ ------ ------ ------ ------
Total $2,510 $2,413 $9,153 $8,607 306 226 1,058 908
====== ====== ====== ======
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Adjustments to reconcile operating profit
to operating margin:
Other deductions(income)
included above 1 (8) (6) (17)
State and local income taxes 1 (24) (6) (52)
General corporate expenses (35) (33) (127) (123)
Mark to market
restricted stock rights (27) (2) (39) (13)
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Operating margin 246 159 880 703
Other income(deductions) (2) (45) 28 (1)
Interest expense (60) (73) (257) (270)
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Income before income taxes 184 41 651 432
Federal income taxes 67 17 244 168
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Net income $ 117 $ 24 $ 407 $ 264
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Earnings Per Share:
Basic $ 1.75 $ 0.38 $ 6.10 $ 4.22
====== ====== ====== ======
Diluted $ 1.71 $ 0.38 $ 5.98 $ 4.15
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NORTHROP GRUMMAN CORPORATION
ADDITIONAL FINANCIAL INFORMATION
($ in millions)
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<CAPTION>
NET SALES BY PROGRAM: FOURTH QUARTER TOTAL YEAR
---------------- ----------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
B-2 $ 425 $ 454 $1,615 $1,725
SURVEILLANCE AIRCRAFT E-8,E-2 328 293 1,073 1,104
BOEING JETLINERS 222 148 858 569
AIRBORNE RADAR 177 172 668 560
MARINE 164 185 590 496
F/A-18 155 194 551 715
ECM 96 112 384 398
SPACE 101 101 328 315
AIRSPACE MANAGEMENT 103 52 297 223
C-17 61 55 276 249
INFORMATION TECHNOLOGY AND SERVICES 289 236 1,022 905
ALL OTHER 389 411 1,491 1,348
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$2,510 $2,413 $9,153 $8,607
====== ====== ====== ======
</TABLE>
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<TABLE>
<CAPTION>
AIRCRAFT UNITS DELIVERED FOURTH QUARTER TOTAL YEAR
---------------- ----------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
747 14 7 46 28
F/A-18 C/D 9 19 35 68
F/A-18 E/F 0 0 0 3
C-17 2 1 8 6
B-2 2 0 4 4
</TABLE>
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<TABLE>
<CAPTION>
AMORTIZATION OF GOODWILL AND OTHER
PURCHASED INTANGIBLES BY SEGMENT
FOURTH QUARTER TOTAL YEAR
---------------- ----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Aircraft $ 4 $ 4 $ 16 $ 16
Electronics 39 41 158 138
Information Technology
and Services 3 3 11 11
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$ 46 $ 48 $ 185 $ 165
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