Prepared by R.R. Donnelley Financial -- Form 425
FILING PURSUANT TO RULE 425 OF THE
SECURITIES ACT OF 1933, AS AMENDED
FILER: NORTHROP GRUMMAN CORPORATION
SUBJECT COMPANY: TRW INC. (NO. 1-2384)
FILING: REGISTRATION STATEMENT ON FORM S-4
(REGISTRATION NO. 333-83672)
Northrop Grumman filed a
registration statement on Form S-4 (File No. 333-83672)
and a tender offer statement on Schedule TO with the SEC on March 4, 2002 with
respect to its offer to exchange all outstanding shares of TRW capital stock for
Northrop Grumman
stock. These documents contain important information. TRW
shareholders should read these documents and any amendments or supplements
thereto before making any decision regarding the offer to exchange. Copies of
such documents may be
obtained without charge at the SEC's website at
www.sec.gov or from D.F. King & Co., Inc. the information agent for the offer to
exchange, at 800-755-7250.
The directors, certain executive officers and other employees and
representatives of Northrop Grumman may be deemed to be participants in the
solicitation of proxies of TRW shareholders in connection with shareholder
proposals relating to the 2002 Annual Meeting of TRW Shareholders and a Special
Meeting of TRW Shareholders to be held on April 24, 2002 and April 22, 2002,
respectively. Northrop Grumman has filed proxy materials for these shareholder
meetings which contain information regarding such potential participants.
Northrop Grumman's proxy materials contain important information and should be
read by TRW shareholders. These proxy materials and any amendments thereto may
be obtained at no charge at the SEC's website at www.sec.gov as they become
available.
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The information in this supplement to the offer to exchange may change. Northrop Grumman may not complete the exchange offer and issue these
securities until the registration statement filed with the Securities and Exchange Commission is effective. This supplement to the offer to exchange is not an offer to sell these securities and Northrop Grumman is not soliciting offers to buy these
securities in any state where the offer is not permitted.
NORTHROP GRUMMAN CORPORATION
Supplement to the
Offer To Exchange Each Outstanding Share of Common Stock
of
TRW INC.
for
Shares of Common Stock of Northrop
Grumman Corporation valued at $53.00
and
Each Outstanding Share of Serial Preference Stock II
of
TRW INC.
for
Shares of Common Stock of Northrop Grumman Corporation valued at $53.00
multiplied by the then-effective conversion rate of the applicable Series of Serial Preference Stock II,
in each
case subject to the procedures and limitations described in this offer
to exchange and the related letters of transmittal.
by
NORTHROP GRUMMAN CORPORATION
The offer to exchange, (as defined below), of Northrop Grumman Corporation, a
Delaware corporation (Northrop Grumman), and the withdrawal rights of the shareholders of TRW Inc., an Ohio corporation (TRW), will expire at 12:00 midnight, New York City time, on May 3, 2002, unless extended. TRW shares
tendered pursuant to the offer to exchange may be withdrawn at any time prior to the expiration of the offer to exchange but not during any subsequent offering period.
This supplement amends Northrop Grummans offer to exchange shares of its common stock for TRW shares, as defined below, originally dated March 4, 2002 and as heretofore amended and
supplemented through April 4, 2002 (as amended by this supplement and as may be further amended from time to time, the offer to exchange).
Northrop Grumman hereby offers, upon the terms and subject to the conditions set forth in the offer to exchange and in the related letters of transmittal, to issue shares of Northrop Grumman
common stock, par value $1.00 per share, (together with associated rights to purchase Series A junior participating preferred stock) for each of the issued and outstanding shares of (a) common stock, par value $0.625 per share, of TRW (the TRW
common stock), (b) Cumulative Serial Preference Stock II, $4.40 Convertible Series 1, no par value per share, of TRW (the Series 1 Shares) and (c) Cumulative Serial Preference Stock II, $4.50 Convertible Series 3, no par
value per share, of TRW (the Series 3 Shares and, together with the TRW common stock and the Series 1 Shares, capital stock or TRW shares). Each share of TRW common stock may be exchanged for a number of
shares of Northrop Grumman common stock equal to the exchange ratio, as defined below. Each Series 1 Share and each Series 3 Share may be exchanged for a number of shares of Northrop Grumman common stock equal to the then-effective conversion rate
for the Serial Preference Stock II multiplied by the exchange ratio. The method for calculating the conversion rates for the Series 1 Shares and the Series 3 Shares is provided in TRWs amended articles of incorporation. See The Offer to
Exchange beginning on page 27 of the offer to exchange, as amended through April 4, 2002 for a discussion of the conversion rates. As of March 28, 2002, TRW reported that the conversion ratios for the Series 1 Shares and Series 3 Shares were
8.8 and 7.448, respectively.
Northrop Grumman will determine the exact exchange ratio (the exchange ratio) by
dividing $53.00 by the average of the closing sale prices for a share of Northrop Grumman common stock on the New York Stock Exchange as reported in The Wall Street Journal over the five consecutive trading days ending immediately prior to the
second trading day prior to the expiration of the offer to exchange but in no event will the exchange ratio be more than 0.4690 ($53.00/$113.00) or less than 0.4309 ($53.00/$123.00). The closing price of Northrop Grumman common stock on the
New York Stock Exchange on March 1, 2002, the last trading day before the offer to exchange commenced, was $107.75. The closing price of Northrop Grumman common stock on the New York Stock
Exchange on April 12, 2002, the last trading day before the date of this supplement to the offer to exchange, was $118.31.
The purpose of the offer to exchange is for Northrop Grumman to acquire control of, and ultimately the entire equity interest in, TRW. Northrop Grumman intends, promptly after completion of the offer to exchange, to seek to have TRW
complete a merger (the TRW merger) with Northrop Grumman, or a wholly-owned subsidiary of Northrop Grumman, in which each outstanding share of capital stock of TRW (except for treasury shares of TRW and shares beneficially owned directly
or indirectly by Northrop Grumman for its own account) would be converted into the right to receive shares of Northrop Grumman common stock at the same exchange ratio as used in the offer to exchange, subject to dissenters rights under Ohio
law.
Tenders of TRW shares pursuant to the offer to exchange will be effective, and Northrop Grumman shall have the right to
acquire tendered TRW shares, only at such time as Section 1704 of the Ohio Revised Code shall not prohibit or delay the TRW merger. No tender of TRW shares shall be effective, and Northrop Grumman shall have no right to acquire tendered TRW shares,
prior to such time. This provision is referred to herein as the 1704 Limitation.
Northrop Grummans obligation
to exchange Northrop Grumman common stock for TRW capital stock is subject to the 1704 Limitation and each of the conditions listed under The Offer to Exchange is subject to the 1704 Limitation and Various Conditions beginning on
page 5.
Northrop Grummans common stock trades on the New York Stock Exchange and the Pacific Exchange under
the symbol NOC, and TRWs common stock trades on the New York Stock Exchange, the Pacific Exchange, the Chicago Stock Exchange and the Philadelphia Stock Exchange under the symbol TRW.
See Risk Factors beginning on page 10 of the offer to exchange, as amended through April 4, 2002 for a discussion of various factors that
shareholders should consider about the offer to exchange.
Northrop Grumman is not asking TRW shareholders for a proxy in
this document and TRW shareholders are requested not to send a proxy. Any solicitation of proxies only will be made pursuant to separate proxy solicitation materials complying with the requirements of Section 14(a) of the Securities Exchange Act of
1934.
Neither the Securities and Exchange Commission (SEC) nor any state securities commission has approved
or disapproved of these securities or passed upon the adequacy or accuracy of the offer to exchange. Any representation to the contrary is a criminal offense.
The Dealer Manager for the Offer to Exchange is
Salomon Smith Barney
The date of this supplement to the offer to exchange is April 15, 2002.
This supplement to Northrop Grummans offer to exchange incorporates important business and financial information about Northrop
Grumman and TRW from documents filed with the SEC that have not been included in, or delivered with, this supplement to Northrop Grummans offer to exchange. This information is available on the SECs website at http://www.sec.gov and from
other sources. See Additional Information beginning on page 63 of the offer to exchange, as amended through April 4, 2002.
TRW shareholders may also request copies of these documents from Northrop Grumman, without charge, upon written or oral request to Northrop Grummans information agent, D. F. King & Co., Inc., 77 Water
Street, New York, New York 10005, toll-free at (800) 755-7250 or by calling collect at (212) 269-5550. TRW shareholders may call the toll free number above to learn the exchange ratio starting on the second trading day prior to the expiration of the
offer to exchange. In addition, TRW shareholders may call the toll free number above at any time during the offer to exchange to determine the exchange ratio that would be in effect assuming the offer to exchange had expired on the date of the call.
In order to receive timely delivery of the documents, TRW shareholders must make requests no later than April 26, 2002 (five
business days before the scheduled expiration date of the offer to exchange).
TABLE OF CONTENTS
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SUPPLEMENT TO THE OFFER TO EXCHANGE
This supplement to Northrop Grumman Corporations offer to
exchange does not contain all of the information that is important to TRW shareholders. To fully understand Northrop Grummans offer to exchange, TRW shareholders should carefully read Northrop Grummans entire offer to exchange, as
amended through April 4, 2002 and all other documents to which the offer to exchange refers. References to Northrop Systems refer to Northrop Grumman Systems Corporation, formerly Northrop Grumman Corporation; references to
Northrop Grumman refer to Northrop Grumman Corporation, formerly NNG, Inc.; references to Litton refer to Litton Industries, Inc.; references to Newport News refer to Newport News Shipbuilding Inc., formerly Purchaser Corp. I; and
references to TRW refer to TRW Inc.
