##### Table of Contents



FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

(Mark One)

|   |  |                                                                                                  
|-- |  | -------------------------------------------------------------------------------------------------
|   |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)         
OF THE SECURITIES EXCHANGE ACT OF 1934 
|   |  |                                                                                                  
|   |  | For the quarterly period ended June 30, 2002                                                     
|  
|OR
|   |  |                                                                                                  
|   |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)         
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number  1-2384

|                                                      
|------------------------------------------------------
|TRW Inc.                                              
|                                                      
|(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Ohio                                                           |  | 34-0575430                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

1900 Richmond Road, Cleveland, Ohio 44124

(216) 291-7000

---

|                                                                               
|-------------------------------------------------------------------------------
|Indicate by check mark whether the registrant (1) has filed all reports        
|required to be filed by Section 13 or 15(d) of the Securities Exchange Act of  
|1934 during the preceding 12 months (or for such shorter period that the       
|registrant was required to file such reports), and (2) has been subject to such
|filing requirements for the past 90 days.                                      

Yes X    No

As of August 9, 2002, there were
128,620,093 shares of
TRW Common Stock, $0.625 par value, outstanding.





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TABLE OF CONTENTS



|                                                   |                                                                                               |  |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                     
|                                                   | Item 1. Financial Statements                                                                 
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                   | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|PART II. OTHER INFORMATION                        
|                                                   | Item 1. Legal Proceedings                                                                    
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                        
|EX-10(A) Amend #2 to Receivables Purchase Agrmt   
|EX-10(D) Master Agreement of Purchase of Sale     
|EX-10(E) Employment Continuation Agreement DCP    
|EX-15 Letter Re: Unaudited Financial Information  
|EX-99(A) Comput. Ratio of Earnings/Fixed Charges  
|EX-99(B) 906 Certification of Timothy W. Hannemann
|EX-99(C) 906 Certification of John C. Plant       
|EX-99(D) 906 Certification of Robert H. Swan      



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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements

Statements of Operations (unaudited)
TRW Inc. and subsidiaries

|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |       |      |      | 
|------------------------------------------------------------------------------- | ------- | -------------------------- | -------------------------------------------------------------------- | ----- | ------------- | ----- | ---------------- | ----- | ---- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ---- | ---- | 
|                                                                                |         |                            |                                                                      |       | Quarter ended |       | Six months ended
|                                                                                |         |                            |                                                                      |       | June 30       |       | June 30         
|                                                                                |         |                            |                                                                      |       |               |       |                 
|(In millions except per share data)                                             |         | 2002                       |                                                                      | 2001  |               | 2002  |                  | 2001 
|                                                                                |         |                            |                                                                      |       |               |       |                  |      
|Sales                                                                           |         | $                          | 4,269                                                                |       |               | $     | 4,006            |       |      | $     | 8,119 |       |       | $     | 7,908 |      
|Cost of sales                                                                   |         |                            | 3,665                                                                |       |               |       | 3,476            |       |      |       | 6,999 |       |       |       | 6,875 |      
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|Gross profit                                                                    |         |                            | 604                                                                  |       |               |       | 530              |       |      |       | 1,120 |       |       |       | 1,033 |      
|                                                                               
|Administrative and selling expenses                                             |         |                            | 219                                                                  |       |               |       | 226              |       |      |       | 426   |       |       |       | 443   |      
|Research and development expenses                                               |         |                            | 100                                                                  |       |               |       | 93               |       |      |       | 193   |       |       |       | 193   |      
|Interest expense                                                                |         |                            | 102                                                                  |       |               |       | 122              |       |      |       | 205   |       |       |       | 251   |      
|Amortization of intangible assets and goodwill in 2001                          |         |                            | 5                                                                    |       |               |       | 24               |       |      |       | 8     |       |       |       | 48    |      
|Other (income)expense-net                                                       |         |                            | (14                                                                  | )     |               |       | 62               |       |      |       | (18   | )     |       |       | 48    |      
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|Earnings from continuing operations before income taxes
and extraordinary items |         |                            | 192                                                                  |       |               |       | 3                |       |      |       | 306   |       |       |       | 50    |      
|Income taxes                                                                    |         |                            | 68                                                                   |       |               |       | 21               |       |      |       | 104   |       |       |       | 30    |      
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|Earnings(loss) from continuing operations before
extraordinary items            |         |                            | 124                                                                  |       |               |       | (18              | )     |      |       | 202   |       |       |       | 20    |      
|Discontinued operations, net of income taxes                                    |         |                            | (683                                                                 | )     |               |       | 21               |       |      |       | (672  | )     |       |       | 38    |      
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|Earnings(loss) before extraordinary items                                       |         |                            | (559                                                                 | )     |               |       | 3                |       |      |       | (470  | )     |       |       | 58    |      
|Extraordinary items, net of income taxes                                        |         |                            |                                                                     |       |               |       |                 |       |      |       | 2     |       |       |       |      |      
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|Net earnings(loss)                                                              |         | $                          | (559                                                                 | )     |               | $     | 3                |       |      | $     | (468  | )     |       | $     | 58    |      
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|Per share of common stock                                                      
|                                                                                |         | Diluted earnings per share |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |       |      |     
|                                                                                |         |                            | Earnings(loss) from continuing operations
before extraordinary items |       | $             | 0.98  |                  |       | $    | (0.15 | )     |       | $     | 1.59  |       |       | $    | 0.17 | 
|                                                                                |         |                            | Discontinued operations                                              |       |               | (5.36 | )                |       |      | 0.17  |       |       |       | (5.30 | )     |       |      | 0.30 | 
|                                                                                |         |                            | Extraordinary items                                                  |       |               |      |                  |       |      |      |       |       |       | 0.02  |       |       |      |     | 
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|                                                                                |         |                            | Net earnings(loss)                                                   |       | $             | (4.38 | )                |       | $    | 0.02  |       |       | $     | (3.69 | )     |       | $    | 0.47 | 
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|                                                                                |         | Basic earnings per share   |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |       |      |     
|                                                                                |         |                            | Earnings(loss) from continuing
operations before extraordinary items |       | $             | 0.98  |                  |       | $    | (0.15 | )     |       | $     | 1.59  |       |       | $    | 0.17 | 
|                                                                                |         |                            | Discontinued operations                                              |       |               | (5.36 | )                |       |      | 0.17  |       |       |       | (5.30 | )     |       |      | 0.30 | 
|                                                                                |         |                            | Extraordinary items                                                  |       |               |      |                  |       |      |      |       |       |       | 0.02  |       |       |      |     | 
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|                                                                                |         |                            | Net earnings(loss)                                                   |       | $             | (4.38 | )                |       | $    | 0.02  |       |       | $     | (3.69 | )     |       | $    | 0.47 | 
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|                                                                                |         | Dividends declared         |                                                                      | $     | 0.175         |       |                  | $     | 0.35 |       |       | $     | 0.175 |       |       | $     | 0.35 |     
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|Shares used in computing per share amounts                                      |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      
|                                                                                | Diluted |                            |                                                                      | 127.5 |               |       |                  | 125.6 |      |       |       | 126.8 |       |       |       | 125.2 |     
|                                                                                | Basic   |                            |                                                                      | 127.5 |               |       |                  | 124.5 |      |       |       | 126.8 |       |       |       | 124.1 |     
|                                                                                |         |                            |                                                                      |       |               |       |                  |       |      |       |       |       |       |       |       |      

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Balance Sheets (unaudited)
TRW Inc. and subsidiaries

|                                                   |                                                |      |         |       |             |   |        |       |  
|-------------------------------------------------- | ---------------------------------------------- | ---- | ------- | ----- | ----------- | - | ------ | ----- | -
|                                                   |                                                |      | June 30 |       | December 31
|(In millions)                                      |                                                | 2002 |         | 2001 
|                                                   |                                                |      |         |      
|Assets                                             |                                                |      |         |       |             |   |        |      
|Current assets                                     |                                                |      |         |       |             |   |        |      
|                                                   | Cash and cash equivalents                      |      | $       | 259   |             |   | $      | 213   |  
|                                                   | Accounts receivable                            |      |         | 1,875 |             |   |        | 1,418 |  
|                                                   | Interest in securitized receivables            |      |         | 182   |             |   |        | 162   |  
|                                                   | Inventories                                    |      |         | 615   |             |   |        | 575   |  
|                                                   | Prepaid expenses                               |      |         | 175   |             |   |        | 160   |  
|                                                   | Deferred income taxes                          |      |         | 274   |             |   |        | 201   |  
|                                                   | Assets of business held for sale               |      |         | 1,644 |             |   |        | 2,018 |  
|                                                   |                                                |      |         |       |             |   |        |      
|Total current assets                               |                                                |      | 5,024   |       |             |   | 4,747  |      
|                                                  
|Property, plant and equipment-on the basis of cost |                                                |      | 8,224   |       |             |   | 7,924  |      
|                                                   | Less accumulated depreciation and amortization |      |         | 4,983 |             |   |        | 4,641 |  
|                                                   |                                                |      |         |       |             |   |        |      
|Total property, plant and equipment-net            |                                                |      | 3,241   |       |             |   | 3,283  |      
|                                                  
|Intangible assets                                  |                                                |      | 539     |       |             |   | 586    |      
|                                                   | Less accumulated amortization                  |      |         | 284   |             |   |        | 272   |  
|                                                   |                                                |      |         |       |             |   |        |      
|Intangible assets-net                              |                                                |      | 255     |       |             |   | 314    |      
|                                                  
|Goodwill                                           |                                                |      | 2,639   |       |             |   | 2,417  |      
|Investments in affiliated companies                |                                                |      | 131     |       |             |   | 243    |      
|Other notes and accounts receivable                |                                                |      | 189     |       |             |   | 204    |      
|Other assets                                       |                                                |      | 278     |       |             |   | 480    |      
|Prepaid pension cost                               |                                                |      | 2,882   |       |             |   | 2,756  |      
|                                                   |                                                |      |         |       |             |   |        |      
|                                                   |                                                | $    | 14,639  |       |             | $ | 14,444 |      
|                                                   |                                                |      |         |       |             |   |        |      
|Liabilities and shareholders investment           |                                                |      |         |       |             |   |        |      
|Current liabilities                                |                                                |      |         |       |             |   |        |      
|                                                   | Short-term debt                                |      | $       | 652   |             |   | $      | 115   |  
|                                                   | Trade accounts payable                         |      |         | 1,883 |             |   |        | 1,575 |  
|                                                   | Current portion of long-term debt              |      |         | 81    |             |   |        | 724   |  
|                                                   | Liabilities of business held for sale          |      |         | 468   |             |   |        | 423   |  
|                                                   | Other current liabilities                      |      |         | 2,105 |             |   |        | 2,029 |  
|                                                   |                                                |      |         |       |             |   |        |      
|Total current liabilities                          |                                                |      | 5,189   |       |             |   | 4,866  |      
|                                                  
|Long-term debt                                     |                                                |      | 4,807   |       |             |   | 4,865  |      
|Long-term liabilities                              |                                                |      | 1,803   |       |             |   | 1,827  |      
|Deferred income taxes                              |                                                |      | 761     |       |             |   | 626    |      
|Minority interests in subsidiaries                 |                                                |      | 84      |       |             |   | 74     |      
|Shareholders investment                           |                                                |      |         |       |             |   |        |      
|                                                   | Capital stock                                  |      |         | 80    |             |   |        | 79    |  
|                                                   | Other capital                                  |      |         | 490   |             |   |        | 480   |  
|                                                   | Retained earnings                              |      |         | 1,964 |             |   |        | 2,468 |  
|                                                   | Treasury shares-cost in excess of par value    |      |         | (271  | )           |   |        | (372  | )
|                                                   | Accumulated other comprehensive income(loss)   |      |         | (268  | )           |   |        | (469  | )
|                                                   |                                                |      |         |       |             |   |        |      
|Total shareholders investment                     |                                                |      | 1,995   |       |             |   | 2,186  |      
|                                                   |                                                |      |         |       |             |   |        |      
|                                                   |                                                | $    | 14,639  |       |             | $ | 14,444 |      
|                                                   |                                                |      |         |       |             |   |        |      

