News Releases

Northrop Grumman Stops Work On Project America

Company Takes Previously Announced $60 Million Charge Against Third Quarter Earnings

LOS ANGELES -- Nov. 1, 2001 -- Northrop Grumman Corporation (NYSE: NOC) announced today that it has stopped work on Project America, a cruise ship program to build two 1,900-passenger cruise ships at its Pascagoula, Miss., Ingalls Operations.

This decision follows negotiations with the U.S. Maritime Administration, which has decided not to continue the guaranteed funding necessary to complete the construction of the ships. As previously announced on Oct. 25, 2001, the company said it would report a charge to operating margin of $60 million in the third quarter 2001 if Project America could not secure guaranteed funding.

Northrop Grumman said today it took pretax charges totaling $60 million in the third quarter 2001, reducing operating margin for the quarter from $285 million to $225 million. The company previously reported third quarter 2001 economic earnings of $161 million, or $1.79 per share, now revised to economic earnings of $121 million, or $1.33 per share. Under Generally Accepted Accounting Principles (GAAP), the company previously reported third quarter net income of $117 million, or $1.28 per share, now revised to $79 million, or $0.84 per share.

Approximately 1,250 employees working on Project America were affected by temporary layoffs last week. The company said it would make every effort to reassign affected employees. Immediately, about 500 employees will be reassigned to other ongoing projects at the Ingalls Operations, while another 200 employees will be transferred to Northrop Grumman's Avondale Operations facilities in Gulfport, Miss. Most of the remaining employees will be reassigned to Avondale Operations facilities in New Orleans, La.

American Classic Voyages Company (NASDAQ: AMCVQ), the parent company of Project America, filed for Chapter 11 bankruptcy protection on Oct. 19, following the tragic events of Sept. 11 and their impact on the tourism industry.

Northrop Grumman Corporation is a $15 billion, global aerospace and defense company with its worldwide headquarters in Los Angeles. Northrop Grumman provides technologically advanced, innovative products, services and solutions in defense and commercial electronics, systems integration, information technology and non-nuclear shipbuilding and systems. With 80,000 employees and operations in 44 states and 25 countries, Northrop Grumman serves U.S. and international military, government and commercial customers.

To the extent this release contains or implies forward-looking information, that information is necessarily subject to various risks and uncertainties. The actual outcome is dependent upon the company’s successful performance of its plans, as well as other risk factors underlying those plans, as well as other risk factors set out from time to time in the company’s filings with the Securities and Exchange Commission, including, without limitation, the company’s reports on Forms 10-K and 10-Q.

Contact:
Northrop Grumman Corporation, Los Angeles 
Randy Belote (Media)
703) 875-8525

Gaston Kent (Investors)
(301) 201-3423