Northrop Grumman Reports Third Quarter 2009 Financial Results

- Sales Increase 4 Percent to $8.73 Billion

LOS ANGELES, Oct. 21 /PRNewswire-FirstCall/ -- Northrop Grumman Corporation
(NYSE: NOC) reported that third quarter 2009 earnings from continuing
operations totaled $487 million, or $1.52 per diluted share, compared with
$509 million, or $1.50 per diluted share, in the third quarter of 2008. Third
quarter 2009 net pension adjustment (FAS/CAS) reduced earnings from continuing
operations by $47 million, or $0.15 per diluted share, compared with an
increase to earnings from continuing operations of $42 million, or $0.13 per
diluted share, in the third quarter of 2008.

Third quarter 2009 earnings included a net tax benefit of $75 million, or
$0.23 per share, primarily for final settlement of the Internal Revenue
Service's (IRS) examination of the company's 2001, 2002 and 2003 tax returns.
In the third quarter of 2008 the company recognized net tax benefits totaling
$21 million, or $0.06 per share.

Sales for the 2009 third quarter increased 4 percent to $8.73 billion from
$8.38 billion in the 2008 third quarter. In the 2009 third quarter, $544
million of cash was provided by operations, compared with $1.37 billion in the
prior year period. The reduction is primarily driven by discretionary pension
plan contributions totaling $586 million that the company made in the 2009
third quarter. The company did not make discretionary pension plan
contributions in the 2008 third quarter.

"This was another solid quarter for Northrop Grumman, continuing our focus on
managing risk, improving performance and driving growth. Based on this
quarter's results we are raising our guidance for 2009 earnings per share to
$5.00 to $5.15 per share," said Ronald D. Sugar, chairman and chief executive
officer.

Financial Highlights

Third Quarter Nine Months
------------- -----------
($ in millions except per share amounts) 2009 2008 2009 2008
---- ---- ---- ----

Sales $8,726 $8,381 $26,003 $24,733

Segment operating income(1) $786 $768 $2,296 $2,010
as a % of sales 9.0% 9.2% 8.8% 8.1%

Operating income $655 $771 $1,963 $2,041
as a % of sales 7.5% 9.2% 7.5% 8.3%

Diluted EPS from continuing operations $1.52 $1.50 $3.89 $3.65

Average diluted shares outstanding,
in millions 320.6 340.1 326.1 344.5

Cash provided by operations $544 $1,373 $1,202 $2,174

Free cash flow(2) $384 $1,183 $708 $1,630

(1) Segment operating income is a non-GAAP measure used as an internal measure
of financial performance for the five sectors and is reconciled to operating
income in the "Business Results" table presented later in this press release.

(2)Free cash flow is a non-GAAP measure defined as cash from operations less
capital expenditures and outsourcing contract & related software costs.
Management uses free cash flow as an internal measure of financial
performance. Free cash flow is reconciled to cash from operations in the "Cash
Flow Highlights" table presented later in this press release.

Operating income for the 2009 third quarter totaled $655 million compared with
$771 million in the prior year period. As a percent of sales, operating
income declined to 7.5 percent from 9.2 percent in the prior year period. The
change includes a $136 million increase in net pension expense, which was
partially offset by an $18 million improvement in segment operating income.
As a percent of sales, segment operating income was 9 percent compared with
9.2 percent in the prior year period.

As reconciled in the Pension-adjusted Results table later in this press
release, pension-adjusted operating income totaled 8.3 percent of sales for
the third quarter of 2009 compared with 8.4 percent of sales for the third
quarter of 2008. Third quarter 2009 pension-adjusted earnings per share from
continuing operations increased 22 percent to $1.67 from $1.37 for the prior
year period.

Federal and foreign income taxes for the 2009 third quarter declined to $133
million from $233 million in the third quarter of 2008. During the quarter the
company recognized a net tax benefit of $75 million primarily for the final
settlement of the IRS examination of the company's tax returns for years 2001,
2002 and 2003. In the third quarter of 2008 the company recognized net tax
benefits totaling $21 million. The effective tax rate applied to earnings
from continuing operations for the 2009 third quarter was 21.5 percent
compared with 31.4 percent in the 2008 third quarter.

Earnings per share are based on weighted average diluted shares outstanding of
320.6 million for the third quarter of 2009 and 340.1 million for the third
quarter of 2008. During the third quarter of 2009 the company repurchased
approximately 4.7 million shares of its common stock, and year-to-date the
company has repurchased 14.7 million shares of common stock.

New business awards totaled $10 billion in the 2009 third quarter. Total
backlog, which includes funded backlog and firm orders for which funding is
not currently contractually obligated by the customer, was $71.5 billion as of
Sept. 30, 2009, compared with $70.4 billion at June 30, 2009.

