UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(D) of the
Securities Exchange Act of 1934

 

APRIL 3, 2001

NORTHROP GRUMMAN CORPORATION (Exact name of registrant as specified in its charter)

DELAWARE	1-16411	No. 95-4840775
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

1840 Century Park East, Los Angeles, California 90067
www.northgrum.com
(Address of principal executive offices and internet site)

(310) 553-6262
(Registrant's telephone number, including area code)

Northrop Grumman Corporation and Subsidiaries

Item 7.	Financial Statements, Pro Forma Financial Information and Exhibits
(b)	Pro Forma Financial Information

In April 2001, Northrop Grumman acquired approximately 97.3% of the outstanding Common Shares of Litton Industries and 58.6% of the preferred stock of Litton. Northrop Grumman subsequently acquired the remaining Common and Preferred Shares of Litton for cash and now owns 100% of the outstanding shares of Litton.

        The Unaudited Pro Forma Condensed Combined Financial Statements presented below are derived from the historical consolidated financial statements of each of Northrop Grumman Systems Corporation, Northrop Grumman Corporation and Litton Industries, Inc. The Unaudited Pro Forma Condensed Combined Financial Statements have been prepared using the purchase method of accounting, with Northrop Grumman treated as the acquiror and as if the Litton acquisition had been completed as of the beginning of the periods presented for statements of income purposes and on March 31, 2001 for statement of financial position purposes.

        The Unaudited Pro Forma Condensed Combined Financial Statements are based upon the historical financial statements of Northrop Grumman Systems, Northrop Grumman and Litton adjusted to give effect to the Litton acquisition. The pro forma adjustments are described in the accompanying notes presented on the following pages. The pro forma statements have been developed from (a) the audited consolidated financial statements of Northrop Grumman Systems contained in its Annual Report on Form 10-K/A for the year ended December 31, 2000 and the unaudited consolidated financial statements of Northrop Grumman contained in its Quarterly Report on Form 10-Q for the three months ended March 31, 2001, and (b) the audited consolidated financial statements of Litton contained in its Annual Report on Form 10-K for the fiscal year ended July 31, 2000 and the unaudited consolidated financial statements of Litton contained in its Quarterly Report on Form 10-Q for the period ended January 31, 2001. In addition, the audited consolidated financial statements of Litton contained in its Annual Report on Form 10-K for the fiscal year ended July 31, 2000 and the unaudited consolidated financial statements of Litton contained in its Quarterly Reports on Form 10-Q for the periods ended January 31, 2000 and January 31, 2001 have been used to bring the financial reporting periods of Litton to within 90 days of those of Northrop Grumman Systems and Northrop Grumman.

Page 2 of 8

Northrop Grumman Corporation and Subsidiaries

        Under the purchase method of accounting, the purchase price is allocated to the underlying tangible and intangible assets and liabilities acquired based on their respective fair market values, with the excess recorded as goodwill. These Unaudited Pro Forma Condensed Combined Financial Statements reflect preliminary estimates of the fair market value of the assets and liabilities acquired and the related allocations of purchase price, and preliminary estimates of adjustments necessary to conform Litton data to Northrop Grumman's accounting policies. The Unaudited Pro Forma Condensed Combined Financial Statements do not include the realization of cost savings from operating efficiencies, synergies or other restructurings resulting from the Litton acquisition, or recognition of liabilities associated with potential restructurings, except for preliminary estimates of costs to consolidate the Litton and Northrop Grumman Corporate Offices. Northrop Grumman is currently reviewing the preliminary estimates of the fair market value of assets and liabilities acquired, including preliminary valuation study results for intangible assets, property, plant and equipment, and retiree benefits assets and liabilities and is evaluating several possible restructuring activities of Litton operations. The final determination of the fair market value of assets and liabilities acquired and final allocation of the purchase price may differ from the amounts assumed in these Unaudited Pro Forma Condensed Combined Financial Statements. Adjustments to the purchase price allocations are expected to be finalized December 31, 2001, and will be reflected in future Northrop Grumman filings. There can be no assurance that such adjustments will not be material.

        The Unaudited Pro Forma Condensed Combined Financial Statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of Northrop Grumman would have been had the Litton acquisition occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations or financial position.

        The Unaudited Pro Forma Condensed Combined Financial Statements should be read in conjunction with the separate historical consolidated financial statements and accompanying notes of Northrop Grumman Systems, Northrop Grumman and Litton.

Page 3 of 8

Northrop Grumman Corporation and Subsidiaries

Unaudited Pro Forma Condensed Combined
Statement of Financial Position
March 31, 2001
($ in millions)

		Northrop								Pro Forma
		Grumman				Litton				Adjustments						Combined
Assets:
Current assets
Cash and cash equivalents		$	1,636			$	74			$	(1,500	)		(a)		$	210
Accounts receivable			1,493				794				(264	)		(a)			2,023
Inventoried costs			749				784				(184	)		(a)			1,349
Deferred income taxes			22				372				—						394
Prepaid expenses			66				33				(2	)		(a)			97
Total current assets			3,966				2,057				(1,950	)					4,073
Property, plant and equipment, net			1,014				870				258			(a)			2,142
Other assets
Goodwill and other purchased intangibles			4,380				1,230				2,748			(a)			8,358
Prepaid retiree benefits cost and intangible         pension asset			1,469				589				356			(b)			2,414
Other assets			356				162				(24	)		(a)			494
			6,205				1,981				3,080						11,266
		$	11,185			$	4,908			$	1,388					$	17,481
Liabilities and Shareholders' Equity:
Current liabilities
Notes payable and current portion of     long term debt		$	—			$	184			$	—					$	184
Accounts payable			491				310				—						801
Accrued employees' compensation			325				226				112			(a)			663
Advances on contracts			468				204				—						672
Income taxes			769				62				—						831
Other current liabilities			531				474				28			(a)			1,033
Total current liabilities			2,584				1,460				140						4,184
Long-term debt			3,105				1,293				1,026			(a)			5,424
Accrued retiree benefits			1,108				303				(22	)		(b)			1,389
Deferred tax and other long-term liabilities			381				241				372			(a)			994
Redeemable Preferred Stock			—				—				350			(a)			350
Shareholders' equity
Paid in Capital			1,214				413				720			(a)			2,347
Retained earnings			2,817				1,254				(1,254	)		(a)			2,817
Accumulated other comprehensive loss			(24	)			(56	)			56			(a)			(24	)
			4,007				1,611				(478	)					5,140
		$	11,185			$	4,908			$	1,388					$	17,481

