FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 29549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 1-3229
NORTHROP GRUMMAN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE No. 95-1055798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Century Park East, Los Angeles, California 90067
(address of principal executive offices)
(310) 553-6262
(Registrant's telephone number, including area code)
Indicate by check mark whether the 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 (or such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock outstanding as of April 30,1999 68,908,626 shares
<PAGE>
Northrop Grumman Corporation and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS
OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31, December 31,
Dollars in millions 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 29 $ 44
Accounts receivable, net of progress payments of
$1,764 in 1999 and $1,388 in 1998 1,489 1,507
Inventoried costs, net of progress payments of
$587 in 1999 and $521 in 1998 1,424 1,373
Deferred income taxes 23 24
Prepaid expenses 65 85
- ---------------------------------------------------------------------------
Total current assets 3,030 3,033
- ---------------------------------------------------------------------------
Property, plant and equipment 3,068 3,058
Accumulated depreciation (1,802) (1,784)
- ---------------------------------------------------------------------------
1,266 1,274
- ---------------------------------------------------------------------------
Goodwill, net of accumulated amortization of
$362 in 1999 and $338 in 1998 3,356 3,381
Other purchased intangibles, net of accumulated
amortization of $318 in 1999 and $295 in 1998 772 795
Prepaid pension cost, intangible pension asset and
benefit trust fund 889 787
Deferred income taxes 154 166
Assets available for sale 35 37
Investments in and advances to affiliates and
sundry assets 59 63
- ---------------------------------------------------------------------------
5,265 5,229
- ---------------------------------------------------------------------------
$9,561 $9,536
===========================================================================
</TABLE>
I-1
<PAGE>
Northrop Grumman Corporation and Subsidiaries
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
Dollars in millions 1999 1998
- ------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Notes payable to banks $ 153 $ 69
Current portion of long-term debt 200 200
Trade accounts payable 422 416
Accrued employees' compensation 321 337
Advances on contracts 335 354
Income taxes payable including deferred income taxes
of $557 in 1999 and $527 in 1998 580 527
Other current liabilities 494 464
- ------------------------------------------------------------------------------------------------
Total current liabilities 2,505 2,367
- ------------------------------------------------------------------------------------------------
Long-term debt 2,375 2,562
Accrued retiree benefits 1,728 1,704
Other long-term liabilities 42 53
Paid-in capital
Preferred stock, 10,000,000 shares authorized; none issued
Common stock, 200,000,000 shares authorized; issued and outstanding:
1999 - 68,872,649; 1998 - 68,836,810 990 989
Retained earnings 1,952 1,892
Accumulated other comprehensive loss (31) (31)
- ------------------------------------------------------------------------------------------------
2,911 2,850
- ------------------------------------------------------------------------------------------------
$9,561 $9,536
================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
I-2
<PAGE>
Northrop Grumman Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended March 31,
Dollars in millions, except per share 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Net sales $2,093 $2,014
Cost of sales
Operating costs 1,609 1,536
Administrative and general expenses 268 271
- ---------------------------------------------------------------------------
Operating margin 216 207
Merger costs (180)
Interest expense (55) (55)
Other, net 3 9
- ----------------------------------------------------------------------------
Income(loss) before income taxes and cumulative
effect of accounting change 164 (19)
Federal and foreign income taxes(benefit) 60 (7)
Income(loss) before cumulative effect of
accounting change 104 (12)
Cumulative effect of change in accounting for start-up costs,
net of income tax benefit of $11 (16)
- ---------------------------------------------------------------------------
Net income(loss) $ 88 $ (12)
===========================================================================
Weighted average shares outstanding, in millions 68.9 67.8
===========================================================================
Basic earnings(loss) per share:
Before cumulative effect of accounting change $ 1.51 $ (.18)
Accounting change (.24)
- ---------------------------------------------------------------------------
Basic earnings(loss) per share $ 1.27 $ (.18)
