Segment Information (Unaudited)

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

Effective January 1, 2020, the company reorganized its operating sectors to better align the company’s broad portfolio to serve its customers’ needs. The four new sectors, which also comprise our reportable segments, are Aeronautics Systems, Defense Systems, Mission Systems and Space Systems.

As discussed in Note 1, beginning in the second quarter of 2020, the company no longer considers certain unallowable costs as part of management’s evaluation of segment operating performance. As a result, certain unallowable costs, which were previously included in segment operating results, are now reported in Unallocated corporate expense within operating income. This change has been applied retrospectively in the amounts below. See Part II, Item 5 for further information regarding the impact of this change on the company’s current and prior period segment information.

The following table presents sales and operating income by segment:

	Three Months Ended June 30						Six Months Ended June 30
$ in millions	2020			2019			2020			2019
Sales
Aeronautics Systems	$	2,925		$	2,721		$	5,768		$	5,539
Defense Systems	1,886			1,916			3,767			3,684
Mission Systems	2,446			2,404			4,793			4,614
Space Systems	2,048			1,788			3,996			3,589
Intersegment eliminations	(421		)	(373		)	(820		)	(781		)
Total sales	8,884			8,456			17,504			16,645
Operating income
Aeronautics Systems	310			299			573			610
Defense Systems	217			212			415			416
Mission Systems	347			338			700			661
Space Systems	209			193			411			383
Intersegment eliminations	(52		)	(49		)	(101		)	(99		)
Total segment operating income	1,031			993			1,998			1,971
Net FAS (service)/CAS pension adjustment	103			107			208			215
Unallocated corporate expense	(140		)	(154		)	(278		)	(304		)
Total operating income	$	994		$	946		$	1,928		$	1,882

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.

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, advertising 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 through business combinations, as well as certain compensation and other costs.

Disaggregation of Revenue

Sales by Customer Type	Three Months Ended June 30								Six Months Ended June 30
	2020				2019				2020				2019
$ in millions	$		%(3)		$		%(3)		$		%(3)		$		%(3)
Aeronautics Systems
U.S. government(1)	$	2,477	85	%	$	2,238	82	%	$	4,838	84	%	$	4,572	82	%
International(2)	407		14	%	439		16	%	851		15	%	874		16	%
Other customers	12		—	%	20		1	%	24		—	%	45		1	%
Intersegment sales	29		1	%	24		1	%	55		1	%	48		1	%
Aeronautics Systems sales	2,925		100	%	2,721		100	%	5,768		100	%	5,539		100	%
Defense Systems
U.S. government(1)	1,305		69	%	1,281		67	%	2,564		68	%	2,422		66	%
International(2)	316		17	%	365		19	%	656		18	%	728		20	%
Other customers	85		4	%	106		5	%	196		5	%	203		5	%
Intersegment sales	180		10	%	164		9	%	351		9	%	331		9	%
Defense Systems sales	1,886		100	%	1,916		100	%	3,767		100	%	3,684		100	%
Mission Systems
U.S. government(1)	1,776		73	%	1,746		73	%	3,447		72	%	3,359		73	%
International(2)	468		19	%	465		19	%	951		20	%	841		18	%
Other customers	18		1	%	29		1	%	35		1	%	53		1	%
Intersegment sales	184		7	%	164		7	%	360		7	%	361		8	%
Mission Systems sales	2,446		100	%	2,404		100	%	4,793		100	%	4,614		100	%
Space Systems
U.S. government(1)	1,911		93	%	1,679		94	%	3,714		93	%	3,348		93	%
International(2)	70		4	%	32		2	%	138		3	%	75		2	%
Other customers	39		2	%	56		3	%	90		3	%	125		4	%
Intersegment sales	28		1	%	21		1	%	54		1	%	41		1	%
Space Systems sales	2,048		100	%	1,788		100	%	3,996		100	%	3,589		100	%
Total
U.S. government(1)	7,469		84	%	6,944		82	%	14,563		83	%	13,701		82	%
International(2)	1,261		14	%	1,301		16	%	2,596		15	%	2,518		15	%
Other customers	154		2	%	211		2	%	345		2	%	426		3	%
Total Sales	$	8,884	100	%	$	8,456	100	%	$	17,504	100	%	$	16,645	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.

