UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)
February 9, 2011

Northrop Grumman Corporation

DELAWARE (State or Other Jurisdiction of Incorporation)		1-16411 (Commission File Number)		95-4840775 (IRS Employer Identification No.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On February 9, 2011, Northrop Grumman Corporation (the “Company”) issued a press release announcing its financial results for the quarter and year ended December 31, 2010, under the heading “Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results.” Complementary to such press release and to the Company’s previously announced conference call to be held on February 9, 2011 at 10:30 a.m. ET and webcast live at http://www.northropgrumman.com, the Company will provide a supplemental presentation related to 2010 results and 2011 guidance on its website. The press release and supplemental presentation are furnished as Exhibits 99.1 and 99.2, respectively.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d)    Exhibits

		Furnished
		Exhibit 99.1 — Press Release dated February 9, 2011
		Exhibit 99.2 — Supplemental Presentation dated February 9, 2011

Signature(s)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit Index

Exhibit No.
Exhibit 99.1		Furnished — Press Release dated February 9, 2011
Exhibit 99.2		Furnished — Supplemental Presentation dated February 9, 2011

		News Release

	Contact:	Dan McClain (Media) (310) 201-3335
		Paul Gregory (Investors)
		(310) 201-1634

Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results

•		Q4 EPS from Continuing Operations Increases to $1.27; 2010 EPS from Continuing Operations Increases to $6.77
•		Q4 Sales Total $8.6 Billion; 2010 Sales Increase to $34.8 Billion
•		Cash from Operations Totals $1.4 Billion for Q4 and $2.5 billion for 2010
•		Free Cash Flow Totals $1 Billion for Q4 and $1.7 Billion for 2010
•		Share Repurchases Total 19.7 Million in 2010
•		Provides Guidance for 2011 EPS from Continuing Operations Anticipating the Spin-off of Shipbuilding
•		Guidance for 2011 EPS from Continuing Operations of $6.40 to $6.60 Excluding Shipbuilding
•		Conference Call Scheduled for 10:30 a.m. ET at www.northropgrumman.com

          LOS ANGELES – Feb. 9, 2011 – Northrop Grumman Corporation (NYSE: NOC) reported that fourth quarter 2010 earnings from continuing operations totaled $376 million, or $1.27 per diluted share, compared with $375 million, or $1.19 per diluted share, in the fourth quarter of 2009. Fourth quarter 2010 results included a previously announced one-time, pre-tax charge of $231 million, or $0.51 per diluted share, principally related to premiums paid to redeem $682 million in debt through the company’s November 2010 tender offer.

          Earnings from continuing operations increased to $2 billion in 2010, or $6.77 per diluted share, from $1.6 billion, or $4.87 per diluted share in 2009. In addition to the fourth quarter charge related to the debt tender offer, 2010 results included a $113 million pre-tax charge related to the consolidation of the company’s Gulf Coast facilities and a $296 million tax benefit related to approval by the Internal Revenue Service (IRS) and the U. S. Congressional Joint Committee on Taxation of the IRS’ examination of tax returns for the years 2004 through 2006. These three items, all of which were previously

          

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Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		2

announced, resulted in a net increase in 2010 earnings from continuing operations of $0.24 per share.

          Fourth quarter 2010 sales totaled $8.6 billion compared with $8.9 billion in the prior year period. The 2010 fourth quarter had fewer working days than the prior year period. Sales increased 3 percent in 2010 to $34.8 billion from $33.8 billion in 2009. New business awards for the 2010 fourth quarter totaled $9.2 billion, bringing total backlog to $64.2 billion as of Dec. 31, 2010. New business awards totaled $30 billion in 2010.

          Fourth quarter 2010 cash provided by operations increased to $1.4 billion from $931 million in the prior year period. In the 2010 fourth quarter the company’s discretionary pension contributions totaled $440 million, and in the fourth quarter of 2009 the company paid income taxes of $508 million on the sale of its Advisory Services business (TASC). Cash provided by operations totaled $2.5 billion in 2010 compared with $2.1 billion in 2009. Discretionary pension contributions totaled $830 million and $800 million for 2010 and 2009, respectively. Cash provided by operations in 2009 also included $102 million from discontinued operations, as well as the income taxes paid on the sale of TASC.

