Northrop Grumman Reports Fourth Quarter and 2012 Financial Results

      Northrop Grumman Reports Fourth Quarter and 2012 Financial Results

- Q4 EPS from Continuing Operations Increase 2 Percent to $2.14; 2012 EPS from
Continuing Operations Increase 5 Percent to $7.81

- Free Cash Flow Totals $922 Million for Q4 and $2.3 Billion for 2012

- 7.3 Million Shares Repurchased in Q4 for $487 Million; 20.9 Million Shares
Repurchased in 2012 for $1.3 Billion

- 2012 New Awards Total $26.5 Billion; Total Backlog of $40.8 Billion

- 2013 EPS Guidance of $6.85 to $7.15

PR Newswire

FALLS CHURCH, Va., Jan. 30, 2013

FALLS CHURCH, Va., Jan.30, 2013 /PRNewswire/ --Northrop Grumman Corporation
(NYSE: NOC) reported fourth quarter 2012 earnings from continuing operations
of $533 million, or $2.14 per diluted share, compared with $550 million, or
$2.09 per diluted share, in the fourth quarter of 2011. The increase in
earnings per share was principally due to a $102 million increase in segment
operating income and a lower share count, partially offset by a $67 million
decrease in net FAS/CAS pension adjustment and a higher effective tax rate. On
a pension-adjusted basis, earnings per diluted share from continuing
operations increased 11 percent to $2.06 from $1.85. Diluted earnings per
share for the fourth quarter of 2012 are based on weighted average diluted
shares outstanding of 248.9 million compared with 262.7 million in the prior
year period, a 5 percent decrease. During the fourth quarter the company
repurchased 7.3 million shares of its common stock for approximately $487
million.

For 2012, earnings from continuing operations totaled $2.0 billion, or $7.81
per diluted share, compared with $2.1 billion, or $7.41 per diluted share in
2011. The change in earnings was principally due to a $268 million decrease in
2012 net FAS/CAS pension adjustment and a higher effective tax rate, which
more than offset a $121 million increase in segment operating income. The
increase in diluted earnings per share reflects higher segment operating
income and a lower share count in 2012. Diluted earnings per share for 2012
are based on 253.4 million weighted average shares outstanding compared with
281.6 million weighted average shares outstanding in 2011, a 10 percent
decrease. In 2012, the company repurchased 20.9 million shares of its common
stock for $1.3 billion, and $1.5 billion remained on its current share
repurchase authorization as of Dec. 31, 2012.

"Our team delivered outstanding results for the quarter and the year. Our
focus on performance, effective cash deployment, and portfolio alignment
continues to create value for our shareholders, customers and employees. As we
look ahead, we expect challenges, but we are confident in our team's ability
to address those challenges and continue to create value for all our
stakeholders," said Wes Bush, chairman, chief executive officer and president.

Table 1 - Financial Highlights
                                      Fourth Quarter    Total Year
$ in millions, except per share       2012     2011     2012      2011
amounts
Sales                                 $ 6,476  $ 6,506  $ 25,218  $ 26,412
Segment operating income^1            875      773      3,176     3,055
Segment operating margin rate^1       13.5%    11.9%    12.6%     11.6%
Operating income                      824      799      3,130     3,276
Operating margin rate                 12.7%    12.3%    12.4%     12.4%
Earnings from continuing operations   533      550      1,978     2,086
Diluted EPS from continuing           2.14     2.09     7.81      7.41
operations
Net earnings                          533      548      1,978     2,118
Diluted EPS                           2.14     2.09     7.81      7.52
Cash provided by continuing           1,057    1,321    2,640     2,347
operations
Free cash flow provided by            922      1,155    2,309     1,855
continuing operations^1
Pension-adjusted Operating
Highlights
Operating income                      824      799      3,130     3,276
Net FAS/CAS pension adjustment^1      (31)     (98)     (132)     (400)
Pension-adjusted operating income^1   $ 793    $ 701    $ 2,998   $ 2,876
Pension-adjusted operating margin     12.2%    10.8%    11.9%     10.9%
rate^1
Pension-adjusted Per Share Data
Diluted EPS from continuing           $ 2.14   $ 2.09   $ 7.81    $ 7.41
operations
After-tax net pension adjustment per  (0.08)   (0.24)   (0.34)    (0.92)
share^1
Pension-adjusted diluted EPS from     $ 2.06   $ 1.85   $ 7.47    $ 6.49
continuing operations^1
Weighted average shares               243.4    258.2    248.6     276.8
outstanding- Basic
Dilutive effect of stock options and  5.5      4.5      4.8       4.8
stock awards
Weighted average shares               248.9    262.7    253.4     281.6
outstanding- Diluted

^1 Non-GAAP metric - see definitions at the end of this press release.

