SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] Annual report pursuant to Section 15 (d) of the Securities
Exchange Act of 1934 (No fee required)
For the fiscal years ended December 31, 1998 and 1997
OR
[ ] Transition report pursuant to SECTION 15 (d) of the Securities Exchange Act
of 1934 (No fee required)
For the transition period from __________ to ____________
Commission file number 333-03959
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
NORTHROP GRUMMAN CORPORATION
1840 Century Park East
Los Angeles, California 90067
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
NORTHROP GRUMMAN ELECTRONIC SENSORS &
SYSTEMS DIVISION SAVINGS AND
INVESTMENT PROGRAM
/s/ Alan M. Roth
-------------------------------------
Dated: June 29, 1999 By Alan M. Roth
Vice President Taxes and Benefits Compliance
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NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 4
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Plan Benefits and
Supplemental Information by Fund as of December 31, 1998
and 1997 5
Statement of Changes in Net Assets Available for Plan Benefits
and Supplemental Information by Fund for the Year Ended
December 31, 1998 3
Notes to Financial Statements 14-20
SUPPLEMENTAL SCHEDULES:
Item 27a - Assets Held for Investment Purposes as of December 31, 1998
Item 27d - Reportable Transactions for the Year Ended
December 31, 1998 - Series Transactions When Aggregated,
in Excess of the Current Value of Assets
-3-
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee of the
Northrop Grumman Electronic Sensors &
Systems Division Savings and Investment Program:
We have audited the accompanying statements of net assets available for plan
benefits of the Northrop Grumman Electronic Sensors & Systems Division Savings
and Investment Program (the "Plan") as of December 31, 1998 and 1997, and the
related statement of changes in net assets available for plan benefits for the
year ended December 31, 1998. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with 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 financial statements present fairly, in all material
respects, the net assets available for plan benefits as of December 31, 1998 and
1997, and the changes in net assets available for plan benefits for the year
ended December 31, 1998 in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes at December 31, 1998, and reportable transactions for
the year ended December 31, 1998 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental information by fund in the statement of
net assets available for plan benefits and the statement of changes in net
assets available for plan benefits is presented for the purpose of additional
analysis rather than to present the net assets available for plan benefits and
changes in net assets available for plan benefits of the individual funds. The
supplemental schedules and supplemental information by fund are the
responsibility of the Plan's management. Such supplemental schedules and
supplemental information by fund have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
June 24, 1999
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NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
Fidelity JPM JPM
Growth & American Institutional Institutional
Janus Income Century Diversified International
Fund Portfolio Ultra Investors Fund Equity Fund
ASSETS:
Investments, at fair value (Note B):
Temporary investments $ - $ 1 $ - $ - $ -
Shares of registered investment companies:
Janus Fund 58,608,091
Fidelity Growth & Income Portfolio 100,267,634
Twentieth Century Ultra Investors
JPM Institutional Diversified Fund 66,792,189
JPM Institutional International Equity Fund 5,773,854
BT Investment Lifecycle Short Range Fund 6,336,464
BT Investment Lifecycle Mid Range Fund
BT Investment Lifecycle Long Range Fund
BT Investment Equity 500 Index Fund
U.S. governmental obligations
Corporate obligations
Corporate stocks
Investments, at contract value (Note C) -
Guaranteed insurance contracts
Participant loans
------------ ------------ ------------- ------------- -----------
Total investments 58,608,091 100,267,635 66,792,189 5,773,854 6,336,464
------------ ------------ ------------- ------------- -----------
Other receivables:
Contribution Receivable - Employer 4,088 7,621 4,909 611 469
Contribution Receivable - Employee 15,914 25,325 17,353 1,667 1,904
Due from broker for securities sold 110,171 149,034 89,185 6,359 336
Interest and dividends receivable
------------ ------------ ------------- ------------- -----------
Total assets 58,738,264 100,449,255 66,903,636 5,782,491 6,339,173
------------ ------------ ------------- ------------- -----------
LIABILITIES -
Due to broker for securities purchased
------------ ------------ ------------- ------------- -----------
DUE (TO) FROM OTHER FUNDS
------------ ------------ ------------- ------------- -----------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $ 58,738,264 $100,449,255 $ 66,903,636 $ 5,782,491 $ 6,339,173
============ ============ ============= ============= ===========
See notes to financial statements.
