UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported) November 29, 2001 ------------------------------------------- NORTHROP GRUMMAN CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 1-16411 No. 95-4840775 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification incorporation or organization) Number) 1840 Century Park East, Los Angeles, California 90067 www.northropgrumman.com (Address of principal executive offices and internet site) (310) 553-6262 (Registrant's telephone number, including area code) Northrop Grumman Corporation and Subsidiaries Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (b) Pro Forma Financial Information In April 2001, Northrop Grumman Corporation ("Northrop Grumman") acquired approximately 97.3% of the outstanding Common Shares of Litton Industries, Inc. ("Litton") and 58.6% of the preferred stock of Litton. Northrop Grumman subsequently acquired the remaining Common and Preferred Shares of Litton for cash and now owns 100% of the outstanding shares of Litton. In November 2001, Northrop Grumman acquired approximately 80.7% of the outstanding shares of Newport News Shipbuilding, Inc. ("Newport News") common stock. On December 13, 2001 Northrop Grumman filed an information statement/prospectus as Post-Effective Amendment No. 1 to Form S-4, which states that a shareholders' meeting will be held on January 18, 2002 to complete the acquisition of Newport News by Northrop Grumman. The Unaudited Pro Forma Condensed Combined Financial Statements presented herein are derived from the historical consolidated financial statements of each of Northrop Grumman Systems Corporation ("Northrop Systems"), Northrop Grumman Corporation, Litton and Newport News. The Unaudited Pro Forma Condensed Combined Financial Statements have been prepared using the purchase method of accounting, with Northrop Grumman treated as the acquirer and as if the Litton and Newport News acquisitions had been completed as of the beginning of the periods presented for statements of income purposes and as if the Newport News acquisition had been completed on September 30, 2001 for the statement of financial position. The Unaudited Pro Forma Condensed Combined Financial Statements are based upon the historical financial statements of Northrop Systems, Northrop Grumman, Litton and Newport News adjusted to give effect to the Litton and Newport News acquisitions. The pro forma adjustments are described in the accompanying notes presented on the following pages. The pro forma statements have been developed from (a) the audited consolidated financial statements of Northrop Systems contained in its Annual Report on Form 10-K/A for the year ended December 31, 2000 and the unaudited consolidated financial statements of Northrop Grumman contained in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2001; (b) the audited consolidated financial statements of Litton contained in its Annual Report on Form 10-K for the fiscal year ended July 31, 2000 and the unaudited consolidated financial statements of Litton contained in its Quarterly Report on Form 10-Q for Page 2 of 9 Northrop Grumman Corporation and Subsidiaries the period ended January 31, 2001; and (c) the audited consolidated financial statements of Newport News contained in its Annual Report on Form 10-K for the year ended December 31, 2000 and the unaudited consolidated financial statements of Newport News contained in its Quarterly Report on Form 10-Q for the period ended September 16, 2001. In addition, the audited consolidated financial statements of Litton contained in its Annual Report on Form 10-K for the fiscal year ended July 31, 2000 and the unaudited consolidated financial statements of Litton contained in its Quarterly Reports on Form 10-Q for the periods ended January 31, 2000 and January 31, 2001 have been used to bring the financial reporting periods of Litton to within 90 days of those of Northrop Systems and Northrop Grumman. Under the purchase method of accounting, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values, with the excess recorded as goodwill. These Unaudited Pro Forma Condensed Combined Financial Statements reflect preliminary estimates of the fair market value of the assets acquired and liabilities assumed and the related allocations of purchase price, and preliminary estimates of adjustments necessary to conform Litton data to Northrop Grumman's accounting policies. Northrop Grumman is currently reviewing the preliminary estimates of the fair market value of assets acquired and liabilities assumed in the Litton and Newport News acquisitions, including valuations associated with certain contracts and preliminary valuation study results for intangible assets, property, plant and equipment, and retiree benefits assets and liabilities. Northrop Grumman is also evaluating several possible restructuring