The Offer to Exchange
Under the terms of the offer to exchange, Northrop Grumman will exchange shares of newly issued Northrop Grumman common stock (together with associated rights to purchase Series A junior
participating preferred stock) for each of the issued and outstanding (a) shares of TRW common stock, (b) Series 1 Shares and (c) Series 3 Shares. Each share of TRW common stock may be exchanged for a number of shares of Northrop Grumman common
stock equal to the exchange ratio. Each Series 1 Share may be exchanged for a number of shares of Northrop Grumman common stock equal to the then-effective conversion rate for the Series 1 Shares multiplied by the exchange ratio, and each
Series 3 Share may be exchanged for a number of shares of Northrop Grumman common stock equal to the then-effective conversion rate for the Series 3 Shares multiplied by the exchange ratio. See The Offer to Exchange
beginning on page 27 of the offer to exchange, as amended through April 4, 2002, for a discussion of the conversion rates.
Northrop Grumman will determine the exact exchange ratio by dividing $53.00 by the average of the closing sale prices for a share of Northrop Grumman common stock on the New York Stock Exchange as reported in The Wall Street Journal
over the five consecutive trading days ending immediately prior to the second trading day before the expiration of the offer to exchange but in no event will the exchange ratio be more than 0.4690 or less than 0.4309.
By way of illustration, the following table provides examples of the exchange ratio calculated at various closing sale prices of Northrop Grumman common
stock.
Northrop Grumman Average Closing Price
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Exchange Ratio
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Implied Value
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$ 111.00 |
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0.4690 |
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$ 52.06 |
113.00 |
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0.4690 |
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53.00 |
115.00 |
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0.4609 |
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53.00 |
117.00 |
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0.4530 |
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53.00 |
119.00 |
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0.4454 |
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53.00 |
121.00 |
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0.4380 |
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53.00 |
123.00 |
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0.4309 |
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53.00 |
125.00 |
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0.4309 |
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53.86 |
The offer to exchange shares of common stock of Northrop
Grumman valued at $53.00 for shares of the outstanding capital stock of TRW common stock represented a premium of 33.17% over the closing price of TRW common stock on the New York Stock Exchange on February 21, 2002, the last trading day before the
public announcement of Northrop Grummans proposal for a business combination of Northrop Grumman and TRW, a premium of 37.78% over the average trading price for the twelve months prior to February 21, 2002 and 17.67% over the highest closing
price of TRW common stock for the twelve months prior to February 21, 2002. Since Northrop Grummans announcement, the $53.00 offer price represents a premium in relation to the trading price of the TRW common stock, and on April 12, 2002, the
last trading day before the date of this supplement
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to the offer to exchange, the $53.00 offer price represented a premium of 1.98% over the closing price of TRW common stock on the New York Stock Exchange.
Northrop Grumman will issue a press release before 9:00 A.M., New York City time, on the second trading day before the offer to exchange expires,
announcing (i) the exchange ratio assuming expiration of the offer to exchange as scheduled, (ii) the average closing price of the Northrop Grumman common stock over the previous five consecutive trading days and (iii) the then-effective
conversion rates of the Series 1 Shares and Series 3 Shares. If for any reason the expiration date is subsequently extended, a revised exchange ratio will be announced prior to the new expiration date.
TRW shareholders will not receive any fractional Northrop Grumman common stock. Instead, shareholders will receive cash in an amount equal to the value
of the fractional Northrop Grumman common stock that shareholders would otherwise have been entitled to receive.
Northrop
Grumman intends, promptly after completion of the offer to exchange, to seek to merge TRW with Northrop Grumman or a wholly owned subsidiary of Northrop Grumman. In the TRW merger, each share of TRW capital stock that has not been exchanged in the
offer to exchange (except for treasury shares of TRW and shares beneficially owned directly or indirectly by Northrop Grumman for its own account) would be converted into the right to receive shares of Northrop Grumman common stock at the same
exchange ratio as used in the offer to exchange, subject to dissenters rights under Ohio law. See The Offer to Exchange beginning on page 27 of the offer to exchange, as amended through April 4, 2002. Upon completion of the
offer to exchange and the TRW merger, the former TRW shareholders will own a maximum of 36.6% of the shares of Northrop Grumman common stock.
Information About Northrop Grumman and TRW
Northrop Grumman
Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067
(310) 553-6262
Northrop Grumman provides technologically advanced, innovative products, services and solutions in defense and commercial electronics, information technology, systems integration and
nuclear and non-nuclear shipbuilding and systems. As a prime contractor, principal subcontractor, partner, or preferred supplier, Northrop Grumman participates in many high-priority defense and commercial technology programs in the United States and
abroad. While Northrop Grumman is subject to the usual vagaries of the marketplace, it is also affected by the unique characteristics of the defense industry and by certain elements peculiar to its own business mix. It is common in this industry for
work on major programs to be shared among a number of companies. A company competing to be a prime contractor may, upon ultimate award of the contract, turn out to be a subcontractor. It is not uncommon to compete with customers, and simultaneously
on other contracts, to be either a supplier to, or a customer of, such competitor. The nature of major defense programs, conducted under binding contracts, allows companies that perform well to benefit from a level of program continuity unknown in
many industries. While Northrop Grumman conducts most of its business with the U.S. Government, principally the Department of Defense (DOD), domestic and international commercial sales still represent a significant portion of its business.
Based on the closing price of Northrop Grumman common stock on the New York Stock Exchange on April 12, 2002, Northrop
Grummans market capitalization was approximately $13.29 billion.
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TRW
TRW Inc.
1900 Richmond Road
Cleveland, Ohio 44124
(216) 291-7000
TRW is a U.S.-based
international company that provides advanced technology products and services. The principal businesses of TRW and its subsidiaries are the design, manufacture and sale of products and the performance of systems engineering, research and technical
services for industry and the U.S. Government in the automotive, information systems, defense and aerospace markets. In the fourth quarter of 2001, as a result of the reorganization and consolidation of TRWs automotive businesses, TRW combined
its Chassis Systems, Occupant Safety Systems and Automotive Electronics segments into one Automotive segment. TRW currently operates its business in the following four operating segments:
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Space & Electronics; and |
Based on the
closing price of TRW common stock on the New York Stock Exchange on April 12, 2002, TRWs market capitalization was approximately $6.59 billion.
The Offer to Exchange Is Subject to the 1704 Limitation and Various Conditions
Tenders of TRW shares pursuant
to the offer to exchange will be effective, and Northrop Grumman shall have the right to acquire tendered TRW shares, only at such time as the 1704 Limitation shall not prohibit or delay the TRW merger. No tender of TRW shares shall be effective,
and Northrop Grumman shall have no right to acquire tendered TRW shares, prior to that time. See The 1704 Limitation beginning on page 38 of the offer to exchange, as amended through April 4, 2002.
Northrop Grummans obligation to exchange shares of Northrop Grummans common stock for TRW shares pursuant to the offer to exchange is
subject to a number of conditions, including, but not limited to, the following:
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the completion of a due diligence investigation of non-public information concerning TRW by Northrop Grumman with results reasonably satisfactory to Northrop Grumman;
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the tender of enough shares of TRW capital stock so that, after the completion of the offer to exchange, Northrop Grumman owns a majority of the then-outstanding TRW common
stock on a fully diluted basis; |
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the expiration or termination of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, Council Regulation (EEC) No. 4064/89 of the
Council of the European Union and any other applicable similar foreign laws or regulations; |
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the requisite approval of TRWs shareholders under the Ohio control share acquisition law or Northrop Grumman being satisfied, in its reasonable judgment, that such law is
inapplicable or invalid; |
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the expiration or termination of the waiting period during which the Ohio Division of Securities may suspend the offer to exchange under the Ohio Revised Code, which waiting
period expired on March 12, 2002; and |
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the approval of the issuance of shares of Northrop Grumman common stock pursuant to the offer to exchange and the TRW merger by the stockholders of Northrop Grumman.
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These conditions and the other conditions to the offer to exchange are discussed under
The Offer to ExchangeConditions to the Offer to Exchange beginning on page 39 of the offer to exchange, as amended through April 4, 2002.
The Receipt of Northrop Grumman Common Stock in Exchange for TRW Shares Pursuant to the Offer to Exchange and/or the TRW Merger is not Expected to be a Taxable Transaction to TRW Shareholders
In the opinion of Gibson, Dunn & Crutcher LLP, counsel to Northrop Grumman, the exchange of TRW shares for Northrop Grumman shares
pursuant to the offer to exchange and the TRW merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which is referred to herein as the Code, provided that
certain factual assumptions are satisfied. If the transactions so qualify, holders of TRW shares generally will not recognize any gain or loss for United States federal income tax purposes on the exchange of their TRW shares for Northrop Grumman
common stock in the offer to exchange and the TRW merger, except for any gain or loss attributable to the receipt of cash in lieu of a fractional share of Northrop Grumman common stock. The qualification of the offer to exchange and the TRW merger
as a reorganization is based on various factual assumptions, but there can be no assurance at the present time that such factual assumptions will in fact be satisfied. For more information, see The Offer to ExchangeMaterial U.S. Federal
Income Tax Consequences of the Offer to Exchange and the TRW Merger beginning on page 34 of the offer to exchange, as amended through April 4, 2002.
