Item 1. Business
Northrop Corporation was incorporated in Delaware in 1985. Effective May 18, 1994, Northrop Corporation was renamed Northrop Grumman Corporation. Northrop Grumman is an advanced technology company operating in the aerospace industry. The company designs, develops and manufactures aircraft, aircraft subassemblies and electronic systems for military and commercial use and designs and develops, operates and supports computer systems for scientific and management information. Additional information required by this Item is contained in Part II Item 7 of this Annual Report on Form 10-K.
NORTHROP GRUMMAN CORPORATION Item 2.

Item 2. Properties
The major locations, general status of the company's interest in the property and identity of the industry segments which use the property described, are indicated in the following table.
Location Property Interest Arlington, Virginia (1) (5) (a) Leased Benton, Pennsylvania (2) (b) Leased *Bethpage, New York (1) (2) (3) (5) (a) (b) (c) (d) Owned, Leased Bohemia, New York (3) (a) Owned, Leased Bridgeport, West Virginia (2) (a) (b) Owned, Leased Calverton, New York (2) (a) (b) (c) (d) (e) Owned Chandler, Arizona (1) (a) (b) Owned Compton, California (1) (b) (c) Owned, Leased El Segundo, California (1) (4) (a) (b) (c) (d) Owned, Leased Fairborn, Ohio (3) (a) (c) Leased Fort Tejon, California (1) (d) Owned, Leased Gardena, California (1) (c) Owned Glen Arm, Maryland (2) (b) Owned Grand Prairie, Texas (1) (a) (b) (c) (d) Owned, Leased Great River, New York (2) (a) (b) Owned Hawthorne, California (1) (2) (4) (5) (a) (b) (c) (d) Owned, Leased *Hicksville, New York (2) (a) (d) (e) Owned Hondo, Texas (3) (e) Leased Houston, Texas (3) (a) Leased Irvine, California (2) (d) Leased Kent, Washington (1) (c) Leased Lake Charles, Louisiana (1) (a) (b) (c) Leased Lawton, Oklahoma (3) (a) (c) Owned, Leased Lexington, South Carolina (1) (a) (c) Owned, Leased Los Angeles, California (1) (2) (5) (a) Leased Mayfield, Pennsylvania (1) (b) Owned Melbourne, Florida (2) (a) (b) (c) (e) Owned, Leased Milledgeville, Georgia (1) (b) (c) (e) Owned, Leased Mojave, California (1) (e) Owned, Leased Montebello, California (1) (c) Leased Montgomery, Pennsylvania (1) (b) Owned
NORTHROP GRUMMAN CORPORATION
New Town, North Dakota (2) (b) (c) Owned, Leased Newbury Park, California (5) (a) (b) (c) (d) Owned Norwood, Massachusetts (5) (b) (c) (e) Owned, Leased Palatine, Illinois (2) (c) Leased Palmdale, California (1) (a) (b) (c) (d) (e) Owned, Leased Perry, Georgia (1) (4) (a) (b ) (c) Owned Pico Rivera, California (1) (a) (b) (c) (d) Owned, Leased Portsmouth, Rhode Island (1) (b) (e) Owned, Leased Rolling Meadows, Illinois (2) (a) Owned, Leased Sherman, Texas (1) (b) Owned St. Augustine, Florida (1) (a) (b) (c) (e) Owned, Leased Stuart, Florida (1) (b) (c) Leased Sturgis, Michigan (1) (a) (b) (c) Owned, Leased Torrance, California (1) (b) (c) Owned, Leased Tulare, California (1) (b) Owned Warner Robins, Georgia (2) (3) (a) Owned, Leased Warren, Michigan (1) (b) Leased
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* Certain portions of the properties at each of these locations are leased or subleased to others. The company believes that in the aggregate the property covered by such leases or subleased to others is not material compared to the property actually utilized by the company in its business.
NORTHROP GRUMMAN CORPORATION
Following each described property are numbers indicating the industry segments utilizing the property:
(1) Military and Commercial Aircraft (2) Electronics and Systems Integration (3) Data Systems and Other Services (4) Missiles and Unmanned Vehicle Systems (5) General Corporate Asset
Following each described property are letters indicating the types of facilities located at each location:
(a) office (b) manufacturing (c) warehouse (d) research and testing (e) other
Government-owned facilities used or administered by the company consist of 10.2 million square feet at various locations across the United States. The company believes its properties are well-maintained and in good operating condition. Under present business conditions and the company's volume of business, productive capacity is currently in excess of requirements.
NORTHROP GRUMMAN CORPORATION
Item 3.

Item 3. Legal Proceedings
False Claims Act Litigation
On June 9, 1987, a Complaint, entitled U.S. ex rel, David Peterson and Jeff Kroll v. Northrop Corporation, was filed in the U.S. District Court for the Central District of California alleging violations by the Company of the False Claims Act in connection with the operation of petty cash funds, inspection, testing, and pricing for the MX Peacekeeper Missile program. On September 1, 1989, the government intervened and reduced the scope of the lawsuit by filing an amended complaint. The amended complaint does not completely specify the total amount being sought but, rather, seeks damages in excess of $1.2 million. On May 7, 1990, the Court ruled that the original plaintiffs may proceed with portions of the lawsuit that the government declined to include in the amended complaint. In 1994, the court granted summary judgment for the Company on the government's fraud allegations related to petty cash, integrated test stations, extended work week and experimental change orders. Trial on the remaining allegations is scheduled for March 1996. In addition, the Company is a party to a number of civil actions brought by private parties alleging violation of the False Claims Act in which the government has declined to intervene. These actions, which have been previously reported, relate to the MX Peacekeeper Missile, the Air Launched Cruise Missile and the Advanced Technology Bomber (B-2) programs. In a number of these actions, plaintiffs also allege employment related claims including claims of wrongful termination. Damages sought include claims for compensatory and punitive damages. A number of these civil actions were initially reported when it was unclear what position, if any, the government would take in the litigation. In light of the government's decision not to intervene or otherwise pursue the litigation, as well as the amounts involved, the cases will not be individually reported. Further, the Company learns from time to time that it has been named as a defendant in lawsuits which are filed under seal pursuant to the False Claims Act. Since these matters remain under seal, the Company does not possess sufficient information to accurately report on the particular allegations.
Walsh, et al. v. Northrop Grumman Corporation
In November 1994, a class action complaint was filed against Northrop Grumman Corporation, Grumman Corporation, Renso Caporali, Howard J. Dunn, Jr., Robert Denien and Robert E. Foster in the U.S. District Court for the Eastern District of New York, Case No. CV 94-5105 (Platt C.J.). A first amended complaint was filed on November 29, 1994 alleging that Grumman Corporation's March 8 and April 4, 1994 Form 14D-9 filings with the Securities and Exchange Commission incorporated a statement concerning the Grumman Severance Plan which violated Sections 10(b) and 14(e) of the Securities and Exchange Act of 1934 (the "Act") and Rule 10b-5 of the Rules and Regulations under the Act. The complaint also contains a cause of action for equitable estoppel based upon the same statement and plaintiffs' alleged reliance thereon. The complaint also alleges that the trustees of Grumman's Investment Plan violated their fiduciary obligations by voting the Plan's shares in favor of the merger without consulting the class members. The complaint seeks an order enjoining the defendants from amending or discontinuing the Severance Plan for a period of thirty (30) months from the date of the merger and an order mandating that defendants permit class members who have accepted voluntary termination with severance pay to rescind their elections. On December 8, 1994 the court denied plaintiffs' application for a preliminary injunction but declined to dismiss the action. On April 7, 1995 the court granted plaintiffs' motion to amend their complaint to add a claim for damages based on post-acquisition changes to Grumman benefit plans. In July 1995, the court certified a class of plaintiffs consisting of all employees who, at the time of the tender offer, were Grumman employees, owned Grumman stock either directly or beneficially through the Employee Investment Plan, and were injured as a result of defendants conduct. Absent dispositive motions, this matter will proceed to trial in late 1996 or early 1997. The defendants intend to vigorously defend this litigation and the Company does not expect this matter to have a material adverse effect on its financial condition.
U.S. Government Investigation
The Company, as a government contractor, is from time to time subject to U.S. Government investigations relating to its operations. Government contractors that are found to have violated the False Claims Act, or are indicted or convicted for violations of other Federal laws, or are considered not to be responsible contractors may be suspended or debarred from, government contracting for some period of time. Such convictions could also result in fines. Given the Company's dependence on government contracting, suspension or debarment could have a material adverse effect on the Company. On May 3, 1995 federal agents executed search warrants at the Military Aircraft Division facilities in Hawthorne and El Segundo, California. Since that time, the Company has learned that the United States Attorney for the Central District of California is conducting a Grand Jury investigation of the F/A-18 and Targets Programs at the Military Aircraft Division. Although the Government has declined to inform the Company of the details of the investigation, it has confirmed that there are no issues regarding flight safety.
NORTHROP GRUMMAN CORPORATION
Executive Officers of the Registrant
NORTHROP GRUMMAN CORPORATION
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders No information is required in response to this Item.
PART II
Item 5.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The information required by this Item is contained in Part II, Item 8 of this Annual Report on Form 10-K.
Item 6.

