Segment Information (Unaudited)

3 Months Ended

Mar. 31, 2012

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

The company is aligned into four reportable segments: Aerospace Systems, Electronic Systems, Information Systems, and Technical Services. The U.S. government is the primary customer for all four of our segments.

The company, from time to time, acquires or disposes of businesses and realigns contracts, programs or business areas among and within its operating segments that possess similar customers, expertise and capabilities. Internal realignments are designed to more fully leverage existing capabilities and enhance development and delivery of products and services.

Segment Realignment

On January 1, 2012, the company transferred its missile business (principally the Intercontinental Ballistic Missile (ICBM) program), from Aerospace Systems to Technical Services. In connection with this realignment, $51 million of goodwill was transferred from Aerospace Systems to Technical Services. The segment sales and segment operating income for the three months ended March 31, 2011, have been recast to reflect the missile business transfer. Sales of $143 million and segment operating income of $14 million were transferred from Aerospace Systems to Technical Services for the three months ended March 31, 2011.

Intersegment Eliminations

As of December 31, 2011, the company revised its reporting of intersegment operating costs and expenses, whereby intersegment costs are now reported based on the predominant attributes of the customer contract, rather than the attributes of the intersegment work performed. As a result, in the condensed consolidated statements of earnings and comprehensive income, product costs has been retrospectively increased by $161 million for the three months ended March 31, 2011, and service costs has been retrospectively decreased by the same amount, while consolidated sales, operating costs and expenses, segment operating income and operating income remain unchanged.

The following table presents sales and operating income by segment:

	Three Months Ended March 31
$ in millions	2012			2011
Sales
Aerospace Systems		$2,383			$2,593
Electronic Systems	1,724			1,808
Information Systems	1,844			2,025
Technical Services	750			831
Intersegment eliminations	(503		)	(523		)
Total sales		$6,198			$6,734
Operating income
Aerospace Systems		$ 279			$ 287
Electronic Systems	304			237
Information Systems	205			194
Technical Services	70			68
Intersegment eliminations	(69		)	(65		)
Total segment operating income	789			721
Reconciliation to operating income:
Unallocated corporate expenses	(23		)	(10		)
Net pension adjustment	32			103
Royalty income adjustment	(2		)	(3		)
Total operating income		$ 796			$ 811

Unallocated Corporate Expenses

Unallocated corporate expenses generally include the portion of corporate expenses not considered allowable or allocable under applicable United States (U.S.) Government Cost Accounting Standards (CAS) regulations and the Federal Acquisition Regulation, and therefore not allocated to the segments. Such costs consist of management and administration, legal, environmental, certain compensation costs, certain retiree benefits, and other expenses.

Net Pension Adjustment

The net pension adjustment reflects the difference between pension expense determined in accordance with GAAP and pension expense allocated to the operating segments determined in accordance with CAS. For the three months ended March 31, 2012 and 2011, the net pension adjustment resulted in income of $32 million and $103 million, respectively. The decrease in net pension adjustment for the three months ended March 31, 2012, as compared to the same period in 2011, is primarily due to increased GAAP pension expense resulting from amortization of prior year actuarial losses.

Royalty Income Adjustment

Royalty income is included in segment operating income and reclassified to other income for financial reporting purposes.