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Document and Entity Information - USD ($) $ in Millions	3 Months Ended
Document and Entity Information - USD ($) $ in Millions	Mar. 31, 2010	Apr. 26, 2010	Jun. 30, 2009
Document and Entity Information [Abstract]
Entity Registrant Name	NORTHROP GRUMMAN CORP /DE/
Entity Central Index Key	0001133421
Document Type	10-Q
Document Period End Date	Mar. 31, 2010
Amendment Flag	false
Document Fiscal Year Focus	2010
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 14,547
Entity Common Stock, Shares Outstanding		301,197,146

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2010	Mar. 31, 2009
Sales and Service Revenues
Product sales	$ 5,526	$ 4,570
Service revenues	3,084	3,365
Total sales and service revenues	8,610	7,935
Cost of Sales and Service Revenues
Cost of product sales	4,296	3,635
Cost of service revenues	2,781	2,963
General and administrative expenses	768	718
Operating income	765	619
Other (expense) income
Interest expense	(80)	(73)
Other, net	7	8
Earnings from continuing operations before income taxes	692	554
Federal and foreign income taxes	230	188
Earnings from continuing operations	462	366
Earnings from discontinued operations, net of tax	7	23
Net earnings	$ 469	$ 389
Basic Earnings Per Share
Continuing operations	$ 1.53	$ 1.12
Discontinued operations	0.02	0.07
Basic earnings per share	$ 1.55	$ 1.19
Weighted-average common shares outstanding, in millions	302.5	326.9
Diluted Earnings Per Share
Continuing operations	$ 1.51	$ 1.1
Discontinued operations	0.02	0.07
Diluted earnings per share	$ 1.53	$ 1.17
Weighted-average diluted shares outstanding, in millions	306.1	332.1
Net earnings (from above)	$ 469	$ 389
Other comprehensive income
Change in cumulative translation adjustment	(28)	(14)
Change in unrealized gain on marketable securities and cash flow hedges, net of tax		7
Change in unamortized benefit plan costs, net of tax	40	53
Other comprehensive income, net of tax	12	46
Comprehensive income	$ 481	$ 435

Condensed Consolidated Statements of Financial Position (Unaudited) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2010	Dec. 31, 2009
Assets
Cash and cash equivalents	$ 1,961	$ 3,275
Accounts receivable, net of progress payments	4,197	3,394
Inventoried costs, net of progress payments	1,289	1,170
Deferred tax assets	627	524
Prepaid expenses and other current assets	295	272
Total current assets	8,369	8,635
Property, plant, and equipment, net of accumulated depreciation of $4,340 in 2010 and $4,216 in 2009	4,797	4,868
Goodwill	13,517	13,517
Other purchased intangibles, net of accumulated amortization of $1,898 in 2010 and $1,871 in 2009	846	873
Pension and post-retirement plan assets	304	300
Long-term deferred tax assets	883	1,010
Miscellaneous other assets	1,046	1,049
Total assets	29,762	30,252
Liabilities
Notes payable to banks	14	12
Current portion of long-term debt	761	91
Trade accounts payable	1,642	1,921
Accrued employees' compensation	1,134	1,281
Advance payments and billings in excess of costs incurred	1,909	1,954
Other current liabilities	2,028	1,726
Total current liabilities	7,488	6,985
Long-term debt, net of current portion	3,440	4,191
Pension and post-retirement plan liabilities	4,723	4,874
Other long-term liabilities	1,471	1,515
Total liabilities	$ 17,122	$ 17,565
Commitments and Contingencies (Note 10)
Shareholders' Equity
Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2010 - 300,814,235; 2009 - 306,865,201	$ 301	$ 307
Paid-in capital	8,264	8,657
Retained earnings	7,077	6,737
Accumulated other comprehensive loss	(3,002)	(3,014)
Total shareholders' equity	12,640	12,687
Total liabilities and shareholders' equity	$ 29,762	$ 30,252

Condensed Consolidated Statements of Financial Position (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2010	Dec. 31, 2009
Assets
Property, plant, and equipment accumulated depreciation	$ 4,340,000,000	$ 4,216,000,000
Accumulated amortization on other purchased intangibles	1,898,000,000	1,871,000,000
Shareholders' Equity
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	800,000,000	800,000,000
Common stock, shares issued	300,814,235	306,865,201
Common stock, shares outstanding	300,814,235	306,865,201

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2010	Mar. 31, 2009
Cash received from customers
Progress payments	$ 2,379	$ 803
Collections on billings	5,339	6,326
Other cash receipts	1	51
Total sources of cash - continuing operations	7,719	7,180
Uses of Cash - Continuing Operations
Cash paid to suppliers and employees	(8,003)	(7,203)
Interest paid, net of interest received	(126)	(98)
Income taxes paid, net of refunds received	(111)	(73)
Excess tax benefits from stock-based compensation	(5)
Other cash payments	(5)	(22)
Total uses of cash - continuing operations	(8,250)	(7,396)
Cash used in continuing operations	(531)	(216)
Cash provided by discontinued operations		44
Net cash used in operating activities	(531)	(172)
Investing Activities
Additions to property, plant, and equipment	(135)	(162)
Payments for outsourcing contract costs and related software costs	(3)	(18)
Other investing activities, net	3	4
Net cash used in investing activities	(135)	(176)
Financing Activities
Net borrowings (payments) under lines of credit	2	(1)
Principal payments of long-term debt	(89)
Proceeds from exercises of stock options and issuances of common stock	70	8
Dividends paid	(129)	(131)
Excess tax benefits from stock-based compensation	5
Common stock repurchases	(507)	(150)
Net cash used in financing activities	(648)	(274)
Decrease in cash and cash equivalents	(1,314)	(622)
Cash and cash equivalents, beginning of period	3,275	1,504
Cash and cash equivalents, end of period	$ 1,961	$ 882