The Offer to Exchange Is Currently Scheduled to Expire on May 3, 2002
The offer to
exchange is scheduled to expire at 12:00 midnight, New York City time, on May 3, 2002. The term expiration date means 12:00 midnight, New York City time, on May 3, 2002, unless Northrop Grumman extends the period of time for which the
offer to exchange is open, in which case the term expiration date means the latest time and date on which the offer to exchange, as so extended, expires.
The Offer to Exchange May Be Extended, Terminated or Amended
Northrop Grumman expressly
reserves the right, in Northrop Grummans sole discretion, at any time or from time to time, to extend the period of time during which the offer to exchange remains open, and Northrop Grumman can do so by giving oral or written notice of the
extension to the exchange agent. Northrop Grumman is not providing any assurance that it will exercise this right to extend the offer to exchange, although Northrop Grumman currently intends to do so until all conditions have been satisfied or, to
the extent permissible, waived. During any extension except in the case of a subsequent offering period, all TRW shares previously tendered and not properly withdrawn will remain subject to the offer to exchange, subject to the right of each
shareholder of TRW to withdraw his or her TRW shares.
Subject to the SECs applicable rules and regulations, Northrop
Grumman also reserves the right, in its sole discretion, at any time or from time to time:
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to delay its acceptance for exchange or the exchange of any TRW shares, or to terminate the offer to exchange, upon the failure of any of the conditions of the offer to
exchange to be satisfied prior to the expiration date, or upon the failure of the condition relating to antitrust approvals to be satisfied at any time after the expiration date; and |
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to waive any condition (other than the conditions relating to antitrust approvals, the absence of an injunction and the effectiveness of the registration statement for the
Northrop Grumman common stock to be issued in the offer to exchange) or otherwise to delay, terminate or amend the offer to exchange in any respect, by giving oral or written notice of such delay, termination or amendment to the exchange agent and
by making a public announcement. However, Northrop Grumman may not waive the 1704 Limitation. |
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Northrop Grumman will follow any extension, termination, amendment or delay, as promptly as
practicable, with a public announcement. In the case of an extension, any related announcement will be issued no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled expiration date. Subject to applicable
law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act of 1934, as amended (the Exchange Act), which require that any material change in the information published, sent or given to TRWs shareholders in connection with
the offer to exchange be promptly sent to those shareholders in a manner reasonably designed to inform them of that change) and without limiting the manner in which Northrop Grumman may choose to make any public announcement, Northrop Grumman
assumes no obligation to publish, advertise or otherwise communicate any public announcement of this type other than by making a release to the Dow Jones News Service.
The Exchange Shall Occur Promptly After the Expiration Date
Upon the terms and subject
to the conditions of the offer to exchange (including, if the offer to exchange is extended or amended, the terms and conditions of any extension or amendment), Northrop Grumman will accept for exchange, and will exchange, TRW shares validly
tendered and not properly withdrawn promptly after the expiration date and promptly after they are tendered during any subsequent offering period that may apply.
Tendered Shares May Be Withdrawn at Any Time Prior to the Exchange of Those Shares
TRW shares tendered pursuant
to the offer to exchange may be withdrawn at any time prior to the expiration date, and, unless Northrop Grumman previously accepted them pursuant to the offer to exchange, may also be withdrawn at any time after May 3, 2002.
Northrop Grumman May Provide a Subsequent Offering Period
Northrop Grumman may elect to provide a subsequent offering period of not more than twenty business days after the acceptance of TRW shares pursuant to the offer to exchange if the requirements of Rule 14d-11 under
the Exchange Act have been met. TRWs shareholders will not have the right to withdraw TRW shares that they tender in the subsequent offering period, if any.
Procedure for Tendering Shares
For TRW shareholders to validly tender TRW shares
pursuant to the offer to exchange, subject to the 1704 Limitation:
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a properly completed and duly executed letter of transmittal, along with any required signature guarantees, or an agents message in connection with a book-entry transfer,
and any other required documents, must be received by the exchange agent at one of its addresses set forth on the back cover of this supplement to the offer to exchange, and certificates for tendered TRW shares must be received by the exchange agent
at one of those addresses, or those TRW shares must be tendered pursuant to the procedures for book-entry tender set forth herein (and a confirmation of receipt of that tender received), in each case before the expiration date; or
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shareholders must comply with the guaranteed delivery procedures set forth in The Offer to ExchangeGuaranteed Delivery beginning on page 32 of the offer to
exchange, as amended through April 4, 2002. |
Reasons for the Offer to Exchange
Northrop Grumman is proposing the offer to exchange and the TRW merger because it believes that the offer to exchange and the TRW merger will
significantly benefit Northrop Grummans stockholders, including TRW shareholders who would become Northrop Grumman stockholders by means of the offer to exchange and the TRW merger, and Northrop Grummans customers. Northrop Grumman
believes that the offer to exchange
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and the TRW merger will provide access to new product areas, increase diversification into new markets, increase market presence and opportunities, provide a complimentary product mix and
increase operating efficiencies for the benefit of all Northrop Grumman stockholders, including the former TRW shareholders.
Plans for TRW
Northrop Grumman is making the offer to exchange in order to acquire control of, and ultimately the entire equity interest
in, TRW. The offer to exchange is the first step in its acquisition of TRW and is intended to facilitate the acquisition of all TRW shares. Northrop Grumman intends, as soon as possible after completion of the offer to exchange, to seek to have TRW
merge with Northrop Grumman or a wholly-owned subsidiary of Northrop Grumman. The purpose of the TRW merger would be to acquire all TRW shares not exchanged in the offer to exchange. In the TRW merger, each outstanding share of TRW capital stock
(except for treasury shares of TRW and shares beneficially owned directly or indirectly by Northrop Grumman for its own account) would be converted into the right to receive shares of Northrop Grumman common stock at the same exchange ratio used in
the offer to exchange, subject to dissenters rights under Ohio law.
Once Northrop Grumman has completed the TRW merger,
Northrop Grumman expects that TRW would continue its current operations, except that it would cease to be publicly owned and would instead be wholly owned by Northrop Grumman. Northrop Grumman expects to promptly dispose of TRWs automotive
business either by selling that business to a third party or parties or by spinning it off to the Northrop Grumman stockholders (including the former TRW shareholders), or a combination thereof.
Dividend Policy of Northrop Grumman
The holders of Northrop Grumman common
stock receive dividends if and when declared by Northrop Grummans board of directors out of legally available funds. For the past 14 fiscal quarters, with the last quarter ended March 31, 2002, Northrop Grumman has paid a cash dividend of
$0.40 per common share.
Following completion of the offer to exchange and the TRW merger, Northrop Grumman expects to continue
paying quarterly cash dividends on a basis consistent with Northrop Grummans past practice. However, the declaration and payment of dividends will depend upon business conditions, operating results, capital and reserve requirements, covenants
in its debt instruments and Northrop Grummans board of directors consideration of other relevant factors. Northrop Grumman can give TRW shareholders no assurance that Northrop Grumman will continue to pay dividends on its common stock in
the future.
No Dissenters Rights in Connection with the Offer to Exchange Although Dissenters Rights Will Exist in Connection with the
TRW Merger
No dissenters rights are available in connection with the offer to exchange. If the TRW merger is
consummated, however, TRW shareholders will have certain rights under the Ohio Revised Code to dissent and demand dissenters rights and to receive payment of the fair cash value of their shares. TRW shareholders who perfect such rights by
complying with the procedures set forth in Sections 1701.84 and 1701.85 of the Ohio Revised Code will have the fair cash value of their TRW shares determined by an Ohio trial court and will be entitled to receive a payment equal to such fair cash
value from the surviving corporation. In addition, such dissenting TRW shareholders would be entitled to receive payment of a fair rate of interest at a rate determined by the trial court on the amount determined to be the fair cash value of their
TRW shares. In determining the fair cash value of the shares, the court is required to take into account all relevant factors, excluding any appreciation or depreciation in market value resulting from the transactions. Accordingly, such
determination could be based upon considerations other than, or in addition to, the market value of the TRW shares, including, among other things, asset values and earnings capacity. A copy of Sections 1701.84 and 1701.85 of the Ohio Revised Code is
provided in Annex B to the offer to exchange, as amended through April 4, 2002.
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Material Differences in Rights of Stockholders/Shareholders
The governing documents of Northrop Grumman and TRW vary, and to that extent, TRW shareholders will have different rights once they become Northrop Grumman stockholders. Similarly,
the laws of Ohio, TRWs state of incorporation, differ from those of Delaware, Northrop Grummans state of incorporation. The differences are described in more detail under Comparison of Rights of Holders of Northrop Grumman Common
Stock and TRW Capital Stock beginning on page 57 of the offer to exchange, as amended through April 4, 2002.
Northrop Grumman Will Account for
the Merger Using the Purchase Method
Northrop Grumman will account for the TRW merger as a purchase for financial reporting
purposes.
