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Information on Business Segments | 12 Months Ended
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Dec. 31, 2017
Segment Reporting [Abstract] |
Information on Business Segments | Information on Business Segments We operate in four business segments: Aeronautics, MFC, RMS and Space. We organize our business segments based on the nature of the products and services offered. Following is a brief description of the activities of our business segments:
• | Aeronautics – Engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies.
• | Missiles and Fire Control – Provides air and missile defense systems; tactical missiles and air-to-ground precision strike weapon systems; logistics; fire control systems; mission operations support, readiness, engineering support and integration services; manned and unmanned ground vehicles; and energy management solutions.
• | Rotary and Mission Systems – Provides design, manufacture, service and support for a variety of military and civil helicopters; ship and submarine mission and combat systems; mission systems and sensors for rotary and fixed-wing aircraft; sea and land-based missile defense systems; radar systems; the Littoral Combat Ship; simulation and training services; and unmanned systems and technologies. In addition, RMS supports the needs of customers in cybersecurity and delivers communications and command and control capability through complex mission solutions for defense applications. The 2015 results of the acquired Sikorsky business have been included in our consolidated results of operations from the November 6, 2015 acquisition date through December 31, 2015. Accordingly, the consolidated results of operations for the year ended December 31, 2015 do not reflect a full year of Sikorsky operations.
• | Space – Engaged in the research and development, design, engineering and production of satellites, strategic and defensive missile systems and space transportation systems. Space provides network-enabled situational awareness and integrates complex space and ground-based global systems to help our customers gather, analyze and securely distribute critical intelligence data. Space is also responsible for various classified systems and services in support of vital national security systems. Prior to August 24, 2016, the date we obtained control of AWE we accounted for the venture using the equity method of accounting with 33% of AWE’s earnings or losses recognized by Space. Subsequent to August 24, 2016, we obtained control of AWE and 100% of AWE’s sales and 51% of AWE’s earnings have been included in our consolidated results of operations. Accordingly, the consolidated results of operations for the year ended December 31, 2016 do not reflect a full year of AWE operations. Operating profit for our Space business segment also includes our share of earnings for our investment in ULA, which provides expendable launch services to the U.S. Government.
The financial information in the following tables includes the results of businesses we have acquired from their respective dates of acquisition and excludes businesses included in discontinued operations (see “Note 3 – Acquisitions and Divestitures”) for all years presented. Net sales of our business segments exclude intersegment sales as these activities are eliminated in consolidation. Operating profit of our business segments includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments. ULA, results of which are included in our Space business segment, is our primary equity method investee. Operating profit of our business segments excludes the FAS/CAS pension adjustment described below; expense for stock-based compensation; the effects of items not considered part of management’s evaluation of segment operating performance, such as charges related to significant severance actions (see “Note 15 – Restructuring Charges”) and goodwill impairments; gains or losses from significant divestitures; the effects of certain legal settlements; corporate costs not allocated to our business segments; and other miscellaneous corporate activities. These items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “Note 1 – Significant Accounting Policies” (under the caption “Use of Estimates”) for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments. Our business segments’ results of operations include pension expense only as calculated under U.S. Government Cost Accounting Standards (CAS), which we refer to as CAS pension cost. We recover CAS pension cost through the pricing of our products and services on U.S. Government contracts and, therefore, the CAS pension cost is recognized in each of our business segments’ net sales and cost of sales. Since our consolidated financial statements must present pension expense calculated in accordance with the financial accounting standards (FAS) requirements under GAAP, which we refer to as FAS pension expense, the FAS/CAS pension adjustment increases or decreases the CAS pension cost recorded in our business segments’ results of operations to equal the FAS pension expense. Selected Financial Data by Business Segment Summary operating results for each of our business segments were as follows (in millions):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Net sales |  |  |  |  |  |
