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INFORMATION ON BUSINESS SEGMENTS | 9 Months Ended
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Sep. 29, 2019
Segment Reporting [Abstract] |
INFORMATION ON BUSINESS SEGMENTS | INFORMATION ON BUSINESS SEGMENTS We operate in four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. We organize our business segments based on the nature of products and services offered. Net sales and operating profit of our business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation. Business segment operating profit 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. Business segment operating profit also excludes the FAS/CAS operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from significant divestitures, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “Note 11 – Other” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments. Summary operating results for each of our business segments were as follows (in millions):
|  | Quarters Ended |  | Nine Months Ended
|  | September 29, 2019 |  | September 30, 2018 |  | September 29, 2019 |  | September 30, 2018
Net sales |  |  |  |  |  |  |  |  |
Aeronautics |  | $ | 6,178 |  |  |  | $ | 5,642 |  |  |  | $ | 17,312 |  |  |  | $ | 15,361 |  |
Missiles and Fire Control |  | 2,601 |  |  |  | 2,273 |  |  |  | 7,362 |  |  |  | 6,035 |  |
Rotary and Mission Systems |  | 3,709 |  |  |  | 3,848 |  |  |  | 11,239 |  |  |  | 10,637 |  |
Space |  | 2,683 |  |  |  | 2,555 |  |  |  | 8,021 |  |  |  | 7,318 |  |
Total net sales |  | $ | 15,171 |  |  |  | $ | 14,318 |  |  |  | $ | 43,934 |  |  |  | $ | 39,351 |  |
Operating profit |  |  |  |  |  |  |  |  |
Aeronautics |  | $ | 665 |  |  |  | $ | 600 |  |  |  | $ | 1,842 |  |  |  | $ | 1,646 |  |
Missiles and Fire Control |  | 349 |  |  |  | 332 |  |  |  | 1,093 |  |  |  | 872 |  |
Rotary and Mission Systems |  | 342 |  |  |  | 361 |  |  |  | 1,068 |  |  |  | 1,013 |  |
Space |  | 309 |  |  |  | 293 |  |  |  | 931 |  |  |  | 831 |  |
Total business segment operating profit |  | 1,665 |  |  |  | 1,586 |  |  |  | 4,934 |  |  |  | 4,362 |  |
Unallocated items |  |  |  |  |  |  |  |  |
FAS/CAS operating adjustment (a) |  | 513 |  |  |  | 451 |  |  |  | 1,537 |  |  |  | 1,353 |  |
Stock-based compensation |  | (54 | ) |  |  | (50 | ) |  |  | (158 | ) |  |  | (148 | ) |
Severance and restructuring charges (b) |  | — |  |  |  | — |  |  |  | — |  |  |  | (96 | ) |
Other, net |  | (19 | ) |  |  | (24 | ) |  |  | 83 |  |  |  | 12 |  |
Total unallocated items |  | 440 |  |  |  | 377 |  |  |  | 1,462 |  |  |  | 1,121 |  |
Total consolidated operating profit |  | $ | 2,105 |  |  |  | $ | 1,963 |  |  |  | $ | 6,396 |  |  |  | $ | 5,483 |  |
Intersegment sales |  |  |  |  |  |  |  |  |
Aeronautics |  | $ | 58 |  |  |  | $ | 35 |  |  |  | $ | 147 |  |  |  | $ | 87 |  |
Missiles and Fire Control |  | 107 |  |  |  | 122 |  |  |  | 372 |  |  |  | 330 |  |
Rotary and Mission Systems |  | 530 |  |  |  | 544 |  |  |  | 1,648 |  |  |  | 1,509 |  |
Space |  | 91 |  |  |  | 63 |  |  |  | 244 |  |  |  | 156 |  |
Total intersegment sales |  | $ | 786 |  |  |  | $ | 764 |  |  |  | $ | 2,411 |  |  |  | $ | 2,082 |  |
(a) | The FAS/CAS operating adjustment represents the difference between the service cost component of financial accounting standards (FAS) pension expense and total pension costs recoverable on U.S. Government contracts as determined in accordance with CAS.