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Statements of Cash Flows (unaudited)
TRW Inc. and subsidiaries

|                                                                                          |                                        |      |                  |      |   |   |      |      |  
|----------------------------------------------------------------------------------------- | -------------------------------------- | ---- | ---------------- | ---- | - | - | ---- | ---- | -
|                                                                                          |                                        |      | Six months ended
|                                                                                          |                                        |      | June 30         
|                                                                                          |                                        |      |                 
|(In millions)                                                                             |                                        | 2002 |                  | 2001
|                                                                                          |                                        |      |                  |     
|Operating activities                                                                      |                                        |      |                  |      |   |   |      |     
|Net earnings(loss)                                                                        |                                        | $    | (468             | )    |   | $ | 58   |     
|Adjustments to reconcile net earnings(loss) to net cash
provided by operating activities: |                                        |      |                  |      |   |   |      |     
|                                                                                          | Discontinued operations                |      |                  | 672  |   |   |      | (38  | )
|                                                                                          | Depreciation and amortization          |      |                  | 306  |   |   |      | 348  |  
|                                                                                          | Pension income                         |      |                  | (123 | ) |   |      | (120 | )
|                                                                                          | Net gain on sale of assets             |      |                  | (27  | ) |   |      | (26  | )
|                                                                                          | Asset impairment charges               |      |                  | 3    |   |   |      | 65   |  
|                                                                                          | Deferred income taxes                  |      |                  | (21  | ) |   |      | (37  | )
|                                                                                          | Other-net                              |      |                  | 42   |   |   |      | 56   |  
|Changes in assets and liabilities, net of effects of
businesses acquired or divested:     |                                        |      |                  |      |   |   |      |     
|                                                                                          | Accounts receivable, net               |      |                  | (436 | ) |   |      | (130 | )
|                                                                                          | Accounts receivable securitized        |      |                  | 32   |   |   |      |     |  
|                                                                                          | Inventories                            |      |                  | (19  | ) |   |      | 42   |  
|                                                                                          | Trade accounts payable                 |      |                  | 242  |   |   |      | 69   |  
|                                                                                          | Prepaid expenses and other liabilities |      |                  | 110  |   |   |      | (113 | )
|                                                                                          | Other-net                              |      |                  | 70   |   |   |      | 110  |  
|                                                                                          |                                        |      |                  |      |   |   |      |     
|Net cash provided by operating activities of
continuing operations                        |                                        |      | 383              |      |   |   | 284  |     
|                                                                                         
|Investing activities                                                                      |                                        |      |                  |      |   |   |      |     
|Capital expenditures including other intangibles                                          |                                        |      | (212             | )    |   |   | (300 | )   
|Net proceeds from sales of assets                                                         |                                        |      | 61               |      |   |   | 25   |     
|Other-net                                                                                 |                                        |      | 24               |      |   |   | (105 | )   
|                                                                                          |                                        |      |                  |      |   |   |      |     
|Net cash used in investing activities of
continuing operations                            |                                        |      | (127             | )    |   |   | (380 | )   
|                                                                                         
|Financing activities                                                                      |                                        |      |                  |      |   |   |      |     
|Increase(decrease) in short-term debt                                                     |                                        |      | 291              |      |   |   | (138 | )   
|Proceeds from debt in excess of 90 days                                                   |                                        |      | 469              |      |   |   | 910  |     
|Principal payments on debt in excess of 90 days                                           |                                        |      | (955             | )    |   |   | (743 | )   
|Dividends paid                                                                            |                                        |      | (45              | )    |   |   | (87  | )   
|Other-net                                                                                 |                                        |      | 26               |      |   |   | 134  |     
|                                                                                          |                                        |      |                  |      |   |   |      |     
|Net cash (used in)provided by financing activities
of continuing operations               |                                        |      | (214             | )    |   |   | 76   |     
|Effect of exchange rate changes on cash                                                   |                                        |      | 18               |      |   |   | 8    |     
|Net cash (used in)provided by discontinued operations                                     |                                        |      | (14              | )    |   |   | 3    |     
|                                                                                          |                                        |      |                  |      |   |   |      |     
|Increase(decrease) in cash and cash equivalents                                           |                                        |      | 46               |      |   |   | (9   | )   
|Cash and cash equivalents at beginning of period                                          |                                        |      | 213              |      |   |   | 248  |     
|                                                                                          |                                        |      |                  |      |   |   |      |     
|Cash and cash equivalents at end of period                                                |                                        | $    | 259              |      |   | $ | 239  |     
|                                                                                          |                                        |      |                  |      |   |   |      |     
|Supplemental Cash Flow Information                                                        |                                        |      |                  |      |   |   |      |     

|                                         |  |                  |     |      |  |   |     | 
|---------------------------------------- |  | ---------------- | --- | ---- |  | - | --- | 
|                                         |  | Six months ended
|                                         |  | June 30         
|                                         |  |                  |    
|(In millions)                            |  | 2002             |     | 2001
|                                         |  |                  |     |     
|Interest paid, net of amount capitalized |  | $                | 193 |      |  | $ | 231 | 
|Income taxes paid, net of refunds        |  |                  | 26  |      |  |   | 48  | 

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NOTES TO FINANCIAL STATEMENTS
(unaudited)

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States for interim financial information. In the opinion of management, all
adjustments consisting of normal recurring accruals considered necessary for a
fair presentation have been included. Operating results for the three-month
and six-month periods ended June 30, 2002 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2002.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2001.

Reclassifications

Certain amounts in the prior year financial statements and related notes have
been reclassified to conform to the current year presentation.

TRW and Northrop Grumman Merger Agreement

On June 30, 2002 the Company, Northrop Grumman Corporation (Northrop) and
Richmond Acquisition Corp., a wholly-owned subsidiary of Northrop, entered into
a definitive merger agreement, whereby Northrop will acquire all of the
Companys outstanding common stock and the Company will become a wholly-owned
subsidiary of Northrop. In the merger, each share of the Companys common
stock will be converted into the right to receive a number of shares of
Northrop common stock equal to the exchange ratio. The exchange ratio is
calculated by dividing $60 by the average closing sale prices for a share of
Northrop common stock on the New York Stock Exchange during the five
consecutive trading days ending on (and including) the second trading day prior
to the date the merger is completed. However, in no event will the exchange
ratio be greater than 0.5357 ($60/$112) or less than 0.4348 ($60/$138), even if
the actual average price per share of Northrop common stock used to calculate
the exchange ratio is less than $112 or greater than $138. The transaction
requires approval from European and U.S. regulatory agencies, as well as
approval by TRW shareholders and Northrop stockholders. Northrop has announced
that after the completion of the merger, it plans to separate the Companys
automotive business, either through a sale or a spin-off of the business to
shareholders. The Companys previously announced agreement to sell
Aeronautical Systems to Goodrich Corporation is unaffected by the merger
agreement.

Discontinued Operations

In June 2002, the Company announced that it had reached a definitive agreement
with Goodrich Corporation for the sale of its Aeronautical Systems business for
gross proceeds of approximately $1.5 billion. Proceeds will be used to reduce
debt and for other cash needs. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, the results of operations of this business are reported
as discontinued operations, net of applicable income taxes, for all periods
presented. In addition, the assets and liabilities of the Aeronautical Systems
business have been reclassified as held for sale. The business was measured at
the agreed upon contract price of $1.5 billion less cost to sell.
Earnings(loss) before income taxes from discontinued operations for the quarter
and six-months ended June 30, 2002 included a loss on disposal of $182 million,
of which $144 million was recorded for the curtailment of the Companys UK
pension plan.

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In addition, as a result of the proposed sale of Aeronautical
Systems, the Company updated its valuation of the business under SFAS 142
taking into account the purchase price and cumulative translation adjustment
which resulted in an impairment of goodwill of $483 million. The impairment
charge was recorded in earnings(loss) from operations before income taxes of
discontinued operations in the second quarter of 2002. The Company expects to
complete the sale of this business by the end of the third quarter of 2002.

The results of Aeronautical Systems were as follows:

|                                            |  |               |      |                  |  |      |     |      |  |   |      |   |  |   |     | 
|------------------------------------------- |  | ------------- | ---- | ---------------- |  | ---- | --- | ---- |  | - | ---- | - |  | - | --- | 
|                                            |  | Quarter ended |      | Six months ended
|                                            |  | June 30       |      | June 30         
|                                            |  |               |      |                 
|(In millions)                               |  | 2002          |      | 2001             |  | 2002 |     | 2001
|                                            |  |               |      |                  |  |      |     |     
|Sales                                       |  | $             | 258  |                  |  | $    | 270 |      |  | $ | 490  |   |  | $ | 535 | 
|                                           
|Earnings(loss) from operations              |  | $             | (462 | )                |  | $    | 32  |      |  | $ | (447 | ) |  | $ | 58  | 
|Loss on disposal                            |  |               | (182 | )                |  |      |    |      |  |   | (182 | ) |  |   |    | 
|                                            |  |               |      |                  |  |      |     |      |  |   |      |   |  |   |     | 
|                                            |  |               | (644 | )                |  |      | 32  |      |  |   | (629 | ) |  |   | 58  | 
|Income taxes                                |  |               | 39   |                  |  |      | 11  |      |  |   | 43   |   |  |   | 20  | 
|                                            |  |               |      |                  |  |      |     |      |  |   |      |   |  |   |     | 
|Earnings(loss) from discontinued operations |  | $             | (683 | )                |  | $    | 21  |      |  | $ | (672 | ) |  | $ | 38  | 
|                                            |  |               |      |                  |  |      |     |      |  |   |      |   |  |   |     | 

The major classes of assets and liabilities for Aeronautical Systems were as
follows:

|                              |  |         |       |             |  |   |       | 
|----------------------------- |  | ------- | ----- | ----------- |  | - | ----- | 
|                              |  | June 30 |       | December 31
|(In millions)                 |  | 2002    |       | 2001       
|                              |  |         |       |            
|Accounts receivable           |  | $       | 169   |             |  | $ | 178   | 
|Inventories                   |  |         | 220   |             |  |   | 188   | 
|Intangible assets  net       |  |         | 336   |             |  |   | 336   | 
|Property, plant and equipment |  |         | 296   |             |  |   | 259   | 
|Goodwill                      |  |         | 312   |             |  |   | 743   | 
|Other assets                  |  |         | 311   |             |  |   | 314   | 
|                              |  |         |       |             |  |   |       | 
|Total assets                  |  | $       | 1,644 |             |  | $ | 2,018 | 
|                              |  |         |       |             |  |   |       | 
|Accounts payable              |  | $       | 138   |             |  | $ | 167   | 
|Other liabilities             |  |         | 330   |             |  |   | 256   | 
|                              |  |         |       |             |  |   |       | 
|Total liabilities             |  | $       | 468   |             |  | $ | 423   | 
|                              |  |         |       |             |  |   |       | 

Accounting Pronouncements

Effective January 1, 2002, the Company adopted Financial Accounting Standards
Board (FASB) SFAS 141, Business Combinations, SFAS 142, Goodwill and
Intangible Assets, and SFAS 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS 141 requires that acquisitions entered into after
June 30, 2001 are to be accounted for using the purchase method and establishes
criteria to be used in determining whether acquired intangible assets are to be
separated from goodwill. As a result of the Companys analysis, only the value
of assembled workforce of approximately $65 million was reclassified from
intangible assets to goodwill at January 1, 2002.

SFAS 142 sets forth the accounting for goodwill and intangible assets already
recorded. Commencing January 1, 2002, goodwill is no longer being amortized.
Goodwill was tested for impairment by comparing the assets fair values to
their carrying values. Management has completed the valuations of its
reporting units and based on the valuations, goodwill for continuing operations
was determined not to be impaired. Refer to the Discontinued Operations note
to financial statements for the results of the valuation on the

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assets held for sale. With the adoption of SFAS 142, the Company reassessed the useful lives
and residual values of all acquired intangible assets to make any necessary
amortization period adjustments, which resulted in no adjustments being made.
Amounts in 2001 have not been restated in accordance with the statement.

The following table reflects the reconciliation of reported earnings(loss) from
continuing operations before extraordinary items to adjusted net earnings(loss)
and related per share amounts for the exclusion of goodwill amortization.

|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |      |    |      | 
|----------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------- | ----- | ------------- | ---- | ---------------- | ----- | -- | ---- | ---- | ----- | - | - | --- | ---- | -- | ---- | 
|                                                                              |                                                                                   |                                             |                                             |       | Quarter ended |      | Six months ended
|                                                                              |                                                                                   |                                             |                                             |       | June 30       |      | June 30         
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                 
|(In millions except per share data)                                           |                                                                                   | 2002                                        |                                             | 2001  |               | 2002 |                  | 2001 
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |      
|Net earnings(loss)                                                            |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|Reported earnings(loss) from continuing
operations before extraordinary items |                                                                                   | $                                           | 124                                         |       |               | $    | (18              | )     |    | $    | 202  |       |   | $ | 20  |     
|                                                                              |                                                                                   | Add back: Goodwill amortization, net of tax |                                             |       |              |      |                  |       | 18 |      |      |       |  |   |     |      | 35 |     
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|Adjusted earnings(loss) from continuing
operations before extraordinary items |                                                                                   |                                             | 124                                         |       |               |      |                 |       |    |      | 202  |       |   |   | 55  |     
|Reported discontinued operations, net of tax                                  |                                                                                   |                                             | (683                                        | )     |               |      | 21               |       |    |      | (672 | )     |   |   | 38  |     
|                                                                              |                                                                                   | Add back: Goodwill amortization, net of tax |                                             |       |              |      |                  |       | 4  |      |      |       |  |   |     |      | 9  |     
|Extraordinary items, net of tax                                               |                                                                                   |                                             |                                            |       |               |      |                 |       |    |      | 2    |       |   |   |    |     
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|Adjusted net earnings(loss)                                                   |                                                                                   | $                                           | (559                                        | )     |               | $    | 25               |       |    | $    | (468 | )     |   | $ | 102 |     
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|Per share of common stock                                                     |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|Diluted:                                                                      |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|                                                                              | Reported earnings(loss) from continuing
operations before extraordinary items     |                                             | $                                           | 0.98  |               |      | $                | (0.15 | )  |      | $    | 1.59  |   |   | $   | 0.17 |   
|                                                                              | Add back: Goodwill amortization, net of tax                                       |                                             |                                             |      |               |      |                  | 0.14  |    |      |      |      |   |   |     | 0.28 |   
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|                                                                              | Adjusted earnings(loss) from continuing
operations before extraordinary items     |                                             |                                             | 0.98  |               |      |                  | (0.01 | )  |      |      | 1.59  |   |   |     | 0.45 |   
|                                                                              | Reported discontinued operations, net of tax                                      |                                             |                                             | (5.36 | )             |      |                  | 0.17  |    |      |      | (5.30 | ) |   |     | 0.30 |   
|                                                                              |                                                                                   |                                             | Add back: Goodwill amortization, net of tax |       |               |     |                  |       |    | 0.03 |      |       |   |  |     |      |    | 0.07 | 
|                                                                              | Extraordinary items, net of tax                                                   |                                             |                                             |      |               |      |                  |      |    |      |      | 0.02  |   |   |     |     |   
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|                                                                              | Adjusted net earnings(loss)                                                       |                                             | $                                           | (4.38 | )             |      | $                | 0.19  |    |      | $    | (3.69 | ) |   | $   | 0.82 |   
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|Basic:                                                                        |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|                                                                              | Reported earnings(loss) from continuing
operations before extraordinary items     |                                             | $                                           | 0.98  |               |      | $                | (0.15 | )  |      | $    | 1.59  |   |   | $   | 0.17 |   
|                                                                              | Add back: Goodwill amortization, net of tax                                       |                                             |                                             |      |               |      |                  | 0.14  |    |      |      |      |   |   |     | 0.28 |   
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|                                                                              | Adjusted net earnings(loss) from continuing
operations before extraordinary items |                                             |                                             | 0.98  |               |      |                  | (0.01 | )  |      |      | 1.59  |   |   |     | 0.45 |   
|                                                                              | Reported discontinued operations, net of tax                                      |                                             |                                             | (5.36 | )             |      |                  | 0.17  |    |      |      | (5.30 | ) |   |     | 0.30 |   
|                                                                              |                                                                                   |                                             | Add back: Goodwill amortization, net of tax |       |               |     |                  |       |    | 0.03 |      |       |   |  |     |      |    | 0.07 | 
|                                                                              | Extraordinary items, net of tax                                                   |                                             |                                             |      |               |      |                  |      |    |      |      | 0.02  |   |   |     |     |   
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     
|                                                                              | Adjusted net earnings(loss)                                                       |                                             | $                                           | (4.38 | )             |      | $                | 0.19  |    |      | $    | (3.69 | ) |   | $   | 0.82 |   
|                                                                              |                                                                                   |                                             |                                             |       |               |      |                  |       |    |      |      |       |   |   |     |     

SFAS 143, Accounting for Asset Retirement Obligations, requires the fair
value of a liability for asset retirement obligations to be recorded in the
period in which it is incurred. The statement applies to a companys legal or
contractual obligation associated with the retirement of a tangible long-lived
asset that resulted from the acquisition, construction or development or
through the normal operation of a long-lived asset. The statement is effective
for the Company beginning January 1, 2003. Management has evaluated the impact
of SFAS 143 and believes that its adoption should not have a material effect on
the Companys financial position or results of operations.

