Northrop Grumman 2011 Annual Report Download - page 97

NORTHROP GRUMMAN CORPORATION
adequately reserved for any disputed amounts and that the outcome of any such matters would not have a material
adverse effect on its consolidated financial position as of December 31, 2011 or its annual results of operations or
cash flows.
Operating Leases – Rental expense for operating leases, excluding discontinued operations, was $420 million in
2011, $448 million in 2010, and $502 million in 2009. These amounts are net of immaterial amounts of sublease
rental income. Minimum rental commitments under long-term non-cancellable operating leases as of
December 31, 2011, total approximately $1.2 billion, which are payable as follows: 2012 - $297 million; 2013 -
$234 million; 2014 - $208 million; 2015 - $176 million; 2016 - $136 million and thereafter - $168 million.
Related Party Transactions – For all periods presented, the company had no material related party transactions.
Spin-off of Shipbuilding Business – Under the Separation and Distribution Agreement with HII described in Note 6,
from and after the spin-off transaction, HII assumed responsibility for certain commitments and contingencies
related to the Shipbuilding business and agreed to indemnify the company for losses related to these commitments
and contingencies. The company has therefore excluded from this report previously disclosed Shipbuilding-related
commitments and contingencies now assumed by HII.
A subsidiary of the company has guaranteed HII’s outstanding $84 million Economic Development Revenue
Bonds (Ingalls Shipbuilding, Inc. Project), Taxable Series 1999A. The immaterial fair value of this guarantee was
recorded in other long-term liabilities. In addition, HII has assumed the responsibility for the payment and
performance of all outstanding indebtedness, obligations and liabilities of the company under this guarantee, and
has agreed to indemnify the company against all liabilities that may be incurred in connection with this guarantee.
16. RETIREMENT BENEFITS
Plan Descriptions
Defined Benefit Pension Plans – The company sponsors several defined benefit pension plans in the U.S. covering
the majority of its employees. Pension benefits for most employees are based on the employee’s years of service,
age and compensation. It is the policy of the company to fund at least the minimum amount required for all
qualified plans, using actuarial cost methods and assumptions acceptable under U.S. Government regulations, by
making payments into benefit trusts separate from the company. The pension benefit for most employees is based
upon criteria whereby employees earn age and service points over their employment period.
Defined Contribution Plans – The company also sponsors 401(k) defined contribution plans in which most
employees are eligible to participate, as well as certain bargaining unit employees. Company contributions for most
plans are based on a cash matching of employee contributions up to 4 percent of compensation. The company also
participates in a multiemployer plan for certain of the company’s union employees. In addition to the 401(k)
defined contribution benefit, certain employees hired after June 30, 2008, are eligible to participate in a defined
contribution program in lieu of a defined benefit pension plan. The company’s contributions to these defined
contribution plans for the years ended December 31, 2011, 2010, and 2009, were $297 million, $288 million, and
$291 million, respectively.
Non-U.S. Benefit Plans – The company sponsors several benefit plans for non-U.S. employees. These plans are
designed to provide benefits appropriate to local practice and in accordance with local regulations. Some of these
plans are funded using benefit trusts that are separate from the company.
Medical and Life Benefits – The company provides a portion of the costs for certain health care and life insurance
benefits for a substantial number of its active and retired employees. Certain covered employees achieve eligibility
to participate in these contributory plans upon retirement from active service if they meet specified age and years
of service requirements. Qualifying dependents are also eligible for medical coverage. Approximately 55 percent of
the company’s current retirees participate in the medical plans. The company reserves the right to amend or
terminate the plans at any time. In November 2006, the company adopted plan amendments and communicated
to plan participants that it would cap the amount of its contributions to substantially all of its remaining post
retirement medical and life benefit plans that were previously not subject to limits on the company’s contributions.
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