Response to April 28th FT article, "investors on the defensive"

Sir,

With regard to the article "investors on the defensive" by Sylvia Pfeifer (April 28th) there are elements underpinning the writers four concerns which have possibly been underplayed. First, BAE Systems is equally exposed to the United States defence market where procurement budgets for FY 2009-2013 indicate higher investment in procurement at the expense of R&D, which should further enhance margin performance of the more effective manufacturers. Secondly, Scaling back operations in Iraq and Afghanistan will still have a legacy in terms of reconstituting and refurbishing worn-out equipment.

Thirdly, concerning BAE exposure to further investigation they are not alone. Thales faces further hearings in South Africa this summer and the Boeing Northrop Grumman battle over the KC-45A air tanker tactics continues to illustrate the thornier challenges for the industry.

Lastly, with regard to support services whilst there are no doubt opportunities which would seem common sense to the finance community given the scale of the US market, the cultural differences in approach, plus the difficulties for primes of taking their cost base from sales and manufacture into razor-thin support services create challenges for all players.

National Audit Office Press Notice: Major Projects Report 2007

National Audit Office Press Notice: Major Projects Report 2007

THIS STATEMENT IS NOT FOR PUBLICATION OR BROADCAST BEFORE 0001 HOURS ON FRIDAY 30TH NOVEMBER 2007

Report by the Comptroller and Auditor General
HC 98 (Volumes I-III) 2007-2008
30 November 2007
ISBN: Vol I: 9780102951486
Vol III: 9780102951509
Price: Vol I: £13.90
Vol III: £7.70
Volume I: Full Report
Volume II: Project Summary Sheets
Volume III: The Landing Ship Dock (Auxiliary) Project

The National Audit Office’s annual report on 20 of the top defence equipment projects shows that, while there has been progress on the majority of projects in the last year, there continue to be time delays and cost increases on some of the major projects.

Of the fifteen projects not in service as at April 2007, eight have progressed to schedule and on two projects, the MoD has recovered time against the schedule. Five projects were delayed by a total of an extra 38 months this year, compared to 33 months on five projects in 2005-06. Of these, the most significant were the Type 45 Destroyer which has been delayed by a further 11 months and the Terrier and Next Generation Light Anti-Armour Weapon projects have each been delayed by a further 12 months.

The current total forecast cost for the 20 largest projects is £28 billion, which is £2.5 billion over the ‘most likely’ budget when the main investment decision was taken. The MoD expects ten projects to deliver within their most likely budgeted cost. Most of this cost growth occurred in earlier years but, on two projects, the Type 45 Destroyer (£354 million) and the Astute Class Submarine (£142 million), there has been significant cost growth in-year. The MoD has now agreed revised contracts on both of these projects to incentivise Industry to reduce costs.

The MoD was again pro-active in limiting potential in-year cost increases on individual projects through reassessing requirements, reducing quantities of equipments and re-allocating expenditure to other projects or budget lines. The total amount reallocated in 2006-07 was £609 million, meaning the MoD has now reallocated over £1 billion over two years. This year the largest component (£305 million) relates to maintaining industrial capacity and capability in accordance with the Maritime Industrial Strategy.

Although the principle of allocating budgets to those best placed to manage them is sensible, many of the same project teams continue to be responsible for the transferred budgets. For example, the budget relating to warranty costs of £64 million for the Support Vehicle project has been more appropriately categorised as In-Service costs, but the same project team is still managing this money.

The Defence Industrial Strategy has now been in place for nearly two years. In the maritime sector, the MoD is making progress. It has identified the key ship and submarine building capabilities it needs to maintain in the United Kingdom, and quantified the core workload necessary. Restructuring of industry is underway. The MoD does not have an overall picture of the cost of rationalising and sustaining the Defence Industrial Base against which it can assess the overall value for money to defence of investment in industrial sustainment.

There have been substantial cost increases and delays on the Landing Ship Dock (Auxiliary) project, which appeared in the Major Projects Report until 2002-03. We have conducted a detailed review of the project in order to understand why problems arose. NAO analysis shows that the project was initiated on an unrealistic basis but, once the problems became clear, the MoD responded well, taking action to limit its exposure to risk and put itself in a position to successfully deliver all four vessels into service.


Sir John Bourn, head of the NAO, said today:

“While there has been progress on the majority of projects in the Report, it is disappointing that a small number continue to suffer from significant cost increases and timescale slippages.

“MoD, working with its industry partners, has made progress towards transforming the maritime industrial base. In taking the Defence Industrial Strategy forward it will be important that MoD establishes a framework with which it can measure value for money to Defence as a whole, so that it can determine the cost-effectiveness of investment in sustaining the maritime industrial base.”

GAO: Defense Transportation: DOD Should Ensure that the Final Size and Mix of Airlift Force Study Plan Includes Sufficient Detail to Meet the Terms of

Defense Transportation: DOD Should Ensure that the Final Size and Mix of Airlift Force Study Plan Includes Sufficient Detail to Meet the Terms of the Law and Inform Decision Makers
GAO-08-704R April 28, 2008

Global mobility is a key component of U.S. national security. Since the end of the Cold War, senior decision makers have relied upon Department of Defense (DOD) mobility studies to provide insights they need to build and maintain the right mix of mobility capabilities. The most recent study, the Mobility Capabilities Study, identified the mobility support needed for the full range of strategic operations in the context of the September 11, 2001 attacks, the global war on terror, and DOD's evolving global defense posture, all in support of the National Military Strategy. According to DOD officials, the department plans to issue the next mobility study--the Mobility Capabilities Requirements Study--in the spring of 2009. The 2005 mobility study also assessed requirements for two overlapping war fights, DOD support to homeland defense, civil support, lesser contingency operations, sustainment of forward-deployed forces, and national strategic missions. In accomplishing these missions, DOD depends on its airlift force. The National Defense Authorization Act for Fiscal Year 2008 mandated a requirements-based study on alternatives for the proper size and mix of the airlift force to meet the needs of the National Military Strategy to be done by a Federally Funded Research and Development Center (FFRDC). The Act specifically defined what the study plan should include and set time frames for the completion of various events. The FFRDC was to submit a study plan to the appropriate congressional committees, the Secretary of Defense, and the Comptroller General 60 days after the enactment of the Act. The Act required us to review the study plan to determine if it is complete and objective and whether it has any flaws or weaknesses in scope or methodology and report to the Secretary of Defense and the FFRDC within 30 days. It also required us to include in the report any recommendations that the Comptroller General considers appropriate for improvements to the study plan. DOD selected the Institute for Defense Analyses (IDA) to accomplish the study and signed a task order with IDA outlining the study framework. On March 28, 2008, IDA delivered the draft Size and Mix of Airlift Force Study Plan to DOD, congressional committees, and us. The draft study plan comprises 34 pages of bulleted information, graphs, and diagrams. The seven major sections are introduction, background, scope, objective, study management, staged approach, and schedule. The single objective of the study is to address the numerous airlift issues identified in the Act and to report to the Secretary of Defense and to the Congress by January 10, 2009. We assessed the draft Size and Mix of Airlift Force Study Plan that IDA delivered on March 28, 2008, for completeness, but we were unable to evaluate objectivity or identify flaws or weaknesses in scope or methodology. We also commented on another ongoing airlift-related study, the Mobility Capabilities Requirements Study, because it is related to the scope of the draft Size and Mix of Airlift Force Study Plan.

The draft Size and Mix of Airlift Force Study Plan does not meet the terms of the Act and lacks sufficient detail for assessment. We are unable to fully assess the draft Size and Mix of Airlift Force Study Plan as required in section 1046 of the Act because the plan does not contain sufficient detail for us to evaluate its objectivity and its scope and methodology. Because the draft study plan did not address all of the specified elements in the Act, it is not complete. The draft plan did not include specific and explicit references that can be traced directly to the Act, such as the assumptions to be included in the study plan and assessments to be accomplished. This absence of detail also precludes us from evaluating the scope and methodology. Moreover, the plan lacked key details expected in such plans, such as assumptions and measures of effectiveness. The lack of details discussed above precludes us from making any recommendations concerning improvements to the study plan. DOD officials stated that because DOD selected IDA and issued a task order for the study only shortly before the mandated deadline, sufficient time was not available to produce a more detailed study plan. Nevertheless, DOD is responsible for ensuring the statutorily required elements of the study plan are fulfilled. IDA officials told us that IDA plans to submit to the Secretary of Defense in June 2008 a final Size and Mix of Airlift Force Study Plan that will be more robust. In addition to the independent draft Size and Mix of Airlift Force Study Plan, we note that DOD is conducting another study that may also inform decision makers on airlift issues.

GAO: Space Acquisitions: DOD Is Making Progress to Rapidly Deliver Low Cost Space Capabilities, but Challenges Remain

Space Acquisitions: DOD Is Making Progress to Rapidly Deliver Low Cost Space Capabilities, but Challenges Remain
GAO-08-516 April 25, 2008

The Department of Defense (DOD) invests heavily in space assets to provide the warfighter with intelligence, navigation, and other information critical to conducting military operations. In fiscal year 2008 alone, DOD expects to spend over $22 billion dollars on space systems. Despite this investment, senior military commanders have reported shortfalls in tactical space capabilities in each recent major conflict over the past decade. To provide short-term tactical capabilities as well as identify and implement long-term solutions to developing low cost satellites, DOD initiated operationally responsive space (ORS). Following a 2006 GAO review of ORS, the Congress directed DOD to submit a report that sets forth a plan for providing quick acquisition of low cost space capabilities. This report focuses on the status of DOD's progress in responding to the Congress and is based on GAO's review and analyses of ORS documentation and interviews with DOD and industry officials.

Since GAO last reported on DOD's ORS efforts in 2006, the department has taken several steps toward establishing a program management structure for ORS and executing research and development efforts. On the programmatic side, DOD provided Congress with a plan that lays out an organizational structure and defines the responsibilities of the newly created Joint ORS Office, and describes an approach for satisfying warfighters' needs. DOD has also begun staffing the office. On the research and development side, DOD has launched one of its TacSat satellites--small experimental satellites intended to quickly provide a capability that meets an identified need within available resources--and has begun developing several others. It has also made progress in developing interface standards for satellite buses--the platform that provides power, altitude, temperature control, and other support to the satellite in space--and continued its sponsorship of efforts aimed at acquiring low cost launch vehicles. Despite this progress, it is too early to determine the overall success of these efforts because most are still in their initial phases. Achieving success in ORS will be challenging. With relatively modest resources, the Joint ORS Office must quickly respond to the warfighter's urgent needs, while continuing research and development efforts that are necessary to help reduce the cost and time of future space acquisitions. As it negotiates these priorities, the office will need to coordinate its efforts with a broad array of programs and agencies in the science and technology, acquisition, and operational communities. Historically, it has been difficult to transition programs from the science and technology environment to the acquisition and operational environment. At this time, DOD lacks a plan that lays out how it will direct its investments to meet current operational needs while pursuing innovative approaches and new technologies.