Fourth quarter 2012 operating income increased $25 million, or 3 percent, and
operating margin rate expanded 40 basis points to 12.7 percent from 12.3
percent in the prior year period. The improvement in operating income and
margin rate reflects a 13 percent increase in segment operating income and a
segment operating margin rate of 13.5 percent, which more than offset slightly
lower sales and a $67 million decline in net FAS/CAS pension adjustment. On a
pension-adjusted basis, fourth quarter 2012 operating income increased $92
million, or 13 percent, to $793 million, and pension-adjusted operating margin
rate expanded 140 basis points to 12.2 percent from 10.8 percent.

For 2012, operating income decreased 4 percent and operating margin rate was
unchanged at 12.4 percent. The change in operating income principally reflects
a $268 million decrease in net FAS/CAS pension adjustment, which more than
offset a $121 million, or 4 percent, increase in segment operating income to
$3.2 billion from $3.1 billion in 2011. In 2012, segment operating margin rate
increased 100 basis points to 12.6 percent.

As of Dec. 31, 2012, total backlog increased 3 percent to $40.8 billion
compared with total backlog of $39.5 billion as of Dec. 31, 2011. Total
backlog as of Dec. 31, 2012, includes new business awards of $26.5 billion in
2012.



Table 2 - Cash Flow Highlights
                                      Fourth Quarter    Total Year
$ millions                            2012     2011     2012     2011
Cash provided by continuing
operations before discretionary       $ 1,029  $ 1,602  $ 2,833  $ 2,995
pension contributions^1
After-tax discretionary pension       28       (281)    (193)    (648)
pre-funding impact
Cash provided by continuing           $ 1,057  $ 1,321  $ 2,640  $ 2,347
operations
Less:
Capital expenditures                  (135)    (166)    (331)    (492)
Free cash flow provided by            $ 922    $ 1,155  $ 2,309  $ 1,855
continuing operations^1
After-tax discretionary pension       (28)     281      193      648
pre-funding impact
Free cash flow provided by
continuing operations before          $ 894    $ 1,436  $ 2,502  $ 2,503
discretionary pension
contributions^1

^1 Non-GAAP metric-- see definitions at the end of this press release.

Through Dec. 31, 2012, cash provided by continuing operations increased to
$2.6 billion from $2.3 billion in the prior year. The increase is principally
due to lower discretionary pension pre-funding in 2012. Free cash flow from
continuing operations through Dec. 31, 2012, increased to $2.3 billion from
$1.9 billion in the prior year due to higher cash provided by operating
activities and lower capital expenditures in 2012. Capital expenditures in
2011 included non-recurring expenditures related to the relocation of the
company's corporate office.

Before discretionary pension contributions, cash provided by continuing
operations totaled $2.8 billion in 2012 compared with $3.0 billion in 2011,
and 2012 free cash flow before discretionary pension contributions of $2.5
billion was unchanged from the prior year. The company made discretionary
pension plan contributions of $300 million in 2012 and $1.0 billion in 2011.
The change in cash provided by continuing operations before the discretionary
pension contributions is principally due to higher income taxes paid and lower
net income in 2012.

Changes in cash and cash equivalents described in Schedule 3 of this press
release include the following items for cash from operations, investing and
financing through Dec. 31, 2012:

Operations

  o$2.6 billion provided by continuing operations

Investing

  o$331 million for capital expenditures

Financing

  o$1.3 billion for repurchases of common stock
  o$535 million for dividends
  o$188 million from exercises of stock options

2013 Guidance

$ in millions, except per share amounts
Sales                                                      ~24,000
Segment operating margin %^1                               Low to mid 11%
Operating margin %                                         High 10% to Low 11%
Diluted EPS from continuing operations                     6.85     -   7.15
Cash provided by operations before discretionary pension   2,100    -   2,400
contributions^1
Free cash flow before discretionary pension                1,700    -   2,000
contributions^1
^1Non-GAAP metric - see definitions at the end of this press release.

The company's 2013 financial guidance is based on the assumption that the
current six-month Continuing Resolution (CR) will be immediately followed by
appropriations, which, even if in the form of a full-year CR, will provide for
program spending levels consistent with those set forth in the President's FY
2013 Budget request (PBFY13) and that support and fund the company's programs.
Guidance for 2013 also assumes there is no disruption or shutdown of
government operations resulting from a federal government debt ceiling breach
or lack of immediate appropriations following the current CR, that
sequestration is not triggered, and any budgetary approach agreed by Congress
to address longer term spending does not result in significant reductions to
our customers' FY13 budget levels.



