Segment Information (Unaudited)

9 Months Ended

Sep. 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, offset by a business acquisition in September 2012, the operations of which will be included in the Information Systems segment.

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 nine months ended September 30, 2011, have been recast to reflect the missile business transfer. Sales of $117 million and $379 million for the three and nine months ended September 30, 2011, respectively, were transferred from Aerospace Systems to Technical Services. Segment operating income of $9 million and $34 million for the three and nine months ended September 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 $146 million and $505 million for the three and nine months ended September 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 September 30						Nine Months Ended September 30
$ in millions	2012			2011			2012			2011
Sales
Aerospace Systems		$2,586			$2,455			$ 7,373			$ 7,521
Electronic Systems	1,707			1,905			5,175			5,504
Information Systems	1,776			1,955			5,476			6,011
Technical Services	748			796			2,281			2,403
Intersegment eliminations	(547		)	(499		)	(1,563		)	(1,533		)
Total sales	6,270			6,612			18,742			19,906
Operating income
Aerospace Systems	288			295			859			902
Electronic Systems	279			293			859			814
Information Systems	170			187			577			570
Technical Services	62			63			206			193
Intersegment eliminations	(69		)	(61		)	(200		)	(197		)
Total segment operating income	730			777			2,301			2,282
Reconciliation to operating income:
Unallocated corporate expenses	(27		)	(48		)	(89		)	(96		)
Net FAS/CAS pension adjustment	34			100			101			302
Royalty income adjustment	(1		)	(4		)	(7		)	(11		)
Total operating income		$ 736			$ 825			$ 2,306			$ 2,477

Unallocated Corporate Expenses

Unallocated corporate expenses 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 generally consist of a portion of management and administration, legal, environmental, certain compensation costs, certain retiree benefits, and other expenses.

Net FAS/CAS Pension Adjustment

The net FAS (GAAP Financial Accounting Standards)/CAS pension adjustment is 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 FAS/CAS pension adjustment for the three and nine months ended September 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

The royalty income adjustment reflects the reclassification of royalty income to other income for financial reporting purposes.