RULE 424(B)(2)
NO. 33-55143
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 22, 1994
$600,000,000
[LOGO]
$350,000,000 8 5/8% Notes Due 2004
$250,000,000 9 3/8% Debentures Due 2024
INTEREST PAYABLE APRIL 15 AND OCTOBER 15
--------------
THE 8 5/8% NOTES DUE 2004 MAY NOT BE REDEEMED BY THE COMPANY PRIOR TO MATURITY.
THE 9 3/8% DEBENTURES DUE 2024 MAY NOT BE REDEEMED BY THE COMPANY PRIOR TO
OCTOBER 15, 2004. ON AND AFTER SUCH DATE, THE 9 3/8% DEBENTURES DUE 2024
MAY BE REDEEMED AT THE OPTION OF THE COMPANY, ON NOT LESS THAN 30 DAYS'
NOR MORE THAN 60 DAYS' NOTICE, IN WHOLE OR IN PART, AT THE REDEMPTION
PRICES SET FORTH HEREIN. THE 8 5/8% NOTES DUE 2004 AND THE 9 3/8%
DEBENTURES DUE 2024 ARE COLLECTIVELY REFERRED TO HEREIN AS THE
"OFFERED DEBT SECURITIES." SEE "CERTAIN TERMS OF THE OFFERED
DEBT SECURITIES."
THE OFFERED DEBT SECURITIES WILL BE ISSUED IN THE FORM OF GLOBAL SECURITIES (THE
"GLOBAL SECURITIES") IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE
"DEPOSITARY") OR ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL SECURITIES
WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH,
RECORDS MAINTAINED BY THE DEPOSITARY AND ITS PARTICIPANTS. EXCEPT AS
DESCRIBED HEREIN, OFFERED DEBT SECURITIES IN DEFINITIVE FORM WILL NOT
BE ISSUED. SEE "CERTAIN TERMS OF THE OFFERED DEBT SECURITIES--GLOBAL
SECURITIES."
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS COMPANY(1)(2)
-------------------- -------------------- --------------------
8 5/8% NOTES DUE 2004................................. 100.000% .650% 99.350%
9 3/8% DEBENTURES DUE 2024............................ 99.350% .875% 98.475%
TOTAL................................................. $598,375,000 $4,462,500 $593,912,500
(1) PLUS ACCRUED INTEREST, IF ANY, FROM OCTOBER 27, 1994.
(2) BEFORE DEDUCTION OF EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $690,000.
--------------
THE OFFERED DEBT SECURITIES ARE OFFERED BY THE SEVERAL UNDERWRITERS WHEN, AS
AND IF ISSUED BY THE COMPANY, DELIVERED TO AND ACCEPTED BY THE UNDERWRITERS AND
SUBJECT TO THEIR RIGHT TO REJECT ORDERS IN WHOLE OR IN PART. IT IS EXPECTED THAT
THE GLOBAL SECURITIES WILL BE READY FOR DELIVERY THROUGH THE FACILITIES OF THE
DEPOSITARY ON OR ABOUT OCTOBER 27, 1994.
CS First Boston
J.P. Morgan Securities Inc.
Merrill Lynch & Co.
Salomon Brothers Inc
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 20, 1994
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OFFERED DEBT
SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE COMPANY
GENERAL
Northrop Grumman Corporation (the "Company" or "Northrop Grumman"), formerly
known as Northrop Corporation, is an advanced technology company that designs,
develops and manufactures military aircraft, missiles and unmanned aeronautical
vehicles, military and commercial aircraft and assemblies and sophisticated
electronic systems. The Company also provides technical and information services
to civilian and governmental customers.
In May 1994, the Company completed the acquisition of Grumman Corporation
("Grumman") and changed its name to "Northrop Grumman Corporation." Grumman
common stock was acquired for an aggregate purchase price of approximately $2.17
billion financed by borrowings against credit facilities provided by a syndicate
of commercial banks. If the Company and Grumman had been combined during 1993,
pro forma sales for that year would have been approximately $8 billion. See
"Recent Developments."
In August 1994, the Company purchased the remaining 51% of the parent
company of Vought Aircraft Company ("Vought") that it did not previously own for
$130 million. Vought, a manufacturer of major subassemblies for both commercial
and military aircraft, had annual sales in 1993 of $972.1 million. See "Recent
Developments."
