SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] Annual report pursuant to Section 15 (d) of the Securities
Exchange Act of 1934 (No fee required)
For the fiscal years ended December 31, 1998 and 1997
OR
[ ] Transition report pursuant to SECTION 15 (d) of the Securities Exchange Act
of 1934 (No fee required)
For the transition period from __________ to ____________
Commission file number 33-59853
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
NORTHROP GRUMMAN CORPORATION
1840 Century Park East
Los Angeles, California 90067
-1-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
/s/ Alan M. Roth
-------------------------------------
Dated: June 29, 1999 By Alan M. Roth
Vice President Taxes and Benefits Compliance
-2-
<PAGE>
NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION SALARIED
SAVINGS AND INVESTMENT PLAN
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 4
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Plan Benefits as of
December 31, 1998 and 1997 5
Statement of Changes in Net Assets Available for Plan Benefits
with Fund Information for the Year Ended December 31, 1998 6
Notes to Financial Statements 7-11
SUPPLEMENTAL SCHEDULES:
Item 27a - Assets Held for Investment Purposes at December 31, 1998 12
Item 27d - Schedule of Reportable Transactions for the Year Ended
December 31, 1998 13
-3-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee of the
Northrop Grumman Commercial Aircraft Division
Salaried Savings and Investment Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Northrop Grumman Commercial Aircraft Division Salaried Savings
and Investment Plan (the "Plan") as of December 31, 1998 and 1997, and the
related statements of changes in net assets available for plan benefits for the
year ended December 31, 1998. These financial statements are the responsibility
of the Plan'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, such financial statements present fairly, in all material
respects, the net assets available for plan benefits of the Plan at December 31,
1998 and 1997, and the changes in net assets available for plan benefits for the
year ended December 31, 1998 in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes at December 31, 1998 and reportable transactions for the
year then ended are presented for the purpose of additional analysis and are not
a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental information by fund in the statement of changes in net
assets available for plan benefits is presented for the purpose of additional
analysis rather than to present the changes in net assets available for plan
benefits of the individual funds. The supplemental schedules and supplemental
information by fund are the responsibility of the Plan's management. Such
supplemental schedules and supplemental information by fund have been subjected
to the auditing procedures applied in our audits of the basic financial
statements and, in our opinion, are fairly stated in all material respects when
considered in relation to the basic financial statements taken as a whole.
June 24, 1999
-4-
<PAGE>
NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
- -------------------------------------------------------------------------------
December 31,
1998 1997
------------------
(In Thousands)
ASSETS:
Investments, at fair value:
Northrop Grumman Master Trust -
Stable Value Fund - (Note Card D) $72,188 $56,187
Frank Russell Trust Company Funds:
Equity I Fund 84,991 68,721
Global Balanced Fund 29,764 25,530
Global Equity Fund 21,069 19,346
T. Rowe Price Company -
Growth & Income Fund 20,176 19,386
Northrop Grumman Corporation common stock 1,377 1,264
Temporary Investment Fund 75 34
Loans receivable from plan participants (Note A) 6,798 6,006
-------- --------
Total investments 236,438 196,474
Receivables:
Employer's contributions 111 --
Participants' contributions 287 --
Net securities sales pending settlement 2,439 274
Accrued income receivable 1 1
-------- --------
Total receivables 2,838 275
-------- --------
Total assets 239,276 196,749
-------- --------
LIABILITIES:
Net securities purchases pending settlement 2,428 296
Accrued expenses payable 318 279
-------- --------
Total liabilities 2,746 575
-------- --------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $236,530 $196,174
======== ========
See notes to financial statements.
