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INFORMATION ON BUSINESS SEGMENTS | 3 Months Ended
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Mar. 29, 2020
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 10 – 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 |
|  | March 29, 2020 |  | March 31, 2019 |
Net sales |  |  |  |  |  |  |
Aeronautics |  | $ | 6,369 |  |  |  | $ | 5,584 |  |  |
Missiles and Fire Control |  | 2,619 |  |  |  | 2,350 |  |  |
Rotary and Mission Systems |  | 3,746 |  |  |  | 3,762 |  |  |
Space |  | 2,917 |  |  |  | 2,640 |  |  |
Total net sales |  | $ | 15,651 |  |  |  | $ | 14,336 |  |  |
Operating profit |  |  |  |  |  |  |
Aeronautics |  | $ | 672 |  |  |  | $ | 585 |  |  |
Missiles and Fire Control |  | 396 |  |  |  | 417 |  |  |
Rotary and Mission Systems |  | 376 |  |  |  | 379 |  |  |
Space |  | 281 |  |  |  | 334 |  |  |
Total business segment operating profit |  | 1,725 |  |  |  | 1,715 |  |  |
Unallocated items |  |  |  |  |  |  |
FAS/CAS operating adjustment (a) |  | 469 |  |  |  | 512 |  |  |
Stock-based compensation |  | (42 | ) |  |  | (37 | ) |  |
Other, net |  | (30 | ) |  |  | 93 |  |  |
Total unallocated items |  | 397 |  |  |  | 568 |  |  |
Total consolidated operating profit |  | $ | 2,122 |  |  |  | $ | 2,283 |  |  |
Intersegment sales |  |  |  |  |  |  |
Aeronautics |  | $ | 59 |  |  |  | $ | 42 |  |  |
Missiles and Fire Control |  | 136 |  |  |  | 121 |  |  |
Rotary and Mission Systems |  | 499 |  |  |  | 499 |  |  |
Space |  | 108 |  |  |  | 68 |  |  |
Total intersegment sales |  | $ | 802 |  |  |  | $ | 730 |  |  |
(a) | The FAS/CAS operating adjustment represents the difference between the service cost component of financial accounting standards (FAS) pension income (expense) and total pension costs recoverable on U.S. Government contracts as determined in accordance with CAS.
Our total net FAS/CAS pension adjustment for the quarters ended March 29, 2020 and March 31, 2019, including the service and non-service cost components of FAS pension income (expense) for our qualified defined benefit pension plans, were as follows (in millions):
|  | Quarters Ended |
|  | March 29, 2020 |  | March 31, 2019 |
Total FAS income (expense) and CAS costs |  |  |  |  |  |  |
FAS pension income (expense) |  | $ | 30 |  |  |  | $ | (273 | ) |  |
Less: CAS pension cost |  | 494 |  |  |  | 641 |  |  |
Net FAS/CAS pension adjustment |  | $ | 524 |  |  |  | $ | 368 |  |  |
Service and non-service cost reconciliation |  |  |  |  |  |  |
FAS pension service cost |  | $ | (25 | ) |  |  | $ | (129 | ) |  |
Less: CAS pension cost |  | 494 |  |  |  | 641 |  |  |
FAS/CAS operating adjustment |  | 469 |  |  |  | 512 |  |  |
Non-operating FAS pension income (expense) |  | 55 |  |  |  | (144 | ) |  |
Net FAS/CAS pension adjustment |  | $ | 524 |  |  |  | $ | 368 |  |  |
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 income (expense) and total CAS pension cost. The non-service FAS pension income (expense) component is included in other non-operating income (expense), net in our consolidated statements of earnings. As a result, to the extent that CAS pension cost exceeds the service cost component of FAS pension income (expense), we have a favorable FAS/CAS operating adjustment. The corporation will have FAS pension income in 2020, compared to FAS pension expense in prior periods. We will no longer have service costs for certain of our plans as a result of completing the planned freeze of our salaried pension plans effective January 1, 2020 that was previously announced on July 1, 2014. See “Note 6 – Postretirement Benefit Plans” for additional information regarding the corporation’s FAS pension expense or income and CAS pension cost. Net sales by products and services, contract type, customer, and geographic region were as follows (in millions):
|  | Quarter Ended March 29, 2020
|  | Aeronautics |  | MFC |  | RMS |  | Space |  | Total
Net sales |  |  |  |  |  |  |  |  |  |
Products |  | $ | 5,455 |  |  | $ | 2,275 |  |  | $ | 2,986 |  |  | $ | 2,450 |  |  | $ | 13,166 |
Services |  | 914 |  |  | 344 |  |  | 760 |  |  | 467 |  |  | 2,485 |