(b) | Unallocated items for the nine months ended September 30, 2018 include charges totaling $96 million ($76 million, or $0.26 per share, after tax) related to certain severance and restructuring actions at our RMS business segment. See “Note 11 – Other” (under the caption “Severance and Restructuring Charges”) for more information.
Our total net FAS/CAS pension adjustment for the quarters and nine months ended September 29, 2019 and September 30, 2018, including the service and non-service cost components of FAS pension expense for our qualified defined benefit pension plans, were as follows (in millions):
|  | Quarters Ended |  | Nine Months Ended
|  | September 29, 2019 |  | September 30, 2018 |  | September 29, 2019 |  | September 30, 2018
Total FAS expense and CAS costs |  |  |  |  |  |  |  |  |  |  |  |
FAS pension expense |  | $ | (274 | ) |  |  | $ | (356 | ) |  |  | $ | (820 | ) |  |  | $ | (1,069 | ) |
Less: CAS pension cost |  | 642 |  |  |  | 608 |  |  |  | 1,924 |  |  |  | 1,825 |  |
Net FAS/CAS pension adjustment |  | $ | 368 |  |  |  | $ | 252 |  |  |  | $ | 1,104 |  |  |  | $ | 756 |  |
Service and non-service cost reconciliation |  |  |  |  |  |  |  |  |  |  |  |
FAS pension service cost |  | $ | (129 | ) |  |  | $ | (157 | ) |  |  | $ | (387 | ) |  |  | $ | (472 | ) |
Less: CAS pension cost |  | 642 |  |  |  | 608 |  |  |  | 1,924 |  |  |  | 1,825 |  |
FAS/CAS operating adjustment |  | 513 |  |  |  | 451 |  |  |  | 1,537 |  |  |  | 1,353 |  |
Non-operating FAS pension cost(a) |  | (145 | ) |  |  | (199 | ) |  |  | (433 | ) |  |  | (597 | ) |
Net FAS/CAS pension adjustment |  | $ | 368 |  |  |  | $ | 252 |  |  |  | $ | 1,104 |  |  |  | $ | 756 |  |
(a) | The non-service cost components of net periodic benefit cost relate only to our qualified defined benefit pension plans. In addition to the non-service cost components in the table above, we incurred similar costs for our other postretirement benefit plans of $30 million and $87 million for the quarter and nine months ended September 29, 2019 and $16 million and $49 million for the quarter and nine months ended September 30, 2018.
We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS cost in each of our business segment’s net sales and cost of sales. Our consolidated financial statements must present FAS pension and other postretirement benefit plan expense calculated in accordance with FAS requirements under U.S. GAAP. The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension expense and total CAS pension cost. The non-service FAS pension cost component is included in other non-operating expense, net in our consolidated statements of earnings. The net FAS/CAS pension adjustment increases or decreases CAS pension cost to equal total FAS pension expense (both service and non-service). Net sales by products and services, contract type, customer, and geographic region were as follows (in millions):
|  | Quarter Ended September 29, 2019
|  | Aeronautics |  | MFC |  | RMS |  | Space |  | Total
Net sales |  |  |  |  |  |  |  |  |  |
Products |  | $ | 5,340 |  |  | $ | 2,172 |  |  | $ | 2,982 |  |  | $ | 2,234 |  |  | $ | 12,728 |
Services |  | 838 |  |  | 429 |  |  | 727 |  |  | 449 |  |  | 2,443 |
Total net sales |  | $ | 6,178 |  |  | $ | 2,601 |  |  | $ | 3,709 |  |  | $ | 2,683 |  |  | $ | 15,171 |
