UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2003
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-16411
NORTHROP GRUMMAN CORPORATION
(Exact name of registrant as specified in its charter)
| DELAWARE | 95-4840775 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification 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)
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 ¨ |
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of stock, as of the latest practicable date.
As of July 30, 2003
| Common stock outstanding |
182,952,138 shares | |
| Preferred stock outstanding |
3,500,000 shares |
NORTHROP GRUMMAN CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
| (Unaudited) | ||||||
| $ in millions | June 30, 2003 |
December 31, 2002 | ||||
| Assets: |
||||||
| Cash and cash equivalents |
$ | 268 | $ | 1,412 | ||
| Accounts receivable, net of progress payments of $19,133 in 2003 and $16,152 in 2002 |
2,980 | 2,889 | ||||
| Inventoried costs, net of progress payments of $887 in 2003 and $988 in 2002 |
1,226 | 1,091 | ||||
| Deferred income taxes |
646 | 662 | ||||
| Prepaid expenses and other current assets |
144 | 160 | ||||
| Assets of businesses held for sale |
463 | 9,621 | ||||
| Total current assets |
5,727 | 15,835 | ||||
| Net property, plant and equipment |
3,920 | 3,605 | ||||
| Goodwill |
17,394 | 15,657 | ||||
| Other purchased intangibles, net of accumulated amortization |
||||||
| of $874 in 2003 and $760 in 2002 |
1,823 | 2,553 | ||||
| Prepaid retiree benefits cost and intangible pension asset |
3,465 | 3,618 | ||||
| Deferred income taxes |
439 | 174 | ||||
| Notes receivable and accrued interest |
482 | 98 | ||||
| Miscellaneous other assets |
738 | 726 | ||||
| Total other assets |
24,341 | 22,826 | ||||
| Total Assets |
$ | 33,988 | $ | 42,266 | ||
I-2
NORTHROP GRUMMAN CORPORATION AND SUBSIDIARIES
| (Unaudited) | ||||||||
| June 30, | December 31, | |||||||
| $ in millions | 2003 | 2002 | ||||||
| Liabilities and Shareholders’ Equity: |
||||||||
| Notes payable to banks |
$ | 28 | $ | 22 | ||||
| Current portion of long-term debt |
142 | 203 | ||||||
| Trade accounts payable |
1,300 | 1,427 | ||||||
| Accrued employees’ compensation |
1,040 | 1,018 | ||||||
| Advances on contracts |
1,046 | 1,006 | ||||||
| Contract loss provisions |
512 | 453 | ||||||
| Income taxes payable |
298 | 1,237 | ||||||
| Other current liabilities |
1,309 | 1,414 | ||||||
| Liabilities of businesses held for sale |
133 | 4,593 | ||||||
| Total current liabilities |
5,808 | 11,373 | ||||||
| Long-term debt |
6,412 | 9,398 | ||||||
| Accrued retiree benefits |
5,959 | 5,942 | ||||||
| Other long-term liabilities |
764 | 742 | ||||||
| Minority interest |
25 | 139 | ||||||
| Mandatorily redeemable preferred stock |
350 | 350 | ||||||
| Paid-in capital |
||||||||
| Preferred stock, 10,000,000 shares authorized; 3,500,000 shares issued and outstanding, reported above |
||||||||
| Common stock, 800,000,000 shares authorized; issued and outstanding: |
12,545 | 12,511 | ||||||
| Retained earnings |
3,169 | 2,870 | ||||||
| Unearned compensation |
(8 | ) | (11 | ) | ||||
| Accumulated other comprehensive loss |
(1,036 | ) | (1,048 | ) | ||||
| Total shareholders’ equity |
14,670 | 14,322 | ||||||
| Total Liabilities and Shareholders’ Equity |
$ | 33,988 | $ | 42,266 | ||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
I-3
NORTHROP GRUMMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| $ in millions, except per share | 2003 | 2002 | 2003 | 2002 | ||||||||||||
| Product sales and service revenues |
$ | 6,627 | $ | 4,231 | $ | 12,493 | $ | 8,162 | ||||||||
| Cost of product sales and service revenues |
||||||||||||||||
| Operating costs |
5,685 | 3,457 | 10,648 | 6,717 | ||||||||||||
| Administrative and general expenses |
551 | 420 | 1,126 | 778 | ||||||||||||