          “Northrop Grumman had a very good fourth quarter and a strong finish to 2010. Operating income and cash generation exceeded our guidance for the year, demonstrating that across all our businesses, our employees are focusing on performance and building a track record of consistent execution. Northrop Grumman is well positioned to continue creating value for our customers and shareholders,” said Wes Bush, chief executive officer and president.

          

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Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		3

1 Non-GAAP metric - see definitions and reconciliations at the end of this press release.

          Fourth quarter 2010 operating income increased 25 percent to $788 million from $631 million in the prior year period, and as a percent of sales increased 210 basis points to 9.2 percent from 7.1 percent. For 2010 operating income increased 24 percent to $3.1 billion from $2.5 billion in the prior year period, and as a percent of sales increased 140 basis points to 8.8 percent from 7.4 percent. The improvement for both periods principally reflects higher segment operating income and lower net pension adjustment, partially offset by higher corporate unallocated expenses.

          Fourth quarter 2010 segment operating income increased $143 million, or 19 percent, and 2010 segment operating income increased $397 million, or 14 percent. As a percent of sales, fourth quarter 2010 segment operating income improved 200 basis points to 10.3 percent from 8.3 percent, and 2010 segment operating income improved by 90 basis points to 9.6 percent from 8.7 percent. The improvement in segment operating income and margin rate for both periods primarily reflects improved program performance.

          Net pension adjustment improved by $86 million in the 2010 fourth quarter and $286 million for the full year. Unallocated corporate expenses totaled $95 million in the

          

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Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		4

2010 fourth quarter and $220 million for the full year, compared with $24 million and $111 million, respectively, for the prior year periods. The increase in corporate unallocated expenses in the 2010 fourth quarter is principally due to additional deferred state taxes and higher other unallowable costs. In 2009 unallocated corporate expenses for the year were reduced by a $64 million pre-tax gain for the settlement of certain litigation matters.

          Federal and foreign income taxes totaled $143 million compared with $196 million in the fourth quarter of 2009. Fourth quarter 2010 included a $15 million credit for the extension of the Research and Development tax credit. The effective tax rate for the 2010 fourth quarter was 27.6 percent compared with 34.3 percent in the 2009 fourth quarter.

          Federal and foreign income taxes totaled $557 million in 2010, including the $296 million benefit from the IRS settlement, compared with $693 million in 2009, which included a net tax benefit of $75 million, primarily for final settlement of the IRS’s examination of the company’s 2001 through 2003 tax returns. The effective tax rate for 2010 was 21.5 percent compared with 30.6 percent in 2009.

          Fourth quarter 2010 diluted earnings per share are based on 296.9 million weighted average shares outstanding compared with 315.5 million in the fourth quarter of 2009. Diluted earnings per share for 2010 are based on 301.1 million weighted average shares outstanding compared with 323.3 million in 2009.

          

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Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		5

Table 2 - Cash Flow Highlights

		Fourth Quarter												Total Year
($ millions)		2010				2009				Change				2010				2009				Change
Cash provided by operations before discretionary pension contributions1		$	1,651			$	790			$	861			$	3,058			$	2,595			$	463
Discretionary pension pre-funding impact, net of tax			(264	)			141				(405	)			(605	)			(462	)			(143	)
Cash provided by operations			1,387				931				456				2,453				2,133				320
Less:
Capital expenditures			(372	)			(218	)			(154	)			(770	)			(654	)			(116	)
Outsourcing contract & related software costs			(1	)			(10	)			9				(6	)			(68	)			62
Free cash flow1		$	1,014			$	703			$	311			$	1,677			$	1,411			$	266

¹ Non-GAAP metric - see definitions and reconciliations at the end of this press release

Table 3 - Cash Measurements, Debt and Capital Deployment

($ millions)		12/31/2010				12/31/2009
Cash & cash equivalents		$	3,701			$	3,275
Total debt			4,829				4,294
Net debt1			1,128				1,019
Net debt to total capital ratio2			6%				6%