GAO: Defense Infrastructure: Continued Management Attention Is Needed to Support Installation Facilities and Operations

Defense Infrastructure: Continued Management Attention Is Needed to Support Installation Facilities and Operations
GAO-08-502 April 24, 2008


The Department of Defense (DOD) manages and operates about 577,000 structures worldwide, valued at about $712 billion. DOD has worked for several years to develop models that can reliably estimate the installation support funds needed to sustain these facilities, and plans to spend over $55 billion to support these facilities and operate its bases in fiscal year 2008. Because GAO has identified support infrastructure as a high-risk area that affects DOD's ability to devote funds to other more critical needs, GAO initiated this review under the Comptroller General's authority. This report discusses (1) the reliability of the annual funding estimates produced by the facilities sustainment model, (2) DOD's progress in meeting funding goals for facility sustainment and recapitalization, (3) the extent to which DOD has addressed deferred facility sustainment funding needs, and (4) the status of DOD's efforts to develop a new installation services model. To address these objectives, GAO reviewed the accuracy and support for the model's key inputs, analyzed pertinent documents, and visited eight judgmentally selected installations.

Although the facilities sustainment model, implemented in 2003, provides a consistent and reasonable framework for preparing estimates of DOD's annual facility sustainment funding requirements, accuracy and supportability issues with two of the model's key inputs have affected the reliability of the model's estimates. First, regarding the inventory quantity input, GAO found that the services had not complied with DOD regulations requiring verification of each real property inventory record. Without the verifications, DOD lacked assurance that the model used accurate inventory quantities, and GAO's analysis identified inaccuracies in some quantities used by the model. Second, regarding the sustainment cost factor input, GAO identified issues concerning some cost factors used by the model. For example, an independent study reported that only 13 of 45 cost factors evaluated were deemed to be reasonably accurate and adequately supported. Until DOD improves the accuracy of these two inputs, the model's estimates of facility sustainment funding requirements will not be as reliable as possible. The military services have not met all of DOD's goals for funding facility sustainment and recapitalization at levels to prevent deterioration and ensure that facilities are restored and modernized. Service officials stated that they generally did not meet the sustainment funding goals because resources were limited and programs such as force modernization often had higher funding priority. Although the services achieved more success in meeting DOD's goal to fund recapitalization, funding remains an issue with the Army, the Navy, and the Air Force reporting recapitalization backlogs of over $50 billion at the end of fiscal year 2007. DOD has not taken actions to estimate and address its deferred facility sustainment requirements. In fiscal years 2005 through 2007, the services did not fund over $3.5 billion of their estimated annual facility sustainment requirements. The services do not have consistent estimates of their deferred sustainment requirements or plans to deal with these needs because DOD has not provided adequate guidance to clearly define deferred sustainment requirements, or direct the services to measure, track, and address these needs. As a result, DOD's plans to address facility sustainment requirements do not include all deferred sustainment requirements, which could result in continued facility deterioration and increased future recapitalization costs. DOD's progress in developing a new model to estimate funding requirements for installation services, such as airfield and port operations, has been slow. Although DOD's goal is to establish common standards and metrics for installation services by the end of 2008, the services had agreed on common definitions and standards for only 2 of 29 areas by the end of 2007. DOD officials stated that reaching agreement has been difficult for several reasons, such as differences among the services in how tasks for installation services are performed and managed. Without a reliable model, DOD cannot provide the Congress with a clear basis for making funding decisions.

New Chief Scientific Adviser at the MOD

New Chief Scientific Adviser at the MOD

A Defence Policy and Business news article
3 Apr 08

Professor Mark Welland FRS FREng has been confirmed today, Thursday 3 April 2008, as the new Chief Scientific Adviser at the Ministry of Defence.

The Chief Scientific Adviser (CSA) is responsible for providing high quality scientific advice to Ministers, senior officials and the Armed Forces. This advice ensures that the Ministry of Defence has access to sound technical information and the technology to support military operations and future strategic capabilities.

Professor Welland said:

"I am delighted to have been offered the opportunity to advise on Science and Technology within the Ministry of Defence. As CSA I look forward to working with professional and dedicated staff from both the Armed Forces and Civil Service to ensure science contributes fully in supporting the role of the Armed Forces by delivering world-beating technology."

Defence Secretary, Des Browne said of the appointment:

"I am delighted to welcome Mark Welland as our new Chief Scientific Adviser. His extensive experience and his wide ranging scientific interest, together with his strong links to academia will prove invaluable to his successful tenure in this role.

"I would also like to pay tribute to Professor Sir Roy Anderson FRS whose work as Chief Scientific Adviser has significantly improved the way the MOD's research programme is developed and managed."

Professor Welland, born in October 1955, will take up his new appointment as Chief Scientific Adviser with effect from 7 April 2008. He received a BSc in Physics from the University of Leeds in 1979, a PhD in Physics from the University of Bristol in 1984 and an MA from the University of Cambridge in 1988. In addition Professor Welland was elected a Fellow of the Royal Society, a Fellow of the Royal Academy of Engineering, and a Fellow of the Institute of Physics in 2002.

After a position as World Trade Visiting Scientist at IBM Research Division in USA between 1985-6, Professor Welland was appointed to a Lectureship in Electrical Engineering at the University of Cambridge where he is currently Professor of Nanotechnology researching into a broad range of both fundamental and applied problems.

Professor Welland succeeds Professor Sir Roy Anderson, who was appointed as the CSA at MOD in July 2004 on a fixed term appointment and who has left the MOD to rejoin Imperial College, pending his appointment as Rector this summer. Sir Roy's key achievements in the MOD include strategic alignment reviews of both the Research and Development programmes, on which the newly formed R&D Board will continue to build in future, and the publication of the Defence Technology Strategy in 2006 which for the first time set out the MoD's future priorities for Research and Development.

Review of UK Reserves gets underway

Review of Reserves gets underway

A Defence Policy and Business news article
24 Apr 08
A Strategic Review of the UK's Reserve Forces is now underway and inviting contributions from interested parties.

The review, announced by the Defence Secretary on 19 March 2008, aims to ensure Reserve Forces meet Defence’s needs now and into the future.

The Review Team has now formed, under the direction of Major General Nick Cottam CB OBE in MOD Main Building, London. Team members include regular and reserve officers, MOD Civil Servants and Consultancy staff.

The Review began on 21 April 2008.

The Review Team seeks to provide a range of recommendations and models which allow for the most usable, sustainable, integrated and representative Reserves to meet Defence needs.

Implicit in this work is the need to find appropriate Terms and Conditions of Service, and to ensure that the Reserves are better understood by the rest of Defence, and by society as a whole.

Initial encounters with Front Line Commands and other agencies has revealed work already in progress that could be helpful.

Engagment with the Reserves community

The Review aims to give the Reserves community the widest possible opportunity to comment and engage.

This has already begun through initial discussions with a number of key stakeholders. Further engagement will be via a comprehensive programme of meetings, workshops and briefings, supplemented by questionnaires where appropriate.

Whilst the team will be making every effort to speak to as wide an audience as possible with an interest in the Review, there will inevitably be some who will be missed. Should you wish to contribute, you can get in touch with the team by post or E-mail:

Strategic Review of Reserves Team
Level 8, Zone C
MOD Main Building
Ministry of Defence
Whitehall
London SW1A 2HB

DRFCReservesReview@mod.uk

Stakeholders can also submit specific questions to indiviudal Team Members; please get in touch via the e-mail adress for further contact details.

General Dynamics Reports Substantial Earnings Growth, Strong Revenue in First Quarter 2008

General Dynamics Reports Substantial Earnings Growth, Strong Revenue in First Quarter 2008

Earnings from continuing operations increase 30.2 percent
EPS from continuing operations increases 32.7 percent
FALLS CHURCH, Va. – General Dynamics (NYSE: GD) today reported first-quarter 2008 earnings from continuing operations of $573 million, or $1.42 per share on a fully diluted basis, compared with 2007 first-quarter earnings from continuing operations of $440 million, or $1.07 per share fully diluted. Revenues grew to $7 billion in the quarter, an 11.2 percent increase over first-quarter 2007 revenues of $6.3 billion. Net earnings for the first quarter of 2008 were $572 million, a 31.8 percent increase over first quarter 2007.

Margins

Company-wide operating margins for the first quarter of 2008 increased 150 basis points over the first quarter of 2007, to 12.3 percent.

Backlog

The company’s funded and total backlog each grew by approximately $2.9 billion in the first quarter of 2008, to $40 billion and $49.8 billion respectively at the end of the period. Compared to first-quarter 2007, funded backlog grew by 16 percent and total backlog grew by 14.1 percent.

Cash

Net cash provided by operating activities from continuing operations in the quarter totaled $431 million. Free cash flow from operations, defined as net cash provided by operating activities from continuing operations less capital expenditures, was $346 million for the period.

“General Dynamics’ performance in the first quarter of 2008 was excellent,” said Nicholas D. Chabraja, chairman and chief executive officer. “Earnings grew substantially over the first quarter of 2007, and significant sales-volume increases in Combat Systems, Marine Systems and the Aerospace segment reflect ongoing demand for each group’s products. While revenue in Information Systems and Technology was essentially unchanged year-over-year, the group’s operating earnings and margin rates increased for the period.

“Orders in the quarter were very strong, with $2.9 billion in future revenue being added to the company’s funded backlog. Notable contract awards include $1.2 billion for upgrades to Abrams tanks, $1.1 billion for a Virginia-class submarine and $1.4 billion for construction of the first DDG-1000 Zumwalt-class destroyer.

“Strong operating performance, lower interest expense and stock-repurchase activity in the quarter all contributed to a 34 percent increase in earnings per share on a fully diluted basis compared to the first quarter of 2007,” Chabraja said.

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 84,000 people worldwide. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. More information about the company is available on the Internet at www.generaldynamics.com.

Certain statements made in this press release, including any statements as to future results of operations and financial projections, may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management’s expectations, estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors. Additional information regarding these factors is contained in the company’s filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

All forward-looking statements speak only as of the date they were made. The company does not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.