Pension-adjusted Results

Third Quarter Nine Months
------------- --------------
($ in millions except per share amounts) 2009 2008 2009 2008
---- ---- ---- ----

Sales $8,726 $8,381 $26,003 $24,733

Operating income $655 $771 $1,963 $2,041
as a % of sales 7.5% 9.2% 7.5% 8.3%
Net pension adjustment(1) 72 (64) 224 (192)
-- ---- --- -----
Pension-adjusted operating income(2) $727 $707 $2,187 $1,849
Pension-adjusted operating margin %(2) 8.3% 8.4% 8.4% 7.5%

Earnings from continuing operations $487 $509 $1,270 $1,255
Net pension adjustment, after-tax 47 (42) 146 (125)
-- ---- --- -----
Pension-adjusted earnings from
continuing operations(3) $534 $467 $1,416 $1,130

Diluted EPS from continuing operations $1.52 $1.50 $3.89 $3.65
Net pension adjustment 0.15 (0.13) 0.45 (0.37)
---- ------ ---- ------
Pension-adjusted diluted EPS from
continuing operations(4) $1.67 $1.37 $4.34 $3.28
Weighted average diluted shares
outstanding, in millions 320.6 340.1 326.1 344.5

(1) Net pension adjustment is a non-GAAP measure defined as pension expense
determined in accordance with GAAP less pension expense allocated to the
business segments under U.S. Government Cost Accounting Standards.

(2)( )Pension-adjusted operating income and margin % are non-GAAP measures
defined as operating income before net pension adjustment and as a % of sales.
Both are reconciled above. Management uses pension-adjusted operating income
and margin % as internal measures of the financial performance of the company.

(3) Pension-adjusted earnings from continuing operations is a non-GAAP measure
defined as earnings from continuing operations excluding net pension
adjustment, after-tax at the statutory rate of 35%. Management uses
pension-adjusted earnings from continuing operations as a performance metric
for operating results.

(4) Pension-adjusted diluted EPS from continuing operations is a non-GAAP
measure defined as diluted EPS from continuing operations available to common
shareholders excluding net pension adjustment, after-tax at the statutory rate
of 35%. Management uses pension-adjusted diluted EPS as a performance metric
for operating results.

Cash Flow Highlights

Third Quarter Nine Months
-------------------- --------------------
($ millions) 2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Before discretionary
pension pre-funding $1,021 $1,373 $(352) $1,805 $2,174 $(369)
Discretionary pension
pre-funding impact(1) (477) (477) (603) (603)
----- ----- ----- ----- ----- -----
Cash provided by
operations 544 1,373 (829) 1,202 2,174 (972)
Less:
Capital expenditures 139 167 28 436 444 8
Outsourcing contract &
related software costs 21 23 2 58 100 42
--- --- --- --- --- ---
Free cash flow $384 $1,183 $(799) $708 $1,630 $(922)

(1) Discretionary pension pre-funding impact is the impact to cash provided by
operations resulting from the company's discretionary pension contributions.
The company made discretionary pension contributions totaling $586 million in
the third quarter of 2009 and cash income taxes were reduced by $109 million,
resulting in a net impact to cash provided by operations of $477 million in
the quarter. For nine months, the company made discretionary pension plan
contributions totaling $800 million, and cash income taxes were reduced by
$197 million, resulting in a net impact of $603 million to cash provided by
operations.

Cash provided by operations in the 2009 third quarter totaled $544 million
compared with $1.37 billion in the prior year period, and free cash flow
totaled $384 million in the 2009 third quarter compared with $1.18 billion in
the prior year period. The change in cash provided by operations and free
cash flow reflects $586 million of discretionary contributions to the
company's pension plan assets and higher working capital than in the prior
year period. For the first nine months of 2009, the company has made
discretionary contributions of $800 million to its pension plans.

Cash Measurements, Debt and Capital Deployment

($ millions) 9/30/2009 12/31/2008
------------ --------- ----------
Cash & cash equivalents $1,924 $1,504
Total debt 4,713 3,944
Net debt(1) 2,789 2,440
Net debt to total capital ratio(2) 16% 15%

(1) Total debt less cash and cash equivalents.
(2) Net debt divided by the sum of shareholders' equity and total debt.