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NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS (Continued)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Supplemental Information by Fund
-----------------------------------------------------------------------------
BT BT BT
Investment Investment Investment BT
Lifecycle Lifecycle Lifecycle Investment
Short Range Mid Range Long Range Equity 500 Fixed Income
Fund Fund Fund Index Fund Fund
ASSETS:
Investments, at fair value (Note B): $ $ $ $ $
Temporary investments
Shares of registered investment companies:
Janus Fund
Fidelity Growth & Income Portfolio
Twentieth Century Ultra Investors
JPM Institutional Diversified Fund
JPM Institutional International Equity Fund
BT Investment Lifecycle Short Range Fund 3,559,353
BT Investment Lifecycle Mid Range Fund 4,760,057
BT Investment Lifecycle Long Range Fund 7,567,638
BT Investment Equity 500 Index Fund 89,992,755
U.S. governmental obligations
Corporate obligations
Corporate stocks
Investments, at contract value (Note C) -
Guaranteed insurance contracts
Participant loans
------------ ------------ ------------- ------------- -----------
Total investments 3,559,353 4,760,057 7,567,638 89,992,755
------------ ------------ ------------- ------------- -----------
Other receivables:
Contribution Receivable - Employer 290 413 747 5,562 --
Contribution Receivable - Employee 1,120 1,633 2,678 21,219 --
Due from broker for securities sold
Interest and dividends receivable
------------ ------------ ------------- ------------- -----------
Total assets 3,560,763 4,762,103 7,571,063 90,019,536
------------ ------------ ------------- ------------- -----------
LIABILITIES -
Due to broker for securities purchased 17,960 28,249 30,163 94,616
------------ ------------ ------------- ------------- -----------
DUE (TO) FROM OTHER FUNDS 17,960 28,249 30,163 94,616
------------ ------------ ------------- ------------- -----------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $ 3,542,803 $ 4,733,854 $ 7,540,900 $ 89,924,920 $
============ ============ ============= ============= ===========
See notes to financial statements.
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NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS (Continued)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Westinghouse Fixed Income Northrop Northrop Cash
Common Contract Grumman Grumman Disbursement
Stock Fund Fund Fund Loan Fund Account Total
ASSETS:
Investments, at fair value (Note B):
Temporary investments $ 518,679 $ $ 4,568 $ $ 188,658 $ 711,906
Shares of registered investment companies:
Janus Fund 58,608,091
Fidelity Growth & Income Portfolio 100,267,634
Twentieth Century Ultra Investors 66,792,189
JPM Institutional Diversified Fund 5,773,854
JPM Institutional International Equity Fund 6,336,464
BT Investment Lifecycle Short Range Fund 3,559,353
BT Investment Lifecycle Mid Range Fund 4,760,057
BT Investment Lifecycle Long Range Fund 7,567,638
BT Investment Equity 500 Index Fund 89,992,755
U.S. governmental obligations
Corporate obligations 75,460,515 1,924,943 77,385,458
Corporate stocks
Investments, at contract value (Note C) - 392,637,208 392,637,208
Guaranteed insurance contracts
Participant loans 21,121,581 21,121,581
----------- ------------ ---------- ---------- -------- ------------
Total investments 75,979,194 392,637,208 1,929,511 21,121,581 188,658 835,514,188
----------- ------------ ---------- ---------- -------- ------------
Other receivables:
Contribution Receivable - Employer -- 51,250 1,413 -- -- 77,013
Contribution Receiable - Employee -- 149,186 3,831 -- -- 241,830
Due from broker for securities sold 147,057 502,142
Interest and dividends receivable 2,699 74 10 2,341 5,124
----------- ------------ ---------- ---------- -------- ------------
Total assets 76,128,950 392,837,644 1,934,829 21,121,591 190,999 836,340,297
----------- ------------ ---------- ---------- -------- ------------
LIABILITIES -
Due to broker for securities purchased 561,624 732,612
----------- ------------ ---------- ---------- -------- ------------
DUE (TO) FROM OTHER FUNDS 561,624 732,612
----------- ------------ ---------- ---------- -------- ------------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $76,128,950 $392,276,020 $1,934,829 21,121,591 $190,999 $835,607,685
=========== ============ ========== ========== ======== ============
See notes to financial statements.
