<PAGE>
Exhibit 99
NORTHROP GRUMMAN CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31, December 31,
Dollars in millions 2000 1999
----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 41 $ 142
Accounts receivable, net of progress
payments of $1,724 in 2000 and $1,714 in 1999 1,450 1,402
Inventoried costs, net of progress payments of
$596 in 2000 and $521 in 1999 1,240 1,190
Deferred income taxes 22 23
Prepaid expenses 50 36
----------------------------------------------------------------------------------------------
Total current assets 2,803 2,793
----------------------------------------------------------------------------------------------
Property, plant and equipment 2,854 2,895
Accumulated depreciation (1,630) (1,655)
----------------------------------------------------------------------------------------------
1,224 1,240
----------------------------------------------------------------------------------------------
Goodwill, net of accumulated amortization of
$468 in 2000 and $441 in 1999 3,445 3,469
Other purchased intangibles, net of accumulated amortization
of $406 in 2000 and $388 in 1999 736 761
Prepaid pension cost, intangible pension asset
and benefit trust fund 1,106 946
Assets available for sale 26 26
Investments in and advances to affiliates and sundry assets 49 50
-----------------------------------------------------------------------------------------------
5,362 5,252
-----------------------------------------------------------------------------------------------
$ 9,389 $ 9,285
===============================================================================================
</TABLE>
-1-
<PAGE>
NORTHROP GRUMMAN CORPORATION
<TABLE>
<CAPTION>
March 31, December 31,
Dollars in millions 2000 1999
------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Shareholders' Equity:
Notes payable to banks $ 95 $ 25
Current portion of long-term debt 200 200
Trade accounts payable 436 490
Accrued employees' compensation 326 366
Advances on contracts 347 316
Income taxes payable including deferred
income taxes of $561 in 2000 and $550 in 1999 641 608
Other current liabilities 489 459
------------------------------------------------------------------------------------------------
Total current liabilities 2,534 2,464
------------------------------------------------------------------------------------------------
Long-term debt 1,800 2,000
Accrued retiree benefits 1,468 1,458
Other long-term liabilities 41 42
Deferred income taxes 137 64
Paid-in capital
Preferred stock, 10,000,000 shares authorized; none issued
Common stock, 200,000,000 shares authorized; issued and outstanding:
2000 - 69,805,396; 1999 - 69,719,164 1,035 1,028
Retained earnings 2,393 2,248
Accumulated other comprehensive loss (19) (19)
------------------------------------------------------------------------------------------------
3,409 3,257
------------------------------------------------------------------------------------------------
$ 9,389 $ 9,285
================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-2-
<PAGE>
NORTHROP GRUMMAN CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended March 31,
Dollars in millions, except per share 2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $1,802 $1,710
Cost of sales
Operating costs 1,302 1,297
Administrative and general expenses 213 210
--------------------------------------------------------------------------------------------
Operating margin 287 203
Interest expense (46) (55)
Other, net 2 4
--------------------------------------------------------------------------------------------
Income from continuing operations before income taxes
and cumulative effect of accounting change 243 152
Federal and foreign income taxes 87 56
--------------------------------------------------------------------------------------------
Income from continuing operations before
cumulative effect of accounting change 156 96
Income from discontinued operations, net of tax 17 8
--------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 173 104
Cumulative effect of change in accounting for
start-up costs, net of income tax benefit of $11 in 1999 (16)
--------------------------------------------------------------------------------------------
Net income $ 173 $ 88
============================================================================================
Weighted average shares outstanding, in millions 69.9 68.9
============================================================================================
Basic earnings per share:
Continuing operations $ 2.23 $ 1.39
Discontinued operations .24 .12
Cumulative effect of accounting change (.24)
--------------------------------------------------------------------------------------------
Basic earnings per share $ 2.47 $ 1.27
============================================================================================
Diluted earnings per share:
Continuing operations $ 2.23 $ 1.38
Discontinued operations .24 .12
Cumulative effect of accounting change (.24)
-------------------------------------------------------------------------------------------
Diluted earnings per share $ 2.47 $ 1.26
===========================================================================================
Dividends per share $ .40 $ .40
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
<PAGE>
NORTHROP GRUMMAN CORPORATION
CONSOLIDATED CONDENSED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Three months ended March 31,
Dollars in millions 2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid-in Capital
At beginning of year $1,028 $ 989
Employee stock awards and options exercised 7 1
--------------------------------------------------------------------------------------------------
1,035 990
--------------------------------------------------------------------------------------------------
Retained Earnings
At beginning of year 2,248 1,892
Net income 173 88
Cash dividends (28) (28)
--------------------------------------------------------------------------------------------------