Net sales by contract type |  |  |  |  |  |  |  |  |  |
Fixed-price |  | $ | 4,567 |  |  | $ | 1,681 |  |  | $ | 2,536 |  |  | $ | 527 |  |  | $ | 9,311 |
Cost-reimbursable |  | 1,611 |  |  | 920 |  |  | 1,173 |  |  | 2,156 |  |  | 5,860 |
Total net sales |  | $ | 6,178 |  |  | $ | 2,601 |  |  | $ | 3,709 |  |  | $ | 2,683 |  |  | $ | 15,171 |
Net sales by customer |  |  |  |  |  |  |  |  |  |
U.S. Government |  | $ | 3,509 |  |  | $ | 1,995 |  |  | $ | 2,763 |  |  | $ | 2,332 |  |  | $ | 10,599 |
International (a) |  | 2,631 |  |  | 572 |  |  | 804 |  |  | 343 |  |  | 4,350 |
U.S. commercial and other |  | 38 |  |  | 34 |  |  | 142 |  |  | 8 |  |  | 222 |
Total net sales |  | $ | 6,178 |  |  | $ | 2,601 |  |  | $ | 3,709 |  |  | $ | 2,683 |  |  | $ | 15,171 |
Net sales by geographic region |  |  |  |  |  |  |  |  |  |
United States |  | $ | 3,547 |  |  | $ | 2,029 |  |  | $ | 2,905 |  |  | $ | 2,340 |  |  | $ | 10,821 |
Asia Pacific |  | 1,046 |  |  | 107 |  |  | 317 |  |  | 17 |  |  | 1,487 |
Europe |  | 1,106 |  |  | 138 |  |  | 168 |  |  | 326 |  |  | 1,738 |
Middle East |  | 455 |  |  | 318 |  |  | 206 |  |  | — |  |  | 979 |
Other |  | 24 |  |  | 9 |  |  | 113 |  |  | — |  |  | 146 |
Total net sales |  | $ | 6,178 |  |  | $ | 2,601 |  |  | $ | 3,709 |  |  | $ | 2,683 |  |  | $ | 15,171 |
|  | Nine Months Ended September 29, 2019
|  | Aeronautics |  | MFC |  | RMS |  | Space |  | Total
Net sales |  |  |  |  |  |  |  |  |  |
Products |  | $ | 14,876 |  |  | $ | 6,051 |  |  | $ | 9,064 |  |  | $ | 6,710 |  |  | $ | 36,701 |
Services |  | 2,436 |  |  | 1,311 |  |  | 2,175 |  |  | 1,311 |  |  | 7,233 |
Total net sales |  | $ | 17,312 |  |  | $ | 7,362 |  |  | $ | 11,239 |  |  | $ | 8,021 |  |  | $ | 43,934 |
Net sales by contract type |  |  |  |  |  |  |  |  |  |
Fixed-price |  | $ | 12,777 |  |  | $ | 4,660 |  |  | $ | 7,681 |  |  | $ | 1,585 |  |  | $ | 26,703 |
Cost-reimbursable |  | 4,535 |  |  | 2,702 |  |  | 3,558 |  |  | 6,436 |  |  | 17,231 |
Total net sales |  | $ | 17,312 |  |  | $ | 7,362 |  |  | $ | 11,239 |  |  | $ | 8,021 |  |  | $ | 43,934 |
Net sales by customer |  |  |  |  |  |  |  |  |  |
U.S. Government |  | $ | 10,420 |  |  | $ | 5,528 |  |  | $ | 8,113 |  |  | $ | 6,900 |  |  | $ | 30,961 |
International (a) |  | 6,736 |  |  | 1,717 |  |  | 2,773 |  |  | 1,098 |  |  | 12,324 |
U.S. commercial and other |  | 156 |  |  | 117 |  |  | 353 |  |  | 23 |  |  | 649 |
Total net sales |  | $ | 17,312 |  |  | $ | 7,362 |  |  | $ | 11,239 |  |  | $ | 8,021 |  |  | $ | 43,934 |
Net sales by geographic region |  |  |  |  |  |  |  |  |  |
United States |  | $ | 10,576 |  |  | $ | 5,645 |  |  | $ | 8,466 |  |  | $ | 6,923 |  |  | $ | 31,610 |
Asia Pacific |  | 2,736 |  |  | 315 |  |  | 1,065 |  |  | 48 |  |  | 4,164 |
Europe |  | 2,751 |  |  | 363 |  |  | 509 |  |  | 1,035 |  |  | 4,658 |
Middle East |  | 1,127 |  |  | 1,003 |  |  | 738 |  |  | 15 |  |  | 2,883 |
Other |  | 122 |  |  | 36 |  |  | 461 |  |  | — |  |  | 619 |
Total net sales |  | $ | 17,312 |  |  | $ | 7,362 |  |  | $ | 11,239 |  |  | $ | 8,021 |  |  | $ | 43,934 |
(a) | International sales include foreign military sales (FMS) contracted through the U.S. Government and direct commercial sales to international governments and other international customers.