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##### Table of Contents



SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
addresses the accounting and reporting for the impairment or disposal of
long-lived assets. The statement provides a consistent method to value
long-lived assets to be disposed of and broadens the presentation of
discontinued operations. The adoption of SFAS 144 did not have a material
effect on the Companys financial statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS 145 requires gains and losses on extinguishments of debt to be
reclassified as income or loss from continuing operations rather than as
extraordinary items as previously required by SFAS 4, Reporting Gains and
Losses from Extinguishment of Debt. SFAS 145 also amends SFAS 13 requiring
certain modifications to capital leases to be treated as sale-leaseback
transactions and to subleases when the original lessee remains a secondary
obligor, or guarantor.

The provisions of SFAS 145 related to the rescission of SFAS 4 are effective
for the Company on January 1, 2003. The extraordinary gains recorded for the
extinguishment of debt in the first quarter of 2002 will be reclassified into
earnings from continuing operations when the statement is adopted. The
remaining provisions of SFAS 145 were effective for transactions and reporting
subsequent to May 15, 2002. The adoption of SFAS 145 did not have a material
impact to the Companys financial position or results of operations.

Other (Income)Expense-Net

|                                    |  |               |     |                  |  |      |     |      |  |   |     |   |  |   |     |  
|----------------------------------- |  | ------------- | --- | ---------------- |  | ---- | --- | ---- |  | - | --- | - |  | - | --- | -
|                                    |  | Quarter ended |     | Six months ended
|                                    |  | June 30       |     | June 30         
|                                    |  |               |     |                 
|(In millions)                       |  | 2002          |     | 2001             |  | 2002 |     | 2001
|                                    |  |               |     |                  |  |      |     |     
|Investment in Endwave               |  | $             |    |                  |  | $    | 70  |      |  | $ |    |   |  | $ | 70  |  
|Foreign currency exchange           |  |               | 1   |                  |  |      | (2  | )    |  |   | 1   |   |  |   | (3  | )
|Net gain on sale of assets          |  |               | (18 | )                |  |      |    |      |  |   | (27 | ) |  |   | (26 | )
|(Earnings)loss of affiliates        |  |               |    |                  |  |      | 6   |      |  |   | 1   |   |  |   | 16  |  
|Miscellaneous other (income)expense |  |               | 3   |                  |  |      | (12 | )    |  |   | 7   |   |  |   | (9  | )
|                                    |  |               |     |                  |  |      |     |      |  |   |     |   |  |   |     |  
|                                    |  | $             | (14 | )                |  | $    | 62  |      |  | $ | (18 | ) |  | $ | 48  |  
|                                    |  |               |     |                  |  |      |     |      |  |   |     |   |  |   |     |  

In the second quarter of 2002, gains on the sale of real estate of $18 million
were recorded. During the second quarter of 2001, the Company recorded an
asset impairment charge related to its investment in, and its share of asset
impairment and restructuring charges recorded by, Endwave Corporation (Endwave)
of $70 million.

Net gain on the sale of assets for the first six months of 2002 included $18
million related to the sale of real estate and $9 million for the sale of RF
Micro Devices, Inc. (RFMD) common stock.

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##### Table of Contents



Operating Segments

As a result of the pending sale of Aeronautical Systems, the business is
reported as discontinued operations, rather than as a separate business
segment.

|                                                                                      |                     |      |               |       |                  |      |       |       |   |   |       |       |  |   |       |       |  
|------------------------------------------------------------------------------------- | ------------------- | ---- | ------------- | ----- | ---------------- | ---- | ----- | ----- | - | - | ----- | ----- |  | - | ----- | ----- | -
|                                                                                      |                     |      | Quarter ended |       | Six months ended
|                                                                                      |                     |      | June 30       |       | June 30         
|                                                                                      |                     |      |               |       |                 
|(In millions)                                                                         |                     | 2002 |               | 2001  |                  | 2002 |       | 2001 
|                                                                                      |                     |      |               |       |                  |      |       |      
|Sales                                                                                 |                     |      |               |       |                  |      |       |       |   |   |       |       |  |   |       |      
|                                                                                      | Automotive          |      | $             | 2,840 |                  |      | $     | 2,678 |   |   | $     | 5,411 |  |   | $     | 5,307 |  
|                                                                                      | Systems             |      |               | 919   |                  |      |       | 799   |   |   |       | 1,697 |  |   |       | 1,588 |  
|                                                                                      | Space & Electronics |      |               | 510   |                  |      |       | 529   |   |   |       | 1,011 |  |   |       | 1,013 |  
|                                                                                      |                     |      |               |       |                  |      |       |       |   |   |       |       |  |   |       |      
|Sales                                                                                 |                     | $    | 4,269         |       |                  | $    | 4,006 |       |   | $ | 8,119 |       |  | $ | 7,908 |      
|                                                                                      |                     |      |               |       |                  |      |       |       |   |   |       |       |  |   |       |      
|Profit(loss) before taxes                                                             |                     |      |               |       |                  |      |       |       |   |   |       |       |  |   |       |      
|                                                                                      | Automotive          |      | $             | 174   |                  |      | $     | 108   |   |   | $     | 287   |  |   | $     | 206   |  
|                                                                                      | Systems             |      |               | 68    |                  |      |       | 53    |   |   |       | 124   |  |   |       | 101   |  
|                                                                                      | Space & Electronics |      |               | 33    |                  |      |       | (40   | ) |   |       | 77    |  |   |       | (6    | )
|                                                                                      |                     |      |               |       |                  |      |       |      
|Profit(loss) before taxes                                                             |                     |      | 275           |       |                  |      | 121   |       |   |   | 488   |       |  |   | 301   |      
|                                                                                     
|Corporate expense and other                                                           |                     |      | (24           | )     |                  |      | (29   | )     |   |   | (49   | )     |  |   | (69   | )    
|Financing costs                                                                       |                     |      | (105          | )     |                  |      | (123  | )     |   |   | (211  | )     |  |   | (253  | )    
|Net employee benefits income                                                          |                     |      | 46            |       |                  |      | 34    |       |   |   | 78    |       |  |   | 71    |      
|                                                                                      |                     |      |               |       |                  |      |       |      
|Earnings(loss) from continuing
operations before income taxes and
extraordinary items |                     | $    | 192           |       |                  | $    | 3     |       |   | $ | 306   |       |  | $ | 50    |      
|                                                                                      |                     |      |               |       |                  |      |       |      



Goodwill amortization included in each segment for the second quarter and the
six months ended June 30, 2001, respectively, was $15 million and $31 million
for Automotive, $5 million and $9 million for Systems, and $1 million and $1
million for Space & Electronics.

|                   |                     |      |               |      |                  |      |   |      |  |  |   |    |  |  |   |    | 
|------------------ | ------------------- | ---- | ------------- | ---- | ---------------- | ---- | - | ---- |  |  | - | -- |  |  | - | -- | 
|                   |                     |      | Quarter ended |      | Six months ended
|                   |                     |      | June 30       |      | June 30         
|                   |                     |      |               |      |                 
|(In millions)      |                     | 2002 |               | 2001 |                  | 2002 |   | 2001
|                   |                     |      |               |      |                  |      |   |     
|Intersegment sales |                     |      |               |      |                  |      |   |      |  |  |   |    |  |  |   |   
|                   | Automotive          |      | $             |     |                  |      | $ | 1    |  |  | $ |   |  |  | $ | 2  | 
|                   | Systems             |      |               | 43   |                  |      |   | 53   |  |  |   | 84 |  |  |   | 95 | 
|                   | Space & Electronics |      |               | 6    |                  |      |   | 15   |  |  |   | 12 |  |  |   | 30 | 

Inventories

|                                      |  |         |     |                                                                                                                                                                                                                                                                  |                                       |   |     |    
|------------------------------------- |  | ------- | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | - | --- | ---
|                                      |  | June 30 |     | December 31                                                                                                                                                                                                                                                     
|(In millions)                         |  | 2002    |     | 2001                                                                                                                                                                                                                                                            
|                                      |  |         |     | Finished products and work in process
        
        $
        350
        
        
        $
        324Raw materials and supplies
        
        
        265
        
        
        
        251$
        615
        
        
        $
        575 | Finished products and work in process |   | $   | 350
|
|Finished products and work in process |  | $       | 350 |                                                                                                                                                                                                                                                                  |                                       | $ | 324 |    
|Raw materials and supplies            |  |         | 265 |                                                                                                                                                                                                                                                                  |                                       |   | 251 |    
|                                      |  |         |     |                                                                                                                                                                                                                                                                  |                                       |   |     |    
|                                      |  | $       | 615 |                                                                                                                                                                                                                                                                  |                                       | $ | 575 |    
|                                      |  |         |     |                                                                                                                                                                                                                                                                  |                                       |   |     |    

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##### Table of Contents



Restructurings

Automotive

Severance costs and plant closing accruals related to restructuring plans
including reorganizing and downsizing operations were $145 million at December
31, 2001. During the six months ended June 30, 2002, additional charges of $9
million before tax were recorded in cost of sales, primarily for severance
costs, of which $6 million was recorded in the second quarter. For the second
quarter and six months ended June 30, 2002, $22 million and $51 million,
respectively, was used for severance payments and costs related to the
consolidation of certain facilities. During the first six months of 2002, a
reduction of approximately 1,000 employees, relating to these programs, was
achieved. The majority of the remaining balance of $103 million is expected to
be used by the end of 2002.

Corporate

During 2001, the Company announced restructuring actions to reduce employee
headcount and related costs. The Company had restructuring reserves of $10
million for severance and related costs at December 31, 2001, of which $5
million was used in the six months ended June 30, 2002. The balance of $5
million is expected to be used by the end of 2002.

Accounts Receivables Securitized

During the fourth quarter of 2001, the Company established a $350 million
accounts receivable securitization program. Under this program, the Company
sells accounts receivables to a wholly-owned, fully consolidated, bankruptcy
remote, special purpose subsidiary, TRW Receivables Inc. The outstanding
balance of receivables sold to the special purpose subsidiary at June 30, 2002
was $532 million compared to $489 million at December 31, 2001. The undivided
interest in the receivables portfolio sold to the financial conduits at June
30, 2002 was $350 million compared to $327 million at December 31, 2001. The
loss on sale for the second quarter and six months of 2002 was $2 million and
$4 million, respectively, and was recorded in other (income)expense-net.

The table below summarizes certain cash flows of the special purpose subsidiary
for the six months ended June 30, 2002:

|                                                                 |  |   |       | 
|---------------------------------------------------------------- |  | - | ----- | 
|(In millions)                                                    |  |   |       | 
|                                                                
|Average monthly proceeds from receivables securitization         |  | $ | 325   | 
|Monthly accumulation of proceeds from receivables securitization |  |   | 1,951 | 

This transaction is accounted for as a sale of the receivables under the
provisions of SFAS 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities.

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##### Table of Contents



Financial Instruments

Foreign currency forward contracts The Company manufactures and sells its
products in countries throughout the world. As a result, it is exposed to
fluctuations in foreign currency exchange rates. The Company enters into
forward contracts and, to a lesser extent, purchased currency options to hedge
portions of its foreign currency denominated forecasted revenues, purchases and
the subsequent cash flows. The critical terms of the hedges are the same as
the underlying forecasted transactions, and the hedges are considered to be
perfectly effective to offset the changes in fair value of cash flows from the
hedged transactions. Gains or losses on these instruments, which mature at
various dates through April 2007, are generally recorded in other comprehensive
income(loss) until the underlying transaction is recognized in net earnings.
The earnings impact is reported in either sales, cost of sales, or other
(income)expense-net, to match the underlying transaction. The Company
designated these contracts as cash flow hedges. The fair values of foreign
currency forward contracts related to the Aeronautical Systems business are
reported in the Balance Sheets in assets and liabilities held for sale.

In addition, the Company enters into certain foreign currency forward contracts
that are not treated as hedges under SFAS 133, Accounting for Derivative
Instruments and Hedging Activities to hedge recognized foreign currency
transactions. Gains and losses on these contracts are recorded in net earnings
and are substantially offset by the earnings effect of the revaluation of the
underlying foreign currency denominated transaction.

At June 30, 2002, the Company had foreign currency forward contracts
outstanding with a notional amount of $1.9 billion, denominated principally in
the U.S. dollar, the euro and the British pound, of which $1.2 billion related
to the Aeronautical Systems business. Foreign exchange contracts are placed
with a number of major financial institutions to minimize credit risk. No
collateral is held in relation to the contracts, and the Company anticipates
that these financial institutions will satisfy their obligations under the
contracts.

Interest rate swap agreements The Company enters into interest rate swaps to
manage the risks and costs associated with its financing activities. The net
payments or receipts under the agreements are recognized as an adjustment to
interest expense. At June 30, 2002, the Company had $100 million notional
principal amount of interest rate swaps outstanding that converted a portion of
its variable rate debt to a fixed rate through August 2005. The interest rate
swaps have a fair market value loss of $12 million at June 30, 2002. These
agreements were designated as cash flow hedges.