FIRST QUARTER 2008 SIGNIFICANT ORDERS (UNAUDITED)

General Dynamics received the following significant contract orders during the first quarter of 2008:

Combat Systems

A multi-year contract from the U.S. Army worth $1.2 billion to upgrade 435 M1A1 Abrams main battle tanks to the M1A2 System Enhancement Package (SEP) Version Two (V2) configuration.
$359 from the Army to continue performing contractor logistics support for the Stryker program.
Combined orders worth $200 from the Army for Abrams Tank Systems Technical Support, bringing the total contract value to over $600.
$127 for 186 armored Cougar vehicles and related spares and support under the Mine Resistant Ambush Protected (MRAP) vehicle program.
$81 for RG-31 support, spares and training under the MRAP vehicle program.
$97 from the Marine Corps to continue the System Development and Demonstration phase of the Expeditionary Fighting Vehicle program.
$166 from the Army for the production of Hydra-70 (2.75-inch) rockets. This order brings the total contract value to date to almost $700. The contract has a potential value of over $900.
$110 from the Army for the production of small-caliber ammunition. This award brings the total contract value to date to approximately $630.
Marine Systems

$1.1 billion in funding from the U.S. Navy for the final Block II Virginia-class submarine.
$325 from the Navy to purchase long-lead materials for the first Block III Virginia-class submarine.
$1.4 billion from the Navy to build the first DDG-1000 Zumwalt-class destroyer.
$360 from the Navy for the construction of the 10th T-AKE combat-logistics ship and $100 to purchase long-lead materials for the 11th ship.
Information Systems and Technology

$263 for the system development and demonstration of the Integrated Computer System for the Future Combat Systems (FCS) program. This award brings the total contract value to over $800.
$133 from the Marine Corps to produce units of the next generation Tactical Data Network (TDN)-Data Distribution Systems-Modular. This indefinite delivery, indefinite quantity (IDIQ) contract has a potential value of $375.
$78 from the Army to provide specialized satellite communications earth terminals and support services for Increment One of the Warfighter Information Network-Tactical (WIN-T) program. This contract has a potential value of over $700.
$374 from the National Geospatial Intelligence Agency to plan, engineer, design, install, test and operate IT infrastructure. This contract has a potential value of $970.
$30 from the Navy to provide systems engineering and program management support to the Aegis Ballistic Missile Defense program. This contract has a potential value of over $190.

Denis Ranque, Chairman and CEO of Thales, reorganises his team

Denis Ranque, Chairman and CEO of Thales, reorganises his team
16th April 2008

Denis Ranque, Chairman and CEO of Thales, has announced the reorganisation of his team in order to reinforce the international organisation and foster transversality in the Group.
The key objectives are to adjust the international organisation of the Group to increase export sales, to develop its activities and visibility in existing "multi-domestic countries", to significantly reinforce its presence in emerging countries, to strengthen its key European partnerships and to optimise its relationship with large international institutions (EU, European Space Agency, NATO). Furthermore, it is important to optimise its Security and Services activities across the Group.

Following these changes, Jean-Paul Perrier, Executive Vice President, International Organisation, and Chairman of Thales International, is appointed Vice Chairman of the Group. He will deputize for Denis Ranque, in particular in representing the Group vis à vis key customers. Denis Ranque wants to congratulate him for the outstanding contribution he has made to the development of the Group on the international markets.

Three geographical areas are created:
The first area includes the UK, the USA, Canada and Australia. It will continue to be managed by Alex Dorrian.
The second area consolidates Continental Europe including France, and Turkey, Russia and Central Asia. It will be managed by Bruno Rambaud who will also take responsibility for relations with European Union, NATO and European industrial partners.
The third area will include Asia, Africa, Middle East, Latin America. It will be managed by Alexandre de Juniac.
At a Group level, Olivier Houssin, Executive Vice President, in addition to his role as Head of the Security Solutions and Services division, will take extended responsibility for coordination of transverse activities of the Group in Security and Services.
The following appointments are also announced:

Richard Deakin will be appointed SVP, Air Systems division, and will succeed to Alexandre de Juniac. He was previously in charge of Aerospace in the UK.
Jean-Paul Lepeytre will be appointed SVP, Corporate Operations, and will succeed to Reynald Seznec. His was previously SVP, Deputy Director of the Security Solutions and Services division.
Reynald Seznec will be appointed SVP, Space Division, and will succeed to Pascale Sourisse. He was previously SVP, Operations.
Pascale Sourisse will be appointed SVP, Land & Joint Systems division, and will succeed to Bruno Rambaud. She was previously SVP, Space division.
The members of the new Thales Executive Committee will be:

Denis Ranque: Chairman and CEO
Jean-Paul Perrier: Vice Chairman
Alex Dorrian: EVP, North America, Australia, United Kingdom. CEO, Thales UK.
Olivier Houssin: EVP, Security and Services
Alexandre de Juniac: EVP, Asia, Africa, Middle East, Latin America.
Bruno Rambaud: EVP, Continental Europe, Turkey, Russia, Central Asia
Richard Deakin: SVP, Air Systems
Jean-Georges Malcor: SVP, Naval
François Quentin: SVP, Aerospace
Reynald Seznec: SVP, Space
Pascale Sourisse: SVP, Land & Joint Systems
Yves Barou: SVP, Human Resources
Sylvie Dumaine: SVP, Corporate Communications
Patrice Durand: SVP, Finance and Administration
Jean-Paul Lepeytre: SVP, Operations
Jean-Loup Picard: SVP, Strategy, Research & Technology
All appointments will be effective May 1st 2008.

VT GROUP PRE-CLOSE STATEMENT FOR YEAR TO 31ST MARCH 2008

VT GROUP PRE-CLOSE STATEMENT FOR YEAR TO 31ST MARCH 2008
March 31st, 2008

Defence and support services company VT Group (VT) today issues the following pre-close statement for the year to 31 March 2008. The preliminary announcement of the Group’s results will be made at 7.00am on Tuesday, 13 May 2008.

The Group continues to trade in line with the Board’s expectations, consistent with the outlook provided at the time of the interim management statement.

The order book now stands at around £4.7 billion, following signature of the Future Strategic Tanker Aircraft (FSTA) contract. This programme will provide the RAF with new refuelling and transport aircraft and related services. Through a combination of its 22 1/3% shareholding in the operating company, Air Tanker Services Limited and direct sub-contracts with VT Aerospace and VT Communications, VT is expected to benefit from business in excess of £1 billion during the 27 year lifespan of the programme.

We expect another multi-billion pound programme, UKMFTS to complete commercial negotiations and financial close within the next few weeks. The Group’s joint venture with Lockheed Martin UK, known as Ascent, is preferred bidder for this programme, which will provide a new UK Military Flying Training System.

The position with regard to VT’s proposed shipbuilding and naval support joint venture with BAE Systems remains as it was when our interim management statement was issued. We continue to be advised by the Government that the CVF aircraft carrier contract will go ahead which will then enable the JV to proceed. In the meantime our shipbuilding business continues to make good progress with existing Royal Navy and export contracts.

Integration of the nuclear services business formerly known as British Nuclear Group Project Services Limited, now re-named VT Nuclear Services, is underway. The business is positioning itself for the nuclear power new build and de-commissioning programmes to which the UK Government is now committed .

We are also making progress in moving from preferred bidder to contract status in the project to design, build, finance and operate waste management and recycling facilities for Wakefield Metropolitan District Council. We expect this £700 million, 25 year PFI contract to be signed by the end of the calendar year with building of the new facilities set to start in 2009.

VT Group Chief Executive Paul Lester commented: “The Group has performed in line with our expectations and our recent business successes have laid the foundations for further long-term growth, with excellent order book visibility. Although we have not been able to progress with our shipbuilding and naval support joint venture as quickly as we would have hoped, we have focused increasingly on developing our engineering based support services business.”

VT GROUP APPOINTS NEW NON-EXECUTIVE DIRECTOR

VT GROUP APPOINTS NEW NON-EXECUTIVE DIRECTOR
21st April, 2008

Defence and support services company VT Group is pleased to announce the appointment of Ian Tyler as a non-executive director, with effect from the Group’s next board meeting on May 12.

Ian, who is Chief Executive of Balfour Beatty, has an extensive background in business operations and finance, having worked for Storehouse and Hanson before joining Balfour Beatty as Finance Director in 1996. He subsequently became Chief Operating Officer and took over as CEO in 2005.

He has considerable experience in international business, particularly in the United States, and has played a key role in helping to establish Balfour Beatty as Britain’s leading construction company.

Ian will replace David Thorpe, who is retiring as a non-executive director of VT Group after five years on the board.

VT Group Chairman Mike Jeffries commented: “David has been a valued member of the board and we thank him for his important contribution to VT’s progress as we welcome Ian. Ian’s business knowledge and experience, especially in Balfour Beatty’s development as a major services provider, will be of great benefit as we continue to implement the Group strategy.”

Raytheon Purchases SI Government Solutions

Raytheon Purchases SI Government Solutions

Expands capability in information assurance and information operations markets

GARLAND, Texas, April 18, 2008 /PRNewswire/ -- Raytheon Company (NYSE:RTN) has acquired SI Government Solutions, a leading provider of
proprietary software security solutions to the U.S. intelligence community. Terms of the transaction were not disclosed.

SI Government Solutions, based in Melbourne, Fla., was founded in 2005 to deliver targeted vulnerability assessment capabilities that protect complex and critical information technology assets of government customers.

"We are excited to add SI Government Solutions to our information
security portfolio, further strengthening our growth in this area and
enabling Raytheon to create a world-class, end-to-end information assurance and information operations capability," said Michael D. Keebaugh, president, Raytheon Intelligence and Information Systems (IIS).

Keebaugh noted that Raytheon has focused its efforts in the emerging
cyber security market under the IIS business where expertise clearly
addresses an environment of ever-changing threats. He added: "Protecting
critical infrastructures is rapidly becoming one of the most complex and
critical challenges our customers face today. The purchase of SI Government Solutions, combined with our earlier acquisition of Oakley Networks and existing assets, gives Raytheon even stronger capabilities to address our customers' growing challenges."

Terry Gillette, SI Government Solutions president and CEO, said,
"Combining Raytheon's 25-year history of information assurance expertise
and capability with our unique vulnerability assessment solutions will
provide customers with superb domain knowledge and expertise in information assurance."

Based in Garland, Texas, Raytheon IIS is a leading provider of
information and intelligence solutions to the government. Raytheon IIS has annual revenues of approximately $2.7 billion and employs more than 9,000 engineering and technical professionals worldwide.

Brian C. Seagrave Named Raytheon's Vice President Of Homeland Security

Brian C. Seagrave Named Raytheon's Vice President Of Homeland Security

WASHINGTON, April 25, 2008 /PRNewswire/ - Raytheon Company (NYSE: RTN)
has named Brian C. Seagrave vice president of Homeland Security, reporting
to Thomas M. Culligan, Raytheon Company senior vice president of Business
Development and chief executive officer of Raytheon International, Inc.

Seagrave will be responsible for leading Raytheon's strategy for growth
in security markets around the world.

"Brian comes to Raytheon with more than 20 years' experience in
government contracting across a wide range of services, including those in
information technology systems integration, consulting and base
operations," said Culligan. "His broad experience in business development
and marketing in the federal, state and local markets is a welcomed
addition to our team."

Seagrave joined Raytheon from Unisys Federal Systems where he most
recently served as partner-general manager of Border Security. He was also
the vice president of Homeland Security for Unisys.

Prior to joining Unisys, he was the director of Federal Enterprise
Business Solutions at Computer Sciences Corporation. Before that, he was
director of Enterprise Systems at DynMcDermott Petroleum Operations
Company.

Seagrave earned a bachelor of science in management and a bachelor of
arts in English from George Mason University, Fairfax, Va.