|  | Quarter Ended September 30, 2018
|  | Aeronautics |  | MFC |  | RMS |  | Space |  | Total
Net sales |  |  |  |  |  |  |  |  |  |
Products |  | $ | 4,799 |  |  | $ | 1,873 |  |  | $ | 3,132 |  |  | $ | 2,114 |  |  | $ | 11,918 |
Services |  | 843 |  |  | 400 |  |  | 716 |  |  | 441 |  |  | 2,400 |
Total net sales |  | $ | 5,642 |  |  | $ | 2,273 |  |  | $ | 3,848 |  |  | $ | 2,555 |  |  | $ | 14,318 |
Net sales by contract type |  |  |  |  |  |  |  |  |  |
Fixed-price |  | $ | 4,163 |  |  | $ | 1,536 |  |  | $ | 2,710 |  |  | $ | 534 |  |  | $ | 8,943 |
Cost-reimbursable |  | 1,479 |  |  | 737 |  |  | 1,138 |  |  | 2,021 |  |  | 5,375 |
Total net sales |  | $ | 5,642 |  |  | $ | 2,273 |  |  | $ | 3,848 |  |  | $ | 2,555 |  |  | $ | 14,318 |
Net sales by customer |  |  |  |  |  |  |  |  |  |
U.S. Government |  | $ | 3,700 |  |  | $ | 1,625 |  |  | $ | 2,765 |  |  | $ | 2,174 |  |  | $ | 10,264 |
International (a) |  | 1,909 |  |  | 600 |  |  | 959 |  |  | 362 |  |  | 3,830 |
U.S. commercial and other |  | 33 |  |  | 48 |  |  | 124 |  |  | 19 |  |  | 224 |
Total net sales |  | $ | 5,642 |  |  | $ | 2,273 |  |  | $ | 3,848 |  |  | $ | 2,555 |  |  | $ | 14,318 |
Net sales by geographic region |  |  |  |  |  |  |  |  |  |
United States |  | $ | 3,733 |  |  | $ | 1,673 |  |  | $ | 2,889 |  |  | $ | 2,193 |  |  | $ | 10,488 |
Asia Pacific |  | 854 |  |  | 126 |  |  | 377 |  |  | 8 |  |  | 1,365 |
Europe |  | 691 |  |  | 112 |  |  | 213 |  |  | 324 |  |  | 1,340 |
Middle East |  | 326 |  |  | 347 |  |  | 202 |  |  | 30 |  |  | 905 |
Other |  | 38 |  |  | 15 |  |  | 167 |  |  | — |  |  | 220 |
Total net sales |  | $ | 5,642 |  |  | $ | 2,273 |  |  | $ | 3,848 |  |  | $ | 2,555 |  |  | $ | 14,318 |
|  | Nine Months Ended September 30, 2018
|  | Aeronautics |  | MFC |  | RMS |  | Space |  | Total
Net sales |  |  |  |  |  |  |  |  |  |
Products |  | $ | 13,080 |  |  | $ | 4,935 |  |  | $ | 8,753 |  |  | $ | 6,062 |  |  | $ | 32,830 |
Services |  | 2,281 |  |  | 1,100 |  |  | 1,884 |  |  | 1,256 |  |  | 6,521 |
Total net sales |  | $ | 15,361 |  |  | $ | 6,035 |  |  | $ | 10,637 |  |  | $ | 7,318 |  |  | $ | 39,351 |
Net sales by contract type |  |  |  |  |  |  |  |  |  |
Fixed-price |  | $ | 11,284 |  |  | $ | 4,043 |  |  | $ | 7,368 |  |  | $ | 1,394 |  |  | $ | 24,089 |
Cost-reimbursable |  | 4,077 |  |  | 1,992 |  |  | 3,269 |  |  | 5,924 |  |  | 15,262 |