¹Total 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 items for cash from operations, investing and financing in 2010:

Operations

Investing

Financing

Northrop Grumman Corporation
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Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		6

Table 4 – 2011 Guidance - Excludes Shipbuilding

($ in millions, except per share amounts)
Sales		~$27,500
Segment operating margin %1		Mid 10%
Operating margin %		~11%
EPS from continuing operations		$6.40    -    $6.60
Cash provided by continuing operations before discretionary pension contributions1		2,300    -    2,700
Free cash flow provided by continuing operations before discretionary pension contributions1		1,700    -    2,000

¹ Non-GAAP metric - see definitions at the end of this press release.

Northrop Grumman Corporation
1840 Century Park East • Los Angeles, CA 90067
www.northropgrumman.com

Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		7

Table 5 - Business Results

Consolidated Sales & Segment Operating Income¹

		Fourth Quarter												Total Year
($ millions)		2010				2009				Change				2010				2009				Change
Sales
Aerospace Systems		$	2,666			$	2,763				(4%)			$	10,910			$	10,419				5%
Electronic Systems			1,873				2,077				(10%)				7,613				7,671				(1%)
Information Systems			2,085				2,174				(4%)				8,395				8,536				(2%)
Shipbuilding			1,730				1,664				4%				6,719				6,213				8%
Technical Services			795				750				6%				3,230				2,776				16%
Intersegment eliminations			(542	)			(503	)							(2,110	)			(1,860	)
		$	8,607			$	8,925				(4%)			$	34,757			$	33,755				3%
Segment operating income 1
Aerospace Systems		$	322			$	291				11%			$	1,256			$	1,071				17%
Electronic Systems			272				274				(1%)				1,023				969				6%
Information Systems			178				107				66%				756				624				21%
Shipbuilding			134				88				52%				325				299				9%
Technical Services			49				40				23%				206				161				28%
Intersegment eliminations			(68	)			(56	)							(240	)			(195	)
Segment operating income1		$	887			$	744				19%			$	3,326			$	2,929				14%
as a % of sales1			10.3%				8.3%			200 bps					9.6%				8.7%			90 bps
Reconciliation to operating income
Unallocated corporate expenses		$	(95	)		$	(24	)			(296%)			$	(220	)		$	(111	)			(98%)
Net pension adjustment1			(1	)			(87	)			99%				(25	)			(311	)			92%
Reversal of royalty income included above			(3	)			(2	)			(50%)				(11	)			(24	)			54%
Operating income			788				631				25%				3,070				2,483				24%
as a % of sales			9.2%				7.1%			210 bps					8.8%				7.4%			140 bps
Net interest expense			(65	)			(62	)			(5%)				(281	)			(281	)			0%
Charge on debt redemption			(231	)			-			NM					(231	)			-			NM
Other, net			27				2				1,250%				37				64				(42%)
Earnings from continuing operations before income taxes			519				571				(9%)				2,595				2,266				15%
Federal and foreign income taxes			(143	)			(196	)			27%				(557	)			(693	)			20%
Earnings from continuing operations			376				375				0%				2,038				1,573				30%
Earnings from discontinued operations			-				38				(100%)				15				113				(87%)
Net earnings		$	376			$	413				(9%)			$	2,053			$	1,686				22%

¹ Non-GAAP metric - see definitions and reconciliations at the end of this press release.

           Results for TASC, divested in December 2009, are reported as discontinued operations for all periods presented.

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Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		8

Aerospace Systems ($ millions)

		Fourth Quarter												Total Year
		2010				2009				% Change				2010				2009				% Change
Sales		$	2,666			$	2,763				(3.5%)			$	10,910			$	10,419				4.7%
Operating income			322				291				10.7%				1,256				1,071				17.3%
as % of sales			12.1%				10.5%								11.5%				10.3%

          Aerospace Systems fourth quarter 2010 sales declined 4 percent, principally due to fewer working days in the 2010 fourth quarter than in the prior year period and lower volume for civil space and missile defense programs. Aerospace Systems sales increased 5 percent in 2010 due to higher volume for manned and unmanned aircraft programs and restricted programs, which was partially offset by lower volume for missile defense programs.