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NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
Fidelity JPM JPM
Growth & Twentieth Institutional Institutional
Janus Income Century Diversified International
Fund Portfolio Ultra Investors Fund Equity Fund
ASSETS:
Investments, at fair value (Note B):
Temporary investments $ - $ - $ - $ - $ -
Shares of registered investment companies:
Janus Fund 35,989,067
Fidelity Growth & Income Portfolio 75,890,290
Twentieth Century Ultra Investors
JPM Institutional Diversified Fund 45,587,669
JPM Institutional International Equity Fund 4,583,613
BT Investment Lifecycle Short Range Fund 4,571,899
BT Investment Lifecycle Mid Range Fund
BT Investment Lifecycle Long Range Fund
BT Investment Equity 500 Index Fund
U.S. governmental obligations
Corporate obligations
Corporate stocks
Investments, at contract value (Note C) -
Guaranteed insurance contracts
Participant loans
------------ ------------ ------------- ------------- -----------
Total investments 35,989,067 75,890,290 45,587,669 4,583,613 4,571,899
Contributions receivable:
Employer
Employee
Other receivables:
Loan repayments and interest receivable 14,006 21,570 18,301 98 120
Due from broker for securities sold 7,959 4,626 85,780 82
Interest and dividends receivable 1
Other receivables
------------ ------------ ------------- ------------- -----------
Total assets 36,011,033 75,916,486 45,691,750 4,583,793 4,572,019
LIABILITIES -
Due to broker for securities purchased 220
DUE (TO) FROM OTHER FUNDS (21,965) (26,195) (104,081) (180) (101)
------------ ------------ ------------- ------------- -----------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $ 35,989,068 $ 75,890,291 $ 45,587,669 $ 4,583,613 $ 4,571,900
============ ============ ============= ============= ===========
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NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS (Continued)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Supplemental Information by Fund
-----------------------------------------------------------------------------
BT BT BT
Investment Investment Investment BT
Lifecycle Lifecycle Lifecycle Investment
Short Range Mid Range Long Range Equity 500 Fixed Income
Fund Fund Fund Index Fund Fund
ASSETS:
Investments, at fair value (Note B): $ $ $ $ $ 9,558,475
Temporary investments
Shares of registered investment companies:
Janus Fund
Fidelity Growth & Income Portfolio
Twentieth Century Ultra Investors
JPM Institutional Diversified Fund
JPM Institutional International Equity Fund
BT Investment Lifecycle Short Range Fund 1,917,318
BT Investment Lifecycle Mid Range Fund 3,305,934
BT Investment Lifecycle Long Range Fund 5,075,848
BT Investment Equity 500 Index Fund 65,343,237
U.S. governmental obligations 8,733,161
Corporate obligations 16,254,722
Corporate stocks
Investments, at contract value (Note C) - 318,017,198
Guaranteed insurance contracts
Participant loans
------------ ------------ ------------- ------------- -----------
Total investments 1,917,318 3,305,934 5,075,848 65,343,237 352,563,556
Contributions receivable:
Employer
Employee
Other receivables:
Loan repayments and interest receivable 60 133 167 33,695 140,407
Due from broker for securities sold 82
Interest and dividends receivable 286,554
Other receivables 148,088
------------ ------------ ------------- ------------- -----------
Total assets 1,917,378 3,306,149 5,076,015 65,376,932 353,138,605
LIABILITIES -
Due to broker for securities purchased 60 10,247 31,612 44,236
DUE (TO) FROM OTHER FUNDS (1) (215) 10,081 (2,082) 61,930
------------ ------------ ------------- ------------- -----------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $ 1,917,317 $ 3,305,934 $ 5,075,849 $ 65,343,238 $353,156,299
============ ============ ============= ============= ===========
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NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS (Continued)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Westinghouse Northrop Northrop Cash
Common Grumman Grumman Disbursement
Stock Fund Fund Loan Fund Account Total
ASSETS:
Investments, at fair value (Note B):
Temporary investments $ 743,345 $ 11,152 $ - $248,117 $ 10,561,089