The combined Company has significant experience in the design and
manufacture of tactical and strategic military aircraft with particular
expertise in both stealth and naval airframe technologies. The Company has
developed leading technologies in the increasingly important area of military
electronic systems, and its experience in the integration of large, complex
systems positions it to be a significant competitor for future aircraft and
electronic systems integration programs. In addition, the Company is one of the
largest manufacturers of commercial aircraft assemblies.
The acquisitions of Grumman and Vought were intended, among other things, to
provide greater stability to revenue and cash flow generation and to allow the
Company to maintain critical skills during the consolidation of the aerospace
industry. The Company's major programs are in transition from the research and
development phase to the production phase, where the Company has historically
realized improved margins.
Northrop Grumman programs include several which are important to current
Department of Defense procurement strategies. Northrop Grumman is the prime
contractor on the B-2 Stealth Bomber, the only bomber program currently in
production; the principal subcontractor on the F/A-18 Hornet Strike fighter, one
of the principal fighter aircraft used by the U.S. Navy as well as numerous
foreign countries; the prime contractor on the E-2C Hawkeye, the U.S. Navy's
principal early warning, command and control aircraft; and the prime contractor
for the JSTARS aircraft radar system, which will be the advanced airborne
surveillance and battle management system for the Air Force and Army. The
Company also participates in the commercial aircraft subassembly market as a
principal subcontractor to The Boeing Company on the 747 jetliner program as
well as providing components for other commercial aircraft.
By the end of 1994 the Company expects to have completed the organization of
its consolidated business activities within five divisions: B-2 Division (B-2),
Commercial Aircraft Division (CAD), Military Aircraft Division (MAD),
Electronics and Systems Integration Division (ESID) and Data Systems and
Services Division (DSSD).
B-2 DIVISION
The B-2 Division will continue to be responsible for the Company's B-2
"Stealth" bomber program. The B-2, for which the Company is the prime
contractor, is the Company's largest program. The B-2 program has provided an
increasing amount of operating margin as the mix of sales continues its shift
from relatively low-margin research and development work to production work. The
B-2 is unique in that it is a
S-2
strategic, long-range heavy bomber with low observable technology effective at
both high and low altitudes. It is designed to penetrate sophisticated air
defenses while having the range and payload capabilities of a contemporary heavy
bomber. These unique characteristics combined with the fact that it is the only
U.S. bomber program currently in production make the B-2 particularly important
to the U.S. Air Force. The B-2 program currently contemplates 20 operational
aircraft through the purchase of 21 aircraft, of which 3 have been delivered.
Deliveries of the remaining aircraft in final operational form are expected to
be made through 1999. In addition to being responsible for current B-2 program
contracts, the B-2 Division will be responsible for future upgrades to the B-2
aircraft, providing depot support and spares, and weapons systems integration
and augmentation.
COMMERCIAL AIRCRAFT DIVISION
The combined Company's commercial aircraft production activities make it one
of the largest commercial aircraft component manufacturers in the world. The
Commercial Aircraft Division will be responsible for the Company's production of
components for commercial aircraft and certain components for military aircraft.
These components include the fuselage and major portions of the tail section for
the Boeing 747, major subassemblies for the Boeing 757 and 767 as well as the
McDonnell Douglas C-17 military transport, various other components for the
Boeing 757, 767, and 777, and components for other aircraft. This division will
include the manufacturing activities of Vought which was acquired in August,
1994. See "Recent Developments." The Company believes that with the acquisition
of Vought it is well positioned to be a significant competitor for future
commercial aircraft component opportunities.
MILITARY AIRCRAFT DIVISION
The Military Aircraft Division is responsible for pursuing the Company's
military aircraft and missile programs and their derivatives. This Division will
manage the F/A-18 program, the Tri-Service Standoff Attack Missile (TSSAM)
program, and the marketing of upgrade services for older aircraft.
The F/A-18 is the United States Navy's primary strike/attack aircraft
currently in production and is deployed by the Navy from aircraft carriers and
by the Marines from air bases. The Company produces the center and aft fuselage,
twin vertical tails, and all associated subsystems for the F/A-18 as a
subcontractor to McDonnell Douglas. Several foreign governments have purchased
the F/A-18. Advanced versions of the
F/A-18 are now being developed and are expected to be deployed starting in 1998.