Forward share sale agreements The Company hedges certain equity investments
in publicly traded companies. These instruments protect the forecasted cash
flows resulting from the sale of shares in the Companys investments in RFMD
and Applera Corporation  Celera Genomics Group (Celera). The fair market
value of these hedges as of June 30, 2002 was a $201 million gain. These
agreements were designated as cash flow hedges.

The following table represents the movement of amounts reported in other
comprehensive income(loss) of deferred cash flow hedges, net of tax.

|                                                        |  |               |    |                  |  |      |     |      |  |   |    |   |  |   |     |  
|------------------------------------------------------- |  | ------------- | -- | ---------------- |  | ---- | --- | ---- |  | - | -- | - |  | - | --- | -
|                                                        |  | Quarter ended |    | Six months ended
|                                                        |  | June 30       |    | June 30         
|                                                        |  |               |    |                 
|(In millions)                                           |  | 2002          |    | 2001             |  | 2002 |     | 2001
|                                                        |  |               |    |                  |  |      |     |     
|Beginning balance                                       |  | $             | (2 | )                |  | $    | (31 | )    |  | $ | (2 | ) |  | $ |    |  
|Net change in derivative fair value and
other movements |  |               | 79 |                  |  |      | (29 | )    |  |   | 79 |   |  |   | (61 | )
|Amounts reclassified to earnings                        |  |               | 2  |                  |  |      | 3   |      |  |   | 2  |   |  |   | 4   |  
|                                                        |  |               |    |                  |  |      |     |      |  |   |    |   |  |   |     |  
|Other comprehensive income(loss)                        |  | $             | 79 |                  |  | $    | (57 | )    |  | $ | 79 |   |  | $ | (57 | )
|                                                        |  |               |    |                  |  |      |     |      |  |   |    |   |  |   |     |  

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Debt and Credit Agreements

The Company amended and restated the revolving credit agreement that expired on
January 22, 2002 in a reduced aggregate amount of $1.25 billion with 20 banks
and established a new expiration date of January 21, 2003. The Company has an
option to extend the maturity of outstanding borrowings at that time to January
21, 2004. The Company also refinanced $250 million of commercial paper
borrowings by entering into a term loan agreement with 10 banks due January 25,
2005. The interest rate under the agreements is either the prime rate or a
rate based on London Interbank Offered Rate (LIBOR), at the option of the
Company.

The Company repaid $300 million of medium-term notes that matured during the
first quarter of 2002. Interest on the notes was based on three-month LIBOR.
A subsidiary of the Company also completed an unsolicited repurchase of £5.4
million of its 10.875 percent bonds due 2020 during the first quarter of 2002.
The repurchase resulted in an extraordinary gain of $4 million before taxes ($2
million after taxes, or $0.02 per share).

During the second quarter of 2002, the Company repaid $400 million of fixed
rate notes that matured.

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Earnings Per Share

|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |       |      | 
|----------------------------------- | ------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | - | ------------- | ----- | ---------------- | - | ----- | ----- | - | - | ------ | ----- | - | - | ----- | ---- | 
|                                    |                                                                                                         |                                                                      |   | Quarter ended |       | Six months ended
|                                    |                                                                                                         |                                                                      |   | June 30       |       | June 30         
|                                    |                                                                                                         |                                                                      |   |               |       |                 
|(In millions except per share data) |                                                                                                         | 2002                                                                 |   | 2001          |       | 2002             |   | 2001 
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |      
|Numerator                           |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |  
|                                    | Earnings(loss) from continuing operations before extraordinary items                                    |                                                                      | $ | 124.5         |       |                  | $ | (18.2 | )     |   | $ | 201.7  |       |   | $ | 20.4  |     
|                                    | Discontinued operations                                                                                 |                                                                      |   | (683.4        | )     |                  |   | 21.2  |       |   |   | (672.0 | )     |   |   | 38.1  |     
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    | Earnings(loss) before extraordinary items                                                               |                                                                      |   | (558.9        | )     |                  |   | 3.0   |       |   |   | (470.3 | )     |   |   | 58.5  |     
|                                    | Extraordinary items                                                                                     |                                                                      |   |              |       |                  |   |      |       |   |   | 2.5    |       |   |   |      |     
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    | Net earnings(loss)                                                                                      |                                                                      |   | (558.9        | )     |                  |   | 3.0   |       |   |   | (467.8 | )     |   |   | 58.5  |     
|                                    | Preferred stock dividends                                                                               |                                                                      |   | 0.1           |       |                  |   | 0.1   |       |   |   | 0.3    |       |   |   | 0.3   |     
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    | Numerator for basic earnings per share  net
earnings(loss) available to common
shareholders            |                                                                      |   | (559.0        | )     |                  |   | 2.9   |       |   |   | (468.1 | )     |   |   | 58.2  |     
|                                    | Effect
of dilutive securities
Preferred stock dividends                                                 |                                                                      |   | 0.1           |       |                  |   | 0.1   |       |   |   | 0.3    |       |   |   | 0.3   |     
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    | Numerator for diluted earnings per
share  net earnings(loss) available to
common shareholders          |                                                                      | $ | (558.9        | )     |                  | $ | 3.0   |       |   | $ | (467.8 | )     |   | $ | 58.5  |     
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|Denominator                         |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    | Denominator for basic earnings per share 
weighted-average common shares                               |                                                                      |   | 127.5         |       |                  |   | 124.5 |       |   |   | 126.8  |       |   |   | 124.1 |     
|                                    | Effect of dilutive securities                                                                          
|                                    |                                                                                                         | Convertible preferred stock                                          |   |               |      |                  |   |       | 0.7   |   |   |        |      |   |   |       | 0.7  | 
|                                    |                                                                                                         | Employee stock options                                               |   |               |      |                  |   |       | 0.4   |   |   |        |      |   |   |       | 0.4  | 
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    | Dilutive potential common shares                                                                        |                                                                      |   |              |       |                  |   | 1.1   |       |   |   |       |       |   |   | 1.1   |     
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    | Denominator for diluted earnings per share 
adjusted weighted-average shares after
assumed conversions |                                                                      |   | 127.5         |       |                  |   | 125.6 |       |   |   | 126.8  |       |   |   | 125.2 |     
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|Earnings Per Share                  |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    | Basic:                                                                                                  |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |       |     
|                                    |                                                                                                         | Earnings(loss) from continuing
operations before extraordinary items |   | $             | 0.98  |                  |   | $     | (0.15 | ) |   | $      | 1.59  |   |   | $     | 0.17 | 
|                                    |                                                                                                         | Discontinued operations                                              |   |               | (5.36 | )                |   |       | 0.17  |   |   |        | (5.30 | ) |   |       | 0.30 | 
|                                    |                                                                                                         | Extraordinary items                                                  |   |               |      |                  |   |       |      |   |   |        | 0.02  |   |   |       |     | 
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    |                                                                                                         | Net earnings(loss)                                                   |   | $             | (4.38 | )                |   | $     | 0.02  |   |   | $      | (3.69 | ) |   | $     | 0.47 | 
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    | Diluted:                                                                                                |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |       |     
|                                    |                                                                                                         | Earnings(loss) from continuing operations before extraordinary items |   | $             | 0.98  |                  |   | $     | (0.15 | ) |   | $      | 1.59  |   |   | $     | 0.17 | 
|                                    |                                                                                                         | Discontinued operations                                              |   |               | (5.36 | )                |   |       | 0.17  |   |   |        | (5.30 | ) |   |       | 0.30 | 
|                                    |                                                                                                         | Extraordinary items                                                  |   |               |      |                  |   |       |      |   |   |        | 0.02  |   |   |       |     | 
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      
|                                    |                                                                                                         | Net earnings(loss)                                                   |   | $             | (4.38 | )                |   | $     | 0.02  |   |   | $      | (3.69 | ) |   | $     | 0.47 | 
|                                    |                                                                                                         |                                                                      |   |               |       |                  |   |       |       |   |   |        |       |   |   |      

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Comprehensive Income(Loss)

The components of comprehensive income(loss), net of tax, for the second
quarter and six months of 2002 and 2001 are as follows:

|                                          |  |               |      |                  |  |      |     |      |  |   |      |   |  |   |      |  
|----------------------------------------- |  | ------------- | ---- | ---------------- |  | ---- | --- | ---- |  | - | ---- | - |  | - | ---- | -
|                                          |  | Quarter ended |      | Six months ended
|                                          |  | June 30       |      | June 30         
|                                          |  |               |      |                 
|(In millions)                             |  | 2002          |      | 2001             |  | 2002 |     | 2001
|                                          |  |               |      |                  |  |      |     |     
|Net earnings(loss)                        |  | $             | (559 | )                |  | $    | 3   |      |  | $ | (468 | ) |  | $ | 58   |  
|Foreign currency exchange gain(loss)      |  |               | 219  |                  |  |      | (70 | )    |  |   | 187  |   |  |   | (189 | )
|Unrealized gain(loss) on securities       |  |               | (39  | )                |  |      | 238 |      |  |   | (68  | ) |  |   | (3   | )
|Unrealized gain(loss) on cash flow hedges |  |               | 81   |                  |  |      | (26 | )    |  |   | 81   |   |  |   | (57  | )
|Minimum pension liability                 |  |               | 1    |                  |  |      |    |      |  |   | 1    |   |  |   |     |  
|                                          |  |               |      |                  |  |      |     |      |  |   |      |   |  |   |      |  
|Comprehensive income(loss)                |  | $             | (297 | )                |  | $    | 145 |      |  | $ | (267 | ) |  | $ | (191 | )
|                                          |  |               |      |                  |  |      |     |      |  |   |      |   |  |   |      |  

The components of accumulated other comprehensive income(loss), net of tax, at
June 30, 2002 and December 31, 2001 are as follows:

|                                             |  |         |      |             |  |   |      |  
|-------------------------------------------- |  | ------- | ---- | ----------- |  | - | ---- | -
|                                             |  | June 30 |      | December 31
|(In millions)                                |  | 2002    |      | 2001       
|                                             |  |         |      |            
|Foreign currency exchange loss               |  | $       | (337 | )           |  | $ | (524 | )
|Unrealized gain on securities                |  |         | 50   |             |  |   | 118  |  
|Unrealized gain(loss) on cash flow hedges    |  |         | 79   |             |  |   | (2   | )
|Minimum pension liability adjustments        |  |         | (60  | )           |  |   | (61  | )
|                                             |  |         |      |             |  |   |      |  
|Accumulated other comprehensive income(loss) |  | $       | (268 | )           |  | $ | (469 | )
|                                             |  |         |      |             |  |   |      |  

Contingencies

Various claims, lawsuits and administrative proceedings with respect to
commercial, product liability and environmental matters are pending or
threatened against the Company or its subsidiaries, arising from the ordinary
course of business.

Further, product liability claims may be asserted in the future for events not
currently known by management. Although the ultimate liability from these
potential claims cannot be ascertained at June 30, 2002, management does not
anticipate that any related liability, after consideration of insurance
recovery, would have a material adverse effect on the Companys financial
position.

During 1996, the United States Department of Justice (DOJ) advised the Company
that it had been named as a defendant in lawsuits brought by a former employee
of the Company originally filed under seal in 1994 and 1995 in the United
States District Court for the Central District of California under the qui tam
provisions of the civil False Claims Act. The DOJ subsequently advised that it
would intervene in the litigation. In a consolidated complaint filed jointly
by the former employee and the DOJ, it is alleged that the Company
misclassified various costs and improperly charged those costs to certain of
its federal contracts, that the United States has incurred substantial damages,
and that the Company is liable for treble damages, penalties, post-judgment
interest, costs (including attorneys fees) and all other proper relief. All
substantive allegations against the Company have been denied in the Companys
answer to the consolidated complaint. The Company cannot currently predict the
outcome of this lawsuit.

In October 2000, Kelsey-Hayes Company (formerly known as Fruehauf Corporation)
was served with a grand jury subpoena relating to a criminal investigation
being conducted by the U.S. Attorney for the Southern District of Illinois.
The U.S. Attorney has informed the Company that the investigation relates to

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possible wrongdoing by Kelsey-Hayes Company and others involving certain loans
made by Kelsey-Hayes Companys then parent corporation to Fruehauf Trailer
Corporation, the handling of the trailing liabilities of Fruehauf Corporation
and actions in connection with the 1996 bankruptcy of Fruehauf Trailer
Corporation. Kelsey-Hayes Company became a wholly-owned subsidiary of TRW upon
TRWs acquisition of LucasVarity in 1999. The Company is cooperating with the
investigation and is unable to predict the outcome of the investigation at this
time.

On May 6, 2002, ArvinMeritor Inc. filed suit against the Company in the United
States District Court for the Eastern District of Michigan, claiming breach of
contract and breach of warranty in connection with certain tie rod ends that
the Company supplied to ArvinMeritor and the voluntary recall of some of these
tie rod ends. ArvinMeritor subsequently recalled all of the tie rod ends, and
claims that it is entitled to reimbursement by the Company for the costs
associated with both the products recalled by the Company and those recalled by
ArvinMeritor on its own. ArvinMeritor is seeking an undisclosed amount of
compensatory and consequential damages. Management believes the Company has
meritorious defenses and intends to defend vigorously the claims asserted
against the Company, but cannot predict the outcome of this lawsuit.

The Company and certain of its subsidiaries have been subject in recent years
to some asbestos-related claims. Management believes that such claims will not
have a material adverse effect on the Companys financial condition or results
of operations. In general, these claims seek damages for illnesses alleged to
have resulted from exposure to asbestos used in certain components sold by the
Company and/or its subsidiaries.

Management believes the majority of the claimants were assembly workers at
major U.S. automobile manufacturers. The vast majority of these claims name as
defendants numerous manufacturers and suppliers of a wide variety of products
allegedly containing asbestos. Management believes that, to the extent that
any of the products sold by the Companys automotive-related subsidiaries and at issue in these
cases contained asbestos, the asbestos was encapsulated. Based upon several
years of experience with such claims, management believes that only a small
proportion of the claimants has or will ever develop any asbestos-related
impairment.