| Operating margin |
391 | 354 | 719 | 667 | ||||||||||||
| Interest income |
17 | 2 | 29 | 4 | ||||||||||||
| Interest expense |
(119 | ) | (105 | ) | (263 | ) | (214 | ) | ||||||||
| Other, net |
11 | 10 | 28 | 20 | ||||||||||||
| Income from continuing operations before income taxes and cumulative effect of accounting change |
300 | 261 | 513 | 477 | ||||||||||||
| Federal and foreign income taxes |
93 | 80 | 132 | 147 | ||||||||||||
| Income from continuing operations before cumulative effect of accounting change |
207 | 181 | 381 | 330 | ||||||||||||
| Income from discontinued operations, net of tax |
2 | 1 | 82 | 1 | ||||||||||||
| Loss on disposal of discontinued operations, net of tax |
(4 | ) | (5 | ) | ||||||||||||
| Income before cumulative effect of accounting change |
205 | 182 | 458 | 331 | ||||||||||||
| Cumulative effect of accounting change |
(432 | ) | ||||||||||||||
| Net income (loss) |
$ | 205 | $ | 182 | $ | 458 | $ | (101 | ) | |||||||
| Weighted average common shares outstanding, in millions |
182.93 | 112.84 | 182.81 | 112.12 | ||||||||||||
| Basic earnings (loss) per common share |
||||||||||||||||
| Continuing operations |
$ | 1.10 | $ | 1.55 | $ | 2.02 | $ | 2.83 | ||||||||
| Discontinued operations |
.01 | .01 | .45 | .01 | ||||||||||||
| Disposal of discontinued operations |
(.02 | ) | (.03 | ) | ||||||||||||
| Before cumulative effect of accounting change |
1.09 | 1.56 | 2.44 | 2.84 | ||||||||||||
| Cumulative effect of accounting change |
(3.85 | ) | ||||||||||||||
| Basic earnings (loss) per common share |
$ | 1.09 | $ | 1.56 | $ | 2.44 | $ | (1.01 | ) | |||||||
| Diluted earnings (loss) per share |
||||||||||||||||
| Continuing operations |
$ | 1.09 | $ | 1.52 | $ | 2.00 | $ | 2.79 | ||||||||
| Discontinued operations |
.01 | .01 | .45 | .01 | ||||||||||||
| Disposal of discontinued operations |
(.02 | ) | (.03 | ) | ||||||||||||
| Before cumulative effect of accounting change |
1.08 | 1.53 | 2.42 | 2.80 | ||||||||||||
| Cumulative effect of accounting change |
(3.79 | ) | ||||||||||||||
| Diluted earnings (loss) per share |
$ | 1.08 | $ | 1.53 | $ | 2.42 | $ | (.99 | ) | |||||||
| Dividends per common share |
$ | .40 | $ | .40 | $ | .80 | $ | .80 | ||||||||
| Dividends per mandatorily redeemable preferred share |
$ | 1.75 | $ | 1.75 | $ | 3.50 | $ | 3.50 | ||||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
I-4
NORTHROP GRUMMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
| Six months ended June 30, $ in millions | 2003 | 2002 | ||||||
| Paid-in Capital |
||||||||
| At beginning of year |
$ | 12,511 | $ | 4,451 | ||||
| Stock issued in purchase of businesses |
308 | |||||||
| Employee stock awards and options |
34 | 90 | ||||||
| 12,545 | 4,849 | |||||||
| Retained Earnings |
||||||||
| At beginning of year |
2,870 | 3,011 | ||||||
| Net income (loss) |
458 | (101 | ) | |||||
| Cash dividends |
(159 | ) | (102 | ) | ||||
| 3,169 | 2,808 | |||||||
| Unearned Compensation |
||||||||
| At beginning of year |
(11 | ) | (18 | ) | ||||
| Amortization of unearned compensation |
3 | 3 | ||||||
| (8 | ) | (15 | ) | |||||
| Accumulated Other Comprehensive Loss |
||||||||
| At beginning of year |
(1,048 | ) | (53 | ) | ||||
| Change in cumulative translation adjustment |
12 | 1 | ||||||
| (1,036 | ) | (52 | ) | |||||
| Total shareholders’ equity |
$ | 14,670 | $ | 7,590 | ||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
I-5
NORTHROP GRUMMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six months ended June 30, $ in millions | 2003 | 2002 | ||||||
| Operating Activities |
||||||||
| Sources of Cash—Continuing Operations |
||||||||
| Cash received from customers |
||||||||
| Progress payments |
$ | 3,348 | $ | 2,681 | ||||
| Other collections |
8,968 | 5,531 | ||||||
| Interest received |
12 | |||||||