Table 3 — Business Results

Consolidated Sales & Segment Operating Income^1
                    Fourth Quarter             Total Year
$ millions          2012     2011    Change    2012     2011     Change
Sales
Aerospace Systems   $ 2,604  $ 2,443  7%       $ 9,977  $ 9,964  —
Electronic Systems  1,775    1,868    (5%)     6,950    7,372    (6%)
Information Systems 1,880    1,910    (2%)     7,356    7,921    (7%)
Technical Services  738      790      (7%)     3,019    3,193    (5%)
Intersegment        (521)    (505)             (2,084)  (2,038)
eliminations
                    6,476    6,506    —        25,218   26,412   (5%)
Segment operating
income^1
Aerospace Systems   359      315      14%      1,218    1,217    —
Electronic Systems  328      256      28%      1,187    1,070    11%
Information Systems 184      196      (6%)     761      766      (1%)
Technical Services  62       67       (7%)     268      260      3%
Intersegment        (58)     (61)              (258)    (258)
eliminations
Segment operating   875      773      13%      3,176    3,055    4%
income^1
Segment operating   13.5%    11.9%    160 bps  12.6%    11.6%    100 bps
margin rate^1
Reconciliation to
operating income
Unallocated         (79)     (70)     (13%)    (168)    (166)    (1%)
corporate expenses
Net FAS/CAS pension 31       98       (68%)    132      400      (67%)
adjustment^1
Other               (3)      (2)      (50%)    (10)     (13)     23%
Operating income    824      799      3%       3,130    3,276    (4%)
Operating margin    12.7%    12.3%    40 bps   12.4%    12.4%    —
rate
Interest expense    (54)     (53)     (2%)     (212)    (221)    4%
Other, net          17       36       (53%)    47       28       68%
Earnings from
continuing          787      782      1%       2,965    3,083    (4%)
operations before
income taxes
Federal and foreign (254)    (232)    (9%)     (987)    (997)    1%
income tax expense
Earnings from
continuing          533      550      (3%)     1,978    2,086    (5%)
operations
Earnings (loss)
from discontinued   —        (2)               —        32
operations
Net earnings        $ 533    $ 548    (3%)     $ 1,978  $ 2,118  (7%)

^1 Non-GAAP metric — see definitions at the end of this press release.

For 2012, Other, net increased $19 million due to higher returns on
non-qualified deferred compensation plans than in the prior year period.
Federal and foreign income tax expense totaled $254 million in the fourth
quarter of 2012 compared with $232 million in the prior year period. The
fourth quarter 2012 effective tax rate was 32.3 percent compared with 29.7
percent for the prior year period. Federal and foreign income taxes totaled
$987 million in 2012 compared with $997 million in 2011. The effective tax
rate for 2012 was 33.3 percent compared with 32.3 percent in 2011.

Effective Jan. 1, 2012, the company transferred its missile business,
principally the Intercontinental Ballistic Missile (ICBM) program, previously
reported in Aerospace Systems to Technical Services. Schedule 6 presents the
previously reported and recast results following the realignment.

Aerospace Systems

                      Fourth Quarter            Total Year
$ millions           2012     2011     Change  2012      2011     Change
Sales                 $ 2,604  $ 2,443  6.6%    $ 9,977   $ 9,964  0.1%
Operating income      359      315      14.0%   1,218     1,217    0.1%
Operating margin rate 13.8%    12.9%            12.2%     12.2%

Aerospace Systems fourth quarter 2012 sales increased 7 percent and 2012 sales
increased by less than 1 percent. Increased sales for both periods are
principally due to higher volume for unmanned systems, including NATO AGS and
Fire Scout, and higher volume for the F-35 and Advanced Extremely High
Frequency satellite (AEHF) programs. Higher volume for these programs was
partially offset by declines in both periods for the F/A-18 and Joint
Surveillance Target Attack Radar System (JSTARS) programs, as well as lower
volume for restricted space programs and the termination of a weather
satellite program.

Aerospace Systems fourth quarter 2012 operating income increased 14 percent
and operating margin rate increased to 13.8 percent from 12.9 percent. Higher
fourth quarter operating income reflects increased sales volume and improved
program performance, which more than offset the impact of lower F/A-18 margin
due to that program's transition from the multiyear 2 contract to the lower
margin multiyear 3 contract. For 2012, operating income was comparable to the
prior year period and operating margin rate was unchanged at 12.2 percent.

Electronic Systems

                    Fourth Quarter            Total Year
$ millions         2012     2011     Change  2012      2011      Change
Sales               $ 1,775  $ 1,868  (5.0%)  $ 6,950   $ 7,372   (5.7%)
Operating income    328      256      28.1%   1,187     1,070     10.9%
Operating margin    18.5%    13.7%            17.1%     14.5%
rate

Electronic Systems fourth quarter 2012 sales declined 5 percent, which
reflects lower volume for infrared countermeasures, LITENING targeting
systems, and postal automation programs. Declines in these programs were
partially offset by higher volume for space and international programs.

