INFORMATION ON BUSINESS SEGMENTS

3 Months Ended

Mar. 29, 2015

INFORMATION ON BUSINESS SEGMENTS

NOTE 3 – INFORMATION ON BUSINESS SEGMENTS

We operate in five business segments: Aeronautics, Information Systems & Global Solutions (IS&GS), Missiles and Fire Control, Mission Systems and Training (MST) 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. Operating profit of our business segments includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments. United Launch Alliance (ULA), which is part of our Space Systems business segment, is our primary equity method investee. Operating profit of our business segments excludes the 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 “Restructuring Charges”) and goodwill impairments; 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 items” between operating profit from our business segments and our consolidated operating profit. See Note 8 (under the caption “Changes in Estimates”) for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.

Our business segments’ results of operations include pension expense only as calculated under U.S. Government Cost Accounting Standards (CAS), which we refer to as CAS pension cost. We recover CAS pension cost through the pricing of our products and services on U.S. Government contracts and, therefore, the CAS pension cost is recognized in each of our business segments’ net sales and cost of sales. Since our consolidated financial statements must present pension expense calculated in accordance with the financial accounting standards (FAS) requirements under GAAP, which we refer to as FAS pension expense, the FAS/CAS pension adjustment increases or decreases the CAS pension cost recorded in our business segments’ results of operations to equal the FAS pension expense.

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

	Quarters Ended
	March 29, 2015		March 30, 2014
Net sales
Aeronautics	$	3,134	$	3,386
Information Systems & Global Solutions		1,869		1,910
Missiles and Fire Control		1,503		1,867
Mission Systems and Training		1,651		1,628
Space Systems		1,954		1,859
Total net sales	$	10,111	$	10,650
Operating profit
Aeronautics	$	371	$	393
Information Systems & Global Solutions		136		174
Missiles and Fire Control		292		358
Mission Systems and Training		219		250
Space Systems		288		254
Total business segment operating profit		1,306		1,429
Unallocated items
FAS/CAS pension adjustment
FAS pension expense		(284)		(313)
Less: CAS pension cost		403		399
FAS/CAS pension adjustment		119		86
Stock-based compensation		(40)		(48)
Other, net		(29)		(35)
Total unallocated items		50		3
Total consolidated operating profit	$	1,356	$	1,432
Intersegment sales
Aeronautics	$	19	$	27
Information Systems & Global Solutions		185		176
Missiles and Fire Control		90		87
Mission Systems and Training		292		315
Space Systems		29		27
Total intersegment sales	$	615	$	632

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

	March 29, 2015		December 31, 2014
Assets
Aeronautics	$	6,655	$	6,021
Information Systems & Global Solutions		6,146		6,228
Missiles and Fire Control		4,030		4,050
Mission Systems and Training		6,291		6,277
Space Systems		4,043		3,914
Total business segment assets		27,165		26,490
Corporate assets (a)		12,587		10,583
Total assets	$	39,752	$	37,073

^(a)  Corporate assets primarily include cash and cash equivalents, deferred income taxes, environmental receivables and investments held in a separate trust to fund certain of our non-qualified deferred compensation plans.

Our Aeronautics business segment includes our largest program, the F-35 Lightning II Joint Strike Fighter, an international multi-role, multi-variant, stealth fighter aircraft. Net sales for the F-35 program represented approximately 19% and 16% of our total consolidated net sales for the quarters ended March 29, 2015 and March 30, 2014.