northrop grumman Ron Sugar, Chairman and CEO (Overview and Strategic Perspective)

Copyright 2006 Northrop Grumman Corporation1

Overview and Strategic Perspective2006 Institutional Investor Conference

November 9, 2006

Ron SugarChairman and CEO


Certain statements and assumptions in these presentations and materials contain or are based on “forward-looking” information. Such “forward-looking” information includes, among other things, projected deliveries,expected funding for various programs, future effective income tax rates, financial guidance and estimated amounts regarding sales, segment operating margin, pension expense, employer contributions under pension plans and medical and life benefits plans, cash flow and earnings per share, and is subject to numerous assumptions and uncertainties, many of which are outside Northrop Grumman’s control. These include Northrop Grumman’s assumptions with respect to future revenues, expected program performance and cash flows, returns on pension plan assets and variability of pension actuarial and related assumptions, the outcome of litigation and appeals, environmental remediation, divestitures of businesses, successful reduction of debt, successful negotiation of contracts with labor unions, effective tax rates and timing and amounts of tax payments, and anticipated costs of capital investments, among other things. Northrop Grumman’s operations are subject to various additional risks and uncertainties resulting from its position as a supplier, either directly or as subcontractor or team member, to the U.S. Government and its agencies as well as to foreign governments and agencies; actual outcomes are dependent upon various factors, including, without limitation, Northrop Grumman’s successful performance of internal plans; government customers’ budgetary constraints; customer changes in short-range and long-range plans; domestic and international competition in both the defense and commercial areas; product performance; continued development and acceptance of new products and, in connection with any fixed price development programs, controlling cost growth in meeting production specifications and delivery rates; performance issues with key suppliers and subcontractors; government import and export policies; acquisition or termination of government contracts; the outcome of political and legal processes and of the assertion or prosecution of potential substantial claims by or on behalf of a U.S. government customer; natural disasters, and any associated amounts and timing of recoveries under insurance contracts, availability of materials and supplies, continuation of the supply chain, contractual performance relief and the application of cost sharing terms, impacts of timing of cash receipts and the availability of other mitigating elements; terrorist acts; legal, financial and governmental risks related to international transactions and global needs for military aircraft, military and civilian electronic systems and support, information technology, naval vessels, space systems, technical services and related technologies, as well as other economic, political and technological risks and uncertainties and other risk factors set out in Northrop Grumman’s filings from time to time with the Securities and Exchange Commission, including, without limitation, Northrop Grumman reports on Form 10-K and Form 10-Q.

Safe Harbor Statement


Northrop Grumman Vision

Be the most trusted provider of systems and technologies that ensure the security and freedom of our nation and its allies

Customers’provider of choiceIndustry’s employer of choiceShareholders’investment of choice

Creating Value Through People and TechnologyCreating Value Through People and Technology


Financial Performance

0

5

10

15

20

25

30

35

2003 2004 2005 2006E 2007E

Sales($

Billio

n)

EPS

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

2003 2004 2005 2006E 2007E

Operating Margin

0%

2%

4%

6%

8%

2003 2004 2005 2006E 2007E

* Non-GAAP: Adjusted for $1B B-2 tax payment; ** Non-GAAP: Adjusted for pension pre-funding

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

2003* 2004** 2005** 2006E 2007E

Cash from Operations

($Bi

llion)

Actual Range B-2 Tax Payment Pension

Focus on Performance Paying Off


Market Assessment

Defense/Intelligence top-line budget authority driven by threat environment

Moderate growth from today’s levelsTransition from war supplementals to force modernization / resetPervasive need for information, electronics and technical servicesNOC competencies match evolving national security prioritiesNOC programs well supported in FY07 budget and the FYDP

Substantial non-DoD opportunities aligned with NOC capabilities are growing faster than DoD

Federal governmentState & localInternational


Balanced, Diversified Portfolio

Ships 16%

Information& Services

36%

Aerospace27%

Electronics21%

Strong Franchise Base . . . Substantial Growth OpportunitiesStrong Franchise Base . . . Substantial Growth Opportunities


Information & Services

Well Positioned in Rapidly Growing MarketsWell Positioned in Rapidly Growing Markets

Prime contractor

Growing markets

Low capital requirements and strong cash returns

Successfully penetrating adjacent markets with competitive wins

Accelerating growth

Organic core & adjacent markets

Selected acquisitions


Center for Disease ControlJoint National Integration CenterNGA Enterprise EngineeringNational Health Information Network Intelligence programs

Information & Services—Awards & Opportunities

UK Military Flight Training SystemJoint Network NodeGCCS - MGuardrail Modernization / ACSGPS OCXIntegrated Air & Missile DefenseAdjunct Sensor

New OpportunitiesNew Opportunities

Recent AwardsRecent Awards

Significant Wins . . . Large Opportunity SpaceSignificant Wins . . . Large Opportunity Space

Intelligence ProgramsInformation Operations /Information AssuranceState & Local ITFirst Responder WirelessLawrence Livermore National Lab Uni-Comm

