Northrop Grumman 2010 Annual Report Download - page 63

and voluntary pension and other post retirement benefit plan contributions, continue acquisition of shares under
the share repurchase program, and continue paying dividends to shareholders. We will continue to provide the
productive capacity to perform our existing contracts, prepare for future contracts, and conduct research and
development in the pursuit of developing opportunities.
Financial Arrangements – In the ordinary course of business, we use standby letters of credit and guarantees issued
by commercial banks and surety bonds issued by insurance companies principally to guarantee the performance
on certain contracts and to support our self-insured workers’ compensation plans. At December 31, 2010, there
were $303 million of unused stand-by letters of credit, $192 million of bank guarantees, and $446 million of
surety bonds outstanding.
Contractual Obligations
The following table presents our contractual obligations as of December 31, 2010, and the estimated timing of
future cash payments:
$ in millions Total 2011
2012 -
2013
2014 -
2015
2016 and
beyond
Long-term debt $ 4,808 $ 773 $ 9 $ 855 $3,171
Interest payments on long-term debt 3,035 241 430 416 1,948
Operating leases 1,514 367 499 330 318
Purchase obligations
(1)
9,303 6,042 2,782 464 15
Other long-term liabilities
(2)
1,488 321 347 239 581
Total contractual obligations $20,148 $7,744 $4,067 $2,304 $6,033
(1) A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and
legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be
purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction.
These amounts are primarily comprised of open purchase order commitments to vendors and subcontractors
pertaining to funded contracts.
(2) Other long-term liabilities primarily consist of total accrued workers’ compensation and environmental
reserves, deferred compensation, and other miscellaneous liabilities, of which $109 million and $197 million
of the environmental and workers’ compensation reserves, respectively, are recorded in other current
liabilities. It excludes obligations for uncertain tax positions of $135 million, as the timing of the payments, if
any, cannot be reasonably estimated.
The table above also excludes estimated minimum funding requirements and expected voluntary contributions
for retiree benefit plans as set forth by ERISA in relation to the company’s pension and postretirement benefit
obligations totaling approximately $5.5 billion over the next five years: $722 million in 2011, $494 million in
2012, $698 million in 2013, $696 million in 2014, and $719 million in 2015. The company also has payments
due under plans that are not required to be funded in advance, but are funded on a pay-as-you-go basis. See
Note 17 to the consolidated financial statements in Part II, Item 8.
Further details regarding long-term debt and operating leases can be found in Notes 14 and 16, respectively, to
the consolidated financial statements in Part II, Item 8.
OTHER MATTERS
Accounting Standards Updates
The Financial Accounting Standards Board has issued new accounting standards which are not effective until after
December 31, 2010. For further discussion of new accounting standards, see Note 2 to the consolidated financial
statements in Part II, Item 8.
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NORTHROP GRUMMAN CORPORATION