Total annual settlement costs in connection with
asbestos-related claims over the last five years as well as legal fees and
expenses to defend these cases have been immaterial. These claims are strongly
disputed and it has been the Companys policy to defend against them aggressively. The
Company and its subsidiaries have been successful in obtaining dismissal of many cases without any
payment whatsoever. Moreover, there is significant insurance coverage with
solvent carriers with respect to these claims.

Taking into account established reserves, management believes that the ultimate
resolution of each of the foregoing matters will not have a material effect on
the Companys financial condition or results of operations. The resolution of
one or more of such matters may have a material effect on cash flow for the
period in which such matters are resolved.

Subsequent Event

On July 26, 2002 the Company gave notice that on August 30, 2002 all
outstanding shares of its Cumulative Serial Preference Stock II, $4.40
Convertible Series 1 (the Series 1 Preferred Stock), will be redeemed at a
redemption price of $104 per share, and all outstanding shares of its
Cumulative Serial Preference Stock II, $4.50 Convertible Series 3 (the Series
3 Preferred Stock), will be redeemed at a redemption price of $100 per share.

Prior to redemption, holders of Series 1 Preferred Stock have an existing right
to convert each of their shares into 8.8 shares of TRW common stock and holders
of Series 3 Preferred Stock have an existing right to convert each of their
shares into 7.448 shares of TRW common stock. The right to convert shares of
Series 1 and Series 3 Preferred Stock into shares of TRW common stock will
terminate on the close of

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business on August 30, 2002. As of July 24, 2002, approximately 77,800 shares of Series 1 and Series 3 Preferred Stock were
outstanding. To the extent that all of these shares are converted into TRW
common stock, then approximately 617,400 shares of TRW common stock will be
issued.

The regular quarterly dividends of $1.10 per share on the Series 1 Preferred
Stock and $1.125 per share on the Series 3 Preferred Stock, are payable on
September 15, 2002 to holders of record on August 9, 2002.

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##### Table of Contents



Independent Accountants Review Report

Audit Committee of the
Board of Directors
TRW Inc.

We have reviewed the accompanying unaudited balance sheet of TRW Inc. and
subsidiaries as of June 30, 2002, and the related unaudited statements of
operations for the three-month and six-month periods ended June 30, 2002 and
2001, and statements of cash flows for the six-month periods ended June 30,
2002 and 2001, included in the Form 10-Q of TRW Inc. for the quarterly period
ended June 30, 2002. These financial statements are the responsibility of the
Companys management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet of TRW Inc. as of December 31,
2001, and the related statements of operations, cash flows, and changes in
shareholders investment for the year then ended (not presented herein), and in
our report dated January 22, 2002, we expressed an unqualified opinion on those
financial statements. Those financial statements and our report on them are
included in the Form 10-K of TRW Inc. for the year ended December 31, 2001. In
our opinion, the information set forth in the accompanying balance sheet as of
December 31, 2001, is fairly stated, in all material respects, in relation to
the balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Cleveland, Ohio
July 18, 2002,
     except for the Subsequent Event note,
     as to which the date is July 26, 2002

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Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations

On June 30, 2002 the Company, Northrop Grumman Corporation (Northrop) and
Richmond Acquisition Corp., a wholly-owned subsidiary of Northrop, entered into
a definitive merger agreement, whereby Northrop will acquire all of the
Companys outstanding common stock and the Company will become a wholly-owned
subsidiary of Northrop. In the merger, each share of the Companys common
stock will be converted into the right to receive a number of shares of
Northrop common stock equal to the exchange ratio. The exchange ratio is
calculated by dividing $60 by the average closing sale prices for a share of
Northrop common stock on the New York Stock Exchange during the five
consecutive trading days ending on (and including) the second trading day prior
to the date the merger is completed. However, in no event will the exchange
ratio be greater than 0.5357 ($60/$112) or less than 0.4348 ($60/$138), even if
the actual average price per share of Northrop common stock used to calculate
the exchange ratio is less than $112 or greater than $138. The transaction
requires approval from European and U.S. regulatory agencies, as well as
approval by TRW shareholders and Northrop stockholders. Northrop has announced
that after the completion of the merger, it plans to separate the Companys
automotive business, either through a sale or a spin-off of the business to
shareholders. The Companys previously announced agreement to sell
Aeronautical Systems to Goodrich Corporation is unaffected by the merger
agreement.

On June 18, 2002, as part of the Companys strategic shareholder value
enhancement plan, the Company announced that it had reached a definitive
agreement with Goodrich Corporation for the sale of its Aeronautical Systems
business for $1.5 billion. Proceeds will be used to reduce debt and for other
cash needs. In accordance with Statement of Accounting Standards (SFAS) 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, the results
of operations of this business are reported as discontinued operations, net of
applicable income taxes, for all periods presented. In addition, the assets
and liabilities of the Aeronautical Systems business have been reclassified as
held for sale. Refer to the Discontinued Operations note to financial
statements for further discussion.

Results of Operations
(In millions except per share data)

|                                                                       |                         |   |               |       |                  |   |        |       |           |   |      |       |      |    |        |   |           |       |       |       |    |      |       |      |      |       |     |       |    |  |    |   | 
|---------------------------------------------------------------------- | ----------------------- | - | ------------- | ----- | ---------------- | - | ------ | ----- | --------- | - | ---- | ----- | ---- | -- | ------ | - | --------- | ----- | ----- | ----- | -- | ---- | ----- | ---- | ---- | ----- | --- | ----- | -- |  | -- | - | 
|                                                                       |                         |   | Quarter ended |       | Six months ended
|                                                                       |                         |   | June 30       |       | June 30         
|                                                                       |                         |   |               |       |                 
|                                                                       |                         |   |               |       |                  |   |        |       | Percent   |   |      |       |      |    |        |   | Percent  
|                                                                       |                         |   | 2002          |       | 2001             |   | Change |       | Inc (Dec) |   | 2002 |       | 2001 |    | Change |   | Inc (Dec)
|                                                                       |                         |   |               |       |                  |   |        |       |           |   |      |       |      |    |        |   |          
|Sales                                                                  |                         | $ | 4,269         |       |                  | $ | 4,006  |       |           | $ | 263  |       |      |    | 7      | % |           | $     | 8,119 |       |    | $    | 7,908 |      |      | $     | 211 |       |    |  | 3  | %
|Profit from continuing
operations before taxes
and extraordinary items |                         |   | 275           |       |                  |   | 121    |       |           |   | 154  |       |      |    | 127    | % |           |       | 488   |       |    |      | 301   |      |      |       | 187 |       |    |  | 62 | %
|Earnings(loss) from
continuing operations
before extraordinary
items   |                         |   | 124           |       |                  |   | (18    | )     |           |   | 142  |       |      | nm |        |   | 202       |       |       |       | 20 |      |       |      | 182  |       |     | nm   
|Discontinued operations                                                |                         |   | (683          | )     |                  |   | 21     |       |           |   | (704 | )     |      | nm |        |   | (672      | )     |       |       | 38 |      |       |      | (710 | )     |     | nm   
|Net earnings(loss)                                                     |                         |   | (559          | )     |                  |   | 3      |       |           |   | (562 | )     |      | nm |        |   | (468      | )     |       |       | 58 |      |       |      | (526 | )     |     | nm   
|Diluted earnings(loss)
per share:                                      |                         |   |               |       |                  |   |        |       |           |   |      |       |      |    |        |   |           |       |       |       |    |      |       |      |      |       |     |       |    |  |    |  
|                                                                       | Continuing operations   |   |               | 0.98  |                  |   |        | (0.15 | )         |   |      | 1.13  |      |    | nm     |   |           | 1.59  |       |       |    | 0.17 |       |      |      | 1.42  |     |       | nm
|                                                                       | Discontinued operations |   |               | (5.36 | )                |   |        | 0.17  |           |   |      | (5.53 | )    |    |        |   |           |       |       | (5.30 | )  |      |       | 0.30 |      |       |     | (5.60 | )  |  |    |   | 
|                                                                       | Extraordinary items     |   |               |      |                  |   |        |      |           |   |      |      |      |    |        |   |           |       |       | 0.02  |    |      |       |     |      |       |     | 0.02  |    |  |    |   | 
|                                                                       | Net earnings(loss)      |   |               | (4.38 | )                |   |        | 0.02  |           |   |      | (4.40 | )    |    | nm     |   |           | (3.69 | )     |       |    | 0.47 |       |      |      | (4.16 | )   |       | nm
|Effective tax rate                                                     |                         |   | 34.9          | %     |                  |   | 651.5  | %     |           |   |      |       |      |    |        |   |           |       | 34.0  | %     |    |      | 59.4  | %    |      |       |     |       |    |  |    |  
|                                                                       |                        
|nm not meaningful                                                     |                         |   |               |       |                  |   |        |       |           |   |      |       |      |    |        |   |           |       |       |       |    |      |       |      |      |       |     |       |    |  |    |  

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The second quarter 2002 sales of $4,269 million increased 7 percent compared
to $4,006 million in the second quarter of 2001. The increase was the result
of higher automotive production volumes of $158 million, primarily in North
America, increased sales on new business and ongoing defense programs of
approximately $100 million and the favorable effects of foreign currency
exchange of $82 million, partially offset by divestitures in 2001 of $48
million and lower pricing of $30 million.

Earnings(loss) from continuing operations before extraordinary items for the
second quarter of 2002 were $124 million, or $0.98 per share, compared to a
loss of $18 million, or $0.15 per share, for the second quarter of 2001. Net
earnings(loss) and net earnings(loss) per share for the second quarter 2002
were a loss of $559 million, or $4.38 per share, compared to earnings of $3
million, or $0.02 per share, in 2001. The Company reported a net loss on
discontinued operations of $683 million after tax, or $5.36 per share, for the
second quarter 2002 compared to earnings of $21 million after tax, or $0.17
per share, in the second quarter of 2001. Adjusting second quarter of 2001
for the effect of adopting SFAS 142 on January 1, 2002, second quarter net
earnings from continuing operations for 2001 would have increased by $18
million, or $0.14 per share.

Unusual items in the second quarter of 2002 negatively impacted earnings from
continuing operations by $9 million, or $0.07 per share. Unusual items in
2002 included after tax charges of $18 million related to the Companys
activities associated with Northrops exchange offer and automotive
restructuring and asset impairment charges of $3 million, which were offset
partially by after tax gains on sales of real estate of $12 million. Unusual
items for the second quarter of 2001 included after tax charges of $58 million
for asset impairment and restructuring expenses related to Endwave, and other
charges, primarily automotive restructuring, of approximately $21 million.

Gross profit of $604 million in the second quarter of 2002 increased $74
million, or 14 percent from $530 million in 2001. This increase was the
result of net cost reductions of $67 million, increased volume of $8 million,
the net reduction of $30 million in expenses, primarily as a result of a
product recall in 2001, and the favorable effect of foreign currency exchange
of $5 million, which were offset by lower pricing of $30 million and
divestitures in 2001 of $14 million. Gross profit included $64 million and
$59 million of net pension income from an overfunded pension plan in the
second quarters of 2002 and 2001, respectively. Gross profit margin (gross
profit as a percentage of sales) increased to 14.1 percent for the second
quarter 2002 compared to 13.2 percent in the second quarter 2001.

Administrative and selling expenses of $219 million in the second quarter 2002
decreased $7 million compared to $226 million in the second quarter of 2001.
Administrative and selling expenses included expenses associated with
Northrops exchange offer of $23 million in 2002 and $15 million related to
automotive restructuring charges in 2001. Without unusual items,
administrative and selling expenses decreased $15 million due primarily to
reduced headcount and related expenses from the Companys corporate
restructuring actions taken in 2001, and divestitures of $6 million, partially
offset by increased expenditures on reimbursable government contracts of $6
million and higher spending on new program awards of $5 million.

Research and development expenses of $100 million in the second quarter of
2002 increased $7 million from the second quarter in 2001. The increase was
primarily due to higher spending on new business opportunities in Space &
Electronics of $5 million.

As a result of lower average debt outstanding and lower short-term interest
rates in the United States, interest expense in the second quarter of 2002
decreased $20 million to $102 million compared to the second quarter of 2001
of $122 million.

Amortization of intangible assets and goodwill of $5 million in the second
quarter of 2002 decreased $19 million compared to $24 million in the second
quarter of 2001, primarily as a result of the adoption of SFAS 142, January 1,
2002, whereby the Company no longer amortizes goodwill.

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Other (income)expense-net was income of $14 million in the second quarter of
2002 compared to expense of $62 million in 2001. Included in 2002 were gains
on the sales of real estate of $18 million. Included in 2001 were asset
impairment and restructuring charges related to Endwave of $70 million.

The effective income tax rate from continuing operations was 34.9 percent in
the second quarter of 2002 compared to 651.5 percent in the second quarter of
2001. Excluding unusual items, the effective income tax rate from continuing
operations would have been 34 percent in the second quarter of 2002 and 37
percent in the second quarter of 2001. The effective income tax rate for the
second quarter of 2002 was reduced primarily by the adoption of SFAS 142
resulting in the elimination of the amortization of nondeductible goodwill.

Sales for the first half of 2002 of $8,119 million increased $211 million, or
3 percent, compared to $7,908 million in 2001. The increase in sales was due
to higher automotive volume, primarily in North America of $204 million, a net
increase in volume on new and existing defense programs of $105 million and
favorable foreign currency exchange of $33 million, partially offset by
divestitures of $76 million and lower pricing of $58 million.

Earnings(loss) from continuing operations before extraordinary items for the
first half of 2002 were $202 million, or $1.59 per share, compared to $20
million, or $0.17 per share, in 2001. Net earnings(loss) and net
earnings(loss) per share for the first half of 2002 were a loss of $468
million, or $3.69 per share, compared to earnings of $58 million, or $0.47 per
share, in 2001. The Company reported a net loss on discontinued operations of
$672 million, or $5.30 per share, for the six months ended June 30, 2002
compared to earnings of $38 million, or $0.30 per share, for the six months
ended June 30, 2001. In the first quarter of 2002, the Company recorded, as
extraordinary items, gains on the early extinguishment of debt of $2 million
after tax, or $0.02 per share. Adjusting the first half of 2001 for the
effect of adopting SFAS 142, net earnings from continuing operations for the
first half of 2001 would have increased by $35 million, or $0.28 per share.

