SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] Annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 (No fee required)
For the fiscal years ended December 31, 2001 and 2000
OR
[ ] Transition report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 (No fee required)
For the transition period from __________ to ____________
Commission file number 1-12385
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
NEWPORT NEWS SHIPBUILDING INC.
401(k) INVESTMENT PLAN FOR SALARIED EMPLOYEES
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
NORTHROP GRUMMAN CORPORATION
1840 Century Park East
Los Angeles, California 90067
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEWPORT NEWS SHIPBUILDING INC.
401(k) INVESTMENT PLAN FOR SALARIED EMPLOYEES
Dated: June 28, 2002 /s/ Gary W. McKenzie
_____________________________________
By Gary W. McKenzie
Vice President-Tax
NEWPORT NEWS SHIPBUILDING INC.
401(k) INVESTMENT PLAN FOR SALARIED EMPLOYEES
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORTS 1-2
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 2001 and 2000 3
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2001 4
Notes to Financial Statements 5-9
SUPPLEMENTAL SCHEDULE:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
as of December 31, 2001 10
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee of the
Newport News Shipbuilding Inc.
401(k) Investment Plan for Salaried Employees:
We have audited the accompanying statement of net assets available for benefits
of the Newport News Shipbuilding Inc. 401(k) Plan for Salaried Employees (the
"Plan") as of December 31, 2001, and the related statement of changes in net
assets available for benefits for the year then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2001, and the changes in its net assets available for plan benefits for the year
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) as of December 31, 2001 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. Such supplemental schedule has been subjected to the auditing
procedures applied in our audit of the basic 2001 financial statements and, in
our opinion, is fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
/s/ Deloitte & Touche LLP
---------------------------
Richmond, Virginia
June 27, 2002
Report of independent public accountants
To Newport News Shipbuilding Inc.:
We have audited the accompanying statements of net assets available for benefits
of the Newport News Shipbuilding Inc. 401(k) Investment Plan for Salaried
Employees (the Plan) as of December 31, 2000 and 1999, and the related statement
of changes in net assets available for benefits for the year ended December 31,
2000. These financial statements and the schedule referred to below are the
responsibility of the Plan's Management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999, and the changes in its net assets available for
benefits for the year ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of December 31, 2000, is presented for purposes of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Vienna, Virginia
June 15, 2001
THIS REPORT IS A COPY OF A PREVIOUSLY ISSUED ANDERSEN REPORT AND THE REPORT HAS
NOT BEEN REISSUED BY ANDERSEN
NEWPORT NEWS SHIPBUILDING INC.
401(k) INVESTMENT PLAN FOR SALARIED EMPLOYEES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS AS OF
DECEMBER 31, 2001 AND 2000
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2001 2000
ASSETS
CASH $ 1,159,534 $ 443,069
INVESTMENTS, At fair market value 813,443,472 790,546,837
RECEIVABLES:
Employer contributions 1,109,509 1,229,053
Participant contributions 1,344,030 1,009,223
Total receivables 2,453,539 2,238,276
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $817,056,545 $793,228,182
============ ============
See accompanying notes to financial statements.
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NEWPORT NEWS SHIPBUILDING INC.
401(k) INVESTMENT PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE
YEAR ENDED DECEMBER 31, 2001
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INVESTMENT INCOME:
Net depreciation in fair value of investments $ (6,125,583)
Interest 2,908,379
Dividends 8,677,779
-------------
Total investment income 5,460,575
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CONTRIBUTIONS:
Employer 26,322,419
Participant 32,454,987
-------------
Total contributions 58,777,406
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DEDUCTIONS:
Benefits paid to participants 40,172,235
Administrative expenses 45,320
Other deductions 192,063
-------------
Total deductions 40,409,618
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NET INCREASE 23,828,363
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 793,228,182
-------------
End of year $ 817,056,545
=============
See accompanying notes to financial statements.
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NEWPORT NEWS SHIPBUILDING INC.
401(k) INVESTMENT PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 2001 AND 2000
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1. DESCRIPTION OF THE PLAN
The following description of the Newport News Inc. 401(k) Investment Plan
for Salaried Employees (the "Plan") provides only general information.
Participants should refer to the plan document for a more complete
description of the Plan's provisions.
General - The Plan was adopted by Newport News Shipbuilding Inc. (the
"Company" or "NNS"), effective December 16, 1996. As of November 7, 2001
the Company completed a merger agreement with Northrop Grumman Corporation
("Northrop Grumman") whereby the Company was subsequently merged with and
into Northrop Grumman.