Shares of registered investment companies: 35,989,067
Janus Fund 75,890,290
Fidelity Growth & Income Portfolio 45,587,669
Twentieth Century Ultra Investors 4,583,613
JPM Institutional Diversified Fund 4,571,899
JPM Institutional International Equity Fund 1,917,318
BT Investment Lifecycle Short Range Fund 3,305,934
BT Investment Lifecycle Mid Range Fund 5,075,848
BT Investment Lifecycle Long Range Fund 65,343,237
BT Investment Equity 500 Index Fund 8,733,161
U.S. governmental obligations 16,254,722
Corporate obligations 75,242,557 1,295,245 76,537,802
Corporate stocks
Investments, at contract value (Note C) - 318,017,198
Guaranteed insurance contracts
Participant loans 20,780,086 20,780,086
----------- ---------- ----------- -------- ------------
Total investments 75,985,902 1,306,397 20,780,086 248,117 693,148,933
Contributions receivable:
Employer
Employee
Other receivables:
Loan repayments and interest receivable 9,280 (227,256) (229) 10,352
Due from broker for securities sold 235,257 333,786
Interest and dividends receivable 3,302 87 1,984 291,928
Other receivables 2,942 151,030
----------- ---------- ----------- -------- ------------
Total assets 75,989,204 1,315,764 20,788,087 252,814 693,936,029
LIABILITIES -
Due to broker for securities purchased 5,971 7,100 (74,977) 24,469
DUE (TO) FROM OTHER FUNDS (2,301) (123) (901) 7,100 (78,832)
----------- ---------- ----------- -------- ------------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $75,986,903 $1,309,670 $20,780,086 $334,891 $693,832,728
=========== ========== =========== ======== ============
See notes to financial statements.
-10-
NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
Fidelity JPM JPM
Growth & American Institutional Institutional
Janus Income Century Diversified International
Fund Portfolio Ultra Investors Fund Equity Fund
Net appreciation (depreciation) in
fair value of investments $13,660,291 $ 16,347,032 $10,633,877 $ 352,680 $ 449,891
Investment income:
Interest and other income (98) 2
Dividends 1,536,273 5,278,878 5,623,569 508,623 180,377
------------ ------------ ------------- ------------- -----------
Total investment income 15,196,564 21,625,812 16,257,446 861,303 630,270
------------ ------------ ------------- ------------- -----------
CONTRIBUTIONS
Employer 1,038,579 1,685,581 1,346,632 140,662 169,495
Employee 4,022,680 6,836,993 4,721,342 524,897 655,931
Loan repayment 744,071 1,164,718 1,081,754 105,632 97,070
Other
------------ ------------ ------------- ------------- -----------
Total contributions 5,805,330 9,687,292 7,149,728 771,191 992,496
------------ ------------ ------------- ------------- -----------
Total additions 21,001,894 31,313,104 28,407,174 1,632,494 1,552,766
DEDUCTIONS:
Benefits paid to participants 1,630,135 3,262,620 2,101,996 149,783 218,123
Administrative expenses
Loan withdrawals 458,266 778,045 683,401 50,859 52,434
------------ ------------ ------------- ------------- -----------
Total deductions 2,088,401 4,040,665 2,785,397 200,642 270,557
------------ ------------ ------------- ------------- -----------
TRANSFERS BETWEEN FUNDS 3,835,703 (2,713,475) 694,190 (232,974) 485,064
------------ ------------ ------------- ------------- -----------
NET INCREASE (DECREASE) 22,749,196 24,358,964 21,315,967 1,198,878 1,767,273
NET ASSETS AVAILABLE FOR
PLAN BENEFITS
Beginning of year 35,989,068 75,890,291 45,587,669 4,583,613 4,571,900
------------ ------------ ------------- ------------- -----------
End of year $58,738,264 $100,449,255 $66,903,636 $5,782,491 $6,339,173
============ ============ ============= ============= ===========
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NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
STATEMENT OF NET CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS (Continued)
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
BT BT BT
Investment Investment Investment BT
Lifecycle Lifecycle Lifecycle Investment
Short Range Mid Range Long Range Equity 500 Fixed Income
Fund Fund Fund Index Fund Fund
Net appreciation (depreciation in
fair value of investments) $ (58,716) $ (427,732) $ (597,565) $16,703,665 $(104,720)
Investment income:
Interest and other income 817,446