===========================================================================
Diluted earnings(loss) per share:
Before cumulative effect of accounting change $ 1.50 $ (.18)
Accounting change (.24)
- ----------------------------------------------------------------------------
Diluted earnings(loss) per share $ 1.26 $ (.18)
===========================================================================
Dividends per share $ .40 $ .40
===========================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
I-3
<PAGE>
Northrop Grumman Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Three months ended March 31,
Dollars in millions 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Paid-in Capital
At beginning of year $ 989 $ 838
Employee stock awards and options exercised 1 105
===============================================================================
990 943
===============================================================================
Retained Earnings
At beginning of year 1,892 1,807
Net income(loss) 88 (12)
Cash dividends (28) (27)
- -------------------------------------------------------------------------------
1,952 1,768
===============================================================================
Accumulated Other Comprehensive Loss (31) (22)
- -------------------------------------------------------------------------------
Total shareholders' equity $2,911 $2,689
===============================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
I-4
<PAGE>
Northrop Grumman Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31,
Dollars in millions 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Sources of Cash
Cash received from customers
Progress payments $ 786 $ 404
Other collections 1,367 1,587
Income tax refunds received 22 5
Interest received 1
Other cash receipts 3
- ------------------------------------------------------------------------------
Cash provided by operating activities 2,178 1,997
- ------------------------------------------------------------------------------
Uses of Cash
Cash paid to suppliers and employees 1,967 1,949
Interest paid 59 58
Income taxes paid 8 5
Other cash disbursements 1 22
- ------------------------------------------------------------------------------
Cash used in operating activities 2,035 2,034
- ------------------------------------------------------------------------------
Net cash provided by(used in) operating activities 143 (37)
- ------------------------------------------------------------------------------
Investing Activities
Additions to property, plant and equipment (42) (40)
Proceeds from sale of property, plant and equipment 9 3
Other investing activities 4 1
- ------------------------------------------------------------------------------
Net cash used in investing activities (29) (36)
- ------------------------------------------------------------------------------
Financing Activities
Borrowings under lines of credit 95
Repayment of borrowings under lines of credit (53)
Principal payments of long-term debt (50) (50)
Proceeds from issuance of stock 2 16
Dividends paid (28) (27)
- ------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (129) 34
- ------------------------------------------------------------------------------
Decrease in cash and cash equivalents (15) (39)
Cash and cash equivalents balance at beginning of period 44 63
- ------------------------------------------------------------------------------
Cash and cash equivalents balance at end of period $ 29 $ 24
==============================================================================
</TABLE>
I-5
<PAGE>
Northrop Grumman Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three months ended March 31,
Dollars in millions 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of Net Income(Loss) to Net Cash
Provided by (Used in) Operating Activities
Net income(loss) $ 88 $ (12)
Adjustments to reconcile net income(loss) to
net cash provided(used)
Depreciation 43 46
Amortization of intangible assets 47 46
Common stock issued to employees 88
Loss on disposals of property, plant and equipment 2
Retiree benefits income (57) (47)
Decrease(increase) in
Accounts receivable (50) (196)
Inventoried costs (122) (163)
Prepaid expenses 20 (9)
Increase(decrease) in
Progress payments 136 260
Accounts payable and accruals 10 (23)
Provisions for contract losses 4 12
Deferred income taxes 43 1
Income taxes payable 23 2
Retiree benefits (45) (45)
Other transactions 3 1
- ----------------------------------------------------------------------------
Net cash provided by(used in) operating activities $ 143 $ (37)
============================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
I-6
<PAGE>
Northrop Grumman Corporation and Subsidiaries
SELECTED INDUSTRY SEGMENT INFORMATION
<TABLE>
<CAPTION>
Three months ended March 31,
Dollars in millions 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Net Sales
Integrated Systems & Aerostructures $ 1,173 $ 1,205
Electronic Sensors & Systems 615 619