Condensed Consolidated Statements of Cash Flows Indirect Method (Unaudited) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2010	Mar. 31, 2009
Reconciliation of Net Earnings to Net Cash Used in Operating Activities
Net earnings	$ 469	$ 389
Net earnings from discontinued operations		(23)
Adjustments to reconcile to net cash used in operating activities
Depreciation	140	136
Amortization of assets	39	38
Stock-based compensation	38	35
Excess tax benefits from stock-based compensation	(5)
Pre-tax gain on sale of business	(11)
(Increase) decrease in
Accounts receivable	(2,706)	(1,748)
Inventoried costs	13	(355)
Prepaid expenses and other current assets	(6)	(31)
Increase (decrease) in
Progress payments	1,779	1,431
Accounts payable and accruals	(526)	(265)
Deferred income taxes	(1)	46
Income taxes payable	163	131
Retiree benefits	107	(5)
Other non-cash transactions, net	(24)	5
Cash used in continuing operations	(531)	(216)
Cash provided by discontinued operations		44
Net cash used in operating activities	(531)	(172)
Non-Cash Investing and Financing Activities
Capital expenditures accrued in accounts payable	$ 38	$ 29

Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2010	Mar. 31, 2009
Statement [Line Items]
At beginning of period	$ 12,687
Net earnings	469	$ 389
Other comprehensive income, net of tax	12	46
At end of period	$ 12,640	$ 12,057
Cash dividends declared per share	$ 0.43	$ 0.4
Common Stock
Statement [Line Items]
At beginning of period	$ 307	$ 327
Common stock repurchased	(8)	(4)
Employee stock awards and options	2	2
At end of period	301	325
Paid-in Capital
Statement [Line Items]
At beginning of period	8,657	9,645
Common stock repurchased	(477)	(161)
Employee stock awards and options	84	(2)
At end of period	8,264	9,482
Retained Earnings
Statement [Line Items]
At beginning of period	6,737	5,590
Net earnings	469	389
Dividends declared	(129)	(133)
At end of period	7,077	5,846
Accumulated Other Comprehensive Loss
Statement [Line Items]
At beginning of period	(3,014)	(3,642)
Other comprehensive income, net of tax	12	46
At end of period	$ (3,002)	$ (3,596)

Basis of Presentation (Unaudited)

3 Months Ended

Mar. 31, 2010

Basis of Presentation [Abstract]

1. BASIS OF PRESENTATION


1.	BASIS OF PRESENTATION

Principles of Consolidation – The unaudited condensed consolidated financial statements include the accounts of Northrop Grumman Corporation and its subsidiaries. All material intercompany accounts, transactions, and profits are eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements of the company have been prepared by management in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (SEC). These statements include all adjustments of normal recurring nature considered necessary by management for a fair presentation of the condensed consolidated financial position, results of operations, and cash flows. The results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year. These financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto contained in the company’s 2009 Annual Report on Form 10-K.

The quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is management’s long-standing practice to establish actual interim closing dates using a “fiscal” calendar, which requires the businesses to close their books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. The effects of this practice only exist within a reporting year.

Accounting Estimates – The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation thereof requires management to make estimates and judgments 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 materially from those estimates.

Accumulated Other Comprehensive Loss – The components of accumulated other comprehensive loss are as follows:


	March 31,			December 31,
$ in millions	2010			2009
Cumulative translation adjustment	$	13		$	41
Net unrealized gain on marketable securities and cash flow hedges, net of tax
expense of $3 as of March 31, 2010 and December 31, 2009		4			4
Unamortized benefit plan costs, net of tax benefit of $1,959 as of March 31, 2010, and $1,984 as of December 31, 2009		(3,019	)		(3,059	)

Total accumulated other comprehensive loss	$	(3,002	)	$	(3,014	)

The changes in the unamortized benefit plan costs, net of tax, were $40 million and $53 million, respectively for the three months ended March 31, 2010, and 2009 and are included in other comprehensive income in the condensed consolidated statements of operations. Unamortized benefit plan costs consist primarily of net after-tax actuarial loss amounts totaling $3,041 million and $3,082 million as of March 31, 2010, and December 31, 2009, respectively. Net actuarial gains or losses principally arise from gains or losses on plan assets due to variations in the fair market value of the underlying assets and changes in the benefit obligation due to changes in actuarial assumptions. Net actuarial gains or losses are amortized to expense when they exceed ten percent of the greater of the plan assets or projected benefit obligations by benefit plan. The excess of gains or losses over the ten percent threshold are subject to amortization over the average future service period of employees of approximately ten years.

Financial Statement Reclassifications – Certain amounts in the prior period notes to the condensed consolidated financial statements have been reclassified to reflect the business operations realignments effective in 2010 (see Note 6).

Fair Value of Financial Instruments (Unaudited)

3 Months Ended

Mar. 31, 2010

Fair Value of Financial Instruments [Abstract]

3. FAIR VALUE OF FINANCIAL INSTRUMENTS


3.	FAIR VALUE OF FINANCIAL INSTRUMENTS

Investments in Marketable Securities – The company holds a portfolio of marketable securities, primarily consisting of equity securities that are classified as either trading or available-for-sale and can be liquidated without restriction. These assets are recorded at fair value, substantially all of which are based upon quoted market prices for identical instruments in active markets and thus considered Level 1 inputs. As of March 31, 2010, and December 31, 2009, respectively, there were marketable equity securities of $62 million and $58 million included in prepaid expenses and other current assets and $237 million and $233 million of marketable equity securities included in miscellaneous other assets.

