northrop grumman Wes Bush, President and Chief Financial Officer (Financial Overview)

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

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

Outlook 2005 2006E 2007E Revenue $30.1B $30.2B $31-32B Segment OM1 8% Low 9% Low 9% Operating Margin 7.3% Low 8% High 8% EPS from Continuing $3.83 $4.40-4.45 $4.65-4.90 Operations Cash from Operations $2.6B $1.5-1.8B $2.5-2.8B Capital Expenditures2 $744M $700-750M $650-700M 1 Non-GAAP Metric - see reconciliation and definition on pages 25 & 26 2 Before Katrina-related capital expenditures 3 Copyright 2006 Northrop Grumman Corporation

Portfolio Actions to Drive Growth Life Cycle Systems Integrated Information Optimization Support Systems Technology Technical Services Systems Mission Life Cycle Electronics Support, Systems Optimization Training & Simulation Life Cycle Optimization Technical Services Space Addresses ~$70 billion arena Technology Growing at 8-9% Military Communications Addresses ~$80B arena Mission Systems Radio Growing at 4-7% Systems Space Comms & Technology Information Network Space & Comms Communications Networks & Collaboration 5 Copyright 2006 Northrop Grumman Corporation

Portfolio Supports Organic Sales Growth Electronics 21% Aerospace 2007E 2006E ($B) Growth 27% I&S ~$11 8-10% Aerospace ~$9 ~(5)% Electronics ~$6.6 ~5% Ships ~$5 ~10% 36% I&S 16% Total ~$30.2 $31-32 Ships Transfer of Radio Systems to Information & Services from Aerospace effective 1/1/07 not included 6 Copyright 2006 Northrop Grumman Corporation

Core Programs Provide Strong Base New 100 New New 80 Follow-on Follow-on % of Sales 60 Unfunded Unfunded 40 Firm 20 0 2006E 2007E 2008E Franchise programs provide reliable long-term revenue Core and adjacent opportunities support organic growth 7 Copyright 2006 Northrop Grumman Corporation

Margin & Cash Performance Drivers Competitive Excellence programs Program performance Infrastructure costs World-class processes ACE Program Scale leverage (Procurement, IT, Facilities) ~$150M cost reduction expected in 2006 ~$300M annual cost reduction targeted by 2008 Shared services Financial systems, workforce administration ~$100M cost reduction targeted by 2008 Cash initiatives Best practice adoption for contract terms & conditions, receivables/ payables management, working capital enhancements Benefits programs modernization Post retirement benefits plan change reflected in 2007 guidance All data and alternatives in the ACE project are considered feasibility assessments. This information is not considered cost or pricing data under Public Law 87-653. 9 Copyright 2006 Northrop Grumman Corporation

Program Risk Management Process Pre-Contract Phase Target selection criteria Non-advocate review (NAR) Independent cost evaluation (ICE) Rigorous corporate risk review process Contract Performance Phase Risk management baseline Company-wide Earned Value Management System Enhanced transparency at all levels Program-focused sector reviews Watch list review process Strengthened corporate oversight of programs 10 Copyright 2006 Northrop Grumman Corporation

Operating Margin Expansion 2006E 2007E Long-Term Margin Operating Margin % Opportunity2 Information & Services Low 8 ~8 8-9 Aerospace Low 9 ~9 9-10 Mid to Electronics High 11 ~12 High 11 Ships ~7 Mid 8 9+ Segment OM1 Low 9 Low 9 ~10 Total Operating Margin Low 8 High 8 9+ 1 Non-GAAP Metric - see reconciliation and definition on pages 25 & 26 2 Dependent on long-term business mix 11 Copyright 2006 Northrop Grumman Corporation

Reconciliation of Segment OM to OM Unallocated 2006E of ~$250 million (~$140 million before Q3 legal provision) 2007E ~$90 million Post retirement benefit plan changes result in substantial savings Net Pension Expense 2006E of ~($25) million 2007E with 2006 assumptions, pre-funding and 2007 demographics is ~($15) million 12 Copyright 2006 Northrop Grumman Corporation

EPS—Key Components 2006E 2007E Sales $30.2B $31-32B Segment OM1 Low 9% Low 9% Unallocated Expenses ~$250M ~$90M Net Pension Expense ~$25M ~$15M Operating Margin Low 8% High 8% Net Interest Expense ~$300M ~285M Effective Tax Rate ~31% 33-34% EPS Guidance $4.40-4.45 $4.65-4.90 1 Non-GAAP Metric - see reconciliation and definition on pages 25 & 26 13 Copyright 2006 Northrop Grumman Corporation

Cash—Key Components 2006E ($M) 2007E ($M) Depreciation & Amortization ~715 ~710 Pension/OPEB Funding ~(650) ~250* Change in Working Capital Neutral Neutral - Improving Cash Taxes (550) (1,000) Stock-based Compensation ~200 ~220 Discontinued Operations (80) - Cash from Operations 1,500 – 1,800 2,500 – 2,800 Capital Expenditures1 700 – 750 650 - 700 Free Cash Flow2 750 – 1,100 1,800 – 2,150 * Based on 2006 assumptions 1 Does not include Katrina-related related capital expenditures 2 Non-GAAP Metric - see definition on page 27 14 Copyright 2006 Northrop Grumman Corporation