Item 6. Selected Financial Data The information required by this Item is contained in Part II, Item 7

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Business Conditions Northrop Grumman's industry segments - military and commercial aircraft, electronics and systems integration, data systems and other services, and missiles and unmanned vehicle systems (MUVS) - are each a factor in the broadly defined aerospace industry. While Northrop Grumman is subject to the usual vagaries of the marketplace, it is also affected by the unique characteristics of the aerospace industry and by certain elements peculiar to its own business mix. In the second quarter of 1994 the company purchased the outstanding common stock of Grumman Corporation (Grumman) for $2.1 billion. Northrop Corporation was renamed Northrop Grumman Corporation effective May 18, 1994. In August 1994 the company purchased the remaining 51 percent interest in Vought Aircraft Company (Vought) for $130 million. The company had purchased a 49 percent interest in Vought in 1992. As a result of these acquisitions the company reorganized, effective January 1, 1995, into five operating divisions - B-2 Division, Military Aircraft Division, Commercial Aircraft Division(CAD), Electronics and Systems Integration Division(ESID) and the Data Systems and Services Division(DSSD). To further strengthen and streamline operations, the B-2 and Military Aircraft Divisions were combined, effective January 1, 1996. The combined division has been designated the Military Aircraft Systems Division (MASD). Northrop Grumman is one of the major companies that compete for the relatively small number of large, long-term programs that characterize both the defense and commercial segments of the aerospace business. It is common in the aerospace industry for work on major programs to be shared between a number of companies. A company competing to be a prime contractor can turn out to be a subcontractor. It is not uncommon to compete with customers, and to simultaneously be both a supplier to and customer of a given competitor. Boeing, Lockheed Martin and McDonnell Douglas are the largest companies in the aerospace industry at this time. Northrop Grumman also competes against many other companies for a number of large and smaller programs, notably in the electronics and systems integration areas. Competition is intense, yet the nature of major aerospace programs, conducted under binding contracts, allows companies that perform well to benefit from a level of program continuity unknown in many industries. Thus, intense competition and long operating cycles are both characteristic of the industry's - and Northrop Grumman's - business. The B-2 bomber, for which the company is the prime contractor, is Northrop Grumman's largest program. The MASD headquartered in El Segundo, California is responsible for final assembly of the B-2's airframe and systems integration (in Palmdale, California), and the manufacture of the fuselage and parts of the B-2's navigation and electronic warfare/situation awareness system. Major subcontractors include Boeing, which makes the aft center section, outboard wing sections, landing gear and fuel system, and GM Hughes, which produces the radar systems. The Air Force currently plans to operate two B-2 bomber squadrons of eight aircraft each with an additional four aircraft available to fill in for those in depot for periodic maintenance.
NORTHROP GRUMMAN CORPORATION
The MASD is also the principal subcontractor on the McDonnell Douglas F/A-18 program. The F/A-18 is a fighter/ground-attack aircraft that can carry either one or two crew members. It is principally deployed by the U.S. Navy on aircraft carriers, but several other nations have purchased the aircraft and use it as a land-based combat aircraft. The company builds approximately 40 percent of the aircraft including the center and aft fuselage sections and vertical tails. Of the versions of the F/A-18 currently in production, the C is a single-seat combat aircraft that was first delivered to the Navy in 1987 and the D is a two-seat version principally used for training. The F/A-18E/F is an enhanced version currently under development for the U.S. Navy as its next generation multi- mission aircraft. MASD also produces aerial targets, principally the BQM-74/Chukar. The BQM-74 series has been in production since the 1960s. It is used by the Navy for air defense training, gunnery practice and weapon system evaluation. The company builds the airframe and the electronics that are used to guide the drone with the drone's engine being produced by Williams International. The CAD manufactures portions of the Boeing 747, 757, 767 and 777 jetliners, the Gulfstream IV and V business jets, and the McDonnell Douglas C-17. Northrop Grumman has been a principal airframe subcontractor for the Boeing 747 jetliner since the program began in 1966. The company produces the fuselage and aft body section for the 747 as well as cargo and passenger doors, the vertical and horizontal body stabilizers, floor beams and smaller structural components. The majority of the Boeing jetliner work is performed at CAD's primary production sites in Hawthorne, California; Grand Prairie, Texas; and Stuart, Florida. CAD manufactures engine nacelles for the Gulfstream IV and other business jets and recently initiated production of the wings for Gulfstream's newest business jet, the Gulfstream V. CAD also produces the empennage, engine nacelles and control surfaces for the McDonnell Douglas C-17 program, the U.S. Air Force's most advanced airlifter, at various locations. The work performed on the C-17, Gulfstream IV and V, 757, 767, 777 and some of the components of the 747 were added as a result of the Grumman and Vought acquisitions. The Northrop Grumman designed and built all-weather E-2C Hawkeye Airborne Early Warning Command and Control aircraft has been in active service with the U.S. Navy since 1973 and is also employed by the air forces of five other nations. The E-2C is produced by the company's ESID. ECM denotes electronic countermeasures equipment manufactured by the ESID. The largest program in this business area is the AN/ALQ-135, which is an internally mounted radar jammer deployed on fighter aircraft as part of that aircraft's Tactical Electronic Warfare System. The AN/ALQ-162 Shadowbox is a jammer built specifically to counter continuous wave radars. The AN/ALQ-162 has been installed on the AV-8B and certain foreign F/A-18 aircraft. It is also being deployed on U.S. Army helicopters and special mission aircraft and it has been sold to the air forces of three other nations. ESID also produces the E-8 Joint Surveillance Target Attack Radar System (Joint STARS). Joint STARS detects, locates, classifies, tracks and targets potentially hostile ground movement in all weather. It is designed to operate around the clock, in constant communication through secure data links with air force command posts, army mobile ground stations or centers of military analysis far from the point of conflict. The Joint STARS platform is a remanufactured Boeing 707-300 airframe. The 707 is remanufactured at Northrop Grumman's Lake Charles, Louisiana site. Final installation of electronics and testing are performed at the ESID integration and test facility in Melbourne, Florida.
NORTHROP GRUMMAN CORPORATION
The ESID, as the prime contractor to the U.S. Army, is developing a "brilliant" anti-armor submunition, designated as BAT, with production scheduled to commence in 1998. BAT is a three foot long, 44 pound, wide- area-attack submunition that will be used to disable and destroy armored vehicles and trucks. BATs are meant to be carried and dispensed by a larger missile. BATs are designed to be ejected over an armored vehicle column or attacking formation. Each BAT has an infrared sensor that can home in on the heat generated by a vehicle's engine, and an acoustic sensor that can home in on the noise created by the tank or truck's engine. Northrop Grumman's DSSD designs, develops, operates and supports computer systems for scientific and management information. Services provided include systems integration, systems service, information conversion and training for federal, state and local governments and private industry. DSSD also provides military base support functions and aircraft maintenance at a number of U.S. Government facilities. Tables of contract acquisitions, sales and funded order backlog by major program, follow and complement industry segment data. B-2, F/A-18, Boeing Jetliners (the 747, 757, 767 and 777) and C-17 are currently the major programs of the military and commercial aircraft industry segment. E- 2C Hawkeye, ECM, E-8 Joint STARS and BAT are included in the electronics and systems integration industry segment. The Tri-Service Standoff Attack Missile (TSSAM), the segment's principal program in 1994 and prior years, and aerial targets are included in the company's MUVS industry segment. The "all other" category includes the data systems and other services as well as the balance of the company's numerous other contracts, classified and unclassified. Individual companies prosper in the competitive aerospace/defense environment according to their ability to develop and market innovative products. They must also have the ability to provide the people, facilities, equipment and financial capacity needed to deliver those products with maximum efficiency. It is necessary to maintain, as the company has, sources for raw materials, fabricated parts, electronic components and major subassemblies. In this manufacturing and systems integration environment, effective oversight of subcontractors and suppliers is as vital to success as managing internal operations. Northrop Grumman's operating policies are designed to enhance these capabilities. The company also believes that it maintains good relations with its employees, a relatively small number of whom are covered by collective bargaining agreements. U.S. Government programs in which Northrop Grumman either participates, or strives to participate, must compete with other programs for consideration during our nation's budget formulation and appropriation processes. As a consequence of the end of the Cold War and pressure to reduce the federal budget deficit, the U.S. defense budget is not expected to increase substantially in the near term. Budget decisions made in this environment will have long-term consequences for the size and structure of Northrop Grumman and the entire defense industry. An important factor in determining Northrop Grumman's ability to successfully compete for future contracts will be its cost structure vis-a-vis other bidders.
NORTHROP GRUMMAN CORPORATION
Although the ultimate size of future defense budgets remains uncertain, the defense needs of the nation are expected to provide substantial research and development (R&D) and other business for the company to pursue well into the future. Northrop Grumman has historically concentrated its efforts in such high technology areas as stealth, airborne surveillance, battle management, precision weapons and systems integration. Even though a high priority has been assigned by the Department of Defense to the company's major programs, there remains the possibility that one or more of them may be reduced, stretched or terminated. In the commercial aircraft market, many airlines have recently deferred deliveries and purchases of new aircraft. This has caused The Boeing Company to reduce scheduled production of various jetliners, including the 747. As a result, Northrop Grumman's subcontract workload for the 747, the company's largest commercial program, was stretched out beginning in late 1993, with deliveries declining 43 percent in 1994, with a further 23 percent decline in 1995. Business conditions in the commercial aircraft industry appear to be on the upswing. The three major producers of jetliners recorded more than twice the number of new aircraft orders in 1995 than in 1994. This positive trend is expected to continue in 1996, potentially signifying a new commercial airplane buying cycle. Northrop Grumman, with its involvement on various Boeing jetliners, remains optimistic about the long-term prospects for its commercial structures business. Northrop Grumman pursues new business opportunities when justified by acceptable financial returns and technological risks. The company examines opportunities to acquire or invest in new businesses and technologies to strengthen its traditional business areas. Northrop Grumman continues to capitalize on its technologies and skills by entering into joint ventures, partnerships or associations with other companies.