Derivative Financial Instruments and Hedging Activities – The company utilizes derivative financial instruments in order to manage exposure to interest rate risk and foreign currency exchange rate risk. The company does not use derivative financial instruments for trading or speculative purposes, nor does it use leveraged financial instruments. Interest rate swap agreements utilize floating interest rates as an offset to the fixed-rate characteristics of certain long-term debt instruments. Foreign currency forward contracts are used to manage foreign currency exchange rate risk related to receipts from customers and payments to suppliers denominated in foreign currencies.

Derivative financial instruments are recognized as assets or liabilities in the financial statements and measured at fair value, substantially all of which are based on active or inactive markets for identical or similar instruments or model-derived valuations whose inputs are observable and thus considered Level 2 inputs. Changes in the fair value of derivative financial instruments that qualify and are designated as fair value hedges are recorded in earnings from continuing operations, while the effective portion of the changes in the fair value of derivative financial instruments that qualify and are designated as cash flow hedges are recorded in other comprehensive income. The market approach was used to determine fair value using inputs including, but not limited to, the London Interbank Offered Rate (LIBOR) swap rates. Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and periodic settlements of the underlying transactions.

For derivative financial instruments not designated as hedging instruments as well as the ineffective portion of cash flow hedges, gains or losses resulting from changes in the fair value are reported in Other, net in the condensed consolidated statements of operations. Unrealized gains or losses on cash flow hedges are reclassified from other comprehensive income to earnings from continuing operations upon the recognition of the underlying transactions.

As of March 31, 2010, an interest rate swap with a notional value of $200 million, and foreign currency purchase and sale forward contract agreements with notional values of $68 million and $131 million, respectively, were designated for hedge accounting. The remaining notional values outstanding at March 31, 2010, under foreign currency purchase and sale forward contracts of $14 million and $79 million, respectively, were not designated for hedge accounting.

As of December 31, 2009, an interest rate swap with a notional value of $200 million, and foreign currency purchase and sale forward contract agreements with notional values of $77 million and $151 million, respectively, were designated for hedge accounting. The remaining notional values outstanding at December 31, 2009, under foreign currency purchase and sale forward contracts of $19 million and $74 million, respectively, were not designated for hedge accounting.

The derivative fair values and related unrealized gains and losses at March 31, 2010, and December 31, 2009, were not material.

There were no material transfers of financial instruments between the three levels of fair value hierarchy during the three months ended March 31, 2010.

The carrying amounts of other financial instruments not listed in the table below approximate fair value due to the short-term nature of these items.

Carrying amounts and the related estimated fair values of the company’s financial instruments not recorded at fair value in the financial statements are as follows:


	March 31, 2010						December 31, 2009
	Carrying			Fair			Carrying			Fair
$ in millions	Amount			Value			Amount			Value
Cash surrender value of life insurance policies	$	246		$	246		$	242		$	242
Long-term debt		(4,201	)		(4,753	)		(4,282	)		(4,825	)

Cash Surrender Value of Life Insurance Policies – The company maintains whole life insurance policies on a group of executives which are recorded at their cash surrender value as determined by the insurance carrier. Additionally, the company has split-dollar life insurance policies on former officers and executives from acquired businesses which are recorded at the lesser of their cash surrender value or premiums paid. The policies are utilized as a partial funding source for deferred compensation and other non-qualified employee retirement plans. Amounts associated with these policies are recorded in miscellaneous other assets in the condensed consolidated statements of financial position.

Long-Term Debt – The fair value of the long-term debt was calculated based on interest rates available for debt with terms and maturities similar to the company’s existing debt arrangements.

Business Acquisitions and Dispositions (Unaudited)

3 Months Ended

Mar. 31, 2010

Business Acquisitions and Dispositions [Abstract]

5. BUSINESS ACQUISITIONS AND DISPOSITIONS


5.	BUSINESS ACQUISITIONS AND DISPOSITIONS

Acquisitions

In April 2009, the company acquired Sonoma Photonics, Inc., as well as assets from Swift Engineering’s Killer Bee Unmanned Air Systems product line for an aggregate amount of approximately $33 million in cash. The operating results of these businesses are reported in the Aerospace Systems segment from the date of acquisition. The assets, liabilities, and results of operations of these businesses were not material to the company’s consolidated financial position or results of operations, and thus pro-forma financial information is not presented.

Dispositions

In December 2009, the company sold its Advisory Services Division (ASD) for $1.65 billion in cash to an investor group led by General Atlantic, LLC, and affiliates of Kohlberg Kravis Roberts & Co. L.P., and recognized a gain of $15 million, net of taxes. During the three months ended March 31, 2010, an additional $7 million gain, net of taxes, was recorded to reflect management’s preliminary estimate of the purchase price adjustment called for under the sale agreement. ASD was a business unit comprised of the assets and liabilities of TASC, Inc., its wholly-owned subsidiary TASC Services Corporation, and certain contracts carved out from other Northrop Grumman businesses also in the Information Systems segment that provide systems engineering technical assistance (SETA) and other analysis and advisory services. Sales and operating income for this business for the three months ended March 31, 2009, were approximately $385 million and $36 million, respectively. The operating results of this business unit are reported as discontinued operations in the condensed consolidated financial statements for all periods presented.

Segment Information (Unaudited)

3 Months Ended

Mar. 31, 2010

Segment Information [Abstract]

6. SEGMENT INFORMATION


6.	SEGMENT INFORMATION

The company is aligned into five reportable segments: Aerospace Systems, Electronic Systems, Information Systems, Shipbuilding, and Technical Services.

In January 2010, the company transferred its internal information technology services unit from the Information Systems segment to the company’s shared services group. The intersegment sales and operating income for this business that were previously recognized in the Information Systems segment are immaterial and have been eliminated for all periods presented.

