Northrop Grumman Corporation · NYSE:NOC
Northrop Grumman — Merger or Acquisition (November 2002)
41 slides from Northrop Grumman's merger presentation, Nov 25, 2002
Slide 1: Northrop Grumman / TRW
Northrop Grumman / TRW November 2002
Slide 2: Forward-looking statements
CCetan ctatements and assumptions in these materials contain or are babed on “forwarcookng" information and involve risks and uncertainties. Such statements are cubject to numerous assumptions and uncertainties, many of ‘which ar outside the company's contol. These include governmental regulatory pr
Slide 3: Northrop Grumman + TRW = New Powerhouse
Northrop Grumman + TRW = New Powerhouse = Sustainable growth in defense spending = Best positioned portfolio = Strong relationships with all DoD & Intelligence customers = Strengthened system-of-systems integration = Strong acquisition integration track record = Solid financial performance & balance
Slide 4: US DoD Procurement & RDT&E
US DoD Procurement & RDT&E SBN ‘Appropriations. Outlays 1996 "1999 2002 6% - 8% CAGR (2002- 2007) in appropriations and outlays NOCITRW positioned in high priority, faster growing sweet spots - C4ISR, space, NMD and ships Homeland Security initiatives provide additional growth ‘Source: Department of
Slide 5: The Persistent Strategy
The Persistent Strategy = Build portfolio of technologies essential to system-of-systems, network centric warfare across all platforms and services = Aggressively pursue emerging opportunities = Apply advanced technologies and human capital across the company = Constantly improve program and financi
Slide 6: Culmination of System of Systems Strategy
Culmination of System of Systems Strategy Land > Sea > Air > Space > Cyberspace
Slide 7: NOC Ideally Aligned with Future Defense Needs
OC Ideally Aligned with Future Defense Needs... Core Competencies acer Progra * Large-Scale integrated ‘irra Carriers, Atack Subs, Systems 8.2, FAG, F-35, Destroyers, Seater Amphibious Assault Ships, CBI Sophisticated Electronic, Classified Space,JSTARS, E-2C, Sensor Systems ‘Guardrail, AWACS, Hunte
Slide 8: Northrop Grumman / TRW Revenue Synergy
Northrop Grumman / TRW Revenue Synergy = “Top-t status yields “Seat at the Table” for system of systems = Combination provides unparalleled pool of technical talent = Will yield significant growth in: ~ Missile Defense — Space - Tactical systems — Intelligence programs — Information warfare — Homela
Slide 9: NOC / TRW - Adding Strength to Strength
NOC / TRW - Adding Strength to Strength How NOC Improves TRW) How TRW Improves NOC Scale to apply technology leadership Financial strength to comps Tier-One New customer - Navy Extensive airborne and naval platform integration expertise Expands customer contacts, Washington presence, and Congression
Slide 10: Highly Capable, Experienced Operating Team
hly Capable, Experienced Operating Team Electronic Information Integrated Newport Ship Space & Systems. Technology "System ystems ‘Systeme ——_—letrones i iy SPN Fe erie esl eceitbseeemel bares iar eae 229 officers and 210 “ready-now” candidates Very experienced incumbents Deep bench for the future M
Slide 11: Recent News Has Been Outstanding
Recent News Has Been Outstanding Northrop Grumman. TRW) Won DD(X) Won SBIRS-Low Won Deepwater Won NPOESS Won Next Generation Space Won NSA Trailblazer Telescope Won lnunigration service 2002E backlog up $5 billion 2002E defense operating Excellent cash gener: profits up >25%" * Operating profits exc
Slide 12: Operations Outlook
Northrop Grumman / TRW Operations Outlook
Slide 13: Leadership in Key Business Areas
Leadership in Key Business Areas Electronic || Information || integrated ||Ship Systems!)| cto, || Space and Systems || Technology || Systems | |Newport News Electronics aE, | 5018 “3478 “$378 “$828 $398 “$258 ~ Airborne Radars — CAR ~ Tactical Aircraft — Naval Systems — Command, Control ~ Itligence
