Business Segment Information

3 Months Ended

Mar. 31, 2013

Business Segment Information

NOTE 3 – BUSINESS SEGMENT INFORMATION

We operate in five business segments: Aeronautics, Information Systems & Global Solutions (IS&GS), Missiles and Fire Control, Mission Systems and Training, and Space Systems. We organize our business segments based on the nature of the products and services offered.

Net sales of our business segments exclude intersegment sales, as these activities are eliminated in consolidation. Intercompany transactions are generally negotiated under terms and conditions that share many similar characteristics (e.g., contract structures, funding profiles, target cost values, contract progress reports) with our third-party contracts; primarily with the U.S. Government.

Operating profit of our business segments includes our share of earnings or losses from equity method investees because the operating activities of the equity method investees are closely aligned with the operations of those business segments. Operating profit of our business segments excludes the non-cash FAS/CAS pension adjustment described below; expense for stock-based compensation; the effects of items not considered part of management’s evaluation of segment operating performance, such as charges related to significant severance actions (Note 8, under the caption “Severance Activities”); gains or losses from divestitures; the effects of certain legal settlements; corporate costs not allocated to our business segments; and other miscellaneous corporate activities. These items are included in the reconciling item “Unallocated expenses, net” between operating profit from our business segments and our consolidated operating profit.

The results of operations of our business segments include pension expense only as determined and funded in accordance with U.S. Government Cost Accounting Standards (CAS). The non-cash FAS/CAS pension adjustment represents the difference between pension expense calculated in accordance with GAAP and pension costs calculated and funded in accordance with CAS. CAS governs the extent to which pension costs can be allocated to and recovered on U.S. Government contracts. The CAS expense is recovered through the pricing of our products and services on U.S. Government contracts and, therefore, is recognized in each of our business segments’ net sales and cost of sales.

Summary operating results for each of our business segments were as follows (in millions):

	Quarters Ended
	March 31,       2013		March 25,           2012
Net sales
Aeronautics		$     3,186		$        3,706
Information Systems & Global Solutions		2,106		2,090
Missiles and Fire Control		1,988		1,766
Mission Systems and Training		1,830		1,838
Space Systems		1,960		1,893
Total net sales		$   11,070		$        11,293
Operating profit
Aeronautics		$        379		$            385
Information Systems & Global Solutions		189		188
Missiles and Fire Control		344		371
Mission Systems and Training		201		157
Space Systems		230		239
Total business segment operating profit		1,343		1,340
Unallocated expenses, net
Severance charges (a)		(30)		—
Other unallocated expenses, net		(194)		(296)
Total consolidated operating profit		$     1,119		$        1,044
Intersegment sales
Aeronautics		$          50		$             39
Information Systems & Global Solutions		190		208
Missiles and Fire Control		53		82
Mission Systems and Training		227		219
Space Systems		23		26
Total intersegment sales		$        543		$            574

^(a)  Severance charges for 2013 consisted of amounts, net of state tax benefits, associated with the elimination of certain positions at our IS&GS business segment (Note 8, under the caption “Severance Activities”). Severance charges for initiatives that are not significant are included in business segment operating profit.

Total assets for each of our business segments were as follows (in millions):

	March 31,    2013		December 31,          2012
Assets
Aeronautics		$     6,203		$            6,525
Information Systems & Global Solutions		6,013		5,664
Missiles and Fire Control		4,394		4,186
Mission Systems and Training		6,710		6,589
Space Systems		3,414		3,478
Total business segment assets		26,734		26,442
Corporate assets (a)		12,846		12,215
Total assets		$   39,580		$          38,657

^(a)  Corporate assets primarily include cash and cash equivalents, deferred income taxes, environmental receivables, and investments held in a separate trust.

Our Aeronautics business segment includes our largest program, the F-35 Lightning II Joint Strike Fighter, an international multi-role, stealth fighter. Net sales for the F-35 program represented approximately 15% and 14% of our total consolidated net sales for the quarters ended March 31, 2013 and March 25, 2012.