Raytheon Reports Strong First Quarter Results

Raytheon Reports Strong First Quarter Results

Highlights
-- Solid bookings of $6.5 billion; record backlog of $37.7 billion
-- Sales of $5.4 billion, up 11 percent
-- Operating income of $608 million, up 17 percent
-- Earnings per share (EPS) from continuing operations of $0.93, up 31
percent
-- Repurchased 5.5 million shares for $340 million
-- Increased annual dividend 10 percent, from $1.02 to $1.12, as previously
announced

WALTHAM, Mass., April 24, 2008 /PRNewswire-FirstCall/ -- Raytheon
Company (NYSE: RTN) reported first quarter 2008 income from continuing
operations of $400 million or $0.93 per diluted share compared to $324
million or $0.71 per diluted share in the first quarter 2007. First quarter
2008 income from continuing operations was higher primarily due to
increased volume, combined with lower net interest and pension expense.

"With the strong performance in the first quarter, the Company is off
to a good start," said William H. Swanson, Raytheon's Chairman and CEO.
"Our strong bookings, record backlog and solid operating performance
demonstrate the Company is continuing to execute and is well positioned
going forward."

First quarter 2008 net income was $398 million or $0.92 per diluted
share compared to $346 million or $0.76 per diluted share in the first
quarter 2007. Net income for the first quarter 2008 included an after-tax
loss of $2 million or $0.01 per diluted share in discontinued operations
compared to income of $22 million or $0.05 per diluted share in the first
quarter 2007 primarily due to the results of Raytheon Aircraft Company,
which was sold in the second quarter 2007.

Net sales for the first quarter 2008 were $5.4 billion, up 11 percent
from $4.8 billion in the first quarter 2007.

Operating cash flow from continuing operations for the first quarter
2008 was a positive $67 million compared to an outflow of $353 million for
the first quarter 2007. First quarter 2007 included a $400 million
discretionary cash contribution made to the Company's pension plans.

In the first quarter 2008 the Company repurchased 5.5 million shares of
common stock for $340 million, as part of the Company's previously
announced share repurchase program. In addition, as announced in March
2008, the Company's Board of Directors voted to increase the Company's
annual dividend by 10 percent from $1.02 to $1.12 per share.





Summary Financial Results 1st Quarter %
($ in millions, except per share data) 2008 2007 Change

Net Sales $5,354 $4,804 11%
Total Operating Expenses 4,746 4,283
Operating Income 608 521 17%
Non-operating Expenses 16 35
Income from Cont. Ops. before Taxes $592 $486 22%
Income from Continuing Operations $400 $324 23%
(Loss) income from Disc. Ops., Net of Tax (2) 22 NM
Net Income $398 $346 15%

Diluted EPS from Continuing Operations $0.93 $0.71 31%
Diluted EPS $0.92 $0.76 21%

Operating Cash Flow from Cont. Ops. $67 $(353)
Workdays in Fiscal Reporting Calendar 63 59



Bookings and Backlog
Bookings 1st Quarter
(in millions) 2008 2007

Total Bookings $6,516 $5,158

Backlog Period Ended
(in millions) 03/30/08 12/31/07

Backlog $37,697 $36,614
Funded Backlog $22,859 $20,518

The Company reported total bookings for the first quarter 2008 of $6.5
billion compared to $5.2 billion in the first quarter 2007. The Company
ended the first quarter 2008 with a record backlog of $37.7 billion
compared to $36.6 billion at the end of 2007 and $33.9 billion at the end
of the first quarter 2007.




Outlook
2008 Financial Outlook

Net Sales ($B) 22.4 - 22.9
FAS/CAS Pension Expense ($M) 150
Interest Expense, net ($M) 45 - 60
Diluted Shares (M) 427 - 429
EPS from Cont. Ops. $3.65 - $3.80
Operating Cash Flow from Cont. Ops. ($B) 2.0 - 2.2
ROIC (%) 9.6 - 10.1
The Company reaffirms full-year 2008 guidance. Charts containing
additional information on the Company's 2008 guidance are available on the
Company's website at http://www.raytheon.com . See attachment F for the Company's
calculation and use of Return on Invested Capital (ROIC), a non-GAAP
financial measure.




Segment Results
Integrated Defense Systems
1st Quarter %
($ in millions) 2008 2007 Change

Net Sales $1,192 $1,092 9%
Operating Income $211 $199 6%
Operating Margin 17.7% 18.2%

Integrated Defense Systems (IDS) had first quarter 2008 net sales of
$1,192 million, up 9 percent compared to $1,092 million in the first
quarter 2007, primarily due to growth on Missile Defense Agency and U.S.
Army programs. IDS recorded $211 million of operating income compared to
$199 million in the first quarter 2007. The increase in operating income
was primarily due to higher volume and the sale of licensed software.

During the quarter, IDS booked an initial $331 million for the design,
development and support of the Patriot system for international customers,
including $246 million for South Korea and $85 million for Taiwan. IDS also
booked $133 million to provide engineering services support for a Patriot
air and missile defense program for the U.S. Army.





Intelligence and Information Systems
1st Quarter %
($ in millions) 2008 2007 Change

Net Sales $692 $588 18%
Operating Income $52 $55 -5%
Operating Margin 7.5% 9.4%

Intelligence and Information Systems (IIS) had first quarter 2008 net
sales of $692 million, up 18 percent compared to $588 million in the first
quarter 2007, primarily due to new programs, including U.K. e-Borders. IIS
recorded $52 million of operating income compared to $55 million in the
first quarter 2007. The decrease in operating income was primarily due to
certain acquisition costs and other investments in cyber operations and
information security capabilities, partially offset by higher volume.

During the quarter, IIS booked an additional $182 million on the U.K.
e-Borders contract, bringing the total inception-to-date bookings for this
program to $1.6 billion. IIS also booked $556 million on a number of
classified contracts, including $171 million on a major classified program.





Missile Systems
1st Quarter %
($ in millions) 2008 2007 Change

Net Sales $1,311 $1,140 15%
Operating Income $137 $120 14%
Operating Margin 10.5% 10.5%

Missile Systems (MS) had first quarter 2008 net sales of $1,311
million, up 15 percent compared to $1,140 million in the first quarter
2007, primarily due to higher volume on international and development
programs. MS recorded $137 million of operating income compared to $120
million in the first quarter 2007. The increase in operating income was due
to higher volume.

During the quarter, MS booked $578 million for Standard Missile-3 for
the U.S. Navy and the Missile Defense Agency. MS also booked $293 million
for the production of Tactical Tomahawk cruise missiles and $127 million
for the production of AIM-9X Sidewinder short range air-to-air missiles for
the U.S. Navy. In addition, MS booked $123 million for the production of
Tube-launched Optically guided Wire controlled (TOW) missiles for
international customers and the U.S. Marine Corps.





Network Centric Systems
1st Quarter %
($ in millions) 2008 2007 Change

Net Sales $1,067 $929 15%
Operating Income $123 $117 5%
Operating Margin 11.5% 12.6%

Network Centric Systems (NCS) had first quarter 2008 net sales of
$1,067 million, up 15 percent compared to $929 million in the first quarter
2007, primarily due to increased volume on certain U.S. Army programs. NCS
recorded $123 million of operating income compared to $117 million in the
first quarter 2007. The increase in operating income was primarily due to
higher volume.

During the quarter, NCS booked $309 million to provide Horizontal
Technology Integration (HTI) forward-looking infrared kits and $100 million
for Long Range Advanced Scout Surveillance Systems (LRAS3) for the U.S.
Army. NCS also booked $203 million for the production of Improved Target
Acquisition Systems (ITAS) for the U.S. Army and the U.S. Marine Corps.





Space and Airborne Systems
1st Quarter %
($ in millions) 2008 2007 Change

Net Sales $995 $964 3%
Operating Income $121 $129 -6%
Operating Margin 12.2% 13.4%

Space and Airborne Systems (SAS) had first quarter 2008 net sales of
$995 million, up 3 percent compared to $964 million in the first quarter
2007, primarily due to growth on airborne sensor programs. SAS recorded
$121 million of operating income compared to $129 million in the first
quarter 2007. The decrease in operating income was primarily due to a
change in program mix.


SAS booked $186 million on a number of classified contracts.



Technical Services
1st Quarter %
($ in millions) 2008 2007 Change

Net Sales $521 $463 13%
Operating Income $35 $23 52%
Operating Margin 6.7% 5.0%

Technical Services (TS) had first quarter 2008 net sales of $521
million, up 13 percent compared to $463 million in the first quarter 2007,
primarily due to training, mission support, and depot support services
programs. TS recorded operating income of $35 million in the first quarter
2008 compared to $23 million in the first quarter 2007. The increase in
operating income was primarily due to higher volume and profit adjustments
taken on certain programs in 2007.

During the quarter, TS booked $110 million for work on the Warfighter
Field Operations Customer Support (FOCUS) contract for the U.S. Army to
provide live, virtual and constructive training services.

Raytheon Company (NYSE: RTN), with 2007 sales of $21.3 billion, is a
technology leader specializing in defense, homeland security and other
government markets throughout the world. With a history of innovation
spanning 86 years, Raytheon provides state-of-the-art electronics, mission
systems integration and other capabilities in the areas of sensing;
effects; and command, control, communications and intelligence systems, as
well as a broad range of mission support services. With headquarters in
Waltham, Mass., Raytheon employs 72,000 people worldwide.

Disclosure Regarding Forward-looking Statements

This release and the attachments contain forward-looking statements,
including information regarding the Company's 2008 financial outlook,
future plans, objectives, business prospects and anticipated financial
performance. These forward-looking statements are not statements of
historical facts and represent only the Company's current expectations
regarding such matters. These statements inherently involve a wide range of
known and unknown risks and uncertainties. The Company's actual actions and
results could differ materially from what is expressed or implied by these
statements. Specific factors that could cause such a difference include,
but are not limited to: the Company's dependence on the U.S. government for
a significant portion of its business and the risks associated with U.S.
government sales, including changes or shifts in defense spending,
uncertain funding of programs, potential termination of contracts, and
difficulties in contract performance; the ability to procure new contracts;
the risks of conducting business in foreign countries; the ability to
comply with extensive governmental regulation, including import and export
policies and procurement and other regulations; the impact of competition;
the ability to develop products and technologies; the risk of cost
overruns, particularly for the Company's fixed- price contracts; dependence
on component availability, subcontractor performance and key suppliers;
risks of a negative government audit; the use of accounting estimates in
the Company's financial statements; risks associated with acquisitions,
dispositions, joint ventures and other business arrangements; risks of an
impairment of goodwill or other intangible assets; the outcome of
contingencies and litigation matters, including government investigations;
the ability to recruit and retain qualified personnel; the impact of
potential security threats and other disruptions; and other factors as may
be detailed from time to time in the Company's public announcements and
Securities and Exchange Commission filings. The Company undertakes no
obligation to make any revisions to the forward-looking statements
contained in this release and the attachments or to update them to reflect
events or circumstances occurring after the date of this release, including
any acquisitions, dispositions or other business arrangements that may be
announced or closed after such date. This release and the attachments also
contain non-GAAP financial measures. A GAAP reconciliation and a discussion
of the Company's use of these measures are included in this release or the
attachments.

Conference Call on the First Quarter 2008 Financial Results

Raytheon's financial results conference call will be held on Thursday,
April 24, 2008 at 9 a.m. EDT. Participants will include William H. Swanson,
Chairman and CEO, David C. Wajsgras, senior vice president and CFO, and
other Company executives.

