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, 1999 and 1998
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 33-03959
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
NORTHROP GRUMMAN PEI RETIREMENT SAVINGS 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 PEI RETIREMENT SAVINGS PLAN
/s/ Gary W. McKenzie
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Dated: June 28, 2000 By Gary W. McKenzie
Vice President Tax
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NORTHROP GRUMMAN PEI RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Plan Benefits as of
December 31, 1999 and 1998 2
Statement of Changes in Net Assets Available for Plan Benefits for the
Year Ended December 31, 1999 3
Notes to Financial Statements 4-7
3
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INDEPENDENT AUDITORS' REPORT
To the Administrative Committee of the
Northrop Grumman PEI Retirement Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Northrop Grumman PEI Retirement Savings Plan (the "Plan") as of
December 31, 1999 and 1998, and the related statement of changes in net assets
available for plan benefits for the year ended December 31, 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 auditing standards generally accepted
in the United States of America. 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 as of December
31, 1999 and 1998, and the changes in net assets available for plan benefits for
the year ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
--------------------------
Deloitte & Touche LLP
Los Angeles, California
June 22, 2000
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NORTHROP GRUMMAN PEI RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1999 AND 1998
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1999 1998
ASSETS:
Investment in Northrop Grumman Corporation PEI Pension
and 401(k) Plans Master Trust, at fair value
(Notes B and C) $1,175,335 $1,066,183
---------- ----------
Contributions receivable:
Employer 4,684 4,938
Participant 10,765 11,378
---------- ----------
Total contributions receivable 15,449 16,316
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NET ASSETS AVAILABLE FOR PLAN BENEFITS $1,190,784 $1,082,499
========== ==========
See notes to financial statements
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NORTHROP GRUMMAN PEI RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 1999
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INVESTMENT INCOME (Notes B and C) -
Plan interest in Northrop Grumman Corporation PEI Pension and
401(k) Plans Master Trust Investment Income (Notes B and C) $ 170,614
-----------
CONTRIBUTIONS:
Employer 47,871
Participant 110,239
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Total contributions 158,110
-----------
Total additions 328,724
BENEFITS PAID TO PARTICIPANTS (Note B) (220,439)
-----------
NET INCREASE 108,285
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 1,082,499
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End of year $ 1,190,784
===========
See notes to financial statements
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Northrop Grumman PEI RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
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A. DESCRIPTION OF THE PLAN
The following description of the Northrop Grumman PEI Retirement Savings
Plan (the "Plan") provides only general information. Participants should
refer to the Plan document for a more complete description of the Plan's
provisions.
General - The Plan is a qualified profit-sharing plan sponsored by the
Productos Electronicos Industriales division of Northrop Grumman
Electronicos, Inc. (the "Company"). The Plan includes a 401(k) feature and
employer matching contributions.
The Plan was established by the Company on March 1, 1996 as a successor to
the Westinghouse de Puerto Rico Retirement Savings Plan (the "Predecessor
Plan"), maintained by Westinghouse de Puerto Rico, Inc. ("Westinghouse")
for the benefit of Puerto Rican employees of certain Westinghouse Electric
Corporation affiliated companies who became employees of the Company, and
any other subsequent eligible employees of the Company.
Effective May 1, 1997, the Plan transferred all of its assets to the
Northrop Grumman Corporation PEI Pension and 401(k) Plans Master Trust
(the "Master Trust"), which is administered by Banco Popular de Puerto
Rico, the Trustee.
Contributions - Plan participants may contribute between 1 percent and 8
percent of total compensation, in increments of 1 percent. Basic
allotments may be made in amounts of 1 percent to 4 percent of total
compensation. Eligible employees who have authorized the maximum Basic
allotment may make supplementary allotments in amounts between 1 percent
and 4 percent of total compensation. Contributions are subject to certain
limitations.
The Company contributes a match of 50 percent of the amount of a
participant's basic allotment. The maximum matching contribution will not
exceed 2 percent of the total compensation of the participant.
An eligible employee may roll over any amount from another qualified plan
or from an Individual Retirement Account into the Plan, provided that such
rollover amount is paid to the trustee within 60 days of the date the
employee received the qualifying rollover distribution.
Participant Accounts - A separate account is maintained for each
participant, each of which has subaccounts. Assets of the Master Trust are
valued at the end of each calendar quarter, and on any other date, and
take into account earnings and losses of the Plan along with appreciation
or depreciation, expenses and distributions. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account.
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Vesting - Plan participants are 100 percent vested in, and have a
nonforfeitable right to, the balance of their Basic and Supplementary
allotments at all times. Plan participants become 100 percent vested in
Company contributions after three years of service and are 0 percent
vested prior to that time. Company contributions become 100 percent vested
upon the death of a participant. Rollovers are 100 percent vested at all
times and are not subject to forfeiture.