Changes in cash and cash equivalents include the following cash deployment and
financing actions during the quarter:
-- $586 million discretionary pension plan contributions
-- $227 million for share repurchases
-- $139 million for capital expenditures and $21 million for outsourcing
contract and related software costs
-- $136 million for dividends

-- $850 million proceeds from issuance of long term debt, a portion of
which was used to retire $400 million of 8 percent senior notes that
matured on Oct. 15, 2009

Business Results

Consolidated Sales & Segment Operating Income
($ millions) Third Quarter Nine Months
----------------------- ----------------------
2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Sales
Aerospace Systems $2,527 $2,417 5% $7,656 $7,250 6%
Electronic Systems 1,839 1,808 2% 5,594 5,018 11%
Information Systems 2,513 2,410 4% 7,589 7,220 5%
Shipbuilding 1,650 1,451 14% 4,549 4,403 3%
Technical Services 692 665 4% 2,026 1,857 9%
Intersegment
eliminations (495) (370) (1,411) (1,015)
----- ----- --- ------- ------- ---
$8,726 $8,381 4% $26,003 $24,733 5%

Segment operating income
Aerospace Systems $265 $233 14% $780 $721 8%
Electronic Systems 215 261 (18%) 695 671 4%
Information Systems 206 156 32% 633 575 10%
Shipbuilding 113 118 (4%) 211 26 712%
Technical Services 41 39 5% 121 110 10%
Intersegment eliminations (54) (39) (144) (93)
---- ---- --- ----- ---- ---
Segment operating income $786 $768 2% $2,296 $2,010 14%
as a % of sales 9.0% 9.2% (20 bps) 8.8% 8.1% 70 bps

Reconciliation to operating income:
Unallocated expenses $(55) $(20) $(87) $(95)
Net pension adjustment (72) 64 (224) 192
Reversal of royalty
income included above (4) (41) (22) (66)
--- --- --- --- --- ---
Operating income $655 $771 (15%) $1,963 $2,041 (4%)
as a % of sales 7.5% 9.2% (170 bps) 7.5% 8.3% (80 bps)

Beginning in the first quarter of 2009, operating results for all periods
presented reflect the realignment of the former Mission Systems and
Information Technology sectors into Information Systems and the realignment of
the former Integrated Systems and Space Technology sectors into Aerospace
Systems. In addition, the presentation reflects the transfer of certain
businesses from Information Systems and Electronic Systems to Technical
Services. Schedule 6 provides previously reported quarterly financial results
revised to reflect the current reporting structure.

Aerospace Systems

Third Quarter ($ millions)
--------------------------
2009 2008
Operating % of Operating % of
Sales Income Sales Sales Income Sales
------ --------- ----- ------ --------- ------
$2,527 $265 10.5% $2,417 $233 9.6%
------- ---- ----- ------ ---- ----

Aerospace Systems third quarter 2009 sales increased 5 percent, principally
due to higher volume for unmanned aircraft programs such as Broad Area
Maritime Surveillance Unmanned Aerial System (BAMS UAS), Global Hawk, and Navy
Unmanned Combat Air System (N-UCAS); restricted programs, and manned aircraft
programs such as E-2D Advanced Hawkeye, the B-2 and the EA-18G. Higher volume
for these programs was partially offset by lower volume for the Kinetic Energy
Interceptor (KEI), Intercontinental Ballistic Missile (ICBM), National
Polar-orbiting Operational Environmental Satellite System (NPOESS) and
Transformational Satellite Communications System (TSAT) programs.

Aerospace Systems operating income rose 14 percent, and as a percent of sales
increased to 10.5 percent from 9.6 percent in the prior year period. The
increase in operating income is due to higher volume and improved program
performance.

Electronic Systems

Third Quarter ($ millions)
--------------------------
2009 2008
Operating % of Operating % of
Sales Income Sales Sales Income Sales
------ --------- ----- ------ --------- -----
$1,839 $215 11.7% $1,808 $261 14.4%
------- ---- ----- ------ ---- -----

Electronic Systems third quarter 2009 sales increased 2 percent. The increase
reflects higher volume for the F-35 program, higher deliveries of Large
Aircraft Infrared Countermeasures (LAIRCM) systems, higher volume for the
Space Based Infrared System (SBIRS) follow-on program, and higher intercompany
sales for aerospace programs.

Electronic Systems third quarter 2009 operating income declined 18 percent,
and as a percent of sales was 11.7 percent compared with 14.4 percent in the
prior year period. The difference in operating income and rate is due to a
$40 million patent infringement settlement in the third quarter of 2008 and
lower performance for government systems programs in the third quarter of
2009.

Information Systems

Third Quarter ($ millions)

2009 2008
Operating % of Operating % of
Sales Income Sales Sales Income Sales
------ --------- ----- ------ --------- -----
$2,513 $206 8.2% $2,410 $156 6.5%
------ ---- --- ------ ---- -----

Information Systems third quarter 2009 sales increased 4 percent due to higher
sales for intelligence and defense programs.

Information Systems operating income increased 32 percent in the 2009 third
quarter, and as a percent of sales increased to 8.2 percent from 6.5 percent
in the prior year period, which included a $57 million negative performance
adjustment for a state and local program.

