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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 13, 2010
Northrop Grumman Corporation
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction
of incorporation)
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1-16411
(Commission
File Number)
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95-4840775
(IRS Employer
Identification No.) |
1840 Century Park East, Los Angeles, CA 90067
(Address of principal executive offices) (Zip Code)
(310) 553-6262
Registrants telephone number, including area code
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On July 13, 2010, Northrop Grumman Corporation (the Company) issued a press release which
contains information about financial events occurring during the quarter ended June 30, 2010. A
copy of the press release is furnished as Exhibit 99.1.
Item 8.01. Other Events.
The press release noted in Item 2.02 above announced the Companys plans to consolidate its Gulf
Coast shipbuilding operations and explore strategic alternatives for its Shipbuilding business.
Ship construction at the Companys Avondale facility is expected to wind down in 2013 and all
future LPD-class ships will be built in a single production line at the Companys Pascagoula,
Mississippi facility.
The strategic alternatives under consideration for the Shipbuilding business include, but are not
limited to, a spin-off to Company shareholders.
There can be no assurance that the exploration of strategic alternatives will result in any
transaction, or that, if completed, any transaction will be on attractive terms. This Current
Report on Form 8-K does not constitute an offer to sell or solicitation of an offer to buy any
securities.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
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Furnished |
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Exhibit 99.1
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Press Release dated July 13, 2010 |
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Statements in this Form 8-K, other than statements of historical fact, constitute
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. Words such as expect, plan, and explore, and similar expressions generally identify
these forward-looking statements. These statements are not guarantees of future performance and
involve certain risks and uncertainties. Actual results could differ materially due to factors
such as: timing and execution of the Gulf Coast consolidation described in this Form 8-K; execution
of any strategic alternative for the Shipbuilding business; the effect of economic conditions in
the United States and globally; access to capital; future sales and cash flows; timing of cash
receipts; effective tax rates and timing and amounts of tax payments; returns on pension plan
assets, interest and discount rates and other changes that may impact pension plan assumptions;
retiree medical expense; the outcome of litigation, claims, audits, appeals, bid protests and
investigations; hurricane and earthquake-related insurance coverage and recoveries; costs of
environmental remediation; our relationships with labor unions; availability and retention of
qualified personnel; costs of capital investments; changes in organizational structure and
reporting segments; risks associated with acquisitions, dispositions, joint ventures, strategic
alliances and other business arrangements; possible impairments of goodwill or other intangible
assets; effects of legislation, rulemaking, and changes in accounting, tax or defense procurement;
changes in government and customer priorities and requirements (including, government budgetary
constraints, shifts in defense spending, changes in import and export policies, changes in customer
short-range and long-range plans); acquisition or termination of contracts; technical, operation or
quality setbacks in contract performance; protection of intellectual property rights; risks
associated with our nuclear operations; issues with, and financial viability of, key suppliers and
subcontractors; availability of materials and supplies; controlling costs of fixed-price
development programs; contractual performance relief and the application of cost sharing terms;
allowability and allocability of costs under U.S. Government contracts; progress and acceptance of
new products and technology; domestic and international competition; legal, financial and
governmental risks related to international transactions; potential security threats, natural
disasters and other disruptions not under our control; and other risk factors disclosed in our
filings with the Securities and Exchange Commission
These forward-looking statements speak only as of the date of this Form 8-K and we undertake no
obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable law.
Signature(s)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this Report to be signed on its behalf by the undersigned hereunto duly authorized.
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Northrop Grumman Corporation
(Registrant)
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Date: July 16, 2010 |
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/s/ Joseph F. Coyne, Jr.
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(Signature) |
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Joseph F. Coyne, Jr.