The following table presents segment sales and service revenues for the three months ended March 31, 2010, and 2009:


	Three Months Ended
	March 31
$ in millions	2010			2009
Sales and service revenues
Aerospace Systems	$	2,696		$	2,456
Electronic Systems		1,882			1,788
Information Systems		2,064			2,093
Shipbuilding		1,721			1,375
Technical Services		763			632
Intersegment eliminations		(516	)		(409	)

Total sales and service revenues	$	8,610		$	7,935

The following table presents segment operating income reconciled to total operating income for the three months ended March 31, 2010, and 2009:


	Three Months Ended
	March 31
$ in millions	2010			2009
Operating income
Aerospace Systems	$	296		$	258
Electronic Systems		226			229
Information Systems		183			186
Shipbuilding		106			84
Technical Services		49			37
Intersegment eliminations		(50	)		(39	)

Total segment operating income		810			755
Non-segment factors affecting operating income
Unallocated corporate expenses		(33	)		(53	)
Net pension adjustment		(8	)		(76	)
Royalty income adjustment		(4	)		(7	)

Total operating income	$	765		$	619

Unallocated Corporate Expenses – Unallocated corporate expenses generally include the portion of corporate expenses not considered allowable or allocable under applicable U.S. Government Cost Accounting Standards (CAS) regulations and the Federal Acquisition Regulation, and therefore not allocated to the segments, for costs related to management and administration, legal, environmental, certain compensation and retiree benefits, and other expenses.

Net Pension Adjustment – The net pension adjustment reflects the difference between pension expense determined in accordance with GAAP and pension expense allocated to the operating segments determined in accordance with CAS.

Royalty Income Adjustment – Royalty income is included in segment operating income and reclassified to other income for financial reporting purposes.

Earnings Per Share (Unaudited)

3 Months Ended

Mar. 31, 2010

Earnings Per Share [Abstract]

7. EARNINGS PER SHARE


7.	EARNINGS PER SHARE

Basic Earnings Per Share – Basic earnings per share from continuing operations are calculated by dividing earnings from continuing operations available to common shareholders by the weighted-average number of shares of common stock outstanding during each period.

Diluted Earnings Per Share – Diluted earnings per share include the dilutive effect of stock options and other stock awards granted to employees under stock-based compensation plans. The dilutive effect of these securities totaled 3.6 million shares and 5.2 million shares for the three months ended March 31, 2010, and 2009, respectively. The weighted-average diluted shares outstanding for the three months ended March 31, 2010, and 2009, exclude stock options to purchase approximately 2.7 million and 13.4 million shares, respectively, because such options have exercise prices in excess of the average market price of the company’s common stock during the period.

Share Repurchases – The table below summarizes the company’s share repurchases beginning January 1, 2009:

Shares Repurchased

(in millions)

Total Shares

Three Months Ended

Repurchase Program

Amount Authorized

Average Price Per

Retired

March 31

Authorization Date

(in millions)

Share⁽²⁾

(in millions)

2010

2009

December 19, 2007⁽¹⁾

3,600

59.94

52.7

8.3

4.2


(1)		On December 19, 2007, the company’s board of directors authorized a share repurchase program of up to $2.5 billion of the company’s common stock. On November 5, 2009, the board of directors authorized an additional $1.1 billion to the December 19, 2007 authorization.

(2)		Includes commissions paid and calculated as the average price per share since the repurchase program authorization date.

Share repurchases take place at management’s discretion or under pre-established non-discretionary programs from time to time, depending on market conditions, in the open market, and in privately negotiated transactions. The company retires its common stock upon repurchase and has not made any purchases of common stock other than in connection with these publicly announced repurchase programs. As of the end of the first quarter 2010, the company has $439 million remaining under this authorization for share repurchases.

Litigation (Unaudited)

3 Months Ended

Mar. 31, 2010

Litigation [Abstract]

9. LITIGATION


9.	LITIGATION

U.S. Government Investigations and Claims – Departments and agencies of the U.S. Government have the authority to investigate various transactions and operations of the company, and the results of such investigations may lead to administrative, civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or compensatory or treble damages. U.S. Government regulations provide that certain findings against a contractor may lead to suspension or debarment from future U.S. Government contracts or the loss of export privileges for a company or an operating division or subdivision. Suspension or debarment could have a material adverse effect on the company because of its reliance on government contracts.

In the second quarter of 2007, the U.S. Coast Guard issued a revocation of acceptance under the Deepwater Program for eight converted 123-foot patrol boats (the vessels) based on alleged “hull buckling and shaft alignment problems” and alleged “nonconforming topside equipment” on the vessels. The company submitted a written response that argued that the revocation of acceptance was improper. The Coast Guard advised Integrated Coast Guard Systems, LLC (ICGS), which was formed by the contractors to perform the Deepwater Program, that it was seeking $96.1 million from ICGS as a result of the revocation of acceptance. The majority of the costs associated with the 123-foot conversion effort are associated with the alleged structural deficiencies of the vessels, which were converted under contracts with the company and a subcontractor to the company. In 2008, the Coast Guard advised ICGS that the Coast Guard would support an investigation by the U.S. Department of Justice of ICGS and its subcontractors instead of pursuing its $96.1 million claim independently. The Department of Justice conducted an investigation of ICGS under a sealed False Claims Act complaint filed in the U.S. District Court for the Northern District of Texas and decided in early 2009 not to intervene at that time. On February 12, 2009, the Court unsealed the complaint filed by Michael J. DeKort, a former Lockheed Martin employee, against ICGS, Lockheed Martin Corporation and the company, relating to the 123-foot conversion effort. On October 15, 2009, the three defendants moved to dismiss the Fifth Amended complaint. On April 5, 2010, the District Court ruled on the defendants’ motions to dismiss, granting them in part and denying them in part. As to the company, the District Court dismissed conspiracy claims and those pertaining to the C4ISR systems. The District Court denied the motion with respect to those claims relating to hull, mechanical and engineering work. The matter is set for trial on November 1, 2010.