Shipbuilding

Third Quarter ($ millions)
-------------------------
2009 2008
Operating % of Operating % of
Sales Income Sales Sales Income Sales
------ --------- ----- ------ --------- -----
$1,650 $113 6.8% $1,451 $118 8.1%
------- ---- --- ------ ---- ----

Shipbuilding third quarter 2009 sales increased 14 percent primarily due to
higher volume for the LPD, Virginia-class submarines, and DDG programs.

Shipbuilding operating income for the 2009 third quarter declined 4 percent
and as a percent of sales declined to 6.8 percent from 8.1 percent in the
prior year period. The declines in operating income and rate primarily
reflect previously announced adjustments to program margin rates to reflect
higher production costs on expeditionary warfare and surface combatant
programs.

Technical Services

Third Quarter ($ millions)
-------------------------
2009 2008
Operating % of Operating % of
Sales Income Sales Sales Income Sales
------ --------- ----- ----- --------- -----
$692 $41 5.9% $665 $39 5.9%
------ --- --- ---- --- ----

Technical Services sales increased 4 percent due to higher volume for life
cycle optimization & engineering, and training & simulation programs.
Operating income increased 5 percent due to higher volume, and as a percent of
sales, was comparable to the prior year period.

Third Quarter Highlights

-- In October, the U.S. Air Force awarded Northrop Grumman a nine-year
contract to provide Contractor Logistics Support for its fleet of
KC-10
Extender refueling tanker aircraft, further demonstrating the
company's
important role as a premier provider of air mobility solutions. The
indefinite delivery/indefinite quantity (ID/IQ) contract has a total
ceiling value of $3.8 billion.
-- The U.S. Air Force raised the cost ceiling on Northrop Grumman's
current
ID/IQ contract for B-2 bomber modernization and sustainment activities
from $6.1 billion to $9.54 billion.
-- The U.S. Navy awarded Northrop Grumman a contract valued at up to $2.4
billion for the refueling and complex overhaul of the nuclear-powered
aircraft carrier, USS Theodore Roosevelt (CVN 71).
-- The U.S. Army selected Northrop Grumman to provide Lightweight Laser
Designator Rangefinders under a five-year ID/IQ contract with an
estimated value of up to $599 million.
-- The U.S. Army awarded Northrop Grumman an ID/IQ contract to continue
providing full-spectrum information operations and computer networks
operations to the 1st Information Operations Command (Land), Fort
Belvoir, Va., and its regional computer emergency response teams. The
single award is valued at $430 million over five years if all options
are exercised.
-- Northrop Grumman was one of two awardees selected by the U.S. Army to
provide Laser Target Locator Modules under a five-year ID/IQ contract,
with an initial award valued at approximately $22 million. The total
potential contract value to Northrop Grumman is an estimated $393
million over the life of the contract.
-- Northrop Grumman was selected by the U.S. Army to finalize development
of its Distributed Common Ground System-Army Mobile Basic system,
specifically for the Army's emerging Brigade Combat Teams. Valued at
$296 million, this continuation development contract covers a total
performance period of 30 months.
-- The U.S. Air Force awarded Northrop Grumman Corporation a $153 million
contract to provide LITENING G4 targeting and sensor systems and
related
equipment to the active U.S. Air Force as well as kits for the Air
Force
Reserve Command and Air National Guard to enable the upgrade of
existing
LITENING AT pods to the G4 configuration.
-- Northrop Grumman was one of five companies selected by the U.S. Army
for
a contract to provide automatic identification technology (AIT)
hardware, software and engineering services for increased
functionality,
visibility and control across the U.S. Department of Defense and
federal
agency logistics systems. The AIT IV program is an ID/IQ contract
with
a maximum ceiling value of $418.5 million available for task order
awards.
-- Two U.S. Missile Defense Agency Space Tracking and Surveillance System
demonstrator satellites built by Northrop Grumman were launched aboard
a
Delta II rocket on Sept. 25, adding a critical space-based capability
to
America's ballistic missile defenses.
-- Northrop Grumman redelivered the nuclear-powered aircraft carrier, USS
Carl Vinson (CVN 70), to the U.S. Navy. The redelivery from the
company's Newport News shipyard follows the completion of a successful
three-and-a-half-year refueling and complex overhaul.
-- Northrop Grumman delivered to the U.S. Navy the Aegis guided missile
destroyer Dewey (DDG 105) and the amphibious transport dock ship New
York (LPD 21).
-- The Northrop Grumman Corporation-built U.S. Coast Guard National
Security Cutter Waesche (WMSL 751) completed a successful acceptance
trial in October, marking the final test of Waesche before her
delivery
in early November.
-- Northrop Grumman's RQ-4 Global Hawk unmanned aircraft system reached a
major milestone - 25,000 combat hours - in July. This significant
program achievement accounts for more than 76 percent of the
aircraft's
32,500 cumulative flight hours for the U.S. Air Force and U.S. Navy.
First flown in 1998, Global Hawk has logged 1,229 missions so far in
support of overseas contingency operations and disaster relief
efforts.
-- Northrop Grumman's newest active electronically scanned array (AESA)
fighter sensor, the Scalable Agile Beam Radar (SABR), has been
successfully installed on a U.S. Air Force F-16 at Edwards Air Force
Base, Calif. Late last year, SABR began a series of flight
demonstrations aboard the company's test aircraft, successfully
detecting and displaying multiple aerial targets and generating high
resolution Synthetic Aperture Radar (SAR) ground maps. Although
designed
specifically for the F-16, SABR is scalable and adaptable to other
platforms and missions.
-- Northrop Grumman's automated Biohazard Detection System (BDS), in use
nationwide with the U.S. Postal Service, recently performed its eight
millionth test without a false positive test result. Northrop Grumman
is
the prime contractor and systems integrator of the BDS, which has
screened tens of billions of pieces of mail for anthrax over the past
five years. It is the only network of autonomous bio-detectors
deployed
nationwide.
-- Northrop Grumman opened a new, state-of-the-art Cyber Security
Operations Center, a comprehensive cyber threat detection and response
center that focuses on protecting Northrop Grumman and its customers'
networks and data worldwide. Located in suburban Maryland, the center
is staffed around-the-clock, providing security monitoring for more
than
105,000 clients and 10,000 servers.

