Segment Information (Unaudited)

6 Months Ended

Jun. 30, 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 United States (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. Portfolio shaping and internal realignments are designed to more fully leverage existing capabilities and enhance development and delivery of products and services. The change in goodwill represents goodwill allocated to a business divested from the Information Systems segment during the three months ended June 30, 2012.

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 and six months ended June 30, 2011, have been recast to reflect the missile business transfer. Sales of $119 million and $262 million for the three and six months ended June 30, 2011, respectively, were transferred from Aerospace Systems to Technical Services. Segment operating income of $11 million and $25 million for the three and six months ended June 30, 2011, respectively, were transferred from Aerospace Systems to Technical Services.

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 have been retrospectively increased by $198 million and $359 million for the three and six months ended June 30, 2011, respectively, and service costs have been retrospectively decreased by the same amounts, 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 June 30						Six Months Ended June 30
$ in millions	2012			2011			2012			2011
Sales
Aerospace Systems		$2,404			$2,473			$ 4,787			$ 5,066
Electronic Systems	1,744			1,791			3,468			3,599
Information Systems	1,856			2,031			3,700			4,056
Technical Services	783			776			1,533			1,607
Intersegment eliminations	(513		)	(511		)	(1,016		)	(1,034		)
Total sales	6,274			6,560			12,472			13,294
Operating income
Aerospace Systems	292			320			571			607
Electronic Systems	276			284			580			521
Information Systems	202			189			407			383
Technical Services	74			62			144			130
Intersegment eliminations	(62		)	(71		)	(131		)	(136		)
Total segment operating income	782			784			1,571			1,505
Reconciliation to operating income:
Unallocated corporate expenses	(39		)	(38		)	(62		)	(48		)
Net pension adjustment	35			99			67			202
Royalty income adjustment	(4		)	(4		)	(6		)	(7		)
Total operating income		$ 774			$ 841			$ 1,570			$ 1,652

Unallocated Corporate Expenses

Unallocated corporate expenses generally include the portion of corporate expenses not considered allowable or allocable under applicable 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. The decreases in net pension adjustment for the three and six months ended June 30, 2012, as compared to the same periods in 2011, are 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.