Northrop Grumman Corporation agreed to an $80 million joint settlement of two civil False Claims Act complaints filed by the U.S. Department of Justice. Of the $80 million, the government allocated $60 million to settle allegations that Newport News Shipbuilding, Inc., acquired by Northrop Grumman in December 2001, improperly charged certain independent research and development costs to its government contracts between 1994 and 1999. The suit was filed in February 2003 in the U.S. District Court
for the Eastern District of Virginia. The case is United States of America v. Newport News Shipbuilding, Inc. #1:03CV142-A. The government allocated the balance of the $80 million to settle claims filed in May 1995 in the U.S. District Court of the Central District of California, related to allegedly defective aerial target drones. The case is United States of America ex rel. Daniel Jordan v. Northrop Grumman Corporation, #CV95-2985 ABC (Ex). The company expressly denied any liability and has agreed to settle these matters, allowing management to focus on the ongoing business operations. The company also said it will not record a charge to its earnings as a result of this settlement. Although cash from operations will be affected by the settlement, the company still expects 2003 cash from operations of $1.1 billion to $1.3 billion, before the $1.0 billion B-2 tax payment.