2,393 1,952
--------------------------------------------------------------------------------------------------
Accumulated Other Comprehensive Loss (19) (31)
--------------------------------------------------------------------------------------------------
Total shareholders' equity $3,409 $2,911
==================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-4-
<PAGE>
NORTHROP GRUMMAN CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31,
Dollars in millions 2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Sources of Cash
Cash received from customers
Progress payments $ 380 $ 786
Other collections 1,763 1,367
Income tax refunds received 7 22
Interest received 2
Other cash receipts 1 3
--------------------------------------------------------------------------------------------------
Cash provided by operating activities 2,153 2,178
--------------------------------------------------------------------------------------------------
Uses of Cash
Cash paid to suppliers and employees 2,009 1,967
Interest paid 50 59
Income taxes paid 2 8
Other cash disbursements 1 1
--------------------------------------------------------------------------------------------------
Cash used in operating activities 2,062 2,035
--------------------------------------------------------------------------------------------------
Net cash provided by operating activities 91 143
--------------------------------------------------------------------------------------------------
Investing Activities
Additions to property, plant and equipment (36) (42)
Payment for businesses purchased (3)
Proceeds from sale of property, plant and equipment 7 9
Other investing activities (3) 4
---------------------------------------------------------------------------------------------------
Net cash used in investing activities (35) (29)
---------------------------------------------------------------------------------------------------
Financing Activities
Repayment of borrowings under lines of credit (80) (53)
Principal payments of long-term debt (50) (50)
Proceeds from issuance of stock 1 2
Dividends paid (28) (28)
--------------------------------------------------------------------------------------------------
Net cash used in financing activities (157) (129)
--------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (101) (15)
Cash and cash equivalents balance at beginning of period 142 44
--------------------------------------------------------------------------------------------------
Cash and cash equivalents balance at end of period $ 41 $ 29
==================================================================================================
</TABLE>
-5-
<PAGE>
NORTHROP GRUMMAN CORPORATION
<TABLE>
<CAPTION>
Three months ended March 31,
Dollars in millions 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities
Net income $ 173 $ 88
Adjustments to reconcile net income to net cash provided
Depreciation 45 43
Amortization of intangible assets 50 47
Common stock issued to employees 7
Retiree benefits income (133) (57)
Decrease(increase) in
Accounts receivable (53) (50)
Inventoried costs (127) (122)
Prepaid expenses (15) 20
Increase(decrease) in
Progress payments 85 136
Accounts payable and accruals 1 10
Provisions for contract losses (20) 4
Deferred income taxes 84 43
Income taxes payable 23 23
Retiree benefits (33) (45)
Other transactions 4 3
----------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 91 $ 143
====================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-6-
<PAGE>
NORTHROP GRUMMAN CORPORATION
SELECTED INDUSTRY SEGMENT INFORMATION
Three months ended March 31,
Dollars in millions 2000 1999
------------------------------------------------------------------------------
Net Sales
Integrated Systems $ 856 $ 791
Electronic Sensors & Systems 601 615
Logicon 378 353
Intersegment sales (33) (49)
------------------------------------------------------------------------------
$ 1,802 $ 1,710
==============================================================================
Operating Margin
Integrated Systems $ 100 $ 70
Electronic Sensors & Systems 34 45
Logicon 31 19
------------------------------------------------------------------------------
Total 165 134
Other items included in operating margin:
Corporate expenses (7) (8)
Deferred state tax provision (11) (5)
Pension income 140 82
------------------------------------------------------------------------------
Operating margin $ 287 $ 203
==============================================================================
Contract Acquisitions
Integrated Systems $ 462 $ 1,058
Electronic Sensors & Systems 595 575
Logicon 437 409
Intersegment acquisitions (35) (29)
------------------------------------------------------------------------------
$ 1,459 $ 2,013
==============================================================================
Funded Order Backlog
Integrated Systems $ 4,057 $ 5,166
Electronic Sensors & Systems 3,518 3,079
Logicon 668 622
Intersegment backlog (87) (149)
------------------------------------------------------------------------------
$ 8,156 $ 8,718
==============================================================================
-7-
<PAGE>
NORTHROP GRUMMAN CORPORATION
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 1999 annual report as restated for discontinued operations in
Exhibit 99.1 to this Form 8-K.
Discontinued Operations
Effective July 24, 2000, the company completed the sale of its commercial
aerostructures ("Aerostructures") business to The Carlyle Group, pursuant to an
Asset Purchase Agreement dated as of June 9, 2000 between Northrop Grumman and
Vought Aircraft Industries, Inc., an entity owned by The Carlyle Group. The
purchase price was composed of $667.7 million in cash and a promissory note for
$175 million, maturing in nine years, with interest payable in kind for four
years and interest payable in kind or cash thereafter. An estimated loss on the
sale of $15 million will be recorded in the second quarter of 2000.