Forward-Looking Statements May Prove Inaccurate
Certain statements and assumptions in this supplement to the offer to exchange and in the documents incorporated by reference in the offer to exchange, as amended through April 4, 2002,
contain or are based on forward-looking information and involve risks and uncertainties. Such forward-looking information includes statements as to the impact of the proposed acquisition on revenues and earnings. Such statements are
subject to numerous assumptions and uncertainties, many of which are outside Northrop Grummans control. These include governmental regulatory processes, Northrop Grummans ability to successfully integrate the operations of TRW, achieving
a successful disposition or other resolution with respect to the TRW automotive business, assumptions with respect to future revenues, expected program performance and cash flows, the outcome of contingencies including litigation, environmental
remediation, divestitures of businesses, and anticipated costs of capital investments. Northrop Grummans operations are subject to various additional risks and uncertainties resulting from its position as a supplier, either directly or as
subcontractor or team member, to the U.S. Government and its agencies as well as to foreign governments and agencies. Actual outcomes are dependent upon many factors, including, without limitation, Northrop Grummans successful performance of
internal plans; government customers budgetary restraints; customer changes in short-range and long-range plans; domestic and international competition in both the defense and commercial areas; product performance; continued development and
acceptance of new products; performance issues with key suppliers and subcontractors; government import and export policies; acquisition or termination of government contracts; the outcome of political and legal processes; legal, financial, and
governmental risks related to international transactions and global needs for military aircraft, military and civilian electronic systems and support and information technology; as well as other economic, political and technological risks and
uncertainties and other risk factors set out in Northrop Grummans filings from time to time with the SEC, including, without limitation, Northrop Grummans reports on Form 10-K and Form 10-Q.
9
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited historical ratios of
earnings to fixed charges of Northrop Systems (formerly Northrop Grumman Corporation) for each of the years in the four-year period ended December 31, 2000 and for Northrop Grumman for the period ended December 31, 2001 and the unaudited
pro forma ratio of earnings to fixed charges of Northrop Grumman, Litton, Newport News and TRW for the year ended December 31, 2001.
The unaudited pro forma ratio of earnings to fixed charges is based upon the historical financial statements of Northrop Grumman, Litton, Newport News and TRW adjusted to give effect to the Litton, Newport News and
TRW acquisitions. The pro forma amounts have been developed from (a) the audited consolidated financial statements of Northrop Grumman contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2001, which is incorporated by
reference in the offer to exchange, as filed on April 4, 2002, (b) the unaudited consolidated financial statements contained in Littons Quarterly Report on Form 10-Q for the period ended January 31, 2001, (c) the unaudited consolidated
financial statements of Newport News contained in its Quarterly Report on Form 10-Q for the period ended September 16, 2001 and (d) the audited consolidated financial statements of TRW contained in its Annual Report on Form 10-K for the year ended
December 31, 2001, which is incorporated by reference in the offer to exchange, as amended through April 4, 2002. TRW information includes all segments and subsidiaries as it is not possible to segregate amounts pertaining to Automotive, Space and
other Defense units. In the event that a transaction were completed, Northrop Grumman has indicated that it would sell or spin off the automotive operations of TRW. There currently is no agreement for the sale of the automotive business and there
can be no assurance that a sale will be consummated or with respect to the terms of such sale. Such a transaction would materially change the pro-forma information provided herein.
Northrop Grumman/ Litton/Newport News/ TRW Pro Forma
|
|
Northrop Systems/Northrop Grumman Historical Data
|
Fiscal Year ended December 31, 2001
|
|
Fiscal Year Ended December 31,
|
|
2001
|
|
2000
|
|
1999
|
|
1998
|
|
1997
|
1.75 |
|
2.35 |
|
5.26 |
|
3.78 |
|
2.11 |
|
2.68 |
For purposes of computing the ratios of earnings to fixed charges, earnings
represent earnings from continuing operations before income taxes and fixed charges, and fixed charges consist of interest expense, the portion of rental expense calculated to be representative of the interest factor, amortization of discounts and
capitalized expenses related to indebtedness, and preferred stock dividends. The ratios should be read in conjunction with the financial statements and other financial data included or incorporated by reference in the offer to exchange, as amended
through April 4, 2002. See Additional Information beginning on page 63 of the offer to exchange, as amended through April 4, 2002.
10
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following table sets forth selected historical consolidated financial data for Northrop Systems (formerly Northrop
Grumman Corporation) for each of the years in the four-year period ended December 31, 2000 and for Northrop Grumman for the period ended December 31, 2001, and selected unaudited pro forma condensed combined financial data of Northrop Grumman,
Litton, Newport News and TRW for the year ended December 31, 2001. Historical consolidated financial data for the years ended December 31, 2000, 1999, 1998 and 1997 have been derived from, and are qualified by reference to, the audited
consolidated financial statements and notes thereto filed by Northrop Systems with the SEC. Historical consolidated financial data for the year ended December 31, 2001 have been derived from, and are qualified by reference to, the audited
consolidated financial statements and notes thereto filed by Northrop Grumman with the SEC. The selected historical financial data for each of the years in the four-year period ending December 31, 2000 do not give affect to the Litton or Newport
News acquisitions. The historical operating data for the period ended December 31, 2001 includes nine months of Littons operating results subsequent to the acquisition on April 3, 2001 and one month of Newport News operating results
subsequent to the acquisition on November 29, 2001.
TRW shareholders should read this summary together with the financial
statements referred to below and incorporated by reference in the offer to exchange, as amended through April 4, 2002, and the accompanying notes and managements discussion and analysis of operations and financial conditions of Northrop
Systems, Northrop Grumman, Litton, Newport News and TRW contained in such reports.
The Unaudited Pro Forma Condensed Combined
Financial Data is based upon the historical financial statements of Northrop Grumman, Litton, Newport News and TRW adjusted to give effect to the Litton, Newport News and TRW acquisitions. The pro forma amounts have been developed from (a) the
audited consolidated financial statements of Northrop Grumman contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2001, which is incorporated by reference in the offer to exchange, as amended through April 4, 2002, (b)
the unaudited consolidated financial statements contained in Litton's Quarterly Report on Form 10-Q for the period ended January 31, 2001, (c) the unaudited consolidated financial statements of Newport News contained in its Quarterly Report on Form
10-Q for the period ended September 16, 2001, and (d) the audited consolidated financial statements of TRW contained in its Annual Report on Form 10-K for the year ended December 31, 2001, which is incorporated by reference in the offer to exchange,
as amended through April 4, 2002. TRW information includes all segments and subsidiaries as it is not possible to segregate amounts pertaining to Automotive, Space and other Defense units. In the event that a transaction were completed, Northrop
Grumman has indicated that it would sell or spin off the automotive operations of TRW. There currently is no agreement for the sale of the automotive business and there can be no assurance that a sale will be consummated or with respect to the terms
of such sale. Such a transaction would materially change the pro forma information provided herein.
The final determination and
allocation of the purchase price paid for the Litton, Newport News and TRW acquisitions may differ from the amounts assumed in this Unaudited Pro Forma Condensed Combined Financial Data.
The acquisition of Litton, which is valued at approximately $5.2 billion, including the assumption of Littons net debt of $1.3 billion, is accounted for using the purchase method
of accounting. 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. The Unaudited Pro Forma Condensed Combined Financial Data reflects preliminary estimates of the fair market value of the Litton assets acquired and liabilities assumed and the related allocations of purchase price, and preliminary
estimates of adjustments necessary to conform Litton data to Northrop Grummans accounting policies. Northrop Grumman is currently reviewing the preliminary estimates of the fair market value of the Litton assets acquired and liabilities
assumed, including valuations associated with certain contracts and
11
restructuring activities and preliminary valuation study results for workers compensation accruals and retiree benefits assets and liabilities. 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 the Unaudited Pro Forma Condensed Combined Financial Data. Adjustments to the purchase price allocations will be
reflected in Northrop Grummans Quarterly Report on Form 10-Q for the period ended March 31, 2002 and in subsequent filings. There can be no assurance that such adjustments will not be material.
The acquisition of Newport News, which is valued at approximately $2.6 billion, including the assumption of Newport News net debt of $400 million,
is accounted for using the purchase method of accounting. Northrop Grumman is in the early stages of the fair market value and accounting conformance evaluation process with respect to the Newport News acquisition. The Unaudited Pro Forma Condensed
Combined Financial Data reflects 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 to conform Newport News to Northrop
Grummans accounting policies. Adjustments to the purchase price allocation are expected to be finalized by June 30, 2002, and will be reflected in future filings. There can be no assurance that such adjustments will not be material.
As of the date of this supplement to the offer to exchange, Northrop Grumman has not performed the valuation studies necessary
to estimate the fair market value of TRW assets to be acquired and liabilities to be assumed and the related allocations of purchase price, nor has it identified the adjustments necessary, if any, to conform TRW data to Northrop Grummans
accounting policies. Accordingly, Northrop Grumman has used the historical book values of the assets and liabilities of TRW and has used the historical revenue recognition policies of TRW to prepare the Unaudited Pro Forma Condensed Combined
Financial Data, with the excess of the purchase price over the historical net assets of TRW 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 data will be subject to adjustment. There can be no assurance that such adjustments will not be material.