In August 2008, the company disclosed to the Antitrust Division of the U.S. Department of Justice possible violations of federal antitrust laws in connection with the bidding process for certain maintenance contracts at a military installation in California. In February 2009, the company and the Department of Justice signed an agreement admitting the company into the Corporate Leniency Program. As a result of the company’s acceptance into the Program, the company will be exempt from federal criminal prosecution and criminal fines relating to the matters the company reported to the Department of Justice if the company complies with certain conditions, including its continued cooperation with the government’s investigation and its agreement to make restitution if the government was harmed by the violations.

Based upon the available information regarding matters that are subject to U.S. Government investigations, the company believes that the outcome of any such matters would not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

Litigation – Various claims and legal proceedings arise in the ordinary course of business and are pending against the company and its properties. Based upon the information available, the company believes that the resolution of any of these various claims and legal proceedings would not have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

The company is one of several defendants in litigation brought by the Orange County Water District in Orange County Superior Court in California on December 17, 2004, for alleged contribution to volatile organic chemical contamination of the County’s shallow groundwater. The lawsuit includes counts against the defendants for violation of the Orange County Water District Act, the California Super Fund Act, negligence, nuisance, trespass and declaratory relief. Among other things, the lawsuit seeks unspecified damages for the cost of remediation, payment of attorney fees and costs, and punitive damages. The June 2009 trial date was vacated and a status conference has been set for April 29, 2010.

On March 27, 2007, the U.S. District Court for the Central District of California consolidated two Employee Retirement Income Security Act (ERISA) lawsuits that had been separately filed on September 28, 2006 and January 3, 2007, into In Re Northrop Grumman Corporation ERISA Litigation. The plaintiffs seek to have the lawsuits certified as class actions. On August 6, 2007, the District Court denied plaintiffs’ motion for class certification, and the plaintiffs appealed the Court’s decision on class certification to the U.S. Court of Appeals for the Ninth Circuit. On September 8, 2009, the Ninth Circuit vacated the Order denying class certification and remanded the issue to the District Court for further consideration. As required by the Ninth Circuit’s Order, the case was also reassigned to a different judge.

On June 22, 2007, a putative class action was filed against the Northrop Grumman Pension Plan and the Northrop Grumman Retirement Plan B and their corresponding administrative committees, styled as Skinner et al. v. Northrop Grumman Pension Plan, etc., et al., in the U.S. District Court for the Central District of California. The putative class representatives alleged violations of ERISA and breaches of fiduciary duty concerning a 2003 modification to the Northrop Grumman Retirement Plan B. The modification relates to the employer funded portion of the pension benefit available during a five-year transition period that ended on June 30, 2008. The plaintiffs dismissed the Northrop Grumman Pension Plan, and in 2008 the District Court granted summary judgment in favor of all remaining defendants on all claims. The plaintiffs appealed, and in May 2009, the U.S. Court of Appeals for the Ninth Circuit reversed the decision of the District Court and remanded the matter back to the District Court for further proceedings, finding that there was ambiguity in a 1998 summary plan description related to the employer-funded component of the pension benefit. The plaintiffs filed a motion to certify a class. The parties also filed cross-motions for summary judgment. On January 26, 2010, the District Court granted summary judgment in favor of the Plan and denied plaintiffs’ motion for summary judgment. The District Court also denied plaintiffs’ motion for class certification and struck the trial date of March 23, 2010 as unnecessary given the Court’s grant of summary judgment for the Plan. Plaintiffs appealed the District Court’s order to the Ninth Circuit.

Other Matters – The company is pursuing legal action against an insurance provider arising out of a disagreement concerning the coverage of certain losses related to Hurricane Katrina (see Note 10). The company commenced the action against Factory Mutual Insurance Company (FM Global) on November 4, 2005, which is now pending in the U.S. District Court for the Central District of California, Western Division. In August 2007, the District Court issued an order finding that the excess insurance policy provided coverage for the company’s Katrina-related loss. FM Global appealed the District Court’s order, and on August 14, 2008, the U.S. Court of Appeals for the Ninth Circuit reversed the earlier summary judgment order in favor of the company, holding that the FM Global excess policy unambiguously excludes damage from the storm surge caused by Hurricane Katrina under its “Flood” exclusion. The Ninth Circuit remanded the case to the District Court to determine whether the California efficient proximate cause doctrine affords the company coverage under the policy even if the Flood exclusion of the policy is unambiguous. On April 2, 2009, the Ninth Circuit denied the company’s Petition for Rehearing and remanded the case to the District Court. On June 10, 2009, the company filed a motion seeking leave of court to file a complaint adding AON Risk Services, Inc. of Southern California as a defendant. On July 1, 2009, FM Global filed a motion for partial summary judgment seeking a determination that the California efficient proximate cause doctrine is not applicable or that it affords no coverage under the policy. Both motions have been fully briefed and argued. Based on the current status of the litigation, no assurances can be made as to the ultimate outcome of this matter.

During 2008, the company received notification from Munich-American Risk Partners (Munich Re), the only remaining insurer within the primary layer of insurance coverage with which a resolution has not been reached, that it will pursue arbitration proceedings against the company related to approximately $19 million owed by Munich Re to Northrop Grumman Risk Management Inc. (NGRMI), a wholly-owned subsidiary of the company, for certain losses related to Hurricane Katrina. The company was subsequently notified that Munich Re also will seek reimbursement of approximately $44 million of funds previously advanced to NGRMI for payment of claim losses of which Munich Re provided reinsurance protection to NGRMI pursuant to an executed reinsurance contract, and $6 million of adjustment expenses. The company believes that NGRMI is entitled to full reimbursement of its covered losses under the reinsurance contract and has substantive defenses to the claim of Munich Re for return of the funds paid to date.

