Northrop Grumman 2012 Annual Report Download - page 75

NORTHROP GRUMMAN CORPORATION
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between $314 million and $746 million, before considering the amount recoverable through overhead charges on
U.S. Government contracts. At December 31, 2012, the amount accrued for probable environmental remediation
costs was $342 million, of which $88 million is accrued in other current liabilities and $254 million is accrued in
other non-current liabilities. A portion of the environmental remediation costs is expected to be recoverable through
overhead charges on government contracts and, accordingly, such amounts are deferred in inventoried costs and
other non-current assets. As of December 31, 2012, $57 million is deferred in inventoried costs and $147 million is
deferred in other non-current assets. These amounts are evaluated for recoverability on a routine basis. Although
management cannot predict whether new information gained as projects progress will materially affect the estimated
liability accrued, management does not anticipate that future remediation expenditures will have a material adverse
effect on the company's consolidated financial position as of December 31, 2012, or its annual results of operations
or cash flows.
Financial Arrangements
In the ordinary course of business, the company uses standby letters of credit and guarantees issued by commercial
banks, and surety bonds issued principally by insurance companies to guarantee the performance on certain
obligations. At December 31, 2012, there were $193 million of stand-by letters of credit, $295 million of bank
guarantees, and $168 million of surety bonds outstanding.
Indemnifications
The company has retained certain warranty, environmental, income tax, and other potential liabilities in connection
with certain of its divestitures. The settlement of these liabilities is not expected to have a material adverse effect on
the company’s consolidated financial position as of December 31, 2012, or its annual results of operations or cash
flows.
Operating Leases
Rental expense for operating leases, excluding discontinued operations, was $347 million in 2012, $420 million in
2011, and $448 million in 2010. These amounts are net of immaterial amounts of sublease rental income. Minimum
rental commitments under long-term non-cancelable operating leases as of December 31, 2012, are payable as
follows:
$ in millions
Year Ending December 31
2013 $ 274
2014 237
2015 198
2016 157
2017 76
Thereafter 129
Total Minimum Lease Payments $1,071
13. 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.
Defined Contribution Plans – The company also sponsors 401(k) defined contribution plans in which most
employees are eligible to participate, including 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, 2012, 2011, and 2010, were $293 million, $297 million, and $288 million,
respectively.