-- Ronald D. Sugar, chairman and chief executive officer since 2003,
announced his plan to retire from the company in June 2010. The Board
of
Directors elected Wesley G. Bush to the position of chief executive
officer and president, effective January 1, 2010. Bush was also
elected
to the Board of Directors, effective immediately. The Board of
Directors also elected Lewis W. Coleman, currently lead independent
director, to the role of non-executive chairman, effective January 1,
2010. Sugar will assume the title of chairman emeritus effective
January 1, 2010.

About Northrop Grumman

Northrop Grumman Corporation is a leading global security company whose
120,000 employees provide innovative systems, products, and solutions in
aerospace, electronics, information systems, shipbuilding and technical
services to government and commercial customers worldwide.

Northrop Grumman will webcast its earnings conference call at 11:30 a.m. EDT
on Oct. 21, 2009. 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 Web site at http://www.northropgrumman.com.

Statements in this release and the attachments, other than statements of
historical fact, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Words such as "expect,"
"intend," "plan," "project," "forecast," "believe," "estimate," "outlook,"
"guidance," "target," "trends," and similar expressions generally identify
these forward-looking statements. Forward-looking statements in this release
and the attachments include, among other things, financial guidance regarding
future sales, segment operating income, pension expense, employer
contributions under pension plans and medical and life benefits plans, cash
flow and earnings. These statements are not guarantees of future performance
and involve certain risks and uncertainties. Actual results could differ
materially due to factors such as: the effect of economic conditions in the
United States and globally; access to capital; future sales and cash flows;
timing of cash receipts; effective tax rates and timing and amounts of tax
payments; returns on pension plan assets, interest and discount rates and
other changes that may impact pension plan assumptions; the outcome of
litigation, claims, audits, appeals, bid protests and investigations;
hurricane-related insurance recoveries; costs of environmental remediation;
our relationships with labor unions; availability and retention of qualified
personnel; costs of capital investments; changes in organizational structure
and reporting segments; risks associated with acquisitions, dispositions,
joint ventures and other business arrangements; possible impairments of
goodwill or other intangible assets; effects of legislation, rulemaking, and
changes in accounting, tax or defense procurement; changes in government and
customer priorities and requirements (including, government budgetary
constraints, shifts in defense spending, changes in import and export
policies, changes in customer short-range and long-range plans); acquisition
or termination of contracts; technical, operation 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; contractual performance relief and the
application of cost sharing terms; allowability and allocability of costs
under U.S. Government contracts; progress and acceptance of new products and
technology; domestic and international competition; legal, financial and
governmental risks related to international transactions; potential security
threats, natural disasters and other disruptions not under our control; and
other risk factors disclosed in our filings with the Securities and Exchange
Commission.

These forward-looking statements speak only as of the date of this release and
we undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by applicable 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.