The Unaudited Pro Forma Condensed Combined Financial Data is provided for illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of Northrop Grumman would have been had Northrop Grummans offer to exchange and the Litton, Newport News, and TRW acquisitions occurred on the dates assumed, nor is it
necessarily indicative of future consolidated results of operations or financial position.
The Unaudited Pro Forma Condensed
Combined Financial Data does not include the realization of cost savings from operating efficiencies, synergies or other restructurings resulting from the Litton, Newport News and TRW acquisitions.
The Unaudited Pro Forma Condensed Combined Financial Data should be read in conjunction with the separate historical consolidated financial statements
and accompanying notes of Northrop Grumman and TRW that are incorporated by reference in the offer to exchange, as amended through April 4, 2002, and the Unaudited Pro Forma Condensed Combined Financial Statements beginning on page 18 of this
supplement to the offer to exchange.
12
|
|
Northrop Grumman/ Litton/ Newport News/ TRW Pro Forma
|
|
Northrop Systems/Northrop Grumman Historical Data Year ended December 31,
|
|
|
Year Ended December 31, 2001
|
|
2001
|
|
2000
|
|
1999
|
|
1998
|
|
1997
|
|
|
(in millions, except per share data) |
Operating Data |
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
33,234 |
|
$ |
13,558 |
|
$ |
7,618 |
|
$ |
7,616 |
|
$ |
7,367 |
|
$ |
7,798 |
Income from continuing operations, net of tax |
|
|
473 |
|
|
427 |
|
|
625 |
|
|
474 |
|
|
193 |
|
|
318 |
Basic earnings per share, from continuing operations |
|
|
2.79 |
|
|
4.84 |
|
|
8.86 |
|
|
6.84 |
|
|
2.82 |
|
|
4.76 |
Diluted earnings per share, from continuing operations |
|
|
2.77 |
|
|
4.80 |
|
|
8.82 |
|
|
6.80 |
|
|
2.78 |
|
|
4.67 |
Cash dividends per common share |
|
|
1.60 |
|
|
1.60 |
|
|
1.60 |
|
|
1.60 |
|
|
1.60 |
|
|
1.60 |
|
Balance Sheet Data (at end of period) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
40,693 |
|
$ |
20,886 |
|
$ |
9,622 |
|
$ |
9,285 |
|
$ |
9,536 |
|
$ |
9,677 |
Total long term obligations |
|
|
16,010 |
|
|
8,013 |
|
|
3,015 |
|
|
3,564 |
|
|
4,319 |
|
|
4,339 |
Redeemable preferred stock |
|
|
350 |
|
|
350 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
13
SELECTED HISTORICAL FINANCIAL DATA OF TRW
The following is a summary of selected consolidated
financial data of TRW for each of the years in the five-year period ended December 31, 2001. This information is derived from the audited consolidated financial statements of TRW contained in its Annual Report on Form 10-K for the fiscal year ended
December 31, 2001. Shareholders should read this summary together with the financial statements which are incorporated by reference in the offer to exchange, as amended through April 4, 2002, and their accompanying notes and managements
discussion and analysis of operations and financial conditions of TRW contained in such reports.
|
|
Year Ended December 31,
|
|
|
|
2001
|
|
2000
|
|
1999
|
|
1998
|
|
1997
|
|
|
|
(in millions, except per share) |
|
Operating Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
16,383 |
|
$ |
17,231 |
|
$ |
16,969 |
|
$ |
11,886 |
|
$ |
10,831 |
|
Income (loss) from continuing operations, net of tax |
|
|
68 |
|
|
438 |
|
|
469 |
|
|
477 |
|
|
(49 |
) |
Basic earnings (loss) per share from continuing operations |
|
|
0.54 |
|
|
3.55 |
|
|
3.87 |
|
|
3.93 |
|
|
(0.40 |
) |
Diluted earnings (loss) per share from continuing operations |
|
|
0.54 |
|
|
3.51 |
|
|
3.80 |
|
|
3.83 |
|
|
(0.40 |
) |
Cash dividends per common share |
|
|
1.05 |
|
|
1.36 |
|
|
1.32 |
|
|
1.28 |
|
|
1.24 |
|
|
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
14,444 |
|
$ |
16,467 |
|
$ |
18,266 |
|
$ |
7,340 |
|
$ |
6,410 |
|
Total long term obligations |
|
|
7,500 |
|
|
7,956 |
|
|
8,825 |
|
|
2,442 |
|
|
2,067 |
|
14
COMPARATIVE PER SHARE INFORMATION
The following table summarizes unaudited per share information for
Northrop Grumman and TRW on a historical basis, pro forma combined basis for Northrop Grumman and equivalent pro forma combined basis for TRW. The following information should be read in conjunction with the audited consolidated financial statements
of Northrop Grumman and TRW, and the Unaudited Pro Forma Condensed Combined Financial Statements beginning on page 18 of this supplement to the offer to exchange. The pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would have occurred if Northrop Grummans offer to exchange and the Litton, Newport News and TRW acquisitions had been completed as of the beginning of the period
presented, nor is it necessarily indicative of the future operating results or financial position of the combined companies. The historical book value per share is computed by dividing total stockholders equity by the number of common shares
outstanding at the end of the period. The pro forma per share earnings from continuing operations are computed by dividing the pro forma income from continuing operations available to holders of common stock by the pro forma weighted average
number of shares outstanding. The pro forma combined book value per share is computed by dividing total pro forma stockholders equity by the pro forma number of common shares outstanding at the end of the period. TRW equivalent pro forma
combined per share amounts are calculated by multiplying Northrop Grumman pro forma combined per share amounts by 0.4521, the percentage of a share of Northrop Grumman common stock that would be exchanged for each share of TRW common stock in the
offer to exchange, based upon a Northrop Grumman common stock price of $117.23 per share, which represents the five-day average of the closing sales prices for a share of Northrop Grumman common stock on the New York Stock Exchange from April 8,
2002 through April 12, 2002. The historical per share information of TRW was derived from its historical annual financial statements.
|
|
Year Ended December 31, 2001
|
Northrop GrummanHistorical |
|
|
|
Historical per common share: |
|
|
|
Income per basic share |
|
$ |
4.84 |
Income per diluted share |
|
|
4.80 |
Dividends declaredCommon |
|
|
1.60 |
Dividends declaredPreferred |
|
|
5.19 |
Book value per share |
|
|
68.08 |
TRWHistorical |
|
|
|
Historical per common share: |
|
|
|
Income per basic share |
|
$ |
0.54 |
Income per diluted share |
|
|
0.54 |
Dividends declaredCommon |
|
|
1.05 |
Dividends declaredPreferred |
|
|
|
Book value per share |
|
|
17.28 |
Unaudited Pro Forma Combined |
|
|
|
Unaudited pro forma per share of Northrop Grumman common shares: |
|
|
|
Income per basic share |
|
$ |
2.79 |
Income per diluted share |
|
|
2.77 |
Dividends declaredCommon |
|
|
1.60 |
Dividends declaredPreferred |
|
|
7.00 |
Book value per share |
|
|
85.30 |
Unaudited Pro Forma TRW Equivalents |
|
|
|
Unaudited pro forma per share of TRW common shares: |
|
|
|
Income per basic share |
|
$ |
1.26 |
Income per diluted share |
|
|
1.25 |
Dividends declaredCommon |
|
|
0.72 |
Dividends declaredPreferred |
|
|
3.16 |
Book value per share |
|
|
38.56 |
15
Northrop Grummans common stock trades on the New York Stock Exchange
and on the Pacific Exchange under the symbol NOC and TRWs common stock trades on the New York Stock Exchange, the Pacific Exchange, the Chicago Stock Exchange and the Philadelphia Stock Exchange under the symbol TRW. The following table
presents trading information for Northrop Grumman and TRW common stock on February 21, 2002, March 1, 2002 and April 12, 2002. February 21, 2002 was the last trading day before the public announcement of Northrop Grummans proposal for a
business combination of Northrop Grumman and TRW, and March 1, 2002 was the last trading day before the date of the commencement of the offer to exchange, and April 12, 2002 was the last trading day before the date of this supplement to the offer to
exchange. Shareholders should read the information presented below in conjunction with Comparative Per Share Market Price and Dividend Information on page 17 of this supplement to the offer to exchange.
|
|
Northrop Grumman Common Stock
|
|
TRW Common Stock
|
|
|
High
|
|
Low
|
|
Closing
|
|
High
|
|
Low
|
|
Closing
|
February 21, 2002 |
|
$ |
118.89 |
|
$ |
114.81 |
|
$ |
117.80 |
|
$ |
40.05 |
|
$ |
38.91 |
|
$ |
39.80 |
March 1, 2002 |
|
|
108.00 |
|
|
106.80 |
|
|
107.75 |
|
|
50.61 |
|
|
50.00 |
|
|
50.05 |
April 12, 2002 |
|
|
119.75 |
|
|
118.03 |
|
|
118.31 |
|
|
52.00 |
|
|
51.28 |
|
|
51.97 |
For illustrative purposes, the following table provides TRW equivalent per share
information on each of the relevant dates assuming the highest ($53.00/$113.00) and the lowest ($53.00/$123.00) possible exchange ratios.