Information Technology (Logicon) 353 235
Intersegment sales (48) (45)
- ------------------------------------------------------------------------------
$2,093 $2,014
==============================================================================
Operating Margin
Integrated Systems & Aerostructures $ 82 $ 85
Electronic Sensors & Systems 45 58
Information Technology (Logicon) 19 14
- ------------------------------------------------------------------------------
Total 146 157
Other items included in operating margin:
Corporate expenses (8) (8)
Deferred state tax provision (5) (7)
Pension income 83 65
- ------------------------------------------------------------------------------
Operating margin $ 216 $ 207
==============================================================================
Contract Acquisitions
Integrated Systems & Aerostructures $ 1,429 $ 964
Electronic Sensors & Systems 575 486
Information Technology (Logicon) 409 250
Intersegment acquisitions (29) (21)
- ------------------------------------------------------------------------------
$ 2,384 $ 1,679
==============================================================================
Funded Order Backlog
Integrated Systems & Aerostructures $ 7,189 $ 7,889
Electronic Sensors & Systems 3,079 3,395
Information Technology(Logicon) 622 462
Intersegment backlog (150) (219)
- ------------------------------------------------------------------------------
$10,740 $11,527
==============================================================================
</TABLE>
I-7
<PAGE>
Northrop Grumman Corporation and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared by management in accordance with the instructions
to Form 10-Q of the Securities and Exchange Commission. They do not
include all information and notes necessary for a complete
presentation of financial position, results of operations, changes in
shareholders' equity, and cash flows in conformity with generally
accepted accounting principles. They do, however, in the opinion of
management, include all adjustments necessary for a fair statement of
the results for the periods presented. The financial statements
should be read in conjunction with the Notes and Independent Auditors'
Report contained in the company's 1998 annual report on Form 10-K
report.
New Accounting Standards
In January 1999, the company adopted Statement of Position (SOP) 98-5 -
Reporting on the Costs of Start-up Activities, which requires that
certain costs, that previously had been deferred, be expensed and
reported as a cumulative effect of a change in accounting principle,
and all such future costs be expensed as incurred.
In the first quarter of 1999, the company recorded a $16 million
after-tax charge, or $.24 per share, as the cumulative effect of a
change in accounting principle.
Earnings per Share
Basic earnings per share are calculated using the weighted average
number of shares of common stock outstanding during each period, after
giving recognition to stock splits and stock dividends. Diluted
earnings per share reflect the dilutive effect of stock options and
other stock awards granted to employees under stock-based compensation
plans.
Basic and diluted earnings per share are calculated as follows:
<TABLE>
<CAPTION>
Net Earnings(Loss)
Three months ended March 31, Income(Loss) Shares per Share
----------- ---------- -------------
<S> <C> <C> <C>
(millions) (millions)
1999
Basic earnings per share
before accounting change $ 104 68.9 $ 1.51
===== =====
Dilutive effect of stock options
and awards .5
====
Diluted earnings per share before
accounting change $ 104 69.3 $ 1.50
===== ===== =====
1998
Basic earnings(loss) per share before
accounting change $ (12) 67.8 $ (.18)
===== =====
Dilutive effect of stock options
and awards 1.5
====
Diluted earnings(loss) per share before
accounting change $ (12) 69.3 $ (.18)
===== ===== =====
</TABLE>
I-8
<PAGE>
Northrop Grumman Corporation and Subsidiaries
Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF THE COMPANY'S FINANCIAL
CONDITION AND THE RESULTS OF ITS OPERATIONS
Sales were 4 percent higher in the first quarter of 1999 versus the
first quarter of 1998, reflecting an increase in Information Technology
(Logicon) segment sales, partially offset by a small decrease in
Integrated Systems and Aerostructures (ISA) segment sales. Electronic
Sensors and Systems (ESS) segment sales were essentially unchanged from
the same period a year ago.
Logicon sales increased 50 percent in the first quarter of 1999
over the same period in 1998. The Government Information Technology
business area benefited from a significant order on the I-CASE program
for the U.S. Government, on which Logicon is a value-added reseller of
hardware and software. Sales in the Technology Services business area
increased as a result of work on the J-BOSC base operations support
contract for NASA and the U.S. Air Force, which began in the fourth
quarter of 1998. For 1999, Logicon sales are expected to increase by
approximately 15 percent over 1998 sales.