NORTHROP GRUMMAN CORPORATION
NORTHROP GRUMMAN CORPORATION
NORTHROP GRUMMAN CORPORATION
Northrop Grumman, as well as many other companies in the defense industry, suffered the effects of the Department of Defense's practice in the 1980s of structuring new, high-risk research and development contracts, such as TSSAM, as fixed-price or capped cost-reimbursement type contracts. Although Northrop Grumman has stopped accepting these types of contracts, it has experienced financial losses on TSSAM and other similar programs acquired under them in the past. The company received a termination for convenience notice on the TSSAM program in February 1995. In the event of termination for convenience, contractors are normally protected by provisions covering reimbursement for all costs incurred subsequent to termination. The company does not expect that the TSSAM termination will have a material financial effect on the company's financial position. Prime contracts with various agencies of the U.S. Government and subcontracts with other prime contractors are subject to a profusion of procurement regulations, with noncompliance found by any one agency possibly resulting in fines, penalties, debarment or suspension from receiving additional contracts with all agencies. Given the company's dependence on U. S. Government business, suspension or debarment could have a material adverse affect on the company's future. Moreover, these contracts may be terminated at the Government's convenience as was done with the TSSAM program. While Northrop Grumman conducts most of its business with the U.S. Government, principally the Department of Defense, commercial sales still represent a significant portion of total revenue. Federal, state and local laws relating to the protection of the environment affect the company's manufacturing operations. The company has provided for the estimated cost to complete remediation where it is probable that the company will incur such costs in the future, including those for which it has been named a Potentially Responsible Party (PRP) by the Environmental Protection Agency or similarly designated by other environmental agencies. The company has been designated a PRP under federal Superfund laws at 11 hazardous waste sites and under state Superfund laws at seven sites. It is difficult to estimate the timing and ultimate amount of environmental cleanup costs to be incurred in the future due to the uncertainties, regarding the extent of the required cleanup and the status of the law, regulations and their interpretations. Nonetheless, to assess the potential impact on the company's financial statements, management estimates the total reasonably possible remediation costs that could be incurred by the company. Such estimates take into consideration the professional judgment of the company's environmental engineers and, when necessary, consultation with outside environmental specialists. In most instances, only a range of reasonably possible costs can be estimated. However, in the determination of accruals the most probable amount is used when determinable and the minimum is used when no single amount is more probable. The company records accruals for environmental cleanup costs in the accounting period in which the company's responsibility is established and the costs can be reasonably estimated. Management estimates that at December 31, 1995, the reasonable range of future costs for environmental remediation, including Superfund sites, is $39 million to $63 million, of which $41 million has been accrued. The amount accrued has not been offset by potential recoveries from insurance carriers or other PRPs. Should other PRPs not pay their allocable share of remediation costs the company may have to incur costs in addition to those already estimated and accrued. The company is making the necessary investments to comply with environmental laws; the amounts, while not insignificant, are not considered material to the company's financial position or results of its operations.
NORTHROP GRUMMAN CORPORATION
Measures of Volume
Contract acquisitions tend to fluctuate and are determined by the size and timing of new and add-on orders. The effects of multi-year orders and/or funding can be seen in the highs and lows shown in the following table. The funded order backlog of Grumman and Vought on the date the companies were acquired are reflected as acquisitions in 1994. The 757, 767, 777 (included in Boeing Jetliners category), E-2, E-8 Joint STARS, and C-17 programs were acquired as part of Grumman and Vought. B-2 acquisitions in 1995 include incremental funding for ongoing development work, spares and other customer support for the 20 operational aircraft program. In 1994 $2.4 billion of funding to complete the last five B-2 production aircraft was received as well as incremental funding for ongoing development work, spares and other customer support. The company still stands to gain future new post-production business, such as airframe depot maintenance, repair of components, operational software changes and product improvement modifications. The debate over the future of the B-2, which is built in the nation's only active bomber producing facility, is now taking place. Without future production orders the nation's multi-billion dollar investment in this capability will be disassembled and become retrievable only at a large additional cost.
Contract Acquisitions
$ in millions 1995 1994 1993 1992 1991 B-2 $ 475 $ 3,646 $ 2,632 $ 2,235 $ 4,794 E-8 Joint STARS 608 1,151 Boeing Jetliners 464 1,177 242 76 870 E-2 475 1,136 F/A-18C/D 650 211 89 576 564 F/A-18E/F 238 249 743 131 10 ECM 590 323 445 361 431 C-17 208 434 BAT 87 88 90 147 82 TSSAM (153) 157 248 349 369 All other 950 3,393 318 289 432 $ 4,592 $11,965 $ 4,807 $ 4,164 $ 7,552
Orders for 128 F/A-18C/D shipsets were finalized in 1995. Acquisitions in 1994 and 1993 included long-lead funding received from the McDonnell Douglas Corporation for new F/A-18C/D shipsets. Advance funding for the next phase of the 747 jetliner programs was received from the Boeing Company in 1995. In 1993, additional contract value was received for, among other things, extending the delivery schedule of the current phase of the 747 into 1996. ECM acquisitions for 1995 included an award of $279 million from the United Kingdom Ministry of Defence to develop and produce directed infrared countermeasures systems.
NORTHROP GRUMMAN CORPORATION
The balance of Grumman and Vought funded order backlog at the dates of acquisition, for those programs not listed in the table, is included in the "all other" category and accounts for the major increase in 1994 over 1993. Year-to-year sales vary less than contract acquisitions and reflect performance under new and ongoing contracts. The 1994 results of operations include Grumman and Vought since the acquisitions in April and August 1994, respectively. Comparative results for 1993 and prior do not include Grumman and Vought data. Sales for 1995 were the highest in the company's history and were 2 percent higher than in 1994. Without the Grumman and Vought acquisitions, sales for 1994 would have declined 10 percent from the 1993 level.
Net Sales $ in millions 1995 1994 1993 1992 1991 B-2 $1,914 $2,392 $2,881 $3,212 $3,100 E-8 Joint STARS 613 345 Boeing Jetliners 569 483 531 549 540 E-2 566 409 F/A-18C/D 418 309 362 492 562 F/A-18E/F 404 508 279 118 10 ECM 351 357 372 378 415 C-17 244 121 BAT 90 88 100 135 71 TSSAM 81 276 179 265 390 All other 1,568 1,423 359 401 606 $6,818 $6,711 $5,063 $5,550 $5,694
The decreasing trend in the B-2 revenues from both EMD and production work continued in 1995. The level of EMD effort, included in amounts reported as contract R&D, constituted 30 percent of the total B-2 revenue, up from 26 percent in 1994 and 28 percent in 1993. Current planning data indicate that the level of overall B-2 revenue will decline roughly 20 percent per year for the remainder of the decade. Sales increased in 1995 for the C/D version of the F/A-18 program with an increase of deliveries to 56, as compared to 42 shipsets delivered in 1994 and the 52 delivered in 1993. In 1996 and 1997, the company currently plans to deliver 68 and 36 F/A-18C/D shipsets respectively. A total of seven shipsets were delivered under the F/A-18E/F EMD contract in 1995. F/A-18E/F revenue is expected to drop below $300 million in 1996 with the final three shipsets for the EMD phase of the program scheduled for delivery. The Low Rate Initial Production phase of the F/A-18E/F program is expected to begin in 1996. Deliveries of 747 center fuselages were 24 in 1995, 31 in 1994 and 54 in 1993. Twenty-eight fuselages are expected to be delivered in 1996. The electronics and systems integration segment revenues increased 40 percent in 1995 as a result of higher revenues on the E-2 Hawkeye and E-8 Joint STARS programs. The increase in 1994 was due to the acquisition of Grumman which more than offset the decrease from lower BAT development revenue and lower ECM sales. Reduced electronics segment revenues in 1993 stemmed from lower BAT development revenue, lower MX Peacekeeper sales and lower sales in the sensor product area.
NORTHROP GRUMMAN CORPORATION
The year-end funded order backlog is the sum of the previous year-end backlog plus the year's contract acquisitions minus the year's sales. Backlog is converted into the following years' sales as costs are incurred or deliveries are made. It is expected that approximately 50 percent of the 1995 year-end backlog will be converted into sales in 1996.
Funded Order Backlog $ in millions 1995 1994 1993 1992 1991 B-2 $ 3,736 $ 5,175 $ 3,921 $ 4,170 $ 5,147 E-8 Joint STARS 801 806 Boeing Jetliners 1,312 1,417 723 1,012 1,485 E-2 637 727 F/A-18C/D 577 345 443 716 632 F/A-18E/F 54 220 477 13 ECM 747 506 540 467 484 C-17 277 313 BAT 17 20 20 30 18 TSSAM 14 248 367 298 214 All other 1,775 2,396 428 469 581 $ 9,947 $12,173 $ 6,919 $ 7,175 $ 8,561
Total U.S. Government orders, including those made on behalf of foreign governments (FMS), comprised 77 percent of the backlog at the end of 1995 compared with 80 percent at the end of 1994 and 89 percent at the end of 1993. Total foreign customer orders, including FMS, accounted for 10 percent of the backlog at the end of 1995 compared with nine percent in 1994 and three percent in 1993. Domestic commercial business in backlog at the end of 1995 was 16 percent, 14 percent at the end of 1994 and 11 percent at the end of 1993.
