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 period ended September 1, 1999.
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
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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/ Gary W. McKenzie
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Dated: February 28, 2000 By Gary W. McKenzie
Vice President Tax
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NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 4
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Plan Benefits
as of September 1, 1999 and December 31, 1998 5
Statement of Changes in Net Assets Available for Plan Benefits
for the Period Ended September 1, 1999 6
Notes to Financial Statements 7-11
SUPPLEMENTAL SCHEDULE -
Item 27d - Schedule of Reportable Transactions for the Period Ended
September 1, 1999 12
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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 September 1, 1999 and December 31, 1998,
and the related statement of changes in net assets available for plan benefits
for the period ended September 1, 1999. 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 as of September 1, 1999 and
December 31, 1998, and the changes in net assets available for plan benefits for
the period ended September 1, 1999, 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 schedule of reportable
transactions for the period ended September 1, 1999 is presented for the purpose
of additional analysis and is not a required part of the basic financial
statements but is 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 schedule is the
responsibility of the Plan's management. Such supplemental schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects when considered in relation to the basic financial statements taken as
a whole.
As discussed in Note H, the Plan was merged into the Northrop Grumman Savings
and Investment Plan on September 1, 1999.
/s/ Deloitte & Touche LLP
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Deloitte & Touche LLP
Los Angeles, California
February 28, 2000
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NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
SEPTEMBER 1, 1999 AND DECEMBER 31, 1998
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September 1, December 31,
1999 1998
ASSETS:
Investments (Notes A, B,C, D, and E) $ - $236,438,152
Receivables:
Employer's contributions 111,315
Participants' contributions 286,918
Net securities sales pending settlement 2,438,999
Accrued income receivable 883
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Total receivables - 2,838,115
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Total assets - 239,276,267
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LIABILITIES:
Net securities purchases pending settlement - 2,427,796
Accrued expenses payable 318,017
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Total liabilities - 2,745,813
-------- ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ - $236,530,454
======== ============
See notes to financial statements.
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NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
PERIOD ENDED SEPTEMBER 1, 1999
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ADDITIONS:
Investment income:
Net appreciation in fair value of investments $ 13,950,324
Interest and dividend income 3,818,132
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Total investment income 17,768,456
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Contributions:
Employer 3,650,142
Participants 9,622,865
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Total contributions 13,273,007
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Total additions 31,041,463
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DEDUCTIONS:
Benefits paid to participants 18,656,895
Administrative expenses 859,627
Transfers out (Note H ) 248,055,395
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Total deductions 267,571,917
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NET DECREASE (236,530,454)
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of period 236,530,454
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End of period $ -
=============
See notes to financial statements.
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NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
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NOTES TO FINANCIAL STATEMENTS
PERIOD ENDED SEPTEMBER 1, 1999 AND AS OF DECEMBER 31, 1998
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, Northrop 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 Plan.
On September 1, 1999, the Plan was merged into the Northrop Grumman Savings
and Investment Plan.
Contributions - The Plan offers participants a choice between the type of
contributions they can make, and such contributions may be between 2 percent
and 18 percent of eligible compensation in increments of 1percent. 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 contributions are as follows:
Company
Employee Contribution Match
First 2% of eligible compensation 100%
Next 2% of eligible compensation 50%
Next 4% of eligible compensation 25%
Contributions over 8% 0%
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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 percent) 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 percent 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 Fund
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 percent 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 percent. 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.
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.
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Investment Valuation and Income Recognition - The Plan's investments are
stated at fair value, except for the Plan's investment in the Northrop
Grumman Stable Value Master Trust, which is valued at contract value (see
Note D and E). Shares of collective funds are valued at the net asset value
of shares held by the Plan at year end. Quoted market price is used to value
Northrop Grumman Corporation common stock. 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 September 1,
1999 and December 31, 1998, benefits payable to participants are
approximately $0 and $14,000, respectively.
Adoption of New Accounting Pronouncements - During 1999, the Plan adopted
Statement of Position (SOP) 99-3, " Accounting for and Reporting of Certain
Define Contribution Plan Investments and other Disclosure Matters." SOP 99-3
eliminates the disclosure requirement for supplemental fund information in
the statements of net assets available for plan benefits and statement of
changes in net assets available for plan benefits. The adoption of SOP 99-3
did not impact the amounts recorded in the financial statements.