The TSSAM is a stealthy subsonic cruise missile that has been designed to
attack high-value land and sea targets using an autonomous guidance system to
deliver either a single conventional warhead or multiple munitions. The Company
has been the prime contractor on this classified program pursuant to a
fixed-price contract since it began in 1986. Although current plans call for
development and production of 4,156 missiles, the program is the only Company
program which was included in an August 1994 Defense Department memorandum
requesting proposals from the armed services for cutting, delaying or replacing
ten programs.
ELECTRONICS AND SYSTEMS INTEGRATION DIVISION
The Electronics and Systems Integration Division will manage the Company's
Joint Surveillance Target Attack Radar System (JSTARS) program, the E-2C Hawkeye
early warning and control aircraft program, the Brilliant Anti-Tank (BAT) weapon
system program, and its electronic countermeasures, sensors, and guidance
systems programs.
Northrop Grumman is the prime contractor for JSTARS. JSTARS is an advanced
airborne radar system currently under development which is designed to provide
real-time detection, location, classification, and tracking of hostile moving
and stationary targets. JSTARS' surveillance capabilities will enable it to be a
critical part of the military's future battlefield management system. Two
aircraft containing prototype systems were deployed and successfully used during
Desert Storm. The Company is nearing completion of the development phase and
production version deliveries are expected to begin in 1996 and to continue
through the end of the decade.
The E-2C Hawkeye is a carrier-based, twin-turboprop powered, all-weather,
airborne early warning and control aircraft that is designed for missions such
as air defense, search-and-rescue, strike control, and air traffic control. The
Company is the prime contractor on this program. Versions of the E-2 have flown
since 1960, and deliveries to the United States Navy and various foreign
customers are expected to continue through 2000.
S-3
The Company is the prime contractor on the BAT "Brilliant" self-guided
submunition program. The BAT can be carried by a variety of air vehicles. When
deployed, the BAT is designed to autonomously find, attack, and destroy tanks,
armored vehicles and other mobile targets by using acoustic and infrared sensors
working in combination with a high speed onboard computer. Prototype production
began in 1992 as part of the engineering and manufacturing development phase of
the program.
DATA SYSTEMS AND SERVICES DIVISION
The Data Systems and Services Division will be responsible for internal data
processing system activities as well as marketing similar services to external
customers. Included among these services are Space Shuttle technical services,
space station program support services, flight simulator maintenance services
and the development of data processing systems for a wide variety of United
States Government entities and applications.
RECENT DEVELOPMENTS
In May 1994, the Company completed the acquisition of Grumman through the
acquisition of all outstanding Grumman common stock for an aggregate purchase
price of approximately $2.17 billion. The acquisition was financed by borrowings
against the term portion of credit facilities provided by a syndicate of
commercial banks. Grumman's financial data have been consolidated with Northrop
Grumman's effective April 1, 1994.
In August 1994, the Company purchased the remaining 51% of the parent
company of Vought that it did not previously own for $130 million. Vought is a
manufacturer of major subassemblies for both commercial and military aircraft.
Vought's principal programs currently include the manufacture of portions of the
tail section for the Boeing 747, 757 and 767, and the McDonnell Douglas C-17. In
1993, Vought reported annual sales of $972.1 million and net income of
approximately $16.1 million.
In September 1994, the Company announced a plan to reduce its workforce by
9,000 people over the next 15 months as part of an effort to cut costs ahead of
anticipated sales reductions and to streamline and consolidate operations. The
announced plan includes the offer of a voluntary early retirement program to
approximately 5,000 eligible participants in the main Northrop retirement plan
and a one time benefit increase for retirees in that plan. The Company estimated
that assuming a 60% acceptance rate in the voluntary early retirement program
these changes would result in a one-time charge against earnings for the 1994
fiscal fourth quarter of approximately $300 million to reflect the plan's
increased actuarial liability. The exact amount of the charge would not be known
until after a November 15, 1994 acceptance deadline. The Company reported that
costs associated with the early retirement plan and the retiree benefit
adjustment would be met by the excess of assets over plan liabilities in the
Northrop pension plan and would not have a direct cash impact on the Company.
The Company also announced that it is evaluating future facilities
requirements in light of industry downsizing and the consolidation of Grumman
and Vought. At this time, the financial impact, if any, arising from that
evaluation cannot be determined.