Aerostructures is a major producer of commercial and military aircraft
subassemblies, the majority of which are sold to The Boeing Company and, for
military contracts, ultimately to the U.S. Government.
The company's Consolidated Statements of Income and related footnote
disclosures have been restated to reflect Aerostructures as discontinued
operations for all periods presented. Balance sheet and cash flow data have not
been restated.
Operating results of the discontinued Aerostructures business are as
follows:
Three months ended March 31,
$ in millions 2000 1999
------------------------------------------------------------------------------
Net Sales $ 278 $ 383
==============================================================================
Income before income taxes $ 27 $ 12
Federal and foreign income taxes 10 4
------------------------------------------------------------------------------
Net income from discontinued operations $ 17 $ 8
==============================================================================
-8-
<PAGE>
NORTHROP GRUMMAN CORPORATION
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>
Earnings
Net Income Shares per share
---------- ------ ---------
Three months ended March 31, (millions) (millions)
<S> <C> <C> <C>
2000
Basic earnings per share from continuing operations $ 156 69.9 $ 2.23
========= ==========
Dilutive effect of stock options and awards
----------
Diluted earnings per share from continuing operations $ 156 69.9 $ 2.23
========= ========== ==========
Basic earnings per share from discontinued operations $ 17 69.9 $ .24
========= ==========
Dilutive effect of stock options and awards
----------
Diluted earnings per share from discontinued operations $ 17 69.9 $ .24
========= ========== ==========
Basic earnings per share $ 173 69.9 $ 2.47
========= ==========
Dilutive effect of stock options and awards
----------
Diluted earnings per share $ 173 69.9 $ 2.47
========= ========== ==========
</TABLE>
-9-
<PAGE>
NORTHROP GRUMMAN CORPORATION
<TABLE>
<CAPTION>
Earnings
Net Income Shares per share
---------- ------ ---------
Three months ended March 31, (millions) (millions)
<S> <C> <C> <C>
1999
Basic earnings per share from continuing operations $ 96 68.9 $ 1.39
========= ==========
Dilutive effect of stock options and awards .4
----------
Diluted earnings per share from continuing operations $ 96 69.3 $ 1.38
========= ========== ==========
Basic earnings per share from discontinued operations $ 8 68.9 $ .12
========= ==========
Dilutive effect of stock options and awards .4
----------
Diluted earnings per share from discontinued operations $ 8 69.3 $ .12
========= ========== ==========
Basic earnings per share before cumulative
effect of accounting change $ 104 68.9 $ 1.51
========= ==========
Dilutive effect of stock options and awards .4
----------
Diluted earnings per share before cumulative
effect of accounting change $ 104 69.3 $ 1.50
========= ========== ==========
Basic earnings per share $ 88 68.9 $ 1.27
========= ==========
Dilutive effect of stock options and awards .4
----------
Diluted earnings per share $ 88 69.3 $ 1.26
========= ========== ==========
</TABLE>
-10-
<PAGE>
NORTHROP GRUMMAN CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL
CONDITION AND THE RESULTS OF ITS OPERATIONS
Sales for the first quarter of 2000 were $1.8 billion, up five percent from the
year ago period. Increases in Integrated Systems (ISS) segment and Logicon
segment sales were offset slightly by a decrease in Electronic Sensors and
Systems (ESS) segment sales.
ISS sales increased by 8 percent in the first quarter of 2000 compared with
the first quarter of 1999, primarily due to increased Air Combat Systems(ACS)
sales. The ACS increase reflects increased F/A-18E/F sales, as this program
transitioned from the development phase in early 1999 to the current production
phase, partially offset by lower B-2 and F/A-18C/D sales.
ESS sales for the quarter ended March 31, 2000, were 2 percent lower than
the same period a year ago. The Command, Control, Communications, Intelligence
and Naval Systems (C3I&N) business area decrease is primarily attributable to
lower air defense and air traffic control radar systems sales for international
customers.
Logicon sales were 7 percent higher in the first quarter of 2000 versus the
same period in 1999, with all three business areas reporting increased sales.
