Northrop Grumman Reports Fourth Quarter and 2012 Financial Results

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- Q4 EPS from Continuing Operations Increase 2 Percent to $2.14; 2012 EPS from
Continuing Operations Increase 5 Percent to $7.81
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 amounts 2012 2011 2012 2011
Sales $ 6,476 $ 6,506 $ 25,218 $ 26,412
Segment operating income1 875 773 3,176 3,055
Segment operating margin rate1 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 operations 2.14 2.09 7.81 7.41
Net earnings 533 548 1,978 2,118
Diluted EPS 2.14 2.09 7.81 7.52
Cash provided by continuing operations 1,057 1,321 2,640 2,347
Free cash flow provided by continuing operations1 922 1,155 2,309 1,855

Pension-adjusted Operating Highlights
Operating income 824 799 3,130 3,276
Net FAS/CAS pension adjustment1 (31) (98) (132) (400)
Pension-adjusted operating income1 $ 793 $ 701 $ 2,998 $ 2,876
Pension-adjusted operating margin rate1 12.2% 10.8% 11.9% 10.9%

Pension-adjusted Per Share Data
Diluted EPS from continuing operations $ 2.14 $ 2.09 $ 7.81 $ 7.41
After-tax net pension adjustment per share1 (0.08) (0.24) (0.34) (0.92)
Pension-adjusted diluted EPS from continuing operations1 $ 2.06 $ 1.85 $ 7.47 $ 6.49
Weighted average shares outstanding - Basic 243.4 258.2 248.6 276.8
Dilutive effect of stock options and stock awards 5.5 4.5 4.8 4.8
Weighted average shares outstanding - Diluted 248.9 262.7 253.4 281.6

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 pension contributions1 $ 1,029 $ 1,602 $ 2,833 $ 2,995
After-tax discretionary pension pre-funding impact 28 (281) (193) (648)
Cash provided by continuing operations $ 1,057 $ 1,321 $ 2,640 $ 2,347
Less:
Capital expenditures (135) (166) (331) (492)
Free cash flow provided by continuing operations1 $ 922 $ 1,155 $ 2,309 $ 1,855
After-tax discretionary pension pre-funding impact (28) 281 193 648
Free cash flow provided by continuing operations before discretionary pension contributions1 $ 894 $ 1,436 $ 2,502 $ 2,503

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

* $2.6 billion provided by continuing operations

Investing

* $331 million for capital expenditures

Financing

* $1.3 billion for repurchases of common stock
* $535 million for dividends
* $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 contributions1 2,100 - 2,400

Free cash flow before discretionary pension contributions1 1,700 - 2,000

1 Non-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 Income1

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 eliminations (521) (505) (2,084) (2,038)
6,476 6,506 - 25,218 26,412 (5%)
Segment operating income1
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 eliminations (58) (61) (258) (258)
Segment operating income1 875 773 13% 3,176 3,055 4%
Segment operating margin rate1 13.5% 11.9% 160 bps 12.6% 11.6% 100 bps
Reconciliation to operating income
Unallocated corporate expenses (79) (70) (13%) (168) (166) (1%)
Net FAS/CAS pension adjustment1 31 98 (68%) 132 400 (67%)
Other (3) (2) (50%) (10) (13) 23%
Operating income 824 799 3% 3,130 3,276 (4%)
Operating margin rate 12.7% 12.3% 40 bps 12.4% 12.4% -
Interest expense (54) (53) (2%) (212) (221) 4%
Other, net 17 36 (53%) 47 28 68%
Earnings from continuing operations before income taxes 787 782 1% 2,965 3,083 (4%)
Federal and foreign income tax expense (254) (232) (9%) (987) (997) 1%
Earnings from continuing operations 533 550 (3%) 1,978 2,086 (5%)
Earnings (loss) from discontinued operations - (2) - 32
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 rate 18.5% 13.7% 17.1% 14.5%

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 rate 9.8% 10.3% 10.3% 9.7%

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 income taxes 2,965 3,083 2,366
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 tax - 32 149
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, in millions 248.6 276.8 296.9

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, in millions 253.4 281.6 301.1

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, net of tax (expense) benefit of $0 in 2012, $2 in 2011, and $0 in 2010 (2) (4) 1
Change in unamortized benefit plan costs, net of tax benefit (expense) of $860 in 2012, $823 in 2011, and $(183) in 2010 (1,303) (1,249) 297
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 incurred 1,759 1,777
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 2011 3,930 3,935
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 compensation (45) (17) (22)
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 operations - (232) 397
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 shipbuilding business - 1,429 -
Purchases of short-term investments - (450) (2)
Other investing activities, net (3) 56 16
Cash (used in) provided by investing activities from continuing operations (84) 743 (571)
Cash used in investing activities from discontinued operations - (63) (189)
Net cash (used in) provided by investing activities (84) 680 (760)
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 compensation 45 17 22
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 continuing operations (1,696) (3,494) (1,087)
Cash used in financing activities from discontinued operations (179)
Net cash used in financing activities (1,696) (3,494) (1,266)
Increase (decrease) in cash and cash equivalents 860 (699) 427
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 compensation (45) (17) (22)
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 operations - (232) 397
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 Funded1 Unfunded2 Total Total
Backlog Backlog3
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.
2 Unfunded backlog represents firm orders for which, as of the reporting date, funding is not contractually obligated by the customer. Unfunded backlog excludes unexercised contract options and unfunded indefinite delivery, indefinite quantity (ID/IQ) orders.
3 Effective January 1, 2012, the company transferred its missile business (principally the ICBM program), previously reported in Aerospace Systems to 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 SALES3 SEGMENT OPERATING INCOME3
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 REPORTED1
Aerospace Systems $ 10,419 $ 10,910 $ 10,458 $ 2,736 $ 2,592 $ 2,572 $ 2,558 $ 1,071 $ 1,256 $ 1,261 $ 301 $ 331 $ 304 $ 325
Electronic Systems 7,671 7,613 7,372 1,808 1,791 1,905 1,868 969 1,023 1,070 237 284 293 256
Information Systems 8,536 8,395 7,921 2,025 2,031 1,955 1,910 624 756 766 194 189 187 196
Technical Services 2,776 3,230 2,699 688 656 680 675 161 206 216 54 51 55 56
Intersegment Eliminations (1,752) (2,005) (2,038) (523) (510) (500) (505) (190) (231) (258) (65) (71) (62) (60)
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 REALIGNED2
Aerospace Systems $ 9,877 $ 10,436 $ 9,964 $ 2,593 $ 2,473 $ 2,455 $ 2,443 $ 988 $ 1,213 $ 1,217 $ 287 $ 320 $ 295 $ 315
Electronic Systems 7,671 7,613 7,372 1,808 1,791 1,905 1,868 969 1,023 1,070 237 284 293 256
Information Systems 8,536 8,395 7,921 2,025 2,031 1,955 1,910 624 756 766 194 189 187 196
Technical Services 3,323 3,705 3,193 831 776 796 790 245 249 260 68 62 63 67
Intersegment Eliminations (1,757) (2,006) (2,038) (523) (511) (499) (505) (191) (231) (258) (65) (71) (61) (61)
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

Randy Belote (Media), 703-280-2720, randy.belote@ngc.com, or Steve Movius,
(Investors), 703-280-4575, steve.movius@ngc.com