The Company has under consideration the possible merger of the Northrop
pension plan and the Grumman pension plan. The Grumman pension plan is currently
underfunded and cash contributions to this plan have been estimated at
approximately $500 million over the next five years. If the Company merges the
two plans it would substantially reduce or eliminate the need for these
contributions as the Grumman pension plan underfunding would be offset by the
surplus in the Northrop pension plan, thus reducing the excess of assets over
projected benefit obligations in the Northrop pension plan. Reduction in excess
assets in the Northrop pension plan will reduce the noncash earnings of the
Company in future periods attributable to pension income.
In September 1994, the Company agreed to settle for $53 million a previously
disclosed lawsuit brought by Data General Corporation against subsidiaries of
Grumman following an appeals court ruling. The difference between the settlement
payment and the amount previously provided for will be among the adjustments to
the preliminary estimates used in allocating the Grumman purchase price.
USE OF PROCEEDS
The net proceeds from the sale of the Offered Debt Securities, estimated to
be $593,222,500, will be used to repay indebtedness under the Company's bank
term credit facility incurred in connection with the Grumman acquisition which
currently bears interest at LIBOR plus .62% per annum and is payable in
quarterly installments, with the last payment due in March 1999.
S-4
CAPITALIZATION
The following table sets forth the capitalization of the Company at June 30,
1994, which is after the acquisition of Grumman, and as adjusted to reflect (i)
the retirement in September 1994, of $160 million of Notes due November 1995,
funded from additional borrowings under the bank term credit facility; and (ii)
the issuance of the Offered Debt Securities and the use of the proceeds (without
deduction of expenses) from the sale of the Offered Debt Securities as described
under "Use of Proceeds."
AS OF JUNE 30, 1994
----------------------
ACTUAL AS ADJUSTED
--------- -----------
($ IN MILLIONS)
Current portion of long-term debt................................................ $ 433 $ 265
--------- -----------
Long-term debt:
Bank term loan................................................................. 1,200 928
Notes due 1995................................................................. 160 --
Notes due 2004 offered hereby.................................................. -- 350
Debentures due 2024 offered hereby............................................. -- 250
Other long-term debt........................................................... 227 227
--------- -----------
Total long-term debt......................................................... 1,587 1,755
--------- -----------
Total debt................................................................... 2,020 2,020
Shareholders' equity............................................................. 1,406 1,406
--------- -----------
Total capitalization......................................................... $ 3,426 $ 3,426
--------- -----------
--------- -----------
SELECTED FINANCIAL DATA
The following table sets forth certain selected consolidated financial data
for the Company for each of the periods indicated. The data for the six months
ended June 30, 1994 includes consolidated results of Grumman effective April 1,
1994. The following data should be read in conjunction with the Company's
financial statements and notes thereto incorporated herein by reference. See
also "Pro Forma Condensed Combined Financial Data" for pro forma financial data
relating to the acquisition of Grumman.
FOR THE SIX
MONTHS ENDED JUNE
30, FOR FISCAL YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------
1994(1) 1993 1993 1992 1991 1990 1989
-------- ------ ------ ------ ------ ------ ------
($ IN MILLIONS)
Operating Data:
Net sales............................. $2,904 $2,587 $5,063 $5,550 $5,694 $5,490 $5,248
Operating margin...................... 216 176 219 229 352 291 23
Interest expense (net)................ 35 19 36 43 69 92 122
Income (Loss) before accounting
changes.............................. 117 105 96 121 268 210 (81)
Cumulative effect of accounting
changes.............................. -- -- -- -- (67)(2) -- --
Net Income (loss)..................... 117 105 96 121 201 210 (81)
Balance Sheet Data:
Total assets.......................... $5,893 $3,228 $2,939 $3,162 $3,128 $3,094 $3,196
Net working capital................... 278 428 481 354 611 570 91
Long-term debt........................ 1,587 160 160 160 470 690 550
Stockholders' equity.................. 1,406 1,335 1,322 1,254 1,182 1,033 875
Other Data:
Net cash from operations.............. $ 354 $ (48) $ 380 $ 284 $ 609 $ 266 $ 78
Funded order backlog.................. 12,126 6,974 6,919 7,175 8,561 6,703 5,593
- ------------------------------
(1) Includes Grumman data from April 1, 1994.