Corporate Vice President, Deputy
General Counsel and Secretary |
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Exhibit Index
Exhibit 99.1 Furnished Press Release dated July 13, 2010
exv99w1
Exhibit 99.1
News Release
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Contact:
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Randy Belote (Media)
(703) 875-8525 |
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Paul Gregory (Investors)
(310) 201-1634 |
Northrop Grumman to Consolidate Gulf Coast Shipyards and Explore Strategic Alternatives for Shipbuilding Business
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Future Gulf Coast Ship Construction to be Consolidated in Mississippi Facilities |
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Ship Construction at Avondale Facility to Wind Down in 2013 |
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Company will also Explore Strategic Alternatives for Entire Shipbuilding Business |
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Company to Record an Estimated Q2 2010 Pre-tax Shipbuilding Charge of $113 Million Related
to the Consolidation |
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Q2 2010 Financial Results will also Include a $296 Million Tax Benefit Unrelated to the
Shipbuilding Decisions |
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Net Impact of Tax Benefit and Shipbuilding Charge to Increase Q2 2010 Earnings from
Continuing Operations by About $0.73 per Diluted Share |
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2010 Guidance to be Updated with Announcement of Q2 2010 Financial Results on July 29 |
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Conference Call Scheduled Tomorrow at 10:30 a.m. EDT at www.northropgrumman.com |
LOS ANGELES July 13, 2010 Northrop Grumman Corporation (NYSE: NOC) announced today plans
to consolidate its Gulf Coast shipbuilding operations and explore strategic alternatives for its
Shipbuilding business. As a result of the Gulf Coast consolidation, the company will recognize an
estimated pre-tax charge of $113 million in the second quarter of 2010. In addition, as previously
disclosed, in the second quarter of 2010, the company will record a tax benefit of $296 million
related to the final settlement with the Internal Revenue Service of tax returns for the years 2004
through 2006. The net impact of the charge and the tax benefit will increase second quarter 2010
earnings from continuing operations by about $0.73 per share. Neither of these items is reflected
in the financial guidance the company provided on April 28, 2010.
Consolidation Actions
Our decision to consolidate the Gulf Coast facilities is driven by the need for
rationalization of the shipbuilding industrial base to better align with the projected needs of our
customers. The consolidation will reduce future costs, increase efficiency, and
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
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Northrop Grumman to Consolidate Gulf Coast Shipyards and Explore Strategic Alternatives for Shipbuilding Business
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address
shipbuilding overcapacity. This difficult, but necessary decision will ensure long-term improvement in Gulf Coast program performance, cost competitiveness and quality,
said Wes Bush, chief executive officer and president.
We are extremely proud of our Avondale shipbuilders and their dedicated contributions to our
company and our nation. We will work with federal, state and local officials and others to explore
alternate uses for Avondale as the last two ships under construction reach completion, said Bush.
The consolidation of Gulf Coast ship construction is the next step in the companys efforts to
improve performance and efficiency at its Gulf Coast shipyards, which began with the integration of
its shipbuilding operations in early 2008. Since that time, Gulf Coast organization and
leadership, operating systems, program execution, risk management, engineering, and quality have
been the focus of intense improvement efforts. Consolidating new ship construction on the Gulf
Coast in one shipyard will position Shipbuilding to achieve additional performance improvement and
efficiency over the long term. Ship construction at Avondale will wind down in 2013. Future
LPD-class ships will be built in a single production line at the companys Pascagoula, Miss.
facility. The company anticipates some opportunities in Pascagoula for Avondale shipbuilders who
wish to relocate.
Strategic Alternatives
Our decision to explore strategic alternatives for Shipbuilding is the result of a portfolio
assessment to determine how to best serve our shareholders, customers, and employees. The
performance improvement initiatives underway in our Gulf Coast operations will be further enhanced
by the facilities consolidation. Recognizing our companys long-term strategic priorities, we
foresee little synergy between Shipbuilding and our other businesses. It is now appropriate to
explore separating Shipbuilding from Northrop Grumman, said Bush.