TRW equivalent per share amounts are calculated by
multiplying Northrop Grumman per share amounts by the exchange ratio.
|
|
NOC Common Stock
|
|
TRW Equivalent per share at Highest Exchange Ratio
|
|
TRW Equivalent per share at Lowest Exchange Ratio
|
Date
|
|
High
|
|
Low
|
|
Close
|
|
High
|
|
Low
|
|
Close
|
|
High
|
|
Low
|
|
Close
|
February 21, 2002 |
|
$ |
118.89 |
|
$ |
114.81 |
|
$ |
117.80 |
|
$ |
55.76 |
|
$ |
53.85 |
|
$ |
55.25 |
|
$ |
51.23 |
|
$ |
49.47 |
|
$ |
50.76 |
March 1, 2002 |
|
|
108.00 |
|
|
106.80 |
|
|
107.75 |
|
|
50.65 |
|
|
50.09 |
|
|
50.54 |
|
|
46.54 |
|
|
46.02 |
|
|
46.43 |
April 12, 2002 |
|
|
119.75 |
|
|
118.03 |
|
|
118.31 |
|
|
56.17 |
|
|
55.36 |
|
|
55.49 |
|
|
51.60 |
|
|
50.86 |
|
|
50.98 |
16
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Northrop Grumman common stock is listed
on the New York Stock Exchange and the Pacific Exchange under the symbol NOC. TRW common stock is listed on the New York Stock Exchange, the Pacific Exchange, the Chicago Stock Exchange and the Philadelphia Stock Exchange under the
symbol TRW. The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share reported on the New York Stock Exchange and the dividends declared on Northrop Grumman common stock and on TRW common
stock.
|
|
Northrop Grumman Common Stock
|
|
|
|
TRW Common Stock
|
|
|
|
|
High
|
|
Low
|
|
Dividends
|
|
High
|
|
Low
|
|
Dividends
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 1999 |
|
$ |
73.25 |
|
$ |
57.00 |
|
$ |
0.40 |
|
$ |
58.63 |
|
$ |
44.75 |
|
$ |
0.33 |
June 30, 1999 |
|
|
73.31 |
|
|
57.75 |
|
|
0.40 |
|
|
54.94 |
|
|
41.94 |
|
|
0.33 |
September 30, 1999 |
|
|
75.69 |
|
|
59.94 |
|
|
0.40 |
|
|
57.19 |
|
|
48.06 |
|
|
0.33 |
December 31, 1999 |
|
|
62.31 |
|
|
49.00 |
|
|
0.40 |
|
|
53.94 |
|
|
41.50 |
|
|
0.33 |
2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2000 |
|
|
55.19 |
|
|
43.56 |
|
|
0.40 |
|
|
64.13 |
|
|
39.81 |
|
|
0.33 |
June 30, 2000 |
|
|
80.25 |
|
|
52.44 |
|
|
0.40 |
|
|
59.94 |
|
|
43.19 |
|
|
0.33 |
September 30, 2000 |
|
|
91.81 |
|
|
65.63 |
|
|
0.40 |
|
|
52.13 |
|
|
40.31 |
|
|
0.33 |
December 31, 2000 |
|
|
92.50 |
|
|
74.13 |
|
|
0.40 |
|
|
42.00 |
|
|
29.88 |
|
|
0.35 |
2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2001 |
|
|
97.54 |
|
|
79.81 |
|
|
0.40 |
|
|
40.34 |
|
|
33.86 |
|
|
0.35 |
June 30, 2001 |
|
|
95.37 |
|
|
77.60 |
|
|
0.40 |
|
|
44.95 |
|
|
33.48 |
|
|
0.35 |
September 30, 2001 |
|
|
102.97 |
|
|
77.00 |
|
|
0.40 |
|
|
44.35 |
|
|
28.01 |
|
|
0.35 |
December 31, 2001 |
|
|
108.97 |
|
|
89.02 |
|
|
0.40 |
|
|
40.51 |
|
|
30.01 |
|
|
0.18 |
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2002 |
|
|
117.80 |
|
|
96.00 |
|
|
0.40 |
|
|
51.61 |
|
|
34.82 |
|
|
0.18 |
April 12, 2002 |
|
|
118.88 |
|
|
113.49 |
|
|
|
|
|
51.97 |
|
|
51.14 |
|
|
|
On March 1, 2002, the last full trading day prior to the date of the commencement
of the offer to exchange, the last sale price per share of Northrop Grumman common stock on the New York Stock Exchange was $107.75 and the last sale price per share of TRW common stock was $50.05. On April 12, 2002, the last full
trading day prior to the date of this supplement to the offer to exchange, the closing price per share of Northrop Grumman common stock on the New York Stock Exchange was $118.31 and the closing price per share of TRW common stock was $51.97.
Northrop Grumman urges TRWs shareholders to obtain current market quotations for Northrop Grumman and TRW common stock
before making any decision regarding the offer to exchange.
17
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed
Combined Financial Statements presented below are derived from the historical consolidated financial statements of each of Northrop Grumman, Litton, Newport News and TRW. The Unaudited Pro Forma Condensed Combined Financial Statements are prepared
using the purchase method of accounting, with Northrop Grumman treated as the acquirer and as if the Litton, Newport News and TRW acquisitions had been completed on January 1, 2001 for statement of operations purposes and on December 31, 2001 for
balance sheet purposes.
For a summary of the business combination, see The Offer to Exchange beginning on page 27
of the offer to exchange, as amended through April 4, 2002.
The Unaudited Pro Forma Condensed Combined Financial Statements are
based upon the historical financial statements of Northrop Grumman, Litton, Newport News and TRW adjusted to give effect to the Litton, Newport News and TRW acquisitions. The pro forma amounts have been developed from (a) the audited consolidated
financial statements of Northrop Grumman contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2001, which is incorporated by reference in the offer to exchange, as filed on April 4, 2002, (b) the unaudited consolidated
financial statements contained in Littons Quarterly Report on Form 10-Q for the period ended January 31, 2001, (c) the unaudited consolidated financial statements of Newport News contained in its Quarterly Report on Form 10-Q for the period
ended September 16, 2001, and (d) the audited consolidated financial statements of TRW contained in its Annual Report on Form 10-K for the year ended December 31, 2001, which is incorporated by reference in the offer to exchange, as amended
through April 4, 2002.
The acquisition of Litton, on April 2, 2001, which is valued at approximately $5.2 billion, including
the assumption of Littons net debt of $1.3 billion, is accounted for using the purchase method of accounting. 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. The Unaudited Pro Forma Condensed Combined Financial Statements reflect preliminary estimates of the fair market value of the Litton assets
acquired and liabilities assumed and the related allocations of purchase price, and preliminary estimates of adjustments necessary to conform Litton data to Northrop Grummans accounting policies. Purchased intangible assets identified and
recorded are contract-based intangible assets. Northrop Grumman is currently reviewing the preliminary estimates of the fair market value of the Litton assets acquired and liabilities assumed, including valuations associated with certain contracts
and restructuring activities and preliminary valuation study results for workers compensation accruals and retiree benefits assets and liabilities. 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. Adjustments to the purchase price allocations will be finalized by March 31, 2002, and will be reflected
in Northrop Grummans Quarterly Report on Form 10-Q for the period ended March 31, 2002 and in subsequent filings. There can be no assurance that such adjustments will not be material.
In November 2001, Northrop Grumman purchased pursuant to an exchange offer approximately 80.7 percent of the outstanding shares of Newport News common stock. In January 2002,
Northrop Grumman completed the acquisition of the shares of Newport News common stock not previously purchased, issuing 3.2 million shares of common stock and paying cash for the remaining balance of the shares. For purposes of the Unaudited
Pro Forma Condensed Combined Financial Statements, Northrop Grumman has assumed that all shares of Newport News were acquired on January 1, 2001 for statement of operations purposes and on December 31, 2001 for balance sheet purposes. The
acquisition of Newport News, which is valued at approximately $2.6 billion, including the assumption of Newport News net debt of $400 million, is accounted for using the purchase method of accounting. Northrop Grumman is in the early stages of the
fair market value and accounting conformance evaluation process with respect to the Newport News acquisition. The Unaudited Pro
18
Forma Condensed Combined Financial Statements reflect preliminary estimates of the fair market value of the assets acquired, including contract-based purchased intangible assets, and liabilities
assumed and the related allocations of purchase price and preliminary estimates of adjustments necessary to conform Newport News to Northrop Grummans accounting policies. Adjustments to the purchase price allocations are expected to be
finalized by June 30, 2002, and will be reflected in future filings. There can be no assurance that such adjustments will not be material.
As of the date of this supplement to the offer to exchange, Northrop Grumman has not performed the valuation studies necessary to arrive at the required estimates of the fair market value of the TRW assets to be
acquired and the TRW liabilities to be assumed and the related allocations of purchase price, nor has it identified the adjustments necessary, if any, to conform TRW data to Northrop Grummans accounting policies. Accordingly, Northrop Grumman
has used the historical book values of the assets and liabilities of TRW and has used the historical revenue recognition policies of TRW to prepare the Unaudited Pro Forma Condensed Combined Financial Statements set forth herein, with the excess of
the purchase price over the historical net assets of TRW recorded as goodwill and other purchased intangibles. Once Northrop Grumman has determined the final purchase price for TRW and has completed the valuation studies necessary to finalize the
required purchase price allocations and identified any necessary conforming changes for TRW, 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. TRW information includes all segments and subsidiaries as it is not
possible to segregate amounts pertaining to Automotive, Space and other Defense units. In the event that a transaction were completed, Northrop Grumman has indicated that it would sell or spin off the automotive operations of TRW. There currently is
no agreement for the sale of the automotive business and there can be no assurance that a sale will be consummated or with respect to the terms of such sale. Such a transaction would materially change the pro forma information provided herein.