-11-
<PAGE>
NORTHROP GRUMMAN CORPORATION
Sales by business area and units delivered in the first quarter were:
<TABLE>
<CAPTION>
Three months ended March 31,
$ in millions 2000 1999
------------------------------------------------------------------------------------------------
<S> <C> <C>
Integrated Systems
Air Combat Systems (ACS) $ 502 $ 451
Airborne Early Warning and Electronic Warfare (AEW/EW) 183 192
Airborne Ground Surveillance and Battle Management (AGS/BM) 176 161
Intrasegment Eliminations (5) (13)
-------------------------------------------------------------------------------------------------
856 791
-------------------------------------------------------------------------------------------------
Electronic Sensors & Systems
Aerospace Electronic Systems 257 254
Command, Control, Communications,
Intelligence and Naval Systems (C3I&N) 177 214
Defensive Electronic Systems 96 111
Other 71 36
-------------------------------------------------------------------------------------------------
601 615
-------------------------------------------------------------------------------------------------
Logicon
Government Information Technology 253 241
Technology Services 92 83
Commercial Information Technology 33 29
-------------------------------------------------------------------------------------------------
378 353
-------------------------------------------------------------------------------------------------
Intersegment eliminations (33) (49)
-------------------------------------------------------------------------------------------------
Total sales $ 1,802 $ 1,710
=================================================================================================
Units
-------------------------------------------------------------------------------------------------
B-2 1 1
F/A-18 C/D 9
F/A-18 E/F 7
-------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE>
NORTHROP GRUMMAN CORPORATION
Operating margin includes pension income of $140 million in the first
quarter of 2000, a $58 million increase from the first quarter of 1999. Pension
income for 2000 is expected to be approximately $560 million.
ISS operating margin for the quarter was $100 million, up 43 percent from
the $70 million reported for the first quarter of 1999. The 2000 results reflect
the return to profitability on the Joint STARS production contracts as well as
an upward cumulative margin rate adjustment of $8 million on the F/A-18E/F
program.
ESS operating margin in the first quarter of 2000 was $34 million as
compared with $45 million in last year's first quarter. The decrease is
primarily the result of the July 1999 merger of three of the company's pension
plans into one.
Logicon operating margin for the quarter was $31 million as compared with
$19 million for the first quarter of 1999. The increase is attributable in part
to increased sales volume and improved performance in all three business areas.
Logicon also benefited from replacing several defined-contribution employee
benefit plans with a defined-benefit type pension plan in the first quarter of
2000. While the total cash cost remains the same, the cost is now included in
net pension income, in accordance with company policy. As a result, pension
income is lower than it otherwise would have been and Logicon's reported
operating margin is higher by $5 million for the quarter, with an additional $5
million expected to be recorded in each of the remaining quarters of this year.
Interest expense for this year's first quarter was $46 million, a $9
million decrease from the $55 million reported in the first quarter of 1999. The
decrease resulted principally from a lower level of average borrowings in the
quarter compared with the first quarter of 1999.
The company's effective tax rate was 36 percent for the first quarter of
2000, down slightly from 37 percent reported for the same period in 1999.
Aerostructures, reported as discontinued operations, had net income of $17
million and $8 million in the first quarter of 2000 and 1999, respectively.
Included in these amounts are related pretax pension income of $10 million and
$2 million in the first quarter of 2000 and 1999, respectively.
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. In 1999, the company
reported a $16 million after-tax charge, or $.24 per share, to write off the
previously deferred start-up costs. All such costs incurred after January 1,
1999, are expensed as incurred.
During the first quarter of 2000, $91 million of cash was generated by
operating activities versus the $143 million generated in the same period last
year. The decline is attributable in part to accelerated cash collections in
1999 due to customers' Year 2000 concerns. The decline is somewhat mitigated by
improved operating margin and lower pension plan contributions as a result of
the July 1999 pension plan merger. For
-13-
<PAGE>
NORTHROP GRUMMAN CORPORATION
the remainder of 2000, cash generated from operations, supplemented by
borrowings under the credit agreement, are expected to be more than sufficient
to service debt, finance capital expenditures, and continue paying dividends to
the shareholders. 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.
Forward-Looking Information
Certain statements and assumptions in Management's Discussion and Analysis and
elsewhere in this quarterly report on Form 8-K contain or are based on
"forward-looking" information (that the company believes to be within the
definition in the Private Securities Litigation and Reform Act of 1995) that
involves risk and uncertainties, including statements and assumptions 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 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; 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.
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, 2000, 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.
-14-
<PAGE>
NORTHROP GRUMMAN CORPORATION
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Shareholders
Northrop Grumman Corporation
Los Angeles, California
We have reviewed the accompanying condensed consolidated balance sheet of
Northrop Grumman Corporation and Subsidiaries as of March 31, 2000, and the
related condensed consolidated statements of income and cash flows for the
three-month periods ending March 31, 2000 and 1999. These financial statements
are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Northrop Grumman Corporation and Subsidiaries as of December 31, 1999, and the
related consolidated statements of income, comprehensive income, changes in
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 26, 2000, except for discontinued
operations footnote, as to which the date is July 24, 2000, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1999 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Los Angeles, California
April 24, 2000,
except for discontinued operations footnote,
as to which the date is July 24, 2000.
-15-
