SEGMENT INFORMATION

The company is aligned in four operating sectors, which also comprise our reportable segments: Aerospace Systems, Innovation Systems, Mission Systems and Technology Services.

The following table presents sales and operating income by segment:



	Three Months Ended June 30						Six Months Ended June 30
$ in millions	2018			2017			2018			2017
Sales
Aerospace Systems	$	3,337		$	3,003		$	6,617		$	5,987
Innovation Systems	400			—			400			—
Mission Systems	2,874			2,859			5,757			5,659
Technology Services	1,048			1,162			2,192			2,352
Intersegment eliminations	(540		)	(551		)	(1,112		)	(1,115		)
Total sales	7,119			6,473			13,854			12,883
Operating income
Aerospace Systems	357			320			698			643
Innovation Systems	39			—			39			—
Mission Systems	352			384			723			743
Technology Services	95			125			217			254
Intersegment eliminations	(64		)	(70		)	(136		)	(140		)
Total segment operating income	779			759			1,541			1,500
Net FAS (service)/CAS pension adjustment	137			154			264			308
Unallocated corporate expense	(92		)	(39		)	(126		)	(71		)
Other	(1		)	(1		)	(2		)	(2		)
Total operating income	$	823		$	873		$	1,677		$	1,735

Net FAS (Service)/CAS Pension Adjustment

For financial statement purposes, we account for our employee pension plans in accordance with FAS. However, the cost of these plans is charged to our contracts in accordance with the Federal Acquisition Regulation (FAR) and the related U.S. Government Cost Accounting Standards (CAS). The net FAS (service)/CAS pension adjustment reflects the difference between CAS pension expense included as cost in segment operating income and the service cost component of FAS expense included in total operating income. The non-service cost components of FAS expense, which include interest cost, expected return on plan assets, and amortization of prior service credit and net actuarial loss, are presented in Net FAS (non-service) pension benefit (expense) in the unaudited condensed consolidated statements of earnings and comprehensive income as a result of our adoption of ASU 2017-07 discussed in Note 1.

Unallocated Corporate Expense

Unallocated corporate expense includes the portion of corporate costs not considered allowable or allocable under applicable CAS or FAR, and therefore not allocated to the segments, such as a portion of management and administration, legal, environmental, compensation, retiree benefits and other corporate unallowable costs. Unallocated corporate expense also includes costs not considered part of management’s evaluation of segment operating performance, such as amortization of purchased intangible assets.

Disaggregation of Revenue



Sales by Customer Type	Three Months Ended June 30								Six Months Ended June 30
	2018				2017				2018				2017
$ in millions	$		%⁽³⁾		$		%⁽³⁾		$		%⁽³⁾		$		%⁽³⁾
Aerospace Systems
U.S. Government ⁽¹⁾	$	2,799	84	%	$	2,616	87	%	$	5,707	86	%	$	5,169	86	%
International ⁽²⁾	449		13	%	272		9	%	720		11	%	581		10	%
Other Customers	38		1	%	40		1	%	80		1	%	78		1	%
Intersegment sales	51		2	%	75		3	%	110		2	%	159		3	%
Aerospace Systems sales	3,337		100	%	3,003		100	%	6,617		100	%	5,987		100	%
Innovation Systems
U.S. Government ⁽¹⁾	265		66	%	—		—		265		66	%	—		—
International ⁽²⁾	92		23	%	—		—		92		23	%	—		—
Other Customers	30		8	%	—		—		30		8	%	—		—
Intersegment sales	13		3	%	—		—		13		3	%	—		—
Innovation Systems sales	400		100	%	—		—		400		100	%	—		—
Mission Systems
U.S. Government ⁽¹⁾	2,155		75	%	2,227		78	%	4,345		76	%	4,413		78	%
International ⁽²⁾	391		14	%	353		12	%	770		13	%	707		12	%
Other Customers	34		1	%	33		1	%	64		1	%	54		1	%
Intersegment sales	294		10	%	246		9	%	578		10	%	485		9	%
Mission Systems sales	2,874		100	%	2,859		100	%	5,757		100	%	5,659		100	%
Technology Services
U.S. Government ⁽¹⁾	597		57	%	672		58	%	1,199		54	%	1,308		56	%
International ⁽²⁾	193		18	%	168		14	%	413		19	%	377		16	%
Other Customers	76		7	%	92		8	%	169		8	%	196		8	%
Intersegment sales	182		18	%	230		20	%	411		19	%	471		20	%
Technology Services sales	1,048		100	%	1,162		100	%	2,192		100	%	2,352		100	%
Total
U.S. Government ⁽¹⁾	5,816		82	%	5,515		85	%	11,516		83	%	10,890		84	%
International ⁽²⁾	1,125		16	%	793		12	%	1,995		15	%	1,665		13	%
Other Customers	178		2	%	165		3	%	343		2	%	328		3	%
Total Sales	$	7,119	100	%	$	6,473	100	%	$	13,854	100	%	$	12,883	100	%


⁽¹⁾	Sales to the U.S. government include sales from contracts for which we are the prime contractor, as well as those for which we are 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.