Measures of Performance
The company's operating profit for 1995 was a record high and has improved in its electronics and systems integration segment for the last two years. These improvements stem from both increased revenue and improved operating margin rates in that segment. Company-wide efforts to reduce costs, install tighter business controls, improve cash management, dispose of excess assets and more effectively utilize productive assets, are all goals aimed at contributing to the future success of Northrop Grumman. This financial report demonstrates the degree to which the accomplishment of these goals is being achieved. Operating profit in the military and commercial aircraft segment decreased in 1995 primarily as a result of lower overall sales volume and $31 million in expenditures for company sponsored research and development for commercial aerostructures. The rate and amount of operating margin on the F/A-18E/F increased in 1995 due to an increase in the rate of operating margin being recorded on the EMD contract, which was made during the third quarter. This resulted from the continuing evaluation of the overall operating margin to be earned on this phase of the program. The increase on the F/A-18E/F more than offset reduced operating margin earned, on higher sales volume, for the F/A-18C/D.
NORTHROP GRUMMAN CORPORATION
The military and commercial aircraft industry segment operating profit increased to its highest level ever in 1994, exceeding the previous high reached in 1993, as margin rates improved on the B-2 and F/A-18 programs. The rate and amount of operating margin recorded on the F/A-18E/F increased in 1994 due to an approximately one and one half percent increase in the rate of operating margin being recorded on the EMD contract. The F/A-18 program operating margin improved in 1994 and 1993 despite reduced F/A- 18C/D shipset deliveries in each of these years versus the previous year. The rate and amount of operating margin recorded on the B-2 production contract increased in 1995 as a result of negotiated contract adjustments and a revised estimate of the overall operating margin expected to be earned. This increase was offset by lower operating margin recorded on decreased revenue on the other phases of the B-2 program. B-2 operating margin improved in 1994 as the amount of margin recorded on the delivery of four aircraft more than offset reduced operating margin from lower production and EMD sales. Following the award of the last increment of production funding for the B-2, the company began recording future operating margin increases on all production aircraft as these units are delivered and accepted by the customer. At the time each unit is delivered an assessment is made of the status of the production contract so as to estimate the amount of any probable additional margin available beyond that previously recognized. That unit's proportionate share of any such unrecognized remaining balance will then be recorded. In this fashion it is believed that margin improvements will be recognized on a more demonstrable basis. The current 15 production units are scheduled for their initial delivery over a five year period, which began in December 1993. All but two units (four equivalent units for this purpose) will be returned for scheduled retrofitting with final deliveries beginning in 1997 and ending in 2000. It is anticipated that the total of 30 equivalent units will be delivered at a rate of from three to five per year. Fewer deliveries and cost increases related to a stretch-out of the current production contract for the Boeing 747 jetliner resulted in a lower rate and amount of operating margin in 1995. The current phase of the program is now expected to be completed in the fall of 1996. A reduction in the rate of operating margin due to increased costs allocated, as a result of establishing a separate commercial aircraft operating element and fewer deliveries than in 1993, caused decreased operating profit on the 747 program in 1994. Operating profit in the electronics and systems integration segment reached a record level in 1995. This was a result of an increased rate of operating margin and higher sales volume on the E-2 Hawkeye and increased sales volume on the E-8 Joint STARS program. The electronics and systems integration segment operating profit increased in 1994 due primarily to the addition of the E-2 Hawkeye, E-8 Joint STARS and various other military electronics programs associated with the Grumman acquisition and an increased rate of margin recorded in the company's electronic countermeasures business, which more than offset the $8 million in provisions recorded by the ESID-Norwood operation for unrecoverable costs incurred. The 13 percent sales decline in the electronics and systems integration segment for 1993 from the level achieved in 1992 was accompanied by an 11 percent decline in operating profit. Lower margins in the sensor product area and on the BAT program more than offset the increase in ECM operating margin. A loss provision of $20 million was made during 1994 on the TSSAM development contract and followed a similar provision of $201 million in 1993. The recording of the expected loss from the performance of this long-term fixed-price R&D contract caused major losses in the MUVS segment during three of the last five years. Production delays caused increased amounts of sustaining labor to be absorbed by the development phase of the program in which the company has invested over $600 million. The ultimate loss on this contract will depend on the resolution of pending claims against the U.S. Government. The company is unable to predict whether it will realize some or all of its claims against the U.S. Government from the TSSAM contract. The company does not expect the termination of the program to have a material adverse financial impact on the company.
NORTHROP GRUMMAN CORPORATION
Operating margin in 1995 included $23 million of pension income compared with $36 million in 1994, and $71 million in 1993. Also contributing to the change from net retiree benefit income in 1993 to a net retiree benefit cost in 1994 and 1995 was the increase in the cost of providing retiree health care and life insurance benefits - $87 million in 1995 versus $69 million in 1994 and $32 million in 1993. A major contributor to the net retiree benefit cost was the addition of the Grumman and Vought retiree plans in 1994. Operating margin in 1994 was reduced by $282 million to record the effect of an early retirement incentive program. The Financial Accounting Standards Board's (FASB) accounting standard No. 106 - Employers' Accounting for Postretirement Benefits Other Than Pensions - was adopted by the company in 1991. The liability representing previously unrecognized costs of $145 million for all years prior to 1991 was recorded as of January 1, 1991, with an after-tax effect on earnings of $88 million or $1.86 per share. In 1994 the company recorded a $42 million pretax charge for the planned disposal of excess real estate and other assets. This was a result of the company's continuing efforts to reduce operating costs and dispose of assets which have become excess due to changes in the company's business strategy. This charge is reported in Other Deductions in the Consolidated Statements of Income. Interest expense increased $28 million in 1995, following a $71 million increase in 1994 after declining $9 million in 1993. The increases in 1995 and 1994 came primarily from the issuance of debt to finance the acquisition of Grumman. Total debt at December 31, 1995 stood at $1.4 billion compared to $1.9 billion at the end of 1994 and $160 million at the end of 1993. In 1991 the company adopted FASB standard No. 109 - Accounting for Income Taxes - and recorded, as of January 1, 1991, a benefit of $21 million, or 43 cents per share. As described in the accounting policy footnote to the financial statements, any future change in the tax rate would result in the immediate recognition in current earnings of the cumulative effect on deferred tax assets and liabilities. The company's effective federal income tax rate was 38.4 percent in 1995, 46.2 percent in 1994 and 43.5 percent in 1993. The decrease in the 1995 rate was due to a reduction in the ratio of expenses not deductible for income taxes to the tax provision at the statutory rate of 35 percent. The change in the 1994 rate was caused by an increase in the amount of expenses not deductible for income taxes, primarily the amortization of goodwill. The rate for 1993 would have been 31.8 percent but for the effects of the retroactive application of The Revenue Reconciliation Act of 1993. The one percentage point increase in the federal statutory income tax rate, now 35 percent, required the redetermination of the December 31, 1992 deferred tax asset and liability balances. This redetermination added $18 million to 1993's tax provision thereby reducing earnings per share by 38 cents. During 1989, final regulations were issued concerning the research tax credit. The company had taken a conservative approach in calculating its tax provisions since 1981 pursuant to uncertain proposed regulations. An exhaustive study was undertaken throughout the company to redetermine qualifying expenditures in compliance with the final regulations so as to recalculate prior years' tax credits and amend its tax returns as appropriate. The benefit resulting from the conclusion of that study was the $90 million in additional research credits recognized in the determination of the 1991 effective tax rate of 3.2 percent.
NORTHROP GRUMMAN CORPORATION
Measures of Liquidity and Capital Resources The improvement of the company's financial condition and liquidity continued in 1995. Over the last three years operating cash flows have averaged over $500 million annually. The $744 million of cash flow from operations in 1995 was an increase of $303 million over 1994 which was an increase of $61 million over 1993 which in turn was a $96 million increase over that of 1992. The trend and relationship of sales volume with accounts receivable and inventoried cost balances, before and after the benefit of progress payments, is a useful measure in assessing liquidity. In 1993 the company's net investment in these balances represented 27 percent of sales. It rose to 33 percent at the end of 1994 with the acquisition of Grumman and Vought before decreasing to 29 percent at year-end 1995. The following table is a condensed summary of the detailed cash flow information contained in the Consolidated Statements of Cash Flows.