For 2012, sales declined 6 percent, principally due to a decrease of
approximately $250 million in postal automation volume and lower volume for
infrared countermeasures. Lower postal automation volume includes the impact
of the company's decision to de-emphasize its domestic business. These
declines were partially offset by higher volume for space programs.

Electronic Systems fourth quarter 2012 operating income increased 28 percent,
and operating margin rate increased to 18.5 percent from 13.7 percent. Fourth
quarter 2012 operating income and margin rate reflect improved program
performance as well as the benefit of cost reduction initiatives. Fourth
quarter 2011 operating income and margin rate included provisions for
contractual matters and higher provisions for reductions in force.

For 2012, operating income increased 11 percent, and operating margin rate
increased to 17.1 percent from 14.5 percent in 2011. Higher operating income
and margin rate reflect an increase in net favorable performance adjustments
of approximately $160 million in 2012. Higher net favorable performance
adjustments primarily resulted from improved program performance for several
combat avionics programs that completed deliveries, negotiated contract
modifications, and successfully mitigated risk. The de-emphasis of the
domestic postal automation business, which incurred $50 million of negative
adjustments in 2011, also contributed to the increase in net favorable
performance adjustments.

Information Systems

                      Fourth Quarter               Total Year
$ millions           2012      2011      Change   2012      2011      Change
Sales                 $ 1,880   $ 1,910   (1.6%)   $ 7,356   $ 7,921   (7.1%)
Operating income      184       196       (6.1%)   761       766       (0.7%)
Operating margin      9.8%      10.3%              10.3%     9.7%
rate

Information Systems fourth quarter 2012 sales declined 2 percent principally
due to the April 2012 divestiture of Park Air Norway, which contributed sales
of approximately $30 million in the prior year period. Lower volume also
includes the wind down and completion of several programs, offset by higher
volume for Consolidated Afloat Network & Enterprise Services (CANES) and the
F-35.

For 2012, sales declined 7 percent due to completion or wind down of several
programs, including the Joint Tactical Radio System Airborne, Maritime and
Fixed (JTRS AMF), I-Kits, Enterprise Network Management, F-22, and certain
restricted programs. Lower volume also includes the impact of the County of
San Diego IT outsourcing contract and Park Air Norway divestitures, which
together accounted for approximately $100 million of the year-over-year
change.

Information Systems fourth quarter 2012 operating income decreased 6 percent,
and operating margin rate totaled 9.8 percent compared with 10.3 percent in
the prior year period. The change in fourth quarter operating income reflects
lower volume and costs related to affordability initiatives. For 2012,
operating income decreased 1 percent and operating margin rate improved 60
basis points to 10.3 percent from 9.7 percent. The decrease in operating
income is due to lower volume and the improvement in operating margin rate
reflects improved program performance.

Technical Services

                      Fourth Quarter           Total Year
$ millions            2012    2011    Change   2012      2011      Change
Sales                 $ 738   $ 790   (6.6%)   $ 3,019   $ 3,193   (5.4%)
Operating income      62      67      (7.5%)   268       260       3.1%
Operating margin rate 8.4%    8.5%             8.9%      8.1%

Technical Services fourth quarter and 2012 sales decreased 7 percent and 5
percent, respectively. Declines for both periods are due to portfolio shaping
actions and lower volume for the KC-10 and ICBM programs.

Technical Services fourth quarter 2012 operating income decreased 7 percent
and operating margin rate was 8.4 percent. For 2012, operating income
increased 3 percent and operating margin rate increased 80 basis points to 8.9
percent. The improvement in operating income and operating margin rate
reflects improved performance for the KC-10 program, which more than offset
the impact of lower sales.

About Northrop Grumman

Northrop Grumman will webcast its earnings conference call at 11:30 a.m.
Eastern time on Jan. 30, 2013. A live audio broadcast of the conference call
along with a supplemental presentation will be available on the investor
relations page of the company's website at www.northropgrumman.com.

Northrop Grumman is a leading global security company providing innovative
systems, products and solutions in unmanned systems, cybersecurity, C4ISR, and
logistics and modernization to government and commercial customers worldwide.
Please visit www.northropgrumman.com for more information.