(2) The Financial Accounting Standards Board's (FASB) accounting standard No.
106 -- EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN
PENSIONS -- was adopted by the Company in 1991. The liability representing
previously unrecognized costs of $145 million for all years prior to 1991
was recorded as of January 1, 1991, with an after-tax effect on earnings of
$88 million.
In 1991 the Company adopted the FASB standard No. 109 -- ACCOUNTING FOR
INCOME TAXES -- and recorded, as of January 1, 1991, a benefit of $21
million.
S-5
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed financial statements combine, on
a pro forma basis, the consolidated financial statements of Northrop Grumman
Corporation, formerly known as Northrop Corporation ("Northrop") and of Grumman
Corporation ("Grumman"). The unaudited pro forma balance sheet has been prepared
as if Northrop had purchased Grumman on March 31, 1994. The pro forma statements
of operations for the year ended December 31, 1993 and for the three months
ended March 31, 1994 were prepared as if Northrop had purchased Grumman on
January 1, 1993 and January 1, 1994, respectively. The acquisition of Grumman is
accounted for in these pro forma financial statements using the purchase method
of accounting. The purchase price has been allocated to the underlying assets
and liabilities of Grumman based on preliminary estimates of their respective
fair values. During the remainder of 1994, these estimates will be refined and
changes, if any, will be reflected in the Company's 1994 Annual Report on Form
10-K.
These unaudited pro forma condensed financial statements and the
accompanying notes are intended to be used for informational purposes only and
are not necessarily indicative of the financial condition or results of
operations had the acquisition of Grumman occurred as of the dates indicated and
are not intended to be indicative of future results.
These unaudited pro forma condensed combined financial statements and the
accompanying notes should be read in conjunction with the consolidated financial
statements and notes thereto of Northrop incorporated herein by reference and
the historical financial statements and notes thereto of Grumman incorporated
herein by reference. The Company has also filed with the Securities and Exchange
Commission the Company's Current Report on Form 8-K/A dated June 30, 1994, which
is incorporated herein by reference.
S-6
PRO FORMA CONDENSED COMBINED
STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
MARCH 31, 1994
ASSETS
PRO FORMA PRO FORMA
NORTHROP GRUMMAN ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
($ IN MILLIONS)
Cash and cash equivalents............... $ 206 $ 287 $ $ 493
Marketable securities................... 28 28
Accounts receivable..................... 812 557 (81)(a)(b)(c) 1,288
Inventoried costs....................... 564 518 (104)(a)(b)(c) 978
Prepaid expenses & other current
assets................................. 67 54 19(a) 140
-------- ------- ----------- ---------
Total current assets.................... 1,649 1,444 (166) 2,927
-------- ------- ----------- ---------
Property, plant and equipment........... 2,796 1,363 (905)(a)(b) 3,254
Accumulated depreciation and
amortization........................... (1,798) (999) 999(a) (1,798)
-------- ------- ----------- ---------
998 364 94 1,456
-------- ------- ----------- ---------
Goodwill................................ 1,219(a) 1,219
Other purchased intangible assets....... 392(a) 392
Prepaid pension cost and intangible
pension asset.......................... 298 13 311
Investments in and advances to
affiliates and
sundry assets.......................... 83 101 (17)(a)(b) 167
Deferred income taxes................... 7 112 (95)(a) 24
-------- ------- ----------- ---------
388 226 1,499 2,113
-------- ------- ----------- ---------
$ 3,035 $2,034 $1,427 $ 6,496
-------- ------- ----------- ---------
-------- ------- ----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt.... $ $ 7 $ 330(a) $ 337
Trade accounts payable.................. 294 145 (29)(b) 410
Accrued employees' compensation......... 159 169 36(a)(b) 364
Income taxes............................ 462 75 (2)(b) 535
Other current liabilities............... 212 183 159(a)(b)(c) 554
-------- ------- ----------- ---------
Total current liabilities............... 1,127 579 494 2,200
-------- ------- ----------- ---------
Long-term debt.......................... 160 241 1,680(a) 2,081
Accrued retiree benefits................ 318 301 183(d) 802
Deferred income taxes................... 48 (48)(a)(c)(d)