          Aerospace Systems fourth quarter 2010 operating income increased 11 percent, and as a percent of sales increased to 12.1 percent from 10.5 percent. Higher operating income and margin rate for the fourth quarter reflect improved program performance and lower costs. Aerospace Systems 2010 operating income increased 17 percent and as a percent of sales increased to 11.5 percent from 10.3 percent. Higher operating income and margin rate for the year reflect higher volume, improved program performance and lower costs.

Electronic Systems ($ millions)

		Fourth Quarter												Total Year
		2010				2009				% Change				2010				2009				% Change
Sales		$	1,873			$	2,077				(9.8%)			$	7,613			$	7,671				(0.8%)
Operating income			272				274				(0.7%)				1,023				969				5.6%
as a % of sales			14.5%				13.2%								13.4%				12.6%

          Electronic Systems fourth quarter 2010 sales declined 10 percent due to fewer working days in the 2010 fourth quarter than in the prior year period and lower volume for several programs nearing completion and contracts transitioning to their next phase, all of which were partially offset by higher volume for targeting systems programs. Electronic Systems 2010 sales were comparable to 2009 sales.

          Electronic Systems fourth quarter 2010 operating income was comparable to the prior year period, and as a percent of sales increased to 14.5 percent from 13.2 percent. The higher margin rate for the fourth quarter reflects improved program performance for intelligence, surveillance and reconnaissance programs, including postal automation, and improved performance on land and self-protection systems programs. Electronic Systems 2010 operating income increased 6 percent, and as a percent of sales increased

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Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		9

 Shipbuilding ($ millions)

		Fourth Quarter												Total Year
		2010				2009				% Change				2010				2009				% Change
Sales		$	1,730			$	1,664				4.0%			$	6,719			$	6,213				8.1%
Operating income			134				88				52.3%				325				299				8.7%
as % of sales			7.7%				5.3%								4.8%				4.8%

Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		10

carrier and submarine programs. Operating income increased 9 percent in 2010, consistent with the increase in sales, and as a percent of sales was unchanged at 4.8 percent.

 Technical Services ($ millions)

		Fourth Quarter												Total Year
		2010				2009				% Change				2010				2009				% Change
Sales		$	795			$	750				6.0%			$	3,230			$	2,776				16.4%
Operating income			49				40				22.5%				206				161				28.0%
as a % of Sales			6.2%				5.3%								6.4%				5.8%

Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		11

About Northrop Grumman

          Northrop Grumman will webcast its earnings conference call at 10:30 a.m. ET on Feb. 9, 2011. 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 website at http://www.northropgrumman.com.

          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. Please visit www.northropgrumman.com for more information.

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 “anticipate,” “assume,” “expect,” “intend,” “plan,” “potential,” “believe,” “estimate,” “guidance,” 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, uncertainties and assumptions. Actual results could differ materially due to factors such as: the effect of the government’s newly announced plans to change its current procurement practices; 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); timing and execution of consolidation of Shipbuilding’s Gulf Coast facilities; execution of any strategic alternative for the Shipbuilding business, including an anticipated spin-off; the effects of changes to capital structure; 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; retiree medical expense; the outcome of litigation, claims, audits, appeals, bid protests and investigations; hurricane and earthquake-related insurance coverage and 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, strategic alliances and other business arrangements; possible impairments of goodwill or other intangible assets; effects of legislation, rulemaking, and changes in accounting, tax or defense procurement; acquisition or termination of contracts; technical, operation or quality setbacks in contract performance; protection of intellectual property rights; risks associated with our nuclear operations; 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.