The dial-in number for the conference call will be (866) 800 - 8651.
The conference call will also be audiocast on the Internet at
http://www.raytheon.com. Individuals may listen to the call and download charts
that will be used during the call. These charts will be available for
printing prior to the call.

Interested parties are encouraged to check the website ahead of time to
ensure their computers are configured for the audio stream. Instructions
for obtaining the free required downloadable software are posted on the
site.



Media Contact: Investor Relations Contact:
Jon Kasle Greg Smith
781-522-5110 781-522-5141



Attachment A

Raytheon Company
Preliminary Statement of Operations Information
First Quarter 2008

(In millions, except per share amounts) Three Months Ended
30-Mar-08 25-Mar-07

Net sales $5,354 $4,804

Cost of sales 4,259 3,856
Administrative and selling expenses 380 330
Research and development expenses 107 97

Total operating expenses 4,746 4,283

Operating income 608 521

Interest expense 34 60
Interest income (23) (28)
Other expense, net 5 3

Non-operating expense, net 16 35

Income from continuing operations before taxes 592 486

Federal and foreign income taxes 192 162

Income from continuing operations 400 324

(Loss) income from discontinued
operations, net of tax (2) 22

Net income $398 $346

Earnings per share from continuing operations
Basic $0.96 $0.73
Diluted $0.93 $0.71

(Loss) earnings per share from
discontinued operations
Basic $(0.01) $0.05
Diluted $(0.01) $0.05

Earnings per share
Basic $0.95 $0.78
Diluted $0.92 $0.76

Average shares outstanding
Basic 418.2 441.0
Diluted 432.3 453.5



Attachment B

Raytheon Company
Preliminary Segment Information
First Quarter 2008

Operating Income
Net Sales Operating Income As a Percent of Sales
(In millions) Three Months Ended Three Months Ended Three Months Ended
30-Mar-08 25-Mar-07 30-Mar-08 25-Mar-07 30-Mar-08 25-Mar-07

Integrated
Defense
Systems $1,192 $1,092 $211 $199 17.7% 18.2%
Intelligence
and Information
Systems 692 588 52 55 7.5% 9.4%
Missile Systems 1,311 1,140 137 120 10.5% 10.5%
Network Centric
Systems 1,067 929 123 117 11.5% 12.6%
Space and Airborne
Systems 995 964 121 129 12.2% 13.4%
Technical Services 521 463 35 23 6.7% 5.0%
FAS/CAS Pension
Adjustment - - (33) (62)
Corporate and
Eliminations (424) (372) (38) (60)

Total $5,354 $4,804 $608 $521 11.4% 10.8%



Attachment C

Raytheon Company
Other Preliminary Information
First Quarter 2008

Funded
(In millions) Backlog Backlog
30-Mar-08 31-Dec-07 30-Mar-08 31-Dec-07

Integrated Defense
Systems $9,306 $9,296 $5,382 $4,781
Intelligence and
Information Systems 5,831 5,636 2,641 2,325
Missile Systems 9,661 9,379 5,674 5,218
Network Centric Systems 5,696 5,102 4,547 3,957
Space and Airborne
Systems 5,277 5,276 3,341 3,037
Technical Services 1,926 1,925 1,274 1,200

Total $37,697 $36,614 $22,859 $20,518


Bookings
Three Months Ended
30-Mar-08 25-Mar-07

Total Bookings $6,516 $5,158



Attachment D

Raytheon Company
Preliminary Balance Sheet Information
First Quarter 2008

(In millions)
30-Mar-08 31-Dec-07
Assets
Cash and cash equivalents $2,287 $2,655
Accounts receivable, net 128 126
Contracts in process 4,068 3,821
Inventories 385 386
Deferred taxes 436 432
Prepaid expenses and other current assets 193 196
Total current assets 7,497 7,616

Property, plant and equipment, net 2,035 2,058
Prepaid retiree benefits 631 617
Goodwill 11,632 11,627
Other assets, net 1,339 1,363
Total assets $23,134 $23,281

Liabilities and Stockholders' Equity
Advance payments and billings in
excess of costs incurred $1,842 $1,845
Accounts payable 1,044 1,141
Accrued employee compensation 563 902
Other accrued expenses 1,025 900
Total current liabilities 4,474 4,788

Accrued retiree benefits and other
long-term liabilities 3,038 3,016
Deferred taxes 483 451
Long-term debt 2,288 2,268
Minority interest 219 216
Stockholders' equity 12,632 12,542
Total liabilities and
stockholders' equity $23,134 $23,281



Attachment E

Raytheon Company
Preliminary Cash Flow Information
First Quarter 2008

(In millions) Three Months Ended
30-Mar-08 25-Mar-07

Net income $398 $346
Plus (less): Loss (income) from
discontinued operations, net of tax 2 (22)
Income from continuing operations 400 324

Depreciation 69 67
Amortization 23 19
Working capital (703) (653)
Discontinued operations (10) (63)
Net activity in financing receivables 20 21
Other 258 (131)
Net operating cash flow 57 (416)

Capital spending (43) (38)
Internal use software spending (17) (15)
Dividends (109) (107)
Repurchases of common stock (340) (275)
Debt repayments - 3
Discontinued operations - (28)
Other 84 76
Total cash flow $(368) $(800)



Attachment F

Raytheon Company
Preliminary Return on Invested Capital Non-GAAP Financial Measure
First Quarter 2008

We define Return on Invested Capital (ROIC) as income from continuing
operations plus after-tax net interest expense plus one-third of operating
lease expense after-tax (estimate of interest portion of operating lease
expense) divided by average invested capital after capitalizing operating
leases (operating lease expense times a multiplier of 8), adding financial
guarantees less net investment in Discontinued Operations, and adding back
the cumulative minimum pension liability/impact of FAS 158. ROIC is not a
measure of financial performance under generally accepted accounting
principles (GAAP) and may not be defined and calculated by other companies
in the same manner. ROIC should be considered supplemental to and not a
substitute for financial information prepared in accordance with GAAP. We
use ROIC as a measure of efficiency and effectiveness of our use of
capital and as an element of management compensation.



Return on Invested Capital

(In millions) 2008 Guidance
Low end High end
of range of range
Income from continuing operations
Net interest expense, after-tax* Combined Combined
Lease expense, after-tax*
Return $1,655 $1,720

Net debt **
Equity less investment in discontinued
operations
Lease expense x 8 plus financial
guarantees Combined Combined
Minimum pension liability (cumulative)

Invested capital from continuing
operations*** $17,300 $17,100

ROIC 9.6% 10.1%

* Effective 2008 tax rate: 34.1% (2008 guidance)
** Net debt is defined as total debt less cash and cash equivalents and
is calculated using a 2 point average
*** Calculated using a 2 point average


SOURCE Raytheon Company

LOCKHEED MARTIN AGREES TO ACQUIRE EAGLE GROUP INTERNATIONAL, LLC

LOCKHEED MARTIN AGREES TO ACQUIRE EAGLE GROUP INTERNATIONAL, LLC

PURCHASE WILL STRENGTHEN COMPANY'S MILITARY LOGISTICS AND HEALTH CARE SERVICE OFFERINGS

Bethesda, MD, April 28th, 2008 -- Lockheed Martin Corporation [NYSE: LMT] has entered into a definitive agreement to acquire Atlanta, Georgia based Eagle Group International, LLC. Eagle Group provides logistics, information technology, training and healthcare services to the U.S. Department of Defense.

As part of the agreement, the parties have agreed to exclude from the transaction all obligations associated with Eagle Group's U.S. Department of Labor Potomac Job Corps Contract. Other terms of the transaction were not disclosed.

Eagle Group's proven capabilities in military readiness and integrated logistics, healthcare program management and outsourcing, information technology, and training services have enabled it to develop a reputation for outstanding support of its customers' critical missions. Eagle's revenue is generated mainly from work done for the U.S. Army.
"The acquisition of Eagle Group extends our logistics and business process outsourcing capabilities, strengthens our relationships with several key Army customers, and enhances our support for military force modernization and reset imperatives," said Bob Stevens, Lockheed Martin's Chairman, President and CEO. "We're confident that this acquisition will create value for our customers and our shareholders."

"The combination will allow our customers to have access to an expanded range of capabilities and will provide growth opportunities for our exceptional and dedicated employees," said A.J. Johnson, Eagle's Chief Executive Officer and President. "We look forward to joining Lockheed Martin and continuing to build upon our success."

The transaction is subject to government approvals, including a review under the Hart-Scott-Rodino Antitrust Improvements Act and satisfaction of certain closing conditions. It is expected that the transaction will close in the second quarter of 2008.

Founded in 1995, Eagle Group employs more than 1,350 people.

LOCKHEED MARTIN DECLARES QUARTERLY DIVIDEND OF 42 CENTS

LOCKHEED MARTIN DECLARES QUARTERLY DIVIDEND OF 42 CENTS

Bethesda, MD, April 24th, 2008 -- The Lockheed Martin Corporation [NYSE: LMT] Board of Directors today declared a regular quarterly dividend on the Corporation's common stock of 42 cents per share.

The dividend is payable June 27, 2008 to holders of record as of June 2, 2008.

Headquartered in Bethesda, Md., Lockheed Martin employs about 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation reported 2007 sales of $41.9 billion.

Northrop Grumman Reports First Quarter 2008 Financial Results, Updates Guidance And Raises Dividend

Northrop Grumman Reports First Quarter 2008 Financial Results, Updates Guidance And Raises Dividend

* Sales Increase 6 Percent to $7.7 Billion
* Backlog Reaches Record $68 Billion
* EPS of $0.76 Including $0.61 per Share Charge Related Primarily to the LHD-8 Program
* Cash from Operations Totals $194 Million
* 2008 Guidance - Sales of $33 Billion, EPS of $4.90 to $5.15, Cash from Operations of $2.6 to $2.9 Billion, and Free Cash Flow of $1.7 to $2.1 Billion
* Quarterly Dividend Increased to $0.40 per Share
* 7.6 Million Shares Repurchased During Q1 2008 for $600 Million

LOS ANGELES - April 24, 2008 - Northrop Grumman Corporation (NYSE:NOC) reported that first quarter 2008 earnings from continuing operations declined to $263 million, or $0.76 per diluted share, from $394 million, or $1.12 per diluted share, in the first quarter of 2007. First quarter 2008 earnings were reduced by a pre-tax charge of $326 million, or $0.61 per diluted share, primarily for cost growth and schedule extension in the company's LHD-8 amphibious assault ship program, as announced on April 15, 2008. Sales for the 2008 first quarter increased 6 percent to $7.7 billion from $7.3 billion in the 2007 first quarter. Cash provided by operations for the 2008 first quarter totaled $194 million compared with $400 million in the prior year period.

The company also announced that it is increasing its quarterly dividend to $0.40 per share from $0.37 per share. The company has increased its quarterly dividend in each of the last five years, and with the increase to $0.40 per share the company has doubled its quarterly common stock dividend since 2003.