Other liabilities and deferred gain..... 22 96 (65)(a) 53
Common stock............................ 261 345 (345)(c) 261
Retained earnings....................... 1,099 472 (472)(a)(c)(d) 1,099
-------- ------- ----------- ---------
1,360 817 (817) 1,360
-------- ------- ----------- ---------
$ 3,035 $2,034 $1,427 $ 6,496
-------- ------- ----------- ---------
-------- ------- ----------- ---------
S-7
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1994
PRO FORMA PRO FORMA
NORTHROP GRUMMAN ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
($ IN MILLIONS, EXCEPT PER SHARE)
Net sales............................... $1,218 $638 $ 37(b)(c) $1,893
Cost of sales
Operating costs....................... 1,019 564 4(a)(b)(c) 1,587
Administrative and general expenses... 116 27 53(a)(b)(e) 196
-------- ------- --- ---------
Operating margin........................ 83 47 (20) 110
Interest expense........................ (5) (7) (26)(b)(e) (38)
Merger related costs.................... (60) 60(f)
Other, net.............................. 1 6 (3)(b) 4
-------- ------- --- ---------
Income (loss) before income taxes....... 79 (14) 11 76
Federal and foreign income taxes
(benefit).............................. 27 (5) 7(g) 29
-------- ------- --- ---------
Net income.............................. $ 52 $ (9) $ 4 $ 47
-------- ------- --- ---------
-------- ------- --- ---------
Weighted average shares outstanding, in
millions............................... 49.1 49.1
Earnings per share...................... $ 1.05 $ .96
YEAR ENDED DECEMBER 31, 1993
PRO FORMA PRO FORMA
NORTHROP GRUMMAN ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
($ IN MILLIONS, EXCEPT PER SHARE)
Net sales............................... $5,063 $3,225 $(360)(b) $7,928
Cost of sales
Operating costs....................... 4,359 2,930 (580)(a)(b)(c) 6,709
Administrative and general expenses... 485 116 279(a)(b)(e) 880
-------- ------- ----- ---------
Operating margin........................ 219 179 (59) 339
Interest expense........................ (38) (32) (104)(a)(e) (174)
Restructuring charge.................... (85) 85(f)
Other, net.............................. (11) 25 (8)(b) 6
-------- ------- ----- ---------
Income before income taxes.............. 170 87 (86) 171
Federal and foreign income taxes........ 74 21 (20)(g) 75
-------- ------- ----- ---------
Net income.............................. $ 96 $ 66 $ (66) $ 96
-------- ------- ----- ---------
-------- ------- ----- ---------
Weighted average shares outstanding, in
millions............................... 48.1 48.1
Earnings per share...................... $ 1.99 $ 1.99
S-8
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(a) Adjustments to record $2 billion in term loans obtained to finance the
acquisition of Grumman, accrued $127 million for the payment of the balance
of Grumman shares still outstanding along with additional acquisition
related costs and to assign the purchase price to assets acquired and
liabilities assumed. The allocation of the purchase price to assets and
liabilities is based on preliminary estimates of their respective fair
values and may subsequently be adjusted.
(b) Adjustment to reflect the Special Purpose Vehicles industry segment as
discontinued operations. Management intends to dispose of the Special
Purpose Vehicles industry segment previously operated by Grumman and
therefore these operations have been excluded from the Statements of
Operations and included in the caption Investment in and advances to
affiliates and sundry assets on the Statement of Financial Position.
(c) Adjustment to reflect change in the method of recognizing revenue on certain
government contracts applied by Grumman to conform with revenue recognition
policy applied by Northrop.
(d) Adjustment to record Grumman retiree benefits liabilities in excess of
market value of assets at March 31, 1994. Management is in the process of
reviewing the Grumman health and welfare benefit plans and based on the
results of that review the fair value of the liability may be adjusted.
(e) Adjustment to: (1) record interest on term loans used to finance the
acquisition of Grumman at the estimated effective rate of 5.5%; (2) amortize
goodwill over a 40 year period on a straight line basis; and (3) amortize
other purchased intangible assets on a straight line basis over periods
ranging from 3 to 38 years, with a weighted average life of 23 years.
(f) Adjustments to eliminate certain expenses which will not be incurred on an
ongoing basis.
(g) Adjustment to record the income tax effects of pretax pro forma adjustments.
