Northrop Grumman 2013 Annual Report Download - page 77

NORTHROP GRUMMAN CORPORATION
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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, 2013, there were $345 million of stand-by letters of credit and guarantees, and $157
million of surety bonds outstanding.
Indemnifications
The company has retained certain 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, 2013, or its annual results of operations and/or cash
flows.
Operating Leases
Rental expense for operating leases, excluding discontinued operations, was $298 million in 2013, $347 million in
2012, and $420 million in 2011. 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, 2013, are payable as
follows:
$ in millions
Year Ending December 31
2014 $277
2015 232
2016 176
2017 107
2018 61
Thereafter 90
Total Minimum Lease Payments $943
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 employees covered under collective bargaining agreements.
Company contributions for most plans are based on a cash matching of employee contributions up to 4 percent of
compensation. 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, 2013, 2012 and 2011, were $285
million, $293 million and $297 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 62 percent of the
company’s current pension retirees participate in the medical plans. The company reserves the right to amend or
terminate the plans at any time. The company has capped the amount of its contributions to substantially all of its
remaining post retirement medical and life benefit plans.
In addition to a company and employee cost-sharing feature, the plans also have provisions for deductibles, co-
payments, coinsurance percentages, out-of-pocket limits, conformance to a schedule of reasonable fees, the use of