Segment Information

12 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

The company is aligned in four reportable segments: Aerospace Systems, Electronic Systems, Information Systems, and Technical Services.

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.

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. The segment sales and segment operating income for the years ended December 31, 2011 and 2010, have been recast to reflect the missile business transfer. Sales of $494 million and $474 million for the years ended December 31, 2011 and 2010, respectively, were transferred from Aerospace Systems to Technical Services. Segment operating income of $44 million and $43 million for the years ended December 31, 2011 and 2010, respectively, were transferred from Aerospace Systems to Technical Services.

U.S. Government Sales

Revenue from the U.S. Government (which includes Foreign Military Sales) includes revenue from contracts for which Northrop Grumman is the prime contractor, as well as those for which the company is a subcontractor and the ultimate customer is the U.S. Government. All of the company’s segments derive substantial revenue from the U.S. Government. Sales to the U.S. Government amounted to $22.7 billion, $23.9 billion, and $25.5 billion, or 90.0 percent, 90.5 percent, and 90.6 percent, of total revenue for the years ended December 31, 2012, 2011, and 2010, respectively.

Foreign Sales

Direct foreign sales amounted to $1.6 billion, or approximately 6 percent, of total revenue for each of the years ended December 31, 2012, 2011, and 2010.

Discontinued Operations

The company’s discontinued operations are excluded from all of the amounts in the following tables.

Assets

Substantially all of the company’s operating assets are located or maintained in the U.S.

Results of Operations By Segment

The following table presents sales and operating income by segment:

	Year Ended December 31
$ in millions	2012			2011			2010
Sales
Aerospace Systems		$ 9,977			$ 9,964			$10,436
Electronic Systems	6,950			7,372			7,613
Information Systems	7,356			7,921			8,395
Technical Services	3,019			3,193			3,705
Intersegment eliminations	(2,084		)	(2,038		)	(2,006		)
Total sales	25,218			26,412			28,143
Operating income
Aerospace Systems	1,218			1,217			1,213
Electronic Systems	1,187			1,070			1,023
Information Systems	761			766			756
Technical Services	268			260			249
Intersegment eliminations	(258		)	(258		)	(231		)
Total segment operating income	3,176			3,055			3,010
Reconciliation to operating income:
Unallocated corporate expenses	(168		)	(166		)	(182		)
Net FAS/CAS pension adjustment	132			400			10
Other	(10		)	(13		)	(11		)
Total operating income		$ 3,130			$ 3,276			$ 2,827

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 consist of a portion of management and administration, legal, environmental, compensation costs, retiree benefits, as well as certain unallowable costs such as for lobbying activities, among others.

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. For the years ended December 31, 2012, 2011, and 2010, the net FAS/CAS pension adjustment resulted in income of $132 million, $400 million, and $10 million, respectively. The decrease in the 2012 net FAS/CAS pension adjustment is primarily due to increased GAAP pension expense resulting from amortization of prior year actuarial losses and reduced CAS pension expense resulting from a plan amendment in 2011.

Intersegment Sales and Margin

Sales between segments are recorded at values that include a hypothetical margin for the performing segment based on that segment’s estimated margin rate for external sales. Such hypothetical margins are eliminated in consolidation. Intersegment sales and operating income before eliminations were as follows:

	Year Ended December 31
$ in millions	2012					2011					2010
	Sales		Operating Income			Sales		Operating Income			Sales		Operating Income
Intersegment sales and operating income
Aerospace Systems		$ 171			$ 20		$ 134			$ 18		$ 133		$	13
Electronic Systems	607			110		649			131		684			118
Information Systems	682			78		687			68		623			61
Technical Services	624			50		568			41		566			39
Total		$2,084			$258		$2,038			$258		$2,006			$231

Other Financial Information

	December 31
$ in millions	2012		2011
Assets
Aerospace Systems		$ 6,657		$ 6,525
Electronic Systems	4,551		4,705
Information Systems	6,940		7,144
Technical Services	1,313		1,352
Segment assets	19,461		19,726
Corporate	7,082		5,685
Total assets		$26,543		$25,411

Corporate assets principally consist of cash and cash equivalents and deferred tax assets.

	Capital Expenditures						Depreciation and Amortization
$ in millions	2012		2011		2010		2012		2011		2010
Aerospace Systems		$154		$184		$195		$196		$200		$237
Electronic Systems	84		121		176		139		144		150
Information Systems	40		45		37		100		121		133
Technical Services	3		1		5		4		4		5
Corporate	50		141		172		71		75		30
Total from continuing operations		$331		$492		$585		$510		$544		$555

The depreciation and amortization expense above includes amortization of purchased intangible assets, as well as amortization of deferred and other outsourcing costs.