ISA sales decreased by 3 percent in the first quarter of 1999
compared with the first quarter of 1998, primarily due to lower Air
Combat Systems (ACS) sales, partially offset by increased
Aerostructures sales. The ACS decrease resulted from lower F/A-18 and
B-2 sales. The F/A-18E/F program is transitioning from a low-rate
initial production (LRIP) contract, accounted for under the cost-to-
cost type of percentage-of-completion method, to a production contract,
accounted for under the units-of-delivery method. As a consequence,
F/A-18E/F sales will increase in the remainder of 1999 as the company
begins making deliveries under the production contract in the second
quarter of this year. The Aerostructures sales increase was due to
higher C-17 and Boeing jetliner sales. The company continues in its
discussions with The Boeing Company regarding the company's claims for
recovery of incurred and estimated future out-of-scope work and related
delay and disruption costs associated with the AFA program. The
program is expected to be substantially completed in the second quarter
of this year. To date, $44 million of such costs, expected to be
recovered, have been incurred and are recorded as a claim receivable.
I-9
<PAGE>
Northrop Grumman Corporation and Subsidiaries
<TABLE>
<CAPTION>
Sales by business area and units delivered in the first quarter were:
$ in millions 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Integrated Systems & Aerostructures
ACS $ 451 $ 540
Aerostructures 391 342
AEW/EW 192 156
AGS/BM 161 185
Intrasegment Eliminations (22) (18)
- --------------------------------------------------------------------------
1,173 1,205
- --------------------------------------------------------------------------
Electronic Sensors & Systems
Aerospace Electronic Systems 254 287
C3I&N 214 177
Defensive Electronic Systems 111 119
Other 36 36
- --------------------------------------------------------------------------
615 619
- --------------------------------------------------------------------------
Information Technology (Logicon)
Government Information Technology 241 173
Technology Services 83 34
Commercial Information Technology 29 28
- --------------------------------------------------------------------------
353 235
- --------------------------------------------------------------------------
Intersegment eliminations (48) (45)
- --------------------------------------------------------------------------
Total sales $2,093 $2,014
==========================================================================
Units 1999 1998
- ---------------------------------------------------------------------------
B-2 1 1
F/A-18 C/D 9 9
747 12 13
C-17 2 2
- --------------------------------------------------------------------------
</TABLE>
I-10
<PAGE>
Northrop Grumman Corporation and Subsidiaries
ISA operating margin for the quarter was $82 million, down
slightly from the first quarter of 1998. The 1999 results reflect
lower operating margins on Boeing jetliners, which were partially
offset by improved margins on the F/A-18 and B-2 programs.
ESS operating margin in the first quarter of 1999 was $45 million
as compared with $58 million in last year's first quarter. The decrease
is due in part to additional costs incurred in transitioning a
defensive electronic system development program to production.
Logicon operating margin for the quarter increased $5 million as
compared with the first quarter of 1998, primarily as a result of
increased sales.
Company operating margin includes pension income of $83 million in
the first quarter of 1999, an $18 million increase from the first
quarter of 1998.
Since the beginning of the Joint STARS program, the company (and
prior to 1994, the Grumman Corporation) has incurred over $100 million
of costs in excess of revenues in the performance of the development
and production phases of the program. In 1998, the company submitted
Requests for Equitable Adjustment (REAs) to the U. S. Air Force seeking
adjustment to production contracts for cost increases incurred during
the refurbishment and conversion of used Boeing 707 aircraft to Joint
STARS platforms. The company and the U. S. Air Force executed an
Alternate Dispute Resolution Agreement(ADR) to attempt to resolve these
REAs and, in April 1999, the company filed these REAs as certified
claims. If the ADR process is unsuccessful, the company will pursue
its claims pursuant to the Contracts Disputes Act. The company cannot
predict the outcome of this claim process or the effect of the ultimate
resolution on the company's results of operations, financial position,
and cash flows.
