Northrop Grumman 2014 Annual Report Download - page 25

NORTHROP GRUMMAN CORPORATION
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result in a remeasurement of our net deferred tax assets through the income tax provision because our deferred tax
assets are measured at the current statutory tax rate. In addition, the final determination of any tax audits or related
litigation could be materially different from our historical income tax provisions and accruals. Changes in our tax
provision or an increase in our tax liabilities, whether due to changes in applicable law and regulations, the
interpretation or application thereof, changes in the tax rate or a final determination of tax audits or litigation, could
have an adverse effect on our financial position, results of operations and/or cash flows.
The spin-off of our former Shipbuilding business may expose us to potential claims, liabilities and reputational
harm.
In connection with the spin-off transaction, we entered into a number of agreements with HII setting forth certain
rights and obligations of the parties after the separation. For example, under the Separation and Distribution
Agreement, from and after the spin-off transaction, each of HII and Northrop Grumman is generally responsible for
the debts, liabilities and other obligations related to the business or businesses that it owns and operates following
the consummation of the spin-off. It is possible that a court would disregard the allocation agreed to between us and
HII, and require that we assume responsibility for certain obligations allocated to HII (for example, tax and/or
environmental liabilities), particularly if HII were to refuse or were unable to pay or perform such obligations.
In addition, third parties could seek to hold us responsible for any of the liabilities or obligations for which HII has
agreed to be responsible and/or to indemnify us, directly or indirectly. The indemnity related rights we have under
our agreements with HII may not be sufficient to protect us against such liabilities. Even if we ultimately succeed in
recovering from HII or the U.S. Government any amounts for which we are held liable, we may be required to
record these losses ourselves until such time as the indemnity contribution is paid. In addition, certain indemnities
that we may be required to provide HII are not subject to a cap, may be significant, and could negatively impact our
business.
In connection with the spin-off transaction, we received a letter ruling from the IRS and an opinion of counsel
confirming that we and our shareholders would not recognize any taxable income, gain or loss for U.S. federal
income tax purposes as a result of the merger, the internal reorganization or the distribution, except that our
shareholders who received cash in lieu of fractional shares would recognize gain or loss with respect to such cash.
Nevertheless, if the merger, the internal reorganization or the distribution were ultimately determined to be taxable
for U.S. federal income tax purposes, we and our shareholders could be subject to additional income tax liabilities.
The impact of these factors is difficult to predict, but one or more of them could cause reputational harm and could
have an adverse effect on our financial position, results of operations and/or cash flows.
Item 1B. Unresolved Staff Comments
None.
FORWARD-LOOKING STATEMENTS AND PROJECTIONS
This Form 10-K and the information we are incorporating by reference contain statements, other than statements of
historical fact, that constitute “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Words such as “expect,” “intend,” “may,” “could,” “plan,” “project,” “forecast,” “believe,”
“estimate,” “outlook,” “anticipate,” “trends,” "goals" and similar expressions generally identify these forward-
looking statements. Forward-looking statements include, among other things, statements relating to our future
financial condition, results of operations and cash flows. Forward-looking statements are based upon assumptions,
expectations, plans and projections that we believe to be reasonable when made, but which may change over time.
These statements are not guarantees of future performance and inherently involve a wide range of risks and
uncertainties that are difficult to predict. Specific risks that could cause actual results to differ materially from those
expressed or implied in these forward-looking statements include, but are not limited to, those identified under Risk
Factors in Part I, Item 1A and other important factors disclosed in this report and from time to time in our other
filings with the SEC.
You are urged to consider the limitations on, and risks associated with, forward-looking statements and not unduly
rely on the accuracy of forward-looking statements. These forward-looking statements speak only as of the date this
report is first filed or, in the case of any document incorporated by reference, the date of that document. We
undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable law.