Northrop Grumman Reports Strong Fourth Quarter and 2010 Financial Results		12

		NORTHROP GRUMMAN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (preliminary and unaudited)		SCHEDULE 1

		Year Ended December 31
$ in millions, except per share amounts		2010				2009				2008
Sales and Service Revenues
Product sales		$	21,776			$	20,914			$	19,634
Service revenues			12,981				12,841				12,681
Total sales and service revenues			34,757				33,755				32,315
Cost of Sales and Service Revenues
Cost of product sales			16,820				16,591				15,490
Cost of service revenues			11,789				11,539				10,885
General and administrative expenses			3,078				3,142				3,143
Goodwill impairment											3,060
Operating income (loss)			3,070				2,483				(263	)
Other (expense) income
Interest expense			(281	)			(281	)			(295	)
Charge on debt redemption			(231	)
Other, net			37				64				38
Earnings (loss) from continuing operations before income taxes			2,595				2,266				(520	)
Federal and foreign income taxes			557				693				859
Earnings (loss) from continuing operations			2,038				1,573				(1,379	)
Earnings from discontinued operations, net of tax			15				113				117
Net earnings (loss)		$	2,053			$	1,686			$	(1,262	)
Basic Earnings (Loss) Per Share
Continuing operations		$	6.86			$	4.93			$	(4.12	)
Discontinued operations			.05				.35				.35
Basic earnings (loss) per share		$	6.91			$	5.28			$	(3.77	)
Weighted-average common shares outstanding, in millions			296.9				319.2				334.5
Diluted Earnings (Loss) Per Share
Continuing operations		$	6.77			$	4.87			$	(4.12	)
Discontinued operations			.05				.34				.35
Diluted earnings (loss) per share		$	6.82			$	5.21			$	(3.77	)
Weighted-average diluted shares outstanding, in millions			301.1				323.3				334.5
Net earnings (loss) from above		$	2,053			$	1,686			$	(1,262	)
Other comprehensive income (loss)
Change in cumulative translation adjustment			(41	)			31				(24	)
Change in unrealized gain (loss) on marketable securities and cash flow hedges, net of tax benefit (expense) of $0 in 2010, $(23) in 2009, and $22 in 2008			1				36				(35	)
Change in unamortized benefit plan costs, net of tax (expense) benefit of $(183) in 2010, $(374) in 2009 and $1,888 in 2008			297				561				(2,884	)
Other comprehensive income (loss), net of tax			257				628				(2,943	)
Comprehensive income (loss)		$	2,310			$	2,314			$	(4,205	)

		NORTHROP GRUMMAN CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (preliminary and unaudited)		SCHEDULE 2

		December 31				December 31
$ in millions		2010				2009
Assets
Current Assets
Cash and cash equivalents		$	3,701			$	3,275
Accounts receivable, net of progress payments			4,057				3,394
Inventoried costs, net of progress payments			1,185				1,170
Deferred tax assets			710				524
Prepaid expenses and other current assets			251				272
Total current assets			9,904				8,635
Property, Plant, and Equipment
Land and land improvements			666				649
Buildings and improvements			2,658				2,422
Machinery and other equipment			5,134				4,759
Capitalized software costs			636				624
Leasehold improvements			670				630
			9,764				9,084
Accumulated depreciation			(4,722	)			(4,216	)
Property, plant, and equipment, net			5,042				4,868
Other Assets
Goodwill			13,517				13,517
Other purchased intangibles, net of accumulated amortization of $1,965 in 2010 and $1,871 in 2009			779				873
Pension and post-retirement plan assets			450				300
Long-term deferred tax assets			612				1,010
Miscellaneous other assets			1,117				1,049
Total other assets			16,475				16,749
Total assets		$	31,421			$	30,252
Liabilities and Shareholders’ Equity
Current Liabilities
Notes payable to banks		$	10			$	12
Current portion of long-term debt			774				91
Trade accounts payable			1,846				1,921
Accrued employees’ compensation			1,349				1,281
Advance payments and billings in excess of costs incurred			2,076				1,954
Other current liabilities			2,331				1,726
Total current liabilities			8,386				6,985
Long-term debt, net of current portion			4,045				4,191
Pension and post-retirement plan liabilities			4,116				4,874
Other long-term liabilities			1,317				1,515
Total liabilities			17,864				17,565
Shareholders’ Equity
Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2010 —290,956,752; 2009 — 306,865,201			291				307
Paid-in capital			7,778				8,657
Retained earnings			8,245				6,737
Accumulated other comprehensive loss			(2,757	)			(3,014	)
Total shareholders’ equity			13,557				12,687
Total liabilities and shareholders’ equity		$	31,421			$	30,252