Year ended December 31 1995 1994 1993 1992 1991 Cash came from Customers 96% 71% 99% 98% 100% Lenders 2% 29% 1% 2% Buyers of assets/other 2% 100% 100% 100% 100% 100% Cash went to Employees and suppliers of services and materials 83% 65% 89% 93% 88% Sellers of assets 2% 18% 1% Lenders 12% 15% 8% 3% 9% Suppliers of facilities/other 2% 1% 2% 2% 2% Shareholders 1% 1% 1% 1% 1% 100% 100% 100% 100% 100%
The increased cash received from lenders in 1994 resulted from the acquisition of Grumman, which was financed mainly through new borrowings. Other important indicators of short-term liquidity are the trend in working capital, the current ratio, and the ratio of long-term debt to shareholders' equity. This information is reported in the table captioned Selected Financial Data. In connection with the financing of the Grumman acquisition the company, in April 1994, replaced the $400 million credit agreement with a new $2.8 billion Credit Agreement. The new facility provided for $600 million, available on a revolving credit basis through March 1999 and a $2.2 billion term loan payable through March 1999. The Credit Agreement was amended in May 1994 to increase the revolving credit line to $800 million and reduce the term loan to $2 billion. In October 1994, the company issued $350 million of notes due in 2004 and $250 million of debentures due in 2024 pursuant to a public offering. The net proceeds from the offering, along with other available funds, were used to prepay $900 million in addition to paying the $100 million September quarterly installment due under the term loan facility. In December 1994, the company amended the Credit Agreement to provide for the repayment of the remaining $1 billion balance of the term loan in 14 quarterly installments of $62.5 million plus interest beginning in September 1995, with a final installment of $125 million due in March 1999. Cash flow from operations during 1994 enabled the company to prepay the $160 million of notes payable to institutional investors due in 1995 and acquire, in the open market, $58 million of notes due in 1999, while paying a net premium of $5 million for the early payments of these notes. The charge for the premium is included in Other Deductions in the Consolidated Statements of Income. Cash flow from operations in 1995 was sufficient to allow the company to make the $125 million required term loan payment as well as $312 million in voluntary payments for amounts which were due through March 1997. During 1995 the company entered into an agreement with a financial institution to sell designated pools of its commercial accounts receivable, in amounts up to $75 million. The company acts as an agent for the purchaser by performing record keeping and collections functions. At December 31, 1995, $34 million of accounts receivable had been sold. On January 3, 1996 the company entered into a definitive agreement to acquire the defense and electronics systems business of Westinghouse Electric Corporation for $3 billion in cash. The company has obtained bank commitments totaling $4.8 billion to finance the transaction and replace its current credit agreement. The sale, which is expected to close in March 1996, is subject to normal governmental and regulatory reviews. Any future near-term borrowing needs will be met through the use of short-term credit lines and the company's revolving credit agreement. To provide for long-term liquidity the company believes it can obtain additional capital from such sources as: the public or private capital markets, the further sale of assets, sale and leaseback of operating assets, and leasing rather than purchasing new assets. The cash improvement program underway throughout the company has produced favorable results, with the expectation that further efforts will result in minimizing, the need to incur additional borrowings during 1996. Cash generated from operations is expected to be sufficient in 1996 to service debt, finance capital expansion projects and continue paying dividends to the shareholders. Capital expenditure commitments at December 31, 1995, were approximately $110 million including $2 million for environmental control and compliance purposes. The company will continue to provide the productive capacity to perform its existing contracts, dispose of assets no longer needed to fulfill operating requirements, prepare for future contracts and conduct R&D in the pursuit of developing opportunities. While these expenditures tend to limit short-term liquidity, they are made with the intention of improving the long-term growth and profitability of the company.
New Accounting Standards During 1995 the company adopted the new FASB No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The adoption thereof had no material effect on the company's financial position or operating results. In October 1995, the Financial Accounting Standards Board issued FASB No. 123 - Accounting for Stock-Based Compensation. This standard changes the manner in which compensation for employee stock options is measured and reported. The company's management is presently evaluating the impact of this standard on the company's financial statements to determine if it will adopt this standard. The company must decide whether or not to adopt this new standard by the end of the first quarter of 1996.
NORTHROP GRUMMAN CORPORATION
NORTHROP GRUMMAN CORPORATION Item 8.

Item 8. Financial Statements and Supplementary Data
NORTHROP GRUMMAN CORPORATION
The accompanying notes are an integral part of these consolidated financial statements.
NORTHROP GRUMMAN CORPORATION
The accompanying notes are an integral part of these consolidated financial statements
NORTHROP GRUMMAN CORPORATION
The accompanying notes are an integral part of these consolidated financial statements.
NORTHROP GRUMMAN CORPORATION
NORTHROP GRUMMAN CORPORATION
The accompanying notes are an integral part of these consolidated financial statements
NORTHROP GRUMMAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation The consolidated financial statements include the accounts of the corporation and its subsidiaries. All material intercompany accounts, transactions and profits are eliminated in consolidation. The company's financial statements are in conformity with generally accepted accounting principles. The preparation thereof requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information and actual results could differ from those estimates.
Nature of Operations Northrop Grumman is a major producer of military and commercial aircraft sub-assemblies and defense electronics and is the prime contractor on the U.S. Air Force B-2 Stealth Bomber. The company operates in the military and commercial aircraft, electronics and systems integration, data systems and other services, and missiles and unmanned vehicle systems industry segments within the broadly defined aerospace industry. The majority of the company's products and services are sold to the U.S. Government and the company is therefore affected by the federal budget process and the competition in the aerospace and defense environment. Sales to the U.S. Government (including foreign military sales) are reported within each industry segment and in total in the Selected Financial Data. The company does not conduct a significant volume of activity through foreign operations or in foreign currencies. Descriptions of the company's principal products and services along with industry segment data, which is considered to be an integral part of these financial statements, can be found in the Management's Discussion and Analysis section of this report. Intersegment sales are transacted at cost incurred with no profit added. Operating profit is defined to include the Other Income earned by each industry segment, but to exclude costs allocated to segments for General Corporate Expenses and State and Local Income Taxes. For segment reporting, the amount of the costs of retiree benefit plans (pension and nonpension) allocable to contracts as determined by government cost accounting standards captioned Retiree Benefit Cost Included in Contract Costs and the income(cost) of retiree benefit plans (pension and nonpension) as calculated in conformity with financial accounting standards captioned Retiree Benefit Income(Cost) are shown separately from general corporate expenses so as not to distort operating profit as reported by industry segment. General corporate assets include cash and cash equivalents, corporate office furnishings and equipment, other unallocable property, investments in affiliates, prepaid pension cost, intangible pension asset, benefit trust fund assets and certain assets held for sale.
NORTHROP GRUMMAN CORPORATION
Sales Sales under cost-reimbursement, service, research and development, and construction-type contracts are recorded as costs are incurred and include estimated earned fees or profits calculated on the basis of the relationship between costs incurred and total estimated costs (cost-to-cost type of percentage-of-completion method of accounting). Construction-type contracts embrace those fixed-price type contracts that provide for the delivery at a low volume per year or a small number of units after a lengthy period of time over which a significant amount of costs have been incurred. Sales under other types of contracts are recorded as deliveries are made and are computed on the basis of the estimated final average unit cost plus profit (units-of-delivery type of percentage-of-completion method of accounting). Certain contracts contain provisions for price redetermination or for cost and/or performance incentives. Such redetermined amounts or incentives are included in sales when the amounts can reasonably be determined. In the case of the B-2 bomber production contract, future changes in operating margin will be recognized on a units-of-delivery basis and recorded as each equivalent production unit is delivered. Amounts representing contract change orders, claims or limitations in funding are included in sales only when they can be reliably estimated and realization is probable. In the period in which it is determined that a loss will result from the performance of a contract, the entire amount of the estimated ultimate loss is charged against income. Loss provisions are first offset against costs that are included in assets, with any remaining amount reflected in Other Current Liabilities. Other changes in estimates of sales, costs, and profits are recognized using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes on current and prior periods. Hence, the effect of the changes on future periods of contract performance is recognized as if the revised estimates had been the original estimates.
Contract Research and Development Customer-sponsored research and development costs (direct and indirect costs incurred pursuant to contractual arrangements) are accounted for like other contracts.
Noncontract Research and Development This category includes independent research and development costs and company-sponsored research and development costs (direct and indirect costs not recoverable under contractual arrangements). Independent research and development (IR&D) costs are included in administrative and general expenses (indirect costs allocable to U.S. Government contracts) while company-sponsored research and development costs are charged against income as incurred.
NORTHROP GRUMMAN CORPORATION
Environmental Costs Environmental liabilities are accrued when the company determines its responsibility for cleanup costs and such amounts are reasonably estimable. When only a range of amounts is established and no amount within the range is better than another, the minimum amount in the range is recorded. The company does not anticipate and record insurance recoveries before collection is probable.
Interest Rate Swap Agreements The company may enter into interest rate swap agreements to offset the variable rate characteristic of certain variable rate term loans outstanding under the company's Credit Agreement. Interest on these interest rate swap agreements is recognized as an adjustment to interest expense in the period incurred.
Income Taxes Provisions for federal, state and local income taxes are calculated on reported financial statement pretax income based on current tax law and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Such provisions differ from the amounts currently payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. The company accounts for certain contracts in process using different methods of accounting for financial statements and tax reporting and thus provides deferred taxes on the difference between the financial and taxable income reported during the performance of such contracts. State and local income and franchise tax provisions are included in administrative and general expenses.
Earnings per Share Earnings per share are based on the weighted average number of shares of common stock outstanding during each period, after giving recognition to stock splits and stock dividends. The dilutive effect of common stock equivalents, shares under stock options, was insignificant.
Cash and Cash Equivalents Cash and cash equivalents include interest-earning debt instruments that mature in three months or less from the date purchased.
Accounts Receivable Accounts receivable include amounts billed and currently due from customers under all types of contracts; amounts currently due but unbilled (primarily related to contracts accounted for under the cost-to-cost type of percentage-of-completion method of accounting), certain estimated contract changes, claims in negotiation and amounts retained by the customer pending contract completion.
NORTHROP GRUMMAN CORPORATION
Inventoried Costs Inventoried costs primarily relate to work in process under fixed-price type contracts (excluding those included in unbilled accounts receivable as previously described). They represent accumulated contract costs less the portion of such costs allocated to delivered items. Accumulated contract costs include direct production costs, factory and engineering overhead, production tooling costs, and allowable administrative and general expenses (except for general corporate expenses and IR&D allocable to commercial contracts, which are charged against income as incurred). In accordance with industry practice, inventoried costs are classified as a current asset and include amounts related to contracts having production cycles longer than one year.