Unusual items for the first six months of 2002 negatively impacted earnings
from continuing operations by $12 million, or $0.10 per share. Unusual items
in 2002 included after tax charges of $22 million related to the Companys
activities associated with Northrops exchange offer, automotive restructuring
and asset impairment charges of $7 million, partially offset by after tax
gains on the sales of real estate of $12 million and the sale of RF Micro
Devices (RFMD) common stock of approximately $5 million. The unusual items
for the first half of 2001 included a charge of $58 million after tax for
asset impairment and restructuring charges related to Endwave and other
charges, primarily automotive restructuring, of approximately $48 million
after taxes. These charges were partially offset by after tax gains from
asset sales, primarily related to electrical products operations and the
aftermarket business in Turkey, of approximately $28 million.

Gross profit of $1,120 million for the first six months of 2002 increased $87
million, or approximately 8 percent from $1,033 million in 2001. Unusual
items included in gross profit in the first half of 2002 and 2001 were
primarily restructuring charges of $10 million and approximately $30 million,
respectively. Excluding the effect of unusual items, gross profit increased
$67 million year over year. The increase was primarily due to net cost
reductions of $110 million and a net reduction of $30 million in expenses,
primarily as a result of a product recall in 2001, partially offset by price
reductions of $58 million and the effect of divestitures of $21 million.
Gross profit for the first six months of 2002 and 2001 included $123 million
and $120 million, respectively, of net pension income from an overfunded
pension plan. Gross profit margin was 13.8 percent for the first half of 2002
compared to 13.1 percent in 2001.

Administrative and selling expenses of $426 million for the first half of 2002
decreased $17 million compared to $443 million in 2001. Excluding unusual
items in 2002 of $29 million for expenses incurred on behalf of the Northrop
exchange offer and in 2001 related to restructuring charges of approximately
$30 million, administrative and selling expenses decreased $16 million. The
decrease was primarily due to the result of the Companys corporate and
Automotive restructuring actions taken in 2001, and the effect of divestitures
of $10 million, offset by higher spending on new programs and initiatives in
Space &

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Electronics and Systems of $16 million and increased expenditures on
reimbursable governmental contracts of $14 million.

Interest expense of $205 million for the first half of 2002 decreased $46
million from $251 million in 2001, due to lower average debt outstanding and
lower short-term interest rates in the United States.

Amortization of intangible assets and goodwill of $8 million for the first six
months of 2002 decreased $40 million compared to $48 million in the first six
months of 2001, primarily as a result of the Company no longer amortizing
goodwill of $41 million.

Other (income)expense-net was income of $18 million in the first half of 2002
and expense of $48 million in 2001. Included in 2002 were gains on the sales
of real estate and RFMD common stock of $18 million and $9 million,
respectively. Included in 2001 were asset impairment and restructuring
charges related to the Companys investment in Endwave of $70 million, offset
by net gains on the sale of assets of approximately $26 million.

The effective income tax rate from continuing operations was 34 percent for the
six months ended June 30, 2002 compared to 59.4 percent in 2001. Excluding
unusual items, the effective income tax rate from continuing operations would
have been approximately 33.4 percent for the six months ended June 30, 2002 and
36.7 percent for 2001. The effective income tax rate for 2002 was reduced
primarily by the adoption of SFAS 142 resulting in the elimination of the
amortization of nondeductible goodwill.

Results of SegmentsAutomotive

|                                                               |  |               |       |                  |  |        |       |           |  |      |     |      |  |         |    |           |  |   |       |   |  |   |       |   |  |   |     |         |  |  |    |  
|-------------------------------------------------------------- |  | ------------- | ----- | ---------------- |  | ------ | ----- | --------- |  | ---- | --- | ---- |  | ------- | -- | --------- |  | - | ----- | - |  | - | ----- | - |  | - | --- | ------- |  |  | -- | -
|                                                               |  | Quarter ended |       | Six months ended
|                                                               |  | June 30       |       | June 30         
|                                                               |  |               |       |                 
|                                                               |  |               |       |                  |  |        |       |           |  |      |     |      |  | Percent |    |           |  |   |       |   |  |   |       |   |  |   |     | Percent
|(In millions)                                                  |  | 2002          |       | 2001             |  | Change |       | Inc (Dec) |  | 2002 |     | 2001 |  | Change  |    | Inc (Dec)
|                                                               |  |               |       |                  |  |        |       |           |  |      |     |      |  |         |    |          
|Sales                                                          |  | $             | 2,840 |                  |  | $      | 2,678 |           |  | $    | 162 |      |  |         | 6  | %         |  | $ | 5,411 |   |  | $ | 5,307 |   |  | $ | 104 |         |  |  | 2  | %
|Profit before taxes                                            |  |               | 174   |                  |  |        | 108   |           |  |      | 66  |      |  |         | 60 | %         |  |   | 287   |   |  |   | 206   |   |  |   | 81  |         |  |  | 39 | %
|Unusual
items-income(expense
) included in
profit before taxes |  |               | (6    | )                |  |        | (23   | )         |  |      | 17  |      |  |         |    |           |  |   | (12   | ) |  |   | (28   | ) |  |   | 16  |         |  |  |    |  

Sales of $2,840 million for the second quarter of 2002 increased 6 percent
compared to $2,678 million in the second quarter of 2001. The increase
resulted from higher volumes, primarily from strengthening North American build
rates and incremental sales from new products, of $158 million and the
favorable effect of foreign currency exchange of $82 million, offset by the
effects of divestitures in 2001 of $48 million and lower pricing of $30
million.

Profit before taxes for the second quarter of 2002 increased $66 million, or 60
percent compared to the second quarter of 2001. Excluding the effect of
adopting SFAS 142 of $15 million and a net decrease in unusual items of $17
million, 2002 profit before taxes increased $34 million compared to 2001.
Unusual items in the second quarter of 2002, which primarily consisted of
restructuring charges, negatively impacted profit before taxes by $6 million.
Unusual items for the second quarter of 2001 included restructuring charges of
$23 million. The segments cost reduction initiatives and the absence of a
seat belt recall in 2001 totaling $70 million combined with higher volume,
primarily in North America of $14 million, more than offset lower pricing of
$30 million, lower European vehicle production and unfavorable product mix of
$11 million and the effects of divestitures in 2001 of $7 million.

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Sales of $5,411 million for the six months ended June 30, 2002 increased $104
million, or 2 percent compared to 2001. The increase resulted from higher
volume, primarily in North America, of $204 million and the favorable effect of
foreign currency exchange of $33 million, partially offset by the effects of
divestitures of $76 million and lower pricing of $58 million.

Profit before taxes for the first six months increased $81 million, or 39
percent compared to 2001. Excluding the effect of adopting SFAS 142 of $31
million and the net change in unusual items of $16 million, 2002 profit before
taxes increased $34 million compared to 2001. Unusual items in 2002, which
consisted of restructuring charges of $9 million and a write-down of an
investment in an affiliate of $3 million, negatively impacted profit before
taxes by $12 million. Unusual items for the first six months of 2001
negatively impacted profit before taxes by $28 million and included
restructuring charges of $54 million, offset by gains on asset sales primarily
related to electrical products operations and the aftermarket business in
Turkey of $26 million. The segments cost reduction initiatives and the
absence of a seat belt recall in 2001 totaling $116 million, more than offset
lower pricing of $58 million, the effects of divestitures of $10 million, the
effect of foreign currency exchange of $6 million and lower volume of $5
million.

Severance costs and plant closing accruals related to restructuring plans
including reorganizing and downsizing operations were $145 million at December
31, 2001. During the six months ended June 30, 2002, the Company recorded
additional before tax charges of $9 million, of which $6 million was recorded
in the second quarter, in cost of sales, primarily for severance costs. For
the second quarter and six months ended June 30, 2002, $22 million and $51
million, respectively, was used for severance payments and costs related to the
consolidation of certain facilities. During the first six months of 2002,
these programs resulted in a reduction of approximately 1,000 employees. The
majority of the remaining balance of $103 million is expected to be used by the
end of 2002.

Systems

|                                                              |  |               |     |                  |  |        |     |           |  |      |     |      |  |         |    |           |  |   |       |  |  |   |       |  |  |   |     |         |  |  |    |  
|------------------------------------------------------------- |  | ------------- | --- | ---------------- |  | ------ | --- | --------- |  | ---- | --- | ---- |  | ------- | -- | --------- |  | - | ----- |  |  | - | ----- |  |  | - | --- | ------- |  |  | -- | -
|                                                              |  | Quarter ended |     | Six months ended
|                                                              |  | June 30       |     | June 30         
|                                                              |  |               |     |                 
|                                                              |  |               |     |                  |  |        |     |           |  |      |     |      |  | Percent |    |           |  |   |       |  |  |   |       |  |  |   |     | Percent
|(In millions)                                                 |  | 2002          |     | 2001             |  | Change |     | Inc (Dec) |  | 2002 |     | 2001 |  | Change  |    | Inc (Dec)
|                                                              |  |               |     |                  |  |        |     |           |  |      |     |      |  |         |    |          
|Sales                                                         |  | $             | 919 |                  |  | $      | 799 |           |  | $    | 120 |      |  |         | 15 | %         |  | $ | 1,697 |  |  | $ | 1,588 |  |  | $ | 109 |         |  |  | 7  | %
|Profit before taxes                                           |  |               | 68  |                  |  |        | 53  |           |  |      | 15  |      |  |         | 31 | %         |  |   | 124   |  |  |   | 101   |  |  |   | 23  |         |  |  | 24 | %
|Unusual
items-income(expense)
included in
profit before taxes |  |               | 2   |                  |  |        |    |           |  |      | 2   |      |  |         |    |           |  |   | 2     |  |  |   |      |  |  |   | 2   |         |  |  |    |  

Sales of $919 million for the second quarter of 2002 increased $120 million, or
15 percent, compared to the second quarter of 2001 due to higher volume from
existing programs, including the Intercontinental Ballistic Missile Prime
Integration (ICBM) program and missile defense, as well as new business, of
$163 million, offset by lower volume on contracts nearing completion or
completed of $43 million.

Profit before taxes of $68 million for the second quarter 2002 increased $15
million, or 31 percent, compared to the second quarter of 2001. Included in
the second quarter of 2002 profit before taxes was an unusual item of $2
million from the gain on sale of real estate. Excluding the effect of adopting
SFAS 142 of $5 million and the unusual item in 2002, profit before taxes in the
second quarter of 2002 increased $8 million compared to second quarter of 2001.
The increase was due to higher sales volumes.

Sales of $1,697 million for the six months of 2002 increased $109 million, or 7
percent, compared to $1,588 million in 2001. This increase was due to higher
volume on new and existing core programs of

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approximately $200 million, offset by lower volume on contracts nearing completion or completed of $93 million.

Profit before taxes for the six months ended June 30, 2002 of $124 million
increased $23 million or 24 percent, compared to $101 million for the same
period in 2001. Excluding the effect of adopting SFAS 142 of $9 million and an
unusual item in 2002 related to the gain on the sale of assets of $2 million,
profit before taxes increased $12 million in 2002 compared to 2001. The
increase was due to higher volume on new programs of $5 million and on existing
programs of $9 million, offset by lower volume on contracts nearing completion
or completed.

Space & Electronics

|                                                              |  |               |     |                  |  |        |     |           |  |      |     |      |  |         |    |          |  |   |       |  |  |   |       |   |  |   |    |         |  |  |   | 
|------------------------------------------------------------- |  | ------------- | --- | ---------------- |  | ------ | --- | --------- |  | ---- | --- | ---- |  | ------- | -- | -------- |  | - | ----- |  |  | - | ----- | - |  | - | -- | ------- |  |  | - | 
|                                                              |  | Quarter ended |     | Six months ended
|                                                              |  | June 30       |     | June 30         
|                                                              |  |               |     |                 
|                                                              |  |               |     |                  |  |        |     |           |  |      |     |      |  | Percent |    |          |  |   |       |  |  |   |       |   |  |   |    | Percent
|(In millions)                                                 |  | 2002          |     | 2001             |  | Change |     | Inc (Dec) |  | 2002 |     | 2001 |  | Change  |    | Inc(Dec)
|                                                              |  |               |     |                  |  |        |     |           |  |      |     |      |  |         |    |         
|Sales                                                         |  | $             | 510 |                  |  | $      | 529 |           |  | $    | (19 | )    |  |         | (4 | %)       |  | $ | 1,011 |  |  | $ | 1,013 |   |  | $ | (2 | )       |  |  |  | 
|Profit(loss) before taxes                                     |  |               | 33  |                  |  |        | (40 | )         |  |      | 73  |      |  |         |   |          |  |   | 77    |  |  |   | (6    | ) |  |   | 83 |         |  |  |  | 
|Unusual
items-income(expense)
included in profit before
taxes |  |               |    |                  |  |        | (70 | )         |  |      | 70  |      |  |         |    |          |  |   | 9     |  |  |   | (70   | ) |  |   | 79 |         |  |  |   | 

Sales for the second quarter of 2002 of $510 million decreased 4 percent
compared to the second quarter of 2001 due to the effect of contracts winding
down or that were discontinued, primarily Astrolink, of approximately $70
million, which were partially offset by higher volume of approximately $50
million on existing core programs, such as the advanced extremely high
frequency (AEHF) satellite, airborne laser and avionics modules, and technology
contracts.

Profit(loss) before taxes of $33 million for the second quarter of 2002
increased $73 million compared to a loss of $40 million in the second quarter
of 2001. Excluding the effect in 2001 of an unusual items charge of $70
million related to the Companys investment in, and its share of, asset
impairment and restructuring charges recorded by Endwave, and the $1 million
effect of adopting SFAS 142, profit(loss) before taxes in 2002 increased $2
million from the prior year as a result of higher volume and performance from
core programs of $23 million, lower expenses related to commercializing
technologies of $2 million, offset by contracts winding down and the
discontinuation of the Astrolink program, of $23 million.