Aeronautics |  | $ | 20,148 |  |  | $ | 17,769 |  |  | $ | 15,570 |
Missiles and Fire Control |  | 7,212 |  |  | 6,608 |  |  | 6,770 |
Rotary and Mission Systems |  | 14,215 |  |  | 13,462 |  |  | 9,091 |
Space |  | 9,473 |  |  | 9,409 |  |  | 9,105 |
Total net sales |  | $ | 51,048 |  |  | $ | 47,248 |  |  | $ | 40,536 |
Operating profit |  |  |  |  |  |
Aeronautics |  | $ | 2,164 |  |  | $ | 1,887 |  |  | $ | 1,681 |
Missiles and Fire Control |  | 1,053 |  |  | 1,018 |  |  | 1,282 |
Rotary and Mission Systems |  | 905 |  |  | 906 |  |  | 844 |
Space (a) |  | 993 |  |  | 1,289 |  |  | 1,171 |
Total business segment operating profit |  | 5,115 |  |  | 5,100 |  |  | 4,978 |
Unallocated items |  |  |  |  |  |
FAS/CAS pension adjustment |  |  |  |  |  |
FAS pension expense (b)(c) |  | (1,372 | ) |  | (1,019 | ) |  | (1,127 | )
Less: CAS pension cost (b)(c) |  | 2,248 |  |  | 1,921 |  |  | 1,527 |
FAS/CAS pension adjustment |  | 876 |  |  | 902 |  |  | 400 |
Severance charges (b)(d) |  | — |  |  | (80 | ) |  | (82 | )
Stock-based compensation |  | (158 | ) |  | (149 | ) |  | (133 | )
Other, net (e)(f) |  | 88 |  |  | (224 | ) |  | (451 | )
Total unallocated, net |  | 806 |  |  | 449 |  |  | (266 | )
Total consolidated operating profit |  | $ | 5,921 |  |  | $ | 5,549 |  |  | $ | 4,712 |
(a) | On August 24, 2016, our ownership interest in the AWE joint venture increased from 33% to 51% and we were required to change our accounting for this investment from the equity method to consolidation. As a result of the increased ownership interest, we recognized a non-cash gain of $127 million at our Space business segment, which increased net earnings from continuing operations by $104 million ($0.34 per share) in 2016. See “Note 3 – Acquisitions and Divestitures” for more information.
(b) | FAS pension expense, CAS pension costs and severance charges reflect the reclassification for discontinued operations presentation of benefits related to former IS&GS salaried employees (see “Note 11 – Postretirement Benefit Plans”).
(c) | The higher FAS expense in 2017 is primarily due to a lower discount rate and lower expected long-term rate of return on plan assets in 2017 versus 2016. The higher CAS pension cost primarily reflects the impact of phasing in CAS Harmonization (see “Note 11 – Postretirement Benefit Plans”).
(d) | See “Note 15 – Restructuring Charges” for information on charges related to certain severance actions at our business segments. Severance charges for initiatives that are not significant are included in business segment operating profit.
(e) | Other, net in 2017 includes a previously deferred non-cash gain of $198 million related to properties sold in 2015 as a result of completing our remaining obligations (see “Note 8 – Property, Plant and Equipment, net”) and a $64 million charge, which represents our portion of a non-cash asset impairment charge recorded by our equity method investee, AMMROC (see “Note 1 – Significant Accounting Policies”).
(f) | Other, net in 2015 includes a non-cash asset impairment charge of approximately $90 million related to our decision in 2015 to divest our LMCFT business (see “Note 3 – Acquisitions and Divestitures”). This charge was partially offset by a net deferred tax benefit of about $80 million, which is recorded in income tax expense. The net impact reduced net earnings by about $10 million. Additionally other, net in 2015 includes approximately $38 million of non-recoverable transaction costs associated with the acquisition of Sikorsky.
Selected Financial Data by Business Segment (continued)
|  | 2017 |  |  | 2016 |  |  | 2015 |
Intersegment sales |  |  |  |  |  |
Aeronautics |  | $ | 122 |  |  | $ | 137 |  |  | $ | 102 |
Missiles and Fire Control |  | 366 |  |  | 305 |  |  | 315 |
Rotary and Mission Systems |  | 2,009 |  |  | 1,816 |  |  | 1,533 |
Space |  | 111 |  |  | 110 |  |  | 146 |
Total intersegment sales |  | $ | 2,608 |  |  | $ | 2,368 |  |  | $ | 2,096 |
Depreciation and amortization |  |  |  |  |  |
Aeronautics |  | $ | 311 |  |  | $ | 299 |  |  | $ | 317 |
Missiles and Fire Control |  | 99 |  |  | 105 |  |  | 99 |
Rotary and Mission Systems |  | 468 |  |  | 476 |  |  | 211 |
Space |  | 245 |  |  | 212 |  |  | 220 |
Total business segment depreciation and amortization |  | 1,123 |  |  | 1,092 |  |  | 847 |
Corporate activities |  | 72 |  |  | 75 |  |  | 98 |
Total depreciation and amortization (a) |  | $ | 1,195 |  |  | $ | 1,167 |  |  | $ | 945 |
Capital expenditures |  |  |  |  |  |
Aeronautics |  | $ | 371 |  |  | $ | 358 |  |  | $ | 387 |
Missiles and Fire Control |  | 156 |  |  | 167 |  |  | 120 |
Rotary and Mission Systems |  | 308 |  |  | 271 |  |  | 169 |
Space |  | 179 |  |  | 183 |  |  | 172 |
Total business segment capital expenditures |  | 1,014 |  |  | 979 |  |  | 848 |
Corporate activities |  | 163 |  |  | 75 |  |  | 60 |
Total capital expenditures (b) |  | $ | 1,177 |  |  | $ | 1,054 |  |  | $ | 908 |
(a) | Total depreciation and amortization in the table above excludes $48 million and $81 million for the years ended December 31, 2016 and 2015 related to the former IS&GS business segment. These amounts are included in depreciation and amortization in our consolidated statements of cash flows as we did not reclassify our cash flows to exclude the IS&GS business segment. See “Note 3 – Acquisitions and Divestitures” for more information.
