Northrop Grumman 2011 Annual Report Download - page 66

NORTHROP GRUMMAN CORPORATION
Program Name Program Description
Space-Based Infrared System
(SBIRS)
Design and develop space-based surveillance systems for missile warning,
missile defense, battlespace characterization and technical intelligence.
Trailer Mounted Support
System (TMSS)
Trailer Mounted Support System is a key part of the Army’s Standard
Integrated Command Post System program providing workspace, power
distribution, lighting, environmental conditioning (heating and cooling) tables
and a common grounding system for commanders and staff at all echelons.
Treasury Communication
System (TCS)
Provide telecommunications infrastructure for collaboration, communication
and computing as required by the U.S. Department of Treasury.
Vehicular
Intercommunications Systems
(VIS)
Provide clear and noise-free communications between crewmembers inside
combat vehicles and externally over as many as six combat net radios for the
Army. The active noise-reduction features of VIS provide significant
improvement in speech intelligibility, hearing protection, and vehicle crew
performance.
Virginia Class Submarine
(VCS)
Produce power and control systems along with advanced surveillance arrays
for all Virginia Class Submarines. The Virginia Class is an advanced stealth
multimission nuclear-powered submarine for deep ocean anti-submarine
warfare and littoral operations.
Virginia IT Outsource
(VITA)
Provide high-level IT consulting, IT infrastructure and services to Virginia
state and local agencies including data center, help desk, desktop, network,
applications and cross-functional services.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market Risk –We are exposed to market risk with respect to our portfolio of trading and available-for-sale
marketable securities with a fair value of $223 million at December 31, 2011.
Interest Rate Risk – We are exposed to interest rate risk with respect to our holdings of cash and cash equivalents of
$3.0 billion at December 31, 2011, and we are also exposed to interest rate risk on variable-rate short-term credit
facilities for which there were no borrowings outstanding at December 31, 2011. At December 31, 2011, we have
$3.9 billion of long-term debt, primarily consisting of fixed rate debt, with a fair value of approximately
$4.7 billion.
Derivatives – We do not hold or issue derivative financial instruments for trading purposes. From time to time, we
may enter into interest rate swap agreements to manage our exposure to interest rate fluctuations. At
December 31, 2011, we have no interest rate swap agreements in effect.
Foreign Currency Risk – We are exposed to foreign currency risk with respect to our foreign operations. We enter
into foreign currency forward contracts to manage a portion of the exchange rate risk related to receipts from
customers and payments to suppliers denominated in foreign currencies. At December 31, 2011, foreign currency
forward contracts with a notional amount of $233 million were outstanding.
Inflation Risk – We have generally been able to anticipate increases in costs when pricing our contracts. Bids for
longer-term firm fixed-price contracts typically include labor and other cost escalations in amounts that historically
have been sufficient to cover cost increases over the period of performance.
A 10 percent change in interest rates or foreign currency exchange rates would not have a material impact to our
consolidated financial position or results of operations.
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