The Plan is intended to constitute a defined contribution 401(k) plan that
provides for tax-deferred savings and employer contributions to
participants. The Company and Merrill Lynch Trust Co. (the "Trustee") have
executed the Newport News Shipbuilding Inc. 401(k) Investment Plan for
Salaried Employees Trust Agreement, which provides for the investment and
reinvestment of the assets of the Plan.
Through February 12, 2002, the Plan was administered by the Company's
Benefits Committee (the "Committee"). The members of the Committee were
appointed by the Company's Board of Directors (the "Board"). The Plan is
subject to the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
Eligibility and Contributions - All salaried employees are eligible to
participate in the Plan as soon as administratively feasible.
Approximately one week after receipt of their first paycheck, employees
may contact the Trustee to enroll in the Plan. Participants may elect to
voluntarily contribute a percentage of their annual before-tax
compensation, not to exceed limitations imposed by the Internal Revenue
Code ("IRC"), through equal pay period deductions. Participant
contributions can range from 1 to 12 percent of annual compensation.
Deferral contributions were capped at $10,500 for the years ended December
31, 2001 and 2000. The Company will provide a matching contribution equal
to 50 percent of the first 8 percent of compensation deferred under the
Plan, resulting in a cap of 4 percent for Company matched contributions.
Company matching contributions were made in the form of the Company's
stock through November 30, 2001 and in cash subsequent to that date. All
of the Plan's participants, regardless of whether they make a
contribution, also received a Company stock grant equal to 3 percent of
the participant's base pay through November 30, 2001 and in cash
subsequent to that date, each pay period through December 31, 2001.
Participant Accounts - Each participant's account is credited with the
participant's contribution, an allocation of the Plan's earnings or losses
and Company matching contributions each pay period. Allocations are based
on the participant's account balance, as defined in the plan document.
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Vesting and Forfeitures - Participants are vested in Company matching
contributions after completing two years of Company service. Forfeited
contributions are applied to reduce future Company matching contributions.
All participants are fully vested in the three percent stock grant and all
other funds in their accounts.
Payment of Benefits - Upon termination of employment, including layoff,
distributions to participants are generally made via single lump-sum
payments. Participants whose account balances exceed $5,000 have the right
to defer the distribution of their account balances until they reach the
age of 70 1/2.
Investment Options - Upon enrollment in the Plan, participants may direct
their contributions in one percent increments in any of the investment
funds that are selected by the Committee.
Loans to Participants - A participant may borrow up to 50 percent of his
or her account balance with a minimum loan amount of $1,000. Loans are
repayable through payroll deductions for a period no longer than five
years. Interest on loans to participants is charged at a rate of prime
(rate of interest charged by commercial banks on loans to preferred
customers) plus one percent. The interest rates at December 31, 2001 and
2000 were 5.8 percent and 10.5 percent, respectively.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The accompanying financial statements are prepared
in accordance with accounting principles generally accepted in the United
States of America.
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of net assets available for benefits and changes
therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Risk and Uncertainties - The Plan utilizes various investment instruments.
Investment securities, in general, are exposed to various risks, such as
interest rate, credit and overall market volatility. Due to the level of
risk associated with certain investment securities, it is reasonably
possible that changes in the values of investment securities will occur in
the near term and that such changes could materially affect the amounts
reported in the financial statements.
Investment Valuation and Income Recognition - All investments are recorded
at fair market value based on quoted market prices. Purchase and sale
transactions are recorded on a trade date basis. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend
date.
Payment of Benefits - Benefit payments are recorded when paid.
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3. INVESTMENTS
The fair market value of individual investments that represent five
percent or more of the Plan's net assets are as follows as of December 31:
2001 2000
Newport News Shipbuilding Inc. Common Stock $ 82,136,810 $186,279,794
Northrop Grumman Corporation Common Stock 82,300,459 -
Money Market Fund 292,490,942 179,872,388
Fidelity Growth Company Fund 103,332,434 137,720,350
Putnam New Opportunities Fund 66,053,066 93,625,671
Equity Index Fund 56,795,956 65,658,915
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as on investments held during the
year) appreciated (depreciated) in value as follows:
2001
Common stock $ 67,185,020
Mutual funds (12,914,827)
Collective funds (60,395,776)
------------
Net depreciation $ (6,125,583)
============
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investment
is as follows as of December 31:
2001 2000
Net Assets -
Newport News Shipbuilding Inc. Common Stock $ - $186,279,794
Year Ended
December 31, 2001
Changes in net assets:
Net appreciation $ 40,959,717
Interest and dividends 745,571
Employer contributions 24,022,782
Participant contributions 2,444,879
Benefits paid to participants (7,465,701)
Administrative expenses (12,513)
------------
Net appreciation $ 60,694,735
============
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5. TAX STATUS
The Internal Revenue Service ("IRS") has determined and informed the
Company by a letter, dated November 17, 1997, that the Plan and related
trust were designed in accordance with the applicable regulations of the
IRC. The Plan has been amended since receiving the IRS' Determination
Letter; however, the Company and the plan administrator believe that the
Plan is currently designed and operated in compliance with the applicable
requirements of the IRC and the Plan and related trust continue to be tax
exempt. Therefore, no provision for income taxes has been included in the
Plan's financial statements.
6. PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions set forth in ERISA. In the
event that the Plan is terminated, participants would become 100 percent
vested in their accounts.
7. TRANSACTIONS WITH PARTIES-IN-INTEREST
Since the Company's and Northrop Grumman's common stock are investments
held by the Plan, investments in these common stocks represented
transactions with parties-in-interest. Certain plan investments are shares
of collective funds managed by the Trustee. Therefore, transactions with
these investments qualify as transactions with parties-in-interest.
8. PLAN AMENDMENTS
The Plan was amended and restated on December 19, 2001, effective January
1, 2002, to provide for the Plan's compliance with specific tax and other
regulatory requirements and to provide for new provisions in the Plan. The
following significant changes in the Plan are effective for the plan year
beginning January 1, 2002:
o The limit on participant contributions was increased to 20 percent;
o The three percent Company stock grant to participants' accounts was
eliminated; and
o The Company matching contribution was increased to one half of the
first eight percent plus one quarter of the next four percent of a
participant's compensation deferred under the Plan.
9. CONVERSION OF COMPANY COMMON STOCK
As a result of the merger of the Company with and into Northrop Grumman,
the Plan converted investments in NNS common stock to Northrop Grumman
common stock. Participants were given the opportunity to exchange all
their NNS shares for either $67.50 per share in cash or 0.7193 shares of
Northrop Grumman common stock, subject to adjustment. This conversion
occurred through a tender offer expiring on November 29, 2001 and a
subsequent surrendering of NNS shares by participants in exchange for
$67.50 per share in cash or 0.7193 shares of Northrop Grumman common
stock. During early 2002 through a final conversion, all shares that had
not been tendered resulted in the participants receiving $51.14 in cash
and 0.1743 shares of Northrop Grumman common stock for each share of NNS
common stock.
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10. ELIMINATION OF INVESTMENT OPTIONS
During the year ended December 31, 2001 the Plan notified participants
that it would eliminate the investment options related to former
affiliates of the Company. Participants were provided with the option to
redirect their balances in these investment options to other investment
options provided for under the Plan. On January 2, 2002, all remaining
investments related to former affiliates were liquidated and the proceeds
were invested in money market funds.
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NEWPORT NEWS SHIPBUILDING INC.
401(k) INVESTMENT PLAN FOR SALARIED EMPLOYEES
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2001
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Description of Investment,
Identity of Issue, Including Maturity Date,
Borrower, Lessor Rate of Interest, Collateral, Current
or Similar Party Par or Maturity Value Value
U.S. Bond Index Fund Collective Fund $ 14,946,840
Equity Index Fund Collective Fund 56,795,956
LifePath 2000* Collective Fund 1,097,237
LifePath 2010* Collective Fund 3,155,362
LifePath 2020* Collective Fund 4,928,159
LifePath 2030* Collective Fund 4,335,460
LifePath 2040* Collective Fund 7,906,253
Money Market Fund* Collective Fund 292,490,941
State Street Research International Mutual Fund Shares 675,100
State Street Aurora Fund Mutual Fund Shares 12,653,123
Van Kampen Growth and Income Fund Mutual Fund Shares 6,221,696
Putnam New Opportunities Fund Mutual Fund Shares 66,053,066
Templeton Foreign Fund Mutual Fund Shares 11,996,928
Fidelity Growth Company Fund Mutual Fund Shares 103,332,434
INVESCO Value Trust Total Return Fund Mutual Fund Shares 5,373,446
Northrop Grumman Common Stock* Common Stock 82,300,459
Newport News Shipbuilding Inc.
Common Stock* Common Stock 82,136,810
El Paso Natural Gas Company
Common Stock Common Stock 7,995,828
PACTIV Corporation Common Stock Common Stock 15,107,604
Tenneco Automobile Inc. Common Stock Common Stock 679,941
Participant Loans (interest rates varied
from 5.8% to 10.5% during 2001)* Participant Loans 33,260,829
------------
Total assets held for investment purposes $813,443,472
============
* Represents a party-in-interest
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