-5-
<PAGE>
NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-------------------------------------------------------------------------------------------
Stable Global Growth & Northrop
Value Equity I Balanced Equity Income Grumman Participant
Fund Fund Fund Fund Fund Fund Loans Total
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Net appreciation
(depreciation) in fair
value of investments $ -- $ 16,386 $ 4,236 $ 3,371 $ (155) $ (623) $ -- $ 23,215
Interest and other income 4,463 217 82 69 2,004 11 -- 6,846
Dividends -- -- -- -- -- 1 -- 1
--------- --------- --------- --------- -------- --------- --------- ---------
4,463 16,603 4,318 3,440 1,849 (611) -- 30,062
CONTRIBUTIONS: --
Employer 1,447 2,310 847 817 947 266 6,634
Employees 3,637 6,020 2,176 2,074 2,394 598 -- 16,899
--------- --------- --------- --------- -------- --------- --------- ---------
5,084 8,330 3,023 2,891 3,341 864 -- 23,533
--------- --------- --------- --------- -------- --------- --------- ---------
Total additions 9,547 24,933 7,341 6,331 5,190 253 -- 53,595
--------- --------- --------- --------- -------- --------- --------- ---------
DEDUCTIONS: -- -- -- -- -- -- --
Benefits paid to participants (4,908) (2,815) (1,433) (877) (1,163) (157) (80) (11,433)
Administrative expenses (340) (788) (322) (263) (93) -- -- (1,806)
--------- --------- --------- --------- -------- --------- --------- ---------
Total deductions (5,248) (3,603) (1,755) (1,140) (1,256) (157) (80) (13,239)
--------- --------- --------- --------- -------- --------- --------- ---------
TRANSFER BETWEEN
FUNDS 12,528 (5,238) (1,717) (3,418) (3,078) 51 872 --
--------- --------- --------- --------- -------- --------- --------- ---------
NET INCREASE 16,827 16,092 3,869 1,773 856 147 792 40,356
--------- --------- --------- --------- -------- --------- --------- ---------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS:
Beginning of period 56,418 68,451 25,437 19,307 19,289 1,266 6,006 196,174
--------- --------- --------- --------- -------- --------- --------- ---------
End of period $ 73,245 $ 84,543 $ 29,306 $ 21,080 $ 20,145 $ 1,413 $ 6,798 $ 236,530
========= ========= ========= ========= ======== ========= ========= =========
</TABLE>
-6-
<PAGE>
NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION SALARIED
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
A. DESCRIPTION OF THE PLAN
The following description of the Northrop Grumman Commercial Aircraft
Division Salaried Savings and Investment Plan (the "Plan") provides only
general information. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions.
General- The Plan is a defined contribution profit sharing plan with a
401(k) feature.
Effective August 31, 1992, the sale of certain assets and liabilities of the
Aircraft and Missiles Division of the LTV Aerospace and Defense Company was
completed. The LTV Corporation sold the Aircraft Division to the Carlyle
Group and Northrop Corporation, and the Vought Aircraft Company ("Vought")
was established. The account balances of former Aircraft Division
participants in the LTV Capital Accumulation Plan (the "Predecessor Plan")
were transferred to the Vought Aircraft Salaried Capital Appreciation Plan
effective August 31, 1992. Effective August 31, 1994, Northop Grumman
Corporation (the "Company") purchased all of the Carlyle Group's interest in
Vought, and Vought became a wholly owned subsidiary of Northrop Grumman
Corporation. Effective July 1, 1995, the Plan was amended to change the name
to the Vought Aircraft Salaried Savings and Investment Plan. Effective
October 1, 1997, the Plan was amended to change the name to Northrop Grumman
Commercial Aircraft Division Salaried Savings and Investment Plans.
Contributions - The Plan offers participants a choice between the type of
contributions they can make, and such contributions may be between 2% and
18% of eligible compensation in increments of 1%. A participant can elect
tax-deferred (before-tax) contributions, after-tax contributions, or a
combination of both. An active participant may change the percentage of his
or her contributions. Contributions are subject to certain limitations.
The Company's matching contribution is as follows:
Employee Contribution Company Match
First 2% of eligible compensation 100%
Next 2% of eligible compensation 50%
Next 4% of eligible compensation 25%
Contributions over 8% 0%
-7-
<PAGE>
Participant Accounts - A separate account is maintained for each
participant. Each participant's account is credited with the participant's
contributions, the Company's matching contributions, and the proportionate
share of the Plan's earnings and administrative expenses. Allocations are
based on the participants' account balances, as defined in the Plan
agreement. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested account.
Vesting - Plan participants are fully vested (100%) at all times in the
balance of their accounts (both employee and employer contributions).
Investment Options - Upon enrollment in the Plan, each participant may
direct that his or her employee contributions and Company matching
contributions, in 1% increments, be invested in any of the following
investment funds:
Northrop Grumman Master Trust - Stable Value Fund
Frank Russell Trust Company Fund - Equity I Fund
Frank Russell Trust Company Funds - Global Balanced Fund
Frank Russell Trust Company Funds - Global Equity Fund
T. Rowe Price Company - Growth & Income Fund
Northrop Grumman Corporation common stock
Participants may change their investment options on a daily basis.