Dividends 397,938 1,055,256 1,769,296 2,474,010
------------ ------------ ------------- ------------- -----------
Total investment income 339,222 627,524 1,171,731 19,177,675 712,726
------------ ------------ ------------- ------------- -----------
CONTRIBUTIONS
Employer 57,653 96,621 167,463 1,431,821
Employee 203,234 408,360 585,615 5,335,751
Loan repayment 54,266 57,971 104,868 1,044,245
------------ ------------ ------------- ------------- -----------
Total contributions 315,153 562,952 857,946 7,811,817
------------ ------------ ------------- ------------- -----------
Total additions 654,375 1,190,476 2,029,677 26,989,492
DEDUCTIONS:
Benefits paid to participants 130,142 151,374 242,228 2,771,886
Administrative expenses 7,662
Loan withdrawals 24,303 52,053 76,255 952,897
------------ ------------ ------------- ------------- -----------
Total deductions 154,445 203,427 318,483 3,724,783 7,662
------------ ------------ ------------- ------------- -----------
TRANSFERS BETWEEN FUNDS 1,125,556 440,871 753,857 1,316,973 353,861,363
------------ ------------ ------------- ------------- -----------
NET INCREASE (DECREASE) 1,625,486 1,427,920 2,465,051 24,581,682
NET ASSETS AVAILABLE FOR
PLAN BENEFITS
Beginning of year 1,917,317 3,305,934 5,075,849 65,343,238 353,156,299
------------ ------------ ------------- ------------- -----------
End of year $3,542,803 $4,733,854 $7,540,900 $89,924,920 -
============ ============ ============= ============= ===========
-12-
NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS (Continued)
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Westinghouse Fixed Income Northrop Northrop Cash
Common Contract Grumman Grumman Disbursement
Stock Fund Fund Fund Loan Fund Account Total
------------------------------------------------------------------------------
Net appreciation (depreciation in
fair value of investments) $ 8,096,375 $ 24,391,970 $(696,294) $ $ $ 88,750,754
Investment income:
Interest and other income 34,485 174,372 978 1,769,564 (16,969) 2,779,780
Dividends 10 9,854 18,834,084
------------ ----------- --------- ---------- ---------- ------------
Total investment income 8,130,860 24,566,342 (695,306) 1,769,564 (7,115) 110,364,618
------------ ----------- --------- ---------- ---------- ------------
CONTRIBUTIONS
Employer (1,841) 7,443,607 332,685 55,030,783 68,939,741
Employee (3,303) 34,216,122 800,245 (44,721,928) 13,585,939
Loan repayment 6,692,057 201,422 (11,347,960) 3,320 3,434
Other (2,830) (2,830)
------------ ----------- --------- ---------- ---------- ------------
Total contributions (5,144) 48,351,786 1,334,352 (11,347,960) 10,309,345 82,526,284
------------ ----------- --------- ---------- ---------- ------------
Total additions 8,125,716 72,918,128 639,046 (9,578,396) 10,302,230 192,890,902
------------ ----------- --------- ---------- ---------- ------------
DEDUCTIONS:
Benefits paid to participants 2,237,793 26,460,138 13,609 411,885 113,477 39,895,189
Administrative expenses 362,758 370,420
Loan withdrawals 630,496 6,573,435 (10,332,445) 10,332,645 10,332,644
------------ ----------- --------- ---------- ---------- ------------
Total deductions 2,868,289 33,396,331 13,609 (9,920,560) 10,446,122 50,598,253
------------ ----------- --------- ---------- ---------- ------------
TRANSFERS BETWEEN FUNDS (5,115,380) 352,754,223 (278) (659) (517,692)
------------ ----------- --------- ---------- ---------- ------------
NET INCREASE (DECREASE) 142,047 392,276,020 625,159 341,505 (143,892) 141,774,957
NET ASSETS AVAILABLE FOR
PLAN BENEFITS
Beginning of year 75,986,903 1,309,670 20,780,086 334,891 693,832,728
------------ ----------- --------- ---------- ---------- ------------
End of year $ 76,128,950 $392,276,020 $1,934,829 $21,121,591 $ 190,999 $835,607,685
============ ============ ========== =========== =========== ============
-13-
NORTHROP GRUMMAN ELECTRONIC SENSORS & SYSTEMS DIVISION
SAVINGS AND INVESTMENT PROGRAM
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
A. DESCRIPTION OF THE PLAN
The following description of the Northrop Grumman Electronic Sensors and
Systems Division Savings and Investment Plan (the "Plan") provides only
general information. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions.