The company will evaluate whether a separation of Shipbuilding would be in the best interests
of shareholders, customers and employees by allowing both the company and Shipbuilding to more
effectively pursue their respective opportunities to maximize long-term value. Strategic
alternatives for the Shipbuilding business include, but are not limited to, a spin-off to Northrop
Grumman shareholders. The company has engaged Credit Suisse as its lead financial advisor. The
company is also being advised by Perella Weinberg Partners.
Financial Impacts
As a result of the consolidation, the company expects higher costs to complete ships currently
under construction in Avondale due to anticipated reductions in productivity and, as a result, is
increasing the estimates to complete LPDs 23 and 25 by approximately $210 million. Of this amount
$113 million will be recognized as a one-time, pre-tax cumulative charge to Shipbuildings second
quarter 2010 operating income. The balance will be recognized as lower margin in future periods,
principally on the LPD 25. The company also anticipates that it will incur substantial
restructuring and facilities shutdown-related costs including, but not limited to, severance,
relocation expense, and asset write-downs. These costs are expected to be allowable expenses under
government
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com
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Northrop Grumman to Consolidate Gulf Coast Shipyards and Explore Strategic Alternatives for Shipbuilding Business
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accounting standards and recoverable in future years under the companys contracts. The company estimates that these restructuring costs will be more than offset by future savings
expected to be generated by the consolidation.
Northrop Grumman will webcast a conference call to discuss todays announcement at 10:30 a.m.
EDT tomorrow. A live audio broadcast of the conference call will be available on the investor
relations page of the companys Web site at http://www.northropgrumman.com. Replays of the call
will be available on the Web site for a limited period of time.
Northrop Grumman Corporation is a leading global security company whose 120,000 employees
provide innovative systems, products, and solutions in aerospace, electronics, information systems,
shipbuilding and technical services to government and commercial customers worldwide. Please
visit www.northropgrumman.com for more information.
Statements in this release, other than statements of historical fact, constitute
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. Words such as anticipate, expect, intend, plan, explore, believe, estimate,
guidance and similar expressions generally identify these forward-looking statements. These
statements are not guarantees of future performance and involve certain risks and uncertainties.
Actual results could differ materially due to factors such as: timing and execution of the Gulf
Coast consolidation described in this release; execution of any strategic alternative for the
Shipbuilding business; the effect of economic conditions in the United States and globally; access
to capital; future sales and cash flows; timing of cash receipts; effective tax rates and timing
and amounts of tax payments; returns on pension plan assets, interest and discount rates and other
changes that may impact pension plan assumptions; retiree medical expense; the outcome of
litigation, claims, audits, appeals, bid protests and investigations; hurricane and
earthquake-related insurance coverage and recoveries; costs of environmental remediation; our
relationships with labor unions; availability and retention of qualified personnel; costs of
capital investments; changes in organizational structure and reporting segments; risks associated
with acquisitions, dispositions, joint ventures, strategic alliances and other business
arrangements; possible impairments of goodwill or other intangible assets; effects of legislation,
rulemaking, and changes in accounting, tax or defense procurement; changes in government and
customer priorities and requirements (including, government budgetary constraints, shifts in
defense spending, changes in import and export policies, changes in customer short-range and
long-range plans); acquisition or termination of contracts; technical, operation or quality
setbacks in contract performance; protection of intellectual property rights; risks associated with
our nuclear operations; issues with, and financial viability of, key suppliers and subcontractors;
availability of materials and supplies; controlling costs of fixed-price development programs;
contractual performance relief and the application of cost sharing terms; allowability and
allocability of costs under U.S. Government contracts; progress and acceptance of new products and
technology; domestic and international competition; legal, financial and governmental risks related
to international transactions; potential security threats, natural disasters and other disruptions
not under our control; and other risk factors disclosed in our filings with the Securities and
Exchange Commission.
These forward-looking statements speak only as of the date of this release and we undertake no
obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable law.
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0710-340
Northrop Grumman Corporation
1840 Century Park East Los Angeles, CA 90067
www.northropgrumman.com