C. INVESTMENTS
The following presents investments that represent 5 percent or more of the
Plan's net assets as of December 31, 1998:
Northrop Grumman Stable Value Master Trust $ 72,187,746
Frank Russell Equity I Fund 84,991,269
Frank Russell Global Balanced Fund 29,763,829
Frank Russell Global Equity Fund 21,068,900
T. Rowe Price Growth & Income Fund 20,176,292
During the period ended September 1, 1999, the Plan's investments (including
gains and losses on investments bought and sold, as well as held during the
year) appreciated in value by $13,950,324 as follows:
Collective funds $13,923,962
Common stock 26,362
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$13,950,324
===========
D. INTEREST IN NORTHROP GRUMMAN STABLE VALUE MASTER TRUST
A portion of the Plan's investments are in the Northrop Grumman Stable Value
Master Trust ("Master Trust") which was established for the investment of
assets of the Plan and several other Northrop Grumman Corporation sponsored
savings plans. Each participating savings plan has an undivided interest in
the Master Trust. The assets of the Master Trust are held by Primco.
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Investments held at contract value in the Master Trust as of December 31,
1998 are as follows (in thousands):
Guaranteed and Bank Investment Contracts $1,298,790
Northrop Retirement Savings Temporary Investment Fund 60,090
Accrued income 113
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Total $1,358,993
==========
The Plan's investment in the Master Trust as of December 31, 1998, is as
follows (in thousands):
Contract value of Guaranteed and Bank Investment Contracts $72,188
Net securities sales pending settlement 1,010
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Total $73,198
=======
Percentage of ownership in Master Trust 5.39 %
Investment income in the Master Trust for the period ended September 1, 1999
and the year ended December 31, 1998 was $59,583,915 and $91,158,197,
respectively.
E. INVESTMENT CONTRACTS WITH INSURANCE COMPANIES
All investment and insurance contracts held by the Master Trust as of
December 31, 1998 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 (in millions):
Contract value of assets: $ 1,299
Fair value of assets: $ 1,343
Crediting interest rate of assets at December 31: 7.08 %
Average yield on assets for the 12 months ending December 31: 7.09 %
Duration: 2.58 Years
F. 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.
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G. TRANSACTIONS WITH PARTIES-IN-INTEREST
In management's opinion, fees paid for services rendered by
parties-in-interest during the period ended September 1, 1999 and the year
ended December 31, 1998 were based upon customary and reasonable rates for
such services.
H. SUBSEQUENT EVENTS
On September 1, 1999, the Plan was merged into the Northrop Grumman Savings
and Investment Plan. The transferred net assets of $248,055,395 have been
recognized in the accounts of the Northrop Grumman Savings and Investment
Plan at their balances previously carried in the accounts of the Plan. The
changes from September 1, 1999 onward in net assets of the combined plans
are included in the Northrop Grumman Savings and Investment Plan statement
of changes in net assets available for plan benefits.
******
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NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION
SALARIED SAVINGS AND INVESTMENT PLAN
<TABLE>
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
PERIOD ENDED SEPTEMBER 1, 1999
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SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS
<CAPTION>
(b) (c) (d) (e) (f) (g) (h)
Current Value Net
Identity of Party Description Purchase Selling Cost of of Asset on Gain
Involved of Asset Price Price Asset Transaction Date (Loss)
<S> <C> <C> <C> <C>
Northrop Grumman Stable Value Utilized Fund $ 26,642,141 $ 26,642,141
Northrop Grumman Stable Value Utilized Fund $ 102,042,980 93,054,275 $ 102,042,980 $ 8,988,405
Frank Russell Equity I Fund 19,198,362 19,198,362
Frank Russell Equity I Fund 112,555,413 77,324,077 112,555,413 35,231,336
Frank Russell Global Equity Fund 26,172,242 17,044,786 26,172,242 9,127,456
Frank Russell Global Balanced Fund 36,084,446 24,743,776 36,084,446 11,840,670
T. Rowe Price Growth & Income Fund 27,342,959 24,050,957 27,842,959 3,292,003
</TABLE>
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Exhibit I
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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
February 28, 2000, appearing in this Annual Report on Form 11-K of the Northrop
Grumman Commercial Aircraft Division Salaried Savings and Investment Plan for
the period ended September 1, 1999.
/s/ Deloitte & Touche LLP
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Deloitte & Touche LLP
Los Angeles, California
February 28, 2000
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