Northrop Grumman 2010 Annual Report Download - page 104

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December 31, 2010, there were $303 million of stand-by letters of credit, $192 million of bank guarantees, and
$446 million of surety bonds outstanding.
The company has also guaranteed the remaining $22 million of bonds outstanding from the Gulf Opportunity
Zone Industrial Revenue Development Bonds issued by the Mississippi Business Finance Corporation in
December 2006. Under the guaranty, the company guaranteed the repayment of all payments due under the
trust indenture and loan agreement. In addition, a subsidiary of the company has guaranteed Shipbuilding’s
outstanding $84 million Economic Development Revenue Bonds (Ingalls Shipbuilding, Inc. Project), Taxable
Series 1999A.
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, results of operations or cash flows.
U.S. Government Claims – From time to time, customers advise the company of claims and penalties concerning
certain potential disallowed costs. When such findings are presented, the company and the U.S. Government
representatives engage in discussions to enable the company to evaluate the merits of these claims as well as to
assess the amounts being claimed. Where appropriate, provisions are made to reflect the company’s expected
exposure to the matters raised by the U.S. Government representatives and such provisions are reviewed on a
quarterly basis for sufficiency based on the most recent information available. The company believes that the
outcome of any such matters would not have a material adverse effect on its consolidated financial position,
results of operations or cash flows.
Operating Leases – Rental expense for operating leases, excluding discontinued operations, was $492 million in
2010, $549 million in 2009, and $567 million in 2008. These amounts are net of immaterial amounts of sublease
rental income. Minimum rental commitments under long-term noncancellable operating leases as of
December 31, 2010, total approximately $1.5 billion, which are payable as follows: 2011 – $367 million; 2012 –
$289 million; 2013 – $210 million; 2014 – $181 million; 2015 – $149 million and thereafter – $318 million.
Related Party Transactions – For all periods presented, the company had no material related party transactions.
17. 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
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. Certain
hourly employees are covered under a target benefit plan. 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,
non-represented 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, 2010, 2009, and 2008, were $338 million, $341 million, and
$311 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.
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NORTHROP GRUMMAN CORPORATION