NYC WirelessVirginia IT OutsourcingSan Diego CountyNevada Test SiteU.S. Immigration & Customs BiometricsJoint Warfighter Center


Strategic Rationale• Expands position in high growth

areas of C4ISR• Strong synergy potential with

combination of capabilities• Expectation of continued growth

in customer investment in these mission areas

Business Description• Products and Services for Intel

Community and DoD• Signals Intelligence & Processing• Computer Network Operations• Information Assurance

• 2007E sales of $330-350M• 04-06E sales CAGR of 34%

Transaction Summary• Cash acquisition of all stock• $24 per share consideration• $580M transaction value• Closing targeted 1Q07• Neutral to EPS in ′07, accretive

in ′08

Integration Plan• Essex will be integrated as a

business unit of NGMS• Portion of NGMS existing

intelligence business will report to Essex

Essex Overview


Electronics

Premier position across entire sensor system spectrum

Undersea, sea, ground, air, space, and cyberspace

Solid double-digit margins

Strong cash returns

Substantial domestic and international opportunities

Technology leadership ensures position on future upgrades and new platforms

Solid Growth, DoubleSolid Growth, Double--Digit Margins . . . High ReturnsDigit Margins . . . High Returns


Electronics—Awards & OpportunitiesRecent Awards

Restricted Bio-detection Counter-MANPADSLarge Aircraft IRCM (NATO)

New OpportunitiesF-22 productionF-35 production International

Jordan Air Defense SystemMESA Radar – Korea RSIP - Japan

USPS Flats Sequencing & Sorting System Counter-MANPADS productionG/ATORCounter-IED

Significant Domestic and International OpportunitiesSignificant Domestic and International Opportunities


Aerospace

Prime contractor or major partner on large platform programs

Manned and unmanned aircraft

Space systems

Differentiated by technology leadership

Large development programs

Long production cycles and substantial cash returns

Stable market with large new competitive opportunities

Solid Performance and Backlog . . . Solid Performance and Backlog . . . Large Platform OpportunitiesLarge Platform Opportunities


Aerospace—Awards & Opportunities

Recent AwardsMultiple Restricted PlatformsF/A-18 Multi-yearAEHF 3 Payload

New OpportunitiesMultiple Restricted PlatformsF-35 ProductionBroad Are Maritime SurveillanceKC-X Tanker/transportNaval UCASEuro HawkLong Range Strike

Robust Pipeline of High Impact OpportunitiesRobust Pipeline of High Impact Opportunities

E-2D ProductionNATO Air to Ground SurveillanceTSATSpace RadarSTSSGOES-R


Ships

Prime or partner across all classes of conventional and nuclear naval platformsStrong franchise position with long term visibilityGrowing consensus for strong shipbuilding budgetsModest growth Post-Katrina regeneration on-trackMargin expansion opportunities

Operational efficienciesGulf Coast shipyard recovery

Improving returns during recapitalization

Managing for Enhanced ReturnsManaging for Enhanced Returns


Ships—Awards & Opportunities

Recent AwardsLHA (R) Long LeadLPD 22 – 24DDG 1000 DesignUSS ToledoCVN 71 RCOH

New OpportunitiesCVN 78 & 79 ProductionVirginia-class Submarines (2/year)DDG 1000 ProductionFast Response CutterCG(X)MPFF - Maritime Pre-position Force Future

Strong Backlog . . . Large OpportunitiesStrong Backlog . . . Large Opportunities


Building Value Working Together

CrossCross--Business Collaboration Enhancing Business Collaboration Enhancing Competitive PositionCompetitive Position

New OpportunitiesCurrent Programs

Restricted UK AWACS

E-10/MP-RTIP

KEI

Counter IED

Restricted

Space RadarCG(X)

Tanker/Transport


The Leadership Team

Bob HelmCorp VP

Bus Dev &Govt Relations

Jim O’NeillCorp VP & President

InformationTechnology

MissionSystems

Jerry AgeeCorp VP & President

Jim CameronCorp VP & President

TechnicalServices

Information & Services

Jim PittsCorp VP & President

Electronic Systems

Electronics

Mike PettersCorp VP & President

NewportNews

Phil TeelCorp VP & President

ShipSystems

Ships

Burks TerryCorp VP &

General Counsel

Law

Ian ZiskinCorp VP & Chief

HR & Admin Officer

HR &Administration

Rosanne O'BrienCorp VP

Communications

Space Technology

Alexis LivanosCorp VP & President

Scott SeymourCorp VP & President

Integrated Systems

Aerospace

Ron SugarChairman & CEO

Wes BushPresident& CFO

The Right Team For Our StrategyThe Right Team For Our Strategy


Growth Portfolio structured for growthSubstantial near-term opportunities

Performance ProgramFinancial

Value-creating cash deployment

Returning cash to shareholdersInvesting for growth

What You Should Expect From NOC

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northrop grumman Ron Sugar, Chairman and CEO (Overview and Strategic Perspective)

Economy & Finance