Slide 1: Northrop Grumman Overview – Third Quarter Review
Northrop Grumman Overview Third Quarter Review October 2002
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements and assumptions in these materials contain or are based on “forward-looking” information and involve risks and uncertainties. Such statements are subject to numerous assumptions and uncertainties, many of which are outside the company's control. These include
Slide 3: The Fundamentals are Strong and Intact
NORTHROP GRUMMAN ZF ere roreD The Fundamentals are Strong and Intact = Growing Defense Outlook = = Experienced Management Team = Strong Acquisition Integration Track Record = Solid Financial Performance = Excellent Prospects for 2003 and Beyond ‘ocused on areholder Value = Purest Defense Play = Best
Slide 4: US DoD Procurement & RDT&E
US DoD Procurement & RDT&E $BN $140 Appropriations, $130 $120 4 $110 $100 $70 1990 19931996, 1999 20026 ry x ¥ 2005E ‘Source: Department of Defense - National Defense Budget, 38°03 budget % Original Budget Request Transforming Technologies Leading to Changes in Tactics, Training and Organization NOC
Slide 5: Proven M&A Track Record
NORTHROP GRUMMAN Proven M&A Track Record = 15 Acquisitions Integrated Since 1994 = Revenue Growth from $5 billion to ~$17 billion (2002 Estimated) = Sold Under-performing and Non-core Businesses = Cross Company, Multi-disciplined Integration Team = Well Honed, Full Spectrum Integration Process = Rap
Slide 6: Mergers & Acquisitions — Strategy & Value Driven
Mergers & Acquisitions — Strategy & Value Driven 7994 * Grumman Corporation (Integrated Systems) + Vought Aircraft (Aerostructures) 1996 * Westinghouse Electronic Systems Group (Electronics) * Allied - sold (Truck Bodies) peer Logicon (Information Technology) 9998 * INRI Information Technology) 1999
Slide 7: Demonstrated Ability to Manage Debt
> Demonstrated Ability to Manage Debt 1 80% + eae Westinghouse a ur Grumman | —“estcahouse | wR! | Ryan/ DPC/ teting 70% ~_ Vought Cal Fed Data Aerojet Microwave Navia|_NNS Aerostructures Sale
Slide 8: Strategy-Driven Transformation
Strategy-Driven Transformation $5.4B - 1993 ~$17B - 2002E ca ==> ‘C Electronic Systems C Information Technology ‘FS Integrated Systems € Ships
Slide 9: Revenue Growth Targets
Revenue Growth Targets 25 20 15 10 i 2001 2002E 2003E Es @iT ols 2004E
Slide 10: Revenue by sector and capabilities
2002E 2004E Int Ship Systems / Newport News ~$5.4B ~$4.2B ~$3.2B ~$4.3B ~$6.5B ~$5.0B ~$4.0B ~$5.5B Airborne Radars clisr Air Combat * ‘Naval Systems CSR Government IT ~ Tactical Integrator Electronic Infrastructure = Long Range * Aircraft Carriers Warfare Science & = Unmanned * Attack Submarines Na
Slide 11: Third Quarter Review
Third Quarter Review = Third Quarter Results & Issues = 2002 Expectations = 2003 & 2004 Expectations
Slide 12: Strong Third Quarter 2002 Results
Strong Third Quarter 2002 Results = Reported Strong Overall Results — $4.2 billion in Sales, up 24% — $4.1 billion in Acquisitions — 7.4% Sector Margin — $459 million cash from operations — 36% net debt to total capital = Cumulative Adjustments affected margin and EEPS = Sold two businesses = Announ
Slide 13: Third Quarter 2002 Issues
Third Quarter 2002 Issues = Discontinued Operations CT, Ruggedized Displays, Electron Devices — 2002 Sales $700 million 2003 Sales $1 billion — $0.15 2002 EEPS — $0.58 2003 EEPS = F-16 Block 60 - $65M charge - Design and Material Costs — $1.1B fixed price development and production through ‘07 — Com
Slide 14: Third Quarter 2002 Issues (continued)