This release and the attachments contain statements, other than statements of
historical fact, that constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Words such as
"expect," "intend," "may," "could," "plan," "project," "forecast," "believe,"
"estimate," "outlook," "anticipate," "trends," "guidance," and similar
expressions generally identify these forward-looking statements.
Forward-looking statements in this release and the attachments include, among
other things, statements relating to our future financial condition and
operating results. Forward-looking statements are based upon assumptions,
expectations, plans and projections that we believe to be reasonable when
made. These statements are not guarantees of future performance and inherently
involve a wide range of risks and uncertainties that are difficult to predict.
Specific risks that could cause actual results to differ materially from those
expressed or implied in these forward-looking statements include, but are not
limited to, risks related to: the assumptions on which our guidance is based;
our dependence on U.S. Government contracts; the effect of economic conditions
in the United States and globally; changes in government and customer
priorities and requirements; government budgetary constraints; shifts or
reductions in defense spending resulting from sequestration under the Budget
Control Act of 2011, a continuing resolution with limited new starts, the lack
of annual appropriations legislation or otherwise; debt-ceiling limits and
disruption to or shutdown of government operations; changes in import and
export policies; changes in customer short-range and long-range plans; major
program terminations; the acquisition, deferral, reduction or termination of
contracts or programs; our ability to access capital; interest and discount
rates or other changes that may impact pension plan assumptions and actual
returns on pension plan assets; the outcome of litigation, claims, audits,
appeals, bid protests and investigations; the adequacy of our insurance
coverage and recoveries; the costs of environmental remediation; our ability
to attract and retain qualified personnel; changes in organizational structure
and reporting segments; acquisitions, dispositions, spin-off transactions,
joint ventures, strategic alliances and other business arrangements; possible
impairments of goodwill or other intangible assets; the effects of
legislation, regulations, and other changes in accounting, tax or defense
procurement rules or practices; technical, operational or quality setbacks in
contract performance; issues with, and financial viability of, key suppliers
and subcontractors; availability of materials and supplies; controlling costs
of fixed-price development programs; domestic and international competition;
legal, financial and governmental risks related to international transactions;
potential security threats, information technology attacks, natural disasters
and other disruptions not under our control; and other risk factors and other
important factors disclosed in our Form 10-K for the year ended December 31,
2012 and other filings with the Securities and Exchange Commission.

You should not put undue reliance on any forward-looking statements in this
release. These forward-looking statements speak only as of the date of this
release, and we undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law. This release and the
attachments also contain non-GAAP financial measures. A reconciliation to the
nearest GAAP measure and a discussion of the company's use of these measures
are included in this release or the attachments.

SCHEDULE 1


NORTHROP GRUMMAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

(Unaudited)
                                               Year Ended December 31
$ in millions, except per share amounts        2012       2011       2010
Sales
Product                                        $ 13,838   $ 15,073   $ 16,091
Service                                        11,380     11,339     12,052
Total sales                                    25,218     26,412     28,143
Operating costs and expenses
Product                                        10,415     11,491     12,558
Service                                        9,223      9,295      10,291
General and administrative expenses            2,450      2,350      2,467
Operating income                               3,130      3,276      2,827
Other (expense) income
Interest expense                               (212)      (221)      (269)
Charge on debt redemption                      —          —          (229)
Other, net                                     47         28         37
Earnings from continuing operations before     2,965      3,083      2,366
income taxes
Federal and foreign income tax expense         987        997        462
Earnings from continuing operations            1,978      2,086      1,904
Earnings from discontinued operations, net of  —          32         149
tax
Net earnings                                   $ 1,978    $ 2,118    $ 2,053
Basic earnings per share
Continuing operations                          $ 7.96     $ 7.54     $ 6.41
Discontinued operations                        —          0.11       0.50
Basic earnings per share                       $ 7.96     $ 7.65     $ 6.91
Weighted-average common shares outstanding,    248.6      276.8      296.9
in millions
Diluted earnings per share
Continuing operations                          $ 7.81     $ 7.41     $ 6.32
Discontinued operations                        —          0.11       0.50
Diluted earnings per share                     $ 7.81     $ 7.52     $ 6.82
Weighted-average diluted shares outstanding,   253.4      281.6      301.1
in millions
Net earnings (from above)                      $ 1,978    $ 2,118    $ 2,053
Other comprehensive income
Change in cumulative translation adjustment    8          (4)        (41)
Change in unrealized (loss) gain on
marketable securities and cash flow hedges,    (2)        (4)        1
net of tax (expense) benefit of $0 in 2012,
$2 in 2011, and $0 in 2010
Change in unamortized benefit plan costs, net
of tax benefit (expense) of $860 in 2012,      (1,303)    (1,249)    297
$823 in 2011, and $(183) in 2010
Other comprehensive (loss) income, net of tax  (1,297)    (1,257)    257
Comprehensive income                           $ 681      $ 861      $ 2,310