S-9
CERTAIN TERMS OF THE OFFERED DEBT SECURITIES
The following description of the Offered Debt Securities supplements, and to
the extent inconsistent therewith replaces, the description of the general terms
and provisions of Debt Securities set forth in the accompanying Prospectus under
the heading "Description of Debt Securities," to which description reference is
hereby made.
GENERAL
The Offered Debt Securities will be Senior Debt Securities issued pursuant
to the Senior Indenture and will be limited to an aggregate principal amount of
$600,000,000, consisting of $350,000,000 principal amount of 8 5/8% Notes Due
2004 and $250,000,000 principal amount of 9 3/8% Debentures Due 2024. Each
Offered Debt Security will bear interest from October 27, 1994 or from the most
recent Interest Payment Date (as defined below) to which interest has been paid
at the applicable rate per annum shown on the cover page hereof, payable
semiannually on April 15 and October 15 (each an "Interest Payment Date"),
commencing April 15, 1995 to the person in whose name such Offered Debt Security
shall have been registered at the close of business on the April 1 or October 1
(each a "Regular Record Date") next preceding such Interest Payment Date. The
8 5/8% Notes Due 2004 will mature on October 15, 2004 and the 9 3/8% Debentures
Due 2024 will mature on October 15, 2024.
The Offered Debt Securities will be issuable in denominations of $1,000 and
integral multiples thereof.
REDEMPTION
The 8 5/8% Notes Due 2004 may not be redeemed by the Company prior to
maturity.
The 9 3/8% Debentures Due 2024 may not be redeemed by the Company prior to
October 15, 2004. On and after such date, the 9 3/8% Debentures Due 2024 may be
redeemed at the option of the Company, on not less than 30 days' nor more than
60 days' notice, in whole or in part, at the redemption prices set forth below,
in each case plus accrued and unpaid interest (if any) to the date fixed for
redemption.
The redemption prices (expressed as percentages of principal amount), if
redeemed during the 12-month period beginning October 15 of the years indicated,
are as follows:
PERCENTAGE PERCENTAGE
OF OF
PRINCIPAL PRINCIPAL
YEAR AMOUNT YEAR AMOUNT
- ------------------------------- ------------ ------------------------------- ------------
2004........................... 104.363 % 2009........................... 102.181 %
2005........................... 103.926 2010........................... 101.745
2006........................... 103.490 2011........................... 101.309
2007........................... 103.054 2012........................... 100.873
2008........................... 102.618 2013........................... 100.436
and thereafter at 100% of the principal amount thereof.
SINKING FUND
There is no provision for a sinking fund for any of the Offered Debt
Securities.
GLOBAL SECURITIES
The Offered Debt Securities will be issued in the form of one or more
registered Global Securities that will be deposited with, or on behalf of, the
Depositary and registered in the name of the Depositary's nominee. Such Global
Securities will be issued in a denomination or aggregate denominations equal to
the portion of the aggregate principal amount of Offered Debt Securities of the
series to be represented by such Global Security or Securities. Unless and until
it is exchanged in whole for Debt Securities in definitive registered form, a
Global Security may not be transferred except as a whole by the Depositary for
such Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of such Depositary or a nominee of
such successor.
The Depositary has advised the Company and the Underwriters as follows: the
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation"
S-10
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. The Depositary was created to hold securities of its
participating organizations ("participants") and to facilitate the clearance and
settlement of securities transactions, such as transfers and pledges, among its
participants in such securities through electronic computerized book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. Participants include securities
brokers and dealers (including the Underwriters), banks, trust companies,
clearing corporations and certain other organizations, some of whom (and/or
their representative) own the Depositary. Access to the Depositary's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants may
beneficially own securities held by the Depositary only through participants.
A further description of the Depositary's procedures with respect to the
Global Securities is set forth in the Prospectus under "Description of Debt
Securities -- Global Debt Securities."
UNDERWRITING
The Underwriters named below have severally agreed to purchase from the
Company the following respective principal amounts of the Offered Debt
Securities.
PRINCIPAL
PRINCIPAL AMOUNT OF
AMOUNT OF 9 3/8%
8 5/8% NOTES DEBENTURES
UNDERWRITER DUE 2004 DUE 2024
- ---------------------------------------------------------------------- -------------- ----------------
CS First Boston Corporation........................................... $ 84,550,000 $ 60,350,000
J.P. Morgan Securities Inc. .......................................... 84,400,000 60,300,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................. 84,400,000 60,300,000
Salomon Brothers Inc.................................................. 84,400,000 60,300,000
Chase Securities, Inc. ............................................... 12,250,000 8,750,000
-------------- ----------------
Total......................................................... $ 350,000,000 $ 250,000,000
-------------- ----------------
-------------- ----------------
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the Offered Debt Securities if any are purchased.