⁽²⁾ International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is an international customer. These sales include foreign military sales contracted through the U.S. government, direct sales with governments outside the U.S. and commercial sales with customers outside the U.S.

⁽³⁾ Percentages calculated based on total segment sales.



Sales by Contract Type	Three Months Ended June 30								Six Months Ended June 30
	2018				2017				2018				2017
$ in millions	$		%⁽¹⁾		$		%⁽¹⁾		$		%⁽¹⁾		$		%⁽¹⁾
Aerospace Systems
Cost-type	$	1,934	59	%	$	1,840	63	%	$	3,836	59	%	$	3,667	63	%
Fixed-price	1,352		41	%	1,088		37	%	2,671		41	%	2,161		37	%
Intersegment sales	51				75				110				159
Aerospace System sales	3,337				3,003				6,617				5,987
Innovation Systems
Cost-type	99		26	%	—		—		99		26	%	—		—
Fixed-price	288		74	%	—		—		288		74	%	—		—
Intersegment sales	13				—				13				—
Innovation System sales	400				—				400				—
Mission Systems
Cost-type	1,207		47	%	1,353		52	%	2,486		48	%	2,669		52	%
Fixed-price	1,373		53	%	1,260		48	%	2,693		52	%	2,505		48	%
Intersegment sales	294				246				578				485
Mission System sales	2,874				2,859				5,757				5,659
Technology Services
Cost-type	385		44	%	404		43	%	822		46	%	849		45	%
Fixed-price	481		56	%	528		57	%	959		54	%	1,032		55	%
Intersegment sales	182				230				411				471
Technology Services sales	1,048				1,162				2,192				2,352
Total
Cost-type	3,625		51	%	3,597		56	%	7,243		52	%	7,185		56	%
Fixed-price	3,494		49	%	2,876		44	%	6,611		48	%	5,698		44	%
Total Sales	$	7,119			$	6,473			$	13,854			$	12,883


⁽¹⁾	Percentages calculated based on external customer sales.



Sales by Geographic Region	Three Months Ended June 30								Six Months Ended June 30
	2018				2017				2018				2017
$ in millions	$		%⁽²⁾		$		%⁽²⁾		$		%⁽²⁾		$		%⁽²⁾
Aerospace Systems
United States	$	2,837	86	%	$	2,656	91	%	$	5,787	89	%	$	5,247	90	%
Asia/Pacific	249		8	%	157		5	%	378		6	%	345		6	%
All other ⁽¹⁾	200		6	%	115		4	%	342		5	%	236		4	%
Intersegment sales	51				75				110				159
Aerospace Systems sales	3,337				3,003				6,617				5,987
Innovation Systems
United States	296		77	%	—		—		296		77	%	—		—
Asia/Pacific	24		6	%	—		—		24		6	%	—		—
All other ⁽¹⁾	67		17	%	—		—		67		17	%	—		—
Intersegment sales	13				—				13				—
Innovation Systems sales	400				—				400				—
Mission Systems
United States	2,193		85	%	2,261		86	%	4,413		85	%	4,468		86	%
Asia/Pacific	160		6	%	155		6	%	313		6	%	309		6	%
All other ⁽¹⁾	227		9	%	197		8	%	453		9	%	397		8	%
Intersegment sales	294				246				578				485
Mission Systems sales	2,874				2,859				5,757				5,659
Technology Services
United States	673		78	%	764		82	%	1,368		77	%	1,505		80	%
Asia/Pacific	36		4	%	28		3	%	68		4	%	74		4	%
All other ⁽¹⁾	157		18	%	140		15	%	345		19	%	302		16	%
Intersegment sales	182				230				411				471
Technology Services sales	1,048				1,162				2,192				2,352
Total
United States	5,999		84	%	5,681		88	%	11,864		85	%	11,220		87	%
Asia/Pacific	469		7	%	340		5	%	783		6	%	728		6	%
All other ⁽¹⁾	651		9	%	452		7	%	1,207		9	%	935		7	%
Total Sales	$	7,119	100	%	$	6,473	100	%	$	13,854	100	%	$	12,883	100	%


⁽¹⁾	All other principally comprised of Europe and Middle East.


⁽²⁾	Percentages calculated based on external customer sales.