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 September 30						Nine Months Ended September 30
$ in millions	2018			2017			2018			2017
Sales
Aerospace Systems	$	3,282		$	3,125		$	9,899		$	9,112
Innovation Systems	1,415			—			1,815			—
Mission Systems	2,911			2,836			8,668			8,495
Technology Services	1,040			1,183			3,232			3,535
Intersegment eliminations	(563		)	(575		)	(1,675		)	(1,690		)
Total sales	8,085			6,569			21,939			19,452
Operating income
Aerospace Systems	376			344			1,074			987
Innovation Systems	161			—			200			—
Mission Systems	399			359			1,122			1,102
Technology Services	111			124			328			378
Intersegment eliminations	(68		)	(71		)	(204		)	(211		)
Total segment operating income	979			756			2,520			2,256
Net FAS (service)/CAS pension adjustment	176			170			440			478
Unallocated corporate income (expense)	24			(88		)	(102		)	(159		)
Other	(1		)	(1		)	(3		)	(3		)
Total operating income	$	1,178		$	837		$	2,855		$	2,572

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 Income (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 and the additional depreciation expense related to the step-up in fair value of property, plant and equipment acquired in connection with the Merger.

Disaggregation of Revenue



Sales by Customer Type	Three Months Ended September 30								Nine Months Ended September 30
	2018				2017				2018				2017
$ in millions	$		%⁽³⁾		$		%⁽³⁾		$		%⁽³⁾		$		%⁽³⁾
Aerospace Systems
U.S. Government ⁽¹⁾	$	2,926	89	%	$	2,724	87	%	$	8,633	87	%	$	7,893	87	%
International ⁽²⁾	270		8	%	295		10	%	990		10	%	876		10	%
Other Customers	44		2	%	36		1	%	124		1	%	114		1	%
Intersegment sales	42		1	%	70		2	%	152		2	%	229		2	%
Aerospace Systems sales	3,282		100	%	3,125		100	%	9,899		100	%	9,112		100	%
Innovation Systems
U.S. Government ⁽¹⁾	972		69	%	—		—		1,237		68	%	—		—
International ⁽²⁾	272		19	%	—		—		364		20	%	—		—
Other Customers	134		9	%	—		—		164		9	%	—		—
Intersegment sales	37		3	%	—		—		50		3	%	—		—
Innovation Systems sales	1,415		100	%	—		—		1,815		100	%	—		—
Mission Systems
U.S. Government ⁽¹⁾	2,232		77	%	2,193		77	%	6,577		76	%	6,606		78	%
International ⁽²⁾	374		12	%	383		14	%	1,144		13	%	1,090		13	%
Other Customers	25		1	%	27		1	%	89		1	%	81		1	%
Intersegment sales	280		10	%	233		8	%	858		10	%	718		8	%
Mission Systems sales	2,911		100	%	2,836		100	%	8,668		100	%	8,495		100	%
Technology Services
U.S. Government ⁽¹⁾	581		56	%	630		53	%	1,780		55	%	1,938		55	%
International ⁽²⁾	183		17	%	187		16	%	596		18	%	564		16	%
Other Customers	72		7	%	94		8	%	241		8	%	290		8	%
Intersegment sales	204		20	%	272		23	%	615		19	%	743		21	%
Technology Services sales	1,040		100	%	1,183		100	%	3,232		100	%	3,535		100	%
Total
U.S. Government ⁽¹⁾	6,711		83	%	5,547		85	%	18,227		83	%	16,437		85	%
International ⁽²⁾	1,099		14	%	865		13	%	3,094		14	%	2,530		13	%
Other Customers	275		3	%	157		2	%	618		3	%	485		2	%
Total Sales	$	8,085	100	%	$	6,569	100	%	$	21,939	100	%	$	19,452	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 September 30								Nine Months Ended September 30
	2018				2017				2018				2017
$ in millions	$		%⁽¹⁾		$		%⁽¹⁾		$		%⁽¹⁾		$		%⁽¹⁾
Aerospace Systems
Cost-type	$	1,953	60	%	$	1,782	58	%	$	5,789	59	%	$	5,449	61	%
Fixed-price	1,287		40	%	1,273		42	%	3,958		41	%	3,434		39	%
Intersegment sales	42				70				152				229
Aerospace System sales	3,282				3,125				9,899				9,112
Innovation Systems
Cost-type	373		27	%	—		—		472		27	%	—		—
Fixed-price	1,005		73	%	—		—		1,293		73	%	—		—
Intersegment sales	37				—				50				—
Innovation System sales	1,415				—				1,815				—
Mission Systems
Cost-type	1,259		48	%	1,315		51	%	3,745		48	%	3,984		51	%
Fixed-price	1,372		52	%	1,288		49	%	4,065		52	%	3,793		49	%
Intersegment sales	280				233				858				718
Mission System sales	2,911				2,836				8,668				8,495
Technology Services
Cost-type	373		45	%	435		48	%	1,195		46	%	1,284		46	%
Fixed-price	463		55	%	476		52	%	1,422		54	%	1,508		54	%
Intersegment sales	204				272				615				743
Technology Services sales	1,040				1,183				3,232				3,535
Total
Cost-type	3,958		49	%	3,532		54	%	11,201		51	%	10,717		55	%
Fixed-price	4,127		51	%	3,037		46	%	10,738		49	%	8,735		45	%
Total Sales	$	8,085			$	6,569			$	21,939			$	19,452


⁽¹⁾	Percentages calculated based on external customer sales.



Sales by Geographic Region	Three Months Ended September 30								Nine Months Ended September 30
	2018				2017				2018				2017
$ in millions	$		%⁽²⁾		$		%⁽²⁾		$		%⁽²⁾		$		%⁽²⁾
Aerospace Systems
United States	$	2,970	92	%	$	2,760	90	%	$	8,757	90	%	$	8,007	90	%
Asia/Pacific	121		4	%	155		5	%	499		5	%	500		6	%
All other ⁽¹⁾	149		4	%	140		5	%	491		5	%	376		4	%
Intersegment sales	42				70				152				229
Aerospace Systems sales	3,282				3,125				9,899				9,112
Innovation Systems
United States	1,105		80	%	—		—		1,401		79	%	—		—
Asia/Pacific	72		5	%	—		—		96		6	%	—		—
All other ⁽¹⁾	201		15	%	—		—		268		15	%	—		—
Intersegment sales	37				—				50				—
Innovation Systems sales	1,415				—				1,815				—
Mission Systems
United States	2,253		86	%	2,220		85	%	6,666		85	%	6,688		86	%
Asia/Pacific	208		8	%	161		6	%	521		7	%	470		6	%
All other ⁽¹⁾	170		6	%	222		9	%	623		8	%	619		8	%
Intersegment sales	280				233				858				718
Mission Systems sales	2,911				2,836				8,668				8,495
Technology Services
United States	653		78	%	723		79	%	2,021		77	%	2,228		80	%
Asia/Pacific	45		5	%	28		3	%	113		4	%	102		4	%
All other ⁽¹⁾	138		17	%	160		18	%	483		19	%	462		16	%
Intersegment sales	204				272				615				743
Technology Services sales	1,040				1,183				3,232				3,535
Total
United States	6,981		86	%	5,703		87	%	18,845		86	%	16,923		87	%
Asia/Pacific	446		6	%	344		5	%	1,229		6	%	1,072		6	%
All other ⁽¹⁾	658		8	%	522		8	%	1,865		8	%	1,457		7	%
Total Sales	$	8,085	100	%	$	6,569	100	%	$	21,939	100	%	$	19,452	100	%


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


⁽²⁾	Percentages calculated based on external customer sales.