Last year's first quarter results included a $180 million pretax
charge ($1.70 per share after tax) for costs associated with the
company's terminated merger with Lockheed Martin Corporation
Interest expense for this year's first quarter was $55 million,
the same as the amount reported for the first quarter of 1998,
reflecting a like level of average borrowings at a similar average
interest rate in both periods.
The company's effective tax rate was 36.6 percent for the first
quarter of 1999, essentially unchanged from the same period in 1998.
I-11
<PAGE>
Northrop Grumman Corporation and Subsidiaries
Effective January 1, 1999, the company adopted the new accounting
standard, SOP 98-5 - Reporting on the Costs of Start-Up Activities,
which requires that certain costs, that previously had been deferred,
be expensed and reported as a cumulative effect of a change in
accounting principle. The company reported a $16 million after-tax
charge, or $.24 per share, to write off the previously deferred start-
up costs. All such future costs will be expensed as incurred.
Cash provided by operating activities increased to $143 million
for the quarter, compared to cash used by operating activities of $37
million in the same period last year. The increase reflects increased
sales and improved cash collections in 1999. Last year's use of cash
by operating activities was driven by merger related expenses as well
as an increase in working capital for Boeing jetliners in support of
increased production levels. Cash generated from operating activities
for the remainder of 1999 is expected to be sufficient to finance
capital expenditures, and dividends and make required debt service
payments. The company's liquidity and financial flexibility will
continue to be provided by cash flow generated by operating activities,
supplemented by the unused borrowing capacity available under the
company's credit agreement and other short-term credit facilities.
Year 2000 Issues
The company continues to implement its program to address the Year 2000
issue. The program, which began in 1996, consists of the following
four phases: assessing, planning, remediating, and testing-validating.
The project encompasses the entire company and all aspects of Year 2000
compliance including software applications, mainframe environment,
desktop equipment, networks, telecommunications, department supported
systems, facilities systems, and embedded systems in product
deliverables. The company also is working with its customers and
suppliers to assess their Year 2000 readiness, reviewing contracts for
any potential Year 2000 liabilities, and developing contingency plans
and year end support plans where appropriate.
All four phases were substantially completed by the end of 1998.
Activities scheduled to be completed in 1999 are largely comprised of
low risk equipment upgrades, and various vendor supplied upgrades that
became available in late 1998 or early 1999.
The company has a formal planning, measurement and reporting
process for the Year 2000 project. This process includes regular
progress briefings to senior management and to the audit committee of
the Board of Directors.
The company separately identifies the costs of Year 2000 remedial
efforts only for internal information services personnel, principally
as a planning and control tool. The total costs of these efforts
incurred during the years 1996 through 1999 are expected to be
approximately $42 million, of which approximately $36 million was
expended through March 31, 1999. Year 2000 costs are allowable costs
under applicable government contracting regulations. Accordingly, the
portion of Year 2000 costs allocable to contracts is being so charged
as part of
I-12
<PAGE>
Northrop Grumman Corporation and Subsidiaries
normal overhead pursuant to approved methods established for this
purpose. Based on information available to date, management does not
anticipate that future expenditures for required modifications and
conversions will have a material adverse effect on the company's
financial position, results of operations, or cash flows.
Northrop Grumman cannot predict the eventual outcome associated
with the innumerable possible situations that could result from
whatever computer failures might occur, internally or among its
customers and suppliers, and the impact that such failures might have
on Northrop Grumman's ability to perform its day to day operations.
If required modifications and conversions are not made as planned,
serious adverse impact to the operations of the company could result.
In addition, Year 2000 problems could adversely affect the ability of
customers and critical suppliers to meet their contractual commitments
to the company. Some of these developments, should they occur, could
have a material adverse impact on the financial position, results of
operations, or cash flows of Northrop Grumman.
As stated above, most of the assessing, planning, remediating and
testing-validating phases were completed in 1998, with a minor number
of activities remaining to be addressed in 1999. Contingency planning
will be required to address potential computer failures that either are
1) of greatest risk for potential failure or 2) might impact mission
critical systems. Assessment of Year 2000 progress is a critical input
to the development of contingency plans. Year 2000 contingency plans
have been developed for each Northrop Grumman sector and are in the
process of being reviewed and approved. Year end support plans and
site staffing requirements are under development.