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 offer to exchange and the Litton, Newport News and TRW acquisitions occurred on the dates assumed, nor
are they necessarily indicative of future consolidated results of operations or financial position.
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, Newport News and TRW acquisitions.
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 Grumman and TRW that are incorporated by reference in the offer to exchange, as amended through April 4, 2002.
19
Unaudited Pro Forma Condensed Combined
Statement of Financial Position
December 31, 2001
($ in millions)
|
|
Northrop Grumman
|
|
|
Pro Forma
|
|
|
TRW*
|
|
|
Pro Forma
|
|
|
|
|
Adjustment
|
|
|
Northrop Grumman Adjusted
|
|
|
|
Adjustment
|
|
|
Combined*
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
464 |
|
|
$ |
|
|
|
$ |
464 |
|
|
$ |
240 |
|
|
$ |
|
|
|
$ |
704 |
|
Accounts receivable |
|
|
2,735 |
|
|
|
|
|
|
|
2,735 |
|
|
|
1,596 |
|
|
|
|
|
|
|
4,331 |
|
Interest in securitized receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162 |
|
|
|
|
|
|
|
162 |
|
Inventoried costs |
|
|
1,226 |
|
|
|
|
|
|
|
1,226 |
|
|
|
763 |
|
|
|
|
|
|
|
1,989 |
|
Deferred income taxes |
|
|
36 |
|
|
|
|
|
|
|
36 |
|
|
|
231 |
|
|
|
|
|
|
|
267 |
|
Prepaid expenses and other current assets |
|
|
128 |
|
|
|
|
|
|
|
128 |
|
|
|
170 |
|
|
|
|
|
|
|
298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
4,589 |
|
|
|
|
|
|
|
4,589 |
|
|
|
3,162 |
|
|
|
|
|
|
|
7,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
3,940 |
|
|
|
166 |
(a) |
|
|
4,106 |
|
|
|
8,266 |
|
|
|
|
|
|
|
12,372 |
|
Accumulated depreciation |
|
|
(1,173 |
) |
|
|
|
|
|
|
(1,173 |
) |
|
|
(4,724 |
) |
|
|
|
|
|
|
(5,897 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
2,767 |
|
|
|
166 |
|
|
|
2,933 |
|
|
|
3,542 |
|
|
|
|
|
|
|
6,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill, net |
|
|
8,668 |
|
|
|
119 |
(a) |
|
|
8,787 |
|
|
|
3,811 |
|
|
|
2,467 |
(k) |
|
|
15,065 |
|
Purchased intangibles, net |
|
|
1,139 |
|
|
|
519 |
(a) |
|
|
1,658 |
|
|
|
|
|
|
|
2,093 |
(k) |
|
|
3,751 |
|
Prepaid retiree benefits cost and intangible pension asset |
|
|
3,075 |
|
|
|
|
|
|
|
3,075 |
|
|
|
2,871 |
|
|
|
|
|
|
|
5,946 |
|
Other assets |
|
|
648 |
|
|
|
(1 |
)(a) |
|
|
647 |
|
|
|
1,058 |
|
|
|
|
|
|
|
1,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,530 |
|
|
|
637 |
|
|
|
14,167 |
|
|
|
7,740 |
|
|
|
4,560 |
|
|
|
26,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,886 |
|
|
$ |
803 |
|
|
$ |
21,689 |
|
|
$ |
14,444 |
|
|
$ |
4,560 |
|
|
$ |
40,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable and current portion of long term debt |
|
$ |
458 |
|
|
$ |
|
|
|
$ |
458 |
|
|
$ |
839 |
|
|
$ |
|
|
|
$ |
1,297 |
|
Accounts payable |
|
|
1,019 |
|
|
|
|
|
|
|
1,019 |
|
|
|
1,742 |
|
|
|
|
|
|
|
2,761 |
|
Accrued employees compensation |
|
|
847 |
|
|
|
|
|
|
|
847 |
|
|
|
477 |
|
|
|
|
|
|
|
1,324 |
|
Contract loss provision |
|
|
843 |
|
|
|
|
|
|
|
843 |
|
|
|
|
|
|
|
|
|
|
|
843 |
|
Advances on contracts |
|
|
656 |
|
|
|
|
|
|
|
656 |
|
|
|
|
|
|
|
|
|
|
|
656 |
|
Income taxes |
|
|
137 |
|
|
|
|
|
|
|
137 |
|
|
|
173 |
|
|
|
|
|
|
|
310 |
|
Other current liabilities |
|
|
1,172 |
|
|
|
|
|
|
|
1,172 |
|
|
|
1,527 |
|
|
|
|
|
|
|
2,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
5,132 |
|
|
|
|
|
|
|
5,132 |
|
|
|
4,758 |
|
|
|
|
|
|
|
9,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
5,033 |
|
|
|
127 |
(a) |
|
|
5,160 |
|
|
|
4,870 |
|
|
|
|
|
|
|
10,030 |
|
Accrued retiree benefits |
|
|
1,931 |
|
|
|
224 |
(a) |
|
|
2,155 |
|
|
|
|
|
|
|
|
|
|
|
2,155 |
|
Minority interest |
|
|
122 |
|
|
|
(107 |
)(a) |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
15 |
|
Deferred tax and other long-term liabilities |
|
|
927 |
|
|
|
253 |
(a) |
|
|
1,180 |
|
|
|
2,630 |
|
|
|
|
|
|
|
3,810 |
|
|
Redeemable preferred stock |
|
|
350 |
|
|
|
|
|
|
|
350 |
|
|
|
|
|
|
|
|
|
|
|
350 |
|
Shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in capital and unearned compensation |
|
|
4,433 |
|
|
|
306 |
(a) |
|
|
4,739 |
|
|
|
559 |
|
|
|
6,187 |
(k) |
|
|
11,485 |
|
Retained earnings |
|
|
3,011 |
|
|
|
|
|
|
|
3,011 |
|
|
|
2,468 |
|
|
|
(2,468 |
)(k) |
|
|
3,011 |
|
Accumulated other comprehensive loss |
|
|
(53 |
) |
|
|
|
|
|
|
(53 |
) |
|
|
(469 |
) |
|
|
469 |
(k) |
|
|
(53 |
) |
Stock Employee Compensation Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
Treasury Sharescost in excess of par value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(372 |
) |
|
|
372 |
(k) |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,391 |
|
|
|
306 |
|
|
|
7,697 |
|
|
|
2,186 |
|
|
|
4,560 |
|
|
|
14,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,886 |
|
|
$ |
803 |
|
|
$ |
21,689 |
|
|
$ |
14,444 |
|
|
$ |
4,560 |
|
|
$ |
40,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*THE COMBINED AMOUNTS AND THE TRW AMOUNTS ARE INCLUSIVE OF THE AUTOMOTIVE
BUSINESS CURRENTLY OPERATED BY TRW. THE COMBINED AND TRW AMOUNTS CONTAINED HEREIN COULD SIGNIFICANTLY CHANGE AS THE RESULT OF THE SALE OR SPIN-OFF OF THE AUTOMOTIVE BUSINESS. THE READER IS DIRECTED TO FOOTNOTE (m) FOR FURTHER INFORMATION.
