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Northrop
    Grumman
    2006 Institutional
    Investor
    Conference

    November 9, 2006

    Gaston Kent
    Vice Pr...
Safe Harbor Statement
     Certain statements and assumptions in these presentations and materials contain or are based on...
Presentation Format
     Guidance
        Effective 1/1/07 Radio Systems business will be transferred from Space
        T...
The Leadership Team
                                                                                             Bus Dev &...
Electronics


                  Growth                                           Operating Margin
                        ...
Electronic
    Systems
    Overview
    2006 Institutional Investor Conference




    November 9, 2006

    James F. Pitt...
Electronic Systems … $6.6B 2006E Sales



                                       Space
                                   ...
Strong & Diversified Portfolio …
     DoD budget trends
                                                     Non-DoD
     ...
Strong Performance Focus
                                             8                                                   ...
Electronics Systems …
     Strong leadership focus
     Improving top line growth
     Strong, diversified portfolio
     ...
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northrop grumman Electronics

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Transcript of "northrop grumman Electronics"

  1. 1. Northrop Grumman 2006 Institutional Investor Conference November 9, 2006 Gaston Kent Vice President, Investor Relations Northrop Grumman Corporation 0 Copyright 2006 Northrop Grumman Corporation
  2. 2. Safe Harbor Statement 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. 1 Copyright 2006 Northrop Grumman Corporation
  3. 3. Presentation Format Guidance Effective 1/1/07 Radio Systems business will be transferred from Space Technology to Mission Systems Reported results for Q4 2006 & Full Year 2006 will not reflect the transfer Guidance does not reflect the change Guidance does not include Essex Segment results 2003 - 2005 Presented on a pro forma basis reflecting Previously announced organizational realignments Transfer of Radio Systems business Adoption of dual-margin recognition on inter-segment sales 3 Copyright 2006 Northrop Grumman Corporation
  4. 4. The Leadership Team Bus Dev & HR & Communications Law Govt Relations Administration Ron Sugar Wes Bush Chairman President & CFO & CEO Bob Helm Burks Terry Ian Ziskin Rosanne O'Brien Corp VP Corp VP & Corp VP & Chief Corp VP General Counsel HR & Admin Officer Mission Information Technical Electronic Integrated Space Ship Newport Systems Technology Services Systems Systems Technology Systems News Jerry Agee Jim O’Neill Jim Cameron Jim Pitts Scott Seymour Alexis Livanos Phil Teel Mike Petters Corp VP & President Corp VP & President Corp VP & President Corp VP & President Corp VP & President Corp VP & President Corp VP & President Corp VP & President Information & Services Electronics Aerospace Ships The Right Team For Our Strategy 1 110906 Investor Conf. Rev N_KLH Copyright 2006 Northrop Grumman Corporation
  5. 5. Electronics Growth Operating Margin 2007E 2006E ($B) 2006E 2007E Long-Term Growth Margin Opportunity2 Operating Margin % I&S ~$11 8-10% Information & Services Low 8 ~8 8-9 Aerospace Low 9 ~9 9-10 Aerospace ~$9 ~(5)% Mid to Electronics High 11 ~12 High 11 Electronics ~$6.6 ~5% Ships ~7 Mid 8 9+ Segment OM1 Low 9 Low 9 ~10 Ships ~$5 ~10% Total Operating Margin Low 8 High 8 9+ Total ~$30.2 $31-32 1 Non-GAAP Metric - see reconciliation and definition on pages 25 & 26 2 Dependent on long-term business mix 2 110906 Investor Conf. Rev N_KLH Copyright 2006 Northrop Grumman Corporation
  6. 6. Electronic Systems Overview 2006 Institutional Investor Conference November 9, 2006 James F. Pitts President Northrop Grumman Electronic Systems 3 110906 Investor Conf. Rev N_KLH Copyright 2006 Northrop Grumman Corporation
  7. 7. Electronic Systems … $6.6B 2006E Sales Space Sensors Airborne Sensors Ground & Soldier & Self-Protection Systems Systems Maritime & International & Underseas Large Systems Infrastructure Solutions … World Class Solution Provider … World Class Financial Performance 4 110906 Investor Conf. Rev N_KLH Copyright 2006 Northrop Grumman Corporation
  8. 8. Strong & Diversified Portfolio … DoD budget trends Non-DoD Upgrades balanced with new starts 20% DoD Adapting products to GWOT International 55% 25% GWOT GWOT An evolving market Undersea to Undersea to Protecting core business Outer Space Outer Space Technology insertion Global Global Move up value chain Security Security Peer Exploiting international opportunities Peer Competitor Competitor Expanding into adjacent markets Acting with speed Positioned for shifting budget priorities 5 110906 Investor Conf. Rev N_KLH Copyright 2006 Northrop Grumman Corporation
  9. 9. Strong Performance Focus 8 14% Top Line… 12% 7 10% Acquisitions up 17% Sales $B OM % 8% from 2005 6 6% Solid revenue projection 4% 5 2% Bottom Line… 4 0% 2003 2004 2005 2006E 2007E Retiring risk Expanding margins Business imperatives … Improving processes – Leadership & people Cash… – Teamwork & collaboration Improving cash conversion – Continuous improvement Reducing capital – Strategic thinking for growth 6 110906 Investor Conf. Rev N_KLH Copyright 2006 Northrop Grumman Corporation
  10. 10. Electronics Systems … Strong leadership focus Improving top line growth Strong, diversified portfolio Scholarship Expanding into adjacent markets Exploiting international Learning Teams Mentoring marketplace Aligning to customer missions Improving margins and cash performance Resource Groups Delivering shareholder value 7 110906 Investor Conf. Rev N_KLH Copyright 2006 Northrop Grumman Corporation
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