SCHEDULE 2
NORTHROP GRUMMAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)
                                                          December 31
$ in millions                                             2012       2011
Assets
Cash and cash equivalents                                 $ 3,862    $ 3,002
Accounts receivable, net of progress payments             2,858      2,964
Inventoried costs, net of progress payments               798        873
Deferred tax assets                                       574        496
Prepaid expenses and other current assets                 300        411
Total current assets                                      8,392      7,746
Property, plant and equipment, net of accumulated
depreciation                                              2,887      3,047

of $4,146 in 2012 and $3,933 in 2011
Goodwill                                                  12,431     12,374
Non-current deferred tax assets                           1,542      900
Other non-current assets                                  1,291      1,344
Total assets                                              $ 26,543   $ 25,411
Liabilities
Trade accounts payable                                    $ 1,392    $ 1,481
Accrued employee compensation                             1,173      1,196
Advance payments and billings in excess of costs          1,759      1,777
incurred
Other current liabilities                                 1,732      1,681
Total current liabilities                                 6,056      6,135
Long-term debt, net of current portion of $5 in 2012 and  3,930      3,935
2011
Pension and post-retirement plan liabilities              6,085      4,079
Other non-current liabilities                             958        926
Total liabilities                                         17,029     15,075
Shareholders' equity
Preferred Stock, $1 par value; 10,000,000 shares
authorized;                                               —          —

no shares issued and outstanding
Common stock, $1 par value; 800,000,000 shares
authorized; issued                                        239        254

and outstanding: 2012 - 239,209,812; 2011 - 253,889,622
Paid-in capital                                           2,924      3,873
Retained earnings                                         11,138     9,699
Accumulated other comprehensive loss                      (4,787)    (3,490)
Total shareholders' equity                                $ 9,514    $ 10,336
Total liabilities and shareholders' equity                $ 26,543   $ 25,411



SCHEDULE 3
NORTHROP GRUMMAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
                                               Year Ended December 31
$ in millions                                  2012       2011       2010
Operating activities
Sources of cash—continuing operations
Cash received from customers
Collections on billings                        $ 20,892   $ 21,628   $ 23,531
Progress payments                              4,472      4,803      4,437
Other cash receipts                            99         149        40
Total sources of cash—continuing operations    25,463     26,580     28,008
Uses of cash—continuing operations
Cash paid to suppliers and employees           (21,074)   (22,059)   (23,759)
Pension contributions                          (367)      (1,084)    (789)
Interest paid, net of interest received        (200)      (227)      (269)
Income taxes paid, net of refunds received     (1,119)    (810)      (1,071)
Excess tax benefits from stock-based           (45)       (17)       (22)
compensation
Other cash payments                            (18)       (36)       (42)
Total uses of cash—continuing operations       (22,823)   (24,233)   (25,952)
Cash provided by continuing operations         2,640      2,347      2,056
Cash (used in) provided by discontinued        —          (232)      397
operations
Net cash provided by operating activities      2,640      2,115      2,453
Investing activities
Continuing operations
Capital expenditures                           (331)      (492)      (585)
Maturities of short-term investments           250        200        —
Contribution received from the spin-off of     —          1,429      —
shipbuilding business
Purchases of short-term investments            —          (450)      (2)
Other investing activities, net                (3)        56         16
Cash (used in) provided by investing           (84)       743        (571)
activities from continuing operations
Cash used in investing activities from         —          (63)       (189)
discontinued operations
Net cash (used in) provided by investing       (84)       680        (760)
activities
Financing activities
Common stock repurchases                       (1,316)    (2,295)    (1,177)
Cash dividends paid                            (535)      (543)      (545)
Proceeds from exercises of stock options       188        101        142
Excess tax benefits from stock-based           45         17         22
compensation
Payments of long-term debt                     —          (768)      (1,011)
Proceeds from issuance of long-term debt       —          —          1,484
Other financing activities, net                (78)       (6)        (2)
Cash used in financing activities from         (1,696)    (3,494)    (1,087)
continuing operations
Cash used in financing activities from                               (179)
discontinued operations
Net cash used in financing activities          (1,696)    (3,494)    (1,266)
Increase (decrease) in cash and cash           860        (699)      427
equivalents
Cash and cash equivalents, beginning of year   3,002      3,701      3,274
Cash and cash equivalents, end of year         $ 3,862    $ 3,002    $ 3,701