(b) | Total capital expenditures in the table above excludes $9 million and $31 million for the years ended December 31, 2016 and 2015 related to the former IS&GS business segment. These amounts are included in capital expenditures in our consolidated statements of cash flows as we did not reclassify our cash flows to exclude the IS&GS business segment. See “Note 3 – Acquisitions and Divestitures” for more information.
Selected Financial Data by Business Segment (continued) Net Sales by Customer Category Net sales by customer category were as follows (in millions):
|  | 2017 |  |  | 2016 |  |  | 2015 |
U.S. Government |  |  |  |  |  |
Aeronautics |  | $ | 12,753 |  |  | $ | 11,714 |  |  | $ | 11,195 |
Missiles and Fire Control |  | 4,640 |  |  | 4,026 |  |  | 4,150 |
Rotary and Mission Systems |  | 9,834 |  |  | 9,187 |  |  | 6,961 |
Space |  | 8,097 |  |  | 8,543 |  |  | 8,845 |
Total U.S. Government net sales |  | $ | 35,324 |  |  | $ | 33,470 |  |  | $ | 31,151 |
International (a) |  |  |  |  |  |
Aeronautics |  | $ | 7,307 |  |  | $ | 5,973 |  |  | $ | 4,328 |
Missiles and Fire Control |  | 2,423 |  |  | 2,444 |  |  | 2,449 |
Rotary and Mission Systems |  | 4,006 |  |  | 3,798 |  |  | 2,016 |
Space |  | 1,305 |  |  | 488 |  |  | 218 |
Total international net sales |  | $ | 15,041 |  |  | $ | 12,703 |  |  | $ | 9,011 |
U.S. Commercial and Other |  |  |  |  |  |
Aeronautics |  | $ | 88 |  |  | $ | 82 |  |  | $ | 47 |
Missiles and Fire Control |  | 149 |  |  | 138 |  |  | 171 |
Rotary and Mission Systems |  | 375 |  |  | 477 |  |  | 114 |
Space |  | 71 |  |  | 378 |  |  | 42 |
Total U.S. commercial and other net sales |  | $ | 683 |  |  | $ | 1,075 |  |  | $ | 374 |
Total net sales |  | $ | 51,048 |  |  | $ | 47,248 |  |  | $ | 40,536 |
(a) | International sales include foreign military sales contracted through the U.S. Government, direct commercial sales with international governments and commercial and other sales to international customers.
Our Aeronautics business segment includes our largest program, the F-35 Lightning II Joint Strike Fighter, an international multi-role, multi-variant, stealth fighter aircraft. Net sales for the F-35 program represented approximately 25% of our total consolidated net sales during 2017, and 23% during both 2016 and 2015. Total assets and customer advances and amounts in excess of costs incurred for each of our business segments were as follows (in millions):
|  | 2017 |  |  | 2016 |
Assets (a) |  |  |  |
Aeronautics |  | $ | 7,903 |  |  | $ | 7,896 |
Missiles and Fire Control |  | 4,395 |  |  | 4,000 |
Rotary and Mission Systems |  | 18,235 |  |  | 18,367 |
Space |  | 5,236 |  |  | 5,250 |
Total business segment assets |  | 35,769 |  |  | 35,513 |
Corporate assets (b) |  | 10,752 |  |  | 12,293 |
Total assets |  | $ | 46,521 |  |  | $ | 47,806 |
Customer advances and amounts in excess of costs incurred |  |  |  |
Aeronautics |  | $ | 2,752 |  |  | $ | 2,133 |
Missiles and Fire Control |  | 1,268 |  |  | 1,517 |
Rotary and Mission Systems |  | 2,288 |  |  | 2,590 |
Space |  | 444 |  |  | 536 |
Total customer advances and amounts in excess of costs incurred |  | $ | 6,752 |  |  | $ | 6,776 |
(a) | We have no long-lived assets with material carrying values located in foreign countries.
(b) | Corporate assets primarily include cash and cash equivalents, deferred income taxes, environmental receivables and investments held in a separate trust.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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