Operating Highlights
--------------------
First Quarter
-------------------------------
($ millions except per share data) 2008 2007 Change
-------------------------------
Sales 7,724 7,314 6%
Operating income 464 690 -33%
as a % of sales 6.0% 9.4% (340) bps
Earnings from continuing operations 263 394 -33%
Diluted EPS from continuing
operations .76 1.12 -32%
Net earnings 264 387 -32%
Diluted EPS .76 1.10 -31%
Cash from operations 194 400 -52%
Free cash flow(1) 16 212 -92%


(1) Free cash flow is a non-GAAP measure defined as cash from
operations less capital expenditures and outsourcing contract &
related software costs. Management uses free cash flow as an
internal measure of financial performance.
"Although the LHD-8 charge is disappointing, the remainder of our first quarter performance was strong. Total backlog increased more than $4 billion to a record $68 billion. We demonstrated strong growth and performance in our Information & Services, Aerospace and Electronics businesses, and we won the KC-45 tanker program. These positives demonstrate the solid, underlying business trends we expect and reinforce our confidence in our long-term financial targets," said Ronald D. Sugar, Northrop Grumman chairman and chief executive officer.

"Based on the strength of that long-term outlook, we continue to execute our balanced cash deployment strategy. During the quarter we purchased $600 million of our shares, and today we announced an increase in our quarterly dividend. This is our fifth annual increase and represents a doubling of our dividend since the TRW acquisition."

Operating income for the 2008 first quarter decreased 33 percent to $464 million from $690 million for the 2007 first quarter. As a percent of sales, operating income decreased to 6 percent from 9.4 percent in the prior year period. The $326 million pre-tax charge in Shipbuilding caused the decline in operating income in the quarter and as a percent of sales, impacted operating income by approximately 400 basis points.

Federal and foreign income taxes for the 2008 first quarter declined to $146 million from $206 million in the first quarter of 2007. The effective tax rate applied to earnings from continuing operations for the 2008 first quarter was 35.7 percent compared with 34.3 percent in the 2007 first quarter.

Net earnings for the 2008 first quarter declined to $264 million, or $0.76 per diluted share, from $387 million, or $1.10 per diluted share, for the same period in 2007. Earnings per share are based on weighted average diluted shares outstanding of 349.3 million for the first quarter of 2008 and 358.3 million for the first quarter of 2007. Weighted average shares outstanding for both periods include the dilutive effects of the company's mandatorily redeemable Series B convertible preferred stock and the impact of share repurchases during the quarter.

New business awards totaled $12.1 billion in the first quarter. Total backlog, which includes funded backlog and firm orders for which funding is not currently contractually obligated by the customer, increased to a record $68 billion as of March 31, 2008.



Cash Flow Highlights
--------------------
First Quarter
-------------------------------
($ millions) 2008 2007 Change
-------------------------------
Cash from operations 194 400 (206)
Less:
Capital expenditures 143 158 15
Outsourcing contract & related
software costs 35 30 (5)
-------------------------------
Free cash flow(1) 16 212 (196)

(1) Free cash flow is a non-GAAP measure defined as cash from
operations less capital expenditures and outsourcing contract &
related software costs. Management uses free cash flow as an
internal measure of financial performance.
Cash provided by operations in the 2008 first quarter totaled $194 million compared with $400 million in the prior year period. The decline in cash provided by operations reflects an increase in accounts receivable. The increase in receivables is due to timing of billing and collection resulting from the transition to a common internal accounting software system. The transition impacted working capital by approximately $200 million, which is largely expected to be recovered in the second quarter of 2008. First quarter 2008 capital spending totaled $143 million compared with capital spending of $158 million in the prior year period. First quarter 2008 free cash flow totaled $16 million compared with $212 million in the prior year period.



Cash Measurements, Debt and Capital Deployment
----------------------------------------------

($ millions) 3/31/2008 12/31/2007
---------------------------------------------------------------------
Cash & cash equivalents 429 963
Total debt 4,097 4,055
Net debt(1) 3,668 3,092
Mandatorily redeemable preferred stock 46 350
Net debt to total capital ratio(2) 17% 14%

(1) Total debt less cash and cash equivalents
(2) Net debt divided by the sum of shareholders' equity and total
debt.
Cash and cash equivalents totaled $429 million at March 31, 2008 compared with $963 million at Dec. 31, 2007, and total debt was $4.1 billion at March 31, 2008. Changes in cash and cash equivalents and total debt include the following cash deployment and financing actions during the quarter:



* $600 million for share repurchases
* $143 million for capital expenditures and $35 million for
outsourcing contract and related software costs
* $126 million for dividends
* $69 million proceeds from exercises of stock options and issuance
of common stock
During the first quarter of 2008 the company announced its intention to redeem its mandatorily redeemable Series B convertible preferred stock on April 4, 2008. The reduction in mandatorily redeemable preferred stock reflects the voluntary conversion by holders of approximately 3 million shares during the first quarter of 2008.

During the first quarter of 2008 the company also announced the sale of its Electro-Optical Systems business for $175 million in cash. This sale was completed on April 21, 2008, and a small after-tax gain is anticipated to be recognized in discontinued operations in the second quarter of 2008.



2008 Guidance
-------------
Prior Current
---------------------------------------------------------------------
Sales ~$33B ~$33B

Segment operating income(1)
as % of sales mid to high 9% mid to high 8%

Operating income as % of sales high 9% high 8%

Diluted EPS from continuing
operations $5.50 - 5.75 $4.90 - 5.15

Cash from operations $2.8 - 3.1B $2.6 - 2.9B

Free cash flow(2) $1.9 - 2.3B $1.7 - 2.1B

(1) Segment operating income is a non-GAAP measure used as an
internal measure of financial performance for the four businesses.

(2) Free cash flow is a non-GAAP measure defined as cash from
operations less capital expenditures and outsourcing contract &
related software costs. Management uses free cash flow as an
internal measure of financial performance.
The company continues to expect sales of approximately $33 billion in 2008. The company has revised its guidance for segment operating income, operating income, and earnings per share to reflect the impacts of the charge in Shipbuilding, $326 million or $0.61 per diluted share, respectively. Guidance for 2008 cash from operations and free cash flow has been revised to include a $200 million negative impact from the charge.



Business Results
----------------
Consolidated Sales & Segment Operating Income(1)
($ millions except per share data)
First Quarter
-------------------------------
2008 2007 Change
-------------------------------
Sales
Information & Services 3,135 2,953 6%
Aerospace 2,115 2,035 4%
Electronics 1,555 1,528 2%
Shipbuilding 1,264 1,156 9%
Intersegment eliminations (345) (358)
-------------------------------
7,724 7,314 6%

Segment operating income(1)
Information & Services 260 231 13%
Aerospace 235 219 7%
Electronics 209 192 9%
Shipbuilding (218) 79 NM
Intersegment eliminations (28) (29)
-------------------------------
Segment operating income(1) 458 692 (34%)
as a % of sales 5.9% 9.5% (460) bps

Reconciliation to operating
income:
Unallocated expenses (32) (32)
Net pension adjustment(2) 59 33
Reversal of royalty income
included above (21) (3)
-------------------------------
Operating income 464 690 -33%
as a % of sales 6.0% 9.4% (340) bps
---------------------------------------------------------------------

(1) Segment operating income is a non-GAAP measure used as an
internal measure of financial performance for the four businesses.
(2) Net pension adjustment includes pension expense determined in
accordance with GAAP less pension expense allocated to the
business segments under U.S. Government Cost Accounting Standards.
Operating results for all periods presented reflect the reclassification of Electro-Optical Systems (formerly reported in Electronics) from continuing to discontinued operations, as well as the transfer of the Park Air and Remotec businesses from Electronics to Mission Systems effective Jan. 1, 2008. Schedule 6 provides previously reported quarterly financial results revised to reflect discontinued operations.



Information & Services
---------------------------------------------------------------------
First Quarter ($ millions)
--------------------------------------------------
2008 2007
Operating % of Operating % of
Sales Income Sales Sales Income Sales
--------------------------------------------------
Mission Systems $1,545 $145 9.4% $1,395 $117 8.4%
Information
Technology 1,085 89 8.2% 1,038 86 8.3%
Technical Services 505 26 5.1% 520 28 5.4%
--------------------------------------------------
$3,135 $260 8.3% $2,953 $231 7.8%
--------------------------------------------------
Information & Services first quarter 2008 sales increased 6 percent from the prior year period due to higher sales for Mission Systems and Information Technology. Operating income for Information & Services rose 13 percent in the 2008 first quarter. As a percent of sales, operating income increased 50 basis points to 8.3 percent from 7.8 percent in the prior year period. The increase in operating income is due to higher volume, and the increase in operating income rate reflects improved program performance for Mission Systems.

Mission Systems sales increased 11 percent due to higher volume for intelligence, surveillance & reconnaissance programs, higher volume for command, control & communications programs and higher volume for the Kinetic Energy Interceptor program. Operating income rose 24 percent, and as a percent of sales, increased 100 basis points to 9.4 percent from 8.4 percent in the prior year period. The increase in operating income reflects higher volume and improved program performance.

Information Technology sales rose 5 percent due to higher volume for intelligence programs, the New York City Wireless program, the Virginia IT outsourcing program, and the Network Centric Solutions program. Operating income rose 3 percent, and as a percent of sales was comparable to the prior year period at 8.2 percent compared with 8.3 percent.

Technical Services sales declined 3 percent due to completion of the Western Range Operations program in 2007 and lower volume for the Joint Base Operations Support program than in the prior year period. Operating income decreased 7 percent, and as a percent of sales, declined to 5.1 percent from 5.4 percent in the prior year period. The comparison to first quarter 2007 reflects lower volume as well as contract mix.



Aerospace
---------------------------------------------------------------------
First Quarter ($ millions)
--------------------------------------------------
2008 2007
Operating % of Operating % of
Sales Income Sales Sales Income Sales
--------------------------------------------------
Integrated Systems $1,340 $170 12.7% $1,281 $160 12.5%
Space Technology 775 65 8.4% 754 59 7.8%
--------------------------------------------------
$2,115 $235 11.1% $2,035 $219 10.8%
--------------------------------------------------
Aerospace first quarter 2008 sales increased 4 percent from the prior year period and includes higher volume for both Integrated Systems and Space Technology. Aerospace first quarter 2008 operating income increased 7 percent, and as a percent of sales, increased to 11.1 percent from 10.8 percent in the prior year period.

Integrated Systems sales rose 5 percent. The increase includes higher volume for restricted, Global Hawk, Navy UCAS-D, and KC-45 air mobility tanker programs, which was partially offset by lower volume for the F-35, Multi-Platform Radar Technology Insertion program, and the E-10A. Integrated Systems operating income rose 6 percent, and as a percent of sales, increased to 12.7 percent from 12.5 percent in the prior year period. The increase in operating income and rate reflect higher volume and improved program performance.

Space Technology sales increased 3 percent, primarily due to higher volume for restricted and James Webb Space Telescope programs. Increases in these programs were partially offset by lower volume in the Advanced Extremely High Frequency, Space Tracking and Surveillance System, and Transformational Satellite Communications System programs. Space Technology operating income increased 10 percent, and as a percent of sales increased to 8.4 percent from 7.8 percent, reflecting improved program performance and higher sales volume.