Depreciable Properties Property, plant and equipment owned by the company are depreciated over the estimated useful lives of individual assets. Capital leases providing for the transfer of ownership upon their expiration or containing bargain purchase options are amortized over the estimated useful lives of individual assets. Most of these assets are depreciated using declining-balance methods, with the remainder using the straight-line method, with the following lives:
Years Land improvements 4-25 Buildings 4-45 Machinery and other equipment 2-20 Leasehold improvements Length of lease
Goodwill and Other Purchased Intangible Assets Goodwill and other purchased intangible assets are amortized on a straight- line basis over periods of 40 years and a weighted average 23 years, respectively. Goodwill and other purchased intangibles balances are included in the identifiable assets of the industry segment to which they have been assigned and amortization is charged against the respective industry segment operating profit. The future profitability and cash flow of the operations to which they relate are evaluated annually. These factors, along with management's plans with respect to the operations are considered in assessing the recoverability of goodwill and other purchased intangibles.
NORTHROP GRUMMAN CORPORATION
Acquisitions In April 1994, the company purchased the outstanding stock of Grumman Corporation (Grumman) at a cost of $2.1 billion and financed the transaction mainly with new borrowings. The operations of Grumman since acquisition are included in the industry segments to which products are associated. In August 1994 the company purchased the remaining 51 percent interest in Vought Aircraft Company (Vought) for $130 million cash. The company had previously purchased a 49 percent interest in Vought for $45 million in September 1992. The operations of Vought since August 1994 are included in the military and commercial aircraft industry segment. The purchase method of accounting was used to record both acquisitions with estimated fair values being assigned to assets and liabilities. The excess of the purchase price over the net tangible assets acquired was assigned to identifiable intangible assets and the balance to goodwill. The following unaudited proforma financial information combines Northrop's, Grumman's and Vought's results of operations as if the acquisitions had taken place on January 1, 1993, and is not necessarily indicative of future operating results for Northrop Grumman.
$ in millions, except per share 1994 1993 Sales $7,770 $8,653 Net income 57 112 Earnings per share 1.16 2.33
ACCOUNTS RECEIVABLE Unbilled amounts represent sales for which billings have not been presented to customers at year end, including differences between actual and estimated overhead and margin rates. These amounts are usually billed and collected within one year, progress payments are however received on a number of fixed-price contracts accounted for using the cost-to-cost type percentage-of-completion method. Amounts due upon contract completion are retained by customers until work is completed and customer acceptance is obtained. The company entered into an agreement in 1995 with a financial institution to sell designated pools of its commercial accounts receivables, with limited recourse, in amounts up to $75 million. Under the agreement, new receivables are sold as previously sold amounts are collected. The accounts receivable are sold at a loss which is included in cost of sales in the period incurred. The company acts as an agent for the purchaser by performing record keeping and collection function. At December 31, 1995, $34 million of accounts receivable had been sold. Accounts receivable at December 31, 1995, are expected to be collected in 1996 except for approximately $93 million due in 1997 and $29 million due in 1998 and later. These amounts principally relate to long-term contracts with the U.S. Government. Allowances for doubtful amounts represent mainly estimates of overhead type costs which may not be successfully negotiated and collected.
NORTHROP GRUMMAN CORPORATION
Inventoried costs relate to long-term contracts in process and include expenditures for raw materials and work in process beyond what is required for recorded orders. These expenditures are incurred to help maintain stable and efficient production schedules. However, no material amount representing claims, learning curve, unamortized tooling or other deferred costs is included in inventoried costs. The ratio of inventoried administrative and general expenses to total inventoried costs is assumed to be the same as the ratio of total administrative and general expenses to total contract costs. According to the provisions of U.S. Government contracts, the customer has title to, or a security interest in, substantially all inventories related to such contracts.
NORTHROP GRUMMAN CORPORATION
INCOME TAXES Income tax expense, both federal and foreign (which arises primarily from work performed abroad by domestic operations), was comprised of the following:
Income tax expense differs from the amount computed by multiplying the statutory federal income tax rate times the income before income taxes due to the following:
The research and experimentation tax credit shown for 1991 was the result of an internal company study that determined the amount earned over the years 1981 through 1990 in excess of the amount previously recognized for those years pending final government regulations which were not issued until 1989. Deferred income taxes arise because of differences in the treatment of income and expense items for financial reporting and income tax purposes. The principal type of temporary difference stems from the recognition of income on contracts being reported under different methods for tax purposes than for financial reporting. Effective January, 1991, the company adopted FASB Statement No. 109 - Accounting for Income Taxes. The tax effects of significant temporary differences and carryforwards that gave rise to year-end deferred federal and state tax balances, as categorized in the Consolidated Statements of Financial Position, were as follows:
NORTHROP GRUMMAN CORPORATION
The tax carryforward benefits are expected to be used in the periods that net deferred tax liabilities mature. The expiration dates for these tax credit carryforwards are in various amounts over the years 1996 through 2007. The alternative minimum tax credit can be carried forward indefinitely.
NORTHROP GRUMMAN CORPORATION
NOTES PAYABLE TO BANKS AND LONG-TERM DEBT The company has available short-term credit lines in the form of money market facilities with several banks. The amount and conditions for borrowing under these credit lines depend on the availability and terms prevailing in the marketplace. No fees or compensating balances are required for these credit facilities. At December 31, 1995, $65 million was outstanding at a weighted average interest rate of 6.15 percent. At December 31, 1994, $171 million was outstanding at a weighted average interest rate of 7 percent. Additionally, the company has a credit agreement with a group of domestic and foreign banks. The Credit Agreement provides for two credit facilities: $800 million available on a revolving credit basis through March 1999 and a floating interest rate term loan payable quarterly through March 1999. In December 1994 the company amended the Credit Agreement to provide for repayment of the $1 billion balance of the term loan in 14 quarterly installments of $62.5 million plus interest beginning in September 1995, with a final installment of $125 million due in March 1999. During 1995 the company made the $125 million required term loan payments as well as $312 in voluntary prepayments for amounts which were due through March 1997. The borrowings under the term loans bear interest at various rates generally equal to the London Interbank Offered Rate (LIBOR) plus .43 percent. At December 31, 1995, $563 million was outstanding at a weighted average interest rate of 6.31 percent. Principal payments permanently reduce the amount available under this agreement as well as the debt outstanding. In 1995 there were no borrowings under the company's revolving credit facility. The company paid an average facility fee in 1995 of .18 percent per annum on the total amount of the revolving credit facility. Under these agreements, in the event of a "change in control," the banks are relieved of their commitments. Compensating balances are not required under these agreements. The company's credit agreements contain restrictions relating to the payment of dividends, acquisition of the company's stock, aggregate indebtedness for borrowed money and the maintenance of shareholders' equity. At December 31, 1995, $413 million of retained earnings were unrestricted as to the payment of dividends. Total indebtedness for all types of borrowed money is limited under the company's credit agreement covenants. At December 31, 1995, indebtedness was limited to $3.1 billion.
NORTHROP GRUMMAN CORPORATION
In November 1995 the notes due in 1999 were called for redemption at face value, on January 2, 1996. The December 31, 1995 balance of $143 million was classified as current. The debentures due in 2024 are callable after October 15, 2004 at a premium of 4 percent declining to par after 2013. The principal amount of long-term debt outstanding at December 31, 1995, is due in: 1997 - $188 million, 1998 - $250 million, 1999 - $125 million and after five years $600 million.
NORTHROP GRUMMAN CORPORATION
FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the company in estimating its fair value disclosures for financial instruments:
The carrying amount reported in the consolidated Statements of Financial Position for Cash and Cash Equivalents, Accounts Receivable and amounts borrowed under the company's short-term credit lines approximate their fair value.
The fair value of the long-term debt was calculated based on interest rates available for debt with terms and due dates similar to the company's existing debt arrangements.