Third Quarter 2002 Issues (continued) = Polar Tanker - $87M charge for reduced learning ($64M) and schedule penalties ($23M) — 3 Ships remain to be delivered in 2003 and 2004 — Bottom up EAC — Strengthened Management — New systems, Work Station Management (Earned Value), LEAN and Six Sigma — EAC inc
Slide 15: Third Quarter 2002 Issues (continued)
Third Quarter 2002 Issues (continued) = Technology Services contract - $20 million positive adjustment — Restructured contract = Net effect of contract adjustments $0.36 per share 2002 EEPS = Pension Income/Expense and Potential reduction to retained earnings — Highly dependent on capital market ret
Slide 16: 2002 Expectations from Continuing Operations
NORTHROP GRUMMAN 2002 Expectations from Continuing Operations ° Sales Sector Margin Rate t! S BILLIONS 109 ‘100 ao ‘ae er) am RE EEPS BS 999 70 ‘001 ame ‘08 ‘0 2001 eae
Slide 17: 2003 and 2004 Expectations
NORTHROP GRUMMAN 2003 and 2004 Expectations am 0 ‘Sales o® -_ a 3 is. 7. He 5 = ° ao ‘ 5 ro aU « ° 999 2000200120028 ONDE 20048 1098 ‘i Sector Margin Rate ae
Slide 18: Sales Guidance
SALES GUIDANCE Q2 Q3 Reason for Change Total 2002 $17.5 - 18B $16.5-17B Discontinued Ops Total 2003 $20 - 20.5B $19-19.5B ES 2002 $5.5-5.7B $5.4B Discontinued Ops ES 2003 Double-digit Double-digit Ships 2002 $4.2-4.4B Unchanged Ships 2003 Double-digit Double-digit IT 2002 $4.2 -4.4B $4.2B Lower Rese
Slide 19: Margin Rate Guidance
MARGIN RATE GUIDANCE a2 Q3 Reason for Change Total 2002 ~8% High 7% Charges Total 2003 ~8.5% Mid-8% Range No Change ES 2002 ~9% ~8.2% F-16 Charge ES 2003 9.5- 10% 9.5- 10% No Change Ships 2002 ~8% 7.5 -8% Polar Charge Ships 2003 8.5-9% 8-8.5% Business Mix IT 2002 Low 5% range 5.5-6% Contract Restruc
Slide 20: Northrop Grumman at Third Quarter '02
Northrop Grumman at Third Quarter ‘02 = Newport News “Stood Up” as New Sector — NOC Now Nation’s Largest Shipbuilder with Greater Than $4 Billion in Revenues = DD(X) Win—Largest Naval Procurement in U.S. History = Deepwater Win—NOC Nowa Key Contractor for Homeland Security ——- = New Global Hawk Cont
Slide 21: TRW Acquisition and Integration Plan
TRW Acquisition and Integration Plan = Nominal $60 Per Share in NOC Shares = Collar Between $112 (.5357) and $138 (.4348) = Shareholder Votes on December 11, 2002 = Spin or Sell Automotive with Appropriate Debt = Sale of Aeronautical to Goodrich for $1.5 billion Completed = Space & Electronics and S
Slide 22: Nation's 2nd Largest Defense Contractor with TRW
Nation's 2nd Largest Defense Contractor with TRW = Third Major Military Space and Missile Defense Competitor = Largest Federal Government IT Provider = Premier Airborne Radar & Electronic Warfare Systems Provider = Strong Overall Competitor in Other Key Areas of DoD Budget = Most Diversified Defense
Slide 23: Northrop Grumman sectors and programs
Northrop Grumman Programs Aircraft Carriers, Attack Subs, B-2, FIA-18, F-35, Destroyers, Amphibious Assault Ships, ICBM * Large-Scale Integrated Systems + Design and Manufacture of pases Electronic JSTARS, E-2C Surveillance jensor Systems Aircraft, AWACS, Global Hawk * Naval Shipbuilding & Propulsio
Slide 24: Revenue Growth Targets With TRW
NORTHROP GRUMMAN Revenue Growth Targets With TRW 30 25 Le 10 5 2001 2002E 2003E 2004E $ Billions Bes mm GIS OShips OTRW
Slide 25: Summary
~ Summary = Right Place, Right Time, Right Capabilities = Northrop Grumman Very Well Positioned With or Without TRW = TRW Rounds Out Portfolio and Benefits Customer, Employees and Shareholders = Financial Outlook Strong and Intact = Managed for Shareholder Value Growth
Slide 26: Registration statement on Form S-4 and proxy solicitation 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