Slide 14: 2002E - 2005E Growth Drivers
2002E - 2005E Growth Drivers: Sales CAGR~10% = C4ISR 14 - 16% CAGR ~ International air defense, networked systems, naval * ry = Space 15 - 20% CAGR ri 2 ° ~ SBIRS Hi /Lo, surveillance payloads, classified = Defensive Systems 10 - 12% CAGR — IRCM, EO targeting, EW, laser systems = Aerospace 5 - 6% CA
Slide 15: 2002E - 2005E Growth Drivers: Information Technology
2002E - 2005E Growth Drivers: * Government IT 10% CAGR: — GTN-21, INS, Deepwater, DD(X), Inteligence * Commercial IT 10 - 15% CAGR: — INS, managed services + Enterprise IT 10- 15% CAGR: — Expect reseller business rebound from 9/11 Margin expansion exceeds growth Robust cash flows Information Technol
Slide 16: Integrated Systems — New Platforms Drive Growth
Integrated Systems — New Platforms Drive Growth 2002E - 2005E Growth Drivers: = ACS 8-10% CAGR: 5 yop Sales 2 CAGR~11% ~ F-35, Global Hawk, MPIRTIP, 8-2 Upgrades = AEWIEW 15-20% CAGR: 7 = Advanced HawkeyelRMP, 5 FOSJIICAPII a * AGSIBM 8-10% CAGR: — JSTARS upgrades, MC2A 2003-05 margin rates reflect
Slide 17: Newport News — Solid Program Base
Newnort News — Solid Program Base 2002E -2005E Highlights — . * * Stable revenues ie = Predictable cash flow . ‘ i i = $5B+ backlog i ’ i = CVN(X) advance funding 2 * Submarine production ° ° |_Strong Earnings and Cash Flow _| a
Slide 18: Ship Systems - Major Wins Drive Growth
Ship Systems - Major Wins Drive Growth 2002E - 2005E Growth Drivers = Surface Combatants 25-30% CAGR: ~ DD(X), Deepwater, DDG-51 cack-20% = Amphibs & Auxiliaries 15-20% CAGR: — LPD, LHD 8 = LCS, Diesel Subs, Cruiser F Conversion 2003-05 margin rates reflect ramp-up in 2001" 2002E 2003 20K 2008 high
Slide 19: TRW Systems — Exceptional Outlook
TRW Systems — Exceptional Outlook 2002E - 2005E Growth Drivers: = Backlog ‘Saloe — $4.5B at year-end 2002 +) | CAGR~10% — Up $500 million in 2002 | = Major program wins: 8 ~ Ground-based Midcourse Defense Segment — Center for Disease Control Force XX Battle Command Brigade & Below ON at Shee Gout Ga
Slide 20: TRW Space & Electronics — Major Wins Drive Growth
TRW Space & Electronics — Major Wins Drive Growth 2002E - 2005E Growth Drivers . = Backlog — $8.5B at year-end 2002 » — Up $4.5B in 2002 = Major program wins — NPOESS — AEHF ~ JSF — Webb Space Telescope — SBIRS-low | A Leader in Satellites, Lasers and Avionics } es
Slide 21: Pipeline of opportunities
+35 + Advanced Hawkeye + Global Hawk + Space-based radar 000), + Littoral Combat Ship Deepwater pause U0 | NATO AGS: * International Air Defense = Trailblazer * International ar defense * Immigration Service + Homeland security += SBIRS High Low + Information Operations = C4ISR Networked Systems npo
Slide 22: Integration
Northrop Grumman / TRW Integration
Slide 23: Diligence
Diligence & Valuation sees Fully Stand-up Integrated Operations Bost ofthe Bes mormon | [Emme Se Louie ‘TRW SBE and Systems integrated poe ee lees | TRW Integ: a ition Will Be Straight-forward |
Slide 24: Supported by Disciplined Operating Processes
~~ supported by Disciplined Operating Processes Excellent Operating m Performance a Focus is on Execution
Slide 25: Results in Demonstrated Ability to Manage Debt
Results in Demonstrated Ability to Manage Debt 80% ‘rumman ) | Westoghouse 70% 4 _voua 60% 2 50% & S 40% g ~~ E 30% 8 20% 10% 0% Sr FS FHSS FS FF > 7 PF PP LEP E PE PLES ES S
Slide 26: Financial Outlook
Northrop Grumman / TRW Financial Outlook
Slide 27: TRW Accelerates Growth
TRW Accelerates Growth 35 30 25 20 15 10 ‘ Ee eo | 2001A 2002E 2003E 2004E 2005E Revenue $ Billions [GES GIT GIS m Ships 0 TRW Systems 5 TRW Space 5 Revenue Synergy)
Slide 28: Transaction Uncertainties Materially Reduced