General - The Plan is a qualified profit sharing and employee stock
ownership plan sponsored by the former Electronic Sensors & Systems Division
of Northrop Grumman Corporation (the "Company"). The Plan was established on
March 1, 1996 and covers all regular employees who are citizens of the
United States of America or resident aliens and are not covered by another
plan. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
The Plan was established by the Company as a successor to the Westinghouse
Savings Program (the "Predecessor Plan"), maintained by Westinghouse
Electric Corporation ("Westinghouse") for the benefit of employees who were
employed by the Westinghouse Electronic Systems Group as of February 29,
1996 and became employees of the Company as of March 1, 1996, and any other
subsequent eligible employees of the Company. Plan participants should refer
to the plan agreement.
Contributions - Plan participants may contribute between 2% and 20% of
eligible compensation, in increments of 1% on an after-tax basis, a pre-tax
basis, or a combination thereof. As of the end of each month, for each
dollar a participant contributes, the Company makes a matching contribution
of $0.50, subject to a maximum Company matching contribution of 3% of
eligible compensation for that month.
A participant other than a terminated participant who has received a
rollover distribution from a qualified defined contribution plan or a
distribution from an individual retirement account may elect to roll over
not more than the cash value of the distribution, less any amount
attributable to the participant's after-tax contributions, to his or her
Standard account within 60 days of receipt of such distribution. The
participant may elect to invest any amount rolled over or transferred to the
Plan in any of the investment options available in increments of 1%.
Participant Accounts - A separate account is maintained for each
participant, each of which has subaccounts. After-tax contributions are
allocated to the participant's Standard Account, and pre-tax contributions
are allocated to the participant's Tax-Deferred Account. Company matching
contributions are allocated to the participant's Company Matching
Contribution Account ("Matching Account"). Assets of the trust are valued
daily, and take into account earnings and losses of the trust along with
appreciation or depreciation, expenses and distributions.
Vesting - Plan participants are 100% vested in, and have a nonforfeitable
right to, the balance of their Standard and Tax-Deferred accounts at all
times. Plan participants as of March 1, 1996 who had a 100% vested interest
-14-
in their accounts under the Predecessor Plan as of February 29, 1996 shall
be 100% vested in their Company Matching Contribution Accounts as of March
1, 1996. All other plan participants who were not fully vested as of March
1, 1996 in their Company Matching Contribution Accounts will not be vested
in any portion of their Company Matching Contribution Accounts until they
accrue five years of service, at which time they become 100% vested in and
have a nonforfeitable right to their Company Matching Contribution Accounts.
Company Matching Contribution Accounts become 100% vested upon retirement or
death.
Investment Options - Upon enrollment in the Plan, each participant may
direct that his or her accounts, in 1% increments, be invested in any of the
following 11 investment funds:
Janus Fund
Fidelity Growth & Income Portfolio
Twentieth Century Ultra Investors
JPM Institutional Diversified Fund
JPM Institutional International Equity Fund
BT Investment Lifecycle Short Range Fund
BT Investment Lifecycle Mid Range Fund
BT Investment Lifecycle Long Range Fund
BT Investment Equity 500 Index Fund
Fixed Income Fund
Northrop Grumman Fund
The Westinghouse Common Stock Fund was transferred from the Predecessor
Plan. This fund was frozen, and no employee contributions have been allowed
since the transfer.
Participant Notes Receivable - Participants may borrow from their fund
accounts a minimum of $1,000, in $100 increments, equal to the lessor of
$50,000 reduced by the highest outstanding loan balance during the preceding
12 months or 50% of their account balance. A participant may not have more
than two outstanding loans at any given time. Loan transfers are treated as
a transfer to (from) the investment fund from (to) the loan fund. Loans may
be prorated across all investment funds or directed against specific funds
based on the participant's request. Loans are secured by the balance in the
participant's account and bear interest determined at the Bankers Trust
prime interest rate on the close of business on the last business day of the
preceding calendar month plus 1%. Repayments are made from monthly payroll
deductions over a period of 6 to 60 months, in increments of 6 months.