Electronics
---------------------------------------------------------------------
First Quarter ($ millions)
--------------------------------------------------
2008 2007
Operating % of Operating % of
Sales Income Sales Sales Income Sales
--------------------------------------------------
$1,555 $209 13.4% $1,528 $192 12.6%
--------------------------------------------------
Electronics first quarter 2008 sales increased 2 percent from the prior year period principally due to higher sales for Army and navigation systems programs. These sales increases were partially offset by declining volume for naval and marine systems programs.

Electronics first quarter 2008 operating income rose 9 percent, and as a percent of sales, increased to 13.4 percent from 12.6 percent. Operating income primarily reflects improved program performance, higher volume, and higher royalty income than in the prior year period.



Shipbuilding
---------------------------------------------------------------------
First Quarter ($ millions)
--------------------------------------------------
2008 2007
Operating % of Operating % of
Sales Income Sales Sales Income Sales
--------------------------------------------------
$1,264 ($218) NM $1,156 $79 6.8%
--------------------------------------------------
Shipbuilding first quarter 2008 sales increased 9 percent from the prior year period primarily due to higher volume in surface combatants and fleet support. Higher surface combatant volume includes production ramp-up for the DDG 107 and the DDG 110. The increase in fleet support reflects revenue from the July 2007 reorganization of AMSEC. Shipbuilding revenue in the 2008 first quarter was reduced by $134 million due to the revision of the LHD-8 contract's estimate to complete (EAC).

Shipbuilding recorded a $218 million operating loss in the first quarter of 2008 compared with income of $79 million in the first quarter of 2007. During the quarter the company recorded a $326 million charge that reduced Shipbuilding income by the following:



* $272 million -- LHD-8 EAC adjustment for the additional time
and materials needed to complete ship rework and the six-month
delivery extension from the fourth quarter of 2008 to the second
quarter of 2009.

* $35 million -- EAC adjustments for other Gulf Coast programs
to reflect resource impacts caused by delay in the LHD-8 delivery,
as well as risk adjustments based on recently concluded EAC
evaluations.

* $19 million -- non-cash write-down of purchased intangibles to
reflect the impairment of purchased intangibles resulting from
the EAC adjustments described above.
First Quarter Highlights



* The U.S. Air Force selected Northrop Grumman to provide the KC-45
aerial refueling tanker for the KC-135 tanker replacement program.
The initial contract provides four System Design and Development
aircraft and is valued at $1.5 billion. The contract has a
potential value of $35 billion. The unsuccessful bidder has filed
an appeal of this award with the U.S. Government Accountability
Office.

* The U.S. Navy awarded Northrop Grumman a $1.4 billion cost plus
incentive fee contract by the U.S. Navy for the construction of a
Zumwalt-class destroyer, DDG 1001, as well as major components for
the DDG 1000.

* The U.S. Navy awarded Northrop Grumman a planning contract option
for the refueling and complex overhaul of the nuclear-powered
aircraft carrier USS Theodore Roosevelt (CVN 71). This option is
valued at $186.4 million and continues work awarded in 2006. The
total estimated value of the contract is $558 million.

* The U.S. Air Force awarded Northrop Grumman the Weather Agency
Systems Engineering, Management and Sustainment II contract to
increase effectiveness, reliability, and performance, while
reducing total cost of ownership for a variety of classified and
unclassified Air Force weather systems. The $239 million cost plus
award fee contract includes a one-year base and four option years.

* A large European postal customer awarded Solystic, a French
subsidiary of Northrop Grumman, a $100 million firm fixed price
contract to provide compact sequence sorters. The contract is for
an initial order of 400 letter sequencing machines with options
for an additional 400 machines.

* MBDA Italia selected Northrop Grumman to provide the navigation and
localization systems within the design and development phase for
NATO's Medium Extended Air Defense System (MEADS) program intended
to replace Hawk and Patriot systems worldwide.

* Northrop Grumman delivered the fourth submarine of the Virginia
class, North Carolina (SSN 777), to the Navy on Feb. 21.

* The Northrop Grumman-built National Security Cutter Bertholf (WMSL
750) successfully completed builder's trials in the Gulf of Mexico.

* Northrop Grumman delivered the payload module for the second
Advanced Extremely High Frequency military communications satellite
ahead of schedule to Lockheed Martin, prime contractor for the
program.

* The Northrop Grumman-built amphibious transport dock ship New York
(LPD 21) was christened in New Orleans on Feb. 29. The ship is
unique in that its bow stem contains seven-and-a-half tons of steel
recovered from the World Trade Center following the terrorist
attacks of Sept. 11, 2001.

* The Northrop Grumman-built guided missile destroyer Dewey (DDG 105)
was christened in Pascagoula, Mississippi, on Jan. 26.

* Northrop Grumman celebrated the 10th anniversary of the first
flight of the RQ-4 Global Hawk unmanned aerial system after
delivering a record five production aircraft to the U.S. Air Force
in 2007. In addition, the Global Hawk set an endurance record for
a full-scale, operational unmanned aircraft on March 22, 2008,
when it completed a flight of 33.1 hours at altitudes up to 60,000
feet over Edwards Air Force Base, Calif.

* Northrop Grumman and the University of Illinois at Urbana-Champaign
announced the creation of the first fully-functional, all-carbon
nanotube transistor radio, demonstrating that carbon nanotubes can
be used as high-speed transistors, while consuming only
one-thousandth the power required by current transistor technology.

* Northrop Grumman announced the sale of its Electro-Optical Systems
business for $175 million in cash to L-3 Communications. The
transaction was completed on April 21, 2008.

* The Northrop Grumman board of directors declared a quarterly
dividend of $0.37 per share on Northrop Grumman common stock.

* Northrop Grumman realigned its two shipbuilding sectors, Newport
News and Ship Systems, into Northrop Grumman Shipbuilding. It also
realigned the reporting of portions of its missiles business from
Mission Systems to Space Technology, effective July 1, 2008.
About Northrop Grumman

Northrop Grumman Corporation is a global defense and technology company whose 120,000 employees provide innovative systems, products, and solutions in information and services, electronics, aerospace and shipbuilding to government and commercial customers worldwide.

Northrop Grumman will webcast its earnings conference call at noon EDT on April 24, 2008. 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 Web site at http://www.northropgrumman.com.

Note: Certain statements and assumptions in this release contain or are based on "forward-looking" information that Northrop Grumman Corporation (the "Company") believes to be within the definition in the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties, and include, among others, statements in the future tense, and all statements accompanied by terms such as "project," "expect," "estimate," "assume," "believe," "plan," "guidance," "outlook," "trends," "target" or variations thereof. This information reflects the Company's best estimates when made, but the Company expressly disclaims any duty to update this information if new data become available or estimates change after the date of this release.

Such "forward-looking" information includes, among other things, financial guidance 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 the Company's control. These include the Company'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, claims, appeals, bid protests, and investigations; hurricane-related insurance recoveries; environmental remediation; acquisitions and divestitures of businesses; joint ventures and other business arrangements; access to capital; performance issues with key suppliers and subcontractors; product performance and the successful execution of internal plans; successful negotiation of contracts with labor unions; allowability and allocability of costs under U.S. Government contracts; effective tax rates and timing and amounts of tax payments; the results of any audit or appeal process with the Internal Revenue Service; and anticipated costs of capital investments, among other things.

The Company'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, the Company'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; technical, operational or quality setbacks, in development and production programs, that could adversely affect the profitability or cash flow of the company; 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, including 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, allowability and allocability of costs under U.S. Government contracts, 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 the Company's filings from time to time with the Securities and Exchange Commission, including, without limitation, Company reports on Form 10-K and Form 10-Q.

Members of the news media may receive our releases via e-mail by registering at: http://www.northropgrumman.com/cgi-bin/regist_form.cgi

LEARN MORE ABOUT US: Northrop Grumman news releases, product information, photos and video clips are available on the Internet at: http://www.northropgrumman.com



NORTHROP GRUMMAN CORPORATION SCHEDULE 1
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(unaudited)

Three months ended
March 31
------------------
$ in millions, except per share 2008 2007
--------------------------------------------------------------------
Sales and Service Revenues
Product sales $ 4,394 $ 4,140
Service revenues 3,330 3,174
--------------------------------------------------------------------
Total sales and service revenues 7,724 7,314
--------------------------------------------------------------------
Cost of Sales and Service Revenues
Cost of product sales 3,729 3,168
Cost of service revenues 2,793 2,749
General and administrative expenses 738 707
--------------------------------------------------------------------
Operating income 464 690
Other Income (Expense)
Interest income 7 7
Interest expense (77) (89)
Other, net 15 (8)
--------------------------------------------------------------------
Earnings from continuing operations before
income taxes 409 600
Federal and foreign income taxes 146 206
--------------------------------------------------------------------
Earnings from continuing operations 263 394
Income (Loss) from discontinued operations,
net of tax 1 (7)
--------------------------------------------------------------------
Net earnings $ 264 $ 387
--------------------------------------------------------------------
Basic Earnings (Loss) Per Share
Continuing operations $ .78 $ 1.14
Discontinued operations (.02)
--------------------------------------------------------------------
Basic earnings per share $ .78 $ 1.12
--------------------------------------------------------------------
Weighted-average common shares outstanding,
in millions 338.8 345.3
--------------------------------------------------------------------
Diluted Earnings (Loss) Per Share
Continuing operations $ .76 $ 1.12
Discontinued operations (.02)
--------------------------------------------------------------------
Diluted earnings per share $ .76 $ 1.10
--------------------------------------------------------------------
Weighted-average diluted shares outstanding,
in millions 349.3 358.3
--------------------------------------------------------------------


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

March 31, Dec. 31,
$ in millions 2008 2007
--------------------------------------------------------------------
Assets:
Cash and cash equivalents $ 429 $ 963
Accounts receivable, net of progress payments 4,358 3,790
Inventoried costs, net of progress payments 1,132 1,000
Deferred income taxes 529 542
Prepaid expenses and other current assets 501 502
--------------------------------------------------------------------
Total current assets 6,949 6,797
Property, plant, and equipment, net of
accumulated depreciation of $3,552 in 2008
and $3,424 in 2007 4,645 4,690
Goodwill 17,620 17,672
Other purchased intangibles, net of accumulated
amortization of $1,711 in 2008 and $1,687 in
2007 1,020 1,074
Pension and postretirement benefits asset 2,103 2,080
Other assets 1,038 1,060
--------------------------------------------------------------------
Total assets $33,375 $33,373
--------------------------------------------------------------------