Investment Options - Upon enrollment in the Plan, each participant may
direct that his or her accounts be invested in any of the following three
investment funds:
Northrop Grumman Fund
U.S. Equity Fund
Money Market Fund
Payment of Benefits - All withdrawals from the Plan during employment
shall be paid in cash. All distributions from the Plan upon retirement,
termination or death shall be paid in cash and/or shares of employer stock
held in the account. A participating employee may elect to withdraw all or
a portion of the vested portion of his or her account only in the case of
hardship, as defined by the Plan, and may make withdrawals twice per year
but not more than once per quarter. Any participant who makes a withdrawal
will be suspended from making Basic and Supplementary allotments for 12
months following the withdrawal. If a participating employee retires or
his or her employment is terminated, the vested portion of his or her
account shall be distributed to him or her as soon as practicable
following the next valuation date after retirement or termination occurs.
Any nonvested portion of his or her account shall be forfeited at that
time. In the case of death of a participating employee, his or her entire
account shall be distributed in a lump sum to his or her beneficiary(ies).
Forfeited Accounts - Any amounts forfeited shall be used to reduce the
Company's obligation to make company matching contributions under the
Plan. In 1999, no employer contributions were reduced by forfeited
nonvested accounts.
B. SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the Plan are prepared
under the accrual basis of accounting.
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America 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 interest
in the Master Trust is stated at fair value. Quoted market prices are used
to value investments in the Master Trust.
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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.
Broker commissions, transfer taxes, and other charges and expenses
incurred in connection with the purchase, sale or other disposition of
securities or other investments held by the Master Trust are added to the
cost of the securities or other investments, or are deducted from the
proceeds of the sale or other disposition thereof, as appropriate. Taxes
(if any) on the assets of the funds, or on any gain resulting from the
sale or other disposition of such assets, or on the earnings of the funds,
are apportioned in such a manner as the Trustee deems equitable among the
participants and former participants (if any) whose interests in the Plan
are affected, and the share of such taxes apportioned to each person is
charged against his or her account of the Plan.
Payment of Benefits - Benefits are recorded when paid. As of December 31,
1999 and 1998, benefits payable in cash to participants are $11,247 and
$52,205, respectively.
New Accounting Pronouncements - The Plan has adopted Statement of Position
99-3 "Accounting and Reporting of Certain Defined Contribution Plan
Investments and Other Matters," which eliminates the by-fund disclosure.
There was no other impact to the Plan's financial statements.
C. INVESTMENTS
The investments of the Plan as of December 31, 1999 and 1998 are stated at
fair values determined and reported by Banco Popular de Puerto Rico, the
Trustee, in accordance with the Master Trust Agreement established by
Northrop Grumman Corporation. Proportionate interests of each
participating plan are ascertained on the basis of the Trustee's equitable
share accounting method for master trust arrangements. Plan assets
represent 50 percent and 85 percent of total net assets reported by
the Trustee of the Master Trust as of December 31, 1999 and 1998,
respectively.
The net assets of the Master Trust at fair value consist of the following:
December 31,
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1999 1998
Assets:
Temporary investments $ 525,718 $ 584,011
Corporate stocks 1,434,521 614,070
Debt obligations 380,346 59,289
Dividends and interest receivable 32 25
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Net assets of the Master Trust $2,340,617 $1,257,395
========== ==========
The Master Trust held approximately 279 and 231 shares of Northrop Grumman
Corporation common stock with fair values of $15,084 and $16,892 at
December 31, 1999 and 1998, respectively, which are included in the
determination of net assets available to this Plan at December 31, 1999
and 1998.
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Investment income for the Master Trust is as follows:
December 31,
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1999 1998
Net appreciation in fair value of investments $ 285,199 $ 158,701
Interest 27,522 31,545
Dividends 404 337
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Total $ 313,125 $ 190,583
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D. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of the
Plan's termination, participants will become 100 percent vested in their
accounts. Distributions will only be made in the event of a complete
termination.
E. TAX STATUS
The Plan is intended to be qualified under the Internal Revenue Code (the
"IRC") and the Puerto Rico Income Tax Code of 1994. The Company believes
that the Plan and the related trust are designed and currently being
operated in compliance with the applicable provisions of the IRC and
Puerto Rico Income Tax Code of 1994.
******
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Exhibit 1
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INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-03959 of Northrop Grumman Corporation on Form S-8 of our report dated June
22, 2000, appearing in this Annual Report on Form 11-K of the Northrop Grumman
PEI Retirement Savings Plan for the year ended December 31, 1999.
/s/ Deloitte & Touche LLP
--------------------------
Deloitte & Touche LLP
Los Angeles, California
June 28, 2000
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