Participant Notes Receivable - Participants may borrow from their fund
accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000
or 50% of their account balance. A participant may not have more than one
outstanding loan at any given time. Loans will be prorated across all
investment funds and are secured by the balance in the participant's
account. The interest rate is fixed on the first business day of each month
at the prime rate of the Plan's trustee plus 1%. Repayments are made from
weekly payroll deductions (for active employees) or other method approved
by the administrative committee. The maximum loan period is five years, or
ten years for a loan used to acquire a dwelling that is to be the principal
residence of the participant. Loans may be prepaid in full; partial
prepayments are not permitted.
Payment of Benefits - Upon termination of service, a participant may elect
to receive a lump-sum amount equal to the value of his or her account
balance. A participant may also delay his or her lump-sum payment until the
participant's normal retirement date if the account balance exceeds $5,000.
B. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the Plan are prepared
under the accrual method of accounting.
-8-
<PAGE>
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition - In the accompanying statements
of net assets available for plan benefits, the Plan's investments are stated
at fair value, except for the Plan's investment in the Stable Value Fund,
which is valued at contract value (see Note D). Investments in the Equity I
Fund, Global Balanced Fund, Global Equity Fund, and Growth & Income Fund
(the "Funds") are valued at quoted market prices which represent the net
asset values of shares held by the Plan at year-end. Northrop Grumman common
stock is valued at its quoted market price. Loans receivable from plan
participants are valued at cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on
the ex-dividend date.
Payment of Benefits - Benefits are recorded when paid. As of December 31,
1998 and 1997, benefits payable to participants are approximately $14,000
and $3,000, respectively.
C. INVESTMENTS
Except for its insurance and investment contracts (see Note D), the Plan's
investments as of December 31, 1998 and 1997, are stated at fair value as
determined by quoted market prices.
On January 1, 1998, Northrop Grumman Corporation pooled all of the insurance
and investment contracts for the Northrop Grumman Corporation Savings and
Investment Plan Master Trust, the Northrop Grumman Master Trust, and the
contracts held by the Northrop Grumman Electronic Sensorws and Systems
Division Savings and Investment Program into the Northrop Grumman Stable
Value Master Trust (the "Master Trust").
Investments held at contract value in the Master Trust as of December 31,
1998 and in the Northop Grumman Master Trust as of December 31, 1997, are as
follows (in thousands):
1998 1997
Guaranteed and Bank Investment Contracts $1,298,790 $ 61,254
Northrop Retirement Savings Temporary Investment Fund 60,090 5,339
Accrued Income 113 15
---------- ---------
Total $1,358,993 $ 66,608
-9-
<PAGE>
The Plan's investment in the Master Trust as of December 31, 1998, and in
the Northrop Grumman Master Trust as of December 31, 1997, is as follows (in
thousands):
1998 1997
Contract Value of Guaranteed and Bank Investment
Contracts $ 72,188 $ 56,187
Net securities sales pending settlement 1,010 274
Total $ 73,198 $ 56,461
Percentage of ownership 5.39% 84.77%
Investment income in the Stable Value Master Trust was $91,158,197 for the
year ended December 31, 1998. Investment income in the Northrop Grumman
Master Trust for the year ended December 31, 1997 was $4,537.000.
D. INVESTMENT CONTRACTS WITH INSURANCE COMPANIES
All investment and insurance contracts held by the Master Trust are
considered to be fully benefit-responsive and, therefore, are reported at
contract value. Contract value represents contributions made under the
contract, plus interest at the contract rate, less withdrawals and
administrative expenses.
The following information is disclosed for the investment and insurance
contracts within the Master Trust as of December 31, 1998, and the Northrop
Grumman Master Trust as of December 31, 1997 (in millions):
1998 1997
Contract value of assets $1,299 $ 61.3
Fair value of assets $1,343 $ 62.2
Crediting interest rate of assets
at December 31 7.08 % 6.62 %
Average yield on assets for the 12 months
ending December 31 7.09 % 7.39 %
Duration 2.58 years 2.05 years
E. INCOME TAX STATUS
The Internal Revenue Service ruled on December 9, 1996 that the Plan
qualifies under Section 401(a) of the Internal Revenue Code ("IRC"), and
therefore, the related trust is not subject to tax under the present income
tax law. Once qualified, the Plan is required to operate in conformity with
the IRC to maintain its qualification. Northrop Grumman Corporation is not
aware of any course of action or series of events that have occurred that
might adversely affect the Plan's qualified status.
