Northrop Grumman Reaches a Settlement Agreement With the U.S. Government on Two Legal Matters
April 02 2009 - 7:22PM
PR Newswire (US)
LOS ANGELES, April 2 /PRNewswire-FirstCall/ -- Northrop Grumman
(NYSE: NOC) announced today that it has reached an agreement with
the U.S. government to settle two legal matters. The settlement
amounts for the two matters are equal and thereby offset each
other. The first matter involved a lawsuit filed by Northrop
Grumman in December 1996 against the U.S. government for recovery
of uncompensated costs, investments and a reasonable profit related
to the Tri-Service Standoff Attack Missile (TSSAM) program that the
government cancelled for convenience in 1995. Under the terms of
the agreement, the Department of Justice valued Northrop Grumman's
TSSAM claims at $325 million. The second matter involved a U.S.
Department of Justice claim related to certain microelectronics
parts produced by the former TRW Inc., prior to its acquisition by
Northrop Grumman in 2002. Under the terms of the agreement, the
Department of Justice valued its claims regarding the
microelectronics matter at $325 million. As previously reported,
the government commenced an investigation in 2003 based on
allegations contained in a False Claims Act case that was filed
under seal in 2002. While the company believes it acted properly
under its contracts and had substantive defenses to the claims, it
also believes that settlement is in the best interest of all
parties as it releases the company from the government's claims,
avoids litigation, and preserves a valued customer relationship.
The company is subject to various litigation and other
contingencies, and management records and adjusts provisions and
accruals for these contingencies from time to time as conditions
require and in accordance with generally accepted accounting
principles. In the third quarter of 2006, the company recorded a
legal provision for settlement and legal expenses related to the
microelectronics claim. The financial impact of this agreement,
including its related cost, on the previously recorded accrual for
the microelectronics claim and any other adjustments for legal
matters is expected to result in a net gain to be reported in the
company's second quarter 2009 results. This agreement will not have
a significant impact on the company's cash from operations.
Northrop Grumman Corporation is a leading global security company
whose 120,000 employees provide innovative systems, products, and
solutions in aerospace, electronics, information systems,
shipbuilding and technical services to government and commercial
customers worldwide. Note: Certain statements and assumptions in
this release contain or are based on "forward-looking" information
that the company believes to be within the definition in the
Private Securities Litigation Reform Act of 1995 and involve risks
and uncertainties. Such forward-looking information includes
statements regarding accruals and provisions for contingencies and
cash from operations. These statements are subject to various
assumptions and uncertainties, including management's evaluation
and associated accruals and provisions for other litigation,
claims, appeals, bid protests and investigations; the impact of
domestic and global economic uncertainties on financial markets,
access to capital, value of goodwill and other long-lived assets;
changes in government spending; future revenues; expected program
performance and cash flows; returns on pension plan assets and
variability of pension actuarial and related assumptions and
regulatory requirements; hurricane-related insurance recoveries;
environmental remediation; acquisitions and divestitures of
businesses; joint ventures and other business arrangements;
performance issues with, and financial viability of, key suppliers
and subcontractors; product performance and the successful
execution of internal plans; successful negotiation of contracts
with labor unions; allowability and allocability of costs under
U.S. Government contracts; effective tax rates and timing and
amounts of tax payments; the results of any audit or appeal process
with the Internal Revenue Service; the availability and retention
of skilled labor; and anticipated costs of capital investments,
among other things. This information reflects the company's best
estimates when made, but the company expressly disclaims any duty
to update this information if new data become available or
estimates change after the date of this release. 0408-169
DATASOURCE: Northrop Grumman CONTACT: Media, Dan McClain,
+1-310-201-3335, , or Investors, Paul Gregory, +1-310-201-1634, ,
both of Northrop Grumman Corporation
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