		NORTHROP GRUMMAN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (preliminary and unaudited)		SCHEDULE 3

		Year Ended December 31
$ in millions		2010				2009				2008
Operating Activities
Sources of Cash — Continuing Operations
Cash received from customers
Progress payments		$	6,401			$	8,561			$	6,219
Collections on billings			28,079				25,099				26,938
Other cash receipts			61				62				88
Total sources of cash — continuing operations			34,541				33,722				33,245
Uses of Cash — Continuing Operations
Cash paid to suppliers and employees			(29,775	)			(29,250	)			(28,817	)
Pension contributions			(894	)			(858	)			(320	)
Interest paid, net of interest received			(280	)			(269	)			(287	)
Income taxes paid, net of refunds received			(1,071	)			(774	)			(712	)
Income taxes paid on sale of businesses							(508	)			(7	)
Excess tax benefits from stock-based compensation			(22	)			(2	)			(48	)
Other cash payments			(46	)			(30	)			(16	)
Total uses of cash — continuing operations			(32,088	)			(31,691	)			(30,207	)
Cash provided by continuing operations			2,453				2,031				3,038
Cash provided by discontinued operations							102				173
Net cash provided by operating activities			2,453				2,133				3,211
Investing Activities
Proceeds from sale of businesses, net of cash divested			14				1,650				175
Payments for businesses purchased							(33	)			(92	)
Additions to property, plant, and equipment			(770	)			(654	)			(681	)
Payments for outsourcing contract costs and related software costs			(6	)			(68	)			(110	)
Decrease (increase) in restricted cash			5				(28	)			61
Other investing activities, net			(4	)							21
Net cash (used in) provided by investing activities			(761	)			867				(626	)
Financing Activities
Net borrowings under lines of credit			(2	)			(12	)			(2	)
Proceeds from issuance of long-term debt			1,484				843
Payments of long-term debt			(1,190	)			(474	)			(113	)
Proceeds from exercises of stock options and issuances of common stock			142				51				103
Dividends paid			(545	)			(539	)			(525	)
Excess tax benefits from stock-based compensation			22				2				48
Common stock repurchases			(1,177	)			(1,100	)			(1,555	)
Net cash used in financing activities			(1,266	)			(1,229	)			(2,044	)
Increase in cash and cash equivalents			426				1,771				541
Cash and cash equivalents, beginning of year			3,275				1,504				963
Cash and cash equivalents, end of year		$	3,701			$	3,275			$	1,504

SCHEDULE 4

NORTHROP GRUMMAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(preliminary and unaudited)

		Year Ended December 31
$ in millions		2010				2009				2008
Reconciliation of Net Earnings (Loss) to Net Cash Provided by Operating Activities
Net earnings (loss)		$	2,053			$	1,686			$	(1,262	)
Net (earnings) from discontinued operations							(95	)			(91	)
Adjustments to reconcile to net cash provided by operating activities
Depreciation			606				585				567
Amortization of assets			132				151				189
Impairment of goodwill											3,060
Stock-based compensation			136				105				118
Excess tax benefits from stock-based compensation			(22	)			(2	)			(48	)
Pre-tax gain on sale of businesses							(446	)			(58	)
Charge on debt redemption			231
(Increase) decrease in
Accounts receivable, net			(664	)			297				(133	)
Inventoried costs, net			(61	)			(246	)			(2	)
Prepaid expenses and other current assets			38				(6	)			(20	)
Increase (decrease) in
Accounts payable and accruals			330				(151	)			383
Deferred income taxes			60				112				167
Income taxes payable			(26	)			65				241
Retiree benefits			(326	)			(20	)			(167	)
Other non-cash transactions, net			(34	)			(4	)			94
Cash provided by continuing operations			2,453				2,031				3,038
Cash provided by discontinued operations							102				173
Net cash provided by operating activities		$	2,453			$	2,133			$	3,211
Non-Cash Investing and Financing Activities
Sale of businesses
Liabilities assumed by purchaser						$	167			$	18
Purchase of businesses
Liabilities assumed by the company										$	20
Mandatorily redeemable convertible preferred stock converted or redeemed into common stock										$	350
Capital expenditures accrued in accounts payable		$	85			$	104			$	84