F. TRANSACTIONS WITH PARTIES-IN-INTEREST
In management's opinion, fees paid for services rendered by
parties-in-interest during 1998 and 1997 were based upon customary and
reasonable rates for such services.
******
-11-
<PAGE>
NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
ITEM 27a - ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Description of Investment,
Including Maturity Date,
Identity of Issue, Borrower, Rate of Interest, Collateral, Current
Lessor or Similar Party Par or Maturity Value Cost Value
<S> <C> <C> <C>
* Northrop Grumman Master Trust 57,132,164 units of
participation in Stable
Value Fund $ 66,412,112 $ 72,187,746
* Frank Russell Trust Company 2,385,854 units of
participation in
Equity I 58,125,716 84,991,269
* Frank Russell Trust Company 1,166,980 units of
participation in
Global Balanced Fund 20,283,557 29,763,829
* Frank Russell Trust Company 734,851 units of
participation in
Global Equity Fund 14,162,137 21,068,900
* T. Rowe Price Company 768,621 units of
participation in Growth &
Income Fund 18,225,735 20,176,292
* Northrop Grumman Corporation 18,831 shares of common
stock 1,702,433 1,377,017
* Bankers Trust Company 70,104 units of
participation in Northrop
Retirement Savings
Temporary Investment
Fund 70,104 70,104
* Loans to Participants At prime rate plus 1%
(7% - 11%) with maturity
dates of up to 10 years 6,798,141
------------ ------------
$178,981,794 $236,433,298
============ ============
</TABLE>
* Party-in-Interest
-12-
<PAGE>
NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31 ,1998
- --------------------------------------------------------------------------------
SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS
<TABLE>
<CAPTION>
(a) (b) (c) (d) (g) (h) (i)
Current Value Net
Identity of Party Description Purchase Selling Cost of of Assets Gain
Involved of Asset Price Price Asset Transaction Date (Loss)
<S> <C> <C> <C> <C> <C> <C>
Bankers Trust Company Pyramid Directed Cash Account $ 4,889,687 $ 4,889,687 $ $ -
Bankers Trust Company Pyramid Directed Cash Account $ 4,819,583 $ 4,819,583 $ 4,819,583
Northrop Grumman Retirement Savings STIF 9,460,918 9,460,918
Northrop Grumman Retirement Savings STIF 9,494,541 9,494,541 9,494,541 -
Northrop Grumman Stable Value Utilized Fund 34,839,697 34,839,697
Northrop Grumman Stable Value Utilized Fund 24,382,594 22,427,774 24,382,594 1,954,820
Northrop Grumman Consolidated GIC Fund 11,283,660 11,283,660
Northrop Grumman Consolidated GIC Fund 10,028,853 9,252,171 10,028,853 776,682
Participant Loans Loans Receivable 4,129,888 4,129,888
Participant Loans Loans Receivable 3,337,534 3,337,534 3,337,534 -
T. Rowe Price Growth & Income Fund 8,674,233 8,674,233
T. Rowe Price Growth & Income Fund 7,729,267 6,658,791 7,729,267 1,070,476
Frank Russell Equity Fund 13,602,861 13,602,861
Frank Russell Equity Fund 13,516,953 9,140,740 13,518,953 4,378,213
Frank Russell Global Balanced 7,705,034 7,705,034
Frank Russell Global Balanced 7,707,306 5,405,501 7,707,306 2,301,805
Frank Russell Global Equity 4,826,858 4,826,858
Frank Russell Global Equity 6,475,303 4,673,750 6,475,303 1,801,553
Frank Russell Equity I Fund - Vought Aircraft 18,094,525 18,094,525
Frank Russell Equity I Fund - Vought Aircraft 18,294,138 13,966,032 18,294,138 4,328,106
</TABLE>
-13-
<PAGE>
Exhibit 1
---------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-59853 of Northrop Grumman Corporation on Form S-8 of our report
dated June 24, 1999, appearing in this Annual Report on Form 11-K of
the Northrop Grumman Commercial Aircraft Division Salaried Savings
and Investment Plan for the year ended December 31, 1998.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Los Angeles, California
June 29, 1999
-14-