ransaction Uncertainties Materially Reduced = Aeronautical Systems sold -- $1.5 billion Auto sale announced - $4.725 billion — Anticipate $3.9 - $4.0 billion cash proceeds — $3.76 billion initial cash — $368 million initial equity - expected reduction to ~$200 million with equity sell down by close
Slide 29: Strong Balance Sheet Following Transaction
Strong Balance Sheet Following Transaction 2002E 2003E 2004E 2005E Assumes share price of $100 per share and proforma fo sale of auto “Includes 82 tax payment and TRW transaction costs
Slide 30: Updated Economic EPS Guidance
Undated Economic EPS Guidance” 2753830 SEL sor) _ sos . = sot $6.10-$6.20 (b) 7202 2003 2003 Guidance Guidance Current uly 4, 2002 § ESSE neem mentonsnoeminsna "See Explanation of S Saiocemsc meee Economie Earnings
Slide 31: Updated Cash from Operations Guidance
Undated Cash from Operations Guidance Discontnood | | PorTantr Opens | | Block 0 Rerewes 8 I {s100 tom owen one NOC Alone July 1, 2002, ‘Combination ee
Slide 32: FAS Accounting Does Not Drive Pension Funding
FAS Accounting Does Not Drive Pension Funding Most NOC Pension plans still over funded Funding driven by ERISA not FAS — Different actuarial methods — Much smoother results — Less short-term market sensitivity — Better visibility of future funding Cash contributions are allowable costs in Government
Slide 33: NOC + TRW = Greater Value for Shareholders
NOC + TRW = Greater Value for Shareholders Top Line Revenue Growth Segment Operating Margin — ~$25B to $26B in 2003 = 2003 ~8.5% — ~Double-digit growth in 2004 — 2004 ~9.0% and 2005 — 2005 approaches 10% Economic Earnings* Cash from Operations ~ 2003 between $7.00 and $7.50 ~ Approximately $1B in 20
Slide 34: Wrap-Up
Northrop Grumman / TRW Wrap-Up
Slide 35: NOC Shareholders
NOC Shareholders = Greatly expands opportunities in high priority areas of a growing defense budget ~ Missile Defense = Information warfare = Expands growth in sales, earnings and free cash flow = Strong balance sheet facilitates shareholder value enhancement = Demonstrated ability to integrate acqu
Slide 36: TRW Shareholders
TRW Shareholders Will own 38% of nation’s premier defense company Obtain financial strength to fully apply TRW technologies Gain top tier scale and access to platforms critical to the system of systems network centric warfare segment of defense budget Realize accelerated future growth and performanc
Slide 37: Northrop Grumman + TRW = New Powerhouse
Northrop Grumman + TRW = New Powerhouse = Sustainable growth in defense spending = Best positioned portfolio = Strong relationships with all DoD & Intelligence customers = Strengthened system-of-systems integration = Strong acquisition integration track record = Solid financial performance & balance
Slide 38: Appendix
Slide 39: Explanation of Economic Earnings
planation of Economic Earnings Reconcilation of Projections - GAAP to Economic Earnings (mine xentper stare) Income tom Continuing personel Taxes «$A $0 10M SHES ROMS 2ITE ‘Anorteaon of Purchase ntangies vests meme enon Expensebncome) eo emcee Tx Rate a ee ed Economic Eamingstom Continuing Operation
Slide 40: TRW Systems and Space & Electronics - 2003E Performance and Margin Reconciliation
TRW Systems and Space & Electronics - 2003E Performance and Margin Reconciliation Space & Change from 2003E Segment ($ Millions) | Systems | chime | Combined | “ME Sales $3,900 $2,500 $6,400 HM Operating Profit -TRW Method 25 Bs 520 426% NOC Adjustments (CAS Penson a a 174 Amort of purchased intangi
Slide 41: Form S-4 registration statement notice
Northrop Grumman Corporation filed a registration statement on Form S-4 (File No. 333-83672) with the Securities and Exchange Commission on March 4, 2002 that has been amended to include a joint proxy statement/prospectus relating to the proposed merger of Northrop Grumman and TRW Inc. The directors
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