		NORTHROP GRUMMAN CORPORATION TOTAL BACKLOG AND CONTRACT AWARDS (preliminary and unaudited)		SCHEDULE 5

$ in millions		December 31, 2010												December 31, 2009 (3)
	FUNDED (1)				UNFUNDED(2)				TOTAL BACKLOG					FUNDED (1)			UNFUNDED(2)				TOTAL BACKLOG
Aerospace Systems		$	9,185			$	11,683			$	20,868			$	8,320			$	16,063			$	24,383
Electronic Systems			8,093				2,054				10,147				7,591				2,784				10,375
Information Systems			4,711				5,879				10,590				4,319				4,508				8,827
Shipbuilding			9,569				7,772				17,341				11,294				9,151				20,445
Technical Services			2,763				2,474				5,237				2,352				2,804				5,156
Total		$	34,321			$	29,862			$	64,183			$	33,876			$	35,310			$	69,186

	(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 2010 presentation.

New Awards — The estimated value of contract awards included in backlog during the year ended December 31, 2010, was approximately $30 billion.

In the fourth quarter of 2010, a $1.1B reduction in backlog was recorded as a result of the restructure of the National Polar-orbiting Operational Environmental Satellite System (NPOESS). Backlog was also impacted in 2010 by an agreement we reached with the Commonwealth of Virginia related to the VITA contract. The agreement defined minimum revenue amounts for the remaining years under the base contract and extended the contract for three additional years through 2019. We recorded a favorable backlog adjustment of $824 million for the definitization of the base contract revenues for years 2011 through 2016, while the contract extension and 2010 portion of the base contract revenues, totaling $802 million, were recorded as new awards in the period.

		NORTHROP GRUMMAN CORPORATION SCHEDULE OF REALIGNED SEGMENT INFORMATION (unaudited)		SCHEDULE 6

		NET SALES																SEGMENT OPERATING INCOME (LOSS)(2)
														Three																Three
														Months Ended																Months Ended
$ in millions		Year Ended December 31												Dec 31				Year Ended December 31												Dec 31
		2007				2008				2009				2009				2007				2008				2009				2009
AS REPORTED
Aerospace Systems		$	9,234			$	9,825			$	10,419			$	2,763			$	919			$	416			$	1,071			$	291
Electronic Systems			6,466				7,048				7,671				2,077				809				947				969				274
Information Systems			7,758				8,205				8,611				2,195				725				629				631				109
Shipbuilding			5,788				6,145				6,213				1,664				538				(2,307	)			299				88
Technical Services			2,422				2,535				2,776				750				139				144				161				40
Intersegment Eliminations			(1,327	)			(1,443	)			(1,935	)			(524	)			(105	)			(128	)			(202	)			(58	)
Total		$	30,341			$	32,315			$	33,755			$	8,925			$	3,025			$	(299	)		$	2,929			$	744
RECASTED AND REALIGNED (1)
Aerospace Systems		$	9,234			$	9,825			$	10,419			$	2,763			$	919			$	416			$	1,071			$	291
Electronic Systems			6,466				7,048				7,671				2,077				809				947				969				274
Information Systems			7,717				8,174				8,536				2,174				722				626				624				107
Shipbuilding			5,788				6,145				6,213				1,664				538				(2,307	)			299				88
Technical Services			2,422				2,535				2,776				750				139				144				161				40
Intersegment Eliminations			(1,286	)			(1,412	)			(1,860	)			(503	)			(102	)			(125	)			(195	)			(56	)
Total		$	30,341			$	32,315			$	33,755			$	8,925			$	3,025			$	(299	)		$	2,929			$	744