Total net sales |  | $ | 15,361 |  |  | $ | 6,035 |  |  | $ | 10,637 |  |  | $ | 7,318 |  |  | $ | 39,351 |
Net sales by customer |  |  |  |  |  |  |  |  |  |
U.S. Government |  | $ | 9,909 |  |  | $ | 4,215 |  |  | $ | 7,729 |  |  | $ | 6,114 |  |  | $ | 27,967 |
International (a) |  | 5,321 |  |  | 1,696 |  |  | 2,562 |  |  | 1,162 |  |  | 10,741 |
U.S. commercial and other |  | 131 |  |  | 124 |  |  | 346 |  |  | 42 |  |  | 643 |
Total net sales |  | $ | 15,361 |  |  | $ | 6,035 |  |  | $ | 10,637 |  |  | $ | 7,318 |  |  | $ | 39,351 |
Net sales by geographic region |  |  |  |  |  |  |  |  |  |
United States |  | $ | 10,040 |  |  | $ | 4,339 |  |  | $ | 8,075 |  |  | $ | 6,156 |  |  | $ | 28,610 |
Asia Pacific |  | 2,394 |  |  | 349 |  |  | 1,002 |  |  | 62 |  |  | 3,807 |
Europe |  | 1,877 |  |  | 227 |  |  | 592 |  |  | 1,082 |  |  | 3,778 |
Middle East |  | 903 |  |  | 1,091 |  |  | 516 |  |  | 18 |  |  | 2,528 |
Other |  | 147 |  |  | 29 |  |  | 452 |  |  | — |  |  | 628 |
Total net sales |  | $ | 15,361 |  |  | $ | 6,035 |  |  | $ | 10,637 |  |  | $ | 7,318 |  |  | $ | 39,351 |
(a) | International sales include foreign military sales (FMS) contracted through the U.S. Government and direct commercial sales to international governments and other 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 28% and 27% of our total consolidated net sales for the quarter and nine months ended September 29, 2019 and 27% and 26% of our total consolidated net sales for the quarter and nine months ended September 30, 2018. Total assets for each of our business segments were as follows (in millions):
|  | September 29, 2019 |  | December 31, 2018
Assets |  |  |  |  |  |
Aeronautics |  | $ | 10,441 |  |  |  | $ | 8,435 |  |
Missiles and Fire Control |  | 5,276 |  |  |  | 5,017 |  |
Rotary and Mission Systems |  | 18,843 |  |  |  | 18,333 |  |
Space |  | 5,821 |  |  |  | 5,445 |  |
Total business segment assets |  | 40,381 |  |  |  | 37,230 |  |
Corporate assets (a) |  | 8,894 |  |  |  | 7,646 |  |
Total assets |  | $ | 49,275 |  |  |  | $ | 44,876 |  |
(a) Corporate assets primarily include cash and cash equivalents, deferred income taxes, environmental receivables, and investments held in a separate trust to fund certain of our non-qualified deferred compensation plans.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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