LEARN MORE ABOUT US: Northrop Grumman news releases, product information,
photos and video clips are available on the Internet at:
http://www.northropgrumman.com

Schedule 1
----------
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three months Nine months
ended ended
September 30 September 30
------------ ------------
$ in millions, except
per share amounts 2009 2008 2009 2008
------------------------- ---- ---- ---- ----
Sales and Service Revenues
Product sales $4,982 $4,808 $14,972 $14,051
Service revenues 3,744 3,573 11,031 10,682
---------------- ----- ----- ------ ------
Total sales and service
revenues 8,726 8,381 26,003 24,733
----------------------- ----- ----- ------ ------
Cost of Sales and Service
Revenues
Cost of product sales 4,027 3,682 12,007 11,204
Cost of service revenues 3,276 3,143 9,742 9,168
General and administrative
expenses 768 785 2,291 2,320
-------------------------- --- --- ----- -----
Operating income 655 771 1,963 2,041
Other (expense) income
Interest expense (76) (74) (219) (223)
Other, net 41 45 62 72
---------- -- -- -- --
Earnings from continuing
operations before
income taxes 620 742 1,806 1,890
Federal and foreign income
taxes 133 233 536 635
-------------------------- --- --- --- ---
Earnings from continuing
operations 487 509 1,270 1,255
Earnings from discontinued
operations, net of tax 3 3 3 16
-------------------------- -- -- -- --
Net earnings $490 $512 $1,273 $1,271
------------ ---- ---- ------ ------

Basic Earnings Per Share
Continuing operations $1.54 $1.52 $3.94 $3.72
Discontinued operations .01 .01 .01 .05
----------------------- --- --- --- ---
Basic earnings per share $1.55 $1.53 $3.95 $3.77
------------------------ ----- ----- ----- -----
Weighted-average common
shares outstanding, in
millions 317.1 334.2 322.0 337.1
----------------------- ----- ----- ----- -----
Diluted Earnings Per Share
Continuing operations $1.52 $1.50 $3.89 $3.65
Discontinued operations .01 .01 .01 .04
----------------------- --- --- --- ---
Diluted earnings per share $1.53 $1.51 $3.90 $3.69
-------------------------- ----- ----- ----- -----
Weighted-average diluted
shares outstanding, in
millions 320.6 340.1 326.1 344.5
------------------------ ----- ----- ----- -----

Schedule 2
----------
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)

September 30, December 31,
$ in millions 2009 2008
------------- ---- ----
Assets
Cash and cash equivalents $1,924 $1,504
Accounts receivable, net of progress
payments 3,951 3,904
Inventoried costs, net of progress
payments 1,243 1,003
Deferred tax assets 513 549
Prepaid expenses and other
current assets 453 229
-------------------------- --- ---
Total current assets 8,084 7,189
Property, plant, and equipment, net of
accumulated depreciation of $4,171 in
2009 and $3,803 in 2008 4,775 4,810
Goodwill 14,526 14,518
Other purchased intangibles, net of
accumulated amortization of $1,873 in
2009 and $1,795 in 2008 899 947
Pension and post-retirement plan assets 292 290
Long-term deferred tax assets 1,281 1,510
Miscellaneous other assets 988 933
-------------------------- --- ---
Total assets $30,845 $30,197
------------ ------- -------

Liabilities
Notes payable to banks $28 $24
Current portion of long-term debt 491 477
Trade accounts payable 1,793 1,943
Accrued employees' compensation 1,419 1,284
Advance payments and billings in
excess of costs incurred 1,977 2,036
Other current liabilities 1,562 1,660
------------------------- ----- -----
Total current liabilities 7,270 7,424
Long-term debt, net of current portion 4,194 3,443
Pension and post-retirement plan
liabilities 5,349 5,823
Other long-term liabilities 1,603 1,587
--------------------------- ----- -----
Total liabilities 18,416 18,277
----------------- ------ ------

Shareholders' Equity
Common stock, $1 par value;
800,000,000 shares authorized;
issued and outstanding: 2009 -
314,716,763; 2008 - 327,012,663 315 327
Paid-in capital 9,061 9,645
Retained earnings 6,457 5,590
Accumulated other comprehensive loss (3,404) (3,642)
------------------------------------ ------ ------
Total shareholders' equity 12,429 11,920
-------------------------- ------ ------
Total liabilities and
shareholders' equity $30,845 $30,197
--------------------- ------- -------

Schedule 3
----------
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Nine Months Ended
September 30
------------
$ in millions 2009 2008
------------- ---- ----
Operating Activities
Sources of Cash - Continuing Operations
Cash received from customers
Progress payments $5,472 $5,465
Collections on billings 20,193 19,828
Other cash receipts 32 87
------------------- -- --
Total sources of cash - continuing
operations 25,697 25,380
---------------------------------- ------ ------
Uses of Cash - Continuing Operations
Cash paid to suppliers and employees (22,717) (22,248)
Pension contributions (832) (86)
Interest paid, net of interest received (240) (251)
Income taxes paid, net of refunds received (675) (569)
Excess tax benefits from stock-based
compensation (2) (47)
Other cash payments (29) (8)
------------------- --- --
Total uses of cash - continuing operations (24,495) (23,209)
------------------------------------------ ------- -------
Cash provided by continuing operations 1,202 2,171
Cash provided by discontinued operations 3
---------------------------------------- ----- -
Net cash provided by operating activities 1,202 2,174
----------------------------------------- ----- -----
Investing Activities
Proceeds from sale of business, net of
cash divested 175
Payments for businesses purchased (33)
Additions to property, plant, and
equipment (436) (444)
Payments for outsourcing contract costs
and related software costs (58) (100)
(Increase) decrease in restricted cash (28) 59
Other investing activities, net 16 11
------------------------------- -- --
Net cash used in investing activities (539) (299)
------------------------------------- ---- ----
Financing Activities
Net borrowings under lines of credit 4 3
Proceeds from issuance of long-term debt 850
Principal payments of long-term debt (73) (110)
Proceeds from exercises of stock options
and issuances of common stock 29 95
Dividends paid (405) (395)
Excess tax benefits from stock-based
compensation 2 47
Common stock repurchases (650) (1,462)
------------------------ ---- ------
Net cash used in financing activities (243) (1,822)
------------------------------------- ---- ------
Increase in cash and cash equivalents 420 53
Cash and cash equivalents, beginning
of period 1,504 963
------------------------------------ ----- ---
Cash and cash equivalents, end of period $1,924 $1,016
---------------------------------------- ------ ------