Commitments and Contingencies (Unaudited)

3 Months Ended

Mar. 31, 2010

Commitments and Contingencies [Abstract]

10. COMMITMENTS AND CONTINGENCIES


10.	COMMITMENTS AND CONTINGENCIES

Contract Performance Contingencies – Contract profit margins may include estimates of revenues not contractually agreed to between the customer and the company for matters such as settlements in the process of negotiation, contract changes, claims and requests for equitable adjustment for previously unanticipated contract costs. These estimates are based upon management’s best assessment of the underlying causal events and circumstances, and are included in determining contract profit margins to the extent of expected recovery based on contractual entitlements and the probability of successful negotiation with the customer. As of March 31, 2010, the recognized amounts related to claims and requests for equitable adjustment are not material individually or in the aggregate.

Guarantees of Subsidiary Performance Obligations – From time to time in the ordinary course of business, the company guarantees performance obligations of its subsidiaries under certain contracts. In addition, the company’s subsidiaries may enter into joint ventures, teaming and other business arrangements (Business Arrangements) to support the company’s products and services in domestic and international markets. The company generally strives to limit its exposure under these arrangements to its subsidiary’s investment in the Business Arrangements, or to the extent of such subsidiary’s obligations under the applicable contract. In some cases, however, the company may be required to guarantee performance by the Business Arrangements and, in such cases, the company generally obtains cross-indemnification from the other members of the Business Arrangements. At March 31, 2010, the company is not aware of any existing event of default that would require it to satisfy any of these guarantees.

Environmental Matters – The estimated cost to complete remediation has been accrued where it is probable that the company will incur such costs in the future to address environmental impacts at currently or formerly owned or leased operating facilities, or at sites where it has been named a Potentially Responsible Party (PRP) by the Environmental Protection Agency, or similarly designated by other environmental agencies. These accruals do not include any litigation costs related to environmental matters, nor do they include amounts recorded as asset retirement obligations. To assess the potential impact on the company’s consolidated financial statements, management estimates the range of reasonably possible remediation costs that could be incurred by the company, taking into account currently available facts on each site as well as the current state of technology and prior experience in remediating contaminated sites. These estimates are reviewed periodically and adjusted to reflect changes in facts and technical and legal circumstances. Management estimates that as of March 31, 2010, the range of reasonably possible future costs for environmental remediation sites is $239 million to $504 million, of which $121 million is accrued in other current liabilities and $159 million is accrued in other long-term liabilities. A portion of the environmental remediation costs are expected to be recoverable through overhead charges on government contracts and, accordingly, such amounts are deferred in inventoried costs (current portion) and miscellaneous other assets (non-current portion). Factors that could result in changes to the company’s estimates include: modification of planned remedial actions, increases or decreases in the estimated time required to remediate, changes to the determination of legally responsible parties, discovery of more extensive contamination than anticipated, changes in laws and regulations affecting remediation requirements, and improvements in remediation technology. 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. In addition, there are some potential remediation sites where the costs of remediation cannot be reasonably estimated. Although management cannot predict whether new information gained as projects progress will materially affect the estimated liability accrued, management does not anticipate that future remediation expenditures will have a material adverse effect on the company’s consolidated financial position, results of operations, or cash flows.

Hurricane Impacts – In 2008, a subcontractor’s operations in Texas were severely impacted by Hurricane Ike. The subcontractor produces compartments for two of the LPD amphibious transport dock ships under construction at the Gulf Coast shipyards. In 2009, the company received $25 million of insurance proceeds representing interim payments on the Hurricane Ike insurance claim. In the first quarter of 2010, the company received $17 million in final settlement of its claim, which was recorded as a business interruption gain in cost of product sales at the Shipbuilding segment during the current quarter.

In August 2005, the company’s Gulf Coast operations were significantly impacted by Hurricane Katrina and the company’s shipyards in Louisiana and Mississippi sustained significant windstorm damage from the hurricane. As a result of the storm, the company incurred costs to replace or repair destroyed or damaged assets, suffered losses under its contracts, and incurred substantial costs to clean up and recover its operations. As of the date of the storm, the company had a comprehensive insurance program that provided coverage for, among other things, property damage, business interruption impact on net profitability, and costs associated with clean-up and recovery. The company has recovered a portion of its Hurricane Katrina claim and expects that its remaining claim will be resolved separately with the two remaining insurers, FM Global and Munich Re.

The company has full entitlement to any insurance recoveries related to business interruption impacts on net profitability resulting from these hurricanes. However, because of uncertainties concerning the ultimate determination of recoveries related to business interruption claims, in accordance with company policy no such amounts are recognized until they are resolved with the insurers. Furthermore, due to the uncertainties with respect to the company’s disagreement with FM Global in relation to the Hurricane Katrina claim, no receivables have been recognized by the company in the accompanying condensed consolidated financial statements for insurance recoveries from FM Global.

In accordance with U.S. Government cost accounting regulations affecting the majority of the company’s contracts, the cost of insurance premiums for property damage and business interruption coverage, other than “coverage of profit,” is an allowable expense that may be charged to contracts. Because a substantial portion of long-term contracts at the shipyards are flexibly-priced, the government customer would benefit from a portion of insurance recoveries in excess of the net book value of damaged assets and clean-up and restoration costs paid by the company. When such insurance recoveries occur, the company is obligated to return a portion of these amounts to the government.