Payment of Benefits - On termination of service due to retirement, a
participant may elect to receive a lump-sum amount equal to the value of the
participant's vested interest in his or her account, or monthly or annual
installments, the amount of which is determined by the participant at
retirement. A retired participant may cancel or change such election at any
time, and may also elect a partial distribution. For termination of service
due to other reasons, a participant may receive the value of the vested
interest in his or her account as a lump-sum amount, or leave his or her
vested account in the plan if he or she has not yet reached normal
retirement age; however, amounts must be withdrawn in a lump sum by the
terminated participant's normal retirement age. Death benefits for active
participants are to be paid to the designated beneficiary in a lump sum, or,
if the designated beneficiary is also the surviving spouse, he or she may
elect to leave the vested balance in the Plan and be treated as the retired
participant. Death benefits for terminated employees are paid in a lump sum
to the designated beneficiary.
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Withdrawals - A vested participant is permitted to make a withdrawal for any
reason from his or her Standard or Matching Account. A vested participant is
permitted to make a withdrawal for any reason from his or her Tax-Deferred
Account upon the attainment of age 59-1/2, or prior to the attainment of age
59-1/2 in the case of hardship (as described in the plan document). A
nonvested participant is permitted to make a withdrawal for any reason from
the portion of his or her Standard Account which represents contributions
that were not matched by contributions in the Matching Account. A nonvested
participant is permitted to make a withdrawal from that portion of his or
her Standard Account which represents contributions that were not matched by
contributions in the Matching Account only in the case of hardship. A
nonvested participant is permitted to make a withdrawal from his or her
Tax-Deferred Account in the case of hardship. A nonvested participant is not
permitted to make a withdrawal from the Matching Account.
Forfeited Accounts - Any amounts forfeited shall be used to reduce the
Company's obligation to make company matching contributions under the plan.
Employer contributions were reduced by $183,411 and $201,792 from forfeited
nonvested accounts in 1998 and 1997, respectively.
B. SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the Plan are prepared
under the accrual basis of accounting.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Investment Valuation and Income Recognition - The Plan's investments are
stated at fair value based on quoted market prices except for its
investments in insurance and investment contracts, which are valued at
contract value (see Note C). Participant notes receivable are valued at
cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on
the ex-dividend date.
Broker commissions, transfer taxes and other charges and expenses incurred
in connection with the purchase, sale or other disposition of securities or
other investments held by the Plan are added to the cost of the securities
or other investments or are deducted from the proceeds of the sale or other
disposition thereof, as appropriate. Taxes (if any) on the assets of the
funds, or on any gain resulting from the sale or other disposition of such
assets, or on the earnings of the funds, are apportioned in such a manner as
the trustees deem equitable among the participants and former participants
(if any) whose interests in the Plan are affected, and the share of such
taxes apportioned to each person is charged against his or her account of
the Plan.
Payment of Benefits - Benefits are recorded when paid. As of December 31,
1998, benefits payable to particpants are $292,155. There were no benefits
payable to participants as of December 31, 1997.
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C. INVESTMENT CONTRACTS WITH INSURANCE COMPANIES
All investment and insurance contracts held by the Plan are considered to be
fully benefit - responsive and, therefore, are reported at contract value.
Contract value represents contributions made under the contract, plus
interest at the contract rate, less withdrawals and administrative expenses.
The following information is disclosed for the investment and insurance
contracts within the Northrop Grumman Stable Value Master Trust (the "Master
Trust") as of December 31, 1998, and the Fixed Income Contract Fund as of
December 31, 1997 (in millions):
1998 1997
Contract value of assets: $1,299 $ 318
Fair value of assets: $1,343 $ 337
Average yield of assets on December 31: % 6.72 %
Crediting interest rate of assets at
December 31: 7.08 % 5.95 %
Duration: 2.58 years 2.90 years
D. INVESTMENTS
Except for its insurance and investment contracts (see Note C), the Plan's
investments as of December 31, 1998 and 1997, are stated at fair value as
determined by quoted market prices.
On January 1, 1998, Northrop Grumman Corporation pooled all of the
insurance and investment contracts for the Northrop Grumman Corporation
Savings and Investment Plan Master Trust, the Northrop Grumman Master
Trust, and the contracts held by the Northrop Grumman Electronic Sensors
and Systems Division Savings and Investment Program into the Northrop
Grumman Stable Value Master Trust.
