Northrop Grumman 2010 Annual Report Download - page 111

last business day of the reporting period. Units in common trust funds and hedge funds are valued based on the
redemption price of units owned by the trusts at year-end. Fair value for real estate and private equity
partnerships is primarily based on valuation methodologies that include third party appraisals, comparable
transactions, discounted cash flow valuation models, and public market data.
Non-government fixed income securities are invested across various industry sectors and credit quality ratings.
Generally, investment guidelines are written to limit securities, for example, to no more than 5 percent of each
trust account, and to exclude the purchase of securities issued by the company. The number of real estate and
private equity partnerships is 167 and the unfunded commitments are $1.2 billion and $1.1 billion as of
December 31, 2010, and 2009, respectively. For alternative investments that cannot be redeemed, such as limited
partnerships, the typical investment term is ten years. For alternative investments that permit redemptions, such
redemptions are generally made quarterly and require a 90-day notice. The company is generally unable to
determine the final redemption amount until the request is processed by the investment fund and therefore
categorizes such alternative investments as Level 3 assets.
At December 31, 2010, and 2009, the defined benefit pension and VEBA trusts did not hold any Northrop
Grumman common stock.
Benefit Payments
The following table reflects estimated future benefit payments, based upon the same assumptions used to measure
the benefit obligation, and includes expected future employee service, as of December 31, 2010:
$ in millions Pension Plans
Medical and
Life Plans
Year Ending December 31
2011 $1,222 $ 186
2012 1,292 191
2013 1,381 199
2014 1,477 207
2015 1,561 214
2016 through 2020 9,135 1,143
In 2011, the company expects to contribute the required minimum funding level of approximately $62 million
to its pension plans and approximately $160 million to its other post-retirement benefit plans and also expects to
make additional voluntary pension contributions of approximately $500 million. During 2010 and 2009, the
company made voluntary pension contributions of $830 million and $800 million, respectively.
18. STOCK COMPENSATION PLANS
Plan Descriptions
At December 31, 2010, Northrop Grumman had stock-based compensation awards outstanding under the
following plans: the 2001 Long-Term Incentive Stock Plan (2001 LTISP) applicable to employees, and the 1993
Stock Plan for Non-Employee Directors (1993 SPND) and 1995 Stock Plan for Non-Employee Directors (1995
SPND) as amended. All of these plans were approved by the company’s shareholders. The company has
historically issued new shares to satisfy award grants.
Employee Plans – The 2001 LTISP permits grants to key employees of three general types of stock incentive
awards: stock options, stock appreciation rights (SARs), and stock awards. Each stock option grant is made with
an exercise price either at the closing price of the stock on the date of grant (market options) or at a premium
over the closing price of the stock on the date of grant (premium options). Outstanding stock options granted
prior to 2008 generally vest in 25 percent increments over four years from the grant date, and grants outstanding
expire ten years after the grant date. Stock options granted 2008 and later vest in 33 percent increments over
three years from the grant date and grants outstanding expire seven years after the grant date. No SARs have
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NORTHROP GRUMMAN CORPORATION