The Company has been advised by CS First Boston Corporation, J.P. Morgan
Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon
Brothers Inc, as Representatives of the Underwriters, that the Underwriters
propose to offer the Offered Debt Securities to the public initially at the
public offering prices set forth on the cover page of this Prospectus Supplement
and, through the Representatives, to certain dealers at such prices less a
concession of .40% of the principal amount per 8 5/8% Note Due 2004 and .50% of
the principal amount per 9 3/8% Debenture Due 2024; that the Underwriters and
such dealers may allow a discount of .25% of the principal amount of the Offered
Debt Securities on sales to certain other dealers; and that after the initial
public offerings, the public offering prices and concessions and discount to
dealers may be changed by the Representatives.
The Company has been advised by the Representatives that they intend to make
a market in the Offered Debt Securities, but they are not obligated to do so and
may discontinue such market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for the Offered Debt
Securities. The Offered Debt Securities will not be listed on any national
securities exchange.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or contribute to payments which the Underwriters may be required to
make in respect thereof.
Each of the Underwriters and certain of their affiliates engage in
transactions with and perform services, including commercial banking services,
for the Company and certain of its subsidiaries in the ordinary course of
business. Affiliates of J.P. Morgan Securities Inc. and Chase Securities, Inc.
are lenders under the Company's bank term credit facility and, as a result, will
receive a portion of the net proceeds from the offering of the Offered Debt
Securities pursuant to the Company's repayment of indebtedness under such bank
term credit facility. See "Use of Proceeds."
S-11
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Offered Debt Securities in Canada is being made only
on a private placement basis exempt from the requirement that the Company
prepare and file a prospectus with the securities regulatory authorities in each
province where trades of Offered Debt Securities are effected. Accordingly, any
resale of the Offered Debt Securities in Canada must be made in accordance with
applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption granted
by the applicable Canadian securities regulatory authority. Purchasers who are
Canadian residents are advised to seek legal advice prior to any resale of the
Offered Debt Securities.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Offered Debt Securities in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Offered Debt Securities
without the benefit of a prospectus qualified under such securities laws, (ii)
where required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions".
RIGHTS OF ACTION AND ENFORCEMENT
The Offered Debt Securities are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
Company or such persons. All or a substantial portion of the assets of the
Company and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the Company or such persons in
Canada or to enforce a judgment obtained in Canadian courts against the Company
or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Offered Debt Securities to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Offered Debt Securities acquired by such purchaser pursuant to this
offering. Such report must be in the form attached to British Columbia
Securities Commission Blanket Order BOR#88/5. Only one such report must be filed
in respect of Offered Debt Securities acquired on the same date and under the
same prospectus exemption.
S-12
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NO DEALER, SALESPERSON OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
----------------
TABLE OF CONTENTS
PAGE
---------
PROSPECTUS SUPPLEMENT
The Company.................................... S-2
Recent Developments............................ S-4
Use of Proceeds................................ S-4
Capitalization................................. S-5
Selected Financial Data........................ S-5
Pro Forma Condensed Combined
Financial Data................................ S-6
Certain Terms of the Offered Debt Securities... S-10
Underwriting................................... S-11
PROSPECTUS
Incorporation of Certain Documents by
Reference..................................... 2
Available Information.......................... 3
The Company.................................... 3
Use of Proceeds................................ 4
Ratio of Earnings to Fixed Charges............. 4
Description of Debt Securities................. 5
Description of Preferred Stock................. 13
Description of Common Stock.................... 15
Description of Warrants........................ 16
Plan of Distribution........................... 17
Legal Opinions................................. 18
Independent Auditors........................... 18
[LOGO]
$350,000,000
8 5/8% Notes
Due October 15, 2004
$250,000,000
9 3/8% Debentures
Due October 15, 2024
PROSPECTUS SUPPLEMENT
CS First Boston
J.P. Morgan Securities Inc.
Merrill Lynch & Co.
Salomon Brothers Inc
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