SCHEDULE 4
NORTHROP GRUMMAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
                                                  Year Ended December 31
$ in millions                                     2012      2011      2010
Reconciliation of net earnings to net cash
provided by operating activities
Net earnings                                      $ 1,978   $ 2,118   $ 2,053
Net earnings from discontinued operations         —         (32)      (134)
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation                                      448       462       446
Amortization                                      62        82        109
Stock-based compensation                          183       140       136
Excess tax benefits from stock-based              (45)      (17)      (22)
compensation
Pre-tax gain on sale of businesses                —         —         (10)
Charge on debt redemption                         —         —         229
(Increase) decrease in assets:
Accounts receivable, net                          90        350       (471)
Inventoried costs, net                            46        (2)       (64)
Prepaid expenses and other assets                 (65)      16        36
Increase (decrease) in liabilities:
Accounts payable and accruals                     23        (341)     70
Deferred income taxes                             78        441       89
Income taxes payable                              (75)      (32)      (26)
Retiree benefits                                  (71)      (904)     (354)
Other, net                                        (12)      66        (31)
Cash provided by continuing operations            2,640     2,347     2,056
Cash (used in) provided by discontinued           —         (232)     397
operations
Net cash provided by operating activities         $ 2,640   $ 2,115   $ 2,453

SCHEDULE 5
NORTHROP GRUMMAN CORPORATION

TOTAL BACKLOG AND CONTRACT AWARDS

(Unaudited)
                    December 31, 2012                 December 31, 2011
$ in millions       Funded^1   Unfunded^2  Total      Total
                                           Backlog    Backlog^3
Aerospace Systems    $11,103     $ 8,491    $19,594      $18,638
Electronic Systems  7,833      1,638       9,471      9,123
Information Systems 4,045      4,496       8,541      8,563
Technical Services  2,719      484         3,203      3,191
Total backlog        $25,700     $15,109    $40,809      $39,515

^1 Funded backlog represents firm orders for which funding is contractually
   obligated by the customer.
   Unfunded backlog represents firm orders for which, as of the reporting
^2 date, funding is not contractually obligated by the customer. Unfunded
   backlog excludes unexercised contract options and unfunded indefinite
   delivery, indefinite quantity (ID/IQ) orders.
   Effective January 1, 2012, the company transferred its missile business
   (principally the ICBM program), previously reported in Aerospace Systems to
^3 Technical Services. As a result of this realignment, $599 million of
   backlog was transferred from Aerospace Systems to Technical Services. Total
   backlog as of December 31, 2011, reflects this transfer.
New Awards — The estimated value of contract awards included in backlog during
the three months and twelve months ended December 31, 2012, was $6.2 billion
and $26.5 billion, respectively.

SCHEDULE 6
NORTHROP GRUMMAN CORPORATION

SEGMENT REALIGNMENT

($ in millions)

(Unaudited)
              SEGMENT SALES^3                                                          SEGMENT OPERATING INCOME^3
              2009       2010       2011       2011                                    2009      2010       2011      2011
              Total      Total      Total      Three Months Ended                      Total     Total      Total     Three Months Ended
              Year       Year       Year       Mar 31    Jun 30    Sep 30    Dec 31    Year      Year       Year      Mar 31  Jun 30  Sep 30  Dec 31
AS
REPORTED^1
Aerospace     $ 10,419   $ 10,910   $ 10,458   $ 2,736   $ 2,592   $ 2,572   $ 2,558   $ 1,071   $ 1,256    $ 1,261   $ 301   $ 331   $ 304   $ 325
Systems
Electronic    7,671      7,613      7,372      1,808     1,791     1,905     1,868     969       1,023      1,070     237     284     293     256
Systems
Information   8,536      8,395      7,921      2,025     2,031     1,955     1,910     624       756        766       194     189     187     196
Systems
Technical     2,776      3,230      2,699      688       656       680       675       161       206        216       54      51      55      56
Services
Intersegment  (1,752)    (2,005)    (2,038)    (523)     (510)     (500)     (505)     (190)     (231)      (258)     (65)    (71)    (62)    (60)
Eliminations
Total         $ 27,650   $ 28,143   $ 26,412   $ 6,734   $ 6,560   $ 6,612   $ 6,506   $ 2,635   $ 3,010    $ 3,055   $ 721   $ 784   $ 777   $ 773
RECASTED AND
REALIGNED^2
Aerospace     $ 9,877    $ 10,436   $ 9,964    $ 2,593   $ 2,473   $ 2,455   $ 2,443   $ 988     $ 1,213    $ 1,217   $ 287   $ 320   $ 295   $ 315
Systems
Electronic    7,671      7,613      7,372      1,808     1,791     1,905     1,868     969       1,023      1,070     237     284     293     256
Systems
Information   8,536      8,395      7,921      2,025     2,031     1,955     1,910     624       756        766       194     189     187     196
Systems
Technical     3,323      3,705      3,193      831       776       796       790       245       249        260       68      62      63      67
Services
Intersegment  (1,757)    (2,006)    (2,038)    (523)     (511)     (499)     (505)     (191)     (231)      (258)     (65)    (71)    (61)    (61)
Eliminations
Total         $ 27,650   $ 28,143   $ 26,412   $ 6,734   $ 6,560   $ 6,612   $ 6,506   $ 2,635   $ 3,010    $ 3,055   $ 721   $ 784   $ 777   $ 773
^1 As reported are the amounts presented in the 2011 Form 10-K, filed February 8, 2012.
^2 Recasted and realigned amounts for years 2009 through 2011, as well as the three month periods in 2011, to reflect the January 2012 transfer of
the company's missile business (principally the ICBM program), previously reported in Aerospace Systems and transferred to Technical Services.
^3 Management uses segment sales and segment operating income as internal measures of financial
performance for the individual operating segments.