The company has limited involvement with financial instruments and does not use them for trading purposes. To mitigate the variable rate characteristic of the term loans, the company entered into interest rate swap agreements through May 1997 with several banks resulting in a fixed interest rate of 6.47 percent on a notional amount of $300 million at December 31, 1995 and $200 million at December 31, 1994. Unrealized gain(loss) on interest rate swap agreements are calculated based upon the amounts at which they could be settled at current interest rates. The unrealized market gain(loss) on interest rate swaps was $(7) million and $7 million at December 31, 1995 and 1994 respectively. The institutions have options to extend $200 million of the swaps through May 1998. The company anticipates that the banks will fully satisfy their obligations under the arrangements. Carrying amounts and the related estimated fair values of the company's financial instruments at December 31 of each year are as follows:
$ in millions 1995 1994 1993 1992 Cash and Cash Equivalents Carrying amount $ 18 $ 17 $ 100 $ 230 Fair value 18 17 100 230
Accounts Receivable Carrying amount 1,197 1,202 820 791 Fair value 1,197 1,202 820 791 Notes payable Carrying amount 65 171 100 Fair value 65 171 100
Long-term debt Carrying amount 1,307 1,763 160 410 Fair value 1,405 1,758 160 443
Interest rate swap agreements Notional amount 300 200 Unrealized gains(losses) (7) 7
NORTHROP GRUMMAN CORPORATION
RETIREMENT BENEFITS The company sponsors several defined-benefit pension plans covering substantially all employees. Pension benefits for most employees are based on the employee's years of service and compensation during the last ten years before retirement. It is the policy of the company to fund at least the minimum amount required for all qualified plans, using actuarial cost methods and assumptions acceptable under U.S. Government regulations, by making payments into a trust separate from the company. Four of the company's seven qualified plans which cover over 80 percent of all employees, were in a legally defined full-funding limitation status at December 31, 1995. To protect the assets in the master trust from a "change in control" the trust agreement and the Northrop Grumman Pension Plan were appropriately amended during 1991. The company and subsidiaries also sponsor defined-contribution plans in which most employees are eligible to participate. Company contributions, up to 4 percent of compensation, are based on a matching of employee contributions. In addition, the company and its subsidiaries provide certain health care and life insurance benefits for retired employees. Employees achieve eligibility to participate in these contributory plans upon retirement from active service and if they meet specified age and years of service requirements. Election to participate must be made at the date of retirement. Qualifying dependents are also eligible for medical coverage. Approximately 85 percent of the company's current retirees participate in the medical plans. The cost and funded status for the medical and life benefits are combined in the tables that follow because (1) life benefits constitute an insignificant amount of the combined cost, and (2) for those plans with assets, the assets in trust for each plan can be used to pay benefits under either plan. Plan documents reserve the company's right to amend or terminate the plans at any time. Premiums charged retirees for medical coverage are based on years of service and are adjusted annually for changes in the cost of the plans as determined by an independent actuary. In addition to this medical inflation cost-sharing feature, the plans also have provisions for deductibles, copayments, coinsurance percentages, out-of-pocket limits, schedule of reasonable fees, managed care providers, maintenance of benefits with other plans, Medicare carve-out and a maximum lifetime benefit of from $250,000 to $1,000,000 per covered individual. It is the policy of the company to fund the maximum amount deductible for income taxes into the VEBA trust established for the Northrop Retiree Health Care Plan for Retired Employees for payment of benefits. The company elected to implement the accounting standard, FASB Statement No. 106 - Employer's Accounting for Postretirement Benefits Other Than Pensions, for 1991 by immediately recognizing the January 1, 1991, accumulated postretirement benefit obligation of $437 million. This amount was offset by $292 million, the fair value of plan assets held in trust outside the company, in recording a net obligation and pretax charge to operations of $145 million.
NORTHROP GRUMMAN CORPORATION
The cost to the company of these plans in each of the last five years is shown in the following table.
In addition to the net periodic pension income and postretirement benefit cost, in 1994 the company recognized the effect of an early retirement incentive program of $250 million for pension and $32 million for postretirement benefits. The total $282 million effect on the company's 1994 operating margin is shown in the Consolidated Statements of Income under the caption Special Termination Benefits.
NORTHROP GRUMMAN CORPORATION
Major assumptions as of each year-end used in the accounting for the defined-benefit plans are shown in the following table. Pension cost is determined using all three factors as of the end of the preceeding year, whereas the funded status of the plans, shown later, uses only the first two factors, as of the end of each year.
1995 1994 1993 1992 1991 Discount rate for obligations 7.00% 8.25% 7.00% 8.00% 8.00% Rate of increase for compensation 5.00 5.25 5.50 5.50 5.50 Expected long term rate of return on plan assets 9.00 8.75 8.25 8.25 8.25
These assumptions were also used in retiree health care and life insurance benefit calculations with one modification. Since, unlike the pension trust, the earnings of the VEBA trust are taxable, the above 9 percent expected rate of return on plan assets was reduced accordingly to 5.25 percent after taxes. A significant factor used in estimating future per capita cost, for the company and its retirees, of covered health care benefits is the health care cost trend rate assumption. The rate used was 8 percent for 1995 and is assumed to decrease gradually to 6 percent for 2006 and remain at that level thereafter. An additional one-percentage-point of increase each year in that rate would result in an $11 million annual increase in the aggregate of the service and interest cost components of net periodic postretirement benefit cost, and a $113 million increase in the accumulated postretirement benefit obligation at December 31, 1995. The following tables set forth the funded status and amounts recognized in the Consolidated Statements of Financial Position at each year-end for the company's defined-benefit pension and retiree health care and life insurance benefit plans. The summary showing pension plans whose accumulated benefits are in excess of assets at December 31, 1995, is comprised of two qualified plans along with thirteen unfunded nonqualified plans for benefits provided to directors, officers and employees either beyond those provided by, or payable under, the company's main plans. The company changed the discount rate for obligations and rate of increase for compensation assumptions in calculating the funded status of the plans at December 31, 1995. The changes resulted in a $922 million increase in the projected benefit obligation for pension plans and a $167 million increase in the accumulated postretirement benefit obligation.
NORTHROP GRUMMAN CORPORATION
NORTHROP GRUMMAN CORPORATION
Pension plan assets at December 31, 1995, were comprised of 50 percent domestic equity type investments in listed companies (including four percent in Northrop Grumman common stock), 13 percent equity investments listed on international exchanges, eight percent in cash and venture capital real estate and 29 percent in fixed income type investments, principally U.S. Government securities. The investment in Northrop Grumman represents 5,974,826 shares, or 12 percent of the company's total shares outstanding. Effective January 1, 1995, the company adopted amendments to two of the company's retirement plans to cap the maximum years of service credit that an employee can earn and adjusted the amount of service credit earned each year. The effect of these changes was to increase the projected benefit obligation at December 31, 1994 by $210 million.
Retiree health care and life insurance plan assets at December 31, 1995, were almost entirely comprised of equity type investments in listed companies.
CONTINGENCIES The corporation and its subsidiaries have been named as defendants in various legal actions. Based upon available information, it is the company's expectation that those actions are either without merit or will have no material adverse effect on the company's results of operations or financial position. Minimum rental commitments under long-term noncancellable operating leases total $158 million which is payable as follows; 1996 - $47 million, 1997 - $35 million, 1998 - $24 million, 1999 - $19 million, and 2000 - $11 million, and 2001 and thereafter - $22 million.
NORTHROP GRUMMAN CORPORATION
STOCK RIGHTS
On September 21, 1988, the company adopted a Common Stock Purchase Rights plan. One right for each outstanding share of common stock was issued to shareholders of record on October 5, 1988. The rights will become exercisable on the tenth business day after a person or group has acquired 15 percent or more of the general voting power of the company, or announces an intention to make a tender offer for 30 percent or more of such voting power, without the prior consent of the Board of Directors. If the rights become exercisable, a holder will be entitled to purchase one share of common stock from the company at an initial exercise price of $105. If a person acquires more than 15 percent of the then outstanding voting power of the company or if the company is combined with an acquiror, each right will entitle its holder to receive, upon exercise, shares of the company's or the acquiror's (depending upon which is the surviving company) common stock having a value equal to two times the exercise price of the right. The company will be entitled to redeem the rights at $.02 per right at any time prior to the earlier of the date that a person has acquired or obtained the right to acquire 15 percent of the general voting power of the company or the expiration of the rights in October 1998. The rights are not exercisable until after the date on which the company's prerogative to redeem the rights has expired. The rights do not have voting or dividend privilege and cannot be traded independently from the company's common stock until such time as they become exercisable.
LONG-TERM INCENTIVE STOCK PLAN
The company's 1993 Long-Term Incentive Stock Plan(LTISP) provides for stock options, stock appreciation rights (SARs) and stock awards to key employees. This plan added 2,300,000 shares, of which up to one-half may be in the form of stock awards, to the pool available for future grants. The 1993 LTISP was amended in 1995, adding 1,800,000 shares, along with 300,000 shares added from the adoption of a stock option plan for non-employee directors, to the pool available for grants. The number of shares reserved for future grants shown in the following table reflects both stock options and stock awards. Stock awards, in the form of restricted performance stock rights, are granted to key employees without payment to the company. Recipients of the rights earn shares of stock based on a total shareholder return measure of performance over a five year period with interim distributions beginning three years after grant. If at the end of the five year period the performance objectives have not been met, 70 percent of the original grant will be forfeited. Compensation expense is estimated and accrued over the vesting period. Each grant of a stock option is made at the closing market price on the date of the grant. When stock options are exercised, the amount of the cash proceeds to the company is added to paid-in capital. Under current accounting standards there are no additions to or deductions from income in connection with these options. Termination of employment can result in forfeiture of some or all of the benefits extended under the plans.
NORTHROP GRUMMAN CORPORATION
Stock option activity for the last five years is summarized below:
NORTHROP GRUMMAN CORPORATION
SUBSEQUENT EVENT On January 3, 1996 the company entered into a definitive agreement to acquire the defense and electronics systems business of Westinghouse Electric Corporation for $3 billion in cash. The company has obtained bank commitments totaling $4.8 billion to finance the transaction and replace its current credit agreement. The transaction is subject to normal governmental and regulation reviews and is expected to close in March 1996.
UNAUDITED SELECTED QUARTERLY DATA Quarterly financial results, previously reported are set forth in the following tables together with dividend and common stock price data.
1995 Quarters, $ in millions, except per share 4 3 2 1 Net sales $1,812 $1,630 $1,759 $1,617 Operating margin 121 131 167 117 Net income 58 61 79 54 Earnings per share 1.17 1.25 1.59 1.10 Dividend per share .40 .40 .40 .40 Stock price: High 64 1/4 62 5/8 54 49 3/4 Low 56 51 7/8 47 39 3/4
The operating margin in the second quarter of 1995 benefited from a net $34 million in cumulative operating margin adjustments. Positive adjustments on the B-2 stealth bomber and C-17 military transport programs were partially offset by a downward adjustment on the Boeing 747 jetliner program. The 747 adjustment reflected cost increases related to the stretch-out of the current production contract, which is now scheduled to conclude in the fall of 1996. The B-2 adjustment was made as a result of negotiated contract adjustments and a revised estimate of the overall operating margin expected to be earned on the B-2 production contract. The positive adjustment on the C-17 reflected improved operating performance on this program.