Schedule 4
----------
NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Nine Months
Ended
September 30
------------
$ in millions 2009 2008
------------- ---- ----
Reconciliation of Net Earnings to Net Cash Provided by
Operating Activities
Net earnings $1,273 $1,271
Adjustments to reconcile to net cash provided by
operating activities
Depreciation 428 416
Amortization of assets 113 148
Stock-based compensation 83 126
Excess tax benefits from stock-based compensation (2) (47)
Pre-tax gain on sale of business (58)
Increase in
Accounts receivable (4,741) (4,845)
Inventoried costs (443) (531)
Prepaid expenses and other current assets (39) (43)
Increase (decrease) in
Progress payments 4,888 5,062
Accounts payable and accruals (120) 313
Deferred income taxes 133 122
Income taxes payable (158) 130
Retiree benefits (208) 35
Other non-cash transactions, net (5) 72
-------------------------------- -- --
Cash provided by continuing operations 1,202 2,171
Cash provided by discontinued operations 3
---------------------------------------- ------ ---
Net cash provided by operating activities $1,202 $2,174
----------------------------------------- ------ ------
Non-Cash Investing and Financing Activities
Sale of business
Liabilities assumed by purchaser $(18)
----------------------------------- ----
Mandatorily redeemable convertible preferred stock
converted into common stock $350
-------------------------------------------------- ----

Schedule 5
----------
NORTHROP GRUMMAN CORPORATION
TOTAL BACKLOG AND CONTRACT AWARDS
(unaudited)

$ in millions September 30, 2009 December 31, 2008 (3)
------------- -------------------- -----------------------
TOTAL TOTAL
FUNDED(1) UNFUNDED(2) BACKLOG FUNDED(1) UNFUNDED(2) BACKLOG
--------- ----------- ------- --------- ----------- -------
Aerospace
Systems $8,213 $16,678 $24,891 $7,648 $22,883 $30,531
Electronic
Systems 7,968 2,809 10,777 8,391 2,124 10,515
Information
Systems 4,911 5,219 10,130 5,310 4,672 9,982
Shipbuilding 12,323 9,078 21,401 14,205 8,148 22,353
Technical
Services 1,812 2,452 4,264 1,840 2,831 4,671
----- ----- ----- ----- ----- -----
Total $35,227 $36,236 $71,463 $37,394 $40,658 $78,052
------- ------- ------- ------- ------- -------

(1) Funded backlog represents firm orders for which funding is
contractually obligated by the customer.
(2) Unfunded backlog represents firm orders for which funding is not
currently contractually obligated by the customer. Unfunded backlog
excludes unexercised contract options and unfunded
Indefinite Delivery Indefinite Quantity (IDIQ) orders.
(3) Certain prior period amounts have been reclassified to conform to the
2009 presentation.

New Awards - The estimated value of contract awards included in backlog
during the nine months ended September 30, 2009, was $24.5 billion.

Backlog Adjustment - In the second quarter of 2009, the company was
notified that the Kinetic Energy Interceptor (KEI) program was terminated
for convenience by the Missile Defense Agency. The KEI termination was
recorded as a reduction to total backlog of $5.1 billion at Aerospace
Systems.