Investments held at contract value in the Master Trust as of December 31,
1998 are as follows (in thousands):
Guaranteed and Bank Investment Contracts $1,298,790
Northrop Retirement Savings Temporary Investment Fund 60,090
Accrued Income 113
----------
Total $1,358,993
----------
The Plan's investment in the Master Trust as of December 31, 1998 is as
follows (in thousands):
Contract Value of Guaranteed and Bank Investment Contracts $ 392,637
Net securities sales pending settlement -
----------
Total $ 392,637
----------
Percentage of ownership 28.89%
Investment income in the Master Trust was $ 91,158,197 for the year ended
December 31, 1998.
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E. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate
the Plan subject to the provisions of ERISA. In the event of the Plan's
termination, participants will become 100% vested in their accounts.
F. TAX STATUS
The Plan is intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986, (the "IRC") as amended, and to include a qualified
cash or deferred arrangement under Section 401(k) of the IRC. The Company
believes that the Plan is designed and currently being operated in
compliance with the applicable provisions of the IRC.
******
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NORTHROP GRUMMAN CORPORATION ELECTRONIC SENSORS &
SYSTEMS SAVINGS AND INVESTMENT PROGRAM
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Description of Investment,
Including Maturity Date,
Identity of Issue, Borrower Rate of Interest, Collateral, Current
Lessor or Similar Party Par or Maturity Value Cost Value
711,906 Shares of participation in the
* Bankers Trust Pyramid Directed Account Cash Fund $ 711,906 $ 711,906
21,121,580 Shares of participation in the
* Northrop Grumman ESSD Loan Fund 21,121,581 21,121,581
1,999,168 Shares of participation in the Ultra
* American Century Mutual Funds Fund Investment 58,778,559 66,792,189
576,951 Shares of participation in the Large
* Bankers Trust Cap Equity Fund (Equity 500) 63,483,077 89,992,755
343,236 Shares of participation in the
* Bankers Trust Lifecycle Short Range Fund 3,704,483 3,559,353
451,190 Shares of participation in the
* Bankers Trust Lifecycle Mid Range Fund 5,168,145 4,760,057
611,279 Shares of participation in the
* Bankers Trust Lifecycle Long Range Fund 7,935,833 7,567,638
* CBS Corp 2,299,714 Shares of participation in the COM 40,075,797 75,460,515
2,187,339 Shares of particiption in the
* Fidelity Growth & Income 72,611,910 100,267,634
415,087 Shares of participation in the
* JPM Institutional Diversified Fund 5,281,833 5,773,854
533,822 Shares of participation in the
* JPM Institutional Funds - Int'l Equity Fund 8,154,721 6,336,464
1,741,697 Shares of participation in the FD
* Janus Fund Income Fund 46,726,583 58,608,091
26,324 Shares of participation in the
* Northrop Grumman Corporate Stock 2,374,184 1,924,943
* Primco Capital Management Fixed Income Contract fund 392,537,208 392,637,208
------------ ------------
Total $928,665,820 $835,514,188
============ ============
* Party-In-Interest
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NORTHROP GRUMMAN CORPORATION ELECTRONIC SENSORS &
SYSTEMS SAVINGS AND INVESTMENT PROGRAM
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
SERIES TRANSACTIONS, WHEN AGGREGATED, IN EXCESS OF 5% OF THE CURRENT VALUE
OF ASSETS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (g) (h) (i)
Current Value Net
Identity of Party Description Purchase Selling Cost of of Assets Gain
Involved of Asset Price Price Asset Transaction Date (Loss)
Bankers Trust Directed Cash Account $ 92,587,217 $92,587,217
Bankers Trust Directed Cash Account $96,936,402 96,936,402 $ 96,936,402
Bankers Trust Large Cap Equity Fund (Equity 50) 21,971,264 21,971,264
Bankers Trust Large Cap Equity Fund (Equity 50) 14,025,413 10,732,698 14,025,413 3,292,715
Bankers Trust Growth & Income Portfolio 22,030,269 22,030,269
Fidelity Growth & Income Portfolio 13,999,958 10,907,005 13,999,958 3,092,953
Fidelity
-20-
Exhibit 1
---------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-03959 of Northrop Grumman Corporation on Form S-8 of our report dated June
24, 1999, appearing in this Annual Report on Form 11-K of the Northrop Grumman
Electronic Sensors & Systems Division Savings and Investment Program for the
year ended December 31, 1998.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Los Angeles, California
June 29, 1999
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