1994 Quarters, $ in millions, except per share 4 3 2 1 Net sales $1,880 $1,927 $1,686 $1,218 Operating margin(loss) (107) 99 126 81 Net income(loss) (121) 39 65 52 Earnings(loss) per share (2.45) .79 1.33 1.05 Dividend per share .40 .40 .40 .40 Stock price: High 47 3/8 45 3/8 39 3/4 45 7/8 Low 40 1/4 35 3/4 34 1/2 36 7/8
Operating margin(loss) for the first three quarters of 1994 has been restated to reflect the reclassification of losses on disposals of machinery and other equipment previously included in the "Other, net" classification in the Consolidated Statements of Income. The operating loss in the fourth quarter of 1994 resulted from a $282 million charge for a voluntary early retirement incentive program offered in 1994 and a $42 million provision for the planned disposal of real estate and other assets. The corporation's common stock is traded on the New York and Pacific Stock Exchanges (trading symbol NOC). The approximate number of holders of record of the corporation's common stock at January 31, 1996, was 10,858.
NORTHROP GRUMMAN CORPORATION
INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders Northrop Grumman Corporation Los Angeles, California
We have audited the accompanying consolidated statements of financial position of Northrop Grumman Corporation and Subsidiaries as of December 31 for each of the years 1991 through 1995, and the related consolidated statements of income, changes in shareholders' equity and cash flows for the years then ended. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and financial statement schedule are the responsibility of the company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule 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 consolidated financial statements present fairly, in all material respects, the financial position of Northrop Grumman Corporation and Subsidiaries at December 31 for each of the years 1991 through 1995, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in the footnotes to the consolidated financial statements, in 1991 the company changed its method of computing income taxes by adopting Financial Accounting Standards Board Statement No. 109 - Accounting for Income Taxes and its accounting for nonpension benefit plans by adopting Financial Accounting Standards Board Statement No. 106 - Employers' Accounting for Postretirement Benefits Other Than Pensions.
Deloitte & Touche LLP Los Angeles, California February 7, 1996 NORTHROP GRUMMAN CORPORATION
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No information is required in response to this Item.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant The information as to Directors will be incorporated herein by reference to the Proxy Statement for the 1996 Annual Meeting of Stockholders to be filed within 120 days after the end of the company's fiscal year.
The information as to Executive Officers is contained in Part I of this report as permitted by General Instruction G(3).
Item 11.

Item 11. Executive Compensation The information required by this Item will be incorporated herein by reference to the Proxy Statement for the 1996 Annual Meeting of Stockholders to be filed within 120 days after the end of the company's fiscal year.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this Item will be incorporated herein by reference to the Proxy Statement for the 1996 Annual Meeting of Stockholders to be filed within 120 days after the end of the company's fiscal year.
Item 13.

Item 13. Certain Relationships and Related Transactions The information required by this Item will be incorporated herein by reference to the Proxy Statement for the 1996 Annual Meeting of Stockholders to be filed within 120 days after the end of the company's fiscal year.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements Consolidated Statements of Financial Position Consolidated Statements of Income Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report
2. Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted either because they are not applicable or not required or because the required information is included in the financial statements or notes thereto. Separate financial statements of the parent company are omitted since it is primarily an operating company and minority equity interests in and/or nonguaranteed long-term debt of subsidiaries held by others than the company are in amounts which together do not exceed 5 percent of the total consolidated assets at December 31, 1995.
NORTHROP GRUMMAN CORPORATION
Exhibits:
3(a) Certificate of Incorporation, as amended (incorporated by reference to Form S-3 Registration Statement, filed August 18, 1994)
3(b) Northrop Grumman Corporation Bylaws, amended as of May 18, 1994 (incorporated by reference to Form S-3 Registration Statement, filed August 18, 1994) and amended as of August 17, 1994
4(a) Common Stock Purchase Rights Agreement (incorporated by reference to Form 8-A filed September 22, 1988, amended on August 2, 1991 (incorporated by reference to Form 8 filed August 2, 1991) and amended on September 28, 1994 (incorporated by reference to Form 8/A- A filed October 7, 1994)
4(b) Indenture Agreement dated as of October 15, 1994 (incorporated by reference to Form 8-K filed October 25, 1994)
10(a) Northrop Grumman Corporation Amended and Restated Credit Agreement dated as of April 15, 1994, as amended and restated as of April 18, 1994 (incorporated by reference to Report on Form 10-Q filed May 9, 1994), amended as of May 11, 1994, and amended as of December 9, 1994 (incorporated by reference to Form 10-K filed March 21, 1995)
10(b) Uncommitted Credit Facility dated October 10, 1994, between Northrop Grumman Corporation and Wachovia Bank of Georgia, N.A., which is substantially identical to facilities between Northrop Grumman Corporation and certain banks some of which are parties to the Credit Agreement filed as Exhibit 10(a) hereto
*10(c) 1973 Incentive Compensation Plan (incorporated by reference to Form 8-B filed June 21, 1985)
*10(d) 1973 Performance Achievement Plan (incorporated by reference to Form 8-B filed June 21, 1985)
*10(e) Northrop Supplemental Plan 2
*10(f) Northrop Grumman Corporation ERISA Supplemental Plan 1 (incorporated by reference to Form 10-K filed February 28, 1994).
*10(g) Retirement Plan for Independent Outside Directors (incorporated by reference to Form SE filed March 29, 1991), amended September 21, 1994 (incorporated by reference to Form 10-K filed March 21, 1995)
*10(h) 1987 Long-Term Incentive Plan, as amended (incorporated by reference to Form SE filed March 30, 1989)
*10(i) Executive Life Insurance Policy
*10(j) Executive Accidental Death, Dismemberment and Plegia Insurance Policy
*10(k) Executive Long-Term Disability Insurance Policy
*10(l) Key Executive Medical Plan Benefit Matrix
NORTHROP GRUMMAN CORPORATION
*10(m) Executive Dental Insurance Policy Group Numbers 5134 and 5135
*10(n) Group Excess Liability Policy
*10(o) Northrop Grumman 1993 Long-Term Incentive Stock Plan, as amended (incorporated by reference to Northrop Grumman Corporation Proxy Statement filed March 30, 1995)
*10(p) Northrop Corporation 1993 Stock Plan for Non-Employee Directors (incorporated by reference to Northrop Corporation 1993 Proxy Statement filed March 30, 1993), amended as of September 21, 1994 (incorporated by reference to Form 10-K filed March 21, 1995)
*10(q) Northrop Grumman Corporation 1995 Stock Option Plan for Non-Employee Directors (incorporated by reference to 1995 Proxy Statement filed March 30, 1995)
*10(r) Northrop Corporation Special Severance Pay Agreement (incorporated by reference to Northrop Corporation Report on Form 10-K filed February 28, 1994), amended and restated as of July 13, 1995
*10(s) Employment Agreement effective January 1, 1996 between Northrop Grumman Corporation and Gordon L. Williams
*10(t) Executive Deferred Compensation Plan (effective December 29,1994)
*10(u) Northrop Grumman Transition Project Incentive Plan (incorporated by reference to Form 10-K filed March 21, 1995)
10(v) Agreement and Plan of Merger dated April 3, 1994 (incorporated by reference to Form 8-K filed May 2, 1994)
11 Statement Re Computation of Per Share Earnings
21 Significant subsidiaries of registrant
23 Independent Auditors' Consent
24 Power of Attorney
27 Financial Data Schedule
________________ * Listed as Exhibits pursuant to Item 601(b)(10) of Regulation S-K
(b) No reports on Form 8-K were filed during the last quarter of the period covered by this report.
NORTHROP GRUMMAN CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 23rd day of February 1996.
Northrop Grumman Corporation
By: Nelson F. Gibbs Nelson F. Gibbs Corporate Vice President and Controller (Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on behalf of the registrant this 23rd day of February 1996, by the following persons and in the capacities indicated.
Signature Title Kent Kresa* Chairman of the Board, President and Chief Executive Officer and Director (Principal Executive Officer)
Jack R. Borsting* Director John T. Chain, Jr.* Director Jack Edwards* Director Aulana L. Peters* Director John E. Robson* Director Richard R. Rosenberg* Director Brent Scowcroft* Director John Brooks Slaughter* Director Wallace C. Solberg* Director Richard J. Stegemeier* Director Richard B. Waugh, Jr.* Corporate Vice President and Chief Financial Officer
*By James C. Johnson James C. Johnson, Attorney-in-Fact pursuant to a power of attorney
NORTHROP GRUMMAN CORPORATION
____________ (1) Uncollectible amounts written off, net of recoveries. (2) Additions include $15,625 of allowance for bad debts from acquired company.
NORTHROP GRUMMAN CORPORATION
(1) This calculation was made in compliance with Item 601 of Regulation S-K. Earnings per share presented elsewhere in this report exclude from their calculation shares issuable under employee stock options, since their dilutive effect is less than 3%.
NORTHROP GRUMMAN CORPORATION
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Nos. 2-73293, 2-98614, 33-15764, 33-49667, 33-55141, 33-55146, 33-59815 and 33-59853 of Northrop Grumman Corporation on Form S-8 of our report dated February 7,1996, appearing in this Annual Report on Form 10-K of Northrop Grumman Corporation for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
Los Angeles, California February 22, 1996