Page 4 of 8

Northrop Grumman Corporation and Subsidiaries

Unaudited Pro Forma Condensed Combined
Statement of Income
Quarter Ended March 31, 2001
(In millions, except per share)

		Northrop						Pro Forma
		Grumman			Litton				Adjustments							Combined
Sales and service revenues		$	1,986			$	1,345			$		(18	)	(c)		$	3,313
Cost of sales
	Operating Costs		1,548				1,120					6		(c)(d)(e)			2,674
	Administrative and general expenses		248				121					—					369
Operating margin			190				104					(24	)				270
Interest expense			(47	)			(27	)				(47	)	(f)			(121	)
Other, net			17				3					—					20
Income from continuing operations
	before income taxes		160				80					(71	)				169
Federal and foreign income taxes			57				30					(25	)	(g)			62
Income from continuing operations		$	103			$	50					(46	)				107
Less dividends paid
	to preferred shareholders											(6	)	(h)			(6	)
Income available to common shareholders										$		(52	)			$	101
Average shares basic			72.19														85.19
Average shares diluted			72.76														86.01
Basic earnings per share:
	Continuing operations	$	1.43													$	1.19
Diluted earnings per share:
	Continuing operations	$	1.42													$	1.17*

*	Calculated by dividing income available to common shareholders by average shares diluted, which is calculated assuming preferred shares are not converted to common shares, resulting in the most dilutive effect.

Page 5 of 8

 

Northrop Grumman Corporation and Subsidiaries

Unaudited Pro Forma Condensed Combined
Statement of Income
Year Ended December 31, 2000
(In millions, except per share)

		Northrop						Pro Forma
		Grumman			Litton				Adjustments							Combined
Sales and service revenues		$	7,618			$	5,626			$		(61	)	(c)		$	13,183
Cost of sales
	Operating Costs		5,446				4,669					(10	)	(c)(d)(e)			10,105
	Administrative and general expenses		1,074				491					—					1,565
Operating margin			1,098				466					(51	)				1,513
Interest expense			(175	)			(105	)				(197	)	(f)			(477	)
Other, net			52				16					—					68
Income from continuing operations
	before income taxes		975				377					(248	)				1,104
Federal and foreign income taxes			350				151					(87	)	(g)			414
Income from continuing operations		$	625			$	226					(161	)				690
Less dividends paid
	to preferred shareholders											(25	)	(h)			(25	)
Income available to common shareholders										$		(186	)			$	665
Average shares basic			70.58														83.58
Average shares diluted			70.88														87.19
Basic earnings per share:
	Continuing operations	$	8.86													$	7.96
Diluted earnings per share:
	Continuing operations	$	8.82													$	7.91*

*	Calculated by dividing income from continuing operations by average shares diluted, which is calculated assuming preferred shares are converted to common shares, resulting in the most dilutive effect.

Page 6 of 8

Northrop Grumman Corporation and Subsidiaries

Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)

(a)		Adjustments to (i) record issuance of preferred and common stock, (ii) eliminate the equity of Litton, (iii) record the new financing of the Litton acquisition and the additional acquisition related costs, (iv) record refinancing of debt using the new credit facilities and (v) record assignment of the purchase price to assets and liabilities in conformance with Northrop Grumman accounting policies based upon the preliminary estimates of their respective fair values. Northrop Grumman is compiling data to determine the final allocation of the purchase price, a process which is expected to be completed by December 31, 2001.
(b)		Adjustment to record preliminary estimate of additional prepaid pension asset and reduction of postretirement benefit liability. Northrop Grumman is reviewing the actuarial data regarding the pension and retiree benefit plans and based on the results of that review, which is expected to be completed by December 31, 2001, further adjustments may be recorded.
(c)		Adjustment to eliminate intercompany sales and cost of sales transactions between Northrop Grumman and Litton.
(d)		Adjustment to amortize the preliminary estimate of goodwill and other purchased intangible assets arising out of the acquisition of Litton over an estimated weighted average life of 27 years on a straight line basis.
(e)		Adjustment to record revised pension income in conformance with Northrop Grumman actuarial pension assumptions and the restatement to fair value of Litton pension assets and liabilities.
(f)		Adjustment to record interest expense and the amortization of debt issuance costs on new financing for the acquisition of Litton at a weighted average rate of 7.2 and 7.5 percent for the quarter ended March 31, 2001 and the year ended December 31, 2000, respectively.
(g)		Adjustment to record income tax effects on pre-tax pro forma adjustments, using a statutory tax rate of thirty-five percent.
(h)		Adjusted, pro rata, for dividends to preferred shareholders using $7 per share dividend rate for redeemable preferred stock issued in the acquisition.

Page 7 of 8

 

Northrop Grumman Corporation and Subsidiaries

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Northrop Grumman Corporation (Registrant)
formerly NNG, Inc.

 

 

Date:    June 14, 2001

by /s/ Robert B. Spiker                                            Robert B. Spiker Corporate Vice President and Controller

Page 8 of 8