activities of Litton operations. The final determination of the fair market value of assets acquired and liabilities assumed and final allocation of the purchase price may differ from the amounts assumed in these Unaudited Pro Forma Condensed Combined Financial Statements, and there can be no assurance that any adjustments will not be material. With the exception of Newport News' long-term debt assumed, Northrop Grumman has not completed the valuation studies necessary to arrive at the required estimates of the fair market value of the assets to be acquired and liabilities to be assumed in the Newport News acquisition and the related allocations of purchase price, nor has it identified the adjustments necessary, if any, to conform Newport News data to Northrop Grumman's accounting policies. Accordingly, Northrop Grumman has used the historical book values of the assets and liabilities of Newport News, other than long-term debt, and has used the historical revenue recognition policies of Newport News to prepare the Unaudited Pro Forma Condensed Combined Financial Page 3 of 9 Northrop Grumman Corporation and Subsidiaries Statements set forth herein, with the excess of the purchase price over the historical net assets of Newport News recorded as goodwill and other purchased intangibles. Once Northrop Grumman has completed the valuation studies necessary to finalize the required purchase price allocations and identified any necessary conforming changes, such pro forma financial statements will be subject to adjustment. Such adjustments will likely result in changes to the pro forma statement of financial position to reflect the final allocations of purchase price and the pro forma statements of income, and there can be no assurance that such adjustments will not be material. The Unaudited Pro Forma Condensed Combined Financial Statements do not include the realization of cost savings from operating efficiencies, synergies or other restructurings resulting from the Litton acquisition, or recognition of liabilities associated with potential restructurings, except for preliminary estimates of costs to consolidate the Litton and Northrop Grumman Corporate Offices. Adjustments to the purchase price allocations are expected to be finalized March 31, 2002 for Litton, and will be reflected in future Northrop Grumman filings. Adjustments to the purchase price allocations are expected to be finalized June 30, 2002 for Newport News, and will be reflected in future Northrop Grumman filings. There can be no assurance that such adjustments will not be material. The Unaudited Pro Forma Condensed Combined Financial Statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of Northrop Grumman would have been had the Litton or Newport News acquisitions occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations or financial position. The Unaudited Pro Forma Condensed Combined Financial Statements should be read in conjunction with the separate historical consolidated financial statements and accompanying notes of Northrop Systems, Northrop Grumman, Litton and Newport News. Page 4 of 9 Northrop Grumman Corporation and Subsidiaries Unaudited Pro Forma Condensed Combined Statement of Financial Position September 30, 2001 ($ in millions) Pro Forma Northrop Newport --------------------------------- Grumman News Adjustments Combined ----------------------------------------------------------------------------------------------------------------------------- Assets: Current assets Cash and cash equivalents $ 310 $ 66 $ - $ 376 Accounts receivable 2,297 131 (7)(a) 2,421 Inventoried costs 1,222 409 - 1,631 Deferred income taxes 35 110 - 145 Prepaid expenses and other current assets 140 19 - 159 ----------------------------------------------------------------------------------------------------------------------------- Total current assets 4,004 735 (7) 4,732 ----------------------------------------------------------------------------------------------------------------------------- Property, plant and equipment 3,297 1,616 - 4,913 Accumulated depreciation (1,211) (950) - (2,161) ----------------------------------------------------------------------------------------------------------------------------- Property, plant and equipment, net 2,086 666 - 2,752 ----------------------------------------------------------------------------------------------------------------------------- Other assets Goodwill and other purchased intangibles, net 7,956 - 1,976 (a)(k) 9,932 Prepaid retiree benefits cost and intangible pension asset 2,773 - - 2,773 Other assets 395 237 - 632 ----------------------------------------------------------------------------------------------------------------------------- 11,124 237 1,976 13,337 ----------------------------------------------------------------------------------------------------------------------------- $17,214 $1,638 $ 1,969 $ 20,821 ============================================================================================================================= Liabilities and Shareholders' Equity: Current liabilities Notes payable and current portion of long-term debt $ 134 $ 46 $ - $ 180 Accounts payable 757 87 (7)(a) 837 Accrued employees' compensation 629 - - 629 Advances on contracts 837 - - 837 Income taxes 373 - - 373 Other current liabilities 1,223 484 - 1,707 ----------------------------------------------------------------------------------------------------------------------------- Total current liabilities 3,953 617 (7) 4,563 ----------------------------------------------------------------------------------------------------------------------------- Long-term debt 5,185 432 696 (a)(k) 6,313 Accrued retiree benefits 1,478 - - 1,478 Deferred tax and other long-term liabilities 973 285 - 1,258 Redeemable preferred stock 350 - - 350 Shareholders' equity Paid in capital and unearned compensation 2,366 452 1,132 (a) 3,950 Retained earnings 2,928 236 (236)(a) 2,928 Accumulated other comprehensive loss (19) - - (19) Stock employee compensation trust - (384) 384 (a) - ----------------------------------------------------------------------------------------------------------------------------- 5,275 304 1,280 6,859 ----------------------------------------------------------------------------------------------------------------------------- $17,214 $1,638 $ 1,969 $ 20,821 ============================================================================================================================= Page 5 of 9 Northrop Grumman Corporation and Subsidiaries Unaudited Pro Forma Condensed Combined Statement of Income Year Ended December 31, 2000 ($ in millions, except per share) Pro Forma Pro Forma Northrop ------------------------- Newport ------------------------ Grumman Litton Adjustments Combined News Adjustments Combined ----------------------------------------------------------------------------------------------------------------------------------- Sales and service revenues $7,618 $5,626 $ (61)(b) $13,183 $2,072 $ (22)(b) $15,233 Cost of sales Operating Costs 5,446 4,669 88 (b)(c)(d) 10,203 1,870 (261)(b)(h)(j) 11,812 Administrative and general expenses 1,074 491 - 1,565 - 271 (j) 1,836 ----------------------------------------------------------------------------------------------------------------------------------- Operating margin 1,098 466 (149) 1,415 202 (32) 1,585 Interest expense (175) (105) (191)(e) (471) (53) (21)(i) (545) Other, net 52 16 - 68 4 - 72 ----------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 975 377 (340) 1,012 153 (53) 1,112 Federal and foreign income taxes 350 151 (119)(f) 382 63 (27)(f)(j) 418 ----------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations 625 226 (221) 630 90 (26) 694 ----------------------------------------------------------------------------------------------------------------------------------- Less, dividends paid to preferred shareholders - - (25)(g) (25) - - (25) ----------------------------------------------------------------------------------------------------------------------------------- Income available to common shareholders $ 625 $ 226 $(246) $ 605 $ 90 $ (26) $ 669 =================================================================================================================================== Average shares basic 70.58 83.58 100.22 Average shares diluted 70.88 84.00 100.64 Basic earnings per share: Continuing operations $ 8.86 $ 7.24 $ 6.68 Diluted earnings per share: Continuing operations $ 8.82 $ 7.20* $ 6.65* * Calculated by dividing income available to common shareholders by average shares diluted, which is calculated assuming preferred shares are not converted to common shares, resulting in the most dilutive effect. Page 6 of 9 Northrop Grumman Corporation and Subsidiaries Unaudited Pro Forma Condensed Combined Statement of Income Nine Months Ended September 30, 2001 ($ in millions, except per share) Pro Forma Pro Forma Northrop ------------------------- Newport ------------------------- Grumman Litton Adjustments Combined News Adjustments Combined ------------------------------------------------------------------------------------------------------------------------------------ Sales and service revenues $9,254 $1,345 $ (18)(b) $10,581 $1,639 $ (37)(b) $12,183 Cost of sales Operating Costs 7,656 1,120 19 (b)(c)(d) 8,795 1,481 (168)(b)(h)(j) 10,108 Administrative and general expenses 908 121 - 1,029 - 153 (j) 1,182 ------------------------------------------------------------------------------------------------------------------------------------ Operating margin 690 104 (37) 757 158 (22) 893 Interest expense (269) (27) (64)(e) (360) (37) (15)(i) (412) Other, net 64 3 - 67 (1) - 