8-KLeadership ChangesExhibits & Filings

NORTHROP GRUMMAN CORP /DE/ 8-K Report, Executive Changes (Feb 20, 2015)

Filed February 20, 2015For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) filed an 8-K on February 20, 2015, detailing executive compensation actions approved by its Compensation Committee and Board of Directors on February 17-18, 2015. The filing primarily concerns the approval of the 2015 Incentive Compensation Plan (ICP) goals and the awarding of new equity-based compensation to named executive officers. Investors should note that the core financial metrics for the ICP remain largely consistent with the prior year, emphasizing pension-adjusted operating margin, free cash flow conversion, book to bill ratio, and pension-adjusted net income. The company also awarded Restricted Performance Stock Rights (RPSRs) and Restricted Stock Rights (RSRs) for the 2015-2017 performance period. The majority of these awards (70%) were performance-based RPSRs, tied to relative total shareholder return, with the remainder being time-vesting RSRs. Notably, the company continues its practice of not awarding stock options to named executive officers, a trend consistent with prior years. The terms of these 2015 awards are substantially similar to those granted in 2014.

Key Highlights

  • 1Northrop Grumman approved 2015 Incentive Compensation Plan (ICP) goals, maintaining financial metrics similar to 2014.
  • 2Key ICP financial metrics for 2015 include pension-adjusted operating margin (35%), free cash flow conversion (35%), book to bill ratio (15%), and pension-adjusted net income (15%).
  • 3The company awarded Restricted Performance Stock Rights (RPSRs) for the 2015-2017 performance period, with metrics based on relative total shareholder return.
  • 4Restricted Stock Rights (RSRs) were also awarded, vesting on February 18, 2018.
  • 5Approximately 70% of the total awards granted to named executive officers were RPSRs, with 30% being RSRs (with a slight variation for Mr. Bush).
  • 6Northrop Grumman did not award any stock options to named executive officers for 2015, continuing a previous practice.
  • 7The terms and conditions for the 2015 RPSR and RSR awards are materially consistent with the 2014 awards.

Frequently Asked Questions

The primary financial goals for 2015 under the Incentive Compensation Plan (ICP) are: pension-adjusted operating margin rate (35%), free cash flow conversion before discretionary pension funding (35%), awards expressed as book to bill ratio (15%), and pension-adjusted net income (15%). These metrics are similar to those used in 2014.

The company granted two types of equity awards: Restricted Performance Stock Rights (RPSRs) and Restricted Stock Rights (RSRs). RPSRs are performance-based and measured against relative total shareholder return over a three-year period (2015-2017). RSRs are time-based and vest on February 18, 2018. The majority of the awards (70%) were RPSRs.

No, the Compensation Committee did not award any stock options to named executive officers for 2015. This is consistent with the company's compensation practices in 2013 and 2014.

No, the filing indicates that the financial metrics for the 2015 ICP are similar to 2014, and the terms of the 2015 Restricted Performance Stock Rights and Restricted Stock Rights awards are not materially different from the 2014 awards.