EPS & Free Cash Flow Per Share $7 $6 $5 $4 $3 $2 $1 $0 2003* 2004 2005 2006E** 2007E Free Cash Flow per Share 1 EPS EPS guidance range Cash guidance range 1 Non-GAAP Metric - see definition on page 27 – prior to Katrina related capital expenditure * Includes $1 Billion B-2 Tax Payment ** Includes $800 Million discretionary pension pre-funding 15 Copyright 2006 Northrop Grumman Corporation

Cash Deployment Strategy 17 Dividends Share Repurchases Moderate share count Maintain competitive payout reduction ratio Review regularly Review regularly Acquisitions Debt Reduction & Divestitures & Pension Pre-funding Accelerate growth & Maintain strong credit profile Accelerate growth & shareholder returns Ensure flexibility Acquisitions in strategically Capture economic benefits aligned businesses with profitable growth Divest to capture enhanced value 17 Copyright 2006 Northrop Grumman Corporation

Share Repurchases 370 Share Repurchases Shares Outstanding 360 Moderate net share count reduction 350 Review regularly 340 330 2002 2003 2004 2005 2006 YTD $3.2 Billion authorized since 2004 $3 Billion completed 18 Copyright 2006 Northrop Grumman Corporation

Dividends $1.40 Dividends $1.20 Dividends per Share $1.00 Maintain competitive payout ratio $0.80 $0.60 Review regularly $0.40 $0.20 $0.00 2003 2004 2005 2006 Double-digit increases in 2004, 2005 & 2006 50% increase since 2003 19 Copyright 2006 Northrop Grumman Corporation

Acquisitions & Divestitures Acquisition Principles Alignment with portfolio strategy Acquisitions Rapid synergy capture & Divestitures Accretive by year two Accelerate growth & Accelerate growth & Valuation based on robust DCF shareholder returns assessment Acquisitions in strategically Rigorous due diligence process, aligned businesses with experienced team profitable growth Comprehensive integration assessment and plan Divest to capture enhanced value Sector execution commitment Annual reviews of performance to sector commitment 20 Copyright 2006 Northrop Grumman Corporation

Debt Reduction & Pension Pre-funding Highest credit rating in Debt Reduction company’s history & Pension Pre-funding $1.2 billion debt reduction expected in 2006 Maintain strong credit profile ~$5.7B debt reduction from 2002 to YE 2006 Ensure flexibility Net debt/total capital has Capture economic declined from 34% to 14% benefit $1.3 billion pension pre- funding in 2004, 2005 & 2006 21 Copyright 2006 Northrop Grumman Corporation

Non-GAAP Measure Reconciliation $ Millions 2005A 2006E 2007E Sales $30,067 ~$30,200 $31,000-$32,000 Segment Operating Margin Rate* 8.0% Low 9% Low 9% Operating Margin Rate 7.3% Low 8% High 8% Segment Operating Margin* 2,414 ~2,750 2,860-2,940 Reconciliations: Unallocated Expenses (190) Pension (Expense) Income (410) ~(300) ~(120) Reversal of CAS Pension Expense included above 389 Reversal of Royalty Income included above (10) Operating Margin as Reported 2,193 ~2,450 2,740-2,820 *Non-GAAP Measure 25 Copyright 2006 Northrop Grumman Corporation

Non-GAAP Measures Definitions Non-GAAP Financial Measures Disclosure Today’s presentation and the accompanying web charts contain non-GAAP (Generally Accepted Accounting Principles) financial measures, as defined by SEC Regulation G and indicated by an asterisk *. While we believe that these non-GAAP financial measures may be useful in evaluating Northrop Grumman, this information 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 used in our presentation. Other companies may define the measures differently. Segment Operating Margin Segment Operating Margin is the total earnings from each of our six business segments including royalty income and pension expense to the extent that the cost is currently recognized under government Cost Accounting Standards (CAS). Segment Operating Margin excludes unallocated corporate expenses, GAAP pension expense and the reversal of CAS pension expense. Reconciling items to total company Operating Margin are: — GAAP pension expense reported separately as a reconciling item under the caption \"Pension expense.\" — Reversal of CAS pension expense included in Segment Operating Margin as a cost recognized under CAS. — Unallocated expenses which include unallocated corporate, legal, environmental, state income tax, and other retiree benefits expenses. — Royalty Income reversed under the caption “Reversal of royalty income included above” and reported under the caption “Other, net.” Management uses segment operating margin as an internal measure of financial performance of our individual business segments. This measure also may be helpful to investors in understanding period-over-period operating results separate from items that may be influenced by external market fluctuations. 26 Copyright 2006 Northrop Grumman Corporation

Non-GAAP Measures Definitions Net Debt Net Debt is calculated as short and long-term interest-bearing debt minus cash and cash equivalents.. Free Cash Flow Free Cash Flow (FCF) is the cash from operations less capital expenditures. Katrina related capital expenditures are excluded. Katrina related capital expenditures was approximately $80M in 2005, and it is projected to be approximately $200M in 2006 and approximately $100M in 2007. Free Cash Flow Per Share Free Cash Flow as defined above divided by weighted average diluted shares 27 Copyright 2006 Northrop Grumman Corporation

northrop grumman Wes Bush, President and Chief Financial Officer (Financial Overview)

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