66 ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations before income taxes 485 80 (101) 464 120 (37) 547 Federal and foreign income taxes 189 30 (35)(f) 184 48 (18)(f)(j) 214 ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations 296 50 (66) 280 72 (19) 333 ------------------------------------------------------------------------------------------------------------------------------------ Less, dividends paid to preferred shareholders (12) - (6)(g) (18) - - (18) ------------------------------------------------------------------------------------------------------------------------------------ Income available to common shareholders $ 284 $ 50 $ (72) $ 262 $ 72 $ (19) $ 315 ==================================================================================================================================== Average shares basic 80.34 85.32 101.96 Average shares diluted 81.03 86.11 102.75 Basic earnings per share: Continuing operations $ 3.53 $ 3.07 $ 3.09 Diluted earnings per share: Continuing operations $ 3.50* $ 3.04* $ 3.07* * Calculated by dividing income available to common shareholders by average shares diluted, which is calculated assuming preferred shares are not converted to common shares, resulting in the most dilutive effect. Page 7 of 9 Northrop Grumman Corporation and Subsidiaries Notes to Unaudited Pro Forma Condensed Combined Financial Statements (a) Adjustments to (i) eliminate the equity of Newport News, (ii) eliminate intercompany receivables and payables between Northrop Grumman and Newport News, (iii) record issuance of common stock, (iv) record debt financing for the Newport News acquisition along with additional acquisition related costs, and (v) record goodwill and other purchased intangibles arising from the acquisition of Newport News. The amount of the purchase price allocated to goodwill and other purchased intangibles is subject to change and is calculated based on the assumption that Northrop Grumman has acquired 100% of Newport News common stock and, accordingly, has issued all 16,636,885 shares of Northrop Grumman common stock available to be exchanged in the Newport News acquisition. The value ascribed to the Northrop Grumman common stock exchanged in the Newport News acquisition is $95.22. This value was determined based on a measurement date of December 5, 2001. Accordingly, this value represents the 5-day average of the Northrop Grumman closing stock prices from December 3, 2001 through December 7, 2001. (b) Adjustment to eliminate intercompany sales and cost of sales transactions between Northrop Grumman and Litton, and between Northrop Grumman and Newport News. (c) Adjustment to amortize the preliminary estimate of goodwill and other purchased intangible assets arising out of the acquisition of Litton over an estimated weighted average life of 26 years on a straight-line basis. (d) Adjustment to record depreciation of property, plant and equipment and amortization of capitalized software arising from fair market value adjustments from the Litton acquisition. (e) Adjustment to record interest expense and the amortization of debt issuance costs on new financing for the acquisition of Litton at a weighted average rate of 7.5 and 6.8 percent for the year ended December 31, 2000 and the nine months ended September 30, 2001, respectively. (f) Adjustment to record income tax effects on pre-tax pro forma adjustments, using a statutory tax rate of thirty-five percent. (g) Adjusted, pro rata, for dividends to preferred shareholders using $7 per share dividend rate for redeemable preferred stock issued in the acquisition of Litton. (h) Adjustment to amortize estimated purchased intangible assets arising out of the Newport News acquisition over an estimated life of 10 years on a straight-line basis. Goodwill arising from the Newport News acquisition has not been amortized, in accordance with the provisions of SFAS No. 142: Goodwill and Other Intangible Assets. (i) Adjustment to record interest on debt financing for the Newport News acquisition at the current rate of 3.1 percent for both the year ended December 31, 2000 and the nine months ended September 30, 2001. (j) Adjustments to reclassify (i) G&A expense from operating costs to administrative and general expenses and (ii) state income tax expense from federal and foreign income taxes to operating costs to conform Newport News data to classifications utilized by Northrop Grumman. (k) Includes fair market value adjustment of $38 million for Newport News long-term debt acquired. Page 8 of 9 Northrop Grumman Corporation and Subsidiaries SIGNATURES 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. Northrop Grumman Corporation (Registrant) Date: January 14, 2002 by /s/ Sandra J. Wright --------------------------------------- Sandra J. Wright Corporate Vice President and Controller Page 9 of 9