Segment Information

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

The company is aligned into four 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 our segments. Portfolio shaping and internal realignments are designed to more fully leverage existing capabilities and enhance development and delivery of products and services.

U.S. Government Sales

Sales to the U.S. Government include sales 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. Each of the company’s segments derives substantial revenue from the U.S. Government. Sales to the U.S. Government amounted to $20.1 billion, $21.3 billion and $22.3 billion, or 84 percent, 86 percent and 88 percent, of total sales for the years ended December 31, 2014, 2013 and 2012, respectively.

International Sales

International sales (which include foreign military sales) amounted to $3.0 billion, $2.5 billion and $2.1 billion, or 13 percent, 10 percent and 8 percent, of total sales for the years ended December 31, 2014, 2013 and 2012, respectively.

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	2014			2013			2012
Sales
Aerospace Systems	$	9,997		$	10,014		$	9,977
Electronic Systems	6,951			7,149			6,950
Information Systems	6,222			6,596			7,356
Technical Services	2,799			2,843			3,019
Intersegment eliminations	(1,990		)	(1,941		)	(2,084		)
Total sales	23,979			24,661			25,218
Operating income
Aerospace Systems	1,315			1,215			1,218
Electronic Systems	1,148			1,226			1,187
Information Systems	611			633			761
Technical Services	261			262			268
Intersegment eliminations	(236		)	(256		)	(258		)
Total segment operating income	3,099			3,080			3,176
Reconciliation to operating income:
Net FAS/CAS pension adjustment	269			168			132
Unallocated corporate expenses	(169		)	(119		)	(168		)
Other	(3		)	(6		)	(10		)
Total operating income	$	3,196		$	3,123		$	3,130

Net FAS/CAS Pension Adjustment

The net FAS/CAS pension adjustment reflects the difference between pension expense charged to contracts and included as cost in segment operating income and pension expense determined in accordance with GAAP.

2014 - The increase in net FAS/CAS pension adjustment is principally due to a reduction in FAS expense, largely due to the increase in our FAS discount rate assumptions as of December 31, 2013. The reduction in FAS expense was partially offset by lower CAS expense due to the passage of the Highway and Transportation Funding Act of 2014 (HATFA), which included provisions that reduce the amount of CAS expense charged to our contracts in 2014.

2013 - The increase in net FAS/CAS pension adjustmentreflects an update for actual demographic experience as of January 1, 2013, which resulted in an increase to the company's 2013 CAS expense.

Unallocated Corporate Expenses

Unallocated corporate expenses include the portion of corporate expenses not considered allowable or allocable under applicable CAS regulations and the FAR, and are therefore not allocated to the segments. Such costs consist of a portion of management and administration, legal, environmental, compensation costs, retiree benefits, and certain unallowable costs such as lobbying activities, among others.

2014 - The increase in unallocated corporate expense for 2014, as compared to 2013, is primarily due to increases in year-over-year provisions for environmental matters.

2013 - The decrease in unallocated corporate expenses for 2013, as compared to 2012, is primarily due to lower year-over-year provisions for disallowed costs and litigation matters and the favorable settlement of overhead claims, partially offset by changes in deferred tax assets due to lower blended state income tax rates.

Intersegment Sales and Operating Income

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

	Year Ended December 31
$ in millions	2014					2013					2012
	Sales		Operating Income			Sales		Operating Income			Sales		Operating Income
Intersegment sales and operating income
Aerospace Systems	$	176		$	22	$	149		$	18	$	171		$	20
Electronic Systems	637			109		629			125		607			110
Information Systems	537			57		504			63		682			78
Technical Services	640			48		659			50		624			50
Total	$	1,990		$	236	$	1,941		$	256	$	2,084		$	258

Other Financial Information

The following tables represent assets, capital expenditures and depreciation and amortization by segment:

	December 31
$ in millions	2014		2013
Assets
Aerospace Systems	$	6,844	$	6,490
Electronic Systems	4,366		4,400
Information Systems	6,725		6,887
Technical Services	1,539		1,367
Segment assets	19,474		19,144
Corporate assets (1)	7,098		7,237
Total assets	$	26,572	$	26,381

(1) Corporate assets principally consist of cash and cash equivalents and deferred tax assets.

	Capital Expenditures						Depreciation and Amortization (1)
$ in millions	2014		2013		2012		2014		2013		2012
Aerospace Systems	$	387	$	198	$	154	$	206	$	210	$	196
Electronic Systems	82		76		84		119		134		139
Information Systems	40		27		40		70		81		100
Technical Services	1		3		3		7		4		4
Corporate	51		60		50		60		66		71
Total	$	561	$	364	$	331	$	462	$	495	$	510

(1) Depreciation and amortization expense includes amortization of purchased intangible assets, as well as amortization of deferred and other outsourcing costs.