NORTHROP GRUMMAN CORPORATION (Exact Name of Registrant As Specified in Its Charter)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission file number to 1-16411 NORTHROP GRUMMAN CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 95-4840775 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 1840 Century Park East, Los Angeles, California 90067 www.northropgrumman.com (Address of principal executive offices and internet site) (310) 553-6262 (Registrant’s telephone number, including area code) Securities registered pursuant to section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $1 par value New York Stock Exchange Pacific Exchange Series B Convertible Preferred Stock New York Stock Exchange 7.25% Equity Security Units New York Stock Exchange Securities Registered pursuant to Section 12(g) of the Act: None 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 ¨ Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨ As of March 7, 2003, 182,889,368 shares of Common Stock were outstanding, and the aggregate market value of the Common Stock (based upon the closing price of the stock on the New York Stock Exchange) of the Registrant held by nonaffiliates was approximately $15,085 million. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the 2003 Annual Meeting of Stockholders. Part III NORTHROP GRUMMAN CORPORATION [THIS PAGE INTENTIONALLY LEFT BLANK] -2- NORTHROP GRUMMAN CORPORATION PART I Item 1. Business Originally formed in California in 1939, Northrop Corporation was reincorporated in Delaware in 1985. In 1994 the company purchased the outstanding common stock of Grumman Corporation and, effective May 18, 1994, Northrop Corporation was renamed Northrop Grumman Corporation (the company). On April 2, 2001, NNG, Inc., a newly formed Delaware holding company, exchanged its common shares for all of the outstanding Northrop Grumman Corporation common shares on a one-for-one basis, through a merger in which Northrop Grumman Corporation became a subsidiary of NNG, Inc. In connection with this merger, NNG, Inc. changed its name to Northrop Grumman Corporation and the former Northrop Grumman Corporation changed its name to Northrop Grumman Systems Corporation (Northrop Systems). In April 2001, the company purchased approximately 97 percent of the common stock and approximately 59 percent of the preferred stock of Litton Industries, Inc. (Litton). The company issued 13,000,000 shares of its common stock and 3,500,000 shares of its preferred stock and paid cash for the balance of the Litton shares. In May and June 2001, the company acquired all of the remaining shares of Litton common and preferred stock for cash. In November 2001, pursuant to a tender offer that expired on November 29, 2001, the company purchased approximately 80.7 percent of the outstanding shares of Newport News Shipbuilding Inc. (Newport News). For the year ended December 31, 2001, the company accounted for the remaining 19.3 percent of Newport News common shares as minority interest. On January 18, 2002, the company acquired the remaining 19.3 percent of Newport News shares not purchased in the tender offer. On December 11, 2002, the company issued 69.4 million shares in exchange for all outstanding shares of TRW Inc. The company completed the sale of TRW’s Automotive business (Auto) to The Blackstone Group on February 28, 2003. The company received approximately $4.7 billion, comprised of $3.9 billion in cash and debt retained by Auto, a $600 million payment-in-kind note and a 19.6 percent investment in the new enterprise. Cash proceeds from the sale, along with cash received from completion of the TRW acquisition will be used primarily to pay down debt. In connection with the acquisition of TRW, the company entered into a formal stipulation and consent decree (Final Judgment) with the United States Department of Justice that was filed in the U. S. District Court for the District of Columbia on December 11, 2002. Key provisions of the consent decree are intended to assure that the merger will not impede fair and open competition related to certain electronic satellite payloads. The consent decree does not require the divestiture of any businesses and will permit the company to operate its businesses and those of TRW as planned. The retained portions of TRW represent the new Mission Systems and Space Technology sectors discussed more fully herein. Additional information describing the aforementioned mergers and acquisitions is contained in the “Acquisitions” footnote to the Consolidated Financial Statements in Part II, Item 8. The company operates in seven business sectors: Electronic Systems, Newport News, Ship Systems, Information Technology, Integrated Systems, Mission Systems and Space Technology. For financial reporting purposes the Electronic Systems, Information Technology, Integrated Systems, Mission Systems and Space Technology sectors are each reportable segments. In accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 131 – Disclosures about Segments of an Enterprise and Related Information , Newport News and Ship Systems results are aggregated and reported as the Ships segment. In 2002, the company decided to sell the majority of the businesses comprising its Component Technologies operating sector, and also sold two of the businesses in its Electronic Systems sector, Ruggedized Displays and Electron Devices. These businesses, Auto and the aerostructures business sold in 2000 are reported as discontinued operations. Additional information is contained in the “Dispositions and Discontinued Operations” footnote to the Consolidated Financial Statements in Part II, Item 8. Electronic Systems is a leading designer, developer and manufacturer of a wide variety of advanced defense electronics and systems. Electronic Systems provides airborne radar systems, secondary surveillance systems, inertial navigation systems and sensors, electronic warfare systems, precision weapons, air traffic control systems, air -3- NORTHROP GRUMMAN CORPORATION defense systems communications systems, space systems, marine systems, oceanic and naval systems, integrated avionics systems and automation and information systems. Headquartered in Baltimore, Maryland the sector includes the Aerospace Electronic Systems, C4ISR&N, Defensive Electronic Systems, Navigation Systems, and Space Systems divisions. Operations not included in these divisions are reported as “Other”. Key products include fire control radars for the F-16 fighter aircraft, the F-22 air dominance fighter, the F-35 joint strike fighter, and the Longbow Apache helicopter; the AWACS airborne early warning radar; Joint STARS air-to-ground surveillance radar sensor; Longbow Hellfire missile; tactical military radars, countrywide air defense systems, airborne electronic countermeasures systems, sophisticated undersea warfare systems and naval propulsion and power generation systems. Electronic Systems has 51 locations worldwide, 19 international offices and approximately 22,000 employees. Newport News’ primary business is the design, construction, repair, maintenance, overhaul, life-cycle support and refueling of nuclear-powered aircraft carriers and the design, life-cycle support and construction of nuclear-powered submarines for the U.S. Navy. Newport News is the nation’s sole designer, builder and refueler of nuclear-powered aircraft carriers and only one of two companies capable of designing and building nuclear-powered submarines. Major programs are the Nimitz-class nuclear powered aircraft carriers and the Virginia-class submarine program. The sector also provides after- market services for a wide array of naval and commercial vessels. Headquartered in Newport News, Virginia, the sector has approximately 18,000 employees. Ship Systems is one of the nation’s leading full service systems providers for the design, engineering, construction, and life cycle support of major surface ships for the U.S. Navy, U.S. Coast Guard and international navies, and for commercial vessels of all types. Major programs for the U.S. Navy include the WASP LHD 1 Class and San Antonio LPD 17 Class amphibious assault ships, the Arleigh Burke DDG 51 and next generation DD(X) destroyers. The company is also a partner in the Coast Guard’s Deepwater modernization program and produces double-hulled crude oil tankers. Headquartered in Pascagoula, Mississippi, with primary operations in Pascagoula, Mississippi; New Orleans, Louisiana; Gulfport, Mississippi; and Tallulah, Louisiana, as