Shipbuilding Quality Issues – In conjunction with a second quarter 2009 review of design, engineering and production processes at Shipbuilding undertaken as a result of leaks discovered in the USS San Antonio’s (LPD 17) lube oil system, the company became aware of quality issues relating to certain pipe welds on ships under production in the Gulf Coast as well as those that had previously been delivered. Since that discovery, the company has been working with its customer to determine the nature and extent of the pipe weld issue and its possible impact on related shipboard systems. This effort has resulted in the preparation of a technical analysis of the problem, additional inspections on the ships, a rework plan for ships previously delivered and in various stages of production, and modifications to the work plans for ships being placed into production, all of which has been done with the knowledge and support of the U.S. Navy. Shipbuilding responsible incremental costs associated with the anticipated resolution of these matters have been reflected in the financial performance analysis and contract booking rates beginning with the second quarter of 2009.

In the fourth quarter of 2009, certain bearing wear and debris were found in the lubrication system of the main propulsion diesel engines (MPDE) installed on LPD 21. Shipbuilding is participating with the U.S. Navy and other industry participants involved with the MPDEs in a review panel established by the U.S. Navy to examine the MPDE lubrication system’s design, construction, operation and maintenance for the LPD 17 class of ships. The team is focusing on identification and understanding of the root causes of the MPDE diesel bearing wear and debris in the lubrication system and potential future impacts on maintenance costs. To date the review has identified several potential system improvements for increasing the system reliability. Certain changes are being implemented on ships under construction at this time and the U.S. Navy is implementing some changes on in-service ships in the class at the earliest opportunity.

The company and the U.S. Navy continue to work in partnership to investigate and identify any additional corrective actions to address quality issues associated with ships manufactured in the company’s Gulf Coast shipyards and the company will implement appropriate corrective actions consistent with its contractual and legal obligations. The company does not believe that the ultimate resolution of the matters described above will have a material adverse effect upon its condensed consolidated financial position, results of operations or cash flows.

Co-Operative Agreements – In 2003, Shipbuilding executed an agreement with the state of Louisiana whereby Shipbuilding leases facility improvements and equipment from a non-profit economic development corporation in Louisiana in exchange for certain commitments by Shipbuilding to the state. As of March 31, 2010, Shipbuilding has met all but one of the requirements in the agreement. Failure by Shipbuilding to meet the remaining commitment could result in reimbursement by Shipbuilding to Louisiana in accordance with the agreement.

Financial Arrangements – In the ordinary course of business, the company uses standby letters of credit and guarantees issued by commercial banks and surety bonds issued principally by insurance companies to guarantee the performance on certain contracts and to support the company’s self-insured workers’ compensation plans. At March 31, 2010, there were $443 million of unused stand-by letters of credit that have not been drawn on, $152 million of issued bank guarantees, and $452 million of surety bonds outstanding.

The company has also guaranteed a $200 million loan made to Shipbuilding in connection with the Gulf Opportunity Zone Industrial Revenue Bonds issued in December 2006. Under the loan agreement, the company guaranteed Shipbuilding’s repayment of the principal and interest to the Trustee. The company also guaranteed payment of the principal and interest by the Trustee to the underlying bondholders.

Indemnifications – The company has retained certain warranty, environmental, income tax, and other potential liabilities in connection with certain of its divestitures. The settlement of these liabilities is not expected to have a material adverse effect on the company’s consolidated financial position, results of operations, or cash flows.

U.S. Government Claims – From time to time, the U.S. Government advises the company of claims and penalties concerning certain potential disallowed costs. When such findings are presented, the company and the U.S. Government representatives engage in discussions to enable the company to evaluate the merits of these claims as well as to assess the amounts being claimed. The company does not believe, but can give no assurance, that the outcome of any such matters would have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Operating Leases – Rental expense for operating leases, excluding discontinued operations and net of immaterial amounts of sublease rental income, for the three months ended March 31, 2010, and 2009, was $128 million and $140 million, respectively.

Related Party Transactions – For all periods presented, the company had no material related party transactions.

Retirement Benefits (Unaudited)

3 Months Ended

Mar. 31, 2010

Retirement Benefits [Abstract]

11. RETIREMENT BENEFITS


11.	RETIREMENT BENEFITS

The cost of the company’s pension plans and medical and life benefits plans is shown in the following table:


	Three Months Ended March 31
	Pension						Medical and
	Benefits						Life Benefits
$ in millions	2010			2009			2010			2009
Components of Net Periodic Benefit Cost
Service cost	$	165		$	165		$	12		$	12
Interest cost		349			337			39			41
Expected return on plan assets		(438	)		(389	)		(14	)		(12	)
Amortization of:
Prior service cost (credit)		12			12			(15	)		(15	)
Net loss from previous years		61			85			7			7

Net periodic benefit cost	$	149		$	210		$	29		$	33

Defined contribution plans cost	$	83		$	82

Employer Contributions – For the three months ended March 31, 2010, contributions of $49 million and $20 million have been made to the company’s pension plans and its medical and life benefit plans, respectively, including voluntary pension contributions totaling $30 million. In 2010, the company expects to contribute the required minimum funding level of approximately $57 million to its pension plans and approximately $171 million to its other post-retirement benefit plans and also expects to make additional voluntary pension contributions of approximately $330 million.

Defined Contribution Plans – The company also sponsors 401(k) defined contribution plans in which most employees are eligible to participate, including certain bargaining unit employees. Company contributions for most plans are based on a cash matching of employee contributions up to 4 percent of compensation. Certain hourly employees are covered under a target benefit plan. The company also participates in a multiemployer plan for certain of the company’s union employees. In addition to the 401(k) defined contribution benefit plan, non-represented employees hired after June 30, 2008, are eligible to participate in a defined contribution program in lieu of a defined benefit pension plan.

New Health Care Legislation – The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act became law during the quarter and these new laws will have an impact on the company’s future costs for providing health care benefits for its employees when the laws begin to impact the company’s health care costs in 2013 and beyond. The initial passage of the laws will eliminate the company’s tax benefits under the Medicare prescription drug subsidies associated with the Medicare Prescription Drug, Improvement and Modernization Act of 2003 beginning in 2013, but these drug subsidies are not material to the consolidated financial statements. The company is in the process of assessing the extent to which the new laws will affect its future health care and related employee benefit plan costs.