Total net sales |  | $ | 6,369 |  |  | $ | 2,619 |  |  | $ | 3,746 |  |  | $ | 2,917 |  |  | $ | 15,651 |
Net sales by contract type |  |  |  |  |  |  |  |  |  |
Fixed-price |  | $ | 4,584 |  |  | $ | 1,718 |  |  | $ | 2,482 |  |  | $ | 519 |  |  | $ | 9,303 |
Cost-reimbursable |  | 1,785 |  |  | 901 |  |  | 1,264 |  |  | 2,398 |  |  | 6,348 |
Total net sales |  | $ | 6,369 |  |  | $ | 2,619 |  |  | $ | 3,746 |  |  | $ | 2,917 |  |  | $ | 15,651 |
Net sales by customer |  |  |  |  |  |  |  |  |  |
U.S. Government |  | $ | 4,033 |  |  | $ | 1,955 |  |  | $ | 2,788 |  |  | $ | 2,483 |  |  | $ | 11,259 |
International (a) |  | 2,321 |  |  | 660 |  |  | 855 |  |  | 420 |  |  | 4,256 |
U.S. commercial and other |  | 15 |  |  | 4 |  |  | 103 |  |  | 14 |  |  | 136 |
Total net sales |  | $ | 6,369 |  |  | $ | 2,619 |  |  | $ | 3,746 |  |  | $ | 2,917 |  |  | $ | 15,651 |
Net sales by geographic region |  |  |  |  |  |  |  |  |  |
United States |  | $ | 4,048 |  |  | $ | 1,959 |  |  | $ | 2,891 |  |  | $ | 2,497 |  |  | $ | 11,395 |
Asia Pacific |  | 995 |  |  | 75 |  |  | 318 |  |  | 28 |  |  | 1,416 |
Europe |  | 948 |  |  | 168 |  |  | 167 |  |  | 398 |  |  | 1,681 |
Middle East |  | 328 |  |  | 407 |  |  | 207 |  |  | (6 | ) |  | 936 |
Other |  | 50 |  |  | 10 |  |  | 163 |  |  | — |  |  | 223 |
Total net sales |  | $ | 6,369 |  |  | $ | 2,619 |  |  | $ | 3,746 |  |  | $ | 2,917 |  |  | $ | 15,651 |
|  | Quarter Ended March 31, 2019
|  | Aeronautics |  | MFC |  | RMS |  | Space |  | Total
Net sales |  |  |  |  |  |  |  |  |  |
Products |  | $ | 4,796 |  |  | $ | 1,916 |  |  | $ | 3,059 |  |  | $ | 2,199 |  |  | $ | 11,970 |
Services |  | 788 |  |  | 434 |  |  | 703 |  |  | 441 |  |  | 2,366 |
Total net sales |  | $ | 5,584 |  |  | $ | 2,350 |  |  | $ | 3,762 |  |  | $ | 2,640 |  |  | $ | 14,336 |
Net sales by contract type |  |  |  |  |  |  |  |  |  |
Fixed-price |  | $ | 4,170 |  |  | $ | 1,535 |  |  | $ | 2,619 |  |  | $ | 523 |  |  | $ | 8,847 |
Cost-reimbursable |  | 1,414 |  |  | 815 |  |  | 1,143 |  |  | 2,117 |  |  | 5,489 |
Total net sales |  | $ | 5,584 |  |  | $ | 2,350 |  |  | $ | 3,762 |  |  | $ | 2,640 |  |  | $ | 14,336 |
Net sales by customer |  |  |  |  |  |  |  |  |  |
U.S. Government |  | $ | 3,435 |  |  | $ | 1,633 |  |  | $ | 2,675 |  |  | $ | 2,236 |  |  | $ | 9,979 |
International (a) |  | 2,095 |  |  | 670 |  |  | 995 |  |  | 395 |  |  | 4,155 |
U.S. commercial and other |  | 54 |  |  | 47 |  |  | 92 |  |  | 9 |  |  | 202 |
Total net sales |  | $ | 5,584 |  |  | $ | 2,350 |  |  | $ | 3,762 |  |  | $ | 2,640 |  |  | $ | 14,336 |
Net sales by geographic region |  |  |  |  |  |  |  |  |  |
United States |  | $ | 3,489 |  |  | $ | 1,680 |  |  | $ | 2,767 |  |  | $ | 2,245 |  |  | $ | 10,181 |
Asia Pacific |  | 906 |  |  | 122 |  |  | 330 |  |  | 8 |  |  | 1,366 |
Europe |  | 798 |  |  | 122 |  |  | 198 |  |  | 381 |  |  | 1,499 |
Middle East |  | 337 |  |  | 413 |  |  | 285 |  |  | 6 |  |  | 1,041 |
Other |  | 54 |  |  | 13 |  |  | 182 |  |  | — |  |  | 249 |
Total net sales |  | $ | 5,584 |  |  | $ | 2,350 |  |  | $ | 3,762 |  |  | $ | 2,640 |  |  | $ | 14,336 |
(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% of our total consolidated net sales for the quarter ended March 29, 2020 and 26% of our total consolidated net sales for the quarter ended March 31, 2019. Total assets for each of our business segments were as follows (in millions):
|  | March 29, 2020 |  | December 31, 2019
Assets |  |  |  |  |  |
Aeronautics |  | $ | 10,003 |  |  |  | $ | 9,109 |  |
Missiles and Fire Control |  | 5,210 |  |  |  | 5,030 |  |
Rotary and Mission Systems |  | 18,901 |  |  |  | 18,751 |  |
Space |  | 6,164 |  |  |  | 5,844 |  |
Total business segment assets |  | 40,278 |  |  |  | 38,734 |  |
Corporate assets (a) |  | 8,970 |  |  |  | 8,794 |  |
Total assets |  | $ | 49,248 |  |  |  | $ | 47,528 |  |
(a) Corporate assets primarily include cash and cash equivalents, deferred income taxes, assets for the portion of environmental costs that are probable of future recovery 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://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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