⁽³⁾ Percentages calculated based on total segment sales.

Sales by Contract Type	Three Months Ended June 30								Six Months Ended June 30
	2020				2019				2020				2019
$ in millions	$		%(1)		$		%(1)		$		%(1)		$		%(1)
Aeronautics Systems
Cost-type	$	1,426	49	%	$	1,312	49	%	$	2,769	48	%	$	2,624	48	%
Fixed-price	1,470		51	%	1,385		51	%	2,944		52	%	2,867		52	%
Intersegment sales	29				24				55				48
Aeronautics Systems sales	2,925				2,721				5,768				5,539
Defense Systems
Cost-type	582		34	%	632		36	%	1,210		35	%	1,255		37	%
Fixed-price	1,124		66	%	1,120		64	%	2,206		65	%	2,098		63	%
Intersegment sales	180				164				351				331
Defense Systems sales	1,886				1,916				3,767				3,684
Mission Systems
Cost-type	895		40	%	870		39	%	1,741		39	%	1,705		40	%
Fixed-price	1,367		60	%	1,370		61	%	2,692		61	%	2,548		60	%
Intersegment sales	184				164				360				361
Mission Systems sales	2,446				2,404				4,793				4,614
Space Systems
Cost-type	1,468		73	%	1,298		73	%	2,866		73	%	2,604		73	%
Fixed-price	552		27	%	469		27	%	1,076		27	%	944		27	%
Intersegment sales	28				21				54				41
Space Systems sales	2,048				1,788				3,996				3,589
Total
Cost-type	4,371		49	%	4,112		49	%	8,586		49	%	8,188		49	%
Fixed-price	4,513		51	%	4,344		51	%	8,918		51	%	8,457		51	%
Total Sales	$	8,884			$	8,456			$	17,504			$	16,645

⁽¹⁾  Percentages calculated based on external customer sales.  

Sales by Geographic Region	Three Months Ended June 30								Six Months Ended June 30
	2020				2019				2020				2019
$ in millions	$		%(2)		$		%(2)		$		%(2)		$		%(2)
Aeronautics Systems
United States	$	2,489	86	%	$	2,258	84	%	$	4,862	85	%	$	4,617	84	%
Asia/Pacific	202		7	%	215		8	%	409		7	%	448		8	%
All other(1)	205		7	%	224		8	%	442		8	%	426		8	%
Intersegment sales	29				24				55				48
Aeronautics Systems sales	2,925				2,721				5,768				5,539
Defense Systems
United States	1,390		82	%	1,387		79	%	2,760		81	%	2,625		78	%
Asia/Pacific	107		6	%	125		7	%	189		5	%	213		6	%
All other(1)	209		12	%	240		14	%	467		14	%	515		16	%
Intersegment sales	180				164				351				331
Defense Systems sales	1,886				1,916				3,767				3,684
Mission Systems
United States	1,794		79	%	1,775		79	%	3,482		79	%	3,412		80	%
Asia/Pacific	191		9	%	142		6	%	367		8	%	277		7	%
All other(1)	277		12	%	323		15	%	584		13	%	564		13	%
Intersegment sales	184				164				360				361
Mission Systems sales	2,446				2,404				4,793				4,614
Space Systems
United States	1,950		97	%	1,735		98	%	3,804		97	%	3,473		98	%
Asia/Pacific	5		—	%	2		—	%	10		—	%	14		—	%
All other(1)	65		3	%	30		2	%	128		3	%	61		2	%
Intersegment sales	28				21				54				41
Space Systems sales	2,048				1,788				3,996				3,589
Total
United States	7,623		86	%	7,155		84	%	14,908		85	%	14,127		85	%
Asia/Pacific	505		6	%	484		6	%	975		6	%	952		6	%
All other(1)	756		8	%	817		10	%	1,621		9	%	1,566		9	%
Total Sales	$	8,884			$	8,456			$	17,504			$	16,645

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

⁽²⁾ 

Percentages calculated based on external customer sales.