Sales for the six months ended June 30, 2002 of $1,011 million remained
essentially unchanged compared to $1,013 million in 2001 as higher volume on
new and existing programs, including technology contracts, of approximately
$130 million were offset by lower volume from contracts winding down and the
discontinuance of Astrolink totaling $133 million.

Profit(loss) before taxes for the six months ended June 30, 2002 of $77 million
increased $83 million from a loss of $6 million in 2001. Unusual items
included in profit(loss) before taxes were a $9 million gain on the sale of
RFMD common stock and a $70 million charge related to the Companys investment
in Endwave, in 2002 and 2001, respectively. Excluding the effect of the
unusual items and the adoption of SFAS 142, profit(loss) before taxes in 2002
increased $3 million as compared to 2001, as higher volume and improved
performance from core programs of $41 million, were partially offset by
contracts winding down and the discontinuance of the Astrolink program, of $37
million.

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Corporate and Other

Excluding unusual items of $8 million in the second quarter of 2002, corporate
expense and other declined $13 million compared to second quarter of 2001,
primarily as a result of reduced headcount and related costs resulting from the
2001 corporate restructuring and the effect of a favorable $4 million
settlement with the U.S. government concerning a closed, overfunded pension
plan. Unusual items in the second quarter of 2002 included before tax charges
of $23 million related to the Companys activities associated with Northrops
exchange offer, offset by gains on the sale of real estate of $15 million.

Excluding the net change in unusual items of $8 million, corporate expense and
other for the first half of 2002 declined $28 million compared to the first
half of 2001, primarily as a result of reduced headcount and related costs
resulting from the 2001 corporate restructuring. Unusual items in the first
half of 2002 included before tax charges of $29 million related to the
Companys activities associated with Northrops exchange offer, offset by gains
on the sale of real estate of $15 million. Unusual items in the first half of
2001 included $6 million of restructuring charges, primarily for severance.

Net employee benefits income for the second quarter of 2002 of $46 million
increased by $12 million compared to the second quarter of 2001, primarily as a
result of the updated actuarial plan valuation of the Companys pension plans,
which reflected improved return on plan assets, a reduction in employee
headcount and the effect of favorable foreign currency exchange.

Accounting Pronouncements

Effective January 1, 2002, the Company adopted SFAS 141, Business
Combinations, SFAS 142, Goodwill and Intangible Assets, and SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 141
requires that acquisitions entered into after June 30, 2001 are to be accounted
for using the purchase method and establishes criteria to be used in
determining whether acquired intangible assets are to be separated from
goodwill. As a result of the Companys analysis, only the value of assembled
workforce of approximately $65 million was reclassified from intangible assets
to goodwill at January 1, 2002.

SFAS 142 sets forth the accounting for goodwill and intangible assets already
recorded. Commencing January 1, 2002, goodwill is no longer being amortized.
Goodwill was tested for impairment by comparing the assets fair values to
their carrying values. Management has completed the valuations of its
reporting units and based on the valuations, goodwill for continuing operations
was determined not to be impaired. Refer to the Discontinued Operations note
to financial statements for the results of the valuation on the assets held for
sale. With the adoption of SFAS 142, the Company reassessed the useful lives
and residual values of all acquired intangible assets to make any necessary
amortization period adjustments, which resulted in no adjustments being made.
Amounts in 2001 have not been restated in accordance with the statement.

SFAS 143, Accounting for Asset Retirement Obligations, requires the fair
value of a liability for asset retirement obligations to be recorded in the
period in which it is incurred. The statement applies to a companys legal or
contractual obligation associated with the retirement of a tangible long-lived
asset that resulted from the acquisition, construction or development or
through the normal operation of a long-lived asset. The statement is effective
for the Company beginning January 1, 2003. Management has evaluated the impact
of SFAS 143 and believes that its adoption should not have a material effect on
the Companys financial position or results of operations.

SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
addresses the accounting and reporting for the impairment or disposal of
long-lived assets. The statement provides a consistent method to value
long-lived assets to be disposed of and broadens the presentation of
discontinued operations. The adoption of SFAS 144 did not have a material
effect on the Companys financial statements.

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In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS 145,
Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections. SFAS 145 requires gains and losses on
extinguishments of debt to be reclassified as income or loss from continuing
operations rather than as extraordinary items as previously required by SFAS 4,
Reporting Gains and Losses from Extinguishment of Debt. SFAS 145 also amends
SFAS 13 requiring certain modifications to capital leases to be treated as
sale-leaseback transactions and to subleases when the original lessee remains a
secondary obligor, or guarantor.

The provisions of SFAS 145 related to the rescission of SFAS 4 are effective
for the Company on January 1, 2003. The extraordinary gains recorded for the
extinguishment of debt in the first quarter of 2002 will be reclassified into
earnings from continuing operations when the statement is adopted. The
remaining provisions of SFAS 145 were effective for transactions and reporting
subsequent to May 15, 2002. The adoption of SFAS 145 did not have a material
impact to the Companys financial position or results of operations.

Liquidity and Financial Position

Operating cash flow from continuing operations for the six months ended June
30, 2002 of $383 million and other items of $89 million were used for capital
expenditures of $212 million, dividend payments of $45 million and other
financing activities of $169 million. As a result, cash and cash equivalents
increased $46 million. Operating cash flow from continuing operations for the
six months ended June 30, 2001 of $284 million and financing activities of $163
million were used for capital expenditures of $300 million, dividend payments
of $87 million and other items of $69 million. As a result, cash and cash
equivalents decreased $9 million.

Net debt (short-term debt, the current portion of long-term debt and long-term
debt, less cash and cash equivalents) was $5.3 billion at June 30, 2002 and
$5.5 billion at December 31, 2001. The ratio of net debt to total capital (net
debt, minority interests and shareholders investment) was 72 percent at June
30, 2002 and 71 percent at December 31, 2001. The percentage of fixed rate
debt to total debt was 81 percent at June 30, 2002 compared to 85 percent at
the end of 2001.

At June 30, 2002, short-term debt was $652 million, an increase from $115
million on December 31, 2001. The increase in short-term debt was principally
due to the repayment of $700 million of U.S. long-term debt that matured during
the first half of 2002. These repayments were funded through the issuance of
commercial paper in the U.S.

Commercial paper borrowings outstanding at June 30, 2002 totaled $536 million
with an average cost of 2.7 percent and maturities of up to three months. The
credit ratings of the Companys debt continue to be classified as on watch with
negative implications by Standard & Poors Rating Services and Moodys
Investors Services, Inc. These classifications continue to increase the cost
of borrowing and decrease the availability of commercial paper with longer
maturities to the Company.

The Company amended and restated the $1.8 billion revolving credit agreement
that expired on January 22, 2002 in a reduced aggregate amount of $1.25 billion
with 20 banks. This agreement will expire January 21, 2003. The Company has
an option to extend the maturity of outstanding borrowings at that time to
January 21, 2004. The Company continues to maintain an additional revolving
credit agreement in an amount of $1 billion that will expire in January 2005.
Both of the revolving credit agreements provide an alternative source of
liquidity and backup support for commercial paper and other short-term
borrowings. There were no borrowings outstanding under the Companys revolving
credit agreements at June 30, 2002. The Company is in compliance with the
covenants contained in these agreements.

At June 30, 2002, the aggregate amount of funds provided by accounts
receivables securitized was $350 million, an increase of $23 million since
December 31, 2001. This transaction is accounted for as a sale of the
receivables and reduces the amount of short-term debt reported by the Company.

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Long-term debt (including the current portion of long-term debt) at June 30,
2002 was $4.9 billion, a decrease of $0.7 billion since December 31, 2001.
This decrease was principally due to the repayment of $700 million of maturing
U.S. long-term debt during the first half of 2002. During the first quarter,
the Company refinanced $250 million of commercial paper borrowings by entering
into a term loan agreement with 10 banks due January 25, 2005. The interest
rate under the agreement is either the prime rate or a rate based on London
Interbank Offered Rate (LIBOR), at the option of the Company.

At June 30, 2002, $100 million of short-term obligations were reclassified to
long-term obligations as the Company intends to refinance the obligations on a
long-term basis and has the ability to do so under its revolving credit
agreements. This is a reduction of $250 million since December 31, 2001.

At June 30, 2002, the fair value of the hedge portion of the Companys share
sale agreements was $201 million, an increase of $57 million from December 31,
2001, as a result of changes in the underlying stocks hedged. The fair value
of the Companys foreign currency forward contracts was a gain of $20 million
at June 30, 2002, which is an increase of $66 million from December 31, 2001,
due primarily to strengthening in the euro and British pound sterling.

The Company has $1.2 billion available under its universal shelf registration
statement for issuance of securities.

If the transaction contemplated by the merger agreement with Northrop is
consummated, the Company will become a wholly-owned subsidiary of Northrop.
The closing of the merger will constitute an event of default under the
Companys revolving credit agreements, $350 million of long-term bank loan
agreements and $350 million accounts receivable securitization program. Such
an event of default would provide the lenders under the Companys revolving
credit facilities and outstanding term loans the right to accelerate payment of
borrowings under and cancel the agreements. Such an event of default would
also be cause for termination of the Companys accounts receivable
securitization program. The Company plans to repay or restructure such
indebtedness or facilities, negotiate waivers of any such termination events or
make alternative arrangements in conjunction with Northrop Grumman to avoid a
disruption in the Companys sources of liquidity. However, there can be no
assurance as to the nature or adequacy of any plans or arrangements that may be
ultimately implemented.

Under the merger agreement, the Company expects to make a number of payments at
or prior to the time of the merger related to outstanding awards under the
Companys long-term incentive plans, the funding of trusts pursuant to the
terms of existing employment continuation agreements and the Companys key
executive life insurance plan, annual incentive compensation, agreements with
financial advisors and other merger-related expenses. The Company currently
estimates that the maximum aggregate amount of such payments will be
approximately $820 million.

This figure includes an estimated $175 million maximum amount that may become
payable under the cash election alternatives that the Company will provide
holders of stock options, restricted stock and restricted stock units unless
the Company or Northrop reasonably determines that such an election could be
deemed to be a tender offer for TRW common stock by the Company. This estimate
is based on the total number of these securities outstanding as of
August 12,
2002, and assumes no exercises of stock options or forfeitures of these
securities between that date and the closing of the merger. If security
holders do not elect such payment or the payment election option is not
offered, the amount of cash payments due from the Company would be reduced.

The amount of certain payments included in the amounts set forth above would
depend on the price of TRW common stock over a period of time preceding the
merger, and the foregoing estimates are based on a stock price of $60 per
share. The maximum amount of cash payments would be reduced to the extent the
relevant average TRW stock price is below $60 per share.

Management believes that the Company will have adequate funds available to make
the foregoing payments and to continue to meet its other cash needs. In the
event that the Company consummates its

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proposed sale of its Aeronautical Systems business prior to the closing of the merger, the Company expects to use
a portion of the proceeds to fund such payments. In the event that the closing
of this sale does not occur prior to the closing, management believes it will
have adequate sources of financing available through its credit facilities
prior to the merger and through other arrangements to be made for the period
following the merger. However, the foregoing payment obligations may have a
material adverse affect on the Companys cash flow prior to and following the
merger and may adversely affect the Companys liquidity position.

Including the assets and liabilities of the Aeronautical Systems business that
are held for sale, the Company had a working capital deficiency of $165 million
at June 30, 2002 due primarily to effective working capital management and debt
maturing within one year. Management believes that sufficient resources from
funds generated by operations, dispositions and existing borrowing capacity are
available to maintain liquidity.

Other Matters

On July 26, 2002 the Company gave notice that on August 30, 2002 all
outstanding shares of its Cumulative Serial Preference Stock II, $4.40
Convertible Series 1 (the Series 1 Preferred Stock), will be redeemed at a
redemption price of $104 per share, and all outstanding shares of its
Cumulative Serial Preference Stock II, $4.50 Convertible Series 3 (the Series
3 Preferred Stock), will be redeemed at a redemption price of $100 per share.

Prior to redemption, holders of Series 1 Preferred Stock have an existing right
to convert each of their shares into 8.8 shares of TRW common stock and holders
of Series 3 Preferred Stock have an existing right to convert each of their
shares into 7.448 shares of TRW common stock. The right to convert shares of
Series 1 and Series 3 Preferred Stock into shares of TRW common stock will
terminate on the close of business on August 30, 2002. As of July 24, 2002,
approximately 77,800 shares of Series 1 and Series 3 Preferred Stock were
outstanding. To the extent that all of these shares are converted into TRW
common stock, then approximately 617,400 shares of TRW common stock will be
issued.

The regular quarterly dividends of $1.10 per share on the Series 1 Preferred
Stock and $1.125 per share on the Series 3 Preferred Stock, are payable on
September 15, 2002 to holders of record on August 9, 2002.

Refer to the Contingencies note to financial statements for discussion of legal
matters.

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Forward-Looking Statements

Statements in this filing that are not statements of historical fact may be
forward-looking statements. In addition, from time to time, the Company and
its representatives make statements that may be forward-looking. This section
provides readers with cautionary statements identifying, for purposes of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
important factors that could cause the Companys actual results to differ
materially from those contained in forward-looking statements made in this
filing or otherwise made by, or on behalf of, the Company.

