INFORMATION ON BUSINESS SEGMENTS

3 Months Ended

Mar. 27, 2016

INFORMATION ON BUSINESS SEGMENTS

NOTE 5 – INFORMATION ON BUSINESS SEGMENTS

We operate in five business segments: Aeronautics, Information Systems & Global Solutions (IS&GS), Missiles and Fire Control (MFC), MST and Space Systems. We organize our business segments based on the nature of the products and services offered. The results of our MST business segment include the operations of Sikorsky since its November 6, 2015 acquisition date. Accordingly, the results of Sikorsky operations are included in the results of our MST business segment for the quarter ended March 27, 2016 but not for the quarter ended March 29, 2015.

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 goodwill impairments and significant severance actions; 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 10 (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 27, 2016		March 29, 2015
Net sales
Aeronautics	$	3,799	$	3,134
Information Systems & Global Solutions		1,334		1,390
Missiles and Fire Control		1,434		1,383
Mission Systems and Training		3,004		1,979
Space Systems		2,131		2,225
Total net sales	$	11,702	$	10,111
Operating profit
Aeronautics	$	420	$	371
Information Systems & Global Solutions		109		145
Missiles and Fire Control		221		286
Mission Systems and Training		229		180
Space Systems		244		324
Total business segment operating profit		1,223		1,306
Unallocated items
FAS/CAS pension adjustment
FAS pension expense		(254)		(284)
Less: CAS pension cost		500		403
FAS/CAS pension adjustment		246		119
Stock-based compensation		(44)		(40)
Severance charges		(99)		—
Other, net		(29)		(29)
Total unallocated items		74		50
Total consolidated operating profit	$	1,297	$	1,356
Intersegment sales
Aeronautics	$	35	$	20
Information Systems & Global Solutions		24		2
Missiles and Fire Control		75		74
Mission Systems and Training		445		319
Space Systems		33		33
Total intersegment sales	$	612	$	448

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

	March 27, 2016		December 31, 2015
Assets
Aeronautics	$	7,070	$	6,618
Information Systems & Global Solutions		4,112		4,206
Missiles and Fire Control		4,038		4,027
Mission Systems and Training		19,187		19,187
Space Systems		5,031		4,861
Total business segment assets		39,438		38,899
Corporate assets (a)		10,720		10,229
Total assets	$	50,158	$	49,128

^(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 20% and 19% of our total consolidated net sales in the quarters ended March 27, 2016 and March 29, 2015, respectively.