Non-GAAP Financial Measures Disclosure: Today's press release contains
non-GAAP (accounting principles generally accepted in the United States of
America) financial measures, as defined by SEC (Securities and Exchange
Commission) Regulation G and indicated by a footnote in the text of the
release. While we believe that these non-GAAP financial measures may be useful
in evaluating our financial information, they 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 and reconciliations are provided in the body of the release.
References to a "Table" in the definitions below relate to tables in the body
of this press release. Other companies may define these measures differently
or may utilize different non-GAAP measures.

Pension-adjusted diluted EPS from continuing operations: Diluted EPS from
continuing operations excluding the after-tax net pension adjustment per
share, as defined below. These per share amounts are provided for consistency
and comparability of operating results. Management uses pension-adjusted
diluted EPS from continuing operations, as reconciled in Table 1, as an
internal measure of financial performance.

Cash provided by continuing operations before discretionary pension
contributions:  Cash provided by continuing operations before the after-tax
impact of discretionary pension contributions. Cash provided by continuing
operations before discretionary pension contributions has been provided for
consistency and comparability of 2012 and 2011 financial performance and is
reconciled in Table 2.

Free cash flow provided by continuing operations: Cash provided by continuing
operations less capital expenditures (including outsourcing contract & related
software costs). We use free cash flow from continuing operations as a key
factor in our planning for, and consideration of, strategic acquisitions,
stock repurchases and the payment of dividends. This measure should not be
considered in isolation, as a measure of residual cash flow available for
discretionary purposes, or as an alternative to operating results presented in
accordance with GAAP. Free cash flow from continuing operations is reconciled
in Table 2.

Free cash flow provided by continuing operations before discretionary pension
contributions:  Free cash flow from continuing operations before the after-tax
impact of discretionary pension contributions. We use free cash flow from
continuing operations before discretionary pension contributions as a key
factor in our planning for, and consideration of, strategic acquisitions,
stock repurchases and the payment of dividends. This measure should not be
considered in isolation, as a measure of residual cash flow available for
discretionary purposes, or as an alternative to operating results presented in
accordance with GAAP. Free cash flow from continuing operations before
discretionary pension contributions is reconciled in Table 2.

Net FAS/CAS pension adjustment: Pension expense determined in accordance with
GAAP less pension expense allocated to the operating segments under U.S.
Government Cost Accounting Standards (CAS). Net pension adjustment is
presented in Table 1.

After-tax net pension adjustment per share: The per share impact of the net
pension adjustment as defined above, after tax at the statutory rate of 35%,
provided for consistency and comparability of 2012 and 2011 financial
performance as presented in Table 1.

Pension-adjusted operating income: Operating income before net pension
adjustment as reconciled in Table 1. Management uses pension-adjusted
operating income as an internal measure of financial performance.

Pension-adjusted operating margin rate: Pension-adjusted operating income as
defined above, divided by sales. Management uses pension-adjusted operating
margin rate, as reconciled in Table 1, as an internal measure of financial
performance.

Segment operating income: Total earnings from our four segments including
allocated pension expense recognized under CAS. Reconciling items to operating
income are unallocated corporate expenses, including unallowable or
unallocable portions of management and administration, legal, environmental,
certain compensation and retiree benefits, and other expenses; net pension
adjustment; and reversal of royalty income included in segment operating
income. Management uses segment operating income, as reconciled in Table 3, as
an internal measure of financial performance of our individual operating
segments.

Segment operating margin rate: Segment operating income as defined above,
divided by sales. Management uses segment operating margin rate, as reconciled
in Table 3, as an internal measure of financial performance.



SOURCE Northrop Grumman Corporation

Website: http://www.northropgrumman.com
Contact: Randy Belote (Media), 703-280-2720, randy.belote@ngc.com, or Steve
Movius, (Investors), 703-280-4575, steve.movius@ngc.com
 
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