I-13
<PAGE>
Northrop Grumman Corporation and Subsidiaries
Forward-Looking Information
This quarterly report on Form 10-Q, and, not by way of limitation,
certain statements and assumptions in Management's Discussion and
Analysis, contain or are based on "forward-looking" statements and
information (as defined in the Private Securities Litigation and Reform
Act of 1995) that involve risk and uncertainties, including statements
and assumptions that reflect the company's views with respect to future
revenues, program performance and cash flows, the outcome of
contingencies including litigation and environmental remediation, and
anticipated costs of capital investments and planned dispositions. The
company's operations are necessarily subject to various risks and
uncertainties; actual outcomes are dependent upon many factors,
including, without limitation, the company's successful performance of
internal plans; government customers' budgetary restraints; customer
changes in short-range and long-range plans; domestic and international
competition in both the defense and commercial areas; product
performance; the ability of the company, its customers and suppliers to
become Year 2000 compliant; continued development and acceptance of new
products; performance issues with key suppliers and subcontractors;
government import and export policies; termination of government
contracts; the outcome of political and legal processes; legal,
financial, and governmental risks related to international transactions
and global needs for military and commercial aircraft and electronic
systems and support as well as other economic, political and
technological risks and uncertainties, including risks detailed in the
company's filings with the Securities and Exchange Commission,
including, not by way of limitation, any Form 10-K, Form 10-Q and proxy
statements, among others.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
The company has fixed-rate long-term debt obligations, most of which
are not callable until maturity. The company also has financial
instruments that are subject to interest rate risk, principally
variable-rate short-term debt outstanding under the Credit Agreement.
The company may enter into interest rate swap agreements to offset the
variable-rate characteristics of these loans. At March 31, 1999, no
interest rate swap agreements were in effect.
Only a small portion of the company's transactions are contracted
in foreign currencies. The company does not consider the market risk
exposure relating to foreign currency exchange to be material.
I-14
<PAGE>
Northrop Grumman Corporation and Subsidiaries
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
General
The company, as a government contractor, is from time to time
subject to U.S. Government investigations relating to its operations.
Government contractors that are found to have violated the False Claims
Act, or are indicted or convicted for violations of other Federal laws,
or are considered not to be responsible contractors may be suspended or
debarred from government contracting for some period of time. Such
convictions could also result in fines. Given the company's dependence
on government contracting, suspension or debarment could have a
material adverse effect on the company. The company is involved in
certain other legal proceedings arising in
the ordinary course of business, none of which the company's management
believes will have a material adverse effect on the company's financial
condition.
II-1
<PAGE>
Northrop Grumman Corporation and Subsidiaries
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended March 31, 1999.
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 thereunto duly authorized.
Northrop Grumman Corporation (Registrant)
Date: May 13, 1999 by/s/R. B. Waugh, Jr.
R. B. Waugh, Jr.
Corporate Vice President and
Chief Financial Officer
Date: May 13, 1999 by/s/J. H. Mullan
John H. Mullan
Corporate Vice President and
Secretary
II-2
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 29
<SECURITIES> 0
<RECEIVABLES> 1,632
<ALLOWANCES> 143
<INVENTORY> 1,424
<CURRENT-ASSETS> 3,030
<PP&E> 3,068
<DEPRECIATION> 1,802
<TOTAL-ASSETS> 9,561
<CURRENT-LIABILITIES> 2,505
<BONDS> 2,575
0
0
<COMMON> 990
<OTHER-SE> 1,921
<TOTAL-LIABILITY-AND-EQUITY> 9,561
<SALES> 2,093
<TOTAL-REVENUES> 2,093
<CGS> 1,877
<TOTAL-COSTS> 1,877
<OTHER-EXPENSES> (3)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 164
<INCOME-TAX> 60
<INCOME-CONTINUING> 104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (16)
<NET-INCOME> 88
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.26
</TABLE>