Stock Compensation Plans (Unaudited)

3 Months Ended

Mar. 31, 2010

Stock Compensation Plans [Abstract]

12. STOCK COMPENSATION PLANS


12.	STOCK COMPENSATION PLANS

At March 31, 2010, Northrop Grumman had stock-based compensation awards outstanding under the following plans: the 2001 Long-Term Incentive Stock Plan, the 1993 Long-Term Incentive Stock Plan, both applicable to employees, and the 1993 Stock Plan for Non-Employee Directors and 1995 Stock Plan for Non-Employee Directors, as amended. All of these plans were approved by the company’s shareholders. Share-based awards under the employee plans consist of stock option awards (Stock Options) and restricted stock awards (Stock Awards).

Compensation Expense

Total pre-tax stock-based compensation expense for the three months ended March 31, 2010, and 2009, was $38 million and $35 million, respectively, of which $9 million and $5 million related to Stock Options and $29 million and $30 million, related to Stock Awards, respectively. Tax benefits recognized in the condensed consolidated statements of operations for stock-based compensation during the three months ended March 31, 2010, and 2009, were $15 million and $14 million, respectively. In addition, the company realized tax benefits of $6 million and $245 thousand from the exercise of Stock Options and $33 million and $47 million from the issuance of Stock Awards in the three months ended March 31, 2010 and 2009, respectively.

At March 31, 2010, there was $285 million of unrecognized compensation expense related to unvested awards granted under the company’s stock-based compensation plans, of which $32 million relates to Stock Options and $253 million relates to Stock Awards. These amounts are expected to be charged to expense over a weighted-average period of 1.6 years.

Stock Options

The fair value of each of the company’s Stock Option awards is estimated on the date of grant using a Black-Scholes option-pricing model that uses the assumptions noted in the table below. The fair value of the company’s stock option awards is expensed on a straight-line basis over the vesting period of the options, which is generally three to four years. Expected volatility is based on an average of (1) historical volatility of the company’s stock and (2) implied volatility from traded options on the company’s stock. The risk-free rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the award is granted with a maturity equal to the expected term of the award. The company uses historical data to estimate future forfeitures. The expected term of awards granted is derived from historical experience under the company’s stock-based compensation plans and represents the period of time that awards granted are expected to be outstanding.

The significant weighted-average assumptions relating to the valuation of the company’s stock options for the three months ended March 31, 2010, and 2009, were as follows:


Weighted Average Assumptions	2010			2009
Dividend yield		2.9	%		3.3	%
Volatility rate		25	%		25	%
Risk-free interest rate		2.3	%		1.7	%
Expected option life (years)		6			6

The company grants stock options almost exclusively to executives, and the expected term of six years was based on these employees’ exercise behavior. In 2009, the company granted options to non-executives and assigned an expected term of five years for valuing these options. The company believes that this stratification of expected terms best represents future expected exercise behavior between the two employee groups.

The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2010, and 2009, was $11 and $7, per share, respectively.

Stock Option activity for the three months ended March 31, 2010, was as follows:


	Shares			Weighted-		Weighted-Average		Aggregate
	Under Option			Average		Remaining		Intrinsic Value
	(in thousands)			Exercise Price		Contractual Term		($ in millions)
Outstanding at January 1, 2010		14,442		$	53		3.8 years	$	88
Granted		1,903			60
Exercised		(1,393	)		51
Cancelled and forfeited		(2	)		48

Outstanding at March 31, 2010		14,950		$	54		4.3 years	$	191

Vested and expected to vest in the future at March 31, 2010		14,724		$	54		4.3 years	$	188

Exercisable at March 31, 2010		10,764		$	54		3.5 years	$	143

Available for grant at March 31, 2010		7,048

The total intrinsic value of options exercised during the three months ended March 31, 2010, and 2009, was $15 million and $618 thousand, respectively. Intrinsic value is measured as the excess of the fair market value at the date of exercise (for options exercised) or at March 31, 2010 (for outstanding options), over the applicable exercise price.

Stock Awards

Compensation expense for stock awards is measured at the grant date based on fair value and recognized over the vesting period, generally three years. The fair value of stock awards is determined based on the closing market price of the company’s common stock on the grant date or, for stock awards granted in 2010, based on a market driven valuation model. For purposes of measuring compensation expense, the amount of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria.

Stock award activity for the three months ended March 31, 2010 and 2009, is presented in the table below. Vested awards include stock awards fully vested during the year and net adjustments to reflect the final performance measure for issued shares.


	Stock			Weighted-Average		Weighted-Average
	Awards			Grant Date		Remaining
	(in thousands)			Fair Value		Contractual Term
Outstanding at January 1, 2010		3,658		$	58		1.6 years
Granted		2,211			60
Vested		(10	)		74
Forfeited		(71	)		57

Outstanding at March 31, 2010		5,788		$	59		1.9 years

Available for grant at March 31, 2010		422


	Stock			Weighted-Average		Weighted-Average
	Awards			Grant Date		Remaining
	(in thousands)			Fair Value		Contractual Term
Outstanding at January 1, 2009		3,276		$	75		1.4 years
Granted		2,350			45
Vested		(185	)		66
Forfeited		(61	)		74

Outstanding at March 31, 2009		5,380		$	62		1.9 years

The company issued 1.3 million and 2.5 million shares to employees in settlement of prior year stock awards that were fully vested, which had total fair values at issuance of $76 million and $111 million and grant date fair values of $91 million and $161 million during the three months ended March 31, 2010, and 2009, respectively. The differences between the fair values at issuance and the grant date fair values reflect the effects of the performance adjustments and changes in the fair market value of the company’s common stock.