Liabilities:
Notes payable to banks $ 59 $ 26
Current portion of long-term debt 110 111
Trade accounts payable 1,806 1,890
Accrued employees' compensation 1,248 1,175
Advance payments and billings in excess of
costs incurred 1,834 1,563
Other current liabilities 1,680 1,667
--------------------------------------------------------------------
Total current liabilities 6,737 6,432
Long-term debt, net of current portion 3,928 3,918
Mandatorily redeemable preferred stock 46 350
Pension and postretirement benefits liability 3,059 3,008
Other long-term liabilities 2,004 1,978
--------------------------------------------------------------------
Total liabilities 15,774 15,686
--------------------------------------------------------------------
Shareholders' Equity:
Common stock, $1 par value; 800,000,000 shares
authorized; issued and outstanding: 2008 --
339,155,655; 2007 -- 337,834,561 339 338
Paid-in capital 10,438 10,661
Retained earnings 7,518 7,387
Accumulated other comprehensive loss (694) (699)
--------------------------------------------------------------------
Total shareholders' equity 17,601 17,687
--------------------------------------------------------------------
Total liabilities and shareholders' equity $33,375 $33,373
--------------------------------------------------------------------


NORTHROP GRUMMAN CORPORATION SCHEDULE 3
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(unaudited)

Three months ended
March 31
------------------
$ in millions 2008 2007
--------------------------------------------------------------------
Operating Activities
Sources of Cash - Continuing Operations
Cash received from customers
Progress payments $ 1,608 $ 1,532
Collections on billings 5,950 5,745
Income tax refunds received 2 1
Interest received 7 7
Proceeds from insurance carriers related to
operations 5
Other cash receipts 28 15
--------------------------------------------------------------------
Total sources of cash-continuing operations 7,600 7,300
--------------------------------------------------------------------
Uses of Cash - Continuing Operations
Cash paid to suppliers and employees (7,189) (6,676)
Interest paid (113) (127)
Income taxes paid (54) (22)
Excess tax benefits from stock-based
compensation (44) (52)
Other cash payments (3) (9)
--------------------------------------------------------------------
Total uses of cash-continuing operations (7,403) (6,886)
--------------------------------------------------------------------
Cash provided by continuing operations 197 414
Cash used in discontinued operations (3) (14)
--------------------------------------------------------------------
Net cash provided by operating activities 194 400
--------------------------------------------------------------------
Investing Activities
Payment for businesses purchased, net of cash
acquired (578)
Additions to property, plant, and equipment (143) (158)
Payments for outsourcing contract and related
software costs (35) (30)
Proceeds from insurance carriers related to
capital expenditures 3
Proceeds from disposals of property, plant
and equipment 3
Decrease in restricted cash 26 15
Other investing activities, net 1 1
--------------------------------------------------------------------
Net cash used in investing activities (148) (747)
--------------------------------------------------------------------
Financing Activities
Net borrowings under lines of credit 33 230
Principal payments of long-term debt (23)
Proceeds from exercises of stock options and
issuance of common stock 69 156
Dividends paid (126) (121)
Excess tax benefits from stock-based
compensation 44 52
Common stock repurchases (600) (600)
--------------------------------------------------------------------
Net cash used in financing activities (580) (306)
--------------------------------------------------------------------
Decrease in cash and cash equivalents (534) (653)
Cash and cash equivalents, beginning of period 963 1,015
--------------------------------------------------------------------
Cash and cash equivalents, end of period $ 429 $ 362
--------------------------------------------------------------------


NORTHROP GRUMMAN CORPORATION SCHEDULE 4
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(unaudited)

Three months ended
March 31
------------------
$ in millions 2008 2007
--------------------------------------------------------------------
Reconciliation of Net Earnings to Net Cash
Provided by Operating Activities
Net Earnings $ 264 $ 387
Adjustments to reconcile to net cash provided
by operating activities
Depreciation 136 135
Amortization of assets 62 34
Stock-based compensation 44 38
Excess tax benefits from stock-based
compensation (44) (52)
Loss on disposals of property, plant, and
equipment 1
Amortization of long-term debt premium (3) (3)
Decrease (increase) in
Accounts receivable (2,080) (1,436)
Inventoried costs (266) (89)
Prepaid expenses and other current assets (15) 18
Increase (decrease) in
Progress payments 1,642 1,390
Accounts payable and accruals 254 (264)
Deferred income taxes 26 (4)
Income taxes payable 112 177
Retiree benefits 31 47
Other non-cash transactions, net 33 36
--------------------------------------------------------------------
Cash provided by continuing operations 197 414
Cash used in discontinued operations (3) (14)
--------------------------------------------------------------------
Net cash provided by operating activities $ 194 $ 400
--------------------------------------------------------------------
Non-Cash Investing and Financing Activities
Purchase of business
Fair value of assets acquired, including
goodwill $ 682
Cash paid for businesses purchased (578)
--------------------------------------------------------------------
Liabilities assumed $ 104
--------------------------------------------------------------------
Mandatorily redeemable preferred stock converted
into common stock $ 304
--------------------------------------------------------------------
Capital Leases $ 21
--------------------------------------------------------------------


NORTHROP GRUMMAN CORPORATION SCHEDULE 5
TOTAL BACKLOG AND CONTRACT AWARDS
($ in millions)
(unaudited)

TOTAL BACKLOG(3)
----------------------------------------------------
March 31, 2008 March 31, 2007
------------------------- -------------------------
FUNDED UNFUNDED TOTAL FUNDED UNFUNDED TOTAL
(1) (2) BACKLOG (1) (2) BACKLOG
----------------------------------------------------
Information &
Services
Mission
Systems $ 3,847 $ 8,751 $12,598 $ 3,674 $ 8,402 $12,076
Information
Technology 2,606 2,024 4,630 2,609 1,673 4,282
Technical
Services 1,655 2,898 4,553 1,317 3,667 4,984
------------------------- -------------------------
Total
Information &
Services 8,108 13,673 21,781 7,600 13,742 21,342

Aerospace
Integrated
Systems 5,342 6,603 11,945 4,749 4,100 8,849
Space
Technology 1,173 8,066 9,239 1,663 6,689 8,352
------------------------- -------------------------
Total Aerospace 6,515 14,669 21,184 6,412 10,789 17,201

Electronics 8,518 2,200 10,718 7,123 1,463 8,586
Shipbuilding 12,075 2,252 14,327 10,674 2,122 12,796
------------------------- -------------------------
Total $35,216 $32,794 $68,010 $31,809 $28,116 $59,925
------------------------- -------------------------

-------------------------
December 31, 2007
-------------------------
FUNDED UNFUNDED TOTAL
(1) (2) BACKLOG
-------------------------
Information & Services
Mission Systems $ 3,399 $ 8,985 $12,384
Information Technology 2,581 2,268 4,849
Technical Services 1,471 3,193 4,664
-------------------------
Total Information & Services 7,451 14,446 21,897

Aerospace
Integrated Systems 4,204 4,525 8,729
Space Technology 1,260 8,266 9,526
-------------------------
Total Aerospace 5,464 12,791 18,255

Electronics 7,887 2,047 9,934
Shipbuilding 10,348 3,230 13,578
-------------------------
Total $31,150 $32,514 $63,664
-------------------------

(1) Funded backlog represents unfilled orders for which funding has
been 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 contract awards.
(3) Certain prior period amounts have been reclassified to conform
to the 2008 presentation.

---------------------------------------------------------------------

CONTRACT AWARDS
---------------

The estimated value of contract awards included in backlog during the
three months ended March 31, 2008, is approximately $12.1 billion.
Significant new awards during this period include $1.5 billion for the
Air Mobility tanker program, $1.4 billion for the Zumwalt-class
destroyer, $596 million for the CVN 78 bridge contract, $208 million
for the VIS IDIQ program, $195 million for the LAIRCM IDIQ program,
and $183 million for the ICBM program. In addition, the company was
awarded approximately $2.6 billion for restricted programs during this
period.

On February 29, 2008, the company was awarded a contract by the U.S.
Air Force to replace its aerial refueling tanker fleet. Included in
backlog is approximately $1.5 billion for this contract to provide
four System Design and Development aircraft of which $61 million has
been funded. The other bidder for the contract subsequently protested
the decision by the U.S. Air Force to award the contract to the
company. The U.S. Air Force issued a stop work order to the company
pending the resolution of this matter. The Government Accountability
Office is currently reviewing the protest and is expected to reach its
decision in June 2008.

The estimated value of contract awards during the three months ended
March 31, 2007, is approximately $7.3 billion. Significant new awards
during this period include $1 billion for LPD 25, $875 million for the
Flat Sequencing System program, $235 million for the Intercontinental
Ballistic Missile program, $133 million for the Euro Hawk program, and
$118 million for the Large Aircraft Infrared Counter-measures
Indefinite Delivery and Indefinite Quantity program. In addition, the
company was awarded approximately $688 million for restricted programs
during this period.


Northrop Grumman Corporation Schedule 6
Summary Operating Results
Discontinued Operations Reclassification
($ in millions)
(unaudited)

2006 2007
------- -------------------------------------------
Three Months Ended Total
Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Year
------- -------------------------------------------
Sales and
Service
Revenues
As reported $30,113 $ 7,340 $ 7,926 $ 7,928 $ 8,824 $32,018
Electro-
Optical
Systems(1) (122) (26) (48) (57) (59) (190)
------- -------------------------------------------
Restated
sales and
service
revenues $29,991 $ 7,314 $ 7,878 $ 7,871 $ 8,765 $31,828
------- -------------------------------------------

Segment
Operating
Margin(2)
As reported $ 2,807 $ 687 $ 789 $ 817 $ 810 $ 3,103
Electro-
Optical
Systems(1) 30 5 9 (1) (1) 12
------- -------------------------------------------
Restated
segment
operating
margin $ 2,837 $ 692 $ 798 $ 816 $ 809 $ 3,115
------- -------------------------------------------

Income From
Continuing
Operations,
Net of Tax
As reported $ 1,573 $ 390 $ 466 $ 490 $ 457 $ 1,803
Electro-
Optical
Systems, net
of tax(1) 19 3 6 (2) -- 7
------- -------------------------------------------
Restated
income from
continuing
operations,
net of tax $ 1,592 $ 393 $ 472 $ 488 $ 457 $ 1,810
------- -------------------------------------------
Preferred
Dividends 24 6 6 6 6 24
------- -------------------------------------------
Income
available
to common
shareholders
from
continuing
operations $ 1,616 $ 399 $ 478 $ 494 $ 463 $ 1,834
------- -------------------------------------------

Diluted Earnings
Per Share from
Continuing
Operations
As reported $ 4.46 $ 1.11 $ 1.33 $ 1.41 $ 1.31 $ 5.16
Electro-
Optical
Systems, net
of tax(1) .05 .01 .02 (.01) .02
------- -------------------------------------------
Restated
diluted
earnings per
share from
continuing
operations $ 4.51 $ 1.12 $ 1.35 $ 1.40 $ 1.31 $ 5.18
------- -------------------------------------------

Weighted Average
Diluted Shares
Outstanding,
in millions 358.6 358.3 355.3 352.6 351.1 354.3

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(1) The adjustment reflects the reclassification of the operating
results of the Electro-Optical business area formerly reported
in the Electronics segment. The definitive sale agreement was
signed March 2008, and the company reclassified the first
quarter of 2008 and all prior financial information to reflect
the business as discontinued operations.

(2) Non-GAAP measure. Management uses segment operating margin as an
internal measure of financial performance for the individual
business segments.