Shareholders should be aware that the preparation of any such forward-looking
statements requires the use of estimates of future revenues, expenses, activity
levels and economic and market conditions, many of which are outside the
Companys control. Further, the Companys results could be affected by the
ability to obtain new contract awards; the level of defense funding by the
government and the termination of existing government contracts; pricing
pressures from customers; moderation or decline in the automobile build rate;
changes in consumer debt levels; work stoppages; unanticipated downturn in the
financial condition of, or business relationships with customers or suppliers;
the ability to reduce the level of outstanding debt from cash flow from
operations and the proceeds from asset dispositions; a credit rating downgrade;
increase in interest rates; customer recall and warranty claims; product
liability and litigation issues; changes to the regulatory environment
regarding automotive safety; the introduction of competing products or
technology by competitors; the ability to attract and retain skilled employees
with high-level technical competencies; the financial results of companies in
which the Company has made technology investments; the availability of funding
for research and development; economic, regulatory and political domestic and
international conditions; fluctuations in currency exchange rates; and the
impact of additional terrorist attacks, which could result in reduced
automotive production, disruptions to the transportation system, or significant
and prolonged disruption to air travel. In addition, there can be no
assurance: (i) regarding the completion of the Companys proposed merger with
Northrop, (ii) regarding the completion of the sale of the Companys
Aeronautical Systems business; (iii) that the necessary government approvals
for such transactions will be obtained; (iv) that the Company will be
successful in reducing the amount of its indebtedness, or that the methods
described for debt reduction will be utilized; (v) regarding the nature or adequacy of any plans or arrangements that
may be implemented with respect to events of default that may occur
upon the closing of the proposed merger with Northrop under TRW's debt facilities or
receivables securitization program; (vi) as to the amount by which debt will be reduced; (vii) that the Companys
strategic plan will deliver any particular level of value to TRW shareholders;
(viii) that defense spending will rise and research, development, test and
evaluation budgets will increase; (ix) that North American 2002 light vehicle
production will increase from 2001 levels; (x) that 2002 earnings per share
estimates will be met or exceeded; (xi) with respect to the expected amounts of
the Companys operating cash flows in 2002, that such amounts will be utilized
to reduce the amount of the Companys indebtedness; (xii) with respect to the
amounts that will be realized, if any, by the Company from divestitures; (xiii)
with respect to the amount of sales, earnings per share or cash flow that will
be realized by the Company in 2002; or (iv) that the Companys costs will
decrease in 2002. Other factors and assumptions not identified above are also
involved in the preparation of forward-looking statements, and the failure of
such other factors and assumptions to be realized may also cause actual results
to differ materially from those discussed. The Company assumes no obligation
to update such estimates to reflect actual results, changes in assumptions or
changes in other factors affecting such estimates other than as required by
law. The above list of important factors is not exclusive.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is subject to inherent risks attributed to operating in a global
economy. It is the Companys policy to utilize derivative financial
instruments to manage its interest rate and foreign currency exchange rate
risks. When appropriate, the Company uses derivatives to hedge its exposure to
short-term interest rate changes as a lower cost substitute for the issuance of
fixed rate debt and as a means of securing long-term, floating-rate debt.
Also, the Company may use interest rate agreements in the management of
interest rate exposure on debt issuances. The Company manages cash flow
transactional foreign

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exchange risk pursuant to a written corporate policy. Forward contracts and, to a lesser extent, options are utilized to protect the
Companys cash flow from adverse movements in exchange rates.

The Company is exposed to credit loss in the event of nonperformance by the
other party to the derivative financial instruments. The Company limits this
exposure by entering into agreements with a number of major financial
institutions that meet credit standards established by the Company and that are
expected to satisfy fully their obligations under the contracts. Derivative
financial instruments are viewed by the Company as a risk management tool and
are not used for speculative or trading purposes.

Based on the Companys interest rate exposure on variable rate borrowings at
June 30, 2002, a one-percentage-point increase in the average interest rate on
the Companys variable rate borrowings would increase future interest expense
by approximately $1 million per month.

Based on the Companys exposure to foreign currency exchange rate risk
resulting from derivative foreign currency instruments outstanding at June 30,
2002, a 10 percent uniform strengthening in the value of the U.S. dollar
relative to the currencies in which those derivative foreign currency
instruments are denominated would result in a $123 million loss in fair value.

The Companys sensitivity analyses of the effects of changes in interest rates
and foreign currency exchange rates do not reflect the effect of such changes
on the related hedged transactions or on other operating transactions. The
Companys sensitivity analyses of the effects of changes in interest rates and
foreign currency exchange rates do not factor in a potential change in the
level of variable rate borrowings or derivative instruments outstanding that
could take place if these hypothetical conditions prevailed.

Management believes the Companys current financial position and financing
arrangements allow flexibility in worldwide financing activities and permit the
Company to respond to changing conditions in credit markets. Management
believes that funds generated from operations, divestitures and existing
borrowing capacity are adequate to fund debt service requirements, capital
expenditures, working capital including tax requirements, company-sponsored
research and development programs and dividend payments to shareholders. The
Companys ability to continue to fund these items and continue to reduce debt
may be affected by a number of factors, including the effect of general
economic conditions on the Companys business, the ability to dispose of assets
and the cost of warranty, recall and litigation claims.

Refer to the Financial Instruments note to financial statements for further
discussion of derivative instruments as of June 30, 2002.

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PART II. OTHER INFORMATION




Item 1.Legal Proceedings

Except as described in Part II, Item 1 of TRWs Form 10-Q filing for the
quarter ended March 31, 2002 and except as provided below, there have been no
material developments in legal proceedings involving the Company or its
subsidiaries since those reported in TRWs Annual Report on Form 10-K for the
year ended December 31, 2001.

The lawsuit filed by Northrop against TRW, referred to in Part II, Item 1 of
TRWs Form 10-Q filing for the quarter ended March 31, 2002, was been dismissed
with prejudice on July 15, 2002 as agreed by Northrop and TRW in the Merger
Agreement.




Item 4. Submission of Matters to a Vote of Security Holders



|(a) |  | The Company held its 2002 Annual Meeting of Shareholders on April 24,
2002.
|--- |  | ---------------------------------------------------------------------------
|   
|    |  | The Company held a Special Meeting of Shareholders on May 3, 2002.         
|   
|(c) |  | At the Companys Annual Meeting of Shareholders held on April 24, 2002:    



| |                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Martin Feldstein was elected a Director of the Company with
108,443,289 votes for election, 1,081,691 votes withheld from
voting and 0 broker non-votes.                                                                                                                                                                                                                              
|
| | Robert M. Gates was elected a Director of the Company with
108,437,981 votes for election, 1,086,999 votes withheld from
voting and 0 broker non-votes.                                                                                                                                                                                                                               
|
| | Clive R. Hollick was elected a Director of the Company with
108,438,892 votes for election, 1,086,088 votes withheld from
voting and 0 broker non-votes.                                                                                                                                                                                                                              
|
| | David Baker Lewis was elected a Director of the Company with
108,426,196 votes for election, 1,098,784 votes withheld from
voting and 0 broker non-votes.                                                                                                                                                                                                                             
|
| | The shareholders ratified the appointment of Ernst & Young LLP as
the Companys independent auditors for the fiscal year ending
December 31, 2002 with 103,355,407 votes for, 3,495,471 votes
against, 2,673,885 votes abstaining and 0 broker non-votes.                                                                                                                             
|
| | The shareholders approved a proposal by Northrop requesting that
TRWs board of directors provide non-public information regarding
TRW to Northrop in order that Northrop may consider if an increase
in the consideration offered in its then-pending exchange offer is
warranted, with 55,226,401 shares for, 45,376,971 against,
2,213,913 votes abstaining and 0 broker non-votes.
|
| | The shareholders defeated Northrops proposal requesting that TRWs
board of directors establish a committee of independent directors
to evaluate Northrops exchange offer and any other proposals
received by TRW, with 35,416,768 votes for, 65,212,404 votes
against, 2,188,114 votes abstaining and 0 broker non-votes.                                                        
|
| | The shareholders defeated Northrops proposal requesting that TRW
take all actions within its authority to let shareholders decide
for themselves whether to exchange their TRW shares for Northrop
common stock, with 81,083,692 votes against, 19,410,984 shares for,
2,322,608 shares abstaining and 0 broker non-votes.                                                           
|
| | The shareholders defeated a proposal raised by a shareholder from
the floor of the meeting to name the directors who have
philanthropic links to the Company and the latest                                                                                                                                                                                                           

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | annual sum with 5,573 votes for, 89,041,421 votes against, 0 votes abstaining, and
0 broker non-votes.                                                                                                                                                                                                                                                                                                                                       
|
| | The shareholders defeated a proposal raised by a shareholder from
the floor of the meeting to report which directors who have
philanthropic links to the Company serve on the Audit Committee
with 5,573 votes for, 89,041,421 votes against, 0 votes abstaining,
and 0 broker non-votes.                                                                                                                                                    
|
| | The shareholders defeated a proposal raised by a shareholder from
the floor of the meeting to name the directors who do not attend
the annual shareholders meeting with 7,933 votes for, 89,039,061
votes against, 0 votes abstaining, and 0 broker non-votes.                                                                                                                                                                              
|
| | The shareholders defeated a proposal raised by a shareholder from
the floor of the meeting to report whether the Companys auditors
perform audit consulting services and name any other categories of
consulting services the Companys auditors perform and the
percentage of their overall fee for each category above 10% of
their annual fee with 7,933 votes for, 89,039,061 votes against, 0
votes abstaining, and 0 broker non-votes.
|
| | The shareholders defeated a proposal raised by a shareholder from
the floor of the meeting to report the topics of any Rule 14a-8
shareholder proposals that were submitted to the Company with 7,745
votes for, 89,039,061 votes against, 188 votes abstaining, and 0
broker non-votes.                                                                                                                                                     
|
| | The shareholders defeated a proposal raised by a shareholder from
the floor of the meeting to report the outcome of any Rule 14a-8
shareholder proposal submittals including challenges the Company
made to the Securities and Exchange Commission with 7,745 votes
for, 89,039,061 votes against, 188 votes abstaining, and 0 broker
non-votes.                                                                                             

A Special Meeting of TRW Shareholders held on May 3, 2002 to vote on
Northrops Control Share Acquisition proposal. At the Special Meeting:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The holders of 93,901,254 million, or 74.0 percent, of TRW common
and preferred stock were represented in person or by proxy and a
quorum was present. Under Ohio law, authorization of Northrops
Control Share Acquisition Proposal required the approval of a
majority of the TRW shares represented at the meeting and the
approval of a majority of all disinterested shares represented at
the meeting. Disinterested shares generally excludes shares that
were: (1) held by any officer of TRW elected or appointed by the
Board, (2) held by any employee director of TRW, (3) purchased
between February 22, 2002 and March 28, 2002 if the total amount
paid for the shares exceeded $250,000, (4) shares held by the
acquiring person and (5) any shares that were voted without a
certification. The proposal was rejected on both counts.
|
| | Of the 93,901,254 shares represented and voting at the meeting,
37,059,656 votes were for the proposal, 56,542,301 votes were
against the proposal, 299,297 votes abstained, and there were 0
broker non-votes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Of the 60,218,072 TRW disinterested shares represented at the
meeting 23,768,899 were voted for the proposal, 36,228,746 were
voted against the proposal, 220,427 abstained, and there were 0
broker non-votes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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Item 6. Exhibits and Reports on Form 8-K

|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | -------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Exhibits
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 2        |  | Agreement and Plan of Merger, dated as of June 30, 2002, by
and among TRW Inc., Northrop Grumman Corporation and Richmond
Acquisition Corp. (Exhibit 2.1 to TRW Current Report on Form 8-K
filed July 1, 2002, File No. 1-2384, is incorporated herein by
reference)                                                                                                                                                                                                                                
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 10(a)    |  | Amendment No. 2, dated as of April 1, 2002 to Receivables
Purchase Agreement dated as of November 20, 2001 among TRW
Receivables Inc., as Seller, TRW Inc., as Servicer, Charta
Corporation, Ciesco, L.P., Corporate Asset Funding Company, Inc.,
Corporate Receivables Corporation, and WCP Funding, Inc., as the
Conduit Purchasers, Citibank, N.A. as Committed Purchaser and
Managing Agent, and Citicorp North America, Inc., as Agent for the
Conduit Purchasers and the Committed Purchasers.
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 10(b)    |  | Retention and Severance Agreement between TRW Inc. and
Howard V. Knicely (Exhibit (e)(2) to Amendment No. 15 to Schedule
14D-9 filed by TRW on May 31, 2002, is incorporated herein by
reference)                                                                                                                                                                                                                                                                                                   
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 10(b)    |  | Retention and Severance Agreement between TRW Inc. and
Timothy W. Hannemann (Exhibit (e)(7) to Amendment No. 15 to Schedule
14D-9 filed by TRW on May 31, 2002, is incorporated herein by
reference)                                                                                                                                                                                                                                                                                                
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 10(d)    |  | Master Agreement of Purchase and Sale between Goodrich
Corporation and TRW Inc. dated as of June 18, 2002                                                                                                                                                                                                                                                                                                                                                                                           
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 10(e)    |  | Employment Continuation Agreement Deferred Compensation Plan
dated as of June 21, 2002                                                                                                                                                                                                                                                                                                                                                                                                              
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 15       |  | Letter re: Unaudited Financial Information                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 99(a)    |  | Computation of Ratio of Earnings to Fixed Charges  Unaudited
(Supplement to Exhibit 12 of the following Registration Statements
of the Company: No. 333-89133 on Form S-3 and No. 333-48443 on Form
S-3)                                                                                                                                                                                                                                                                                           
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 99(b)    |  | Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 99(c)    |  | Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | 99(d)    |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                              

|    |  |                                                                                                                                                                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Reports on Form 8-K                                                                                                                                                                                                                                                       
|    |  |                                                                                                                                                                                                                                                                           
|    |  | Current Report on Form 8-K, dated April 15, 2002, regarding TRWs
announcement advising shareholders to take no action at that time in
response to Northrops revised $53 per share exchange offer. TRW urged
shareholders to await the recommendation of TRWs directors.
|    |  |                                                                                                                                                                                                                                                                           
|    |  | Current Report on Form 8-K, dated April 17, 2002, regarding TRWs
announcement announcing the recommendation of the Board of Directors with
respect to Northrops revised exchange offer.                                                                                 
|    |  |                                                                                                                                                                                                                                                                           
|    |  | Current Report on Form 8-K, dated May 17, 2002, regarding a presentation
made by TRW Inc. and TRWs responses to questions at an investor
conference.                                                                                                                     

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                      |  |                                                                                                |  |                                                                                            
|--------------------- |  | ---------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------
|                      |  |                                                                                                |  | TRW Inc.                                                                                   
|                      |  |                                                                                                |  |                                                                                            
|Date:
August 13, 2002 |  | By: /s/ W. B. Lawrence

W. B. Lawrence
Executive Vice President, General
Counsel and Secretary
|                      |  |                                                                                                |  |                                                                                            
|                      |  |                                                                                                |  | By: /s/ Robert H. Swan

Robert H. Swan
Executive Vice President
and Chief Financial Officer

33