2. Safe Harbor Statement
Certain statements and assumptions in these materials contain
or are based on “forward-looking” information. Such “forward-
looking” information includes, and is subject to, numerous
assumptions, risks and uncertainties, many of which are outside
Northrop Grumman’s control. The Safe Harbor Note to today’s
press release and Northrop Grumman’s filings from time to time
with the Securities and Exchange Commission including,
without limitation, reports on Form 10K and Form 10Q, describe
such economic, political and technological risks factors and
other uncertainties.
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4. 2006 Outlook
OM % of
Sales1
Information & Services ~8%
Aerospace ~9%
Electronics Mid 11%
Ships ~7%
Segment total2 ~9%
Total operating margin Mid 8%
1
Includes impact of intersegment operating margin adjustment
2
Net of intersegment eliminations
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5. Guidance Details ($Millions)
YTD 2006 2006E
Unallocated Expenses 81 ~140
Net Pension Expense 22 ~25
Net Interest Expense 161 ~300
~700 - 7501
Capital Expenditures 324
Depreciation 278 ~580
Amortization of Purchased
Intangibles 73 ~135
Effective Tax Rate 27.9% 31 - 32%
1
Before 2006 Katrina-related capital spending
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6. 2006 Outlook
Sales $
Information & Services ~11B
Aerospace ~9B
Electronics ~6.6B
Ships ~5B
Total1 ~30.5B
1
Net of intersegment eliminations
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7. Q2 2006 Cash from Operations ($Millions)
Q2 2006 YTD
Net Income 430 787
Depreciation & Amortization 174 351
Non-Cash Pension/OPEB (5) 114
Change in Working Capital 138 (642)
Deferred & Payable Income Taxes (166) (65)
All Other 86 80
Discontinued Operations (19) (102)
Cash from Operations 638 523
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8. Executing Balanced Cash Deployment Strategy
Internal & External Investment Dividends & Share Repurchases
Well supported internal Dividends
investment
15% increase May 2006
Research & Development
50% increase over three
Capital Spending years
Active MA&D program for Share repurchases
portfolio optimization
$3.2B authorized since 8/30
$3B completed to date
Meaningful reduction in
shares outstanding
Regular review
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9. 2006 Outlook
Sales 1 ~30.5 billion
Segment operating margin ~ 9%
Total operating margin Mid 8%
EPS from continuing operations $4.35 - $4.45
Cash from operations $2.3 - $2.6 billion
1
Net of intersegment eliminations
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10. Non-GAAP Measure Reconciliation
$Millions 2005A 2006E
Sales $30,067 $30,500 $30,500
Segment Operating Margin Rate* 8.0% 8.9% - 9.0%
Operating Margin Rate 7.3% 8.3% - 8.4%
Segment Operating Margin* 2,414 2,700 - 2,750
Reconciliations:
Unallocated Expenses (190)
Pension (Expense) Income (410) (180) - (180)
Reversal of CAS Pension Expense
included above 389
Reversal of Royalty Income
included above (10)
Operating Margin as Reported 2,193 2,520 - 2,570
*Non-GAAP Measure
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11. Non-GAAP Measures Definitions
Non-GAAP Financial Measures Disclosure
Today’s presentation and the accompanying web charts contain non-GAAP (Generally Accepted Accounting Principles)
financial measures, as defined by SEC Regulation G and indicated by an asterisk *.
While we believe that these non-GAAP financial measures may be useful in evaluating Northrop Grumman, this
information should be considered as supplemental in nature and not as a substitute for financial information prepared in
accordance with GAAP.
Definitions are provided for the non-GAAP measures used in our presentation. Other companies may define the
measures differently.
Segment Operating Margin
Segment Operating Margin is the total earnings from each of our six business segments including royalty income and
pension expense to the extent that the cost is currently recognized under government Cost Accounting Standards (CAS).
Segment Operating Margin excludes unallocated corporate expenses, GAAP pension expense and the reversal of CAS
pension expense.
Reconciling items to total company Operating Margin are:
– GAAP pension expense reported separately as a reconciling item under the caption quot;Pension expense.quot;
– Reversal of CAS pension expense included in Segment Operating Margin as a cost recognized under CAS.
– Unallocated expenses which include unallocated corporate, legal, environmental, state income tax, and other retiree
benefits expenses.
– Royalty Income reversed under the caption “Reversal of royalty income included above” and reported under the
caption “Other, net.”
Management uses segment operating margin as an internal measure of financial performance of our individual business
segments. This measure also may be helpful to investors in understanding period-over-period operating results separate
from items that may be influenced by external market fluctuations.
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