Schedule 6
----------
NORTHROP GRUMMAN CORPORATION
REALIGNED SEGMENT OPERATIONS RESULTS
($ in millions)
(unaudited)

NET SALES
---------
2006 2007 2008
---- ---- ---------------------------------------
Three Months Ended
Total Total ------------------------------- Total
Year Year Mar 31 Jun 30 Sep 30 Dec 31 Year
---- ---- ------ ------ ------ ------ ----
AS REPORTED (1)

Information &
Services

Mission
Systems $4,704 $5,077 $1,298 $1,388 $1,417 $1,537 $5,640
Information
Technology 3,962 4,486 1,085 1,215 1,085 1,133 4,518
Technical
Services 1,858 2,177 505 572 607 612 2,296
----- ----- --- --- --- --- -----
10,524 11,740 2,888 3,175 3,109 3,282 12,454

Aerospace

Integrated
Systems 5,500 5,067 1,340 1,358 1,345 1,461 5,504
Space
Technology 3,869 4,176 1,022 1,118 1,079 1,117 4,336
----- ----- ----- ----- ----- ----- -----
9,369 9,243 2,362 2,476 2,424 2,578 9,840

Electronics 6,267 6,528 1,555 1,675 1,814 2,046 7,090

Shipbuilding 5,321 5,788 1,264 1,688 1,451 1,742 6,145

Intersegment
Eliminations (1,490) (1,471) (345) (386) (417) (494) (1,642)
------- ------- ----- ----- ----- ----- -------

Total $29,991 $31,828 $7,724 $8,628 $8,381 $9,154 $33,887
------- ------- ------ ------ ------ ------ -------

REALIGNED (2)

Aerospace
Systems $9,358 $9,234 $2,361 $2,472 $2,417 $2,575 $9,825

Electronic
Systems 6,201 6,466 1,545 1,665 1,808 2,030 7,048

Information
Systems 8,383 9,245 2,298 2,512 2,410 2,557 9,777

Shipbuilding 5,321 5,788 1,264 1,688 1,451 1,742 6,145

Technical
Services 2,090 2,422 558 634 665 678 2,535

Intersegment
Eliminations (1,362) (1,327) (302) (343) (370) (428) (1,443)
------- ------- ----- ----- ----- ----- -------
Total $29,991 $31,828 $7,724 $8,628 $8,381 $9,154 $33,887
------- ------- ------ ------ ------ ------ -------

NORTHROP GRUMMAN CORPORATION
REALIGNED SEGMENT OPERATIONS RESULTS
($ in millions)
(unaudited)

SEGMENT OPERATING INCOME (3)
----------------------------
2006 2007 2008
---- ---- ---------------------------------------
Three Months Ended
Total Total ------------------------------- Total
Year Year Mar 31 Jun 30 Sep 30 Dec 31 Year
---- ---- ------ ------ ------ ------ ----

AS REPORTED (1)

Information &
Services

Mission
Systems $451 $508 $128 $133 $128 $119 $508
Information
Technology 342 329 89 82 37 97 305
Technical
Services 120 120 26 36 31 28 121
--- --- --- --- --- --- ---
913 957 243 251 196 244 934

Aerospace

Integrated
Systems 551 591 170 143 144 156 613
Space
Technology 311 329 82 93 90 (461) (196)
--- --- --- --- --- --- ---
862 920 252 236 234 (305) 417

Electronics 786 813 209 202 264 277 952

Shipbuilding 393 538 (218) 126 118 (2,333) (2,307)

Intersegment
Eliminations (117) (113) (28) (31) (44) (38) (141)
--- --- --- --- --- --- ---
$2,837 $3,115 $458 $784 $768 $(2,155) $(145)

REALIGNED (2)

Aerospace
Systems $861 $919 $252 $236 $233 $(305) $416

Electronic
Systems 783 809 209 201 261 276 947

Information
Systems 771 815 212 207 156 208 783

Shipbuilding 393 538 (218) 126 118 (2,333) (2,307)

Technical
Services 139 139 29 42 39 34 144

Intersegment
Eliminations (110) (105) (26) (28) (39) (35) (128)
--- --- --- --- --- --- ---
Total $2,837 $3,115 $458 $784 $768 $(2,155) $(145)

NOTE: There have been no changes to the realigned segment operating
results since this schedule was first made available with the First
Quarter 2009 earnings release filed on April 22, 2009.

(1) "As reported" amounts are as of December 31, 2008, which reflects
the Park Air / Remotec realignment, Missile Systems realignment, and
the presentation of Electro-Optical Systems as a discontinued
operation and are reported in the 2008 Form 10-K. 2008 quarterly
results for the three months ended Mar. 31, Jun. 30, and Sep. 30 were
previously reported in Schedule 6 of the Third Quarter 2008 earnings
release.
(2) Reported amounts adjusted to reflect the realignment of certain
logistics, services, and technical support programs and assets from
the Information Systems and Electronic Systems segments to the
Technical Services segment and the streamlining of the company's
organizational structure by reducing the number of operating segments
from seven to five.
(3) Non-GAAP measure. Management uses segment operating income as an
internal measure of financial performance for the individual business
segments.

SOURCE Northrop Grumman Corporation

Media, Dan McClain, +1-310-201-3335, or Investors, Paul Gregory,
+1-310-201-1634, both of Northrop Grumman Corporation