20
Unaudited Pro Forma Condensed Combined
Statement of Income
Twelve Months Ended December 31, 2001
($ in millions, except per share)
|
|
Northrop Grumman
|
|
|
Litton
|
|
|
Pro Forma
|
|
|
Newport News
|
|
|
Pro Forma
|
|
|
TRW*
|
|
|
Pro Forma
|
|
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
Adjustments
|
|
|
Combined*
|
|
Sales and service revenues |
|
$ |
13,558 |
|
|
$ |
1,345 |
|
|
$ |
(18 |
)(b) |
|
$ |
14,885 |
|
|
$ |
2,024 |
|
|
$ |
(58 |
)(b) |
|
$ |
16,851 |
|
|
$ |
16,383 |
|
|
$ |
|
|
|
$ |
33,234 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Costs |
|
|
11,219 |
|
|
|
1,120 |
|
|
|
13 |
(b)(c)(d) |
|
|
12,352 |
|
|
|
1,640 |
|
|
|
27 |
(b)(d)(h)(j) |
|
|
14,019 |
|
|
|
14,225 |
|
|
|
52 |
(h)(j) |
|
|
28,296 |
|
Administrative and general expenses |
|
|
1,335 |
|
|
|
121 |
|
|
|
|
|
|
|
1,456 |
|
|
|
189 |
|
|
|
|
|
|
|
1,645 |
|
|
|
1,111 |
|
|
|
|
|
|
|
2,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin |
|
|
1,004 |
|
|
|
104 |
|
|
|
(31 |
) |
|
|
1,077 |
|
|
|
195 |
|
|
|
(85 |
) |
|
|
1,187 |
|
|
|
1,047 |
|
|
|
(52 |
) |
|
|
2,182 |
|
Interest expense |
|
|
(373 |
) |
|
|
(27 |
) |
|
|
(41 |
)(e) |
|
|
(441 |
) |
|
|
(46 |
) |
|
|
(32 |
)(i) |
|
|
(519 |
) |
|
|
(478 |
) |
|
|
|
|
|
|
(997 |
) |
Other, net |
|
|
68 |
|
|
|
3 |
|
|
|
|
|
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
71 |
|
|
|
(429 |
) |
|
|
|
|
|
|
(358 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
699 |
|
|
|
80 |
|
|
|
(72 |
) |
|
|
707 |
|
|
|
149 |
|
|
|
(117 |
) |
|
|
739 |
|
|
|
140 |
|
|
|
(52 |
) |
|
|
827 |
|
Federal and foreign income taxes |
|
|
272 |
|
|
|
30 |
|
|
|
(25 |
)(f) |
|
|
277 |
|
|
|
59 |
|
|
|
(46 |
)(f)(j) |
|
|
290 |
|
|
|
72 |
|
|
|
(8 |
)(f)(j) |
|
|
354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
427 |
|
|
|
50 |
|
|
|
(47 |
) |
|
|
430 |
|
|
|
90 |
|
|
|
(71 |
) |
|
|
449 |
|
|
|
68 |
|
|
|
(44 |
) |
|
|
473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less, dividends paid to preferred shareholders |
|
|
(18 |
) |
|
|
|
|
|
|
(7 |
)(g) |
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common shareholders |
|
$ |
409 |
|
|
$ |
50 |
|
|
$ |
(54 |
) |
|
$ |
405 |
|
|
$ |
90 |
|
|
$ |
(71 |
) |
|
$ |
424 |
|
|
$ |
68 |
|
|
$ |
(44 |
) |
|
$ |
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares basic |
|
|
84.46 |
|
|
|
|
|
|
|
|
|
|
|
86.60 |
|
|
|
|
|
|
|
|
|
|
|
103.24 |
|
|
|
|
|
|
|
|
|
|
|
160.79 |
(l) |
Average shares diluted |
|
|
85.26 |
|
|
|
|
|
|
|
|
|
|
|
87.50 |
|
|
|
|
|
|
|
|
|
|
|
104.14 |
|
|
|
|
|
|
|
|
|
|
|
161.69 |
(l) |
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
4.84 |
|
|
|
|
|
|
|
|
|
|
$ |
4.68 |
|
|
|
|
|
|
|
|
|
|
$ |
4.11 |
|
|
|
|
|
|
|
|
|
|
$ |
2.79 |
(l) |
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
4.80 |
|
|
|
|
|
|
|
|
|
|
$ |
4.63 |
|
|
|
|
|
|
|
|
|
|
$ |
4.07 |
|
|
|
|
|
|
|
|
|
|
$ |
2.77 |
(l) |
* THE COMBINED AMOUNTS AND
THE TRW AMOUNTS ARE INCLUSIVE OF THE AUTOMOTIVE BUSINESS CURRENTLY OPERATED BY TRW. THE COMBINED AND TRW AMOUNTS CONTAINED HEREIN COULD SIGNIFICANTLY CHANGE AS THE RESULT OF THE SALE OR SPIN-OFF OF THE AUTOMOTIVE BUSINESS. THE READER IS DIRECTED TO
FOOTNOTE (m) FOR FURTHER INFORMATION.
21
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(a) |
|
Adjustments to record the completion of the acquisition of Newport News including the following: (i) issuance of common stock for the purchase of remaining shares, (ii)
additional debt for the purchase of remaining shares and acquisition related costs, (iii) fair value adjustments, (iv) elimination of minority liability, and (v) additional goodwill and other purchased intangibles. |
(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 for the Litton and
Newport News acquisitions. |
(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 6.5 percent for
year ended December 31, 2001. |
(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 and TRW acquisitions over an estimated life of 10 years on a straight line basis.
Goodwill arising from the Newport News and TRW acquisitions 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 a weighted average rate of 4.8 percent for the year ended December 31, 2001.
|
(j) |
|
Adjustments to reclassify state income tax expense from federal and foreign income taxes to operating costs to conform Newport News and TRW data to classifications utilized by
Northrop Grumman. |
(k) |
|
Adjustments to (i) eliminate the equity of TRW, (ii) record issuance of Northrop Grumman stock, and (iii) record goodwill and other purchased intangibles arising from the
acquisition of TRW. |
The amount of 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 the TRW common stock and Serial Preference Stock II, and accordingly, has issued 57,546,746 shares of Northrop Grumman common stock in the TRW
acquisition.
The value ascribed to the Northrop Grumman common stock exchanged in the TRW acquisition is $117.23, which
represents the 5-day average of the Northrop Grumman closing stock prices from April 8, 2002 through April 12, 2002.
(l) |
|
Calculated based on the assumption that Northrop Grumman has acquired 100% of the TRW common stock and Serial Preference Stock II, and accordingly, has issued 57,546,746 shares
of Northrop Grumman common stock, determined using the 5-day average of the Northrop Grumman closing stock prices from April 8, 2002 through April 12, 2002, of $117.23. Using the maximum exchange ratio of 0.4690 would result in the issuance of 59.70
million Northrop Grumman shares and pro forma basic earnings per share and diluted earnings per share for the year ended December 31, 2001, of $2.75 and $2.73, respectively. Using the minimum exchange ratio of 0.4309 would result in the issuance of
54.85 million Northrop Grumman shares and pro forma basic earnings per share and diluted earnings per share for the year ended December 31, 2001, of $2.83 and $2.82, respectively. |
22
(m) The |
|
pro forma financial statements presented herein for the year ended December 31, 2001 do not exclude the TRW automotive business. For the year ended December 31, 2001 TRW
reported the following amounts for its automotive segment: |
(in millions) Year ended
|
|
2001
|
|
Sales |
|
$ |
10,111 |
|
Profit before taxes |
|
|
228 |
|
Unusual itemsincome (expense) included in profit before taxes |
|
|
(241 |
) |
Segment Assets |
|
|
5,501 |
|
Depreciation and Amortization |
|
|
544 |
|
Capital expenditures including other intangibles |
|
|
475 |
|
In the event of a sale or spin-off of TRWs automotive
segment by Northrop Grumman, the information reported in the pro forma financial statements contained herein could significantly change. The amounts noted above are provided for information only and are not representative of the results of a
spin-off or sale transaction. Presently, Northrop Grumman has not established a method of disposal of the automotive segment primarily due to the number of variables involved in determining a representative scenario for such a transaction. Such
variables include but are not limited to:
|
1. |
|
The amount of debt allocable to the automotive segment to ensure that the business retains investment grade status, the independent rating agencies assessment of that
debt and what Northrop Grummans debt structure will be following the spin-off. |
|
2. |
|
The inherent value of the Thompson parts business that has been in existence for in excess of 40 years. |
|
3. |
|
The disposition of goodwill and its allocation in connection with the provisions of SFAS 142Goodwill and Other Intangible Assets. |
|
4. |
|
The amount of corporate overhead allocable to the automotive business. |
|
5 |
|
The effect of Pension and OPEB adjustments resulting from a transaction. |
|
6. |
|
The amount of interest expense and interest rate in effect for debt remaining on the books of the automotive business. |
|
7. |
|
The precise method of disposition can only be determined once Northrop Grumman has reviewed the appropriate due diligence materials relating to TRW.
|
|
8. |
|
The amount and form of consideration if all or part of the automotive segment were sold, and, if a partial sale, the structure and valuation of the simultaneous spin-off of the
remainder of the automotive sector. |
23
The Exchange Agent for the offer to exchange is:
EQUISERVE TRUST COMPANY
By Mail: |
|
By Hand Delivery: |
|
By Overnight Delivery: |
|
EQUISERVE TRUST COMPANY P.O. Box 43034 Providence, RI 02940-3034 |
|
EQUISERVE TRUST COMPANY c/o Securities Transfer and Reporting Services, Inc. 100 William StreetGalleria New York, New York 10038 |
|
EQUISERVE TRUST COMPANY 40 Campanelli Drive Braintree, Massachusetts
02184 |
|
|
|
Confirm by Telephone: |
|
|
|
|
|
(781) 575-4816 |
|
|
Any questions or requests for assistance or additional copies of the offer to
exchange, the letter of transmittal and the notice of guaranteed delivery and related exchange offer materials may be directed to the information agent at its telephone number and location listed below. Shareholders may also contact their local
broker, commercial bank, trust company or nominee for assistance concerning the offer to exchange.
The Information Agent for the offer to
exchange is:
D. F. King & Co., Inc. |
U.S. and Canada |
|
Europe |
77 Water Street |
|
No. 2 London Wall Buildings, 2nd Floor |
New York, New York 10005 |
|
London Wall |
Banks and Brokers Call Collect: 1-212-269-5550 |
|
London EC2M 5PP, United Kingdom |
All Others Call Toll-Free: 1-800-755-7250 |
|
Tel.: +(44) 20 7920 9700 |
The Dealer Manager for the offer to exchange is:
Salomon Smith Barney
388 Greenwich Street
New York, New York 10013
(888) 328-4596